the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 1 october 2019 page:18-25 https://www.ilomata.org/index.php/ijtc factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 ratih kumala institute of social and management studies stiami, jakarta correspondence: rhaty07@gmail.com submitted: 6 august 2019. revised: 24 august, 18 sept 2019. published: 30 october 2019. abstract tax extensification and intensification are one of the government's way of improving tax revenue. therefore, revenue officers are required to be active, as well as the taxpayers' awareness and willingness. the deficiency of willingness to pay taxes is inseparable from the lack of knowledge, understanding, service, and financial condition of taxpayers and is one of the factors that hinder taxpayer awareness in carrying out their tax obligations. this study aims to analyze the effect of tax awareness, knowledge and understanding of taxation rules, service quality, and financial conditions on the taxpayer readiness of individual income taxpayers. the population used in this study are the taxpayers of bolu online business community smes. the sample used was 100 respondents. the result of this study indicates that the awareness of paying taxes and the quality of service do not significantly influence the willingness to pay taxes. in contrast, knowledge and understanding of tax regulations and financial conditions have a positive influence on taxpayers' willingness to pay. keywords: tax awareness, knowledge and understanding of taxation rules, service quality, financial conditions, msmes, and gr no.23 of 2018 introduction tax is the central source of internal revenue. without taxation, the country is unable to develop well and smoothly. most of the state revenue sources contained in the state budget (apbn) come from taxes. this is evident in the realization of tax revenue in 2018, according to the revised state budget of 2018, the total tax revenue reached rp.1, 315.9 trillion or grew by 14.3%. this tax growth is the highest revenue since 2012. the tax ratio also reached 11.5% of gross domestic revenue (gdp), which increased by 0.8% from 2017. with the improved tax revenue, the tax 18 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.ilomata.org/index.php/ijtc mailto:rhaty07@gmail.com factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala ratio experienced a significant improvement in just a year (https://www.kemenkeu.go.id). to overcome these problems, the government through the directorate general of taxes since july 2013 issued government regulation (gr) no 46 of 2013 concerning tax regime from on business income of individual with a certain gross turnover was amended to government regulation (gr) no. 23 of 2018 which has been in effect since july 2018. indirectly, the intended target of this government regulation is msmes, both individuals, and entities, except for permanent business entities that have gross circulation not more than rp.4.8 billion. therefore, the writer wants to analyse the factors that influence the taxpayer's willingness to pay taxes after the enactment of government regulation no.23 of 2018 in the bolu online business community. the bolu community (belajar online yuk!) is a community and place for online learning to maximize and develop its members' business. the bolu community was established in 2014 and today has more than 3,000 members and alumni who have successfully developed their online business. based on act 1 number 16 of 2009, tax is a mandatory contribution to a state owed by a personal or corporate taxpayer whose nature is coercive under the law by not getting a direct reward and is used for the country's needs for people's prosperity. whereas according to law article 1 number 16 of 2009, the taxpayer is an individual or entity, including taxpayers, tax-cutters, and tax collectors, who have taxation rights and obligations per tax legislation's provisions. in law number 20, 2008, article 1 in chapter i, it is stated that microenterprise (mie) is a productive business independently owned by a person or a business entity fulfilling the criteria of mie. small enterprise (se) is a stand-alone productive economic enterprise undertaken by a person or a business entity that is not a subsidiary or not a branch of a medium enterprise (me) or a large enterprise (le) that meets the se criteria. while medium enterprise is a stand-alone productive economic enterprise undertaken by a person or a business entity that is not a subsidiary or not a branch of a se or a le with the number of net assets or annual sales as stipulated in the act. last, large enterprise (le) is a business owned by a business entity with a net worth or annual sales greater than a medium business. tax willingness is a value that is willing to be conditioned by someone (stipulated by the regulations) that is used to finance general state expenditures by not obtaining direct service (contra-performance) directly (widayati and nurlis, 2010). 19 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.kemenkeu.go.id/ factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala tax awareness can be interpreted as a form of moral attitude by providing a contribution to the state to support the country's development and seeks to comply with all regulations that have been set by the state that can be forced on taxpayers. the important indicators in raising awareness among taxpayers are by creating taxpayers' positive perceptions about their tax obligations, studying the characteristics of taxpayers, increasing taxpayers' knowledge of taxation, and apprising taxation to taxpayers (suryadi, 2006). tax knowledge is the process of changing an individual or group of taxpayers' attitudes and behavior in hopes of maturing humans through teaching and training efforts. public's knowledge of tax regulations through formal and non-formal education will have a positive impact on taxpayer awareness to pay taxes, such as counseling or tax socialization. meanwhile, taxpayers' understanding of taxation regulations is a way for taxpayers to understand existing taxation regulations. taxpayers who are unable to understand tax regulations tend to be disobedient. the more taxpayers understand the tax regulations, the more aware they are of the sanctions they would receive if they neglect their tax obligations. if the taxpayers truly understand, they would know about tax returns and taxpayer identification number's administrative and criminal sanctions. excellent service is one of the factors in creating customer satisfaction. a service is said to be good if the business is running as expected. service quality is a service that can provide satisfaction to customers but remains within the limits of service standards that can be accounted for and must be carried out continuously (hardiningsih, 2011). when the taxpayers are satisfied with the services provided, then they will tend to pay taxes obligation according to the regulations applied. if the tax provisions are simple and easily understood by the taxpayers, the taxation services on their rights and obligations can be effective and efficient. thus, the taxation information system and reliable human resources quality will result in better taxation services. a person's financial condition may positively or negatively affect their willingness to meet their tax provisions regardless of the taxpayer's perception of tax services’ quality and compliance behaviour. someone who is experiencing financial difficulties would feel depressed when they are required to pay their obligations including taxes (torgler, 2003). blomquist (2003) identified that financial pressure as a source of pressure for taxpayers and believes that individual taxpayers who have limited income might avoid paying taxes if their financial condition is severe because the family's expenditure is greater than income. this shows that regardless of the relationship between tax services’ quality perception and compliance behaviour, tax obligations compliance depends among other things, such as the individual's financial condition. 20 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala method this research used primary data in the form of a questionnaire filled out by the respondents. primary data sources in this study were given directly to the respondents. the population in the research is the msmes of bolu online business community and 100 taxpayer respondents’ samples are taken. from the total population obtained, this study will take a sample using the simple random sampling technique, because of the ease in obtaining the data needed. for the data collection techniques in this research, the authors collected data through the distribution of questionnaires to msmes taxpayers with the measurement method used to measure respondents' opinions is the 5-point likert scale. the conceptual framework illustrated to explain the thought process in the research is: picture 1. conceptual framework based on the picture above, the problem that will be addressed in this research is the taxpayer's high understanding of tax regulations that come from taxpayers compliance, then the taxpayers' compliance will be high and the state income from taxes will increase, so the hypothesis in this study is: h1: tax awareness affects willingness to pay taxes. h2: knowledge of tax regulations influences willingness to pay taxes. h3: understanding of tax regulations affect willingness to pay taxes. 21 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 h4 tax awareness (x1) knowledge of taxation regulations (x2) understanding of taxation regulations (x3) service quality (x4) willingness to pay taxes (y) h2 h3 financial condition (x5) h1 h5 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala h4: service quality affects willingness to pay taxes. h5: financial conditions influence willingness to pay taxes. result and discussion table 1. regression coefficient results coefficientsa model unstandardized coefficients standardi zed coefficien ts t sig. collinearity statistics b std. error beta toleranc e vif 1 (constant) ,727 ,413 1,76 0 ,08 2 tax awareness -,103 ,101 -,089 1,01 9 ,31 1 ,603 1,65 8 knowledge of tax regulations ,218 ,106 ,186 2,05 8 ,04 2 ,555 1,80 2 understanding of tax regulations ,484 ,076 ,563 6,38 9 ,00 0 ,587 1,70 4 service quality ,023 ,075 ,024 ,304 ,76 2 ,754 1,32 7 financial conditions ,195 ,072 ,211 2,71 8 ,00 8 ,758 1,32 0 a. dependent variable: willingness to pay taxes the table above is the coefficient result of the regression equation, thus to obtain the regression equation from the results of this research are as follows: y = 0,727 – 0,103 x1 + 0,218 x2 + 0,484 x3 + 0,023 x4 + 0,195 x5 based on the results of the regression equation, the multiple linear regression equation has a meaning, scilicet: the constant value is 0.727 and has a positive sign indicating that if the five independent variables (awareness of paying taxes, knowledge of tax regulations, understanding of tax regulations, quality of tax services, and financial conditions) value is zero, then the value of paying tax remains fixed at 0.727%. the regression coefficient value of tax awareness 0.103 and is negative, indicating that tax awareness is not aligned with the willingness to pay msmes taxes. this implies that for every 1% decrease in tax awareness, the willingness to pay taxes will decrease by 0.103% if the other independent variables of the regression model remain. the regression coefficient value of tax knowledge understanding 0.218 and positive, indicating that the knowledge of tax regulations has a 22 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala direct relationship with the willingness to pay msmes taxes. this implies that every 1% increase in knowledge of tax regulations, the willingness to pay taxes will increase by 0.218% if the other independent variables of the regression model remain. the regression coefficient value of understanding of tax regulations is 0.484 and has a positive sign, which indicates that understanding tax regulations has a direct relationship with the willingness to pay msmes taxes. this implies that every 1% increase in understanding of tax regulations, the willingness to pay taxes will increase by 0.484% if the other independent variables of the regression model remain. the regression coefficient value of tax service quality is 0.023 and positive, indicating that the quality of tax services has a direct relationship with the willingness to pay msmes taxes. this implies that for every 1% of the quality of tax services, the willingness to pay taxes will increase by 0.023% if the other independent variables of the regression model remain. the regression coefficient value of the taxpayer's financial condition is 0.195 and positive, indicating that the taxpayer's financial condition has a direct relationship to the willingness to pay msmes taxes. this implies that for every 1% of the taxpayer's financial condition, the willingness to pay taxes will increase by 0.195% if the other independent variables of the regression model remain. significant simultaneous test result (f-test) if the f value > f statistic, then ho is rejected and ha is accepted, and if the significant value is <0.05, then the independent variables together have a significant effect on the dependent variables (ghozali, 2016). table 2. f-test result anovaa model sum of squares df mean square f sig. 1 regressio n 13,736 5 2,747 25,142 ,000b residual 10,271 94 ,109 total 24,007 99 a. dependent variable: willingness to pay taxes b. predictors: (constant), financial conditions, service quality, tax awareness, understanding of tax regulations, knowledge of tax regulations source: data processed by spss 25, 2019 based on the f-test result table above, it can be acquired that the value of the fvalue> f statistic is 25.142 > 2.31 and significant value of 0.000 < 0.05. thus from this value, it can be concluded that tax awareness, knowledge of tax regulations, understanding of tax regulations, service quality, and financial conditions have a significant effect on the willingness 23 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala to pay msme taxes. partial test result (t-test) if the significance level on the table is 1 > 0,05, the t calculated value < t statistic then ha would be accepted and ho would be rejected, then there is no no influence between the independent variables and the dependent variables (ghozali, 2016). from the table can be concluded as follow: tax awareness has a negative effect on msme's willingness to pay taxes. this is indicated by the level of significance value of 0.311 > 0.05, and the tvalue of -1.109 < 1.660. meaning, tax awareness has a negative effect or does not have a significant effect on the willingness to pay msme taxes. knowledge of tax regulations has a positive effect on msmes' willingness to pay taxes. this is indicated by the level of significance value 0.042 <0.05, and tvalue is greater than the t statistic of 2.058> 1.660. that is, knowledge of tax regulations has a significant effect on the willingness to pay msme taxes. understanding tax regulations have a negative effect on msmes' willingness to pay taxes, indicated by the level of significance value of 0,000 <0.05, and the tvalue of 6.389> 1.660. that is, understanding tax regulations has a significant effect on msmes' willingness to pay taxes. service quality has a negative effect on msmes' willingness to pay taxes. this is shown by the level of significance value 0.762> 0.05, and the tvalue is greater than the value of tstatistic by 0.304 <1.660, which means the quality of tax services does not significantly influence the willingness to pay msme taxes. the financial condition of the taxpayer has a positive effect on the willingness to pay tax on msmes. this is indicated by the level of significance value 0.008 <0.05, and the tvalue is greater than the tstatistic of 2.718> 1.660, which means the taxpayer's financial condition has a significant effect on the willingness to pay msme taxes. coefficient of determination test (r2) the coefficient of determination (r2) measures how far does the model able to explain the dependent variables (ghozali, 2016). table 3. coefficient of determination test result (r2) model summary mode l r r square adjusted r square std. error of the estimate 1 ,756a ,572 ,549 ,33056 a. predictors: (constant), financial conditions, service quality, tax awareness, understanding of tax regulations, knowledge of tax regulations source: data processed by spss 25, 2019 24 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala from the table above, the coefficient of determination (r2) measures how far does the model able to explain the dependent variables (ghozali, 2016). the coefficient of determination r2 is obtained by 0.572 or (57.2%). this shows that the independent variables (tax awareness, knowledge of tax regulations, understanding of tax regulations, service quality, and financial conditions) can explain the effect of the dependent variables (willingness to pay msmes taxes) by 57.2% and the remaining 42.8% is influenced by other variables not included in this study. tax awareness towards the willingness to pay msme taxes the results of this study indicate that tax awareness does not significantly influence the willingness to pay taxes for msmes. meaning that taxpayers do not understand their tax rights and obligations. however, this research is contrary to permana's study (2015) which stated that taxpayer awareness has a significant effect on the willingness to pay taxes and the results of sari's research (2017) that stated the same thing. knowledge of taxation regulations towards the willingness to pay msme taxes the results of this study show that the knowledge of tax regulations has a significant effect on the willingness to pay msme taxes. this means that if taxation knowledge is increasingly known among taxpayers, the willingness to pay taxes would also increase. the results of this study are in accordance with sari (2017) knowledge of tax regulations has a significant effect on the willingness to pay taxes. but this study is in contrast with permana’s finding (2015) that knowledge of taxation regulations does not significantly influence the willingness to pay taxes. understanding of taxation regulations towards the willingness to pay msme taxes the results of this study reveal that understanding taxation regulations has a significant effect on the willingness to pay msme taxes. meaning that if the understanding of tax regulations is increasingly understood by taxpayers, the willingness to pay taxes would also increase. the results of this study are compatible with sari (2017) knowledge of tax regulations has a significant effect on the willingness to pay taxes. in contrast, permana (2015) stated that knowledge of taxation regulations does not significantly influence the willingness to pay taxes. service quality towards the willingness to pay msme taxes the results of this study indicate that the service quality does not significantly influence the willingness to pay msme taxes. this proves that taxpayers have not experienced adequate services yet so there is no 25 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala willingness to pay taxes. the results of this study are in harmony with sari's research (2017) which stated that the quality of tax services does not significantly influence the willingness to pay taxes. whereas both pancawati (2011) and permana's (2015) research stated that the quality of services significantly positively affects the willingness to pay taxes. financial conditions towards the willingness to pay msme taxes the outcome of this study reveals that financial conditions significantly influence the willingness to pay taxes. this confirms that the taxpayer's financial condition influences their willingness to fulfill their tax obligations. likewise, the study of sulastri et al (2016) and fitri's research (2017) also stated that financial conditions significantly influence the willingness to pay taxes. conclusion tax awareness does not significantly affects the willingness to pay msme taxes. this shows that taxpayers do not understand their tax rights and obligations yet. the knowledge of tax regulations has a significant effect on the willingness to pay msme taxes. this means that if taxation knowledge is increasingly known among taxpayers, the willingness to pay taxes would also increase. understanding of taxation regulations has a significant effect on the willingness to pay msme taxes. meaning that if the understanding of tax regulations is increasingly understood by taxpayers, the willingness to pay taxes would also increase. service quality does not significantly influence the willingness to pay msme taxes. this proves that taxpayers have not experienced adequate services yet so there is no willingness to pay taxes. financial conditions significantly influence the willingness to pay taxes. this confirms that the taxpayer's financial condition influences their willingness to fulfill their tax obligations. referencexblomquist, john. 2003. impact evaluation of social programs: a policy perspective. social safety nets primer paper, world bank. washington, d.c. ghozali, imam. 2016. aplikasi analisis multivariative dengan program spss. badan penerbit universitas diponegoro: semarang. hardiningsih, pancawati. 2011. faktor-faktor yang mempengaruhi membayar pajak. jurnal dinamika keuangan dan perbankan, nopember 2011, hal: 126-142. issn : 1979-4878. 26 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala peraturan pemerintah. nomor 46 tahun 2013. direktorat jendral pajak. tentang pph atas penghasilan dari usaha wajib pajak yang memiliki peredaran bruto tertentu. peraturan pemerintah. nomor 23 tahun 2018. direktorat jendral pajak. tentang pph atas penghasilan dari usaha wajib pajak yang memiliki peredaran bruto tertentu. permana, c.a. 2015. faktor-faktor yang mempengaruhi kemauan wajib pajak pelaku umkm untuk membayar pajak setelah diberlakukan pp no.46 tahun 2013 (survei pada wajib pajak yang terdaftar di kpp pratama surakarta). sari, fitria. 2017. pengaruh kesadaran membayar pajak, pengetahuan dan pemahaman peraturan perpajakan, kualitas layanan, dan kondisi keuangan terhadap kemauan membayar pajak wajib pajak orang pribadi. skripsi fakultas ekonomi dan bisnis universitas muhammadiyah surakarta. sulastri, ita dewi, dkk. 2016. pengaruh presepsi pengetahuan pajak, sistem perpajakan, kesadaran membayar pajak dan kondisi keuangan terhadap kemauan membayar pajak penghasilan pada wajib pajak. ejournal.unisri.ac.id volume 12 no.2. torgler, b. (2003a). cross culture comparison of tax morale and tax compliance: evidence from costa rica and switzerland, wwz discussion paper, university of basel. torgler, b. (2003). tax morale, rule-governed behaviour and trust, constitutional political economy, vol. 14 no. 2 pp. 119-140. undang-undang republik indonesia nomor 16 tahun 2009 tentang perubahan keempat atas undang-undang nomor 6 tahun 1983 tentang ketentuan umum dan tata cara perpajakan. undang-undang republik indonesia nomor 20 tahun 2008 tentang usaha mikro kecil menengah. widaningrum, dwi indah. (2007). “identifikasi kemampuan dan kemauan membayar masyarakat berpenghasilan menengah rendah (di lokasi rencana pembangunan rumah susun tamansari kota bandung)”. tugas akhir. diambil dari: www.sappk.itb.ac.id (diambil pada 11 september 2016) widayati. dan nurlis. 2010. “faktor-faktor yang mempengaruhi 27 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 factors that influence msme taxpayers' willingness to pay tax after the implementation of the government rules number 23 of 2018 kumala kemauan untuk membayar pajak wajib pajak orang pribadi yang melakukan pekerjaan bebas (studi kasus pada kpp pratama gambir tiga).” makalah simposium nasional akuntansi xiii. purwokerto. https://www.kemenkeu.go.id/publikasi/berita/ini-capaian-apbn-2018/ 28 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 abstract introduction method result and discussion conclusion the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 1 october 2019 page:35-40 https://www.ilomata.org/index.php/ijtc the influence of account receivable for inventory of income before tax meilani1, pandoyo2 12stie bussiness development and management, jakarta correspondence: meilani@higienis.com submitted: 6 august 2019. revised: 23 august, 20 sept 2019. published: 30 october 2019. abstract this research aims to understand the influence of account receivable’s variable simultantly or partially and inventory of income before tax from multi sarana persada inc. in research period 2012-2015. the test was using multiple regression analysis. the result shows that account receivable’s variable simultantly and inventory have an effect on income before tax. account receivable’s variable has a significant effect on income before tax. however, the inventory’s variable does not affect income before tax. keywords: multi sarana persada, account receivable, inventory, income before tax. introduction economic development which is faster in this era pushes business company in coal contractor company, to increase their performance to keep surviving and growing. a good or bad condition of worker’s performance can be detected from the achievement of management in increasing their performance, in that case, it is required an internal audit or internal control. internal control in business company is handed by internal audit. internal auditor helps the company reaching a good performance, by introducing a systematic approach to evaluate and increase the effectivity of internal control and also give a note for the lack which is found when the evaluation was going around. to make an internal audit which can reach a big goal from their program and operational company activity is required a competent and indpendent auditor. the preview auditor part is just becoming a supervisor in the company who find their fault. however, on progress, nowadays internal audit can suggest internal audit data correction to improve the company’s performance (margaretha & hapsari, 2018). the implementation of periodical internal audit in a company is the right decision because one of the functions of internal audit is 35 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.ilomata.org/index.php/ijtc mailto:meilani@higienis.com the influence of account receivable for inventory of income before tax meilani, pandoyo improvement systematically and internal control evaluation in the company, test and assess the sufficiency effectivity of internal control system continuously. the internal audit aimed to set systematically and evaluate internal control in the company. however, in practical it still does not run perfectly from the concept, because there is still defections and lack of responsiveness in the company. those defections usually occur in leadership pattern and employee’s performance, because inconsistency between leadership pattern and employee’s performance with the operative procedure or multiple tasks make internal control become not efficient. internal control, leadership pattern and employee’s performance are important because those are the cores in the company to reach the company’s goal which is already arranged from the beginning. internal audit activity tests and assesses the effectivity and sufficiency of the internal control system in the company, without the function of internal audit, director or the leader of the company has no sources for free internal information about employee’s performance and company’s performance too (bintari, 2017). good performance is optimum performance, it is a performance which is appropriate with organization standard and giving support to reach the goal or vision of the organization. good organization is an organization which gives the effort to improve human resource’s quality because that is the key factor to improve employee’s performance. improving employee’s performance will bring advance for the company to survive in business competition circles which is not really stable at all. therefore, the effort to improve employee’s performance is the most serious challenge of management because success to reach the goal and life of the company depends on the employee’s performance inside. the company always hopes for the high quality of employee’s performance. more employees have good performance, the production of the company will increase, thus the company can survive in global competition. employees are demanded to able finishing tasks and their responsibility effectively and efficiently. the success of employee can be measured by satisfaction from the consumer, lack of complaint and reaching the company’s target optimally. lanna harita inc employee’s performance can be measured by completion of their order effectively and efficiently and also doing their part and their function well and all of those are connected each other and having positive relation for the success of a company. there are negative factors which can decrease employee’s performance, they are decreasing employee’s pretension to reach work achievement, lack of discipline of time in finishing their work, getting influence from their circle, friend worker who has a low spirit in work and there is no figure 36 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the influence of account receivable for inventory of income before tax meilani, pandoyo who is precedent in reaching achievement of work. all of those are caused by decreasing employee’s performance in work. factors which can be applied to increase employee’s performance are leadership style and motivation. most of lanna harita inc employee feel that their salary which they got every month is not appropriate with the exist stipulation, they work on their portion even more but their salary which they receive is lack and not appropriate with their work, there are employee who already there since a long time ago got the salary less than new employee’s salary. they do not even get paid for their overtime work, work outside of normal working hours make the employee always feel perforce to survive in this company. one of the employees who feel unpleasant and still holds out in this company decided to stay because that is very difficult to find another job. the employee also complains about their activity every day, when the bored is coming it will disturb their performance and the result from their work become not optimum. therefore, this company strive for a refreshing activity for their employee once a year outside the office to make the office situation better. method multiple linear regression equality is like this :(ghozali, 2016): y = α + β1x1 + β2x2 + ε this research aims to understand how big the influence of internal audit and leadership simultantly and partially for employee’s performance. table 1. the definition of operational variable n o name of variable concept indicator measurin g scale 1 account receivable (x1) (reeve, warren, & duchac, 2014) account receivable is claimed for selling by a credit to the other party account receivable = ln (total of account receivable) ratio 2 inventory (x2) (stice, stice, & skousen, 2009) inventory is used for available things to sell in a normal business, inventory = ln (total of inventory) ratio 37 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 account receivable (x1) inventory (x2) income before tax (y) e picture 1. research paradigm the influence of account receivable for inventory of income before tax meilani, pandoyo and in manufacture company’s case, this word is used for the process production or placed in production activity. 3 income before tax (y) (subramanyam, 2017) income before tax is income from operational on going before sparing for earning tax income before tax = ln (total income before tax) ratio result and discussion the influence of account receivable and inventory income before tax account receivable management in a company relates to receivable’s rotation management and account receivable’s submission period. account receivable’s rotation is a several time account receivable belongs to the company which turn over every year. account receivable’s rotation has a close relationship with account receivable’s submission period. (sundvik, 2016). the faster account receivable rotate, the efficiency of financial capital which is buried in account receivable will higher, and the higher of account receivable’s rotation, the time that needed for account receivable’s submission will shorter. (fathoni, 2018). it means that if the rotation of account receivable run faster, the time that needed to make account receivable become cash is also faster. hence, that cash can be used again for the company operation. company for the policy which affect the number of account receivable finally affect to the company profitability too. (wild, subramanyam, & halsey, 2005). this shows that the company with all of their policy about account receivable will increase the earned and income because the risk of bad debt can be handed, thus the company profitability will increase too. table 2. f-test output anovaa model sum of squares df mean square f sig. 1 regress ion 0,750 2 0,375 17,13 9 0,006 b residua l 0,109 5 0,022 total 0,859 7 a. dependent variable: income before task b. predictors: (constant), inventory, account receivable table 3. determination coefficient test output model summaryb 38 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the influence of account receivable for inventory of income before tax meilani, pandoyo mode l r r squar e adjusted r square std. error of the estimate 1 0,934 a 0,873 0,822 0,14789 a. predictors: (constant), inventory, account receivable b. dependent variable: income before task the first hypothesis declares that there is side-effect collectively between account receivable and inventory on income before tax. the result of research give a significant number of them, it is 0,006 that means with conviction level 95 percentage model is real, this explains that the first hypothesis is proven. the second effect is the free variable on income before tax, it is 82,2 percentage. the remaining 17,8 percentage is affected by the other variable outside research objects such as working capital and interest bank. table 4. test-t output coefficientsa model unstandardized coefficients standardi zed coefficien ts t sig. b std. error beta 1 (constant) -60,379 42,328 1,426 0,21 3 piutang dagang 3,687 0,851 0,943 4,331 0,00 7 persediaan -,122 2,105 -,013 -,058 0,95 6 a. dependent variable: income before task the influence of account receivable on income before task one of the step to keep the customer which is already staying and draw new costumers is doing sell on the account. selling on account will make account receivable. account receivable generally is a claim which occurs because of selling thing or service on the account. account receivable is maturity value which comes from selling thing or service or giving money loans (wild et al., 2005). an account receivable term includes all claim in money form to the other party, included individual, company, or the other organization (reeve et al., 2014). therefore, generally, account receivable occurs as a consequence of giving money loans to the other individual, company, organization or the other transaction which creates a relation between the party who give loans 39 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the influence of account receivable for inventory of income before tax meilani, pandoyo and a party who is payable. account receivable is on record in the balance sheet by debiting account receivable and classifying as circulating assets. the second hypothesis declares that there is influence between account receivable with income before tax. the task result shows a significant number, 0,007 that means with conviction level 95 percentage model is real, this means that the second hypothesis is proven. rate of influence from account receivable’s variable on income before tax is 3,687 unit. if the company determines the tight term of payment, it means that the company give first place to safety credits instead of profitability consideration (riyanto, 2008). the examples of tight term of payment are they give a shorter time to payment deadline and a heavy interests in the late payment of receivables”. the significant circle on receivables does not affect the dependent variable (roi)(suarnami, suwendra, & cipta, 2014). the circle of receivable has no significant effect on increasing profitability in pt pos indonesia (bramasto, 2007). the influence of inventory to income before tax inventory is one of the assets that is the most active in the operational activity of a merchandise company. inventory also is the biggest and the most current asset from the manufacturing company or even merchandise company. the influence of inventory to income before tax is detected when business activity is fluctuating. inventory is one of the most important assets. it has a big part to the company, for example, make the operation of the company run currently which is finished consecutive start from the material, fabricating material goods and finished goods that in the next, they will be distributed to the consumers. for the companies, especially a concern in the retail and wholesale business, inventory is the biggest asset that belongs to the company compared with the other assets. inventory is classified in a current asset because generally inventory can be changed to the case or the other assets in the operating cycle of the company. the third hypotheses declared that there is influence from inventory to income before tax. the result of the test gives a significant score that is 0,956, it means the third hypothesis is proven (sig. 0,956 > 0,05). there is no significant effect from inventory to the profitability of the company (surya, ruliana, & soetama, 2017). conclusion simultantly, receivable’s variable and inventory have an influence on income before tax that is 82,2 percentage. the other, 17,8 percentage is influenced by another variable outside the object of the research such as working capital and bank interests. 40 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the influence of account receivable for inventory of income before tax meilani, pandoyo partially, receivable’s variable has a significant influence on the income before tax which is showed by a coefficient score of the regression that is 3,687. it means if account receivable’s variable up one unit, income before tax will increase 3,687 units with the provision of inventory’s variable is constant (ceteris paribus). besides, inventory’s variable has no influence to income before tax because the significant score is 0.956 (sig. 0,956 > 0,05). based on the conclusion, the suggestion from this research is expected to the company that can increase account receivable, by high trade receivable will show the higher cash sales compared with the existing total. account receivable also shows the skill of the company in operating receivable to the cash. the higher means the existence receivable become cash faster. by increasing cash in, it will increase the income of the company directly so that company income will increase too. the coefficient determination’s result test shows that is still the other variable which must be considered in this research. further research, it should add another variable that can affect income before tax. reference bintari, w. c. (2017). analisis pengaruh manajemen modal kerja terhadap kemampuan pencapaian laba pada usaha dagang (studi kasus pada toko di sorong). jurnal noken: ilmu-ilmu sosial, 2(1), 40. https://doi.org/10.33506/jn.v2i1.25 bramasto, a. (2007). analisis perputaran aktiva tetap dan perputaran piutang kaitannya terhadap return on assets pada pt. pos indonesia (persero) bandung. jurnal ekonomi unikom, 9(2), 215– 230. retrieved from https://jurnal.unikom.ac.id/jurnal/analisisperputaran-aktiva.2h fathoni, a. (2018). sistem akuntansi penerimaan kas pada kjks bmt mandiri sejahtera karangcangkring gresik jawa timur. al-idarah: jurnal manajemen dan administrasi islam, 2(1), 137. https://doi.org/10.22373/al-idarah.v2i1.3154 ghozali, imam. (2016). aplikasi analisis multivariete dengan program ibm spss 23 (edisi 8). in universitas diponegoro. https://doi.org/https://doi.org/10.3929/ethz-b-000238666 margaretha, f., & hapsari, a. d. (2018). pengelolaan modal kerja pada usaha kecil dan menengah di indonesia. jurnal kesejahteraan sosial, 2(02). https://doi.org/10.31326/jks.v2i02.159 reeve, j. ., warren, c. ., & duchac, j. . (2014). principle of accounting. in south western. riyanto. (2008). dasar dasar pembelajaran perusahaan. in dasar dasar 41 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the influence of account receivable for inventory of income before tax meilani, pandoyo pembelajaran perusahaan. https://doi.org/10.1128/mcb.4.6.1134 stice, stice, j., & skousen, f. (2009). akuntansi keuangan menegah. in salemba empat. suarnami, l. k., suwendra, i. w., & cipta, w. (2014). pengaruh perputaran piutang dan periode pengumpulan piutang terhadap profitabilitas pada perusahaan pembiayaan. e-journal bisma univesitas pendidikan ganesha, 2(1), 1–8. retrieved from https://ejournal.undiksha.ac.id/index.php/jmi/article/viewfile/2092/1 825 subramanyam, k. r. (2017). analisis laporan keuangan. in jakarta: salemba empat (11th ed.). sundvik, d. (2016). earnings management around swedish corporate income tax reforms. international journal of accounting, auditing and performance evaluation, 12(3), 261. https://doi.org/10.1504/ijaape.2016.077892 surya, s., ruliana, r., & soetama, d. r. (2017). pengaruh perputaran kas dan perputaran persediaan terhadap profitabilitas. akuntabilitas, 10(2). https://doi.org/10.15408/akt.v10i2.6139 wild, j., subramanyam, k. r., & halsey, r. f. (2005). analisis laporan keuangan. in yanivi & nurwahyu (eds.), jakarta: salemba empat (8th ed.). jakarta: salemba empat. 42 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 abstract introduction method result and discussion conclusion reference the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 255-261 255 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) erni prasetiyani1, ai nety sumidartini2, achmad barlian3 institut ilmu sosial dan manajemen stiami 1correspondent: erni@stiami.ac.id received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: prasetiyani, e., sumidartini, a.n, barlian, a. (2021). financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu). ilomata international journal of tax & accounting 2(4),255-261. https://doi.org/10.52728/ijtc.v2i4.373 abstract: the progress of a region can be measured by the level of financial literacy of its population and financial inclusion. dki jakarta is in the top financial ranking for literacy and inclusion, but it is inversely proportional to the pulau seribu region. this research is a qualitative research with the technique of obtaining data through in-depth interviews with residents in the pulau seribu. the results are processed with a strength weakness opportunity threat (swot) analysis to produce a map of the strengths, weaknesses, opportunities and threats that exist in the pulau seribu region. with the swot condition in the region, it is hoped that the policy makers, namely the otoritas jasa keuangan (ojk), the dki jakarta regional government and the community themselves are able to synergize in formulating strategies to accelerate the backwardness of the pulau seribu with dki jakarta. keywords: financial literacy, financial inclusion, strength weakness opportunity threat (swot) and the otoritas jasa keuangan(ojk) this is an open access article under the cc-by 4.0 license. introduction financial literacy in the industrial era has become a hot issue for a country's economic progress. some countries experienced a significant increase while others experienced stagnation and even did not experience significant changes. countries with the highest acceleration of financial literacy are china and india which occupy a financial literacy level of 87% while indonesia is only at 34%, russia and africa are at the level of 82% (shandy, 2021). in a study about financial literacy in south africa showed those gender, age, language, race and income levels do have an impact on the level of financial literacy (de clercq & venter, 2009). in other study for muslim community in usa, even religion have an impact on the level of financial literacy (zinser, 2019). the newest study in portugal, shows that the financial literacy scale presents a tri-factor structure with adequate validity and reliability levels. the three obtained factors are designated 1-2-year financial planning and goals, long-term saving and taste for numeric calculations (santos et al., 2021). lack of literacy and lack of information can affect the ability to save and secure a comfortable retirement. few individuals rely on the help of financial advisors, https://www.ilomata.org/index.php/ijtc mailto:erni@stiami.ac.id https://doi.org/10.52728/ijtc.v2i4.373 financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 256 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and ignorance about basic financial concepts can be linked to a lack of retirement planning and lack of wealth (sarpong-kumankoma, 2021). a study in indonesia show that financial literacy has a positive effect on access to finance and growth of msmes, and access to finance also has a positive effect on growth of msmes (susan, 2020). the purpose of financial literacy is to create better economic decisions through citizens who have adequate information and knowledge and also to improve household welfare both individually and in groups (nugraha, 2018). financial literacy is able to move economic actors to carry out financial planning. financial planning according to the otoritas jasa keuangan(ojk) is how to live a simple current life in accordance with financial conditions and prepare for a better and more advanced future (suryani & ramadhan, 2017). the demographics of financial literacy in indonesia in 2019 based on the ojk survey figure 1. indonesia's 2019 financial literacy demographics source: otoritas jasa keuangan survey report 2019 the ojk survey shows that the highest position of financial literacy is occupied by the province of dki jakarta at 59.16% and the lowest position in the province of nusa tenggara timur (ntt) at 27.62% (jasa keuangan, 2019) the existence of a gap between the pulau seribu and the mainland dki jakarta shows that the development is not evenly distributed economically or commonly referred to as the development economy in which a country aims to improve the welfare of its people. development economics is the part of economics that deals with the economic aspects of the development process in lowincome countries. economic development does not only develop its economic development, economic growth and structural changes but also in increasing the potential of the mass population, such as through health, education and the work environment, both through the public sector and the private sector (private sector). the definition of economic development according to indonesian economist sadono sukirno "development economy is the process of increasing income or per capita income of a country by processing economic potential into real form" (sukirno, 2006). in order to harmonize the development economy and a sustainable financial system to form a quality society in terms of human resources and economic aspects, ojk has issued a roadmap for sustainable finance (sustainable finance) which is defined as comprehensive support from the financial services industry for sustainable growth resulting from harmony. between economic, social and environmental interests as stated in the medium term development plan (rpjmn) dated 5 december 2014 and published the 2015-2019 sustainable finance roadmap (roadmap for suistainable finance in indonesia, 2015). https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 257 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the problems dki jakarta is as the top rank in financial literacy is an indicator of the high level of welfare of its population, in addition to high financial literacy, dki jakarta's financial inclusion also ranks first at 94.76% while ntt province lasts at 60.63%, however, the dki jakarta area, which is divided into two regions, namely mainland dki jakarta and the pulau seribu, has resulted in uneven distribution of financial inclusion and experienced very different gaps. in terms of financial literacy, the people of the pulau seribu are sufficient, but in terms of financial inclusion, their access is not wide open to get it. the researchers used analysis strength weakness opportunity and threat or swot is a strategy that can be optimized by combining strengths and opportunities, but at the same time there are also weaknesses and threats that must be minimized (abadi et al., 2020), to measure the strengths and weaknesses of pulau seribu in utilizing financial literacy and empowering financial inclusion as a strategy for the potency welfare of the community's economy,. each of these factors can be described as follows: 1. strength, namely the advantages possessed by the resources owned by the organization, which can be used by factors that can handle threats. 2. weaknesses, namely deficiencies in resources that are difficult to use to deal with opportunities and threats. 3. opportunity, namely the external condition of resources that have the potential to be profitable. 4. threat is an external condition that has the potential to cause problems and difficulties. table 2. swot matrix the table above is a summary of the swot analysis and the combination strategy between the pros and cons of various conditions (prasetiyani, 2006) method the research was conducted using qualitative methods with data collection techniques through indepth interviews. interviews with the main informants are those who are directly involved in the social interactions studied and additional informants are those who can provide information even though they are not directly involved in social interactions (rony, 2017). informants major is they have access and always associated with bank in financial interaction as public servants and msmes while additional informants were informants scanty associated with banks and used in comparison course . the type of interview conducted is a semi-structured interview which is a free interview where the researcher still makes special guidelines. strength – s (strength) list of strengths weaknesses–w (weaknesses) list of weaknesses opportunity – o (opportunity) list of opportunities so strategy use strength to take advantage of opportunities wo strategy overcome weaknesses by taking advantage of opportunities threats – t (threats) threat list st strategy use power to avoid threats wt strategy minimize weaknesses and avoid threats. https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 258 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the interview is in the form of a closed questionnaire where the researcher gives answer choices about financial literacy, financial inclusion and the business and financial conditions of the respondent or informant. the following are the things question by the researchers: table 3. question aspect no. question aspect context 1. knowledge of financial and banking products to obtain information on community representatives consisting of crossprofessionals 2. access to banking and credit to obtain data on banking facilities in the pulau seribu and access to credit from banks or non-bank financial institutions that have been received so far 3. business and financial conditions to obtain data on how business and financial conditions are with access to banking and credit that has been received result and discussion there were 3 (three) residents of the pulau seribu from different backgrounds who underwent indepth interviews with a team of lecturers whose questions included financial literacy, financial inclusion and business and finance where the informants consisted of micro, small and medium enterprises (msmes), civil servants(civil servants), fishermen. the main questions are divided into 3 parts, namely (1). financial literacy (2). access to banking and credit (3). business and finance. following are the results of written interviews with 3 (three) residents of the pulau seribu with various professions. no. financial literacy access banking & credit business and financial condition informant 1, woman civil servant teacher knowledge of banking functions and benefits is quite good. utilize brilink for daily financial transactions. feeling unsatisfied with access to banking in their area because they are only served by mobile banks whose arrivals are uncertain. informant 1 does not have credit at a bank and has never borrowed money from a bank. informant 1 does not have a business and financial condition is quite good, income comes from salary as a teacher informant 2, man fisherman knowledge of banking functions and benefits is good. utilize bri-link for daily financial transactions. feeling unsatisfied with the condition of the mobile bank model. according to him, there should be a bank at the district level. informant 2 has no credit and has never used credit from a bank for his fishing business. have never received a people's business credit and really need the credit. for now, the income is only as a fisherman. financial management has separated money for family needs and business interests as fishermen. don't have books yet because you don't know how to get started. turnover idr 1 millionidr 6 million informant 3, male fisherman and collector of used goods knowledge of banking functions and benefits is good. utilize bri-link for daily financial transactions. feeling enough with the mobile bank model. as a fisherman and collector of used goods, he uses savings as business capital. has no credit and urgently needs people's business credit. income comes from fishermen and collectors. the monthly income is more than idr 6 million per month. https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 259 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc swot analysis of financial literacy and inclusion in the thousand islands strength – s (strength) pulau seribu is a tourist destination for residents of jakarta and its surroundings area close to the capital city of dki jakarta, the most developed city in indonesia\ the population is multi-ethnic the community 56.79% are fishermen the home industry for breadfruit chips has become an icon for pulau seribu souvenirs. financial literacy is quite good weaknesses – w (weaknesses) pulau seribu has many islands, each of which is inhabited breadfruit chips home industry is still managed conventionally the average education is only up to high school limited access to banking and access to credit/ no financial inclusion development gap with mainland jakarta opportunity – o (opportunity) community empowerment is widely open to be more advanced skillfully and economically the marine tourism sector can be developed more optimally wide open banking opportunities for expansion in order to create an equitable development economy on this island so strategy as a part of jakarta, the pulau seribu should have broad opportunities to be equal economically, socially and educationally so that the people there can develop optimally which in turn can create jobs and increase the income of local residents with all the strengths and opportunities that exist. wo strategy the existence of a home industry that is still managed conventionally and has not been touched by technology will open up opportunities for the transfer of food technology which will create a variety of other pulau seribu culinary delights such as culinary from marine biota or souvenir products. for banking, there must be new innovations to manage this area because there are residents who live in small islands while currently banking is still served by mobile banks. the opening of bank branch offices, both stateowned and private banks, needs to be studied by mobilizing funds to transport using special transportation threats – t (threats) economic access in terms of banking and credit which is very limited will result in slow progress both in terms of human resources and local revenue-sustainable tourism will be very difficult to realize because it faces quite heavy competition where development on land is currently faster, making it easier to reach the destination faster and affordable, for example, the jakarta-surabaya toll road is only taken 9 hours if this is not handled quickly, there will be an opportunity for an increase in the number of poor people in dki jakarta province st strategy if the economic development strategy is not quickly updated, the economy in this region will gradually experience a slowdown and have the potential to create a poor community. to anticipate this, a movement of the banking literacy community is needed so that they become a bankable society. the financial literacy of the people in this area is quite good but the same opportunities as dki jakarta are not widely given by policy makers. wt strategy with the demoraphics of education up to university level which is still low and the absence of access to banking, it shows that the level of welfare of the population in this area is still low. the role of ojk as an authority that has a financial road map for all the nation's children is to play a more active role in mobilizing and creating a younger generation who are more technology literate and more familiar with the financial industry so that weaknesses and threats can be minimized or even eliminated. https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 260 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion financial literacy and financial inclusion are not always directly proportional. for example, in the pulau seribu, citizens are literate enough to understand financial knowledge but lack the opportunity to get access to finance (inclusion). this island group is part of the dki jakarta area but is very contrary to economic development so that the facilities, pleasures and conveniences that are available in dki jakarta are not fully enjoyed by residents of this area. it takes a breakthrough, good faith and a very innovative strategy to lift this area into little jakarta. the synergy between the dki jakarta regional government, ojk and the local community will determine the realization of a sustainable finance roadmap which was initiated and became the ojk program. reference abadi, m. d., lailiyah, e. h., & kartikasari, e. d. (2020). analisis swot fintech syariah dalam menciptakan keuangan inklusif di indonesia (studi kasus 3 bank syariah di lamongan). jesya (jurnal ekonomi & ekonomi syariah), 4(1), 178–188. https://doi.org/10.36778/jesya.v4i1.298 de clercq, b., & venter, j. m. p. (2009). factors influencing a prospective chartered accountant’s level of financial literacy: an exploratory study. meditari accountancy research, 17(2), 47–60. https://doi.org/10.1108/10222529200900011 roadmap for suistable finance in indonesia, (2015). jasa keuangan, o. (2019). survei nasional literasi dan inklusi keuangan 2019. jasa keuangan, otoritas. https://www.ojk.go.id/id/berita-dan-kegiatan/publikasi/pages/survei-nasionalliterasi-dan-inklusi-keuangan-2019.aspx nugraha, u. (2018). strategy to accelerate financial literacy rate in indonesia: best practices from selected countries. jurnal perencanaan pembangunan: the indonesian journal of development planning, 2(1). https://doi.org/10.36574/jpp.v2i1.33 prasetiyani, e. (2006). analysis of the influence of the cash management service strategy on fee based income at bank x. rony, z. t. (2017). siap fokus, siap menulis skripsi, tesis, disertasi (jurus mudah gunakan metode kualitatif tipe studi kasus) (issue november 2017). santos, e. m. m., tavares, v. c., ratten, v., & tavares, f. o. (2021). the profile of the portuguese regarding the perception of financial literacy. managerial finance, ahead-of-p(ahead-of-print). https://doi.org/10.1108/mf-05-2021-0210 sarpong-kumankoma, e. (2021). financial literacy and retirement planning in ghana. review of behavioral finance, ahead-of-p(ahead-of-print). https://doi.org/10.1108/rbf-05-2020-0110 shandy, k. f. (2021). duh, tingkat melek keuangan kita kalah jauh oleh china dan india. sindo news, 1. https://ekbis.sindonews.com/read/302262/178/duh-tingkat-melek-keuangan-kitakalah-jauh-oleh-china-dan-india-1610690476 sukirno, s. (2006). ekonomi pembangunan : proses, masalah dan dasar kebijakan (2nd ed.). kencana. suryani, s., & ramadhan, s. (2017). analisis literasi keuangan pada pelaku usaha mikro di kota pekanbaru. journal of economic, bussines and accounting (costing), 1(1), 12–22. https://doi.org/10.31539/costing.v1i1.67 https://www.ilomata.org/index.php/ijtc financial literacy and inclusion analysis of the community of pulau seribu (a case study on the limitations of banking financial services in the pulau seribu) prasetiyani, sumidartini, barlian 261 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc susan, m. (2020). financial literacy and growth of micro, small, and medium enterprises in west java, indonesia (pp. 39–48). https://doi.org/10.1108/s1571-038620200000027004 zinser, b. a. (2019). retail islamic banking and financial services: determinants of use by muslims in the usa. journal of islamic marketing, 10(1), 168–190. https://doi.org/10.1108/jima-072017-0074 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, number 3 july 2021 page no. 184-193 https://www.ilomata.org/index.php/ijtc 184 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto faculty of economics, gunadarma university, jakarta correspondent: hart2862@gmail.com submitted : june 22, 2021 revised : july 15, 2021 published : july 31, 2021 abstract this paper is aimed at analyzing the impact of the covid-19 pandemic on the performance of general insurance subsector in indonesia. secondary data obtained from the indonesia financial service authority which include annual growth rate (year on year) of total asset, technical reserve, investment, equity, and net premium income for the periods between april 2019, 2020 and 2021 to march 2019, 2020 and 2021 were used in this study. using the dependent sample t-test, it is revealed that the impacts of the covid-19 pandemic on the performance of general insurance subsector were varied. the growth rates of the total asset, total investment, and net premium income of general insurance subsector significantly decreased during the covid-19 pandemic. the decline of these variables was influenced by the covid-19 pandemic. in the meantime, the growth rate of technical reserve and equity were not significantly influenced by the covid-19 pandemic. the growth rate of these variables decreased, however, the degree of decreases was not statistically significant. findings of the study indicate that further study is required to examine in more detail the factors that affect the performance of the general insurance subsector in relation to the covid19 pandemic. keywords: general insurance, growth rate, performance indicator, covid-19 pandemic. introduction financial institutions play an important role in the economic system, namely as a source of economic life in the form of providing facilities for the flow of funds in and out of funds or capital circulation. insurance is one of the oldest fields of the economy. insurance sector in indonesia—as one of the sectors in the financial industry which include banking, capital markets, pension funds, financial institutions, and other financial service institutions—plays an important role in strengthening monetary and investment activities by means of providing the long-term funds needed for the development of physical and social infrastructure while at the same time increasing the ability of business actors to take risks. the insurance sector plays an important role in maintaining financial system stability for a number of reasons, three of which are (i) insurance companies are large investors in the financial market, (ii) the increasing relationship between insurance companies and banks, and (ii) by insuring the risks they face, insurance companies protect the financial stability of households and firms. insurance, according to ghimire (2014), is a means of financial protection from events that result in loss of property (wealth or assets), loss of the head of the family as the breadwinner of the family, and loss of income due to accidents, prolonged illness, and permanent disability. the insurance sector plays a major role in increasing gdp. premiums collected by insurance companies have been recognized to have positive impact on economic development. in addition, insurance has a substantial contribution towards the balance of payments, positive financial https://www.ilomata.org/index.php/ijtc mailto:hart2862@gmail.com general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 185 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 stability as well as increases employment in the economy. these factors, in various ways and magnitudes, accelerate economic growth. on the other hand, the development and performance of insurance sectors is influenced by a number of factors. this includes, as summarized by outreville (2011), economic factors, demographic factors, social and cultural factors, and institutional and market structure factors. the world health organization (who), on march 11, 2020, declared covid-19 a pandemic. this statement is supported by data showing that more than 3 million cases have been found and more than 200 thousand deaths in 213 countries (world health organization, 2020). it realized that the infection has not only become a public health crisis but has also affected the global economy. significant economic impact has already been experienced by a number of countries across the globe due to reduced productivity, loss of life, business closures, trade disruption, and decimation of the tourism industry. like other countries, indonesia is still experiencing the social, economic and even political impacts of the pandemic. since insurance sector is, to some degree, influenced by economic factors such as, amongst others, economic growth, income per capita and unemployment rate, it is assumed that the sector—in this case general insurance sector—will be affected by the covid-19 pandemic. accordingly, the present study primary objective is to investigate the effect of the covid-19 pandemic on the development of general insurance sector in indonesia. the development indicators of general insurance sector investigated in this study include the growth rate total asset, technical reserve, investment, equity, and gross premium income. method insurance sector and the economy it has been widely recognized that insurance sector provides substantial contribution towards economic development. a number of studies such as, amongst other, arena (2006), han, li & tian (2010), sorensen & gutiérrez (2006), sawadogo, guerineau & ouedraogo (2018), concha & taborda (2014), alhassan & biekpe (2016), and din, abu-bakar & regupathi (2017), have generally proved that there are strong causal relationships between insurance sector and economic growth a nation. arena (2006) discovered that the insurance activity across 55 countries affect the economic growth. han et al. (2010) recognized that insurance sector—both life and general—through its indicator such as insurance density has positive influence on economic growth. in malaysia, it was reported by kok et al. (2010) that there was a strong co-integration and long-run relationship between national economic growth and insurance sector growth. concha & taborda (2014) discovered in 11 latin america countries that all measures of insurance sector growth i.e., insurance density, total insurance, life insurance and non-life insurance are positive and significantly affect economic growth. alhassan & biekpe (2016) found that general insurance in some african countries positively influenced the nations’ economic growth. these include algeria, gabon, kenya, madagascar, morocco, and nigeria. recently, din et al. (2017) conducted a comprehensive study on the relationship between insurance sector activity and economic development in 20 countries. they used net written premiums, penetration and density to measure insurance activity. their findings are relatively similar with the findings of the previous mentioned studies where insurance sector, either life or general/non-life, provides positive contribution towards the nations’ economic growth. the relationships between insurance sector activity and economic development investigated by all studies generally use the same patterns which is depicted in the figure which general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 186 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 follows. the insurance industry promotes economic growth through the channels as follows:(1) offering protection to firms and relieving pressure to covering large damages; (2) facilitating commercial transactions and the provision of credit by mitigating losses; (3) promoting entrepreneurial attitude, encouraging innovations, investment, the vitality of the market and of the competition; (4) increasing financial intermediation through life insurance products; and (5) enabling risk averse individuals and entrepreneurs to undertake higher return activities (brainard (2008); cristea, marcu & carstina (2014); peleckienė, peleckis, dudzevciute & peleckis 2019). figure 1. the relationship pattern between insurance sector and economic growth (adapted from brainard (2008); cristea et al. (2014); and peleckienė et al. (2019) insurance market determining factors it has been theoretically and empirically understood that growing insurance market provides positive impact on economic growth (brainard, 2008; cristea et al., 2014; peleckienė et al., 2019). on the other hand, it is necessary to, in turn, comprehend the determining factors that contribute to the development of a healthy insurance markets. brainard (2008) identified there are three most important driving factors of insurance market coverage namely rising incomes, reasonable inflation, and financial system development. the study of feyen, lester & rocha (2013) to some degree supports this statement. they revealed that in both developed and developing nations insurance—life and non-life/general insurance—development is strongly associated with per capita income, population size and density, demographic structures, income distribution, the size of the public pension system, state ownership of insurance companies, the availability of private credit, and religion. podoaba (2015) and peleckienė et al. (2019) agreed that insurance sector development which is measured by insurance density and insurance penetration has a strong association with higher per capita incomes, the development of financial system, better banking sector development, and moderate rate of inflation. this indicates that there is a strong interrelationship between economic growth and insurance sector development. it is clearly in accordance with brainard's (2008) explanations that the substantial contribution of rising incomes to greater insurance coverage and development is believed to be attributable to demand factors and supply factors or a combination between the two factors. the development of the insurance market can be measured by both qualitative and quantitative approaches. insurance penetration is a synthetic indicator that indicates the level of the insurance sector's contribution to gdp (gross domestic product) formation. this indicator is estimated by dividing the total direct premium by gross domestic product. insurance penetration, then, is the ratio between gross direct premiums and gdp. insurance density is the ratio between total gross direct premiums collected and the total population (population) of a country. the general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 187 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 ratio—insurance density—represents the average population expenditure on insurance in per year (podoaba, 2015). the covid-19 pandemic impact on the economy the covid-19 pandemic has been plaguing indonesia for more than a year since the government confirmed the first corona infection in indonesia on march 2, 2020. this pandemic not only caused a public health crisis, but also disrupted national economic activity. the strategic step taken by the government to anticipate the broader and deeper impact of the pandemic is to implement a large-scale social restriction (lssr) policy. the government's decision to implement the large-scale social restrictions (lssr) since april 2020 has had a wide impact on the process of production, distribution and other operational activities, which ultimately disrupt economic performance. the impact of the covid-19 pandemic is clearly illustrated in the rate of economic growth as seen in the following figure. figure 1. gdp growth rate year 2019-2021 (%) (source: statistics indonesia, 2021) in accordance with the data in the figure, per capita income throughout 2020 fell to idr 56.9 million (us $ 3,911) per year. in 2019, indonesia's gdp per capita reached idr 59.1 million (us $ 4,174) and 2018 idr 56 million (us $ 3,927). in the first quarter of 2021, per capita income will increase slightly (statistics indonesia, 2021). research hypothesis since the development of the insurance sector market is closely related to national economic growth (i.e., gross domestic product—gdp), it is assumed that the covid-19 pandemic which causes a substantial decline in the national economy will indirectly have a negative impact on the development of the insurance sector, including the general insurance subsector. accordingly, the hypothesis to be tested in this preliminary research can be formulated as follows. h1: the covid-19 pandemic has an effect of reducing the growth rate of total assets of general insurance subsector. general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 188 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 h2: the covid-19 pandemic has an effect on reducing the growth rate of the total technical reserves of general insurance subsector. h3: the covid-19 pandemic has an effect of reducing the total growth rate of total investment of general insurance subsector. h4: the covid-19 pandemic has an effect on reducing the growth rate of total equity in the general insurance sector. h5: the covid-19 pandemic has an effect on reducing the growth rate of general insurance net premium income. research methods secondary data which consists of total asset, technical reserve, equity, investment, and net premium income of general insurance sector for the periods between 2019 and 2021 were obtained from the indonesia financial service authority (otoritas jasa keuangan—ojk). based on these data, annual (year-over-year) growth rate of all variables studied for the whole 2019/2020 (i.e., april 2019 to march 2020) and 2020/2021 (i.e., april 2020 to march 2021) were estimated using the following formula. growth = (1) where growth = year-over-year growth; vet1 = the value of the estimated variable in the same month this year; vet0 = the value of the estimated variable in the same month last year. the proposed hypotheses were tested using the dependent sample t-test. result and discussion descriptive statistical data analysis the y-o-y growth of the studied variables such as total asset, technical reserve, total investment, total equity, and net premium income of general insurance subsector for the periods of 2019/2020 and 2020/2021 are presented in table 1. referring to the average value of growth, all variables experience a decline. total asset growth decreased by more than 20 per cent (-20.26%), technical reserve decreased by almost 17 per cent (-16.99%), total investment decreased by more than 50% (-52.70%), total equity decreased by 13.55 per cent, and a very substantial decrease was experienced by net premium income. it decreased by more than 100 per cent (-114.81%). the decline in the rate of growth experienced by total assets, technical reserves, total investment, and equity was a continuation of the decline in premium income, both gross premium income and net premium income. for insurance companies, premium income is the main source of revenue (insurance information institute, 2021). the decrease in net premium income earned by the general insurance subsector was due to, among other, the decrease in the sales volume of motorized vehicles, both motorbikes and cars. the car sales volume until march 2021 decreased by 41.83%, while the motorcycle sales volume decreased by 49% (statistics indonesia, 2021). these declines were followed by the decline in demand for motor vehicle credit insurance and motor vehicle insurance itself. table 1. growth (y-o-y) of total asset (ta), technical reserve (tr), total investment (ti), equity (eq.), and net premium income (np) of general insurance subsector in the general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 189 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 periods of 2019/2020 and 2020/2021 changes in the growth rate (y-o-y) of the studied variables between 2019/2020 (pre covid-19 pandemic) and 2020/2021 (covid-19 pandemic) are presented in table 2. table 2. changes in the growth rate (y-o-y) of total asset (ta), technical reserve (tr), total investment (ti), equity (eq.), and net premium income (np) of general insurance subsector from the periods of 2019/2020 to 2020/2021 month ta (%) tr (%) ti (%) eq. (%) npi (%) april 1.13 3.76 -4.82 1.28 -29.16 may 1.05 3.09 -2.35 3.07 -22.54 june -0.59 2.48 -4.81 0.65 -20.29 july -3.78 -1.17 -6.71 0.26 -16.59 august -2.04 -2.27 -6.88 0.38 -14.71 september -1.90 -1.66 -5.80 -1.93 -21.86 october -0.30 -0.53 -5.68 -2.25 -26.05 november -5.64 -5.12 -4.78 -8.10 -26.39 december -3.06 -0.95 -5.39 -7.67 -17.35 january -4.82 -4.33 -4.21 -6.57 -11.92 february -1.81 -4.37 -2.11 1.74 -5.06 march -5.74 -13.20 -4.87 1.82 -9.48 mean -2.29 -2.02 -4.87 -1.44 -18.45 std. dev. 2.28 4.37 1.35 3.76 7.00 source: estimated from the indonesia financial service authority (insurance statistics 2018, 2019, 2020 & 2021) the decline in the growth rate of total assets in the annual period of the covid-19 pandemic (april 2020-march 2021) an average of -2.29%. the first decline occurred in june 2020, two months after the covid-19 pandemic was declared, which was -0.59%. the largest decline in growth occurred at the end of the month from the first year of the covid-19 pandemic, i.e., 5.74%. the average decline in the growth rate of technical reserve was -2.02%. the decline in growth began to occur in july 2020, namely -1.17%. the largest decline in growth occurred at the end of the month from the first year of the covid-19 epidemic, i.e., -13.20%. total investment growth rate has begun to decline in the first month of the covid-19 pandemic (april 2020) i.e., 4.82%. the highest decline occurred in august 2020, i.e., -6.88% and the lowest was in february 2021, i.e., -2.11%. the decline in the growth rate of equity had an average of -1.44%. the decline started happening in september 2020 i.e., -1.93%, in the following two months it continued to decline until it reached the highest figure (-8.10%) in august 2020. after that the rate of decline continued month ta (%) tr (%) ti (%) eq. (%) npi (%) 2019/20 2020/21 2019/20 2020/21 2019/20 2020/21 2019/20 2020/21 2019/20 2020/21 april 10.10 11.24 11.84 15.60 9.15 4.33 8.68 9.96 26.20 -2.96 may 8.54 9.59 10.68 13.77 7.17 4.81 7.25 10.32 22.35 -0.19 june 8.24 7.65 8.66 11.14 7.93 3.12 8.79 9.44 20.49 0.20 july 10.31 6.53 10.99 9.82 8.81 2.10 9.03 9.29 19.03 2.45 august 9.33 7.29 11.66 9.40 8.25 1.37 9.45 9.83 17.37 2.66 september 9.45 7.55 11.41 9.75 8.17 2.37 10.62 8.69 18.32 -3.54 october 8.84 8.54 10.88 10.36 8.62 2.94 11.37 9.12 20.96 -5.09 november 10.67 5.03 11.61 6.49 8.52 3.74 14.26 6.16 19.55 -6.84 december 8.66 5.60 9.59 8.65 9.03 3.64 13.03 5.36 17.33 -0.02 january 10.39 5.57 12.33 8.00 7.96 3.75 13.20 6.63 8.23 -3.69 february 10.85 9.05 13.77 9.40 8.02 5.91 11.28 13.02 2.37 -2.69 march 12.99 7.25 19.25 6.05 4.00 7.19 10.59 12.41 0.62 -8.87 mean 9.87 7.57 11.89 9.87 7.97 3.77 10.63 9.19 16.07 -2.38 std. dev. 1.27 1.74 2.54 2.60 1.26 1.50 2.02 2.20 7.65 3.40 source: estimated from the indonesia financial service authority (insurance statistics 2018, 2019, 2020 & 2021) general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 190 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 to decline until finally in february 2021 there was an increase in growth of 1.74%. the decline in the growth rate of net premium income began to occur in april 2020, the first month the covid19 pandemic was declared, i.e., -29.16%. this is the degree of decline in the growth rate of the largest net premium income. the decline continued until february 2021. the rate of decline fluctuated until it finally reached -9.48% in march 2021, the last month of the first year of the covid-19 pandemic. inferential statistical data analysis the results of hypothesis testing using the dependent sample t-test—the hypothesis testing method used to analyze the impact of the covid-19 pandemic on the performance or growth of the general insurance subsector—are presented in table 3. table 3. results of the dependent t-test for the differences in the growth (y-o-y) of total asset, technical reserve, total investment, equity, and net premium income of general insurance subsector variables mean differences (%) rate of changes probability research hypothesis total asset -2.29 decreased by 2.29% 0.0067 accepted technical reserve -2.02 decreased by 2.29% 0.1535 rejected total investment -4.20 decreased by 4.20% 0.0000 accepted equity -1.44 decreased by 1.44% 0.2289 rejected net premium income -18.45 decreased by 18.45% 0.0000 accepted mean -5.68 source: ms excel output as shown in the table, all the variables studied experienced a decrease in their growth rate. the degree of decline varied between -1.44% (equity) and -18.45% (net premium income) with an average of -5.68%. it is interesting, however, that not all variables under study have a mean difference—i.e., mean before and the mean during the covid-19 pandemic—which was statistically significant. in other words, not all research hypotheses were accepted which means that not all variables were significantly affected by the covid-19 pandemic. variables which were significantly affected by the covid-19 pandemic include total asset, total investment, and net premium income. these variables were accepted at the level of significance (alpha) of one per cent (p < 0.01). the remaining variables, i.e., technical reserve and equity were discovered to not significantly be affected by the covid-19 pandemic (p > 0.05). the growth rate of total assets before the covid-19 pandemic was in the range of 8.24% (june 2019) and 12.99% (march 2020) with an average growth rate of 9.87%. during the covid19 pandemic, the growth rate of total assets ranged from 5.03% (november 2020) and 11.24% (april 2020) with an average of 7.57%. the difference in the growth rate of total assets before the covid-19 pandemic and during the covid-19 pandemic ranged from -0.30% (october) and -5.74% (march) with an average of -2.29% and a standard deviation of 2.28. the decline in the growth rate of total assets of the general insurance subsector was proven to be influenced or caused by the covid-19 pandemic. the same phenomenon is experienced by the growth rate of total investment in the general insurance subsector. the decline in the growth rate of total investment was influenced or caused by the covid-19 pandemic. the difference in the growth rate of total investment before the covid19 pandemic and during the covid-19 pandemic ranged from -2.11% (february 2021) and -4.87% (march 2021) with an average of -4.87%. similar to the rate of growth in total assets, the decline was due to the covid-19 pandemic. the growth rate of total assets before the covid-19 pandemic was in the range of 8.24% (june 2019) and 12.99% (march 2020) with an average growth rate of 9.87%. during the covid19 pandemic, the growth rate of total assets ranged from 5.03% (november 2020) and 11.24% general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 191 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 (april 2020) with an average of 7.57%. the difference in the growth rate of total assets before the covid-19 pandemic and during the covid-19 pandemic ranged from -0.30% (october 2020) and -5.74% (march 2021) with an average of -2.29% and a standard deviation of 2.28. the decline in the growth rate of total assets in the general insurance subsector was proven to be influenced or caused by the covid-19 pandemic. the same phenomenon is experienced by the growth rate of total investment in the general insurance subsector. the decline in the growth rate of total investment was influenced or caused by the covid-19 pandemic. the difference in the growth rate of total investment before the covid19 pandemic and during the covid-19 pandemic ranged from -2.11% (february 2021) and -4.87% (march 2021) with an average of -4.87%. similar to the rate of growth in total assets, the decline was due to the covid-19 pandemic. not different from total assets and total investment, the growth rate of net premium income in the general insurance subsector experienced a significant decline. the difference in the growth rate of net premium income before the covid-19 pandemic and during the covid-19 pandemic ranged from -0.02% (december 2020) and -8.87% (march 2021) with an average of 2.38%. the decline in the growth rate of net premium income was even influenced by the covid19 pandemic. the occurrence of these three phenomena can be assumed to be an indirect impact of the covid-19 pandemic. the pandemic caused a drastic decline in national economic growth (see figure 1). the subsequent impact is the decrease in per capita income, which means the decrease in people's purchasing power. the decrease in per capita income and purchasing power of the people leads to a decline in demand for insurance products. an indicator of the decline in demand for insurance products is a decrease in premium income, both net premium income and gross premium income. a decrease in premium income, no matter how small the amount of reduction is, will have an impact on the decrease in the amount of funds allocated to increase the company's assets and the amount of funds allocated for investment activities. the decline in the rate of growth in technical reserves and equity was proven not to have been caused by the covid-19 pandemic. in fact, data (see figure 1) shows that the covid-19 pandemic caused a massive decline in national economic growth indicated by a decrease in gross domestic product (gdp). this in turn decreases per capita income, which leads to a decrease in people's purchasing power. the decline in demand for insurance products is the final terminal of the decline in national economic growth. however, this phenomenon did not significantly decrease the growth rate of the two variables—technical reserve and equity. the decline in the rate of national economic growth which has resulted in a decrease in per capita income and a decrease in the purchasing power of the people has resulted in a decline in demand for insurance products. the decline in demand led to a very significant reduction in the growth rate of net premium income. it has been well known that theoretically and empirically, net premium income is categorized as the primary source of revenue for insurance companies. assets owned and funds invested by insurance companies come from premium income. slightly different rules apply to technical reserves and equity. technical reserves, which consist of premium reserves, unearned premium reserves, claims reserves, and reserves for catastrophic risk, have a complex method of determining the amount regulated by the ojk (circular letter number 27/seojk.05/2017). technical reserves represent the readiness of an insurance company in anticipating risks that will occur in the future, namely to fulfill all obligations that can be predicted to occur in the future. thus, the value of this variable must be maintained so that it does not decline sharply under any circumstances. likewise with equity where the largest components are paid-in capital and retained earnings. the value of these two variables can be controlled and, therefore, can be maintained at general insurance subsector performance in 2020/2021, does the covid-19 pandemic matter? toto sugiharto 192 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 a certain level by the manager so that it remains at the amount considered safe. the dependence of the value of the two variables on external factors macroeconomic indicators is relatively smaller than the other studied variables, especially net premium income. thus, the decline in the growth rate of these two variables—technical reserves and equity—during the covid-19 pandemic is insignificant or, in other words, these two variables are not affected by the covid-19 pandemic. conclusion covid-19 was officially declared by the world health organization a global pandemic on march 11, 2020. the virus has had unexpected economic and human consequences in many countries and, to date, has resulted in significant economic damage. the economic damage caused by the covid-19 pandemic is largely due to falling demand, meaning that fewer consumers are willing to buy goods and services available in the global economy. the decline in demand was mainly due to the decline in people's purchasing power as a consequence of the slumping rate of economic growth at the local, regional and global levels. the insurance sector, both life insurance and general insurance, in indonesia is inseparable from the economic storms triggered by the covid-19 pandemic. the drastic decline in the rate of economic growth directly results in a decrease in per capita income and, in the end, leads to people's purchasing power which is expressed in terms of decreased demand including demand for insurance products. the decline in demand for insurance products in this case general insurance is believed to have a negative impact on the performance of the general insurance subsector. however, the results of this preliminary study indicate that the impact of the covid-19 pandemic on the general insurance subsector growth rate indicator varies. total assets, total investment, and net premium income were found to be affected by the covid-19 pandemic where the growth rate of these three variables decreased significantly during the pandemic period. meanwhile, the two other variables studied were technical reserves and equity which proved not to be affected by the covid-19 pandemic. the growth rate of these two variables decreased during the covid-19 pandemic, but the rate of decline was insignificant. the practical implication of the results of this preliminary research is the need for a number of other studies that are focused on the same subject matter with a wider scope i.e. more variable and not just limited to the general insurance subsector. reference alhassan, a. l., & biekpe, n. 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(2020). who_the covid-19 pandemic.pdf. https://www.who.int/director-general/speeches/detail/who-director-general-s-openingremarks-at-the-media-briefing-on-covid-19---11-march-2020 ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 2 april 2021 page no. 122-133 https://www.ilomata.org/index.php/ijtc 122 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 effect of sales promotion on purchasing decisions indri suryani1, afriapollo syafarudin2 1feb student management study program, mercu buana university, jakarta 2 feb lecturer management study program, mercu buana university, jakarta correspondent: suryaniibindri@gmail.com submitted : march 3, 2021 revised : march 30, 2021 published : april 30, 2021 abstract to trigger consumer transactions to buy a certain product and encourage aggressive purchasing decisions. one trick is that promotion can stimulate demand for a product. with the promotion, it is expected that consumers will want to try these products and encourage existing consumers to buy products more often so that re-purchases will occur and the sales volume of a company's products will increase. promotion is an important factor in realizing the sales goals of a company. for consumers to be willing to subscribe, they must first be able to try or research the goods produced by the company, so that buyers can be sure of these goods. targeted promotion is expected to have a positive effect on increasing sales. promotion is an important aspect of marketing management and is often said to be a continuous process. with the promotion, people who are not interested in buying a product will be interested and try the product so that consumers make a purchase. the type of promotional mix is the combination of the best strategies from the variables of advertising, personal selling, and other promotional tools, all of which are planned to achieve the goals of the sales program. this study aims to examine the effect of promotion on glove purchasing decisions. respondents of this study used 150 research samples at various hospitals, namely doctors and health workers, the tools used in this study used the pls (partial least square) analysis method. the results of this research are the effect of promotion on purchasing decisions accepted. keywords: sales promotion, purchase decision, effect introduction promotion is a tool used in running marketing programs. promotion is an activity of introducing product benefits, goodness, additional benefits, low prices, and so on to consumers and prospective consumers. the purpose of the promotion is to provide information that strengthens awareness and knowledge about the products or services marketed, to encourage the increase in demand for a product from consumers, increase profits for the company because the product is favored by consumers so that sales volume increases, the company can defer product because profits increase, can stabilize sales volume. besides, the promotion also serves to influence the attitude and preferences of consumers in choosing a company's products, as well as to motivate consumers to take positive action that is to make purchasing decisions on the products offered. a trading company that sells various types of gloves under the comet brand. (hertati, mustopa, widiyanti, safkaur,2020). comet brand is one of the brands of gloves that consumers are interested in. especially those who are engaged in manufacturing industries, such as the automotive industry, food, and others. brands are important because brands become product identities to be different from competitors. competition to compete for potential customers and retain existing customers is an increasingly big challenge and must be faced by companies in marketing their products. the company must https://www.ilomata.org/index.php/ijtc mailto:suryaniibindri@gmail.com effect of sales promotion on purchasing decisions suryani, & syafarudin 123 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 increase its sales significantly for the company to exist, even in the future the company must be more advanced. (hertati, ferry, puspitawati, gantino,ilyas, 2021). to increase sales volume the company must implement relevant policies and strategies in the framework of increasingly tight business competition. one strategy that can be implemented by the company is to increase promotion and create a positive brand image in the eyes of consumers so that consumers can decide to buy the product. purchasing decisions are several stages made by consumers before deciding on the purchase of a product (kotler, 2010). in the current era of globalization, market interest is indispensable for companies in meeting customer satisfaction and marketsatisfaction. a lot of the business world makes a lot of competition. (hertati, asmawati, widiyanti, 2021). products that can obtain higher satisfaction consumers will survive in the competition in the market. every business must have advantages and disadvantages both in terms of product quality, promotion, and brand image to produce the opinion of the buyer's decision to get the goods that will create customer satisfaction. from time to time the development of the business world is very rapid, one of them in the world of marketing is very important for the progress of a company. if the company has produced an item then how the company market the product that has been produced to make a profit. therefore, companies must have creative ideas to achieve high consumer buying interest. in marketing, the product is necessary because to achieve the success of the company. the company must be able to know what consumers want and need before producing an item so that the goods that have been produced by the company can be useful to consumers (napik, 2018). the life that is lived today is very influential to the mindset of consumers towards product purchasing decisions. in these circumstances, the decision to choose an item or brand is strongly influenced by the development of human resources, product quality, promotion, and brand image that will make consumer purchasing decisions. the era of globalization promises a new business opportunity and challenge for companies in indonesia. on the one hand, the era of globalization expands the product market of companies in indonesia, and on the other hand, the situation gives rise to increasingly intense competition both between domestic and foreign companies. in competition the company must have a marketing strategy that can support in marketing comet gloves is to create a brand image and increase promotion. (syafarudin, 2016). with this promotional strategy, the company can introduce the products offered by pt. alifindo partners together with the community both through advertisements and brochures. besides, the company must also create a positive brand image so that the company can influence consumer purchasing decisions. by implementing this strategy, it is expected that the company can control the market share (syafarudin. & mulyana, 2019). so that the company can increase sales of products and increase the profit of companies. pt. alifindo is a joint partner. palm fit type gloves comet brand is one of the products. pt. alifindo mitra bersama is the most in-demand by consumers. here are the sales data from 2015 2019: table 1. sales data pt. alifindo mitra bersama period 2015 – 2019 years comet glove products (rp) 2015 16,047,119,467,90 2016 19,136,502,540,19 2017 22,570,526,917,47 2018 32,501,785,662,00 2019 27,209,153,919,00 effect of sales promotion on purchasing decisions suryani, & syafarudin 124 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 source : internal data pt. alifindo mitra bersama (2020) from the table can be known that the revenue of pt. alifindo mitra bersama has often experienced fluctuations in the last five years. although the revenue of pt. alifindo mitra bersama in 2018 increased significantly, but this was followed by a very drastic decrease in 2019. various strategies and improvements are carried out by pt. alifindo mitra bersama to increase sales of its products. including increasing the purchase of comet pt glove products. alifindo mitra bersama. kotler and amstrong (2013), marketing is the process by which companies create value for customers and build strong relationships with those customers to capture the value of customers in return. meanwhile, tjiptono (2010) defines that marketing as the function that has the most contact with the external environment, but the company has only limited control over the external environment. the company's activities in this marketing determine the direction of the company to be able to compete in the world of increasingly tight competition. marketing is an important element in the company to determine the success of a business. therefore, the company must apply marketing understanding correctly to stay afloat. according to kotler and keller (2011) suggests that: marketing is a social process in which individuals and groups get what they need and want by creating, offering, and freely exchanging valuable products with other products. marketing has two things. first, marketing is a philosophy, attitude, perspective, or management orientation that emphasizes customer satisfaction. second, marketing is a set of activities used to implement that philosophy. in fact marketing for a company is a very important factor in its role in its business operations. the ability of the company to make a profit is determined by the ability to organize all its business activities, mainly marketing. to enter the competitive market and can attract consumers, the company seeks to create buyer interest. this is clearly outlined in the scope of marketing, among others, the improvement of the quality of service in marketing. kotler and keller (2009:36) propose the concept of marketing is satisfying the needs and desires of consumers. the goal of the business is to deliver customer value to make a profit. the creation and delivery of values can include the phase of selecting a value, the phase of providing value, the phase communicating the value. choosing the right targeting strategy will determine the success of a product's marketing efforts, especially in the current very strict business climate. hurriyati (2010:49), stated that to reach the target market that has been set, then every company needs to manage its marketing activities well. companies must be able to compile and use controllable marketing variables, in anticipation of changes from uncontrollable marketing variables, as well as to influence the company's product demand. therefore, the company must be able to combine these elements in the right proportions so that its marketing mix is under the corporate environment, can satisfy the target market, and remain in line with the company's objectives in the field of overall marketing. kotler and keller (2009:172) suggest that: promotion is a marketing communication in which, the company seeks to inform, persuade, and remind consumers directly or indirectly about the products and brands sold. efforts to introduce products to the market are carried out a promotional strategy. the concept used to introduce products is promotion mix, activities that combine product excellence and persuade consumers to buy (private, 2010:349). promotional activities not only serve as a means of communication between the company and consumers but also as a tool to influence consumers in purchasing or using products according to their needs and desires (sunyoto, 2012:154). the tools that can be used to promote a product effect of sales promotion on purchasing decisions suryani, & syafarudin 125 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 can be selected in several ways, namely advertising, sales promotion, publicity, personal selling, and direct marketing called a promotional mix. according to tjiptono (2010:219), promotion is one of the determinants of the success of a marketing program. no matter the quality of a product, if the consumer has never heard of it and is not sure that the product will be useful to them, then they will not buy it. the promotional mix includes advertising, personal selling, public relations and publicity, sales promotion, and direct marketing. the promotional mix is part of marketing stimuli which are variables that can be controlled by the company (kotler, 2012). kotler and keller (2012) promotional mix cover five dimensions namely advertising, direct marketing, sales promotion, public relations, personal sales. 1. advertising. advertising is any form of mass media communication (tv, radio, magazines, newspapers) that can send a message to a large group of individuals at the same time, about a product, service, or idea. advertising becomes one of the important promotional instruments especially for companies that produce goods or services aimed at the public. 2. direct marketing. direct marketing is the company's effort to communicate directly either by e-mail, telephone, fax, or the internet with potential customers to elicit direct responses or sales transactions. 3. public relations. public relations is something that summarizes the entire planned communication, both inward and outward between a company. public relations relates to the creation of understanding through knowledge, and through activities that are expected to have a positive impact on maintaining or protecting the company or product image. 4. personal selling. personal sales are a form of direct communication between a seller and his prospective buyer. in this case, the seller attempts to assist or persuade potential buyers to purchase the products offered. 5. set goals. promotional objectives are derived from broader promotional objectives, derived from more fundamental marketing objectives developed for those products. 6. choose business promotion and sales promotion tools. companies use business promotion and sales promotion tools, they're used to gather business leads, impress customers and reward them, and motivate salespeople. 7. developing programs. planning a promotional program, marketers increasingly incorporate multiple media into a total campaign concept. first, determine the number of such incentives. second, create conditions for people to participate. third, decide the length of the promotion. fourth, the marketer chooses the means of distribution. mangkunegara (2008:3) consumer behavior is actions taken by individuals, groups, or organizations related to the decision-making process in obtaining, using goods or services economically that can be affected by the environment. studying consumer behavior not only includes consumer activities at the time of purchase but includes all activities of choosing, assessing, obtaining, and using the product. every consumer makes a variety of decisions in the search, purchase, use of a variety of products, and brands in any given period. the purchase decision is strongly influenced by the motives of the purchase where it can be because the buyer carries out the purchase only emotional considerations, such as pride, suggestion, and so on. but also buyers buy rationally as the price (daryanto, 2011:94). kotler (2013) defines the purchase decision as the process made by a customer before it comes to the purchase and subsequent post-purchase. the attitude of others reduces the alternative effect of sales promotion on purchasing decisions suryani, & syafarudin 126 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 that one likes will depend on two things, namely the intensity of negative attitudes of others towards alternatives favored by the customer and the motivation of the customer to according to the wishes of others. kotler and armstrong (2013) also stated that the purchase decision is a purchase process related to the brand to be purchased. purchasing decisions are individual activities that are directly involved in the decision-making process to make purchases of products offered by the seller. where decision making is an individual activity that is directly involved in obtaining and using the goods offered. in the decision-making process, consumers will consider various aspects before deciding to buy. ( hertati & safkaur: 2020: syafarudin, 2020). kotler and keller's (2015) purchase decision is a purchasing decision-making process that includes determining what to buy or not to make a purchase and that decision is obtained from previous activities. the purchasing decision process has stages to achieve purchasing decisions made by customers through several stages that include recognizing needs, seeking information, evaluating alternatives, purchasing decisions, and behavior after purchase. ( syaparudin & hertati. 2020). 1. need recognition. the introduction of needs is the first stage of the purchasing decision process where the customer recognizes the problem or need. the buyer feels a difference between the actual circumstances and the desired circumstances. that need can be triggered by stimulants when one's normal needs are hungry, thirsty, rising to a level high enough to be a driver. besides, the need is also triggered by external stimuli. 2. finding information. information search is a stage of the buyer decision-making process where the customer is moved to look for additional information, the customer may simply remind attention or may also seek information actively. 3. alternative evaluation. alternative evaluation is a stage of the buyer decision process where customers use the information to evaluate various alternative brands in a series of options. the way the customer starts the business evaluates the buyer's alternative depends on the individual customer and the specific purchasing situation.\ 4. purchase decision. customers make three types of purchases, namely trial purchases, repurchases, and long-term commitment purchases. 5. behavior after purchase. when customers use a product, they assess the performance of the product according to their various expectations. three assessments may arise, namely the actual performance under the expectations of causing neutral feelings, performance exceeding expectations that cause satisfaction, and performance below expectations that cause dissatisfaction. 6. cultural factors. culture is a factor that determines the basis of one's desires and behaviors. while the subculture includes nationality, racial groups, religions, and geographical areas. almost all human beings exhibit social stratification, most often in the form of social class, a relatively homogeneous and durable part of society. 7. social factors. social factors such as a group of references, family, and social status influence a person's purchasing behavior. reference groups are groups that have a direct or indirect influence on one's attitudes or behaviors. while the family is the most influential primary reference group. consists family of parents and siblings. from parents, one gets an orientation towards religion, politics, and economics, a sense of personal ambition, self-esteem, and love. effect of sales promotion on purchasing decisions suryani, & syafarudin 127 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 8. factor personal. personal characteristics that influence buyer decisions include age and stage in the life cycle, occupation, and economic circumstances, personality and self-concept, as well as value and lifestyle. buyer characteristics and decision-making processes lead to certain purchasing decisions. the task of marketers is to understand what is happening in the buyer's awareness ranging from the presence of external stimuli to the emergence of buyer purchase decisions (lembang, 2010:14). consumer behavior will determine the decision-making process in their purchase, the process is a problem adjustment approach consisting of five stages conducted by consumers, the five stages are problem recognition, information search, alternative assessment, decision making, and behavior after purchase. promotional activities not only serve as a means of communication between the company and consumers but also as a tool to influence consumers in purchasing or using products according to their needs and desires (sunyoto, 2012:154). the main purpose of the promotion is the modification of consumer behavior, informing, influencing and persuading, and reminding the target consumer about the company and the products or services it sells. every company that does something activity certainly has a purpose. promotion is one of the variables in the marketing mix that is very important implemented by the company in marketing products. tjiptono (2008:229) states that sales promotion is a form of direct persuasion through the use of a variety that can be arranged to stimulate the purchase of products immediately and increase the number of goods purchased by customers. according to zaini's research (2013), showing that promotions have a positive relationship to purchasing decisions, this result is in line with research conducted by purwosembodo (2014), which means that companies that promote in some media used can attract interest from prospective consumers, so it can be concluded that the more often companies conduct promotional activities will be a concern of consumers and prospective consumers. promotion that gives the most influence is information by word of mouth, while the lowest influence is on direct marketing. based on the results of the research conducted by the author of the influence of sales promotions that good on purchasing decisions. h1: effect of sales promotion on a purchase decision. picture: conceptualresearch, 2021 promotion of sales suitability of product needs different prices reason for purchase purchase decision effect of sales promotion on purchasing decisions suryani, & syafarudin 128 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 methods data processing techniques in this study using the sem with partial least square (pls) method in which data processing uses the smartpls 3.0 program. the purpose of pls is to find optimal predictive relationships that exist in the data. analysis with pls-sem uses two important stages, namely measurement models and structural models. the data in the measurement model is evaluated to determine its validity and reliability level. measurement model testing (outer model) is used to determine the specific relationship between latent variables and manifest variables, these tests include convergent validity, discriminant validity, and composite reliability. respondents in this study were all doctors and hospital health workers in indonesia. the number of respondents used as a sample in this study as many as 150 respondents using google form. hasil dissemination of questionnaires against 150 respondents, 80 respondents who returned questionnaires and 20 respondents no answers respondents located in bekasi, west java, 15 respondents from the online community instagram (cometsaftyofficial) and 5 respondents from the online community facebook (comet fan pages). results and discussion convergent validity aims to determine the validity of each relationship between an indicator and its latent construct or variable. to test convergent validity is used outer loading value or loading factor. an indicator is declared to meet the convergent validity which is said to be high or in either category if the outer loading value is 0.70. however, according to chin quoted by ghozali (2015)stated the outer loading value between 0.5 to 0.6 is considered sufficient to qualify convergent validity. table 2 convergent validity test results variable leave indicator code outer loading ≥0,50 description p1 0.863 valid p2 0,896 valid sales promotion p3 0,808 valid (x1) p4 0,817 valid p5 0,822 valid p6 0,721 valid purchase decision kb2 0,816 valid (z) kb3 0,824 valid kb4 0,774 valid based on table 2 above, shows that all loading factor values have given the aboverecommended value of 0.50. so the indicators used in this study are valid or have met the convergent validity requirements. discriminant validity testing, reflective indicators can be seen in the cross-loading between the indicator and its construct. ghozali (2015:39) states that one indicator declared valid or declared to meet the discriminant validity of the cross-loading value of the indicator on its variable is compared to other variables, such as table 3, follows: table 3 discriminant validity test results (cross loadings indicator sales promotion purchase decision x1 0,863 0,625 x2 0,896 0,731 x3 0,808 0,569 x4 0,817 0,621 effect of sales promotion on purchasing decisions suryani, & syafarudin 129 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 indicator sales promotion purchase decision x5 0,822 0,662 x6 0,721 0,653 x7 0,658 0,745 x8 0,809 0,688 x9 0,764 0,708 x10 0,691 0,652 x11 0,632 0,569 x12 0,721 0,653 x13 0,658 0,745 x14 0,645 0,816 z15 0,619 0,824 z16 0,546 0,774 z17 0,488 0,608 z18 0,524 0,471 z19 0,587 0,503 ofthe 20 0,595 0,524 ofthe 21 0,587 0,587 z22 0,619 0,652 z23 0,546 0,652 z24 0,488 0,652 z25 0,524 0,652 z26 0,587 0,652 z27 0,595 0,652 z28 0,619 0,652 z29 0,546 0,652 ofthe 30 0,488 0,652 source: smartpls output of processed data (2021) based on table 3 above shows that the correlation value of the construct with its indicator is greater than the correlation value with other constructs. thus it can be concluded that all constructs or latent variables already have a good discriminant validity in arranging their respective variables, where the indicators on the construct indicator block are better than the indicators in the other blocks. discriminant validity tests can also be performed by looking at the ave root for each construct which should be greater than the correlation with other constructs, which will be viewed from the criterion fornell-lacker table. table 4. discriminant validity (fornell-lacker criterion) test results variable sales promotion purchase decision promotion 0,823 0,785 purchase decision 0,791 source: smartpls output of processed data (2021) based on table 4 ave root results of each intended construct is greater than the correlation with other constructs which means indicator indicators used in this study meet the criteria discriminate validity criteria. table 5 ave test results variable average variance extracted (ave) sales promotion 0,677 purchase decision 0,625 source: smartpls output of processed data (2021) effect of sales promotion on purchasing decisions suryani, & syafarudin 130 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 based on the feed-in table 5 above, it is known that the ave value for each variable has a value of > 0.5. the ave output results indicate that the ave value is good for each construct because it has qualified convergent validity. and therefore there is no convergent validity issue on the model being tested. so that testing can be done at a later stage. composite reliability testing and cronbach's alpha aim to test the reliability of an instrument in a research model or measure internal consistency and its value should ≥ 0.60. if all latent variable values have both composite reliability and cronbach's alpha values ≥ of 0.70. it is barati, construct has good reliability or questionnaires used as a tool in this study, has been reliable and consistent ghozali (2015:41) table 6 composite reliability and cronbach's alpha test results variable composite reliability cronbach's alpha description promotion 0,926 0,904 reliabel purchase decision 0,869 0,800 reliabel source: smartpls output of processed data (2021) based on table 6 above, it is known that all variables have qualified composite reliability and cronbach's alpha because it has a value of ≥ 0.70. so it can be concluded that the overall construct has good reliability or questionnaires used as tools in this study have been reliable or consistent and can be done further analysis. inner model testing is the development of concept-based models and theories to analyze the relationship between exogenous and endogenous variables, which has been described in a conceptual framework. the inner model analysis is carried out to ensure that the structure model built is robust and accurate. testing of the structural model was conducted by looking at the value of r-square which is a test of a goodness-fit model. stages of testing against structural models (inner model). the goodness of fit model (gof) described an overall model conformity rate that calculates the residual squares of the predicted model compared to the actual data introduced bytenenhaus (2004) in ghozali (2015:83). this gof index is a single measure used to validate the combined performance between the measurement model (outer model)and the structural model (inner model). the gof index value is derived from the average communalities index multiplied by the r2 value of the model. from the calculation of gof above, it can be known that the result is 0.633 of the result can be concluded that the performance between the measurement model and the structural model can be said to be fit because it has met the standard above 0.38. the coefficient of r-square determines (r2) to assess how much influence independent latent variables have on dependent latent variables. the r-square value is 0 to 1, a value of 0.67 indicates that the model is well categorized (chin, 1998). when r-square is closer to 1, independent variables provide all the information needed to predict dependent variable variations. on the contrary, the smaller the r-square, the more limited the ability of independent variables to describe dependent variable variations. the r-square value has the disadvantage that the rsquare value will increase every time there is the addition of one independent variable even though the independent variable has no significant effect on dependent variables. based on the data processing that has been done, obtained the value of r-square as follows: table. 7 r-square test results endogenous variables r-square purchasing desperation (z) 0,695 source: smartpls output of processed data (2021) effect of sales promotion on purchasing decisions suryani, & syafarudin 131 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 based on the data shown in table 7 indicates that the model on the purchase decision variable can be said to be strong because r square has a value of 0.7 which is 0.695. while the structural model also indicates that the variable model of the independent latent variable influence model (sales promotion) on the purchase decision gives the r-square value of 0.695 which can be interpreted that variable construct purchase decision that can be explained by the variable sales promotion of 69.5% while 30.5%is explained by other variables beyond the researched. table 8 hypothesis test results direct influence results variable original sample (o) sample mean (m) standard deviation (stdev) t statistics (| o/stdev|) sales promotion →thedecisionofthe purchaser 0,276 0,262 0,154 1,636 source: output processing with smartpls 3 2021 hypothesis (h1) was rejected because the t-statistic value of 1,636 is smaller than 1.96 with an original sample estimate of 0.276 meaning that the promotion has a positive but insignificant influence directly on the purchase decision. these results are in contrast to the results of research conducted by abshor et al. (2018) which concludes that if the promotion is attractive, the purchase decision will be increased. conclusion sales promotion is very important in affecting consumers. this reinforces the concept that "promotion is one of the determining factors of the success of a sales program. quality product, if the consumer has never heard of it and believes that the product will be useful, then the product will never buy it. consumers making purchase decisions are a collection of several organized decisions. in the purchase decision, six purchase decisions are consisting of product choice, brand choice, dealer choice, purchase amount, time of purchase, and payment method. in deciding the purchase, consumers can form five sub-decisions such as: deciding which promotion to buy, which dealer to choose to buy the product, the number of goods to be purchased, the time of purchase of the product, and the payment method to be used. references alim, d. 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(2015). pengaruh kualitas produk terhadap nilai pelanggan dan kepuasan pelanggan dan dampaknya pada loyalitas pelanggan apotek dela semarang. proceeding fakultas ekonomi. pakpahan, h.h. 2019. analisa pengaruh kualitas produk, harga, dan ketersediaan produk terhadap keputusan pembelian dan implikasinya pada kepuasan konsumen obat sakit kepala. wulandari.w, hertati.l, antasari.r, nazarudin .(2021). the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance. ilomata international journal of tax & accounting (ijtc) 2, (1) 17-36 http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 313-322 313 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 alian natision1, cindy anggraini2, novianita rulandari3, redjeki agoestyowati4 1234institut ilmu sosial dan manajemen stiami, jakarta, indonesia 1correspondent: aliannatision07@gmail.com received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: natision, a., anggraini, c., rulandari, n., agoestyowati, r.(2021 analysis of valueadded tax restitution on exports at pt. rama global in 2019. ilomata international journal of tax & accounting 2(4),313-322. https://doi.org/10.52728/ijtc.v2i4.379 abstract: pt rama global is a trading company that carries out preliminary restitution under certain conditions. the purpose of this paper is to find out how the preliminary restitution with certain requirements in the context of tax planning is carried out by pt. rama global, how are the obstacles faced in making tax refunds, and what efforts are being made to deal with these obstacles. the method used is a qualitative method with data collection techniques, namely interviews, observation, documentation, and triangulation. based on observations, pt rama global is an export company that input tax is greater than the output tax. pt rama global chose to restitute the tax with a preliminary restitution, but there will be some refunds that cannot be withdrawn, so pt rama global confirms the transaction with the counterparty. keywords: value-added tax, restitution, export this is an open access article under the cc-by 4.0 license. introduction taxes are things that are often encountered in everyday life, one of which is export taxes. export tax is a tax that will be imposed by the government for an export activity. export tax is also a tax on goods or services payable when an item leaves the exporting country or when the service is rendered to a foreign national. export taxes consist of export duties, export benefits and exchange rate taxes. the export tax policy of each country varies depending on which tax system is adopted by that country. (solleder, 2020; zhang et al., 2021) export taxes are generally levied by countries producing raw materials. differential exchange rates are often used to increase tax revenues from the export sector of raw materials, such as crude oil, palm oil, rubber, and various mining products. export taxes are also influenced by international cartels which have determined several categories of export taxes. (rehm et al., 2021; tran & wende, 2021) export taxes are an effective protection measure for domestic industries. the governments of norway and sweden impose taxes on the export of forest products in order to protect the domestic milling, woodworking and paper-making industries. meanwhile an export tax is imposed by the government of india on untanned leather to encourage the tannery industry in india. however, in some countries, the export tax imposed is designed to protect the industry of the importing country and not the exporting country. (federici et al., 2020) https://www.ilomata.org/index.php/ijtc mailto:aliannatision07@gmail.com https://doi.org/10.52728/ijtc.v2i4.379 analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 314 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in indonesia, where the export activities can be in the form of exporting taxable goods or bkp and taxable services or jkp. in general, the export tax is often imposed on export activities related to taxable services. even so, there are still some categories of taxable goods that can also be subject to export tax. an entrepreneur who becomes a taxpayer, of course, has tax obligations including export taxes. (rokhmawati, 2021) the tax collection system that inspirits the indonesian taxation law is a self-assessment system, where taxpayers are trusted to have an active role in fulfilling their tax obligations, namely calculating, depositing, and reporting taxes owed. concerning the self-assessment system, the taxation law gives several rights to the taxable entrepreneur (pkp) in carrying out and fulfilling their tax obligations which can be broadly grouped into four main rights, namely: first, the right to receive npwp (taxpayer registration number); second, the right to make compensation or restitution; third, the right to object and appeal; and fourth, the right to correct and extend the deadline for submitting a tax return (spt). (amir et al., 2013) taxpayers (wp) who are taxable entrepreneurs (pkp) who have insufficient payment of valueadded tax (vat) are required to pay off the unpaid tax, while taxable entrepreneurs (pkp) who have tax overpayments can compensate for the overpayment to the next tax period or apply for the excess of taxes or restitution payment. (rahwani et al., 2019) the proposal for restitution of value added tax can be made during each tax period, but only the taxable entrepreneur can export the tangible taxable goods, submit the taxable goods or taxable services to the vat (value added tax) collector, submit taxable goods or taxable services that are not collected vat (value added tax), exports of intangible taxable goods, exports of taxable services or are still in the non-production stage, other than taxable entrepreneurs can only make restitution at the end of the financial year. (hajawiyah et al., 2021) pt rama global is one of the companies that always apply for vat restitution because their business activities are exports. pt rama global is a company that has a high level of competitiveness because it has an extensive business network in both local and international areas. pt rama global's high competitiveness can be seen from its export activities which have covered the international region. pt rama global's export activities are subject to vat on output tax, thus causing vat overpayments. (harjo, 2019; mardiasmo, 2016) the excess payment of value-added tax that was experienced by pt rama global is submitted for a return request or called restitution. restitution carried out by pt rama global aims to smooth business activities related to the cash flow of taxpayers. (rahayu, 2010) from the description above, the phenomenon that occurs is the number of tax restitution carried out in indonesia, one of them is pt rama global, and therefor the author needs to conduct a research entitled analysis of value-added tax restitution on exports at pt. rama global year 2019. in this research, the author limits the scope of the problem to only vat refunds on export activities in the context of tax planning at pt rama global in 2019. (asriati & sasmito, 2016) based on the subject matter above, the purpose of this research is to analyze the restitution of value-added tax on exports; analyze what obstacles are faced in carrying out value-added tax restitution on exports, and analyze the efforts to deal with the constraints of vat restitution on exports carried out by pt rama global in 2019. based on previous research entitled anticipating value-added tax restitution for export and import activities at pt ykk zipco indonesia, shows that pt. ykk zipco indonesia calculates vat on export and import activities starting from data input, reporting until submission for restitution is correct and in accordance with the vat law no. 42 of 2009 (rahmadani & munawaroh, 2017) . the strategy in anticipating the occurrence of vat restitution that was carried https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 315 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc out starting in 2013 with several policy changes, so the strategic decisions done by the company in 2016 were to increase the efficiency and effectiveness of company. the tax planning that was carried out by pt. ykk zipco indonesia is very influential in anticipating vat restitution, this can be seen in the company's compliance as taxpayers with government regulations, by completing every document required in the tax audit conducted by the directorate general of taxes (dgt). to anticipate the occurrence of vat restitution, tax planning carried out by the company is to use a bonded zone facility, based on the regulation of the minister of finance of the republic of indonesia number 147/pmk.04/2011. furthermore, a research entitled time value of money analysis of value-added tax restitution settlement process (case study of pt xy corporate taxpayer). the results of the study concluded that pt xy's vat refund occurred because of its main business activities were in the export sector with completion through a complicated and time-consuming inspection process step. the refund requested by pt xy for the long term makes the refund received related to the time value of money. comparison of pt xy's restitution if the money is received more quickly, then it is a time deposit with an interest rate without risk. bank indonesia, has a higher value than the return on money that has been received in the long term. the refund process required is practical, easy and accurate, requiring good preparation and assessment by pt xy with a new policy on vat refunds. (ariawan et al., 2016) meanwhile, research entitled restitution of vat on export activities in the context of tax planning (case study of pt. y.i), concludes that vat refunds carried out (p.t yi) in nominal and time terms have implications for cash flow. if the vat refund application is successful with a small correction rate, the cash flow can run normally and vice versa. in the beginning, the tax planning efforts made to minimize the company's cash flow burden has not been optimal, therefore efforts were made to improve tax planning both internally and externally. (samudra, 2008) research entitled analysis of the value-added tax restitution (vat) restitution process in indonesia concluded that the vat restitution process in indonesia as regulated in the law and has not been carried out online causes complicated procedures related to vat restitution, both internal or external dgt, the amount of workload borne by the tax authorities, and the length of the vat restitution to the taxpayer. the vat restitution process in indonesia is regulated by law is necessary to deregulate the regulation therefore that the vat restitution process will be faster. in addition, vat restitution should be made online to reduce the period and the procedure itself. (octavia et al., 2015) following research entitled the effect of value-added tax restitution on value added tax revenue at the palembang ilir barat pratama tax office, it had a conclusion that value-added tax restitution did not affect value-added tax revenue at the pratama tax service office, palembang ilir barat. this is because when submitting an application for restitution, not all applications for restitution are approved by the pratama tax service office, palembang ilir barat. if there is a refund of the nominal amount of the overpaid tax, it does not affect the amount of existing value-added tax revenue. this is because the percentage of taxpayers who submit applications for restitution that are not approved is smaller than the percentage of taxpayers who submit applications for restitution that are approved. (jusmani & qurniawan, 2016) the latest research on tax refunds, through a research entitled input value-added tax refund policy for taxable enterprise experiencing production failures or policy of value-added tax refund for taxable entrepreneurs experiencing production failures, concluded that there is a difference between the law, general concept and legal nature of vat. on the other hand, the regulation was revised to prevent misuse of the vat refund mechanism. problems that may arise https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 316 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from this new regulation are problems related to regulatory consistency in the basic concept of vat, and economic disincentives that can be experienced by taxable entrepreneurs from certain industries. therefore, at a macro level, this policy can hamper investment growth in indonesia. (oktaria, 2011) restitution is an overpayment of value-added tax that occurs because the amount of input tax paid is greater than the amount of output tax collected in a tax period. government regulation no. 3 of 2002 article 1 point 5 restitution is compensation given to the victim or the family by the doer or a third party, it can be in the form of returning property, payment of compensation for loss or suffering or reimbursement of costs for certain actions. law on general provisions of taxation article 17b tax restitution is the right of the taxpayer (the agency) if the value of the input tax is greater than the output tax. it is very unfair when generalizing all taxpayers (the agency) that they commit tax evasion. what if the person applying for restitution is a taxpayer (agency) who has good intention? with this stigma and image, there are doubts among taxpayers (agencies) (especially export companies) when they will apply for their rights (tax refunds). (djuanda & lubis, 2011) related to that matter, several companies have complained about the difficulty of applying for vat restitution at the directorate general of taxes. whereas in article 17b of the law on general provisions of taxation (uu kup), it is regulated that the directorate general of taxes must issue an overpaid tax assessment letter (spklb) no later than 12 months since restitution application received in full. if the directorate general of taxes does not decide within that period, the application is considered granted, and the skplb is issued no later than 1 (one) month after the end of the period. then, in paragraph (3), it is also regulated that if the directorate general of taxes is late in issuing skplb, the taxpayer will be given an interest rate of 2% per month, calculated from the end of the period. so, the kup law has provided legal certainty for taxpayers (corporates) (business actors) to apply for restitution. however, in practice, there are many factors hamper the process of paying restitution, such as bureaucracy, the interpretation of several articles in the taxation law, which can be vary, especially those concerning requests for completeness of documents or company data, and so on. vat restitution has a legal basis for law no. 28 of 2007 and strengthened by minister of finance regulation (pmk) 192/pmk.03/2007 and later changed to pmk number 74/pmk.03/2012 and then it was changed again to pmk number 198/pmk.03/2013, and the latest pmk number 39/pmk.03/2018. the provision in the form of law is the government effort to inform the requirements of taxpayers/pkp in applying for vat restitution. meanwhile, the pmk which has been revised up to three times is a procedure for the implementation of the preliminary implementation of tax overpayments or acceleration of tax refunds/vat restitution. preliminary restitution or in this case the acceleration of vat refunds is needed so that the pkp gets legal certainty that the excess vat that has been deposited into the state can be submitted for restitution more quickly. (sukardji, 2019) based on previous research, the author tries to explain how the process of the occurrence of tax overpayment restitution. restitution is an overpayment of value-added tax that occurs because the amount of input tax paid is greater than the amount of output tax collected in a tax period. productivity restitution of decisions that stipulate the existence of tax overpayments, decisions in tax payments are tax assessments overpaid (skplb) which after being issued after going through an inspection process, examination of mass notification letters is required to be carried out to provide legal certainty on the status of tax payments from taxable employers. the directorate general of taxes will issue a decision letter on preliminary return of excess tax, namely a decision letter that determines the amount of the preliminary return on excess tax for certain https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 317 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxpayers. based on article 7 paragraph (1) of the regulation of the minister of finance number 72/pmk.03/2010, the process of refunding the excess tax must be completed within 1 month after the complete application is received. method this study uses a qualitative approach, which requires relevant and accurate data and information to support the research results. the kind of research used is descriptive qualitative, where the type of descriptive qualitative research is carried out by determining the data that will be used, collecting the data that has been determined, then grouping it, interpreting, and analyzing the data, and comparing it with theories, then a conclusion is taken and then gives a conclusion and it will be continued by suggestion. the descriptive method is a method in examining the status of a group of people, an object, condition, system of thought, or events in the present time. this type of research tried to explain certain social phenomena. research can be divided into several types, based on differentiating criteria, including the final function and approach. this research aims to determine how the value-added tax restitution of pt. rama global, and how tax planning is used by pt. rama global in implementing tax restitution, by determining the data that will be used, and then collecting the data that has been determined, then grouping it, interpreting, and analyzing the data and comparing it with theories, then drawing a conclusion, and then providing suggestions. based on the place of implementation, this research is field research, namely visiting the institution that is the object of research by asking for data and an explanation of what is being studied. the definition of operational is a definition given to a variable by giving meaning or specifying an activity or justifying an operation needed to measure the variable. in this research, what is operationalized is the restitution of overpayment of taxes on exports by pt. rama global; obstacles in doing restitution of tax overpayments on exports at pt. rama global; and efforts to overcome obstacles in refunding tax overpayments on exports to pt rama global in 2019. data collection techniques used in this research are interview, observation, documentation study and triangulation. the author conducted unstructured interviews with people (employees) from the company. this interview was conducted by open interview. observations that was made by the author aim to support the distribution of questionnaires. in this research, the informants interviewed were finance managers at pt. rama global, tax staff of pt. rama global, tax service office staff, and academics. through observation techniques, the author will observe vat restitution and tax planning adjusts by selecting relevant informants. the author also collects data from various printed media that discusses the tax restitution of pt. rama global. this study uses three kinds of triangulations, firstly, triangulation of data sources in the form of information from places, events, and documents as well as archives containing notes related to the data in question. second, triangulation techniques or data collection methods are derived from interviews, observations, and documents. third, triangulation of data collection time is when triangulation or data collection methods are carried out. the validity of the data in the study was tested using triangulation techniques, namely triangulation of sources, data collection, and time. the data analysis technique used in this study follows the data analysis technique. data analysis consists of three stages, namely data reduction and data presentation, and conclusion. data https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 318 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc obtained from the results of research data collection in the form of interviews, observations, and documentation in the field objectively, then reduced by summarizing, choosing the main things, focusing on important things, looking for themes and patterns. data reduction refers to the selection process, focusing on simplification, abstracting, and “rough” data information that occurs in written field notes. data reduction is a form of analysis that sharpens, classifies, directs, discards unnecessary data, and organizes data in such a way that conclusions can be drawn and verified. furthermore, the reduced data is presented in the form of sentences, pictures/schemas, networks, and tables as narratives. finally, conclusions are drawn and verification is carried out. what is meant by data verification is an attempt to find, test, re-check or understand the meaning, regularities, patterns, explanations, plots, cause, and effect, or prepositions. while conclusions can be in the form of a description or description of an object that was previously dim or dark so that after being examined it becomes clear, it can be a causal or interactive relationship, hypothesis, or theory. result and discussion as an objective tax, vat is charged on the delivery of goods and services. as indirect taxes, these two types of taxes ultimately become the burden of the final consumer who consumes goods and services. theoretically, the imposition of indirect taxes can be delegated the tax burden to other parties, in this case, consumers or buyers. meanwhile, the entrepreneur is a person or entity appointed by law to carry out tax obligations. therefore, in the vat provisions, those who become taxable entrepreneurs are entrepreneurs (sellers) as vat subjects. pt. rama global in the vat law is included in the subject of vat in the sense of pkp. before running its business, pt. rama global has established itself as a pkp. this was clarified by the tax staff of pt. rama global who stated that pt. rama global confirmed itself as a pkp in 2018. this was done to follow the tax rules and obligations that is applied in indonesia. in addition, to avoid sanctions and ask for the rights from the director-general of taxes on obligations that will be or have been carried out by pt. rama global that is in s field of export company that exports all kinds of products. in the vat law, the value-added rate is 0%, so that pt rama global often experiences tax overpayments when reporting spt. this is because the input tax is greater than the output tax. in this case pt. rama global chose to refund its tax overpayment. restitution can be done by checking and can also be done by researching based on the tax laws and regulations. pt rama global carries out its restitution by choosing preliminary restitution. the procedure for submitting a preliminary tax restitution is by submitting restitution in the preliminary restitution column on the vat spt. reporting the spt to the dgt web or kpp registered and can be done online, then the kpp will research/check the reporting of tax invoices on each transaction opponent, and then issue a letter tax overpayment decision (skplb). the tax overpayment that is refunded will be processed by the director-general of taxes for a minimum of 1 month for preliminary restitution and a maximum of 1 year for audits until the issuance of a tax assessment letter. obstacles faced in conducting preliminary restitution with certain conditions at pt. rama global includes the differences in input tax corrections on the acquisition of domestic taxable goods or services, late reports from vendors in collaboration with pt. rama global so that there is a difference between the nominal stated on the sppkp and the spt which causes the restitution https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 319 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cannot be liquidated and there is a fictitious tax invoice. from the statement above, it can be seen that pt rama global which performs preliminary restitution often cannot disburse tax refunds due to differences in data between the tax authorities and taxpayers. efforts made by pt rama global to overcome the obstacles that occur are by reconfirming the vat tax reporting included, whether it has been reported or not, then asking the bpe and appendix a2 to be evidence and resubmitting it. from the above statement, we can know that pt. rama global deal with the problems that exist in the company is by confirming to the vendor or transaction partner, and aski for electronic receipt evidence(bpe) along with attachment a2 and then visit the kpp to check the correctness of attachment a2 provided by the counterparty. from the research results obtained, it is known that pt. rama global is a taxable entrepreneur who must fulfill his obligations, namely, he is obliged to report his business to be confirmed as a pkp; obliged to collect vat and sales tax on luxury goods or ppnbm payable; must deposit the vat accrued in case the output tax is greater than the input tax can be credited. besides that, pkp is also required to deposit ppnbm payable; obliged to report taxes in the spt (tax return) period of vat, and must issue a tax invoice for each submission of bkp/jkp. the rights of taxable entrepreneurs such as crediting taxes, making tax compensation or tax restitution, objections and appeals. as a pkp, pt. rama global often experiences tax overpayments, this happens because pt rama global is a company engaged in the export sector where according to the vat law the tax rate for exports is 0%, so that it becomes the main cause that input tax is greater than output tax. this tax overpayment is always experienced every time, but the tax overpayment does not reach 1 (one) billion, so pt. rama global chooses to restitute taxes with certain requirements restitution criteria by the provisions of article 17d of the kup law. based on pmk 39/pmk.03/2018 concerning procedures for preliminary refund of excess tax payments, it is stated that the tax restitution is subject to certain conditions. pt. rama global is a taxable entrepreneur who submits a periodic value-added tax return with an overpayment of less than 1 billion so that pt. rama global performs vat restitution with certain conditions. to obtain a preliminary return. in making restitution, it takes 1 (one) to 3 (three) months for the issuance of the decision letter for payment of excess tax (skpkp). after the issuance of the skpkp, the director-general of taxes will send an account request letter and pt. rama global sends an account notification letter to the registered kpp and waits for 1 (one) month for payment of restitution. the following is a tax refund mechanism. figure 1. tax refund mechanism with certain requirements procedure procedures pre-refund application taxpayers apply fill in the preliminary return column on the spt kpp conducts research on kpp does not issue skpkpp and kpp issues skpkpp • the correctness of writing and calculating taxes • evidence of credited withholding or collection of income tax • credited/self-paid input taxreturn column on the spt https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 320 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in making restitution, pt. rama global also needs to obey the applicable laws and regulations, starting from depositing taxes and reporting taxes that must be based on the provisions so that the restitution that we apply for can be fully refunded. from the results of the research obtained by the researcher, it was found that the obstacles that occurred in carrying out preliminary restitution with certain conditions: there is a large number of data differences between the tax authorities and pt rama global. the difference of the data occurred due to several multiple counterparties of pt. rama global who do not report their tax invoices or reports taxes in different months, resulting in delays in the restitution process. from the interview research studied, the researcher also found that there was a risk pt. rama global. this risk arises due to the frequent occurrence of tax restitution at pt rama global so that there is a greater opportunity for the director-general of taxes (dgt) to make fiscal corrections from the tax audit process. the monitoring mechanism for value-added tax (ppn) is the reporting of periodic tax return (spt) from certain taxpayers (wp) reflecting transactions with counterparties. this allows the dgt to trace transactions between parties, to ensure that all taxes owed have been deposited into the state treasury. in solving the problems faced by the company for restitution that can't be disbursed, pt. rama global confirms the transaction counterparty by sending attachments of related documents and notifying confirmation to the counterparty via e-mail by requesting electronic receipt proof (bpe) along with attachment a2; make an application letter to confirm the non-conformity; confirm by telephone about data discrepancies; visit the counterparty company to ask for further confirmation. in handling fictitious tax invoices, we can scan barcodes on tax invoices by using the barcode scan e-invoice application or use the available tax invoice scan tools. efforts made during a tax audit are that pt rama global must be ready to face this audit by preparing complete documents such as tax invoices relating to vat overpayments for which a refund restitution is requested, including supporting documents, namely evidence of receipt/payment of money for the purchase/sale of goods, evidence of delivery/receipt of goods. furthermore, for bkp export attachments, it is necessary for peb which has been given export approval by the authorized djbc official, ocean b/l or master b/l or airway bill, photocopy of export draft, or other evidence of receipt of money from the bank that has been legalized by the bank concerned, certification from certain agencies such as the ministry of industry and or the ministry of trade. conclusion restitution of export value-added tax (vat) at pt. rama global occurs because the input tax is greater than the output tax, this is because the vat rate for exports is 0%. so that pt. rama global is experiencing tax overpayment. excess tax payments that occur at pt. rama global is restituted by pt. rama global with restitution method with certain requirements under 1 billion. the obstacle that occurs during restitution is the difference in data between the tax authorities and the taxpayer, causing a tax correction on value added tax (vat) refunds, which is because the transaction partner has not reported the tax or has reported it in a different month. efforts made by pt. rama global is confirming the value-added tax reporting data listed on the tax invoice to the relevant transaction partner. researchers suggest to do storing supporting documents as evidence for every transaction, especially those closely related to the request for restitution properly in a special room for https://www.ilomata.org/index.php/ijtc analysis of value-added tax restitution on exports at pt. rama global in 2019 natision, anggraini, rulandari, agoestyowati 321 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc approximately 5 (five) years or as long as it has not been checked by the fiskus; provide opportunities for tax staff to attend both formal and informal education in order to improve the competence and professionalism of human resources in the tax sector; selection and placement of competent human resources (hr) in the field of taxation; there is special attention and direct support from top management and other related departments so that the process of applying for restitution does not experience delays or corrections in the examination; make good use of the tax facilities provided by the directorate general of taxes that can help stabilize the company's cash flow, such as applying for the use of the "uncollected vat" facility in its export activities or trying to become a compliant taxpayer. reference amir, h., asafu-adjaye, j., & ducpham, t. 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(2021). analyzing sentiments and attitudes toward carbon taxation in europe, usa, south africa, canada and australia. sustainable production and consumption, 28, 241–253. https://doi.org/10.1016/j.spc.2021.04.010 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 13-21 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery ratih kumala1, ibrahim abu bakar2 1institut ilmu sosial dan manajemen stiami, indonesia 2abubakar tatari ali polytechnic, nigeria correspondent: rhaty07@gmail.com1 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: kumala, r., bakar, i, a (2022). evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery. ilomata international journal of tax & accounting.3(1), 13-21. https://doi.org/10.52728/ijtc.v4i1.422 abstract: until now, indonesia still faces covid-19 and is still in the process of economic recovery. however, the directorate general of taxes (dgt) was able to achieve the target of 100% tax revenue according to the target mandated in the 2021 state budget even before the close of the year. at the end of 2021 tax incentives that have been utilized in the framework of the national economic recovery program have reached idr 63.16 trillion (100.5%) from the ceiling of idr 62.83 trillion. this achievement is thanks to the contributions of all taxpayers who continue to be committed to paying taxes. on this achievement, the government continues to show improvement efforts that must be maintained momentum, in order to continue to the 2022 state budget. the purpose of this study is to find out and analyze the evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery. this research uses descriptive qualitative methods through literature studies. in the evaluation of the utilization of tax incentive policies during the covid-19 pandemic, it was explained that this tax revenue is one of the many state revenues that participate in supporting the nation and the country. keywords: covid-19, tax incemtive, recovery. this is an open access article under the cc-by 4.0 license. introduction currently almost all countries in the world are experiencing the covid-19 pandemic. this pandemic has a very bad impact on the countries that experience it, because it not only harms health but also affects the economic side of countries around the world, not least indonesia (resmi & barmawi, 2022). like other developing countries, indonesia is particularly vulnerable to the covid-19 pandemic (barbier & burgess, 2020). indonesia was less responsive in the early days of covid-19 (fadhal, 2020). while many countries in asia and western europe have tightened the flow of people in and out to prevent covid-19, indonesia had not yet implemented significant policies by continuing to enforce normal human inflows from abroad (sparrow et al., 2020). to prevent the spread of the covid-19 outbreak, policies are needed by implementing health protocols in the form of physical distancing and social restrictions because there is a link between covid-19 control efforts and economic impacts (baldwin & tomiura, 2020). this policy choice https://www.ilomata.org/index.php/ijtc mailto:r https://doi.org/10.52728/ijtc.v4i1.422 evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc carries significant consequences of reducing community and business activity. output then came under pressure, prompting the economy to continue slowing into recession (malahayati et al., 2021). to prevent a deeper recession, the government needs to issue stimulus policies (wiryawan, 2020). policy priority is given to mitigate the negative impact on vulnerable community groups and the business world so as not to lead to bankruptcy. stimulus policies are also carried out so that the decline in welfare felt by the community does not have a negative impact outside the economy, such as social and political turmoil (muhyiddin & nugroho, 2020). for that, president joko widodo asked some parties for the enactment of the lockdown of course has an impact on the government economic sector (anderson et al., 2020). these pandemics have become a significant threat to human physical, mental health and dramatically affected daily life with psychosocial implications on a global scale (kurniawan, 2021). the impact of the covid-19 pandemic on public health is completely beyond everyone's imagination (kurniawan, 2021). pandemics have hit more than 210 countries, and most of these countries are still under a variety of infection control measures, including lockdown, quarantine, mandatory use of mask, and public distance (wang et al., 2021). the highest state revenue comes from tax revenues. the government is still trying to achieve tax revenue targets by revising tax incentives by 2020. the government needs state revenue through taxes to help in handling the covid-19 outbreak and on the other hand the government also wants to relieve people who are experiencing economic difficulty due to this outbreak (sariwati, 2021; wantasen et al., 2021). to mitigate these negative impacts, governments can implement economic policy packages such as fiscal, monetary, and financial (gourinchas, 2020). one of the government's efforts in the field of taxation in the national economic recovery is the existence of tax incentive policies. this tax incentive policy aims to help move the wheels of the country's economy which is experiencing rapid decline due to the covid-19 pandemic (andrew & sari, 2021). the tax incentive policy contained in the regulation of the minister of finance (pmk) number 86/pmk.03/2020 on tax incentives for taxpayers affected by the covid-19 pandemic provides several tax incentives, including income tax 21 borne by the government for workers earning a gross income of no more than idr 200 million per year, the final income tax of msmes, exemption of income tax 22 import, reduction of installment of income tax 25 by 30 percent and restitution of value added tax (vat) accelerated (kumala & junaidi, 2020). any tax subject who meets the criteria as a taxpayer under the provisions of taxation is inseparable from the obligation to pay taxes, report as well as administrating taxation. because of the importance of tax contributions in state revenues, taxpayers have a large role and responsibility in implementing the provisions of the tax law and its implementation regulations (hannan et al., 2022). tax reform that began in 1983 implemented a system of tax administration with a selfassessment system where the system can increase people's participation in the fulfillment of tax obligations that are a vital source of state revenue. self-assessment system gives taxpayers the authority to calculate, pay, and report their own tax obligations. in the implementation of selfassessment system, fiscus has a role in providing services, construction and supervision of the fulfillment of tax obligations by taxpayers (hasanah & indriani, 2013). taxes are one of the main sources of state revenue that can be used in financing indonesia's national development, namely educating the life of the nation to create the general welfare, protect https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc all indonesian blood, and help carry out world order and lasting peace (kumala & junaidi, 2019). referring to law number 17 of 2003 concerning state finance, state revenue is all revenues derived not only from taxation, but including state income that is not in the tax category and in the form of grants as state revenues sourced from within and from abroad (aditya, 2021). the characteristics of taxes include taxes levied based on the strength of the law and the rules of implementation (pendit et al., 2021). the government enacted law number 6 of 1983 about general tax (ketentuan umum perpajakan/kup) and continued to be updated until last with law number 28 of 2007 (resmi & barmawi, 2022). the object of the tax is income, so to regulate specifically regarding income tax the government sets out law number 36 of 2008 (undangundang pajak penghasilan) which since it was issued has first undergone the fourth change as an income tax law (saniananda, 2020). since the end of 2019 state revenues decreased when the covid-19 pandemic hit the world and affected health, social and economic problems including in indonesia, in the second quarter of 2020 indonesia experienced growth of minus 5.32% compared to the previous year, and is expected to enter into an economic recession in the third quarter of 2020 (muhyiddin & nugroho, 2021). the government decided to extend the tax incentive policy in the national economic recovery program 2021 (sarjono, 2021). this policy is contained in pmk number 9/pmk.03/2021 and is valid until june 30, 2021. this tax incentive policy consists of: (a) government-borne income tax 21 waivers; (b) the final income tax of msmes; (c) the final income tax of construction services; (d) exemption from the collection of income tax 22 imports; (e) reduction of the installment of income tax 25; and (f) value added tax (vat) incentives. this tax incentive provided by the government aims to encourage people's purchasing power, meet imports of raw materials production for sectors still affected by the covid-19 pandemic, and to help the company's cash flow to return to business activities. but on the other hand, the extension of these incentives will have implications for the eroding of state revenues (aulawi, 2020). but in the first half of 2021 tax revenues grew 7.60% or by idr 647.70 trillion or 52.68% against the 2021 state budget target when compared to the same period in 2020. the increase in the realization of this revenue is thanks to the active contribution of taxpayers throughout indonesia (padyanoor, 2020). in the state budget scheme, this receipt is then channeled in various forms of financing including assistance in the framework of the covid-19 pandemic (saniananda, 2020). one form of distribution of the national economic recovery program which becomes an instrument for handling health and economic recovery. realization of national economic recovery program in 2021 to july 16, 2021 reached idr 277.36 trillion from a ceiling of idr 744.75 trillion (indahsari & fitriandi, 2021). therefore, in mid-2021 the government decided to extend the tax incentive policy again in the national economic recovery program. this policy is contained in pmk number 82/pmk.03/2021 and valid until december 31, 2021. this tax incentive policy consists of: (a) government-borne income tax 21 waivers; (b) the final income tax of msmes; (c) the final income tax of construction services in the program to accelerate the improvement of irrigation water use (p3-tgai); (d) exemption from the collection of income tax 22 imports; (e) reduction of the installment of income tax 25; and (f) adjustment of preliminary return incentives of a maximum of idr 5 billion for vat. https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc until now, indonesia still faces covid-19 and is still in the process of economic recovery. however, the directorate general of taxes (dgt) was able to achieve the target of 100% tax revenue according to the target mandated in the 2021 state budget even before the close of the year. as of december 26, 2021, dgt has recorded a net amount of tax revenue of idr 1,231.87 trillion. thus, tax revenues have met the mandated target in the 2021 state budget of idr 1,229.6 trillion and there will even still be an increase until the close on december 31. this achievement is thanks to the contributions of all taxpayers who continue to be committed to supporting the nation and state by paying taxes. director general of taxes suryo utomo reported that a total of 138 tax service offices (kpp) throughout indonesia managed to achieve the target of tax revenues of more than 100% of the target set in each office. a total of seven regional offices also managed to contribute more than 100% achievements, namely regional offices dgt south jakarta i, regional offices dgt big taxpayer, regional offices dgt special of jakarta, regional offices dgt north sulawesi, central, gorontalo, and north maluku, regional offices dgt west kalimantan, regional offices dgt south and central kalimantan, and regional offices dgt north jakarta. that is, the achievement of tax revenues that continue to show improvement efforts must be maintained momentum, in order to continue to the 2022 state budget. one of the focus of the country is adrift of tax policy. some countries issue various tax relaxation policies to predict the use of tax incentive policies in the wake of the covid-19 outbreak. including indonesia which implements various tax relaxations. from the description, the purpose of this study is to find out and analyze the evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery. method this research procedure uses qualitative procedures (creswell, 2017). qualitative research is a procedure for collecting and analyzing non-quantitative information with the aim of studying social bonds and reality stories felt by informants (nunfam, 2021). qualitative research is research that means to understand events about what is felt by the research theme such as attitudes, assumptions, encouragement, actions, and others in a holistic way, and with the method of stories in the form of words and language, in a special condition that is natural and by using various natural ordinances (sugiyono, 2019). in this research, researchers sorted using a type of descriptive research, is to make a tower of events whose operationalization revolves around the collection of information, information work and understanding of information that is given meaning in a logical way by always grasping the principles of common sense as a result of creating holistic conclusions. information can be through literary research, by reading and observing and analyzing various references, both in the form of archives, newsletters, publishing information from the ministry of finance or from legal websites. https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion evaluation of tax incentive performance 2020 the ministry of finance noted that tax revenues in 2020 contracted quite deeply by 19.7% (yoy). this is as a result of the covid-19 pandemic as well as the provision of tax incentives that provide significant pressure, where these incentives contributed 22.1% to the decrease in tax revenues. but tax facilities that aim for business recovery are actually underutilized widely by business actors. the realization of tax incentives until december 2020 was recorded at idr 55.03 trillion or only 56.7% of the total budgeted. figure 1. realization of tax incentives in the economic recovery program 2020 (idr trillion) source: ministry of finance, 2022 from figure 1 explains that the lowest incentive realization is the tax incentive income tax 21 borne by the government, which is recorded only utilized at 6.3% of the total budget. likewise, the final income tax of msmes which was only realized in 2020 amounted to 28% or idr 0.67 trillion. some of the things that are noted for the low realization of tax incentives in 2020 include, first there is the issue of trust in tax authorities that by utilizing tax incentives can pose risks. as stated by tax observer centre for indonesia taxation analysis (cita) that the employee tax incentive scheme only benefits employees, while for companies this scheme is less attractive because it is considered to pose risks. seeing the tax system is already in the form of reporting, then there is a possibility that taxpayers can be checked for the future. second, socialization is less effective than the government to the community. third, the sluggish economic conditions make the utilization of tax incentives does not run optimally because tax incentives are not what businesses need. businesses are more in need of consumer demand. evaluation of tax incentive performance in 2021 in the midst of an economy that is still beset by uncertainty due to the pandemic in 2021, of course, it will still erode tax revenues. reflecting from 2020, the amount of tax incentive contribution to the decrease in tax revenue is expected to continue in 2021. in addition, according to the oecd (2020) the provision of tax incentives when pandemics are vulnerable to abuse and not on target. https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 18 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this is because policy making is generally done in a short time and the limitations of tax authorities in conducting surveillance in times of pandemic. the oecd pointed out that providing employee tax incentives provides a loophole for some companies to create fictitious data related to the number of employees and the amount of wages given. the mode could potentially escape checks carried out by tax authorities due to lack of supervision due to remote working patterns carried out by tax authorities. in addition to the risk of misuse of incentive facilities, there are risks to data security systems caused by remote working patterns. the policies of a number of countries that enforce work from home make data transmission done remotely using information technology, which allows access by unauthorized parties (resti pratiwi & liana, 2021) taxes are the backbone of the state budget in the handling of pandemics and economic recovery. however, in the midst of economic uncertainty, taxes that should be a source of revenue, are dedicated as incentives to help taxpayers. therefore, the government helps with incentives, later when the normal economy of the community pays taxes again so that we can use it for development. in supports national economic recovery programs, fiscal policies such as tax incentives are very helpful to maintain cash flow through government-borne income taxes. the money used to pay taxes is used to become working capital, for everyday and the hope is that it can survive even as things improve later when the economy recovers can pay taxes even more strongly. on july 1, 2021, the government has established the minister of finance regulation number 82/pmk.03/2021 on changes to the minister of finance regulation number 9/pmk.03/2021 on tax incentives for taxpayers affected by the corona virus disease pandemic 2019. with pmk-82, taxpayers can take advantage of incentives until december 2021. tax incentives that have been utilized in the framework of the national economic recovery program have reached idr 63.16 trillion (100.5%) from the ceiling of idr 62.83 trillion. the allocation of the utilization of tax incentives is as follows: 1. income tax 21 borne by the government for 87,086 employers. 2. exemption of import income tax 22 for 9,601 taxpayers. 3. preliminary return (restitution) of vat for 2,778 taxpayers. 4. vat borne by the government property for 942 sellers. 5. luxury tax cars for 6 sellers. 6. income tax final msmes borne by the government for 134,922 msme taxpayers. 7. reduction in installment income tax 25 for 58,057 taxpayers. 8. decreased agency income tax rate for all taxpayers. 9. domestic vat rental outlet for 885 taxpayers. 10. bm by the government for import value amounted to rp4.51 trillion. this achievement is thanks to the contributions of all taxpayers who continue to be committed to supporting the nation and country by paying taxes. the achievement is tax revenue that continues to show improvement efforts must be maintained momentum, in order to continue to the 2022 state budget. the challenge to next year is the voluntary disclosure program on january 1. there is a harmonization of taxation regulation act (undang-undang harmonisasi peraturan https://www.ilomata.org/index.php/ijtc evaluation of the utilization of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery kumala and bakar 19 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc perpajakan) with all including april 1 value added tax (vat) being 11%, and there is economic recovery through continuously strengthened monitoring. it is expected that the economic recovery will secure the 2022 state budget which is the final limit of the deficit above 3% as law number 2 of 2020. conclusion the implementation of tax incentive policies during the covid-19 pandemic in the framework of national economic recovery is very effective because it has reached 100.5% or idr 63.16 trillion from the ceiling of idr 62.83 trillion. the allocation of tax incentive utilization is obtained from (1) income tax 21 borne by the government for 87,086 employers. (2) exemption of import income tax 22 for 9,601 taxpayers. (3) preliminary return (restitution) of vat for 2,778 taxpayers. (4) vat borne by the government property for 942 sellers. (5) luxury tax cars for 6 sellers. (6) income tax final msmes borne by the government for 134,922 msmes taxpayers. (7) reduction of installment income tax 25 for 58,057 taxpayers. (8) decrease in the agency income tax rate for all taxpayers. (9) domestic vat rental outlet for 885 taxpayers. (10) bm by the government for import value of idr 4.51 trillion. this achievement is thanks to the contributions of all taxpayers who continue to be committed to supporting the nation and the country by paying taxes that continue to show improvement efforts must be maintained momentum, in order to continue to the 2022 state budget. reference aditya, g. n. i. a. 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(2019). metode penelitian kuantitatif kualitatif dan r&d (i). alfabeta. https://cvalfabeta.com/product/metode-penelitian-kuantitatif-kualitatif-dan-rd-mpkk/ wang, c., wang, z., wang, g., lau, j. y.-n., zhang, k., & li, w. (2021). covid-19 in early 2021: current status and looking forward. signal transduction and targeted therapy, 6(1), 114. https://doi.org/10.1038/s41392-021-00527-1 wantasen, m. a., sondakh, j. j., & suwetja, i. g. (2021). analisis penerimaan pajak sebelum dan sesudah adanya insentif pajak bagi wajib pajak yang terdampak covid-19 selama masa pandemi pada kpp pratama manado. going concern : jurnal riset akuntansi, 16(4), 387–397. https://doi.org/https://doi.org/10.32400/gc.16.4.37587.2021 wiryawan, i. w. (2020). kebijakan pemerintah dalam penanganan pandemi virus corona disease 2019 (covid-19) di indonesia. percepatan penanganan covid-19 berbasis adat di indonesia, 179–188. https://e-journal.unmas.ac.id/index.php/webinaradat/article/view/1180 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 78-90 78 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia novianita rulandari1 , setya haryati2, victor van kommer3, dwi agustina4, diana prihandini5 1,2,4,5institut ilmu sosial dan manajemen stiami, indonesia 3the international bureau of fiscal documentation (ibfd), netherlands correspondent: novianitarulandari@gmail.com1. received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: rulandari, n., haryati, s., kommer, v, v., agustina, d., prihandini, d. (2022). the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia. ilomata international journal of tax and accounting, 3(1), 78-90. https://doi.org/10.52728/ijtc.v4i1.428 abstract: the archives management system (simpan) application is a breakthrough application innovation developed by the bekasi madya tax office to improve the performance of its employees in the context of monitoring and deepening tax revenue by improving the management and administration of taxpayer files and supervision of paying spt (spt) effectively and efficiently. the purpose of this study was to analyze the level of effectiveness of using the simpan application. this study uses a qualitative descriptive method with data collection through observation, interviews, and documentation. the theory of effectiveness according to campbell is used as a reference in this study. the results of the study indicate that the application of the simpan application has been effectively carried out at the bekasi madya tax office. keywords: effectiveness, simpan application, service, supervision this is an open access article under the cc-by 4.0 license. introduction currently, taxation is the largest contributor to indonesia's state revenue. in 2019, the figure generated from tax revenues was 1,332.66 trillion rupiahs, although the tax ratio this year is still at 10.7%. meanwhile, in 2020, the figure generated from tax revenue is 1,072.1 trillion rupiahs. from the data on the realization of the 2020 apbn, the realization of tax revenues was recorded at rp. 1,072.1 trillion or a 19.6% contraction compared to the realization in 2019. this realization was 89.4% of the apbn target from perpres 72 or there was a shortfall of around rp. 126.7 trillion (kementerian keuangan, 2021; masdi, 2021). since 2020 the whole world has been faced with the challenge of adversity, especially in the economic sector due to the covid-19 pandemic where this has an impact on the economy both macro and micro (unicef, 2021). indonesia is one of the countries affected by the covid-19 pandemic with the largest number of people infected with covid-19 in the world (haryanto, 2020; shalihah, 2020) https://www.ilomata.org/index.php/ijtc mailto:novianitarulandari@gmail.com https://doi.org/10.52728/ijtc.v4i1.428 the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 79 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the movement restriction policies issued by the central government and regional governments to reduce the spread of this epidemic will certainly have a direct impact on the national economy (muhyiddin & nugroho, 2020). many entrepreneurs stop their business operations because they are unable to pay for employees and office operations. national economic growth grew minus 1.1 percent, the minister of finance of the republic of indonesia at the time said that the indonesian economy had entered the recession stage (rahmah, 2020). even though the government issued a policy of limiting this activity, the economy in indonesia, both at the center and at the regional level, must continue (górska et al., 2021; wiryawan, 2020) . and to finance economic activities, the government needs funds whose largest contribution is still based on tax revenues which nationally account for about 75% of total state revenues (anggraini et al., 2021). meanwhile, the tax is a mandatory contribution from the community to the state based on the law where the community does not get a direct contra-performance and this levy is used to finance state development to achieve public welfare (aditya, 2021; harjo, 2019). in addition to public awareness of the fulfillment of their tax obligations, among others, the lack of willingness to pay taxes, which is partly because people do not know the concrete form of rewards from the money spent to pay taxes (latofah & harjo, 2020). one form of supporting the achievement of tax revenue targets is by utilizing information technology in the form of computerized applications where information systems are built, developed and used to carry out service processes to the community through an integrated system.targets (hajawiyah et al., 2021; pendit et al., 2021). the utilization of information technology carried out by the tax office is no longer a luxury but has become a necessity (bai et al., 2021; syafitri, 2018). the efficiency, effectiveness, and productivity of an public and private organizations company work either at the individual, group level, or at the organization or company level as a whole can be improved by the use of these application technologies (wulandari, 2021). in improving services for its taxpayers, the bekasi madya tax service office, west java, indonesia created an internal computerized application that connects between divisions and sections in the office which is named the archives management system application (simpan). through the simpan application, it is expected to be able to increase speed and accuracy in providing services to the public, especially taxpayers, and internally it is also hoped that this application can improve employee performance to support dgt to used to carry out service processes to the community through an integrated system targets and ultimately foster public confidence, in the end it fosters public trust, especially better management of taxpayer administration. management some phenomena that occur in connection with this simpan application are: 1. the dgt's internal public service applications are still separate from each other applications are still separate from one another. 2. in terms of administration of taxpayer documents, there is no standardization of filing, the old process of copying borrowing taxpayer documents, requires good resources in terms of filing, the unavailability of a taxpayer document filing system, and taxpayer document borrowing that is not by procedures. https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 80 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. in the completion of the overpaid spt (sptlb), a partial application, there is a risk of delay in the completion of the sptlb examination, causing the risk of interest compensation and sanctions to tax officials. 4. there is inefficiency in the use of paper that should have been done digitally. because sophisticated information technology is the key to the successful implementation of tax policy and is expected to be able to improve employee performance in the agency's efforts to achieve the goal of achieving tax revenue targets, in line with this the authors designed the objectives of this study as follows: 1. to analyze the effectiveness of the application of the archives management system application (simpan) in improving the performance of the bekasi madya tax office employees. 2. to analyze the obstacles to the application of the archives management system application (simpan) in improving the performance of the bekasi madya tax office employees. 3. to analyze efforts to overcome obstacles to the application of the archives management system application (simpan) in improving the performance of the bekasi madya tax office employees. several theories related to this research include the notion of effectiveness. according to mardiasmo, "effectiveness is a measure of the success or failure of achieving goals an organization achieves its goals. when an organization achieves its goal then the organization has been running effectively. effectiveness indicators describe reaching consequences and impacts (outcomes) of the program's outputs in achieving program objectives. the bigger the contribution the resulting output towards the achievement of the specified goals or objectives, the more effective the work process an organizational unit” (mardiasmo, 2016) according to campbell, there are four dimensions those affect the level of effectiveness of an activity, namely 1. the success of the program has two entities, namely the program in the simpan application and improving employee performance. 2. the success of the target, focusing on the output to be achieved, has two entities, namely so that the simpan application can be used by all employees and the function of making this simpan application for employees of kpp madya bekasi. 3. satisfaction with the program, which has two entities, namely employee satisfaction at kpp madya bekasi as users of the simpan application and the effectiveness of the simpan application in improving employee performance at kpp madya bekasi, and the fourth dimension, namely the achievement of overall goals by looking at the extent of the target from in terms of quality, quantity and time achieved by the institution, namely the achievement of predetermined targets and future expectations with the simpan application. the four dimensions of campbell's theory will be operationalized in this study (shabrina, 2014). the filing management system (simpan) application is a breakthrough application innovation developed by kpp madya bekasi to improve the performance of bekasi madya tax office employees in the context of monitoring and extracting tax revenues by improving the management and administration of taxpayer files, monitoring spt overpaid, reporting https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 81 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc compliance taxpayers in submitting spt effectively and efficiently. applications are also built as a means of storing, searching, monitoring, and supervising digital legal documents/products, taxpayer applications as well as other data and documents to support a reliable, easy, and efficient office administration system trusted (irkham et al., 2021). related to the administration and supervision of taxpayer compliance with the following principles: a. to support the modernization of information technology of the directorate general of taxes, the system that is built must improve the performance of all sections with the application standards of the head office of the directorate general of taxes; to support the modernization of information technology directorate general of taxes, the system built must be able to support each other with standard head office applications directorate general of taxation; b. this internal access security system is integrated with the information system of the directorate general of taxes which is used externally, in the sense that it can be accessed by taxpayers the security system for access to the system is integrated with the information system of the directorate general of taxes; c. the system that is built does not duplicate the existing system head office of the directorate general of taxes and is an invention new, original. the simpan application which is an internal application at the bekasi madya tax office consists of menus related to administration and supervision, namely: the simpan application consists of related menus administration and supervision, namely: 1) administration 1. the e-office application for correspondence is for recording incoming and outgoing mail faster and saving incoming mail documents and documents digital out-of-office letters; 2. taxpayer library application in the form of document digitization taxpayers (digital archiving), make it easier to search for taxpayer documents, make it easier search for legal products that have been published, support employee performance related to the use of data/documents both internal data in the dgt and data borrowed from taxpayer for tax audit purposes; 3. application of e-reporting in the form of mentoring inspection. to make a mentoring report easier and faster, monitoring implementation tax auditor functional field inspection; 4. postal delivery/delivery applications, namely for creating a mail delivery register by post more easy and fast, and monitoring of delivery decisions and other letters using the post in the section service; 2) supervision 1. overpaid spt dashboard application, as innovation supervision of the maturity of annual report of overpaid taxes (spt lb) with integrated data from directorate information system general tax (sidjp) and report application tax audit (alpp); https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 82 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. spt reporting compliance dashboard application for monitoring the submission of the taxpayer's annual spt and make it easier for employees, especially account representative to do supervision of taxpayer compliance level; 3. tax invoice confirmation application to answer confirmation of tax invoices/proof of deduction on time, and follow-up tracking of invoice confirmation answers withholding tax/proof; 4. application for free certificate application, application for objection, application for extension submission of spt, application for overbooking, and warrant for paying excess tax (spmkp) namely to monitor the application of the taxpayer and tracking and viewing application documents until with legal products published easily because already digitized; 5. the service satisfaction dashboard application is the monitoring of taxpayer satisfaction with services provided by the integrated service center officer (tpt) and as material for evaluating the performance of tpt officers; 6. monitoring application for issuance of tax assessment letters to monitor the issuance of tax assessment letters and other legal products so that they are not past due. by using the theoretical approach mentioned above, in completing the work, especially the maturity of tax refunds, taxpayer compliance in submitting the annual tax report (spt report) can be achieved, so that the performance of the bekasi madya tax office employees can increase. in addition, the management and administration of taxpayer files are digital, so the performance of bekasi madya tax office employees in completing work is expected to increase. the factors that influence effectiveness according to campbell are associated with the implementation of this simpan application are 1. the success of the program has two entities, namely the program in the simpan application and improving employee performance. 2. the success of the target, focusing on the output to be achieved, has two entities, namely so that the simpan application can be used by all employees and the function of making this simpan application for employees of kpp madya bekasi. 3. satisfaction with the program, which has two entities, namely employee satisfaction at kpp madya bekasi as users of the simpan application and the effectiveness of the simpan application in improving employee performance at kpp madya bekasi, and the fourth dimension, namely the achievement of overall goals by looking at the extent of the target from in terms of quality, quantity and time achieved by the institution, namely the achievement of predetermined targets and future expectations with the simpan application. campbell theory will be appointed as a reference in this study, by presenting the research conceptual model as follows: https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 83 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1 conceptual model source : campbell (shabrina, 2014) several previous studies that were also used as references in the preparation of this scientific paper include : 1. hertiwi, who researched about application system information management for productivity boost work on service communication and informatics (diskominfo) district north lombok 2020 (journal of science administration public, vol.9 no.1, 2020). hertiwi's research results show that the implementation of the management information system at the communication and information office of north lombok regency has been effective. judging from the use of the website in disseminating information to the public, it can be faster, more economical, and cheaper, so that it can reduce the department's budget expenditure. there are two supporting factors for the implementation of sim, namely internal factors and external factors, while the inhibiting factors in implementing this sim are lack of budget, lack of aspirations from the community, and lack of expert resources. then efforts to increase employee work productivity at the communication and information office of north lombok regency, are still less effective, several obstacles were found, namely the lack of employee motivation, employees lack expertise, salaries that are not appropriate/low and office facilities are not adequate (hertiwi, 2020) 2. research conducted by putri dwi february (2019), entitled effectiveness of regional management information system application application (simda) finance at the tanah datar regency dprd secretariat office. this study focuses on how effective the simda application is in finance at the tanah datar regency dprd secretariat to help the financial management process produce financial reports accurately, in a quality, and goals success program success overall goal achievement satisfaction with program effort obstacle employee performance effectiveness of application of the save application https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 84 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc timely. measurement indicator effectiveness used in this study, among others, the success of the program, target success, satisfaction with the program, and overall goal achievement. the results of this study show that the financial simda application has been successfully implemented at the secretariat since 2009. this application is very effective because makes the financial management process easier and reports can be generated quickly and accurately. but the effectiveness of its implementation in the secretariat of the tanah datar regency dprd is still not maximum because there are still several inhibiting factors such as there are still many employees who cannot operate simda so some goals have not been achieved to the maximum, yet holding special training on the use of simda for employees, still lack of hardware availability as well as network disruption that often hinder the process of using simda finance (febria et al., 2018). 3. previous study shows the effectiveness of the implementation of the personnel management information system at the regional staffing and education and training agency which is looking at the four criteria, namely adaptation, integration, and undeveloped production effectiveness. this is evidenced by observations and interviews that have been done, the adaptation and motivation criteria have not been effective because at the agency the number of operators who are able to operate applications with available technology is still very limited, and provision of training for non-routine data processing staff and has not been effective in providing technological facilities and infrastructure information, in this case, is still lacking a computer for processing data (diani, 2017). 4. the next previous research shows that integrating information technology into business processes, for example, enterprise resource planning system (enterprise resource planning), supply chain management system (supply chain management), and inventory management, ignoring modernization human management systems such as performance management, can be a misguided investment (chen et al., 2019). this is a form of implementation of information technology in many public institutions. regardless of how good the technology was and how big is the investment, if the people working on the system information technology is inefficient, a business cannot be productively (tray et al., 2020). therefore, the efficiency of information technology systems can only deliver results if there is a high level of efficiency from people who use the system. institutions that have implemented and automated its performance system has benefited from the system in terms of cost savings, speed service delivery, productivity, and quality of service offered. to ensure the impact of the performance management system supported by information technology within the organization; researchers investigate the use of performance management systems in zambian public institutions and how the system impacts efficiency and productivity (mapoma, 2017). the similarity in several previous studies with this research is that they both examine management information systems, while the difference is in the theory used as a reference, place, and year of research. https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 85 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method a descriptive qualitative research approach will be used to analyze the problems in this study because the authors want to explore in detail and intensively the policies of the modern tax administration system to improve taxpayer compliance. in addition, another reason the author chooses a qualitative approach is the study of the literature in this study and the pattern of inductive research thinking. this research is not to test the truth of a theory, but to conclude what happened (sugiyono, 2019). the type of research used in this research is descriptive research which describes and explains in detail the phenomena or problems that exist in the status of human groups, objects, conditions, and systems of thought or events in the present. this type of research seeks to explain certain social phenomena (creswell, 2017) . the data collection techniques used were conducting observations, conducting interviews with several informants, and documenting some data that were considered important and relevant to this research. the data collection technique used is to make observations, conduct interviews with several informants who come from elements of the simpan application users, namely employees of the bekasi madya tax office, taxpayers as recipients of services from tax officials and academics, and documenting some data that is considered important and relevant to this research. this technique is by what was stated by sugiyono that "data collection methods are the methods used by researchers to collect data." the data analysis technique is an activity that begins with collecting data, then choosing the validity of the data that has been collected, choosing a particular coding to be effective in conducting research, and drawing a decision to do research. in carrying out data analysis techniques, the authors use the techniques proposed by miles & huberman, namely through the stages of data reduction, displaying data (with verbatim encoding), and concluding. the data reduction stage is sorting and selecting the collected data, both data from interviews and data from documentation with the aim that the author will choose valid and relevant data to the research to be carried out, so not all the collected data will be used as research data. the next stage is to display the data in this case the author uses verbatim coding to facilitate data analysis and the last stage is to draw conclusions based on the analysis carried out. in conducting interviews, the writer chose several informants with the criteria that the informants knew and understood about the problems to be analyzed, also the informants were needed to explore the information that became the basis and the theoretical design that was built. in determining informants in qualitative research, it is possible to use three methods, namely the purposive procedure (deliberate), the quota procedure, and the snowball procedure (bungin, 2017). purposive sampling is the author's choice in selecting informants. the selected informants represent 10 people from bekasi madya tax office, 2 taxpayers, and 1 person from academics. the informants from the tax office consist of the implementing level to the section head, the informants from the taxpayers consist of taxpayers who are directly related to the services and supervision carried out by the bekasi madya tax service office, while the academic https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 86 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc element functions as a theoretical counterweight to statements resulting from interviews with informants who come from elements of the tax office and taxpayers. in analyzing the data that was collected from interviews with informants, the authors used verbatim coding solely to facilitate the data analysis process. this study focuses on the effectiveness of using an internal application at the bekasi madya tax service office, west java province, indonesia, which is named the simpan application. the author uses campbell's theory of effectiveness because the variables described in the theory are by the research theme that the author is examining. in researching a policy, the author needs to examine how the overall achievement is, how the target is successful, how the program is successful, and how satisfied the program has been implemented. result and discussion in conducting the analysis the author refers to the effectiveness theory campbell which has 4 variables, namely success of the program, the success of the target, satisfaction with the program, and the achievement of overall goals by looking at the extent of the target from in terms of quality, quantity and time achieved by the institution with the discussion of the results as follows: 1. how is the effectiveness of the archives management system application (simpan) in improving the performance of bekasi madya tax office employees. a. from the analysis that has been carried out using verbatim coding about the success of the archives management system application (simpan) program in improving employee performance the bekasi madya tax service office concluded that the simpan application had been used by employees more than 80% of bekasi madya kpp employees who served in the field of service to taxpayers and the success of the simpan application program was monitoring the annual report of overpaid taxes regarding restitution, digitizing work, better document archiving, making it easier to find documents and monitoring progress. work faster, and a good tax application should be able to save time, effort, and space and reduce usage paper. b. the conclusion that can be drawn from the verbatim analysis about the success of the archives management system application (simpan) application in improving the performance of the bekasi madya tax office employees is that this application has achieved the desired target because with this simpan application the work of the implementers and supervisors become more effective and efficient, both in terms of time effectiveness at work as well as in spending on work implementation as well as better archive management, in terms of utilization of taxpayer document archives. implementers and supervisors becomes more effective and efficient, management archives are better, in terms of the utilization of the taxpayer's document archives has been successful. the success of the simpan application target is that there is systematic monitoring of the annual tax report overpayment regarding restitution which reduces the occurrence of manual supervision errors, including miscalculations and errors in the timeliness of submitting information to taxpayers. the annual tax report overpayment regarding restitution is not past due, makes it easier to supervise and monitor the date a work must be completed, archives that neatly makes it easy to search for data to https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 87 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc complete work; so it is can support expected that the performance of employees, especially the state civil apparatus (asn) at the bekasi madya tax office is more professional, independent and reliable. c. from verbatim's analysis of satisfaction with the archives management system application (simpan) program in improving the performance of bekasi madya tax office employees it was concluded that the simpan application helped employees a lot in carrying out their work, the use of the simpan application was appropriate and facilitated the work and was even able to improve the performance of kpp madya bekasi employees. the simpan application is easy to access, the operation is easy, the display on the simpan application is also very easy to understand so that employees can easily use the simpan application. applications that can help smooth service tasks if the application is easy to use, reducing manual work and human errors. d. analysis of research on the overall goal achievement of the archives management system application (simpan) in improving the performance of the bekasi madya tax service office employees concluded that the use of the simpan application was effective in improving employee performance because employees did not need to do the work manually. in terms of accuracy, the simpan application is guaranteed to be accurate because the data presented is taken directly from the dgt information system and other official applications from dgt. in terms of timeliness and relevance, it is good. 2. verbatim's analysis of the obstacles to the application of the archives management system application (simpan) in improving the performance of the bekasi madya tax office employees shows that the obstacle in implementing the simpan application is the transfer application maker to another office so that if there is a problem with the simpan application it cannot be resolved immediately, the data has not been uploaded so that sometimes the latest archive is not found. the use of an application will not be separated from internal and external obstacles. 3. from interviews with internal informants from the bekasi madya tax office as primary data that is displayed in coding verbatim analysis of efforts to overcome the barriers to the archives management system application (simpan) in improving the performance of the bekasi intermediate tax office employees shows that the bekasi intermediate tax office has appointed an employee who understands the ins and outs of the simpan application as a pic regarding the use of this application and appoints an employee with a level above the employee as a supervisor as well as the person in charge to ensure that scanning documents/files are always uploaded so that data is always updated. for the application to be useful in completing the work, the employee must master the application, and the application must continue to be developed and patented so that it is not recognized by irresponsible parties. conclusion based on the description of the research results from the discussion, it can be concluded as follows: https://www.ilomata.org/index.php/ijtc the effectiveness of using the application of coverage management system (simpan) at the madya tax office bekasi, west java, indonesia rulandari, haryati, kommer, agustina, prihandini 88 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. the use of the simpan application at the bekasi madya tax office has been effective in improving employee performance because it makes it easier, shortens time, reduces the risk of human error, better records management, and the data presented is very accurate and relevant. 2. obstacles in implementing the simpan application at the bekasi madya tax office, namely: a. appoint an employee as a pic and a supervisor related to the simpan application to solve problems that occur in the application, form a helpdesk to overcome application errors and compile and publish a guidebook for the implementation of the simpan application. the maker of the simpan application has transferred to another office, so there are problems if there are errors in the application. b. sometimes the latest archive is not found, because the file has not been uploaded. 3. the efforts made by kpp madya bekasi are: a. one employee has been appointed as the pic related to the simpan application, when there are problems related to the simpan application, the employee will contact and ask the solution maker for the simpan application. b. an employee has been appointed as the person in charge of the simpan application to ensure that scanning documents/files are always uploaded to the simpan application so that the data is always updated. reference aditya, g. n. i. a. 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(2021). digitalisasi sistem administrasi perpajakan dan biaya kepatuhan pajak terhadap kepatuhan wajib pajak orang pribadi. journal of accounting science, 5(1), 36–70. https://jas.umsida.ac.id/index.php/jas/article/view/1131 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 139-149 139| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue raden kusyeni1, pandoyo2, ratih kumala3, mochamad sofyan4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: kusyenird@gmail.com1, rhaty07@gmail.com3 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: kusyeni, r., pandoyo., kumala, r., sofyan, m.(2022). finance technology innovation in the finance sector: the role of e-money on increasing tax revenue. ilomata international journal of tax and accounting, 3(2), 139-149. https://doi.org/10.52728/ijtc.v3i2.443 abstract: the expanding versatility of people in general in monetary exercises wants to make monetary exchanges simpler, more compelling and effective yet at the same time protected in exchanges. the mechanical advancement that is the subject of the most recent review in indonesia is financial technology (fintech). the adjustment of the type of cash, both paper cash and coins started to be supplanted with electronic cash or ordinarily alluded to as e-cash. e-cash right now circling in indonesia as ovo cash, shopee pay, gopay, brizzi, paytren, isaku, dana, linkaja, flazz and others, is a type of money innovation to complete monetary exchange exercises, with the presence of e-cash. this cash is relied upon to help people in general in getting to monetary items and work with monetary exchanges and duty installment exchanges. progresses in monetary innovation can make it more straightforward for citizens to make charge installments. the exploration technique utilized is unmistakable subjective strategy with writing survey. the motivation behind this exploration is to help the local area in making charge installments simpler and it is trusted that this electronic installment can expand charge income. keywords: tax revenue, financial technology, electronic money (e-money) this is an open access article under the cc-by 4.0 license. introduction in the current time of digitalization, the utilization of innovation has infiltrated into our regular routines, and has even turned into a way of life among individuals, particularly youngsters. the fast advancement of science and innovation has affected the example of human conduct in getting to different data and different highlights of electronic administrations. one of the innovative advancements that has turned into the subject of ongoing examinations in indonesia is monetary exchanges utilizing electronic money or e-money (ben lahouel et al., 2022; kahloul et al., 2022; maqbool & zameer, 2018; siueia et al., 2019; wardhani et al., 2020). there are such countless choices for going through with monetary exchanges. besides, the present mechanical advances are so fast, making monetary exchanges more straightforward. igeneration or generally known as generation z is an age that can be supposed to be the most 'educated' of the simplicity of this exchange. how not, this age is the age with the biggest level of clients of nonhttps://www.ilomata.org/index.php/ijtc mailto:kusyenird@gmail.com mailto:rhaty07@gmail.com https://doi.org/10.52728/ijtc.v3i2.443 finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 140 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cash monetary administrations in this ten years (adeyemo et al., 2020; balakrishnan & shuib, 2021; gorshkov, 2022; ng et al., 2021). e-cash or electronic money isn't something unfamiliar today. as expressed in bank indonesia regulation number: 11/12/pbi/2009 concerning electronic money (electronic money), which has now been refreshed to pbi number: 18/17/pbi/2016, electronic money is the worth of cash put away in card chips or servers (virtual). the cash, among others, is utilized to pay for food, public transportation or expressways. e-money is given based on the worth of cash which is kept ahead of time by the holder to the guarantor and the worth of the cash is put away electronically in a medium like a server or chip (sasongko et al., 2022). e-money isn't just a substitute for actual money as coins and paper cash with identical electronic money, yet in addition as a framework that permits an individual to pay for labor and products by sending a number starting with one pc then onto the next. the rise of e-cash amidst society expects to diminish the development pace of the utilization of money. committed to installments of a miniature and retail nature (omodero, 2021). then, at that point, what is the contrast between the installment interaction with e-cash contrasted with installment utilizing a visa or check card? the principle distinction is that e-cash clients don't have to give their credit or charge card data while executing. this will lessen the danger of individual information burglary and furthermore decrease the danger of misrepresentation (x. chen et al., 2022; deng et al., 2019; merello et al., 2022; pizzi et al., 2021; zhang et al., 2021). moreover, the variables that support the development of electronic exchanges in indonesia include: first, the change in individuals' conduct in going through with monetary exchanges movements to computerized exchanges. second, there is a coordinated effort between payment service providers (pjp) and venture stages. for instance, the coordinated effort among ovo and bareksa and the cooperation among linkaja and bibit to offer shared asset items for clients. third, the development of the biological system through corporate activities (sasongko et al., 2022; siueia et al., 2019). the development of this biological system isn't just through acquisitions or consolidations yet in addition useful joint efforts between industry players, for example, banks, fintech and internet business. fourth, banking digitalization will be more inescapable. different ways are done by banks, beginning from reinforcing inward limit, both from business methodology, business cycles, innovation and center banking. for instance, procuring little banks and afterward growing the biological system with the goal that few banks can accomplish positive execution. e-money is perhaps the most likely choice to help monetary incorporation (ali et al., 2021; chuc et al., 2022; liu et al., 2021). media transmission and banking organizations are additionally contending to give e-cash administrations and items (ding et al., 2022; luo et al., 2022; schindler, 2017; senyo & osabutey, 2020; yang & wang, 2022). practically all significant banks in indonesia presently have e-cash administrations, for example, mandiri e-cash, bri brizzi, bni tapcash, bca flazz, and furthermore t-cash which is a result of the media communications organization, telkomsel. indeed, their means were likewise trailed by new company players, definitively in the fintech field which has a more limited size however exceptionally light-footed developments, for example, tokocash claimed by tokopedia, there is bukadompet possessed by bukalapak and gopay has a place with gojek (y. chen et al., 2022; daud et al., 2021; he et al., 2017; ioannou & wójcik, 2022; muthukannan et al., 2021). https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 141 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on data from bank indonesia, the value of electronic money transactions reached 35.10 trillion as of december 2021. the value of electronic money transactions in that month increased by 58.60% compared to the same period the previous year in december 2020. electronic money reached 22.13 trillion. not only that, this percentage also increased by 12.17 percent compared to november 2021 which reached 31.29 trillion. the volume of transactions with electronic money in indonesia was recorded at 602.29 million in december 2021. this number increased by 13.63% compared to november 2021 which reached 530.02 million transactions. the transaction volume figure increased by 37.49% compared to december 2020. at that time, the volume of transactions with electronic money was recorded at 438.04 million: graph 1 graph of the development of electronic transactions in indonesia 2021 data source: indonesia bank, 2022 from the diagram above, obviously the advancement of financial technology (fintech) can impact the way of life of individuals in indonesia, besides, fintech is currently present as a day by day need. the presence of this fintech obviously has its own motivation, in particular so that individuals can undoubtedly get to monetary items in each exchange. the advancement of the fintech business in indonesia begins with the quantity of business people who take an interest in the online business time, from smes to the center section. nonetheless, in its execution there are still issues with installment issues. one of the deterrents that happen is the indonesian individuals who actually utilize the money society framework (tualeka et al., 2021). the minister of finance clarified that the job of fintech to help little and medium ventures is additionally critical. little business visionaries get more effective and simpler subsidizing, so they become an elective wellspring of financing on the grounds that the system is viewed as exceptionally short, basic, and simple (herdinata & pranatasari, 2020). seeing this condition, in the time of the covid-19 pandemic, the presence of fintech is additionally vital in government exercises, for example, exercises in giving non-cash social help to individuals impacted by the https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 142 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc covid-19 pandemic through the pre-employment card program which is given to 5.3 million unique occupants. new beneficiary the help is given as cash sent through a computerized record or e-wallet to every beneficiary (fu & mishra, 2022; sugandi, 2021). furthermore, the government additionally utilizes e-money in installment exchanges, like the utilization of transportation and different exchanges. in the monetary area, for this situation, the directorate general of taxes (dgt) additionally does burden organization changes so that charge incomes will get to the next level. one type of assessment change is the modernization of expense administration organization using data and correspondence innovation through the djponline page. this should be done as such that citizens feel simple in following their expense commitments. one of the reasons for the absence of citizen consistence is the managerial interaction that is troublesome, insufficient, and wasteful, bringing about enormous consistence costs (toon et al., 2018). charge income is a wellspring of income that can be acquired consistently and can be grown ideally as indicated by the requirements of the public authority and the states of the local area. the assets got by the state depository will be utilized for government consumptions for the government assistance of the local area. as indicated by the minister of finance sri mulyani, one of the frameworks worked by the ministry of finance to oversee state incomes all the more, with perfect timing, and to offer better types of assistance to the whole local area in completing their assessment commitments is teaming up with a few beginning up finance organizations. the modernization of the state income framework and the administration of the state financial plan is completed to build the collectibility of state incomes, work with stores to meet expense commitments, and adjust to changes in data innovation. furthermore, it will facilitate with different foundations so computerized innovation based monetary administrations (financial technology) can be created to the greatest. the coordination predominantly concerns guidelines and assessment assortments. the indonesian fintech association (aftech) expressed that this computerized based monetary assistance can possibly expand state charge income, however the job of fintech in aiding charge income isn't joined by charge guidelines for the fintech new business (aliyudin, 2020). parts of tax collection connected to monetary administrations, in view of dgt's review the assessment approach is changed in accordance with the order of the monetary business. there are five sorts of fintech enactment: first, fintech installment administrations, for example, swarm establishing, in light of assessment arrangements, the benefits got by these business entertainers are liable to article 23 income tax of 2% of complete income and 10% vat on help conveyance. second, monetary programming exchanging fintech, the expense for this sort of actuation is 10% vat on the conveyance of theoretical products. third, fintech credit appraisal research benefits, this fintech is simply dependent upon 10% vat on the conveyance of credit esteem administrations. fourth, fintech in the venture the executives area is likely to article 23 income tax of 2% of absolute income and 10% vat on help conveyance. fifth, fintech is occupied with monetary administrations, protection, investment funds, credits, and capital, for the most part likely to article 23 income tax of 15% on pay got from advance revenue, profits, or different benefits (putri et al., 2021). one of the public authority's centers is the job of e-cash in expanding charge income. the job of e-cash is relied upon to further develop monetary organization consistence and increment charge income in indonesia with the goal that advancement in indonesia can be acknowledged appropriately. subsequently, scientists are keen on investigating https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 143 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc “finance technology innovation in the finance sector: the role of e-money on increasing tax revenue”. furthermore it is trusted that this exploration can be a wellspring of reference and data for controllers and further specialists. method the exploration is a writing audit. the strategy utilized in this examination is graphic subjective, in which the exploration methods delivered are as composed words and from a few references to logical works, diaries, articles, web and books, so they can be a depiction of the exploration results. the information assortment procedure utilized a writing concentrate on approach, which was gotten from books, broad communications articles, web locales, public diaries and worldwide diaries connected with this examination (creswell, 2017). result and discussion • financial technology financial technology is the aftereffect of a blend of monetary administrations with innovation that at last changes the plan of action from traditional to direct, which at first pays up close and personal and brings cash, presently distant installment exchanges should be possible rapidly and effectively (haptari & aribowo, 2019). alongside changes in individuals' ways of life which are presently overwhelmed by quick moving clients of data innovation. with the presence of monetary innovation, it can answer trading issues and installments, for example, having opportunity and energy to search for products to a retail outlet to a bank or atm to move cash (pathak, 2017). fintech helps make trading exchanges and installment framework exchanges more straightforward, more compelling and proficient. fintech is an update of business processes, plans of action, and monetary instruments that offer new added benefit in the monetary administrations area by including the computerized environment. there are 4 classifications of online-based monetary administrations, as per the financial services authorization: 1. fintech as installment administrations (installment), (clearing), (settlement). 2. fintech which gathers some data on monetary assistance choices as examinations from highlight costs to the advantages of monetary items and afterward offers them to possible purchasers. 3. fintech which centers around hazard the board and speculation by creating monetary arranging framework programming through planning of monetary circumstances and conditions in light of essential data from clients. 4. fintech is an assortment of assets or financing through applications that work with communication between people who go about as debt holders and banks. this kind of fintech is regularly known as group establishing and distributed (p2p) loaning. the installment framework in indonesia depends on 3 lawful bases, in particular: 1. bank indonesia regulation no. 18/40/pbi/2016 concerning the handling of installment monetary exchanges. 2. bank indonesia circular letter no. 18/22/dksp with respect to the execution of advanced monetary administrations. 3. bank indonesia regulation no. 18/17/pbi/2016 concerning electronic cash. https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 144 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the guidelines referenced above were given with thought of the advancement of innovation and data frameworks that produce developments, particularly those connected with monetary innovation. this guideline expects to address the issues of the local area in the field of installments, both as far as instruments, suppliers, systems, and framework for the handling of between installment exchanges (herdinata & pranatasari, 2020). • tax revenue charge income is a wellspring of income that can be acquired ceaselessly and can be grown ideally as per the requirements of the public authority and the states of the local area. charge income will be pay gotten by the public authority which is obtained from charge installments paid by individuals. it doesn't simply come to the definition over that the assets got by the state depository will be utilized by government uses for the government assistance of individuals, as the state's evenhanded in the law is to succeed individuals, to make flourishing in view of civil rights for every single indonesian individual. as far as expanding charge income, dgt has arranged strides to seek after charge income targets: 1. automatic exchange of information policy. pmk 39/pmk.03/2017 in regards to methods for trading data in view of peaceful accords expresses that skillful experts in indonesia might demand data from equipped experts in accomplice nations in regards to annual expense keeping information, account information, country-by-country reports in light of shared arrangement among indonesia and the state. accomplices with regards to oversight and review. 2. supportable compliance. through charge administration developments, dgt keeps on making progress toward restoration by building and keeping up with maintainable assessment mindfulness through different duty administration advancements, for example, e-administration, portable expense unit, miniature kpp and outbound calls. 3. mix of tax assessment information and data frameworks. dgt should put forth attempts to refresh information and incorporate frameworks, among others, through e-filling, echarging, e-structures, and e-solicitations. moreover, dgt likewise approves information as duty back payments through the provenido program to information approval of notification letters (spt). dgt additionally moves data sets in dgt's data framework. 4. charge impetuses and audit of exception charge approaches. the public authority keeps on giving duty motivators as expense occasions and assessment recompenses. charge occasions have been allowed to citizens who make new ventures and are spearheading enterprises with specific circumstances. 5. improvement of human resources (hr) and the association of hr improvement is centered around working on the administrations of representatives and citizens as well as expanding hierarchical viability through further developing data frameworks and functional strategies. • effect of non-cash payments on the national economy by accepting indonesia as a shut economy country, the expansion in the utilization of non-cash installment instruments or e-money can affect diminishing interest for cash locally. hypothetically, a reduction in the interest for cash will cause a diminishing in loan costs in the currency market https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 145 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc since individuals will decide to utilize non-cash installment instruments along with setting aside cash in the bank concerned. this makes acquiring costs more cutthroat, consequently expanding firm venture and expanding public genuine result. so one might say that the utilization of e-money will prompt monetary development (matei et al., 2021). with similar insightful apparatuses, in the event that individuals use e-money, e-money clients will feel a diminishing in exchange expenses and holding up costs in making cash installment exchanges. this is on the grounds that with the presence of non-cash installment instruments, installment exchanges will be done all the more rapidly. what's more, there is the potential for extra pay as impetuses as a sugar presented from every e-money specialist organization, like limits and free vouchers for specific exchanges. this condition will build public utilization. • indonesia toword an era cashless society the compulsory implementation of utilizing e-money or it very well may be with e-cash on october 31, 2017 then gives many advantages. aside from not holding up in long queues and stressing over changing cash since you need to zero in on driving, exchanges utilizing e-tolls likewise save time, particularly since there are cost sticks, which are instruments, for example, cost sticks with a tip that has a spot to embed an e-money card, making it simpler for clients to tap. in or tap out at the cost entryway. considerably more refined, there is an e-toll pass, which is an on board unit (obu) transmitter that is mounted on the windshield (focus, left or right) making it more straightforward for drivers to cross the automatic toll gate (gto) set apart with an etollpass at a speed of 10 km/ hour without expecting to pause and open the vehicle window. not just on expressways, presently transjakarta clients are likewise expected to utilize e-money. this is as per the impression of public administrations that follow innovative turns of events. this required execution likewise affirms the national non-cash movement (gnnt), which was sent off on august 14, 2014 to carry indonesia into the time of a credit only economy. the term thick wallet that feels awkward will be supplanted by one card, specifically, e-money. notwithstanding the reasonableness got, the utilization of e-cash can likewise limit the wrongdoing of circling fake cash. a bank indonesia study with respect to the burden of a charge for top-up e-cash of around rp. 1.500 to rp. 2.000 for a solitary charge, was at long last dropped and gotten a positive reaction from general society, particularly e-cash clients. looking at certain instances of the utilization of e-cash in different nations like suica in japan, oyster card in england, and octopus card in hong kong, there is no energize for top. since e-cash can't be obstructed, it is something similar with cash, if this e-money is lost, the ostensible measure of our equilibrium in it is additionally lost. so it would be better not to fill in an excessive amount of equilibrium in e-money. another disadvantage that may in any case should be improved is the accommodation of top-up, which should be possible by means of cellphone, so you don't need to go searching for the closest atm or minimarket, particularly when you're on an expressway. as the "current" age, we should move this electronic installment framework together by changing to e-money with the goal that the acknowledgment of a cashless society in indonesia will be quicker for common advancement. computerized money, future money (pathak, 2017). dgt likewise surveys the possible income from the financial technology industry, yet there are still hindrances to getting charges, in particular: first, government mediation to decide charges, for this situation it is remembered for money, yet the guidelines have not been figured out. second, the public authority should likewise guarantee that fintech registers locally, in light of the fact https://www.ilomata.org/index.php/ijtc finance technology innovation in the finance sector: the role of e-money on increasing tax revenue kusyeni, pandoyo, kumala, and sofyan. 146 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that there are no organizations that start fintech monetary administrations from abroad. in the financial services authorization (ojk) number 77 of 2016 that unfamiliar organizations can enlist their organizations with the ojk, article 3 expresses that unfamiliar administrators or lawful elements have a limit of 85% of organization shares (shabbir & wisdom, 2020). nonetheless, there are as yet numerous deterrents looked by fintech organizations in their assessment assortment guidelines, there are a few obstructions like muddled guidelines that make fintechs not make good on their expenses, for example, guidelines on gathering business results for these fintech organizations, for the time being, fintech-based organizations are as yet utilizing the arrangements of article 23 income tax with a pace of 2% in light of the fact that there is no extraordinary guideline to direct it. another impediment is that there are still errors in finishing up the citizen's data (putri et al., 2021). conclusion monetary innovation has moved the worldview of monetary exchanges and requests quicker and more versatile administrative changes. fintech is the aftereffect of a blend of monetary administrations and innovation that eventually changes the plan of action from ordinary to direct, which at first pays up close and personal and conveys a specific measure of money, can now do significant distance exchanges by creating installments that can be made in short order, fintech in this exceptionally evolved period, it very well may be seen from the conversation over that there is an increment in fintech clients, one of which is p2p loaning. the development and greatness of the example of p2p loaning monetary exchanges affects charge incomes, the sythesis of the tax collection area, and the development of the duty area. the public authority as a controller needs to direct extraordinary tax assessment guidelines covering tax assessment perspectives, specifically subjects, objects, charge rates, assortment instruments and different angles that are attributes of the p2p loaning business. also there is no duty guideline that explicitly controls the p2p loaning industry which incorporates subjects, objects, charge rates, and assortment instruments (khuong et al., 2021). notwithstanding, there are as yet numerous snags experienced by fintech organizations in their expense assortment guidelines, there are a few challenges like hazy guidelines that make fintechs not settle their duties, for example, guidelines on gathering business results for these fintech organizations, for the present fintech-based organizations actually utilizing the arrangements of article 23 pph with a pace of 2% on the grounds that there is no unique guideline to manage it. another deterrent is that there are still errors in finishing up the sort of business in the oss application which will later influence the assurance or kind of business recorded on the data from the citizen. this exploration offers help for the ideas of financial technology. while the execution of this hypothesis has demonstrated to be appropriate in expanding state income, the consequences of this examination add to giving extra arrangement in regards to financial technology. hypothetically, research results that demonstrate the predominance of financial technology can be information and thought for the controller as a material thought in making guidelines. reference adeyemo, k. a., isiavwe, d., adetula, d., olamide, o., & folashade, o. 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(2021). the contribution of fintech to sustainable development in the digital age: ant forest and land restoration in china. land use policy, 103, 105306. https://doi.org/10.1016/j.landusepol.2021.105306 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 1 october 2019 page:1-11 https://www.ilomata.org/index.php/ijtc internal control analysis towards the accounts receivable accounting system at stiami institute iin andrayanti institute of social science and management stiami correspondence: inez_aulia@ymail.com submitted: 6 august 2019. revised: 26 august, 16 sept 2019. published: 30 october 2019. abstract this research aims to reveal how internal control of the accounts receivable system, obstacles faced on the internal control applied, and the endeavors made to reduce it at stiami institute. this research use descriptive-analytical methods to determine the implementation of internal control and account receivable system. based on the result of the research, internal control towards the account receivable accounting system implemented on stiami is quite efficient, indicated by the independence of the audit committee or the internal supervisory unit (isu) in which are right under the head of stiami auspices. in addition, stiami's management has applied basic concepts and principles of internal control. in stiami internal control activities, it is better to enforce the functions and centralization of the online system so that the operations and financial statement presentation can run effectively and efficiently. keywords: internal control and accounts receivable system. introduction accounting has endured development throughout the everchanging era continuously. the increasingly complex business world has caused accounting concepts and techniques developed in which it can present information about financial positions, performance, and flow of funds of an economic unit to decision-makers. the increasing competitiveness in business competition is an indicator of the exploding and rapid growth of the business world's impact. fronting this circumstance, companies and their leaders are required to be able to create or upgrade the companies' value as well as managing the existing production factors in order to achieve the companies' goals. companies are also required to be able to determine a good performance in such manner that the company would be able to warrant their sustainability. 1 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.ilomata.org/index.php/ijtc mailto:inez_aulia@ymail.com analysis of the accounts receivable internal control system at stiami institute andrayanti one of the competitive advantages which can be proposed by trading companies, as well as companies who offer service provision, is the flexibility of credit payment. credit payment systems incur account receivable for trading companies or service companies and incur debts for customers or service users. receivables that occur from sales or service-provision are the main activities of companies identified as trade receivables that are classified as current assets in the balance sheet. the number of receivables depends on the company management policies, such as credit and billing policies. remarking from liquidity aspect, receivable is a liquid tool after cash and banks. consequently, to avoid contrary risks that can ensue due to the receivables, companies must have an adequate accounting system as the company's internal control tools to examine business activities. accounts receivable accounting system aims to record the company's receivables mutations and receivables mutations caused by credit sales transactions and cash receipts from debtors (ge & mcvay, 2005). therefore, adequate internal control is needed to coordinate and supervise the company’s activity, especially on receivables. this action meant to avoid any occurences that may cause harm to the company, for instance, misappropriation, fraud, dissipation, and theft from both inside and outside parties (bentley-goode, newton, & thompson, 2017). the internal control system has elements that need to be structured, scilicet authority system and responsibilities segregration, especially on operation and storage functions with accounting functions, as well as a restriction on giving full responsibility to perform all stages of a transaction to provide ample protection towards wealth, debt, revenue, and costs. internal control structure represented three things, videlicet control environment, accounting system, and ample control procedure in an organization would be able to help managements in securing both physical non-physical assets from abuse and fraud (sofyan, 2016). in each organization, each transaction only consists of authorization from officials who have the authority to approve of the deal. hence, organizations must establish a system that regulates the authority’s arragement for sanction each transaction done. from the built system, the implementation would not run successfully if there is an unhealthy practice from the authorities simultaneously with incompetent and dishonest employees (hoitash, hoitash, & bedard, 2009). in a reliable accounting system, there are supervision ways that could run by itself through a particular system plus procedure, the outcome of a part would be controlled by other parts through several various reports which reach the management. a good accounting system has to be able to summarize internal control principles and techniques, in 2 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti which one of the attributes is to provide trustworthy information. moreover, in managing financial management, notably accounts receivable, it needs to be planned and analyzed carefully, so that the policies of accounts receivable management can run effectively and efficiently, especially in the implementation of internal control over the existing accounts receivable accounting system (beasley, carcello, hermanson, & lapides, 2000). stiami institue is a private-owned business engaged in education services, notably for undergraduate programs, which provide services for students in the learning process, constantly aligning the quality of their education with the needs of the working world in forming professional human resources. in conducting accounts receivable collection to students, besides going through cashier who is in charge of receiving payment from students in counter, the collecting process can be done by class treasurers or financial staff in charge chosen by the chief financial officer. class treasurers' are in charge of monitoring students' installment from the first installment until the full tuition fees for the current semester. in addition, because stiami’s activity is an educational service unit, especially for undergraduate education, and stiami has more than a thousand active students, thus resulting in high accounts receivable. besides that these accounts must be obtained effortlessly and managed properly, the billing process also must be done according to the specified time, so the company would be able to achieve their goals. therefore, the implementation of internal control shall correspond with the existing and sufficed functions as a means to make the recording, billing, and presentation of the financial statements more efficient. subsequently, it would be able to suppress the risk of errors, dissipation, and fraud attempts. the lack of internal control audits can heighten the risk of misstatements in financial statements, hence the proper procedures are needed to identify the defiances (mascha, lamboy-ruiz, & janvrin, 2018). the proceeding is to group the organization’s difficulties in accruals estimation, determining material weaknesses exist, and self-selection bias correction (doyle, ge, & mcvay, 2007). previous studies have shown that when the internal control of local government organizations is increasingly high, the practice of accounting fraud will be more profound. conversely, when the internal control system is low, accounting fraud will be elevated. meanwhile, the interaction between internal control and loyalty does not affect individuals committing accounting fraud in local governments (tehupuring & lingga, 2017). implementation of the internal control system for cash expenditures at pt. lestari berkat sejahtera in samarinda was not fully following the elements of a great internal 3 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti control system, as seen from the absence of sudden checks (surprise audit) conducted by the owner towards each division, and there was no selection for prospective employees that met the requirements. nevertheless, the cash expenditures process had function properly, videlicet a distinct separation between functions and responsibilities in the organizational structure for cash expenditures procedure, including cash, finance, cashier, and accounting functions (firma yandi, 2014). overall, kjks bmt mandiri sejahtera karangcangkring cash receipts had been functioning well, aided by the administrative, cashier, accounting, billing and internal audit functions (fathoni, 2018). method the approach used in this thesis is descriptive-analytical, scilicet in analyzing and discussing problems, an explanation and description will be described systematically, objectively, and relevantly based on data collected as a basis in shaping judgments. the descriptive-analytical approach was taken to provide an adequate picture of the implementation of internal control and accounts receivable accounting in may 2013-may 2014. comparing existing facts with internal control norms is the qualitative approach used in this study. the internal control components are: 1. control environment division of functions, authorities, and responsibilities towards existing functions in the company, whether or not there is a possibility of double duty or function, and other happenings that may cause internal control deficiencies the company encountered will be addressed. 2. risk interpretation this element encloses the risks that the company would encounter if internal control's weaknesses are still obtained and the necessary actions to overcome the risks. 3. control activities 4 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 internal control: control environment risk interpretation control activites information and communication supervision and monitoring account receivable accounting system: related organizations authorization system recording procedures documents used healthy practice reability of the finance report compliance towards provision and laws applied operation effectiveness and efficiency diagram 1. framework analysis of the accounts receivable internal control system at stiami institute andrayanti this element will investigate the authorization procedure in the implementation of the account receivable accounting system which includes authorization, responsibilities and authorization, segregation of duties, documentation, reconciliation, competent and honest employees, and internal audit inspections. 4. information and communication this element will observe data and additional information contained in the full report with the intent to show that communication exists within the company. 5. supervision or monitoring in this element, there will be a review of whether the executed internal control quality is viable already or any correction is still required. result and discussion stiami’s internal control 1. control environment stiami management highly values integrity and competence. in the company, between one division and the other is affiliated as one entity. every employee is required to be competence. recruiting qualified prospective employees is the first milestone in creating competency. the contract system set by the company for new employees is one of the management's attempts to encourage in creating a great human resource to enhance the company's performance. the company has an sop (standard operating procedure) that must be carried out by every individuals. the sops for each division are different because of the various job descriptions of each division. routine meetings occur at least twice a month, while the leadership meetings occur at least once every month and or on certain important moments. division meetings are held separately between each division. for instance, for the marketing division, the meeting is chaired by the deputy chairperson iii, who also coordinated with the head of the marketing division to give directions about market conditions and strategies to the marketing staff. division meeting is a meeting headed by each deputy chairperson and must be attended by each individual. on that occasion, heads of division provide information about their respective division's achievement so their division's performance will be known. furthermore, every individual has the right to give responses, suggestions or input for improvement, while each deputy chairperson has to coordinate and provide guidance for the heads of division, subdivision, and staff to enhance their performance. for example, there 5 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti are plenty of students in debt, then it is specifically deputy chairperson ii's job to instruct the billing process to be further improved. structurally, the internal supervisory unit (isu) is under the auspices of the head of stiami. the operational audit went well, and audit activities were carried out in all divisions quarterly. this audit aims to assess whether each individual in each section has carried out work procedures under company standards, as well as measuring whether the work procedures can improve internal control. if the standard procedure failed to generate internal control, then the internal auditor would render recommendations to stiami's chairperson to advance internal control to accomplish the company's goals and the objectives of the internal control system as a whole. a. risk interpretation every organization or company is bound to face some risks both from internal and external that can hinder them from achieving their objectives at some point. these risks are associated with establishing goals to be accomplished by the organization, scilicet operations efficiency and effectiveness, reliability of financial statements and compliance. therefore, each organization or company is obligated to interpret the risks they may face appropriately. stiami had interpreted the risks of misstatement possibilities, which arose from internal and external events such as: 1) placement of new employees in receivables receipts and billings. 2) changes in the accounts receivable accounting information system. 3) socialization of the new technology's usage in receivables receipts activity. 4) changes in accounts receivable accounting utilization principles. b. control activities control activities on accounts receivable at stiami can be classified into numerous activities e.g.: 1) new students' admission activities are done by the marketing division, while the head of marketing authorized new students' admissions approval. moreover, deputy chairperson ii and iii determined the tuition fees list, student admission requirements, and fees deduction. 2) responsibility and authorization activities over the transfer of receivables are done by class' personnel and treasurers, like the class cashier and treasurers responsibility in doing receipt transactions, recording receipts as an evidence of receivables deduction, and tuition fees' return, as well as the authority and 6 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti authorization of the head of the financial division and subdivision in leading their subordinates to improve their operating performance to acquire profitability. 3) segregation of duties by each section or functions associated with receivables such as: a) the admission section and the recording section for the number of students’ recapitulation are separated from each other. student admissions are arranged by the marketing staff, while the number of students’ recapitulation is done by the head of the marketing sub-division, and the head of the marketing division does the authorization. b) the receptions (cashier and class treasurers) are separated from the recording section (accounting staff). cashier and class treasures do the payment and account receivable receipts, while the accounting staff does the receivables recording. c) accounts receivable collections are different from the recording section (accounting staff). billing, especially in cooperative classes, is done by each class treasurer while accounts receivable mutation recording is done by the accounting staff. this aims to reduce deviations in the form of errors, fraud, or embezzlement of money or the company’s cash. d) accounts receivable documentation activities in the shape of: (1) cash or bank receipts are printed according to the serial number and maintained based on the print month, year, and number and signed by the head of finance plus stamped with the stiami logo. (2) students’ payment receipts issued by the cashier indicate the reduction of students’ accounts receivable who pay in the register and the cashier will file the document according to the month, year, and serial number. (3) students’ payment receipts issued by the class treasurers will be printed following the serial number, receipt’s date and signed by the class treasurers and stamped with the stiami logo. the receipts show the reduction in cooperation student’s receivables who make payments in the cooperation class. the document will be filed by each class treasurer in the order of month, year and serial number. (4) regular student debtors accounts or installments are 7 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti printed according to the major and class year. (5) cooperative or non-regular student debtors accounts or installments are printed according to the class and class year. (6) the class’ accounts receivable recap is made by the accounting and accounts receivable section staff which then are reported to the head of finance and archived by the head of finance, accounting staff, and the accounts receivable section itself. (7) daily cash statements prepared by the reception cashier from the regular or cooperative or non-regular classes are supporting documents for cash receipts from accounts receivable. e) reconciliation and internal audit, reconciliation and internal audit activities related to accounts receivable are: (1) accounts receivable section will send a debtor statement to every student periodically to evaluate the accuracy of the accounts receivable recordings made by each class treasurer, especially for cooperative students. (2) the accounting division has to coordinate bank statements with the accounts receivable collection record. this activity is done by the head of the finance sub-division. (3) the head of finance sub-division will coordinate the class treasurers’ accounts receivable collection recapitulation with the cashier’s accounts receivable collection record from the cooperation classes. (4) doing cross-check between cash receipts and disbursements (cash opname) from cashier and class treasurers with the existing cash balance record from the cashier and the class treasurers itself. this activity is also done by the head of the finance sub-division daily. f) competent employees, employees who perform accounts receivable control in stiami are competent, as seen from the management policies, such as: (1) the selective recruitment of prospective employees procedure is done through selection stages according to their respective fields, in which the applicants have a diploma in accounting economics with a gpa standard of 3,00 the least, and came from an accredited college for cashier staff and class treasurers, and a minimum of bachelor degree and is experienced within the field for the head of finance or accounting sub-division. 8 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti (2) the application of an employment contract system for new employees with three alternative considerations, such as the first alternative is if the employee’s performance is above the average, when the contract has expired, they would be appointed as a permanent employee. the second alternative is if the employee’s performance is slightly below average, then the contract would be extended until a specified time. the last alternative is if the employee’s performance is bad, then their contract would be terminated. the new employee’s performance is measured by the division’s head every three months through evaluations. 1)information and communication stiami’s accounts receivable information are from each division who is in charge of the accounts receivable, such as: a) information from the marketing division and class treasurers about the prospective and current students’ condition. this information is used to determine whether the students have met stiami’s regulations or not for prospective students, and whether the current students’ status as a stiami student deserves to be extended or not. b) information from marketing about prospective students’ current interests. this aims to determine the market share and how much interest do the prospective students have to choose stiami as one of the campuses to continue their studies. c) data from each class treasurers about the students’ payment history, especially for current cooperation students. this intends to anticipate overdue arrears because of students’ negligence in paying tuition. the information then processed and used as a decisionmaking tool by each division’s head or deputy chairman which later then is communicated to every individual both formally and informally. 2. supervision or monitoring stiami’s management has ruled definite responsibilities to each individual. the smooth running of accounts receivable is the responsibility of each individual who is in charge of accounts receivable, because between one division and other divisions are related to each other. for instance, the head of finance sub-division is also responsible for students’ arrears, either from regular or non9 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti regular or cooperation students, so they are also obligated in collecting and to monitor the student’s payment. likewise, the cashier and class treasurers are also obligated in collecting and constantly remind the students to pay their debts actively according to their installment made by the cashier and class treasurers. the appointed class treasurers and cashier are required to work optimally to minimize uncollectible accounts receivable. monitoring accounts receivable’s steadiness is the head of the finance division’s responsibility. every individual’s performance is always monitored based on accounts receivable recapitulation information from treasurers and cashier of the previous period. hence, from the receivables collection’s achievement, there would be an evaluation and the head of finance would follow up to assess each individual’s rank. this is related to giving out promotions and rewards or incentives. obstacles faced in internal control at stiami there are a few obstacles found in internal control at stiami, a few of them are: 1. control function a. in the accounting and finance division, there was a double-duty found. in the head of accounting and tax position, two officials are supposed to be in this position. but in reality, this position is only occupied by one official, so there was a pile-up of duties, authority, and delegation of responsibilities that may cause the operational implementation, especially in the financial statements presentations, to be hampered and ineffective. b. the accounting division was indeed done the recording and is separated from the revenue function, however in the implementation, this function sometimes also does the receive accounts receivable payment activity when one of the class treasurers or cashier needs someone to complete the task. because of that, the accounting division could not do accounts receivable recording and the financial statement would be hampered and did not finish on time. c. there is a pile-up of duties in the revenue function, especially the cashier. the cashier is only supposed to serve cash receipts and disbursements services, making daily cash recaps and making deposits to the bank. yet, they had to do recording plans and the realization of regular student payments activity too, when the activity should have been done by the class treasurers who are in charge and responsible for regular students’ payment history and students loans recording. 10 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti 2. information system used despite of the implementation of computer-based accounts receivable accounting system at stiami, there were a few weakness found which had become obstacles in the implementation of internal control, such as: a. cooperation class’ accounts receivable system recording was still made manually by inputting accounts receivable realization plans to excel and not programmed in the finance information system in stiami’s financial division. in other words, the program was only automatically recapitulating the addition and reduction of regular classes’ accounts receivable. so finding out non-regular or cooperation classes’ receivable balance is not as easy as the regular classes. b. academic information system that is available in the students’ course selection sheet is only for students from regular classes. so when non-regular or cooperation students did some changes in the semester course credit, the accounts receivable bill did not change automatically according to the amount of the student’s course credit. c. the weakness of stiami’s system in receiving accounts receivable payment activities have caused cash or bank receipts having the same numbers but with different students’ name, and resulting in one of the student’s payment data lost or was replaced automatically. d. the course selection form for non-regular or cooperation classes was still being noted and printed manually so students can easily change their course credit without any confirmation to the academic division. this may cause a data mismatch between the finance division and the student itself. e. non-regular or cooperation classes’ student debtors accounts were also made and printed manually, so when students made their payment, the bill would not change automatically according to the nominal the student has paid. the efforts that have been made to minimalize the obstacles of the internal control system towards accounts receivable accounting system at stiami the efforts that have been made by stiami’s management in minimalizing the obstacles are as follow: 1. control function a. there was a selection for competent employees, especially in tax or accounting division, so they can be recommended as the head of the accounting or tax sub-division. with this position 11 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti and human resources addition separation, hopefully, the workload, authorities, and responsibilities will run effectively. b. when the class treasurers or cashier could not come, then the delegation of receivables, especially the cooperation class receivables, authority is carried out by the head of finance subdivision, so that the accounting department can continue to carry out its activities as usual. c. to reduce the cashier's burdening tasks of recording the realization plan for the regular students’ accounts receivable receipts, the management held a selection for prospective employees or adding competent human resources, especially in the financial section who would later be assigned as a regular class treasurers’ who is going to record the realization of regular students’ payment plans and recapitulate regular class receivables. 2. information system due to the differences in using the financial information systems and academic information systems between the regular and nonregular or cooperation classes, the management has made an effort to centralize the existing system and apply it to all classes: regular and non-regular or cooperation classes. conclusion 1. the internal control applied in stiami. overall, the internal control procedures towards the accounts receivable accounting system at stiami is quite effective, where the company’s management has applied the basic concepts and principles of internal control. in addition, the control environment has also run well, indicated by the independence of the audit committee or the internal supervisory unit (isu) in which are right under the head of stiami auspices, as well as the implemented control concept applied by the deputy chairman line and the head of division are going well too. however, there are some procedures that do not reflect the internal control concept yet, such as the ineffective duties segregation, in which the function that collects receivables is the same as the revenue function. according to the control concept, the accounts receivable collector should not occupy the revenue section as well. 2. there are a few obstacles found in the implementation of internal control at stiami, scilicet in the control function, there were doubleduty found, namely in the head of accounting and tax position, so there was a pile-up of duties, authority, and delegation of responsibilities that may cause the operational implementation, 12 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti especially in the financial statements presentations, to be hampered and ineffective. besides, in the information system used, the accounts receivable recording system for cooperation classes was made manually and not programmed in the finance information system in stiami’s finance division, resulting in data mismatch between the student in non-regular classes with the existing accounts receivable data in the finance division sometimes. moreover, the time needed to find out the non-regular or cooperation classes’ accounts receivable balance was not as easy and fast as the regular classes. 3. the efforts that stiami has made in minimalizing the obstacles in the implementation of internal control are as follow: in the control function, there was a selection for competent employees, especially in tax or accounting division, so they can be recommended as the head of the accounting or tax sub-division. with this position and human resources addition separation, hopefully, the workload, authorities, and responsibilities will run effectively. meanwhile in the information system, due to the differences in using the financial information systems and academic information systems between the regular and non-regular or cooperation classes, the management has made an effort to centralize the existing system and apply it to all classes: regular and non-regular or cooperation classes. based on the conclusion above, then the suggestions the writer can offer are: 1. internal control system at stiami. in addition to being carried out by the internal supervisory unit owned by stiami management, the monitoring and supervision should be carried out by the external audit as well, in order to achieve the company's internal control objectives, scilicet the reliability of financial statements, compliance towards the laws and regulations applied, and operation’s effectiveness and efficiency. 2. the management should have enforced the functions so that the organization can carry out its activities according to their respective functions in order the operations run effectively. 3. the management should centralize the system online, so the access to get information, either finance, academics, study programs or other information are easily obtained. reference beasley, m. s., carcello, j. v., hermanson, d. r., & lapides, p. d. (2000). fraudulent financial reporting: consideration of industry traits and corporate governance mechanisms. accounting horizons, 14(4), 13 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of the accounts receivable internal control system at stiami institute andrayanti 441–454. https://doi.org/10.2308/acch.2000.14.4.441 bentley-goode, k. a., newton, n. j., & thompson, a. m. (2017). business strategy, internal control over financial reporting, and audit reporting quality. auditing: a journal of practice & theory, 36(4), 49–69. https://doi.org/10.2308/ajpt-51693 doyle, j. t., ge, w., & mcvay, s. (2007). accruals quality and internal control over financial reporting. the accounting review, 82(5), 1141–1170. https://doi.org/10.2308/accr.2007.82.5.1141 fathoni, a. (2018). sistem akuntansi penerimaan kas pada kjks bmt mandiri sejahtera karangcangkring gresik jawa timur. al-idarah: jurnal manajemen dan administrasi islam, 2(1), 137. https://doi.org/10.22373/al-idarah.v2i1.3154 firma yandi, s. (2014). analisis penerapan sistem pengendalian intern terhadap pengeluaran kas pada pt. lestari berkat sejahtera di samarinda. ejournal ilmu administrasi bisnis, 2(3). retrieved from https://ejournal.adbisnis.fisip-unmul.ac.id/site/?p=776 ge, w., & mcvay, s. (2005). the disclosure of material weaknesses in internal control after the sarbanes‐oxley act. accounting horizons, 19(3), 137–158. https://doi.org/10.2308/acch.2005.19.3.137 hoitash, u., hoitash, r., & bedard, j. c. (2009). corporate governance and internal control over financial reporting: a comparison of regulatory regimes. the accounting review, 84(3), 839–867. https:// doi.org/10.2308/accr.2009.84.3.839 mascha, m. f., lamboy-ruiz, m. a., & janvrin, d. j. (2018). pcaob inspections: an analysis of entity-level and application-level control audit deficiencies. international journal of accounting information systems, 30, 19–39. https://doi.org/10.1016/j.accinf.2018.06.002 sofyan, m. (2016). sistem pengendalian intern pengelolaan pajak restoran dalam meningkatkan pendapatan asli daerah (pad) kota bogor. jurnal eksekutif, 13(1), 59–77. retrieved from http://jurnal.ibmt.ac.id/index.php/jeksekutif/article/view/107 tehupuring, r., & lingga, r. a. (2017). sistem pengendalian intern sebagai prediktor kecurangan akuntansi pada pemerintah daerah. dapatkah loyalitas individu memitigasinya? jurnal tata kelola & akuntabilitas keuangan negara, 3(2), 113. https://doi.org/10.28986/jtaken.v3i2.111 14 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 abstract introduction method result and discussion conclusion reference the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 236-245 236 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax bertilia lina kusrina1, putri desti fatwah fatimah2 12faculty of economic, gunadarma university, jakarta, indonesia 1correspondent: lkusrina@staff.gunadarma.ac.id1 received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: kusrina, b.l., fatimah, p.f. (2021). liquidity, profitability and operational costs on corporate income tax. ilomata international journal of tax & accounting 2(4),236-245. https://doi.org/10.52728/ijtc.v2i4.335 abstract: tax revenue is the largest source of income for the indonesian state. one of the contributors to state revenue from the tax sector is corporate income tax. financial performance is one measure of the success of a business entity which is expected to increase revenue from corporate income tax. this study aims to determine the effect of financial performance using variable liquidity ratios, profitability ratios, and operating costs on corporate income tax. the data used is secondary data, namely annual financial report data from large trading sub-sector companies (wholesale) listed on the indonesia stock exchange (idx) for the 2014-2018 period. the analytical method used is multiple regression analysis. the results showed that partially profitability and operating costs have an effect on corporate income tax, while liquidity has no effect on corporate income tax. simultaneously, liquidity, profitability and operating costs affect corporate income tax. based on the results obtained that the ratio that affects corporate income tax is profitability and operating costs, so as an implication the internal party/management must be careful with the information presented in the financial statements which will have a negative impact on the users of financial statements, especially on operating costs. keywords: liquidity, profitability, operational costs, corporate income tax this is an open access article under the cc-by 4.0 license. introduction company taxes, also called corporate taxes, are direct taxes levied by the government or tax authorities on corporate income. corporate taxes are imposed nationally, but corporate taxes can also be levied at the regional level. in general, taxes are imposed on the company's income or capital. corporate tax usually applies to local companies incorporated in a country, foreign companies that do business in a country and earn income from their business, a foreign company that has a business license in a country, and the company is owned by a resident of a country. (ježek, 2014) taxable corporate income is often determined based on the taxable income of individual taxpayers. the tax imposed is based on the company's net profit. in some jurisdictions, the rules for tax companies may differ significantly from the rules for individual taxes. certain corporate actions, https://www.ilomata.org/index.php/ijtc mailto:lkusrina@staff.gunadarma.ac.id1 https://doi.org/10.52728/ijtc.v2i4.335 liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 237 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc such as reorganization, may not be taxed. certain types of entities may be exempt from taxes. (farah et al., 2021) the state can tax the company on its net income and can also tax the shareholders when the company pays dividends. where dividends are taxed, companies may be required to withhold taxes before the dividends are distributed. (zhang & huang, 2014) companies in indonesia must pay corporate income tax no later than the end of the fourth month of each year by submitting a corporate income tax return. tax payments are made through the nearest bank or tax service office. a copy of the proof of tax payment is attached to the annual spt. the extension can be valid for a maximum of two months if you submit written notification to the directorate general of taxes before the spt deadline. (direktorat jenderal pajak, 2013) up to date, taxes are the biggest source of income in indonesia. from the data on the state budget of revenues and expenditures in 2018, of the state revenue at rp 1.894.73 trillion rupiah, the 1.618,1 trillion came from taxation or it is 85 percent of the state revenue . likewise, in 2019, 1.786,4 trillion rupiah came from taxes, which was 82.5 percent of the total state revenue which amounted to 2.165,1 trillion rupiah. although the percentage of the proportion of tax revenue from the total receipts in the state budget decreased from 2018 to 2019 but the acceptance of taxation from 2018 to 2019 increased at 168.3 trillion. from this proportion, it can be seen that tax revenues are still expected to be the backbone of national income. tax revenue cannot be separated from taxpayer compliance in fulfilling their tax obligations. taxpayers are individuals or entities, including taxpayers, tax withholder, and tax collectors, who have taxation rights and obligations in accordance with the provisions of the legislation of taxation . this means that tax revenues depend on the compliance of individuals or entities that fulfill their obligations in paying taxes. the more people or corporations that pay taxes, the more income from the tax sector. (direktorat jenderal pajak, 2013) table 1. state revenues in 2018 and 2019 (in trillion rupiah) description 2018 2019 state income 1.894,73 2.165,10 domestic income 1.893,53 2.164,70 1. taxation receipt 1.618,1 1.786,40 2. non-tax revenue 275,43 378,30 grant receipt 1,2 0,40 source: ministry of finance (kemenkeu) seen from the apbn realization report (table 2.) , income tax is the highest contributor to tax revenue compared to value added tax revenue and others. of the total tax revenue, each accounted for 60 percent and 57 percent in 2018 and 2019 of the total tax revenue. this proves that income tax must be considered in its receipt. table 2. realization of tax revenue for 2018-2019 https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 238 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (in trillion rupiah) source: ministry of finance (kemenkeu) according to the tax law no. 36 of 2008 concerning income tax, the subject of tax is an individual, an undivided inheritance as a unit to replace those entitled, corporations, and permanent establishment. the subject of the corporate tax referred to here is a group of people and/or capital which is a unit, either doing business or not doing business . these tax subjects are responsible for fulfilling their tax obligations. meanwhile, the size of the tax to be paid to the state treasury is calculated based on the tax object. the object of income tax is income that is subject to tax, namely any additional economic capacity received or obtained by the taxpayer, both from indonesia and from outside indonesia, which can be used for consumption or to increase the wealth of the taxpayer concerned, in any name and form. (direktorat jenderal pajak, 2013) operating profit in a business entity can be used as a basis for measuring company performance. companies that have good performance should have high operating profits, and on the other way around if operating profits are low, it can be said that the company has poor performance. operating profit in taxation is also used as a tax object. the higher the company's income, the higher the tax to be paid. for this reason, it can be concluded that companies that have good financial performance will have a higher contribution to national tax revenues than companies that are not good. (li et al., 2021) based on previous research, the company's financial performance can affect the amount of corporate income tax payments. good corporate financial performance is expected to have a good effect on tax payments. the liquidity ratio can view the company's ability dala m sup hi short-term liabilities. good liquidity condition means the company is financially sound and is expected to increase its sales which will increase its operating profit and corporate income tax. with this liquid condition, it is also expected that the company will not have obstacles in fulfilling its tax obligations, namely paying corporate income tax. (menichini, 2020) the profitability ratio is a ratio that is closely related to corporate income tax. with a high profitability ratio, it means that the company can perform cost efficiency which has an impact on increasing operating profit so that the corporate income tax paid to the state will also be high. in addition to financial performance, corporate income tax is also affected by operating costs, where these costs directly reduce the company's sales or income which has an impact on the company's profit which is used as a tax base. the imposition of large costs will suppress the profits obtained and conversely the imposition of low costs will increase the company's profits . the purpose of this study is to test the effect of liquidity, profitability and operating costs partially or simultaneously on corporate income tax . (andrejovská et al., 2017) effect of liquidity on corporate income tax 2018 2019 income tax 855,13 894,44 non-oil 817,00 828,29 oil and gas 38,13 66,15 vat & luxury goods tax 541,80 655,39 land and building taxes & other taxes 27,06 27,71 tax revenue 1.423,99 1.577,54 https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 239 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on article 1 of law no. 36 of 2008 states that income tax is imposed on individuals and entities with respect to income received or earned during the tax year. income tax is any additional tax on economic capability received or obtained by the taxpayer, both from indonesia and from outside indonesia, which can be used for consumption or to increase the wealth of the taxpayer concerned. so corporate income tax is a tax imposed on tax subjects, namely companies or entities on the object of income tax, namely company profits (mardiasmo, 2016) stated that, income tax rate uses progresif tax rate namely the percentage of rate used is getting higher when the number of those subject to tax is getting higher. corporate income tax arises because of the income or profit from the company's operations or sales. the higher the profit generated by the company, the greater the tax that must be paid to the state treasury. to calculate corporate income tax, the company's net profit is multiplied by corporate income tax rate in rupiah, article 17 (atina et al., 2017). according to (kasmir, 2017) liquidity ratio is a ratio showing the company's ability to pay shortterm debts that are due or the ratio to determine a company's ability to finance and fulfill the obligation at the time billed. in this study, the liquidity ratio using current ratio (cr) is the ratio that measures a company's ability to repay current liabilities using current assets owned. the larger this ratio means the more liquid the company is. however, this ratio has a weakness, because not all components of current assets have the same level of liquidity. in practice it is often used that the current ratio with a standard of 200% (2:1) is sometimes considered a fairly good or satisfactory measure for a company. according to puspitasari and nik amah (2019) liquidity has an effect on corporate income tax, while according to anam & zuardi (2018) liquidity has no effect on income tax. effect of profitability on corporate income tax the profitability ratio is a ratio to assess the company's ability to seek profit (kasmir, 2017). this ratio also provides a measure of the effectiveness of a company's management. net profit margin (npm) is a measure of profit by comparing the profit after interest and taxes compared with sales. this ratio shows the company's net income on sales. the general standard of the industry average for npm is 20%, if it is above the industry average then the profit margin of a company is good, and vice versa . theoretically, the profitability ratio affects the size of the corporate income tax. this is supported by the results of research by puspitasari and nik amah (2019) that shows the effect of profitability of the corporate income tax, whereas the study with the results of no effect of profitability by atina et al. (2017) it is estimated that the company does not minimize the costs that even though the company generates very high sales, the burden becomes large and has an impact on the decline in net sales. effect of operating expenses on corporate income tax cost is the cost of goods or services that have provided benefits which is used to earn income. costs will be deducted from income to determine profit or loss for a period so that costs will be included in the income statement (siregar et al., 2013). according to murhadi (2013) operating costs are costs incurred relating to the operations of the company covering the sales and administrative costs, depreciation costs, advertising costs, as well as repair and maintenance costs. costs that are allowed to be deducted in calculating domestic taxpayers are costs related to https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 240 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc business activities (law no. 36 of 2008) . theoretically operating costs affect corporate income tax. the results showed that there was an effect of operational costs on corporate income tax, among others, found by anam and zuardi (2018), anggraini and kusufiyah (2020) while puspitasari and nik amah (2019) found no effect. the theoretical framework of the research can be illustrated in the research model as follows: figure 1. research model hypothesis: h1. liquidity has partial effect on corporate income tax h2. profitability has partial effect on corporate income tax h3. operational costs have a partial effect on corporate income tax h4. liquidity, profitability and operating costs have a simultaneous effect on corporate income tax. method the object of this study is company of trade, services and investment in major trade subsector (wholesale) listed on the indonesia stock exchange (bei) for the data period of 2014 2018. determination of the sample in this study using the purposive sampling method. of the 40 companies listed on big trade subsector (wholesale), there are eight companies that can be used as samples with the following criteria :1. no commercial or fiscal losses, 2. the profit/loss report uses the rupiah currency unit. 3. company data and components in complete financial statements the analysis used was multiple linear regression analysis which that was processed with the software statistical product and service solution (spss) software version 26. the data sources in the form of financial statements were obtained from www.idx.go.id and www.idnfinancials.co.id. result and discussion based on table 3, the results of the kolmogorov-smirnov test show that the values of liquidity, profitability and operating costs in this study are normally distributed. in this case, it is shown by h3 h2 h1 liquidity (x1) profitability (x2) operational cost (x3) income tax h4 https://www.ilomata.org/index.php/ijtc http://www.idnfinancials.co.id/ liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 241 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the obtained value of asymp. sig . (2-tailed) 0,121 . it can be concluded that the data is normally distributed because the significance value is 0,121 > 0,05, so the regression model meets the assumption of normality. thus the regression model is feasible to be used in research. table 3. normality one -sample kolmogorov-smirnov test unstandardized residual n 40 normal parametersa,b mean 0.0000000 std. deviation 0.23615215 asymp. sig. (2-tailed) ,121c source: data processed multicollinearity testing results shown in table 4, shows the value tolarance liquidity of 0,807 , the profitability at 0.880 , and operating expenses amounted to 0,872 . while the value of vif for liquidity is 1,239, profitability is 1,136 , and operational costs are 1,147 . it can be concluded that the value of liquidity ratios tolerance, profitability and operational costs ≥ 0.10 and vif liquidity ratios, profitability and operational costs ≤ 10. it can be concluded the research data is not the case of multicolinearity and is stated that multicolinearity test is fulfilled. table 4 . multicollinearity test coefficients a model collinearity statistics tolerance vif 1 liquidity 0.807 1.239 profitability 0.880 1.136 operating costs 0.872 1.147 source: data processed the results of the autocorrelation test in table 5 below show the dw value is 1,869, this indicates that the dw value is less than 2, which means there is no autocorrelation . table 5. autocorrelation test model summaryb model r r square adjusted r square std. error of the estimate durbinwatson 1 0,979a 0.959 0.956 0.24579 1.869 source: data processed the results of the heteroscedasticity test with a scatterplot diagram (figure 2) show that there is no heteroscedasticity because there is no clear pattern and the points spread above and below the number 0 on the y axis , it can be concluded that there is no heteroscedasticity symptom, so it can be stated the heteroscedasticity test is fulfilled. https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 242 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2 heteroscedasticity test results source: data processed based on table 6, the results of the multiple linear regression test obtained the regression equation for variables, inflation rates, interest rates, and exchange rates, as follows: corporate income tax = -0,079 + 0,202x1 + 0,633x2 + 1,026x3 + e note: x1: liquidity x2: profitability x3: operating cost table 6 . multiple linear regression test source: data processed the results of the partial test (t test) obtained the following results: a. liquidity based on the test results that the significance value is at 0,577 . the significance value is > 0.05 , then 𝐻0 is accepted or 𝐻1 is rejected. from these results it can be concluded that the liquidity variable partially has no effect on corporate income tax. b. profitability based on the test results that the significance value is at 0 , 000 . the significance value is < 0.05, then 𝐻0 is rejected or 𝐻2 accepted. from these results it can be concluded that the profitability variable partially affects corporate income tax. c. operational costs based on the test results that the significance value is 0,000. the significance value is < 0 , 05 so 𝐻0 is rejected or 𝐻3 is accepted. from these results it can be concluded that the operational cost variable partially affects corporate income tax. table 7 . coefficient of determination model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -0.079 0.237 -0.334 0.740 liquidity 0.202 0.359 0.021 0.563 0.577 profitability 0.633 0.104 0.219 6.104 0.000 operating costs 1.026 0.038 0.968 26,789 0.000 https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 243 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc model summaryb model r r square adjusted r square std. error of the estimate 1 0,979a 0.959 0.956 0.24579 source: data processed based on table 7 coefficient of determination is seen that the column of adjusted r square at 0,956 shows the magnitude of the role or contribution of independent variables such as liquidity, profitability and operating costs contribute to the corporate income tax amounted to 95.6%. while the rest of 4,4% is explained by other variables that do not exist in this study. table 8 . f uji test anova a model sum of squares df mean square f sig. 1 regression 50.934 3 16.978 281.021 ,000 b residual 2.175 36 0.060 total 53.109 39 source: data processed in table 8. simultaneous test results (f) obtained sig. f 0,000. value of sig. f is smaller than 0,05. it can be concluded that the variables of liquidity, profitability and operating costs are simultaneously affect the corporate income tax. effect of liquidity ratio on corporate income tax the first hypothesis (h1) proposed in this study is that it is suspected that liquidity has an effect on corporate income tax . the results of the partial t test are known to have a coefficient of 0,202 with a significance level of 0.577. these results indicate that the liquidity ratio has no effect on corporate income tax . this means that the level of the company's liquidity ratio will not affect the amount of corporate income tax payable. the liquidity ratio, which is a reflection of available current assets, will not directly affect income tax, because current assets are not necessarily all used for company operations which will ultimately increase sales and profits. these results are in accordance with the research by anam & zuardi (2018) and widanto and pramudianti (2021) . the effect of profitability ratios on corporate income tax the second hypothesis (h2 ) is suspected that profitability has an effect on corporate income tax. the regression coefficient for the change in profitability is 0,633 implying that the increase in one-unit change in the profitability of the corporate income tax will have an increase at 0,633. based on calculations of significance level at 0,000, since the significance value is less than 0,05 then in partial, there is influence between profitability with corporate income tax. these results support the results of research by puspitasari and nik amah (2019) which found that there was an effect of profitability on corporate income tax. effect of operating costs on corporate income tax https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 244 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the third hypothesis (h3) is suspected that operational costs have an effect on corporate income tax. the regression coefficient for the change in exchange rate is 1,026 implying that there is an increase of one -unit change operating costs so the corporate income tax will increase by 1,026. based on the results of the calculation of the significance level of 0,000, because the significance value is less than 0.05, so there is a partial effect between operational costs and corporate income tax . this research is in line with the research by anam & zuardi (2018) and vindasari (2019) which states that operational costs have an effect on corporate income tax. this is because operational costs are a determining element of operating profit. so the size of the cost will affect the corporate income tax. effect of liquidity, profitability and operating costs on corporate income tax the fourth hypothesis (h4) simultaneously has an effect on the ratio of liquidity, profitability and operating costs to corporate income tax. simultaneous test results (f) obtained sig. f 0,000 means that the variable liquidity, profitability and operating expenses simultaneously affect the corporate income tax. supported by the results of the coefficient of determination showing a figure of 95.6 %, it means that the independent variables of liquidity, profitability, and operating costs can explain the dependent variable, namely corporate income tax payable of 95,6 %, the remaining 4,4 % is caused by other factors that are not used in this study . conclusion partially liquidity does not effect corporate income tax. the ratio of profitability and operational cost give effects on corporate income tax. simultaneously, liquidity, profitability and operational cost give effects to corporate income tax. based on the results obtained that the ratio that affects corporate income tax is profitability and operating costs, so as an implication the internal party/management must be careful with the information presented in the financial statements which will have a negative impact on the users of financial statements, especially on operating costs. the results of this study are limited to large trading sub-sector companies for the period 20142018 using 3 variables, namely liquidity, profitability and operating costs. suggestions for further researchers can explore other financial variables that have the potential to affect corporate income tax and expand the sample to be compared with the results of previous studies. reference anam, c., & zuardi, l. r. (2018). analisis rasio likuiditas, rasio solvabilitas, dan biaya operasional terhadap pajak penghasilan badan terutang (sektor pertambangan di bei tahun 2011-2016). jurnal ekonomi dan perkembangan bisnis margin eco, 2(1), 43–68. https://doi.org/https://doi.org/10.32764/margin.v2i1.198 andrejovská, a., mihóková, l., & martinková, s. (2017). metaanálisis de categorización de los países de la unión europea en el contexto del impuesto de sociedades. contaduria y administracion, 62(3), 1001–1018. https://doi.org/10.1016/j.cya.2017.04.002 anggraini, d., & kusufiyah, y. v. (2020). dampak profitabilitas, leverage dan biaya operasional terhadap pajak penghasilan badan. jurnal ekonomi dan bisnis dharma andalas, 22(1), 33–47. https://jurnal.unidha.ac.id/index.php/jebd/article/view/76 https://www.ilomata.org/index.php/ijtc liquidity, profitability and operational costs on corporate income tax kusrina & fatimah 245 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc atina, i., harimurti, f., & kristianto, d. (2017). pengaruh profitabilitas dan biaya operasional terhadap pph badan perusahaan makanan dan minuman di bei (periode 2013–2015). jurnal akuntansi dan sistem teknologi informasi, 13(3), 323–330. https://ejurnal.unisri.ac.id/index.php/akuntansi/article/view/1844 direktorat jenderal pajak. (2013). undang-undang kup dan peraturan pelaksanaannya (k. petrus (ed.); i). direktorat jenderal pajak. https://kemenkeu.go.id/sites/default/files/uu-kup mobile.pdf farah, b., elias, r., chakravarty, d., & beamish, p. (2021). host country corporate income tax rate and foreign subsidiary survival. journal of world business, 56(2), 101186. https://doi.org/10.1016/j.jwb.2020.101186 ježek, f. (2014). comparative research in the area of corporate income tax. procedia social and behavioral sciences, 110, 997–1005. https://doi.org/10.1016/j.sbspro.2013.12.946 kasmir. (2017). analisis laporan keuangan (kasmir (ed.); i). rajagrafindo persada. https://www.rajagrafindo.co.id/produk/analisis-laporan-keuangan/ li, b., liu, c., & sun, s. t. (2021). do corporate income tax cuts decrease labor share? regression discontinuity evidence from china. journal of development economics, 150(january), 102624. https://doi.org/10.1016/j.jdeveco.2021.102624 mardiasmo. (2016). perpajakan (mardiasmo (ed.); iii). andi. http://www.library.usd.ac.id/web/index.php?pilih=search&p=1&q=0000133697&go=det ail menichini, a. a. (2020). how do firm characteristics affect the corporate income tax revenue? international review of economics and finance, 65(september 2019), 146–162. https://doi.org/10.1016/j.iref.2019.10.004 murhadi, w. r. (2013). analisis laporan keuangan (proyeksi dan valuasi saham) (werner r. murhadi (ed.); i). penerbit salemba. https://penerbitsalemba.com/buku/01-0234-analisis-laporankeuangan-proyeksi-dan-valuasi-saham puspitasari, d. a. l., & nik amah. (2019). pengaruh profitabilitas likuiditas dan biaya operasional terhadap pajak penghasilan badan (studi pada perusahaan manufaktur sub sektor industri barang konsumsi yang terdaftar di bursa efek indonesia periode tahun 2015-2017). jurnal simba : seminar inovasi manajemen, bisnis, dan akuntansi, 1(1), 474–488. http://prosiding.unipma.ac.id/index.php/simba/article/view/1166 siregar, b., suripto, b., hapsoro, d., widodo, e., herowati, e., kusumasari, l., & nurofik. (2013). akuntansi biaya (baldric siregar (ed.); ii). salemba empat. https://penerbitsalemba.com/buku/01-0333-akuntansi-biaya-e2 zhang, y., & huang, j. h. (2014). cost-based pricing model with value-added tax and corporate income tax for a supply chain network. applied mathematical modelling, 38(1), 168–180. https://doi.org/10.1016/j.apm.2013.06.011 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 31 july 2021 page no. 175-183 https://www.ilomata.org/index.php/ijtc 175 | ilomata international journal of tax & accounting volume 2 issue 3, july 2021 the influence of corporate governance perception index, profitability ratio and firm size to company value (cgpi and listed companies on the idx) eva safina rose1, siti arbainah2, suko raharjo3, ardian widiarto4 1234politeknik negeri semarang correspondent: arbainah.siti@gmail.com, ardian.widiarto@polines.ac.id submitted : june 22, 2021 revised : july 15, 2021 published : july 31, 2021 abstract this research is based on the problem of what factors can affect the value of company in the form of book value of shares (pbv) in companies that are ranked cgpi and listed on the idx 20142018. cgpi itself is a corporate governance index given by the iicg institution to participating companies in accordance with the results of research on corporate governance mechanisms. this study aims to analyze the effect of the corporate governance perception index, profitability ratios, and company size on firm value in companies that are ranked cgpi and listed on the idx during the 2014-2018 period with a sample of 11 companies using purposive sampling technique. the results of multiple linear regression statistical analysis show that (1) the effect of cgpi on book value of shares (pbv) is positive and significant (2) the effect of roa on book value of shares (pbv) does not have a positive and significant effect (3) effect of roe on firm value (pbv) is positive and significant (4) the influence of company size on company value (pbv) does not have a positive and significant effect (5) cgpi, return on assets, return on equity, and company size simultaneously have an influence on firm value. keyword: corporate governance perception index, roa, roe, company size, pbv introduction the company's goal is to maximize the value of the company. salvatore (1989) [1] states that companies exist because the company's economy produces production and distribution and provides great benefits for employers, workers, and other resource owners. firm value is related to the company's stock performance. this statement is supported by maksum (2005) which states that the value of the company in the eyes of investors increases as a result of their increased trust in the company. firm value can be measured through various aspects, one of which is proxied by price to book value (pbv). one of the things that can affect company value is good corporate governance. in indonesia, currently many organizations are interested in studying corporate governance issues such as academics who have established various forums one among them is the indonesian institute for corporate governance (iicg). iicg in collaboration with the national committee on companies conducts research studies and assessments on the implementation of good corporate governance, both public and private, banking, and state-owned enterprises in indonesia. the results are then published nationally and internationally by the swa magazine and https://www.ilomata.org/index.php/ijtc mailto:arbainah.siti@gmail.com mailto:ardian.widiarto@polines.ac.id the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 176 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 the iicg website. the resulting product is the corporate governance perception index. one of the interesting things studied is the anomaly between the ranking results and the performance of a company. this anomaly that will be used in this study will raise the question whether the cgpi score is really effective in assessing the performance of the company where this will determine the value of the company. in addition to being an indicator of the company's ability to meet the obligations of the owners of capital, company profit is also an element in the creation of company value that shows the company's prospects in the future. profitability ratio can be proxied by return on asset (roa) and return on equity (roe). on the other hand, company size is also an important aspect in determining company value. the size of the company referred to in this study is to see how much assets a company owns. the assets owned by the company represent the rights and obligations as well as the company's capital. companies that participate in cgpi have been confirmed to have a good and general reputation in the community with a large number of assets generated because the majority of cgpi participants are public, private, banking, state-owned companies and even regional own enterprise. companies with large assets will usually get more attention from the public and investors. this will cause companies to be more careful in their financial reporting. it is hoped that the company will always strive to maintain financial performance stability which will certainly have an impact on company value. agency theory is the basis used to explain corporate governance. this theory contains an explanation of the relationship between agent as manager and principal as owner (wijayanti and mutmainah, 2012). in practice, the owner will give authority to the manager in the hope that the manager will give his best to achieve the owner's goals, namely maximizing company value. however, problems arise from the separation of ownership and management, which is known as agency problems. agency problems arise from a conflict of interest between the owner (shareholder) and the agent (management). to reduce problems or conflicts that occur between owners and management, a supervisory mechanism is needed for company management. the mechanism that can be used is gcg (good corporate governance). gcg is expected to be a system that provides guidelines and principles to harmonize the different interests of managers and shareholders. according to the forum for corporate good corporate governance is a set of regulations governing the relationship between shareholders, company managers, creditors, government, employees as well as other internal and external stakeholders relating to their rights and obligations or with another word is a system that controls the company. strengthening financial performance required good corporate governance (gcg). according to effendi (2016). the definition of good corporate governance is a company internal control system that has the main objective of managing significant risks in order to meet its business objectives. the indonesian institute for corporate governance (iicg) was established on june 2nd, 2000 is an independent agency conducting dissemination and development of in indonesia. the main activity undertaken is conducting research on the implementation of good corporate governance which results in the corporate governance perception index (cgpi). the corporate governance perception index (cgpi) is a research and ranking application of good corporate governance in public companies listed on the indonesia stock exchange (idx). the the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 177 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 implementation of the corporate governance perception index (cgpi) is based on the importance of knowing the extent to which public companies have implemented good corporate governance. the corporate governance perception index (cgpi) is held annually, for the first time in 2001. the research methodology used includes four stages of research involving internal and external company stakeholders. the four stages are self-assessment, collecting company documents, drafting papers and achievements as well as observing the company. corporate governance index (cgpi) ranking is designed into three categories based on the level / level of trustworthiness which can be explained according to the application score, namely highly trusted, trustworthy, and fairly trustworthy. return on asset (roa) according to kasmir (2014) is a ratio used to measure a company's ability to generate profits from investment activities. roa can help companies that have implemented good accounting practices to be able to measure the efficiency of the use of capital as a whole, which is sensitive to everything that affects the company's financial condition so that the company's position on the industry can be seen. another profitability ratio is roe or return on equity. roe is part of the profitability ratio. the definition of roe according to brigham and houston (2010). has the view that return on equity is the ratio of net to ordinary equity, which serves to measure the rate of return on investment from common stockholders. according to brigham & houston (2010), company size is the size of a company that is shown or valued by total assets, total sales, total profits, tax expenses and others. meanwhile, according to harahap (2007). the measurement of company size is the size of the company measured by the natural logarithm (ln) of the average total assets (total assets) of the company. according to anthanasius (2012), price to book value is a ratio that shows how high a stock is purchased by an investor compared to the book value of the stock. the smaller the price to book value, the cheaper the price of a stock is. price to book value (pbv) is a value that can be used to compare a stock that is more expensive or cheaper than other stocks. with this pbv ratio, investors can immediately know how many times the market value of a stock has been valued from its book value. the pbv ratio can provide an overview of potential stock price movements so that from this description, indirectly the pbv ratio also has an influence on stock prices. the conclusion is that pbv becomes a benchmark for seeing market recognition of a company. well recognized the share price will increase, but if the market admits it is not good, the share price will decrease. hypothesis that would be used in this research conduct: h1: cgpi has positive effect on the value of cgpi participating companies h2: return on assets affects positively against the value of cgpi participating companies h3: return on equity affects positively against the value of cgpi participating companies h4: the size of the company has a positive influence on the value of cgpi participating companies. method the type of data used in this study is quantitative data which is in the form of numbers or qualitative data that is guessed/scoring (sugiyono, 2011). the data source used in the study is secondary data. secondary data that is data obtained in the finished form has been collected and the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 178 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 processed by other parties (sugiyono 2011). quantitative and secondary data in this study are cgpi report containing corporate governance index of companies from various sectors both public, private, state-owned enterprises, bumd. this data is obtained through the e-mail of the institution that held the cgpi event iicg. and annual financial statements of cgpi participating companies listed on the indonesia stock exchange that do not directly provide data to data collectors, for example through others or through documents. the data comes from the idx website. table 1. sampling result cgpi participant 2014-2018 163 cgpi participant that not listed on idx for 2014-2018 (83) cgpi participant in 2014-2018 whom not consistent (69) cgpi participant whom consistent and also annually published their financial statement on idx for the 20142018 period 11 x 5 = 55 source: private data, 2020 this research using multiple linear regression method to established the result. multiple linear regression analysis is a regression analysis used to determine the relationship between one dependent variable and several independent variables. the result of multiple regression analysis is the coefficient of each independent variable. the result of regression analysis is the coefficient of each independent variable by predicting the value of a dependent variable with an equation. the mathematical form will be explained as below: 𝑃𝐵𝑉 = 𝛽0 + 𝛽1𝐶𝐺𝑃𝐼 + 𝛽2𝑅𝑂𝐴 + 𝛽3𝑅𝑂𝐸 + 𝛽4𝑆𝐼𝑍𝐸 + 𝜀 where: β : regression coefficient cgpi : corporate governance perception index roa : return on asset roe : return on equity size : company size ε : error result and discussion descriptive statistical data serves to see an overview of the research. in a descriptive statistic, there is a number of data, the maximum value, the minimum value, and the average value. descriptive statistical results for cgpi, roa, roe, and enterprise size independent variables and company value dependent variables (pbv) can be found in the following table: table 2. descriptive statistic result the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 179 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 n minimum maximum mean std. deviation variance cgpi 55 71,00 93,86 85,909 5,217 27,221 roa 55 -0,05 0,21 0,037 0,046 0,002 roe 55 -0,08 0,33 0,130 0,076 0,006 size 55 28,70 34,80 32,210 1,936 3,750 pbv 55 0,41 4,55 1,024 1,024 1,049 valid n (listwise) 55 source: secondary data, 2020 table 3. kolmogorov-smirnov result test statistic 0,970 asymp.sig.(2-tailed) 0,200 source: secondary data, 2020 table 4. multicollinearity test result variable tolerance vif cgpi 0,597 1,675 roa 0,153 6,552 roe 0,111 9,016 size 0,26 3,849 dependent variable: pbv source: secondary data, 2020 the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 180 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 figure 1. scatterplot graph table 5. autocorrelation test r r square adjusted r square durbin watson 0,649 0,421 0,375 1,963 source: secondary data, 2020 table 6. t-test result variable t test result significant cgpi 2,532 0,015 roa 1,134 0,262 roe 2,17 0,035 ukuran -0,793 0,432 perusahaan dependent variable: pbv source: secondary data, 2020 the t-test is the second model due diligence that tests independent variables in this study (corporate governance perception index, return on assets, return on equity, and size of the the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 181 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 company) to see the result which between the variables individually has an influence on the value of the company (pbv). the study's free degree was 1,67591 where the a specified was 5%. cgpi variables on pbv have a significant positive influence this can be characterized by a sig < of 0,05 in this research the significancy of cgpi below 0,05 which is 0,015 followed by ttable > t-count that is 2,532 > 1,67591. this indicates that h0 was rejected and hypothesis 1 (h1) accepted. this means that cgpi variables have a positive partial and significant effect on the value of the company. roa variables do not have a significant influence on pbv. this can be seen from the significance. the condition of the acceptance of the hypothesis is with the < of 0.05. statistical results show that the variable roa level of significance of 0.262 exceeds the requirement for acceptance of decisions that are below 5%. t-hitung is also priced less than t-table, which is 1,314 < 1,67591 so it can be concluded that roa has no influence whatsoever on the value of the company. this means h0 is accepted and hypothesis 2 (h2) is rejected. this means that roa has no influence on the value of the company (pbv). roe have a positive and significant influence on the value of the company. this can be proven in statistical test results that the significance of < 0,05 is 0,035 with t-hitung > t-table test result of 2,170 > 1,67591. h0 is rejected and hypothesis 3 (h3) is accepted. roe has positive impact due to company value (pbv). as for the size of the company appears to have a negative and insignificant effect on the value of the company with a value of -0,793 < 1,67591t-tabel. however, the level of significance shows above 5% which is 0,431. this indicates that h0 is accepted and hypothesis 4 (h4) is rejected. this means that the size of the company does not have a significant influence on the value of the company (pbv). to measure the ability of independent variables in this study used an adjusted value of r. the reason is that the adjusted value of r already considers the sample data and the number of variables used. the test results of the determination coefficient will be displayed in the following table: table 7. r determination test r r square adjusted r square 0,649 0,421 0,375 source: secondary data, 2020 in the regression model of this study, it is known the coefficient of determination is 0,375 or 37,5%. the ability to explain these independent variables is relatively small because the larger percentage of 62,5% is explained by other variables not included in this study. conclusion cgpi participating companies, are expected to have good guaranteed governance. this can be proven by the index given according to research conducted by the iicg team on all companies that willingly participate in cgpi events. this index turns out to have an influence on the value of the company. this research shows a corresponding result with previous research the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 182 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 conducted by marlyanti, hasan basri, and faisal (2015) showing that cgpi is adhered to the value of the company (pbv), the opposite of the research conducted by cahyaningtyas (2015) reveals that the cgpi index has no influence on the value of the company. the result indicates that roa having no positive affect against company value. this happen because may also be the case because there have been several periods in cgpi participating companies, experiencing significant asset increases but not accompanied by an increase in corporate profits. investors in this case concluded that the management of assets in the company is less maximal. this research has inverse results from research conducted by marlyanti, hasan basri, and faisal (2015) and cahyaningtyas (2015) in which roa has a significant influence on the value of the company (pbv). these results are in line with lianti and heliana's research (2015) [13] showing that roa has no influence on changes in the company's value. the result indicates that roe has positive influence against company value. it means that with the total capital there can affect the value of the company. according to afidah (2014) in kusumaningrum (2015) roe shows the rate of return on capital invested by shareholders. if the roe figure is high then the share price is also likely to be high so it will also increase shareholder value. this will further increase the company's attractiveness to investors, as the profit level will increase. according to harmono (2009) in kusumaningrum (2015) roe which is one of the profitability has a causality relationship to the value of the company. this causality relationship shows that roe can describe a company's financial performance as measured using the dimensions of profitability in good condition, will have a positive impact on the investor's decision in the capital market to invest in the form of capital investment. research conducted has corresponding with previous research with kusumaningrum (2015) revealed that return on equity proved to have a positive influence on the value of the company. the result indicates that firm size has no positive corresponding affect against company value. cgpi participating companies are mostly in the category of companies with large businesses according to bapepam 1995 number 9 because the majority of cgpi participating companies include state-owned or private national businesses. in general, large assets will attract investors to invest however, errors in the management of corporate assets can also lower the value of the company in the eyes of investors. according to suryandani (2018), the company obtains a source of funds one of which comes from debt to external parties of the company, so it can be concluded that the larger the size of the company will be the greater the debt. debt withdrawals made by large companies should be able to make the company get a return in the form of large assets as well. the assets that are guaranteed to obtain debt are worth more than the return on assets received by the company. the high risk in the company is considered to increase the potential for bankruptcy which can be a concern for investors. the results of this study had corresponding result with previous research by suryandani (2018) and languju (2018) reveal that the size of the company has no effect or even negative influence but does not have a significant effect on the value of the company. indriyani (2016) also revealed a negative reaction between the size of the company and the value of the company. however, the opposite was revealed by marlyanti,et al (2015) revealing that the size of the company had a positive impact on the value of the company. the influence of corporate governance perception index, profitability ratio, and firm size to company value (cgpi and listed companies on the idx) eva safina rose, siti arbainah, suko raharjo & ardian widiarto 183 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 reference athanasius, thomas., (2012). panduan berinvestasi saham. elex media 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bursa efek indonesia). jurnal ilmiah mahasiswa universitas jember. languju, et.al., (2016). pengaruh return on equity, ukuran perusahaan, price earnings ratio dan struktur modal terhadap nilai perusahaan property and real estate terdaftar di bursa efek indonesia. ilmiah efisiensi volume 16 no. 02. universitas sam ratulangi. marlyanti, et.al., (2015). pengaruh corporate governance perception index, rasio profitabilitas, dan ukuran perusahaan terhadap nilai perusahaan pada bursa efek indonesia. journal of accounting research and review universitas syiah kuala vol.8 no.2. salvatore, d., (1989). ekonomi internasional. gelora aksara. jakarta. sugiyono, (2014). metode penelitian manajemen. bandung: cv.alfabeta. suryandani,atika., (2018). pengaruh pertumbuhan perusahaan, ukuran perusahaan, dan keputusan investasi terhadap nilai perusahaan pada perusahaan sektor property dan real estate. businesa manageent analysis journal vol.1 no.1 oktober 2018. universitas muria kudus. wijayanti, sri dan mutmainah., (2012). pengaruh penerapan corporate governance terhadap kinerja keuangan pada perusahaan perbankan yang terdaftar di bursa efek indonesia (bei) tahun 2009-2011. undergraduate thesis, fakultas ekonomika dan bisnis. universitas diponegoro. the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, number 3 july 2021 page no. 222-235 https://www.ilomata.org/index.php/ijtc 222 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya state university of jakarta submitted : june 22, 2021 revised : july 15, 2021 published : july 31, 2021 abstract return is one of the factors that investors pay attention in determining their investment policies. for this reason, this study analyzes the effect of several conventional financial performance indicators such as total asset turnover, current assets, debt to equity ratio, and return on assets to stock returns. other variables that are seen as new indicators such as economic value added, human economic value added, and value added intellectual capital are also examined for their effects on stock returns. companies engaged in the energy sector in indonesia and malaysia were made as objects in this study. ols regression is used to analyze the effect of independent variables on the dependent variable. the results of an analysis of energy company data in indonesia show that debt to equity ratio and human economic value added have a negative and significant effect on stock returns, while economic value added and value added intellectual capital have a positive and significant effect on stock returns. as for the object of research on energy companies in malaysia, the results showed that total asset turnover, economic value added and value added intellectual capital had a positive and significant effect on stock returns. keyword: stock return, economic value added, value added intellectual coefficient introduction energy is one industry sector that has a significant effect on increasing the company's production specifically and the economic output of a country in general. economic growth will highly depend on the availability of adequate energy considering the production process of goods or services will always need support for energy supply. economic improvement is always associated with energy use, while the developing global economy will result in increased demand for energy (rashid, et al., 2016). the world economic forum notes that developed and developing countries are the biggest energy providers and contributors of carbon dioxide emissions in the world in 2016 (wef, 2019:18). for southeast asia region, indonesia ranks highest from the perspective of energy use when compared to other countries in the same region. the central intelligence agency on its official website noted that indonesia consumed as much energy as 213 billion kwh in 2016, followed by thailand with 187 billion kwh, vietnam 143 billion kwh, and malaysia 136 billion kwh. the amount of energy consumption for indonesia, vietnam, and thailand is considered reasonable given the three have the largest population in southeast asia. however, it is different with malaysia. with a population of only around 12% of the total population of indonesia, malaysia is able to absorb 64% of indonesia's total energy consumption the comparison of indonesian and malaysian data is interesting to study considering that https://www.ilomata.org/index.php/ijtc conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 223 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 the two countries are in the same region and even have neighbors, with almost the same historical background, and have relatively similar geographical conditions, but in fact have very different levels of energy consumption and economic performance. on the other hand, based on data i obtained from marketwatch.com, the return of energy company shares on the indonesia stock exchange and the malaysian stock exchange has seen significant differences in the last three years. the average stock return per year of energy companies in indonesia has the same trend as the cspi, which increased 36% per year in 2015-2016, an increase of 18% in 2016-2017, but decreased by 12% in 2017-2018. on the other hand, the average annual stock return of energy companies in malaysia increased 75% in 2015-2016, decreased 39% in 20162017, and increased again by 71% in 2017-2018. changes in prices and stock returns are strongly influenced by internal and external factors of the company (utami et al, 2015). where when viewed from the perspective of company internal factors, a picture of company performance can be analyzed from financial data contained in the company's financial statements (khadaffi and heikal, 2014: 219). some financial ratios that have long been known as tools for analyzing corporate financial performance include activity ratios, liquidity ratios, solvency ratios, and profitability ratios. in the context of performance analysis, several recent studies also discuss economic value added (eva) or economic added value as an alternative that can be used to measure the effectiveness of the company's financial performance. another contemporary measurement tool related to company performance is human economic value added (heva). heva is a development of the eva concept that was popularized by the sten steward & co. organization and is useful for measuring the wealth of companies created per employee. pulic in 1998 made a new concept to measure the intellectual capital (ic) of a company and in 2004 pulic introduced the concept of value added intellectual coefficient (vaic) consisting of several main components namely capital employee efficiency (cee), human capital efficiency (hce ), and structural capital efficiency (sce) (sirapanji and hatane, 2015: 46). furthermore, an analysis of company performance is also important not only as an evaluation material in the context of the country's macroeconomic context, but also as an input for stakeholders in making all decisions related to company operations. for example, the decision of creditors in giving or not giving credit to a company, the company's managers in making decisions related to the company's future going forward, and investors in making investment decisions, one of them by buying a company's shares. in general, good company performance will increasingly attract the interest of creditors to provide loans that can be used as one of the inputs in order to expand the company. on the other hand, a good company performance will also increasingly attract new investors to invest their funds in the company, which is in accordance with the company's goal which is to increase the wealth of shareholders. in determining investment decisions, there are two methods that can be used by investors in evaluating company performance, namely technical analysis and fundamental analysis (abdulmannan and faturohman, 2015: 580). this research refers more to fundamental analysis by focusing on some conventional financial ratios such as the ratio of activities represented by total asset turnover (tato), liquidity ratios represented by current ratio (cr), solvency ratios represented by debt to equity ratio (der) , profitability ratios represented by return on assets (roa). in addition, several other analytical tools such as economic value added, human economic value added, and value added intellectual capital conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 224 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 which are all represent the tools of performance analysis of contemporary companies are also the focus of discussion in this study. all these performance analysis tools will be evaluated for their effect on stock returns (sr) of companies engaged in the energy sector in indonesia and malaysia. referring to the results of previous studies discussing the variables used in this study, it can be concluded that there is no uniformity of results regarding the effects of conventional financial performance, economic value added, human economic value added, and value added intellectual capital on stock returns. the variety of research results is possible because of differences in the database used, the method used, and the period of research conducted. in addition, researchers see that there is still a research gap where there is no research comparing the effect of conventional financial performance, economic value added, human economic value added, and value added intellectual capital on company stock returns in the energy sector between indonesia and malaysia. in investing, every investor must expect a maximum return on his investment activities (oktavia and norita, 2016: 56). the return on investment can also be referred to as return or return on investment which is usually calculated over a certain period of time and measured by a percentage of the value of the investment made. stock returns generally have two components, namely dividend yield and capital gain / loss (tandelilin, 2010: 10). dividend yield is any profit received by investors over share ownership which is usually called a dividend. while the capital gain/loss is the difference between changes in stock prices when bought with stock prices when sold. oktavia and norita (2016: 58) define the activity ratio as the efficiency level of a company in using its assets or resources to support the company's activities and achieve the expected goals. total asset turnover as an indicator used in this study to represent the ratio of company activity is a ratio that illustrates the level of efficiency of the company in using its assets in order to increase sales and profits of the company (aziz, pahlavi, and toaha, 2018: 33). furthermore, liquidity ratios are used to measure a company's ability to meet short-term financial obligations that must be resolved (robinson, 2009; medyawati and yunanto, 2017: 5) and meet unexpected needs for cash (weygrandt, kimmel, and kieso, 2013: 695 ). one of the liquidity ratios used in this study is the current ratio, which is a ratio that describes how much the company's current liabilities can be covered by assets that are predicted to be converted into cash in a short time (asmirantho & somantri, 2017: 95). the solvency ratio is used to measure the company's ability to meet its long-term obligations (robinson, 2009: 277). in other words, this ratio can be used to measure the company's ability to survive in the long run (weygrandt et al., 2013: 703). based on putra, nurlaela, and samrotun (2018: 134), debt to equity ratio is a measure of a company's ability to pay short-term and long-term debt. profitability ratios measure the income or operating success of a company within a certain period of time, where company income will affect the company's ability to obtain debt and equity financing (weygrandt et al., 2013: 699). return on assets that indicate a company's ability to generate profits from assets owned (atidhira & yustina, 2017: 130) are used in this study to represent profitability ratios the concept of economic value added or economic value added began in the early 1990s when stern stewart & co. created a trademark on economic value added. economic value conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 225 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 added includes a relatively new company performance analysis tool compared to conventional financial ratios such as activity ratios, liquidity ratios, ratios, solvency, and profitability ratios. this added economic value will ensure that management operates the company consistently with the concept of increasing shareholder value (brigham & ehrhardt, 2011: 69). economic value added is then developed into human economic value added by considering the perspective of human capital (kumar and basu, 2013: 64). human economic value added is useful for measuring the added value created by companies per employee. pulic in 1998 created a new concept to measure a company's intellectual capital and in 2004 pulic introduced the concept of value added intellectual coefficient (vaic) which consisted of several main components namely capital employee efficiency (cee), human capital efficiency (hce), and structural capital efficiency (sce) (sirapanji and hatane, 2015: 46). the concept of intellectual capital put forward by pulic is motivated by the assumptions of the majority of economic and financial models that view employees as costs and not as resources. intellectual capital itself is useful in measuring the company's non-physical resources such as human capital (skills, experience, training, etc.), relational capital (relationships with customers and stakeholders, brands, company agreements, etc.), and structural capital (culture organization, work environment, and system) (stahle, stahle, and aho, 2011: 532). method the object of this research is the data of 32 companies engaged in the energy sector which are listed on the indonesia stock exchange and data on 22 companies engaged in the energy sector which are listed on the malaysia stock exchange between 2014 and 2018. the research method used is quantitative research methods. by describing the effect of each independent variable on the dependent variable examined through the process of collecting, processing, and interpreting the data obtained using statistical analysis. the data analysis method used in this study is multiple regression of panel data using the ordinary least squares (ols) method with the help of eviews software version 9.0. several tests were carried out to support the regression analysis, including chow test, normality test, multicollinearity test, heterocedasticity test, autocorrelation test, and t test for regression results. next in order to analyze the effect of independent variables on the dependent variable, multiple regression equations are made as follows: y = α + β1tato + β2cr + β3der + β4roa + β5eva + β6heva + β7vaic + e variables stock return is the difference in the current investment value with the initial investment value for a certain period. stock returns can be calculated using the following formula: stock return = capital gain/loss + dividend yield conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 226 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 total asset turnover is a financial ratio that is used to measure a company's ability to generate sales by utilizing its assets. the formula for calculating total asset turnover is as follows: total asset turnover = sasec totas æccet in order to calculate the current ratio, the data of current assets and current liabilities are obtained from each company's financial statements with the following formula: current ratio = current æccet current liabisitiec debt to equity ratio is a measure of a company's ability to pay short-term debt and long term debt. the formula for calculating the debt to equity ratio is as follows: debt to equity ratio = totas debt totas equity return on assets is calculated by dividing the company's net income by the average total assets (weygrandt et al., 2013: 699; robinson, 2009: 292). from this description, it can be seen the formula for calculating return on assets is as follows: return on asset = net incone totas æccet æverage economic value added is calculated by reducing nopat to the value of cost of capital, so the formula for calculating economic value added is as follows: eva = nopat – ( invested capital x wacc ) in which: wacc = wd kd (1-t) + we ke notes: wacc = weighted average cost of capital ebit = earning before interest and taxes nopat = ebit (1-t) invested capital = total equity – (total debt-current debt) wd = debt proportion kd (1-t) = debt costs after taxes we = equity proportion ke = equity costs the amount of the cost of equity used can be calculated using the formula capital asset pricing model (capm) with the following formula: conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 227 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 capm = krf + β ( km krf ) notes: krf = risk free rate km = market return β = company beta (non diversifiable risk) jones, utama, frensidy, ekaputra, and budiman (2009: 239) define a company beta as a relative measurement of a company's risk to the market portfolio for all shares. to calculate company beta, jones et al. (2009: 239) explain that the equation of the single index model as follows can be used: ri = αi + βi rm + e notes: ri : the return on security i rm : the return on market index αi : intercept βi : slope e : error term to calculate human economic value added, full time equivalent data is obtained from each company's financial statements. the formula for calculating human economic value added is as follows: human economic value added = econonic vasue ædded fuss tine equivasent value added intellectual coefficient is the sum of the value of intellectual capital efficiency (ice) and capital employed efficiency (cee), where ice itself is the sum of the human capital efficiency (hce), and structural capital efficiency (sce). these explanations can be summarized in the formula: vaic = hce + sce + cee or vaic = hce + sce + cee referring to the explanation of pulic (2004: 64), the detailed formula used to calculate the value added intellectual coefficient is as follows: hce = væ kc in which va = out – in conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 228 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 or va = op + ec + d + a in which sc = va – hc hce = væ kc sce = sc væ cee = væ ce notes: va = value added hc = human capital ce = book value of the net assets (total assets – total liabilities) out = total sales in = cost of bought-in materials, components, and services op = operating ec = employee costs d = depreciation a = amortization result and discussion regression model approach test table 1 chow test results of energy company data in indonesia effects test statistic d.f. prob. cross-section f 2.907014 (15,8) 0.0657 cross-section chi-square 57.789611 15 0,0000 table 2 chow test results of energy company data in malaysia effects test statistic d.f. prob. cross-section f 2.427026 (9,2) 0.3258 cross-section chi-square 47.088711 9 0.0000 from the results of the chow test as presented in tables 1 and 2 above, it can be seen that the probability value of the two chow tests is more than 0.05. these results indicate that in this test the best model that can be used in regression analysis is the common effect.uji normalitas, multikolinearitas, heterokedastisitas, dan autokorelasi conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 229 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 for energy company data in indonesia, the probability value of the jarque-bera test results using residual data is 0.3611, while for the energy company data in malaysia is 0.728417, where both values are greater than the test probability set which is equal to 0.05. from this information it can be seen that the residual data has been normally distributed or in other words it can be concluded that there is no normality problem in the existing data. multicollinearity test is performed to detect the linear relationship between independent variables. the close relationship between independent variables causes one of the assumptions to not be fulfilled in an effort to obtain estimators that are not biased, linear, and have minimum variants. from the multicollinearity test results on energy company data in indonesia and malaysia, there is no correlation between independent variables above 0.85, so it can be concluded that from the data there are no multicollinearity problems in the analysis. table 3 heterokedasticity test results for energy companies in indonesia dependent variable: resabs table 4 heterokedasticity test results for energy companies in malaysia dependent variable: resabs from tables 3 and 4 above, it can be seen that the probability value of each independent variable coefficient of the glacial test results is insignificant or more than 5%, so it can be said that there is no heterocedasticity problem in the data used in the analysis in this study. to test whether there is an autocorrelation problem, the durbin-watson test can be used by referring to the durbin-watson table. the value of d was obtained from the regression results in the amount of 2,066, with the amount of data processed in the regression of 160 for energy company data in indonesia and the d value of 2,022, with the amount of data processed in the regression of 105 for the energy company data in malaysia. referring to the existing data, the durbin-watson table sets the d value limit where there is no autocorrelation problem at variable coefficient prob tato -0.142200 0.6692 cr -0.014397 0.7699 der 0.207363 0.3052 roa 0.268867 0.8753 eva -5.818794 0.7523 heva -1.534235 0.8358 vaic -0.005795 0.3659 variable coefficient prob tato -0.047525 0.8467 cr 0.072356 0.8199 der 0.088064 0.8535 roa 0.705433 0.3359 eva 0.051327 0.8534 heva -0.180772 0.5267 vaic -0.006784 0.9223 conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 230 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 approximately 2. furthermore, given that the d value obtained from the regression results is 2,066 and 2,022, it can be concluded that the analyzed data there is no autocorrelation problem. regression result based on panel data regression analysis using the ols method with the common effect model as the chosen model, a regression result is obtained that illustrates the effect of total asset turnover, current assets, debt to equity ratio, return on assets, economic value added, human economic value added, and value added intellectual capital to stock returns as shown in table 5 as follows: table 5 regression results of energy company data in indonesia and malaysia dependent variable sr (indonesia) sr (malaysia) independent variable c 0.472936 10.16090 tato 1.303983 1.333708 *** cr 0.133041 0.873381 der 0.893373 ** 0.303474 roa 1.731458 1.827673 eva 0.524723 *** 1.022512 ** heva 0.628547 ** 0.779515 vaic 0.032690 *** 0.296690 *** note: ** and *** show significant level of 5% dan 10% respectively the results of data analysis of energy companies in indonesia show that total asset turnover has no significant effect on stock returns, while in malaysia it shows a positive and significant effect. this positive and significant influence in malaysia further confirms the results of previous studies which have been conducted by several researchers such as zamzami and afif (2015), yuliantari and sujana (2014), and medyawati and yunanto (2017). the insignificant effect of the current ratio variable on stock returns is equally shown by data in both the two countries of indonesia and malaysia. the limited number of population of companies engaged in the energy sector is indicated as one of the causes of this significant result, where there are no more than 40 companies in indonesia and no more than 30 companies in malaysia engaged in the energy sector, and not the entire population meets the criteria of purposive sampling to be analyzed as a sample. for the debt to quity ratio variable, the negative sign on the coefficient is shown by all the data in indonesia and malaysia, only for the regression results in indonesia the effect of the debt to quity ratio on stock returns is proven significant, while data in malaysia shows the conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 231 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 opposite. the insignificant effect of the variable return on assets on stock returns is equally shown by data in both the two countries of indonesia and malaysia. as with the current ratio, the limited number of samples is indicated to be a cause of insignificant results. another factor that may be the cause of the insignificant influence of return on assets on stock returns is the existence of other variables in the data processing. as is known, the existence of a control variable will also determine the value and significance of the variable being studied. in this case, researchers have tried to do a regression by eliminating other variables that are indicated to be affiliated with the variable return on assets, including economic value added variables, human economic value added, and value added intellectual coefficient. from the results of trials conducted by researchers, proven return on assets has a positive and significant effect on stock returns. the results of the analysis of the data of companies engaged in the energy sector both in indonesia and malaysia produce the same conclusions related to the influence of economic value added, namely there is a positive and significant influence of economic value added variables on stock returns. some previous studies that have the same conclusions, among others, conducted by awan et al. (2014), worthington & west (2004), akbar, khan, and ali (2010), amyulianthi and ritonga (2016), babatunde & evuebie (2017), and nugroho (2018). the results of an analysis of data from companies engaged in the energy sector in indonesia have concluded that there is a negative and significant influence from the human economic value added variable on stock returns. the negative coefficient is similar to the data in malaysia, only the difference in the data in malaysia shows insignificant results. from the author's analysis, the difference in the coefficient symbol between economic value added and human economic value added is caused by an increase or decrease in the number of employees of the company within the five years of the study. the majority of companies show a declining trend in the number of employees in the 2014-2015 period. in the case that the number of employees has not changed, then economic value added and human economic value added should have the same effect on stock returns. the results of research on energy companies both in indonesia and malaysia show the same conclusions related to the effect of the value added intellectual coefficient, namely the value added intellectual coefficient has a positive effect on stock returns at a significance level of 5%. these results reinforce the conclusions of a number of previous studies that have been carried out by ahmed, khurshid and yousaf (2019) and firmansari, migdad and kustono (2019). this positive coefficient illustrates that the more efficient a company is in utilizing its resources, the greater the potential of the company to generate profits, where it should further encourage increased profits, dividends, as well as the attractiveness of investors to invest in the company. conclusion the results of an analysis of energy company data in indonesia show that debt to equity ratio and human economic value added have a negative and significant effect on stock returns, while economic value added and value added intellectual capital have a positive and significant effect on stock returns. as for the object of research on energy companies in malaysia, the results showed that total asset turnover, economic value added and value added intellectual capital had a positive and significant effect on stock returns. further research can add other factors both internal and external sources of the company that have the potential to influence stock returns in order to obtain better research results. conventional financial performance, economic value added, human economic value added, value added intellectual coefficient and its impact on stock return of companies operating in energy sector in indonesia and malaysia anton wijaya 232 | ilomata international journal of tax & accounting volume 2 issue 31, july 2021 reference abdulmannan, a.a. & faturohman, t. 2015. the relationship between fundamental factors and stock return: a case based approach on banking companies listed in indonesia stock 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journal of tax & accounting volume 2 issue 31, july 2021 economic value-added. australian journal of management, 29(2): 201-224. yuliantari, n.n.a.w. & sujana, i.k. 2014. pengaruh financial ratio, firm size, dan cash flow operating terhadap return share perusahaan f&b. e-jurnal akuntansi universitas udayana, 7.3(2014): 547-558. zamzami, k.k. & afif, m.n. 2015. influence of return on assets (roa), debt to equity ratio (der), current ratio (cr), and total assets turnover (tat) return of shares in the sign in category index lq-45 in indonesia stock exchange. jurnal akunida, 1(1): 24-30. the illomata international journal of management ijjm ilomata international journal of management p-issn: 2714-8971; e-issn: 2714-8963 vol. 1 no. 3 july 2020 pp.170-178 https://www.ilomata.org/index.php/ijjm 170 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors tnsurance company listed in indonesia stock exchange period 2015-2018 bustani management study program, faculty of economics kalimantan islamic university muhammad arsyad al banjari banjarmasin, indonesia correspondent: bustani1993@gmail.com submitted : june 27, 2020 revised : july 19, 2020 published : july 30, 2020 abstract this study aims to examine the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr), dividend yield (dy) on share prices in insurance sub-sector companies listed on the indonesia stock exchange period 20152018. this type of research is explanatory research. this study took a population of 16 companies with a sample of 10 companies selected through purposive sampling, so the number of sample observations over 4 years to 40 companies. the data used are secondary data, namely financial statement data in the form of roa, npm, dpr and dy ratios from 2015-2018. secondary data was collected through documentation of research objects obtained by the idx. furthermore, the data were analyzed using multiple linear regression which had previously been fulfilled the classic assumption test as a prerequisite for conducting a regression test. the results of this study roa and npm significantly influence stock prices. dpr and dy have no effect on stock prices. the coefficient of determination (r2)worth of 0.29%, which means that the roa, npm, parliament and dy explain the effect on stock prices by 29%, while the value of 71% is influenced by other variables not included in this study. keywords: roa, npm, dpr and dy, stock price, indonesia stock exchange (idx) introduction today's global competition, every company is demanded to constantly improve company performance so that it can survive and thrive in the management of the company. nowadays,the impact of globalization is increasing rapidly, especially companies in processing economic resources (firdaus, 2020). similarly, the more rapid development of insurance companies in indonesia, the more stringent competition that occurs. the only way to survive and compete and maintain its existence in the business world is to continue to grow and develop(egam et al., 2017). herefore the ability of adaptation to the times must always be done so that the company still exists. one supporting factor for the company to survive and develop is the availability of funding sources. meeting the needs for funds can be obtained by making loans in the form of debt or issuing shares in the capital market (alipudin & oktaviani, 2016). stock investment activities in the capital market are expected to generate profits for the actors (utami & darmawan, 2018). the capital market is one source of economic progress because it can be a source of capital and an alternative for companies besides banks(astuti, 2018). ne aspect assessed by investors is financial performance (efendi & ngatno, 2018; lindriani, 2018). for this reason, when an investor invests in shares, investors need information for consideration and assessment of the company's performance and the possible effects on stock prices. there are many things that investors must do, one of which is to use fundamental analysis, which focuses on analysisanalysis of published https://www.ilomata.org/index.php/ijjm mailto:bustani1993@gmail.com the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 171 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 financial statements. share price is a very important factor to consider and indicators are used to measure shareholder welfare (wulandari & badjra, 2019). thus the investor's decision is very dependent on the results of the analysis of the financial statements. in this analysis investors usually use financial ratios to predict share prices, such as return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy). signaling theory emphasizes the importance of information released by companies on investment decisions outside parties (bulutoding et al., 2018). information is an important part for investors in making a decision, because with the information presented in the form of notes, information and a description of information past, present and predictions in the future can help investors make investment decisions. in making a decision, investors certainly have a variety of perspectives in interpreting information. therefore the need for information is needed as a basis for making an investment decision. information that illustrates good financial performance will certainly be the choice of investors, on the contrary if the company's financial performance is not good, certainly it is not possible for investors to make investment choices in companies that have poor performance. if the company performs well, of course, it is possible to get the maximum profit, if the company has a profit, of course, it allows investors to get the expected profit. conversely, if the company does not perform well it is unlikely to get maximum profits, and investors' expectations to get profits far from expectations. some studies suggest different results related to return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices. first, return on assets (roa) significantly influence stock prices (ambarwati et al., 2019; astuti, 2018; bulutoding et al., 2018; sihombing, 2019; silalahi & manik, 2019; wulandari & badjra, 2019). but it is different from (alipudin & oktaviani, 2016; efendi & ngatno, 2018; egam et al., 2017; hutapea et al., 2017; lindriani, 2018; ramdhani, 2013; sausan et al., 2020; utami & darmawan, 2018), return on assets has no significant effect on stock prices. second, net profit margin (npm) has a significant effect on stock prices (indahsafitri et al., 2015; lindriani, 2018; wulandari & badjra, 2019). but it is different from (ambarwati et al., 2019; astuti, 2018; dini & indarti, 2012; hutapea et al., 2017), net profit margin (npm) has no significant effect on stock prices. third, dividend payout ratio (dpr) has a significant effect on stock prices (bulutoding et al., 2018; devi et al., 2016; ermiati et al., 2019; ningrum, 2017; nugraha & sudaryanto, 2016; sihombing, 2019; silalahi & manik, 2019). but it is different from (bailia et al., 2016; girsang et al., 2019), dividend payout ratio (dpr) does not have a significant effect on stock prices. fourth, dividend yield (dy) has a significant effect on stock prices fourth, dividend yield (dy) has a significant effect on stock prices (anastassia & firnanti, 2014; devi et al., 2016; ermiati et al., 2019; margaretha, 2008; ningsih et al., 2016; novius, 2017; prakoso, 2016; wagiri, 2013). but it is different from (puspitasari & purnamasari, 2013; rachman, 2015), dividend yield (dy) has no significant effect on stock prices. based on some of the results of previous studies related (roa, npm, dpr and dy) on the share prices described above turned out to have different research results, so it is important for researchers to re-examine the effect of roa, npm, dpr and dy on stock prices in the insurance sub-sector companies listed on the indonesia stock exchange (idx) for the 2015-2018 period. the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 172 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 method type of research is explanatory research that uses a quantitative approach with the aim of testing the effect of independent variables, namely roa, npm, dpr and dy of the dependent variable, namely the share price (y) in the insurance sub-sector companies listed on the indonesia stock exchange in the 2015-2018 period. the data used in this study are secondary data obtained on the idx by documenting the financial statements, roa, npm, dpr and dy data and share price data taken from the summary of company performance reports listed on the idx through the website http://www.idx.co.id, and indonesia capital market directory (icmd) through the site http://www.finance.yahoo.com. furthermore, the data is analyzed through multiple linear regression which was previously conducted a prerequisite test, namely the classic assumption test (bustani & firdaus, 2020). this study took a population of 16 (sixteen) companies with a total sample of 10 (ten) companies selected through purposive sampling, so that the total sample of observations over 4 (four) years became 40 (forty) companies. the research model is formulated as follows (figure 1): figure 1. research model data analysis in this research uses statistical product and service solutions (spss) version 18 processing tools. the multiple linear regression equation in this study is formulated as follows: y = a + b1 (x1) + b2 (x2) + b3 (x3) + b4 (x4) + e description: y : stock prices a : constants x1 : roa (return on assets) x2 : npm (net profit margin) x3 : dpr (dividend payout ratio) x4 : dy (dividend yield) b1, b2, b3, b4: regression coefficient xn e : error-terms result and discussion in this study have met the classical assumption test criteria, namely the normal distribution model, homoscedasticity has occurred, and there is no autocorrelation so the research model can proceed to regression analysis. based on the calculation of multiple linear regression using the spss application version 18, the regression results of this study are shown in table 1 below: return on assets (x1) net profit margin (x2) dividend payout ratio (x3) stock prices (y) dividend yield (x4) the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 173 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 table 1. results of multiple linear regression coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 1786,361 549,703 3,250 ,003 return on assets (roa) 517,541 141,709 ,760 3,652 ,001 net profit margin (npm) -64,790 26,482 -,506 -2,447 ,020 dividend payout ratio (dpr) ,271 ,722 ,057 ,376 ,709 dividend yield (dy) -224,946 128,745 -,270 -1,747 ,089 a. dependent variable: stock prices source: secondary data processed, 2020 from the results of multiple linear regression (table 1), the regression equation for this study is as follows: y = 1786,361 + 517,541 (x1) -64,790 (x2) +0,271 (x3) -224,946 (x4) explanation of the regression equation is: a. constants (a) are worth 1786,361. this means that if the variable roa, npm, dpr and dy does not exist or is considered to have a value of 0 (zero), then the stock price (y) variable reaches a value of 1786,361. b. the coefficient value of the variable roa (x1) is 517,541 which is positive. this shows that for every increase of 1 (one) unit on roa with the assumption that the other independent variables are fixed, the change will raise the share price by 517,541 c. the coefficient value of the variable npm (x2) is -64.790 which is negative. this shows that every 1 (one) unit increase in npm with the assumption that the other independent variables are fixed, then the change will reduce the share price by -64,790. d. the coefficient value of the dpr variable (x3) is 0.271 which is positive. this shows that for every increase of 1 (one) unit in the house with the assumption that the other independent variables are fixed, the change will raise the share price by 0.271. e. the coefficient value of the variable dy (x4) is -224,946 which is negative. this shows that every 1 (one) unit increase in dy with the assumption that the other independent variables are fixed, then the change will reduce the share price by -224,946. partial test (t-test) is used to see the effect of the independent variable (xn) partially on the dependent variable (y). the independent variable influences the dependent variable if tcount is greater than ttable with a significance level of 5% or 0.05. while the degree of free testing is n k = 40 5 = 35, so that a ttable of 1.68957 is obtained. based on the results of the t-test (table 1), the partial test results of this study are as follows: a. variable return on assets(x-1)obtained tcount of 3.652 is greater than ttable 1.68957 and the significance value 0.001 <0.05, so this result proves that the hypothesis of unity (h1) is accepted. these results indicate that the return on assets (xvariable1)has a significant effect on stock prices (y). b. variable net profit margin (x2)obtained tcount of -2.447 which is greater than the value of ttable -1.68957 and a significance value of 0.020 <0.05, so this result proves that the second the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 174 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 hypothesis (h2) is accepted. these results indicate that the variable net profit margin (x2) has a significant effect on stock prices (y). c. variable dividend payout ratio (x3) obtained t-value of 0.376 which is smaller than t-value of table 1.68957 and significance of 0.709> 0.05, so these results prove that the third hypothesis (h3) is rejected. these results indicate that the dividend payout ratio (xvariable3)does not significantly influence the stock price (y). d. variable dividend yield (x4)obtained tcount of -1.747 which is greater than t-count and significance -1.68957 0.089> 0.05, so these results prove that the fourth hypothesis (h4) was rejected. these results indicate that the variables dividend yield (x4)partially no significant effect on stock price (y). simultaneous test (f-test) is used to prove the effect of the independent variable (xn) simultaneously on the dependent variable (y). f test can be obtained by determining the fvalue and f-table and see the significance level of 5% or 0.05. degree of freedom (df) 1 = 4, and (df) 2 = 35 to obtain a f-tabel of 2.64. then fcount is compared with ftable which is f-count 3,570 greater than ftable 2.64. thus roa, npm, dpr and dy simultaneously influence the price of shares in the insurance sub-sector companies listed on the indonesia stock exchange (idx). the f-test results are shown in table 2 below. table 2. simultaneous test results (f-test) anovab model sum of squares df mean square f sig. 1 regression 6,821e7 4 1,705e7 3,570 ,015a residual 1,672e8 35 4776997,609 total 2,354e8 39 source: secondary data processed (2020). the coefficient of determination obtained from the analysis of this study (table 3) has a value of r-square of 0.290 which means that the variation in roa, npm, parliament and dy is able to explain the variations that occur in the variable shares price (y ) by 29%, while 71% of other variations are explained by other variables not included in this research model. table 3. determination coefficient model r r-square adjusted r square std. error of the estimate 1 ,538a ,290 ,209 2185,63437 sumber: data sekunder yang diolah, 2020 return on assets (x1) obtained tcount of 3.652 is greater than ttable 1.68957 and the significance value 0.001 <0.05, so this result prove that the first hypothesis (h1) is accepted. these results indicate that the return on assets (xvariable1)partially has a significant effect on the stock price (y) of the insurance sub-sector companies listed on the indonesia stock exchange period 2015-2018. these results can also be interpreted when return on assets increase, the share price will also increase. vice versa, if return on assets decreases, the stock price will decrease as well. thus if the return on assets (roa) is high, it will be a good signal for investors. because with high roa shows that the company's financial performance is good, investors will be interested in investing their funds in the form of securities or shares. these findings are in line with empirical the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 175 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 research (ambarwati et al., 2019; astuti, 2018; bulutoding et al., 2018; sihombing, 2019; silalahi & manik, 2019; wulandari & badjra, 2019) which states that return on assets has an effect on stock price. net profit margin (x2) obtained tcount of -2.447 which is greater than the value of ttable 1.68957 and a significance value of 0.020 <0.05, so this result prove that the second hypothesis (h2) is accepted. these results indicate that the variable net profit margin (x2) partially has a significant effect on the stock price (y) of insurance sub sector companies listed on the indonesia stock exchange period 2015-2018. these results can be interpreted when the net profit margin increases, the share price will increase. vice versa, if the net profit margin decreases, then the share price will decrease as well. thus, if the net profit margin (npm) has a significant effect on stock prices, it will be a good signal for investors. because with a high npm, the company's financial performance is good, investors will be interested in investing their funds in the form of securities or shares. these findings are in line with empirical research (indahsafitri et al., 2015; lindriani, 2018; wulandari & badjra, 2019) which states that net profit margin has a significant effect on stock prices. dividend payout ratio (x3)obtained tcount of 0.376 which is smaller than t-count and significance 1.68957 0.709> 0.05, so these results prove that hypothesis third (h3) is rejected. these results indicate that the dividend payout ratio (xvariable3)partially has no significant effect on the share price (y) of insurance sub sector companies listed on the indonesia stock exchange period 2015-2018. these results can be interpreted when the dividend payout ratio increases, then the stock price will have no effect or remain. vice versa, if the dividend payout ratio decreases, then the share price will also have no effect. therefore, if the dividend payout ratio (dpr) does not have a significant effect on stock prices, it will be a signal to investors that the eps variable cannot be used as a reference in determining investors' investment strategies in investing their shares in the capital market during this research period. these findings are in line with research with (bailia et al., 2016; girsang et al., 2019) which states that dividend payout ratio has no significant effect on stock prices. dividend yield (x4)obtained tcount of -1.747 which is greater than t-count and significance -1.68957 0.089> 0.05, so these results prove that hypothesis fourth (h4) received. these results indicate that the variables dividend yield (x4)partially no significant effect on stock price (y) on sub-sector insurance companies listed in indonesia stock exchange period 2015-2018. this result can be interpreted when the dividend yield increases, the share price will not increase. vice versa, if the dividend yield decreases, the share price will not decline. thus if the dividend yield (dy) does not affect the stock price then it becomes a signal for investors that the dy variable cannot be used as a reference in determining an investor's investment strategy in investing his shares in the capital market. these findings are in line with research with (puspitasari & purnamasari, 2013; rachman, 2015) which states that the dividend yield has no significant effect on stock prices. conclusion based on the results of data analysis and discussion, the return on assets (roa) and net profit margin (npm) variables partially have a significant effect on stock prices. while dividend payout ratio (dpr) and dividend yield (dy) partially do not have a significant effect on stock prices. furthermore, the results of the analysis also prove that roa, npm, dpr and dy simultaneously influence stock prices. in the other test, the coefficient of determination (r2)worth the effect of return on assets (roa), net profit margin (npm), dividend payout ratio (dpr) and dividend yield (dy) on stock prices in the subsectors insurance company listed in indonesia stock exchange period 2015-2018 bustani 176 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 of 0.29%, which means that the return on assets (roa), net profit margin (npm), dividend payout ratio (dpr), dividend yield (dy) describe the effect on the share price of 29%, while the other 71% is influenced by other variables not examined. this study is still limited to four independent variables, namely roa, npm, dpr and dy which are used in this research model. the use of four independent variables is felt to still not reflect the effect on the overall stock price considering there are still other factors that influence it such as return on equity, debt to equity ratio, earning per share, company size. this finding has practical relevance for researchers, practitioners, and investors as important information for investing in insurance sub-sector companies listed on the indonesia stock exchange. in addition, this finding can add to the repertoire of academic research, especially on the variable roa, npm, dpr and dy on share prices.. reference alipudin, a., & oktaviani, r. 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(2019). pengaruh profitabilitas terhadap harga saham pada perusahaan lq-45 di bursa efek indonesia (bei). e-jurnal manajemen universitas udayana, 8(9), 5722–5740. https://doi.org/10.24843/ejmunud.2019.v08.i09.p18 the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, number 3 july 2021 page no. 194-208 https://www.ilomata.org/index.php/ijtc 194 | ilomata international journal of tax & accounting volume 2 number 3 july 2021 the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar1, maraini2 1,2department of management, persada bunda college of economics, pekanbaru, indonesia correspondent: yrahmat.akbar@stiepersadabunda.ac.id submitted : june 22, 2021 revised : july 15, 2021 published : july 31, 2021 abstract this study aims to analyze the effect of good governance on regional financial performance and allocation of capital expenditures and their impact on economic growth in districts and cities in riau province. the research was conducted quantitatively with a causal and descriptive research design. the population in this study were 12 districts and cities in riau province. data samples were obtained from the revenue service and the regional financial and asset management office of riau province. the research was carried out by census on budget realization reports from 2016 to 2020 so that 60 data were obtained. the data analysis technique used was partial least square (pls) analysis. the results of this study indicate that good governance has a significant effect on regional financial performance and allocation of capital expenditures. regional financial performance has a significant effect on the allocation of capital expenditures and does not have a significant effect on economic growth. direct capital expenditure allocation has no significant effect on economic growth. indirectly, good governance has a significant effect on economic growth through regional financial performance and allocation of capital expenditures. keywords: good governance, growth, regional finacial performance introduction good governance has become important for every entity both the private sector and the public sector and government. stakeholders use good governance as a measure or benchmark in making decisions, especially investment decisions. an assessment of the implementation of good governance in private and government entities has begun to be carried out both at the national and international levels. in indonesia, governance has been implemented since the reform era wherein that era there has been an overhaul of the government system for a clean democratic process so that governance/good governance is one of the reform tools that absolutely must be applied in the new government both at the centre and regions (adisetiawawan, 2013). however, from the development of reforms that have been going on so far, the implementation of governance in indonesia cannot be said to be fully successful. there are still many frauds and leaks in budget management. https://www.ilomata.org/index.php/ijtc mailto:yrahmat.akbar@stiepersadabunda.ac.id the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 195 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 regional financial management is an important part of government activities, including regional government activities. the main mission of regional management is to increase the efficiency and effectiveness of the management of regional financial resources to improve welfare and services to the community. according to (mardiasmo, 2018), regional financial management is divided into two parts, namely regional revenue management and regional expenditure management. the evaluation of regional financial management and regional development financing has very broad implications. these two components will determine the position of a regional government in implementing regional autonomy. local government as an entity that runs the wheels of government at the regional level cannot be separated from the conditions of globalization. awareness of the importance of good governance has increased after the crisis which became known as the reform era. the economic crisis is not only due to macroeconomic factors but also due to bad governance in these countries, such as a lack of legal and accounting standards, financial audits have not been implemented, the absence of supervisory commissioners and ignoring the rights of minority stakeholders. this means that the implementation of good governance will have an impact on national economic growth (fajerin, 2018). regional financial management has a huge influence on the fate of a region because a region can become a strong and powerful region and can develop its greatness or become powerless depending on how to manage its regional finances. in connection with this background, the problem is the management of regional finances in riau province, which in this study will be specifically limited to financial performance and allocation of capital expenditures which can have an impact on economic growth. riau province is one of the autonomous regions in indonesia that organize government and carries out development. to carry out the government and realize this development, a substantial amount of funds is needed and besides that, it must be with its regional strength in addition to assistance from the provincial and central governments. in government administration, the budget becomes a guide in carrying out government activities. ironically, budget management in various regions is still ineffective. this is shown, among others, by the ever-increasing allocation of personnel expenditures, on the other hand, the portion of capital expenditures for regional development has decreased (prihastuti, taufik, & agusti, 2015). three factors in the economic growth of each country, namely capital allocation, population growth and technological progress (todaro & smith, 2020). capital accumulation here is closely related to investment. one of the progress of a region can be shown by good economic growth, where one of the factors that influence economic growth is the investment issued by the local government. to increase investment, the regional financial capacity must also be adequate. the indicator for the size of regional investment is the high ratio of capital expenditures in the budget. the more capital spending, the higher the productivity of the economy because capital expenditure in the form of infrastructure has an impact on economic growth and job creation. the allocation of capital expenditures to local governments is also influenced by whether the regional financial performance is good or not. thus there is a link between regional economic growth and the allocation of capital expenditures and financial performance. regional financial management is an important part of government activities, including regional government activities. the main mission of regional management is to increase the efficiency and effectiveness of the management of regional financial resources to improve welfare and services to the community. this research implies that local governments must constantly manage their the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 196 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 financial performance because it has an impact on increasing capital expenditures, so they must get adequate priority. capital expenditures made by local governments are also used, among others, for the development and improvement of infrastructure in the education, health, and transportation sectors so that the community can also enjoy the benefits of regional development. the availability of good infrastructure is expected to create efficiency and effectiveness in these various sectors. the productivity of the community is getting higher and in the end, there is an increase in economic growth in the area (akbar & mar'aini, 2020). the increase in the share of personnel expenditures in the regional revenue and expenditure budget is closely related to the addition and appointment of new regional civil servants every year, which in many cases do not match their competence and needs. unfortunately, part of the capital expenditure was also used for the construction of official houses, procurement of official cars, and other improper expenditures. supposedly, capital expenditures are used for infrastructure development, such as roads and bridges, which need to be increased (director general of regional finance, ministry of home affairs, 2013). according to government regulation no. 71/2010, capital expenditure is expenditure by local governments whose benefits are more than one fiscal year and will increase regional assets or assets and result in routine expenditures. capital expenditures are classified into two groups, the first group is public expenditure, namely expenditures whose benefits can be directly enjoyed by the community, such as building bridges, buying an ambulance for the public, and others. meanwhile, the second group is personnel expenditure, which is expenditure whose benefits are not directly enjoyed by the community but can be felt directly by the apparatus, for example, building council buildings, purchasing official cars, and others (halim, 2013). the central government (on the website of the ministry of home affairs http://keuda.kemendagri.go.id/artikel/detail/41-belanja-modal-pemda-harus-capai-30-persen) continues to urge local governments to increase the percentage of capital expenditures by 30 percent of the total regional revenue and expenditure budget, moreover from the total capital expenditure that has been allocated, most of it is spent on the interests of regional institutions or work units. meanwhile, the percentage of capital expenditure towards total realized expenditure in regencies/cities in riau province was still much below this percentage. the problem faced by local governments in public sector organizations is regarding budget allocation. budget allocation is the number of funds allocated for each activity program. with limited resources, the government must be able to allocate the revenues obtained for productive regional expenditures (capital expenditures). the program to increase capital expenditures will inevitably touch directly on increasing the development of various infrastructures, such as agricultural facilities, transportation, and other infrastructure that directly support people's productivity and welfare. this means that in the future, all spending will be oriented to the regions because building the nation is regional development and forming capital or capital that is getting bigger in the regions. there is no doubt that infrastructure plays an important role as one of the driving forces for economic growth and the development of this sector becomes the foundation for further economic development. the existence of adequate infrastructure is needed to sustain a higher, the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 197 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 more equitable, and more prosperous economic growth for the community. the limitations of infrastructure development have slowed the rate of investment in the country in recent years. on the other hand, it must be admitted that infrastructure in indonesia is still unable to increase the competitiveness of the real sector. because the budget for infrastructure, agriculture, health, and transportation will be doubled, operational costs, official travel, or unproductive capital expenditures must be reduced. the demand for changing the spending structure is strong, especially in regions experiencing low fiscal capacity. this development budget allocation strategy is in turn capable of encouraging and accelerating national economic development, as well as being a tool to reduce regional disparities. furthermore, the planned and more pro-public budget allocation for development is expected to mediate and bridge the realization of public welfare and optimal economic growth with the availability of funds in the form of regional income as a source of financing. realizing economic growth requires fixed assets such as infrastructure and infrastructure that can support economic activity. in regional government, additional fixed assets are carried out through the allocation of capital expenditures. with the increased allocation of capital expenditures, it is hoped that economic growth will also increase. the allocation of capital expenditures is of course inseparable from the financial management carried out by local governments. based on research conducted by (horota, riani, & marbun, 2017) stated that the income of each region is only able to cover routine expenditures, and to cover other expenses each region still expects transfers from a higher-level government. in other words, each region is still dependent on the central government. when viewed from the revenue realization of the riau provincial government compared to the regional routine expenditure from operating expenditures for the last five years, it has experienced a fairly large difference each year. this means that local revenues are not able to cover routine expenses. like development spending, regional governments undertake capital expenditures to procure regional assets as investment, to finance the implementation of regional autonomy which ultimately aims to increase regional economic productivity. the more capital expenditure, the higher the economic productivity because capital expenditure in the form of infrastructure has an impact on economic growth and job creation. the allocation of capital expenditures to local governments is also influenced by whether the regional financial performance is good or not. thus there is a link between regional economic growth and the allocation of capital expenditures and financial performance. the financial performance simultaneously has a significant effect on the allocation of capital expenditures. although partially the ratio of financial dependence, independence, and the degree of contribution of local companies have a negative effect on the allocation of capital expenditures. the local government financial performance in the form of dependency ratios, degree of fiscal decentralization, fiscal space ratios have a significant effect on the allocation of capital expenditures. the influence of local revenue and capital expenditure on economic growth (yuliana, 2014). research by positioning the allocation of capital expenditures as a mediating variable, among others, was carried out by (sularso & restianto, 2012) on the effect of financial performance on the allocation of capital expenditures and economic growth in districts/cities in central java. the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 198 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 from these studies, it is found that the allocation of capital expenditures is influenced by financial performance. the allocation of capital expenditures affects economic growth and economic growth is indirectly influenced by regional financial performance. the implication of this research is that local governments must constantly improve their financial performance because it has an impact on increasing capital expenditures, so they must get adequate priority. in this study, the effect of financial performance on economic growth is not measured directly. a different finding is expressed by prihastuti, taufik and agusti (2015) who found that the allocation of capital expenditures does not mediate the relationship between financial performance and economic growth. the effect of decentralization, the effectiveness of local revenue, and the degree of contribution of regionally owned enterprises to economic growth with the interaction of capital expenditure allocations have no significant effect. this shows that the allocation of capital expenditures does not affect the economy, however, financial performance can directly affect economic growth. the allocation of capital expenditures moderates the relationship between financial performance through self-reliance and regional financial effectiveness with economic growth. the relationship between regional financial management performance and economic growth is moderated by the allocation of capital expenditures (putro, 2017). the various research results above indicate that the mediating nature of capital spending in the relationship between regional income and economic growth shows positive and negative results. aside from the inconclusive findings of research findings on the mediating nature of capital expenditure allocations, research related to public sector finances has so far only focused on technical discussions of financial accounting and budget allocations without any further discussion regarding the impact/outcome of budget allocations. the scope of the budget becomes relevant and important in the local government environment because it is related to the impact of the budget on government performance, in relation to the government's function in providing services to the community (muis, 2012). one way to measure performance is through the achievement figures for economic growth as a very important indicator for identifying and evaluating development outcomes. the existence of economic growth data will show the extent to which the government has performed in generating added value or public income in a certain period. positive growth indicates an increase in performance and vice versa if negative means a decrease in performance (suwandi & tahar, 2015). the consequence of the implementation of autonomy lies in the readiness and ability of the regions to accept the burdens and responsibilities they have in managing and managing their own households. this means that the regional government of riau province must be able to improve its performance through its various potentials. if this is not done, in addition to increasing the burden on the central government budget, the autonomy which is expected to create independence will be difficult to implement. based on the above problems, the formulation of problems that can be identified is how the effect of good governance directly on regional financial performance and allocation of capital expenditures, as well as how good governance affects regional economic growth indirectly through regional financial performance and allocation of capital expenditures in cities. and districts in riau province. the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 199 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 the implementation of good government governance (ggg) in local government is simply by applying the principles of ggg into the system and management of local government properly. the implementation of good government governance has a big role and benefits that can bring positive changes to both local governments, the central government and the general public. the optimal implementation of the implementation of principles of good governance will be able to improve the performance of the existing government and will provide added value for all parties involved. as well as the goal of good government governance is the application of a good governance system which is expected to increase added value for all parties in the long term and can protect the welfare of society. good governance good governance is an approach concept oriented towards public sector development towards good governance (mardiasmo, 2018). as a system that regulates the relationship between the role of the board of commissioners, the role of the board of directors, shareholders and other stakeholders. good governance is also referred to as a transparent process for determining governance goals, their achievements, and assessing their performance (agoes & ardana, 2011). the concept of managing public sector organizations is fundamental to three main elements, namely economy, efficiency and effectiveness (mardiasmo, 2018). referring to research (masnun, 2018) which concluded in his study that the better the quality of government management, the better regional financial accountability and the principles of good governance have been implemented. likewise with (kaufman, 2005) states that there is a strong positive relationship and influence between good governance and budget allocation. this is measured through government effectiveness which is defined as the government's capacity in formulating and implementing policies, both socially and economically. a well-ordered government becomes the capital of a country in serving the needs of its people. the allocation and realization of budget absorption become more efficient and free of corruption towards a clearer human development because the government is implemented in a people-oriented manner and to achieve this, a country must apply the principles of good governance. h1. good governance has a direct effect on regional financial performance. h2. good governance has a direct effect on the allocation of capital expenditures. regional financial performance regional government financial performance is the achievement of a work result in regional finance which includes the budget and capital expenditures using financial indicators that are determined through a policy or statutory provisions from one budget period. the form of performance measurement is in the form of financial ratios which are formed from the elements of the regional head's accountability report in the form of budgeting calculations. in government organizations to measure financial performance, there are several performance measures, namely regional financial independence, regional original revenue effectiveness, activities (ratio of conformity), degree of decentralization, financial dependence. the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 200 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 measurement of financial performance for the public interest can be used as an evaluation and restoring performance against a comparison of work schemes and their implementation. besides, it can also be used as a benchmark for improving performance, especially local government finances in the next period. the existence of regional autonomy has resulted in the decentralization of the government system in the riau provincial government. therefore, the district and city governments in riau province as the party in charge of running the wheels of government, development and community services are required to submit a regional financial accountability report to assess whether the riau provincial government has succeeded in carrying out its duties properly or not. the regional capacity in managing finances is stated in the budgeting, which directly or indirectly reflects the ability of the regional government to finance the implementation of governmental tasks, development and community social services. evaluation of regional financial management and regional financial financing will greatly determine the position of a regional government in implementing regional autonomy. research conducted by sularso and restianto (2011) on the effect of financial performance on the allocation of capital expenditures in districts/cities in central java. from these studies, it is found that the allocation of capital expenditure is influenced by financial performance. the allocation of capital expenditures affects economic growth and economic growth is indirectly influenced by regional financial performance. this research implies that local governments must constantly improve their financial performance because it has an impact on increasing capital expenditures, so they must get adequate priority. the financial performance is also closely related to economic growth. the results of research by mone et al (2016) prove that regional financial performance has a positive and significant effect on economic growth. meanwhile, the results of research by tobi & idayati (2016) on the east flores regional government show that the level of independence is at a very low level of ability to meet the need for funds for carrying out government tasks, development and community social services so that it affects economic growth. h3. regional financial performance has a direct effect on the allocation of capital expenditures. h4. regional financial performance has a direct effect on economic growth. capital expenditure allocation local governments allocate funds in the form of a capital expenditure budget in budget to increase fixed assets. this capital expenditure allocation is based on regional needs for facilities and infrastructure, both for the smooth implementation of government tasks and the quality of public services. the amount of capital expenditures allocated by local governments in the budgeting is of course strongly influenced by the financial position of the region. the higher the income of a region, the higher the capital expenditure allocation will be. capital expenditure allocation is a budget for obtaining fixed assets and other assets (halim, 2013). according to government regulation no. 71/2010, capital expenditure is regional government expenditure whose benefits exceed 1 fiscal year and will increase regional assets or assets and further add routine expenditures such as maintenance costs in the general administrative expenditure group. capital expenditures are used to obtain local government fixed assets such as the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 201 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 equipment, infrastructure and other fixed assets. how to get capital expenditure by buying through an auction or tender process. some factors mediate regional financial performance that plays a role in economic growth, namely the need to allocate capital expenditures. the capital expenditure budget is based on regional needs for facilities and infrastructure, both for the smooth implementation of government duties and public facilities. therefore, to improve the quality of public services, local governments should change the composition of their spending. so far, regional spending has been mostly used for routine expenditures which are relatively unproductive. the use of spending should be allocated for productive things, for example, development activities (saragih, 2013). the allocation of capital expenditure affects regional economic growth. the policy of implementing regional autonomy and fiscal decentralization is based on the consideration that it is the regions that know more about the needs and service standards for the people in their regions so that the provision of regional autonomy is expected to trigger an increase in the welfare of the people in the regions through increased economic growth (prihastuti, taufik, & agusti, 2015). likewise, yuliana (2014) has proven that capital expenditure has a positive effect on economic growth in districts and cities on the island of sumatra. however, the amount of this capital expenditure allocation is still small, namely 0.319. this needs attention from the government to further increase government spending, especially in capital expenditures. h5. the allocation of capital expenditures has a direct effect on economic growth. economic growth economic growth can be interpreted as an increase in the production capacity of an economy which is manifested in the form of an increase in national income so that economic growth can be used as an indicator of the success of economic development. economic growth is a change in the level of economic activity that applies from year to year. so to find out, a comparison of national income must be made from year to year, which is known as the rate of economic growth. economic growth is measured using the gross regional domestic product (grdp) (sukirno, 2015). good governance should be realized by managing the budget in an economical, effective and efficient manner to increase the rate of economic growth. based on the results of previous research by fajerin, fahmi and dalimunthe (2018) which states that government management can have a positive and significant effect both directly and mediate by capital spending. one of the government's efforts to increase development is by allocating a budget for expenditure. however, the slowdown in economic growth is not in line with the increase in the allocation of capital expenditures, gdp per capita and the government's commitment to continue realizing good governance. the local governments must continually improve their financial performance because they have an impact on increasing capital expenditures, so they must get adequate priority. in this study, the effect of financial performance on economic growth is measured indirectly. the results of research (sularso & restianto, 2012) in districts and cities in central java, show that financial the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 202 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 performance indirectly has a significant effect on economic growth through the allocation of capital expenditures. the allocation of capital expenditure is influenced by financial performance, the allocation of capital expenditure affects economic growth and economic growth is indirectly influenced by regional financial performance. this means that local governments must continually improve their financial performance because they have an impact on increasing capital expenditures so that they must receive adequate priority. on the other hand, research with the same variables as in the results of research (prihastuti, taufik, & agusti, 2015) shows that there is a mediating role in the allocation of capital expenditures in influencing financial performance and economic growth in riau regency / city. the financial performance of districts and cities in the province has an influence on the allocation of capital expenditures with a contribution of 59.29%. while direct financial performance has a significant effect on economic growth with a contribution of 30.25%, however, the allocation of capital expenditures does not have a direct effect on economic growth, so that indirect financial performance (through the allocation of capital expenditures) has no significant effect on economic growth in the district and city in riau province. in this study, the authors try to add the local revenue variable as an influencer of capital expenditure allocations and regional economic growth. h6. good governance has an indirect effect on economic growth through the allocation of capital expenditures regional financial performance. h7. good governance has an indirect effect on economic growth through the allocation of capital expenditures. method the population in this study is the financial statements of 12 regencies and cities in riau province, with sample data from the revenue service and the regional financial and asset management office of riau province. the research was carried out by census on reports on the realization of the apbd from 2014 to 2018 so that the data was obtained totalling 60. the design of the analysis in this research is quantitative using secondary data, which functions from the report on the realization of the regional income and expenditure budget (akbar y. r., 2020). to obtain the data and information needed in this study, use secondary data from the revenue, financial and asset management office in the form of annual budget realizations published through regional regulations concerning budget accountability where there are financial reports that are used as basic data for analysis. meanwhile, to find out the regional cash flow per month, it is collected by processing data on the realization of the budget for a certain period (e.g. per month or per quarter) obtained from the processing of the regional financial information system (sikd) which has been synchronized with the regional general treasury and the use of a single treasury account. the data collection method used in this research is by collecting secondary data obtained from the media through the website www.dupk.depkeu.go.id. which are the official website of the regional government that publishes apbd data and the riau province central bureau of statistics (bps) for 2016-2020. as revealed in the object of research, the main problem under study is governance (x) which consists of economics, effectiveness and efficiency as exogenous variables. regional financial performance (y1) consists of (regional financial independence, original regional income effectiveness, activity, degree of decentralization, financial the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 203 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 dependence as intervening variables. meanwhile, endogenous variables are capital expenditure allocation (y2) and economic growth (z). in analyzing the data to test hypotheses h1 – h7, the analysis tool used is partial least square (pls). result and discussion the pls analysis process is carried out in three stages, namely evaluation of measurement models, evaluation of structural models and testing of hypotheses. evaluation of the measurement model (outer model) the measurement model (outer model) describes the relationship between indicators and their latent variables. evaluation of the measurement model includes constructing validity and reliability as depicted in figure 1. figure 1. outer model convergent validity testing based on outer loading will be declared valid if the loading factor value is above 0.70 (hair, black, babin, & anderson, 2014). outer loading test, several indicators are invalid because the value is below 0.70. the invalid indicators are x1.2 and x1.3 on the governance variable, and indicators x3.1, x3.2, x3.4, x3.5 on the financial performance variable. meanwhile, composite reliability and cronbach alpha have met the requirements above 0.60. likewise, the ave value is above 0.50. so, it can be concluded that the constructs in this study are reliable. so that overall, the results of the construction measurement model (outer model) have met the requirements for further analysis by issuing invalid indicators. evaluation of the structural model (inner model) the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 204 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 the structural model in pls is evaluated using the coefficient of determination (r-square). the higher the r2 value, the better the prediction of the proposed research model. the test results (in table 1) show that the good governance variable can explain the variance that occurs in regional financial performance by 0.173 (17.3%). the variables of good governance and regional financial performance can explain the variance that occurs in the allocation of capital expenditures of 0.652 (65.2%). meanwhile, good governance, regional financial performance and allocation of capital expenditures can explain the variance that occurs in regional economic growth of 0.161 (16.1%), the rest is explained by other factors not included in this research model. table 1. coeficient of determination variable r-square regional financial performance 0.173 capital expenditure allocation 0.652 economic growth 0.161 source: pls output hypothesis test hypothesis testing is seen from the t-statistic and p-value. the hypothesis is accepted if the tstatistic> 1.96 and the p-value <0.05, whereas if the opposite is true the hypothesis is rejected. the test results are in table 2: table 2. hypothesis test path t-stat p-value result good governance -> regional financial performance 1.962 0.05 accepted good governance -> capital expenditure allocation 4.357 0.00 accepted regional financial performance -> capital expenditure allocation 40.994 0.00 accepted regional financial performance -> economic growth 1.086 0.27 rejected capital expenditure allocation -> economic growth 0.542 0.58 rejected good governance -> regional financial performance -> economic growth 2.047 0.04 accepted good governance -> capital expenditure allocation -> economic growth 3.219 0.00 accepted source: pls output the conditions that exist in the riau province government with the number of data (n) tested were 60 obtained from the total number of districts and cities in riau province with each within a period of 5 years, from 2016 to 2020. consolidated, governance in riau province which is proxied from the economy shows an average value of 86.31% which means that it is in an economic condition with a minimum of 67.37% and a maximum of 97.38%. in terms of effectiveness in budget management, there are still ineffective conditions with a minimum value of 74.75%. although there are still some districts and cities that have very high effectiveness (121.37%), on average, the effectiveness is at an effective level of 92.98%. there is also inefficient government management with an efficiency level of 101.32% with an average of 75.17%. the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 205 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 regional financial performance in terms of financial independence or autonomy is still low with an average of 12.7%. likewise, the activities (harmony) of local governments prioritizing their allocation of funds for routine expenditure and development expenditures are still low with an average of 21.28%. meanwhile, the ability of local governments to realize local own revenue is quite high, with an average of 92%. however, the degree of decentralization, which reflects the contribution of own-source revenue to total regional revenue, is still low with an average of 10.55% and high financial dependence an average of 87%. the allocation for capital expenditure is still at an average rate of 21% with a 5-year economic growth rate of 2.82%. a well-ordered government becomes the capital of a country in serving the needs of its people. the allocation and realization of budget absorption have become more efficient and free of corruption and the direction of human development has become clearer because the government is implemented in a people-oriented manner. the results of this test support the results of previous studies, including kaufmann et. al (2019). the results of these studies indicate that there is a strong positive relationship and influence between good governance, which can also be measured through the effectiveness of government, and the level of development. the effect of financial performance on the allocation of capital expenditures is accepted in this study. these findings indicate that the size of the allocation of capital expenditures determined by regional governments is influenced by regional financial performance, particularly the effectiveness of locally-generated revenue. with a low financial dependency ratio, the less regional dependence on the central/provincial government, which means that the financial capacity of the regional government is better so that it can allocate more capital expenditure. the results of this study support the research conducted previously by sularso and restianto (2011), which states that since regional autonomy there has been an increase in general financial capacity, but mostly due to significant changes in locally-generated revenue growth. meanwhile, the share of the budget to expenditure did not increase. in public sector financial management, analysis of financial performance on investment allocations or capital expenditures has not been done much, but in the private sector, this is very common. good financial performance should increase the allocation of fixed asset investment. the results of this study also tested hypotheses about how financial performance affects economic growth either directly or indirectly through the allocation of capital expenditures. based on the results of the analysis and testing that has been done, it can be concluded that the indirect effect of financial performance on economic growth is rejected in this study. the results showed that there was no mediating role for the capital expenditure allocation variable which was able to encourage the strength of the influence of financial performance on economic growth. the contribution of the capital expenditure allocation variable is considered relatively small in increasing economic growth. the results of this study support research conducted previously by (prihastuti, taufik, & agusti, 2015), which concluded that indirect financial performance (through the allocation of capital expenditures) has no significant effect on economic growth. then the next discussion is to find out how the influence of the allocation of capital expenditures on economic growth. based on the analysis and testing that has been carried out, the results show that the allocation of capital expenditures does not have a significant effect on the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 206 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 economic growth. the increase in the allocation of capital expenditures in the form of fixed assets such as infrastructure, equipment and infrastructure will further increase capital spending and it is hoped that the productivity of the economy will also increase. however, in this study, capital expenditure does not affect the economic growth of the people of an area. this condition is due to the small proportion of capital expenditure, which only ranges from 15% to 20% of the 2014 2018 apbd. the capital expenditure budget fluctuates from year to year. the amount of capital expenditure should be followed by the effectiveness of capital expenditure for the public interest which will directly impact development activities in the region. however, in reality, a large capital expenditure budget is used to add assets such as roads, buildings, land, and others. economic growth by managing existing resources and forming a partnership pattern with the community should create new jobs that will affect the development of economic activity in the area. this economic development is marked by increased productivity and increased per capita income of the population, resulting in improved welfare. these results indicate that in the framework of implementing fiscal decentralization, the riau province government has not been wise in allocating its budget for investment in various sectors, both in the construction of facilities and infrastructure that support development. government investment as referred to in this case is expenditure made by the government which is made by the government in the apbd for capital expenditure or development. as explained in the previous chapter, government spending on capital expenditures in riau province on development is considered to be expansive, which means that if government spending increases, it will encourage higher economic growth. government investment can take the form of infrastructure development and improvement. increased government investment will be able to improve the quality of public services which in turn can increase the level of public participation (contribution) to development. however, government investment that is issued should still prioritize efficiency, effectiveness and savings by the expected development priorities. the fundamental condition for economic development is a level of provision of development capital that is balanced with population growth. it is hoped that additional infrastructure and improvements by local governments will spur regional economic growth. in theory, consumption-sustained economic growth will not be sustainable growth. sustainable economic growth is growth that is supported by investment. investment-supported growth is thought to be able to increase productivity and thus help increase economic growth. the results of this study do not support previous research conducted by sularso and restianto (2011), which in their research shows that government spending, which includes capital expenditure and personnel expenditure, has a very strong influence on economic growth. but on the other hand, the results of the research are similar to the research by fajerin (2018) that capital expenditure does not have a positive and insignificant effect on economic growth. conclusion based on the results of the analysis and testing that has been carried out, it can be concluded that good governance has a significant effect on regional financial performance and allocation of capital expenditures. regional financial performance has a significant effect on the allocation of the role of good governance in economic growth: mediated by regional financial performance and capital expenditure allocation y rahmat akbar, maraini 207 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 capital expenditures and does not have a significant effect on economic growth. direct capital expenditure allocation has no significant effect on economic growth. indirectly, good governance has a significant effect on economic growth through regional financial performance and allocation of capital expenditures. good governance has a partially significant effect on regional financial performance and the allocation of capital expenditures. meanwhile, regional financial performance and allocation of capital expenditures have not been able to have a significant effect on economic growth. therefore, good governance can have a significant effect on economic growth through the mediation of regional financial performance and allocation of capital expenditures. this study obtained some evidence of data analysis based on research findings. the results of the research findings can recommend several policy implications according to priorities that can be given as input to the government. the government must continue to strive to improve government governance through bureaucratic reform. in addition, the government must support anti-corruption programs, increase government effectiveness, have clear rules, political stability, and the quality of rules in society, especially those related to economic activities. district/city governments must continuously improve financial performance because it can have an impact on increasing the allocation of capital expenditures used for public services. carry out the budget allocation function effectively and efficiently. the budget must be right on target to maximize the welfare of the community. the government and the dprd must increase the synergy value in managing the state budget. the government effectively and efficiently runs the apbd for the welfare of the people. meanwhile, the dprd acts as a partner in monitoring the government in implementing the apbd for the realization of an effective and efficient budget allocation. capital expenditures allocated by district/city governments are a stimulus for the regional economy, so they must receive adequate priority. because development is an ongoing process, it is suggested that the investment of the riau provincial government in the absorption of capital expenditures that are considered to be sufficiently good should be further increased in the proportion of expenditures that always prioritize the public interest, such as in infrastructure development and improvement as well as improving the quality of public services. this is aimed at maintaining the existence of government administration. in addition, in its use, capital expenditures must continue to prioritize efficiency, effectiveness, and savings in accordance with priorities, which are expected to provide support for the strategic programs of the riau provincial government. reference adisetiawawan, r. 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(2014). pengaruh pendapatan asli daerah dan belanja modal terhadap pertumbuhan ekonomi (studi pada kabupaten/kota di pulau sumatera). jurnal akuntansi & keuangan vol 5 no.1, 33-48. ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 71-83 https://www.ilomata.org/index.php/ijtc 71 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 afriapollo syafarudin mercu buana university jakarta-indonesia correspondent: afriapollo88@gmail.com submitted : january 8, 2021 revised : january 18, 2021 published : january 31, 2021 abstract customer satisfaction is the level of customer satisfaction after comparing the services or products received under what is expected. consumer satisfaction is the feeling of disappointment or pleasure for each individual after comparing the performance of the product that is thought of according to the expected product performance. customer satisfaction is the goal of every company for the survival of every company. paying attention to and increasing the level of customer satisfaction is very useful in the world of business competition. companies with a high level of customer satisfaction tend to be superior to other competitors. not only improving, but the company must also be able to maintain the stability of customer satisfaction levels to remain high. the function of customer satisfaction is very important in running a service and product business. by paying attention to customer satisfaction, entrepreneurs and business owners can find out about complaints and feedback from customers who receive services or products. from complaints and suggestions, the company can improve and improve the quality of customer service and products offered to compete and outperform competitors. a good company provides a means by which consumers can submit input and complaints so that consumers feel their voice heard. the research survey was conducted on 150 functional units at regional banks in indonesia. the results showed that product quality affected customer quality and customer quality affected customer loyalty. keywords: product quality, customer satisfaction, customer loyalty. introduction globalization provides enormous opportunities for the development of the business world around the world. the development of the world's open business market has been impacted by restrictions on activities during the covid-19 era due to the spread of the covid-19 outbreak that has hit the world so that the digital banking business is affected by the service system to customers. the service system to customers is very much needed for society today, which is maximum service so that the economic sector is not significantly affected so that people continue to carry out activities and opportunities to find opportunities so that product quality becomes wider, but on the contrary, competition becomes smaller. this condition requires each bank to create a competitive advantage in its business to be able to compete sustainably with other banks in the same field. banks that want to develop and gain competitive advantage must be able to provide products in the form of quality goods or services and good service to customers, so that satisfaction will emerge in the minds of customers and are expected to have a positive impact on the bank. (ali & baruna, 2015: azwar, syaifuddin, 2007: bhatt, 2016). banks continue to serve customers where atms can still join switching companies. meanwhile, digital has not been able to co-brand with other banks until now. during the current https://www.ilomata.org/index.php/ijtc mailto:afriapollo88@gmail.com the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 72 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 conditions of the spread of the coronavirus, banks cannot be aggressive in channeling loans and pay more attention to cash flow conditions. the restructuring process has been running for about 30 percent, seen from the cash flow, which is important to cover operations. how profitability exceeds the cost, capital can be eroded. in providing credit restructuring to customers, the bank applies a prudent principle. credit restructuring has a negative side, namely camouflaging customers who are unable to pay, but their status remains smooth. the company also continues to strive for normal backup formation. his party chose to help provide provisions for debtors who were in trouble rather than bringing problems forward. (bhatt, et. al, 2016: chamidah, 2016: christina, et, al 2014: febriana). tightening liquidity is one of the risks looming over the banking sector amid the covid-19 pandemic. this is because affected customers need to postpone paying installments through a restructuring program. liquidity risk, it is not impossible that banks can get around their liquidity conditions, especially since not all debtors need credit relief. banks only need operational needs prepared and at this point, the bank will not expand. before covid-19, banks experienced liquidity problems, so short liquidity could occur. apart from liquidity pressure, it can also occur if banks use a lot of bonds as a source of maturing funds or big customers withdraw their funds. however, if banks can convince large customers not to withdraw and entrust their funds during a pandemic, then liquidity pressure will not occur. the problem of lending bank rights, want to reduce or stop when liquidity decreases. banks can control, not release bad credit during a pandemic and when liquidity is lacking (griffin, 2005: gunawardane, 2015: gerry, 2004: kotler, philip 2008: hertati, safkaur, simanjuntak, 2019). consumer satisfaction is the level of consumer feelings after comparing what they receive and what they expect (hertati, et, al, 2019). if a customer is satisfied with the value provided by a product or service, he will likely be a customer for a long time. philip kotler and kevin lane keller quoted from the book marketing management said that customer satisfaction is a feeling of pleasure or disappointment for someone who appears after comparing the performance (results) of the product thought against the expected performance. satisfying consumer needs is the desire of every company. apart from being an important factor for the company's survival, satisfying the needs of consumers can increase its advantage over the competition. consumers who are satisfied with products and services tend to buy back products and reuse services when the same needs reappear at a later date. this means that satisfaction is a key factor for consumers in making repeat purchases, which is the largest portion of the company's sales volume (hertati & syafarudin, 2018: iskandar, dibyo, 2007: james and sasser, 2013). banks serve various kinds of community needs in financial needs, from investments, savings, or savings to loan products. some of the bank's products are savings plus, child savings, business savings, youth savings, smart savings, tapenas, savings dollars, hajj savings, and emerald savings. emerald savings savings is premium savings with various special and exclusive facilities provided to individuals who have funds in the bank. is a customer. customer satisfaction is someone's expression in providing value or optimizing the value that someone feels and expects about a product or service concerning trust (junoy, & torres, 2010: kaplan, robert & dennis, 1993: kincaid, 2013). the phenomenon states that poor customer product quality is not satisfied so that customers are not loyal so they move to other banks, as revealed by rustam (2020), the fact shows that the presence of covid-19 19 in indonesia also greatly affects bank operations. operational risk management must be carried out properly to improve the performance of bank services to customers in this competitive and competitive era. the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 73 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the facts show that the presence of covid-19 19 has changed the work patterns of many banks in indonesia. the presence of covid-19 19 can change the current pattern of bank operations in indonesia. try to pay attention to some of the changes that have occurred. closure of bank operational units. many unit offices such as cash offices and sub-branch offices have been closed by the head office considering the high risk of the covid-19 19 virus. many services have been moved to branch offices to avoid many bank operational risks. bank operating hours. many banks have imposed limited operating hours to reduce operational risk due to the spread of covid-19 19. the application of bank operating hours varies depending on the policies of the bank's head office, both conventional and sharia. the average bank operates only 6 hours in 1 day. split operation. many banks have implemented an attendance that is arranged in such a way as to provide opportunities for some employees at home to reduce operational risk and minimize the risk of spreading covid-19 19. most banks have implemented a 50% split operation. this means that 50% of employees are sent home and the rest work as usual. the number of holidays also varies, there are 2 days off, even 5 days off. increased bank operating costs. to prevent the spread of covid-19 19, banks must be able to customize services for customers by providing hand sanitizers, disinfectants, and changing masks, not only for customers but also for employees. finding masks and hand sanitizers is very difficult. the increase in operating costs has increased significantly because banks also have to spend a budget to treat employees infected with the covid-19 19 virus. expenditures like this only happened in 2020. the effect of covid-19 19 on bank operational costs. operational costs are increasing with the efforts of the bank's human resource management division which must continue to disseminate the dangers of covid-19 19 and make changes to systems and procedures to anticipate risks that occur. operational risk has also increased in line with the absence of face-to-face training for all of the bank's human resources. problems related to operational risk management at a bank of a financial institution such as bank operational risk cannot be avoided. operational risk is the risk of loss caused by failure or inadequacy of internal processes, people, and systems or from external events. in the covid-19 problem, we see the two most dominant elements, namely external events and the human element. the effect of the previous two elements also affects internal processes and the bank system. human or employees at the bank are a vital aspect of bank operations which greatly affect performance. operational risks related to humans are of course related to bank employees as the main actors in bank operations. the fact shows that currently doing split operations in many banks in indonesia due to covid-19 19 can pose several risks of human error. these factors are internal fraud, poor management practices, and too much dependence on certain employees. the factors that are monitored in minimizing operational risks related to the human aspect are also possible due to naughty traders, poor employee training, and high employee turnover or employee conflicts. implementing a split operation can pose operational risks. how weak control is, the absence of a clear division of tasks and responsibilities can result in operational risk. review, mitigation, and improvement of internal processes are essential to monitoring the extent to which banks can anticipate operational risk events caused by transaction errors, weak controls, and inappropriate documentation. in 2020 the occurrence of operational risk has had an impact on all bank businesses in indonesia. why? because this risk is inherent in the day-to-day activities of all banks. the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 74 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 this trust is very important to build because the bank does not have enough cash to pay obligations to all its customers. to ensure long-term business continuity and retain customers, good service is needed in facing the increasingly competitive banking industry. high-quality banking services can determine customer satisfaction. hertati, et, al, 2020) stated that service quality is one of the factors that can determine customer satisfaction. if the quality of service received or felt is as expected, then consumers will feel satisfied. conversely, if the quality of service received is lower than expected, the consumer will be dissatisfied. therefore, good service quality has an important role in shaping consumer satisfaction (manyi agbor, 2011: munisih & soliha, 2015: ogbuji & sylva, 2014: par, 2015). rizan, mohamad (2010) explained that the quality of the product is quite attractive to customer satisfaction. so that customers will find it difficult to leave products that are already attached to the brands they know. syafarudin, et, al (2016) conducted a study that found that product quality affected customer satisfaction, which they had experienced good benefits. the results of the research by hertati & sumantri (216) show that the results are under several theories and research that product quality has great benefits for customers so that it is difficult to switch to other similar products. it means that the hypothesis which states that product quality has a significant effect on customer satisfaction is acceptable. zeithaml, valarie a., & bitner, (2013) found the same results that customer satisfaction affects customer loyalty because brands that have a good impact on their eyes are difficult to ignore and multiply to other similar products. previous research conducted by zabeen, (2019) also states that when customers are satisfied, they will be loyal to the company and customer satisfaction can be used as the basis for the realization of loyal or loyal customers. (syafarudin. 2016: sheth, & mittal, banwari, 2014: schifman, & kanuk, 2014: rosdiana, 2011). lovelock & wright (2015) argues that service quality is the following: service quality is the level of excellence expected and control over that level of excellence is to fulfill customer desires. zeithaml and bitner (2013) define service quality as the delivery of service that is good or very good when compared to customer expectations. kotler and keller (2012) state that service quality is the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs (hertati & safkaur, 2020: khan, et, al, 2016: pramudana & satria, 2017: sari, np, heny, 2018). the measurement of service quality consists of 5 dimensions: (1) reliability is the ability of a company to provide services as promised accurately and reliably; (2)responsiveness is the company's ability to assist and provide fast and precise service to customers, by delivering clear information; (3) assurance and certainty, namely knowledge, the ability of company employees to foster customer trust in the company; and (4) empathy, give sincere and individual attention to customers by trying to understand the desires of customers. customer satisfaction understanding customer satisfaction. satisfaction is a way to make customers not disappointed and can buy back the products we market. in this case, the company must be able to recognize, fulfill, and provide quality service and satisfy customer needs properly, which is a company strategy to increase sales. tjiptono, (2015) defines that customer satisfaction is a central concept in business and management discourse. the consequences of customer satisfaction are very crucial for business, government, and consumers, of course. for business people, satisfaction is seen as a dimension of market performance. increased customer satisfaction has the potential to lead to long-term and short-term sales growth, as well as market share as a result of repeat purchases. kotler and the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 75 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 keller (2013) state that customers are satisfied if their expectations are met or under what the customer wants are exceeded. (krishna naik, 2010: lestari & hertati., 2020: lomendra & ettall, 2019: looy, a., dierdonck, 2018: lovelock, et, al, 2012).) there are 5 main factors of customer satisfaction, which can be seen from internal and external companies. as: 1. quality of products or services business owners do not just create a business or business entity, but must also be able to maintain and improve the quality of the products or services offered to consumers so that consumers become regular customers. 2. quality customer service the quality of service to customer needs is also a measure of customer satisfaction. consumers will be happy if they get service quality that is responsive to consumer needs and friendly. 3. price the price of the product or service provided is under the value of the product or service being offered. consumers are also happy with relatively cheap prices for goods or services. especially if the company implements a promotional strategy that attracts consumers to buy products or services owned by the company. 4. easy accessibility it is easy for consumers to find services or products without additional costs and additional effort. so it is practical and easy to get. that way, it can increase the degree of 'need' because it is easy to get without having to bother. judith & kincaid, (2013) stated that consumer loyalty is based on building and managing close relationships with consumers and providing positive experiences to consumers. loyal consumers will buy a company's products or services continuously. however, if companies stop providing positive experiences, either tangible or intangible, to consumers, their loyalty will be lost and they will not come back. zabeen, (2019) states that: consumer loyalty is consumer behavior which is described as a positive pattern of purchases over a long period (measured by average repurchases, frequency of purchases, wallet shares, or other indicators) and driven by positive attitudes towards the company and products/services zeithaml, valarie & bitner, 2013). consumer loyalty is characterized by consumer behavior (measured by repeated purchases, frequency of purchases, spending money, or other indicators) and driven by a positive attitude towards the company and the company's products or services. judith w kincaid, (2013) states that customer loyalty is a behavior, built on positive experiences and values. this behavior is buying our product, even though it may not be the most rational decision. then hertati & sumantri (2026) stated that customer loyalty is a behavior that is built through positive experiences and values. this behavior is buying a company's product, even though this does not appear to be a rational decision. loyal customers are important assets for the company, this can be seen from the characteristics they have. hermawan kartajaya (2013) and griffin (2010) state that loyal customers have characteristics which are also dimensions of loyalty as follows: (1) make repeated purchases regularly. customers who are loyal to the products or services they buy will repeat these purchases more than twice at the same company regularly; (2) buying interline products and services. furthermore, these loyal customers will expand their loyalty to other products or services made by the same manufacturer. in the end, they are loyal customers to the company forever; (3) referring to others. loyal customers will show an attitude of rejection of other products or services because they have trusted and feel part of the company; and (4) shows immunity to pull from competitors. loyal customers will not be interested in promotions or offers from other companies. the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 76 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 good relationships with customers are the key to winning the competition and maintaining good relationships with customers because customers are the parties who directly use the products offered by the company (kotler, 2003). customer satisfaction is the result that the buyer feels of the performance of companies that meet their expectations for one important step is to order make customers loyal to the products offered. in building product loyalty, bank customers must provide expectations to be fulfilled and happy to buy more customers, less sensitive to the products offered and will provide good comments to the bank (abdullah, 2014). customers are very important assets that must be maintained and maintained to achieve the success of the company. therefore, whatever the customer requests, how are the attitudes and behavior of customers, serve customers well, and always think positively. improving the quality or service standards is very important for the company because it will have a deep impact increase in the company's operational efficiency, where the increase occurred in product sales, increased production, and expanded marketing networks. the food industry is an industry the most prospective in indonesia, especially in batam because of the main characteristics that are closely related to daily needs. this makes the food industry one of the most thriving businesses. the rapid pace of the food industry continues to excite entrepreneurs to work on the food business (daud, denny 2012: kotler, & kevin keller, 2009: eirlangga, et, al, 2015: lupiyoadi rambat. 2001: hertati, 2015: kondoy, et, al, 2016: kotler, p., & armstrong, 2014). methods the sample (sample) is a part of the population consisting of many members who are selected from the population, wherein this research, who will be sampled is 141 (one hundred and forty-one) apheresis machine users/respondents. this study uses the slovin formula because, in sampling, the amount must be representative so that the research results can be generalized and the calculation does not require a sample size table but can be done with simple formulas and calculations. the slovin formula for determining the sample is as follows: (arikunto, suharsimi, 2008: ghozali, 2014: nazir, 2019: sugiyono, 2015: supranto, 2010: uyanto, 2016). information: n = sample size / number of respondents n = population size e = tolerable percentage of allowance for accuracy of sampling error; e = 0.1. in the slovin formula with the provisions as value e = 0.05 (5%) for a large population. the value of e = 0.1 (10%) for a small population. the sample range that can be drawn from the slovin technique is between 5% of the study population. the total population in this study was 150 people, so the number of respondents used was 100 respondents so that the leeway percentage used was 5% and the calculation results could be rounded up to achieve conformity. the following is a picture of the research framework: product quality customer satisfaction customer loyalty the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 77 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 results and discussion an indicator is said to have good validity if it has a loading factor value greater than 0.70. while the loading factor of 0.50 to 0.60 can still be maintained for models that are still in the development stage. table 1. the outer model evaluation loading factor values diagram dimension indicator product quality customer satisfaction customer loyalty reliability x1 0,803 0,807 0,827 x2 responsiveness x3 0,803 0,807 0,827 x4 assurance, x5 0,803 0,807 0,827 x6 empathy x7 0,803 0,807 0,827 x8 quality of products or services x9 0,803 0,807 0,827 x10 quality customer service x11 0,803 0,807 0,827 x12 price x13 0,803 0,807 0,827 x14 easy accessibility x15 0,803 0,807 0,827 x16 make repeated purchases on a regular basis x17 0,803 0,807 0,827 x18 buy cross-line products and services x19 0,803 0,807 0,827 x20 referring to others x21 0,803 0,807 0,827 x22 shows immunity to pull from competitors x23 0,803 0,807 0,827 x24 source: data processed results, 2020 table 2. value of cronbach's alpha, composite reliability, and average variance extracted (ave) variable cronbach’s alpha square root of (ave) composite reliability average voidance extracted (ave) product quality 0,816 0,826 0,826 0,846 customer satisfaction 0,812 0,856 0,846 0,866 customer loyalty 0,817 0,876 0,876 0,876 source: data processed results, 2020 table 3. value path coefficients dan nilai r square parameter original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/sterr| ) p values r square x -> y 0,244 0,243 0,075 2,746 0,006 0,844 y -> z -0,031 -0,023 0,069 0,303 0,782 source: data processed results, 2020 the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 78 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 based on the picture above, it appears that all loading factors have a value above 0.50. thus it can be concluded that the construct has good convergent validity. the value of crossloadings presented in the table above also shows good discriminant validity, where the correlation value of the indicator with its construct is higher than the correlation value of the indicator with other constructs. the next stage assesses cronbach's alpha, composite reliability, and average variance extracted (ave) criteria. each construct is said to be reliable if it has cronbach's alpha and composite reliability that is greater than 0.70, while the ave value is expected to be greater than 0.50 all constructs have cronbach's alpha and composite reliability values greater than 0.70. the same thing is seen in the ave value, all constructs have ave values that are greater than 0.50. thus it can be concluded that all exogenous and endogenous measurement constructs are reliable. inner model evaluation is an analysis of the results of the relationship between constructs. the relationship between constructs can be said to be significant if it has a t-statistics value greater than 1.96. it can be seen that the service quality variable contributes simultaneously to influencing the customer satisfaction variable by 0.408 or 40.8%. service quality variable has a simultaneous effect on customer loyalty variable of 0.408 or 40.8%, while the remaining 59.2% is influenced by other variables not observed in this study with the following details: hypothesis 1: the effect of product quality on customer satisfaction has a path coefficient of 0.277 with a statistical value of t that is greater than the critical value (2.091> 1.96). thus h0 is rejected and h1 is accepted, meaning that service quality affects customer satisfaction. hypothesis 2: the effect of customer satisfaction has a path coefficient of 0.396 with a statistical value of t that is greater than the critical value (3.021> 1.96). thus h0 is rejected and h1 is accepted, meaning that customer satisfaction affects customer loyalty. banks can build relationships with customers who have used products or services for a long time with promotions so that customers are encouraged to use the services or products they have so that customer loyalty is created. the bank must be able to provide good service so that the customer concerned can establish a personal relationship with the bank and can anticipate changes in the expectations or needs of the majority of customers. banks can encourage staff to meet customer expectations and build relationships to make it easier to know consumer needs in depth. in addition to knowing the needs of consumers to be more personal, the bank will be provided with information about competitors and competitors who have the same type of product or service as the company that owns the business. (sefiani &, fauzi, 2015: syarifin, 2014: safkaur. & hertati. 2020: yana & yanti, 2015: hertati & safkaur, 2020: hertati, zarkasy., adam, umar, suharman, 2020). by knowing the competitors' strategies, the bank can create a more mature strategy to outperform competitors on its products. another method is to increase the number of employees in customer care to make it easier for customers to submit complaints and suggestions. making it easier for consumers to submit suggestions and complaints will bring staff and business owners closer to consumers. some types of operational risk such as fraud and processing errors may occur more frequently. this incident may have had little effect. but for the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 79 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 that, banks usually manage this operational risk with routine daily procedures and policies. (yasin, 2012: syafarudin saluy, masyhudzulhak, 2020: syafarudin, masyhdzulhak, badawi, 2020: syafarudin. mulyana, 2019: hertati, fery, safkaur , 2020). the year 2020 proves how important learning about the presence of covid-19 is that many factors can trigger the high risk of bank operations in 2020. in addition to the dangers of covid19, which has successfully changed many things, namely the existence of automation and increasing dependence on technology is one of the risk triggers. bank operations this year. with that implementation error, dependence on technology accuracy is predicted to also have the risk of affecting increasing bank losses. many cases of operational risk will befall banks in 2020 and considering the influence of covid-19 19 at this time we can see that the banking business is very vulnerable. we hope that the occurrence of covid-19 will not trigger the risk of operational failure in the banking industry in indonesia. hopefully. (syaparudin & hertati. 2020: oskooii, ebrahim albonaiemi, 2017: oskooll, 2017: khan, et, al, 2016: hertati, syafarudin, safkaur, fery, 2020: hussein, 2017: hertati & safkaur 2019: syaparudin & hertati, 2020 ).). conclusion customer loyalty will have an impact on customer decisions much easier than before knowing about the importance of customer satisfaction. banks that place human resources who are friendly, polite, and energetic, and professional will observe and listen to customer needs to maintain the survival of the bank. over time, the needs of customers often change information technology which was popular and needed at that time. the bank also pays attention to trends and needs that are being discussed by its customers. customer satisfaction is an important element in business life and business development. as a business actor, the thing that is often overlooked is the bookkeeping process, even though bookkeeping is one way to monitor the overall financial health of a business and to find out the advantages or disadvantages experienced in the business. if you think that doing bookkeeping is difficult and time-consuming, accurate online as a business accounting software, the bookkeeping process becomes easier and can be done anytime and anywhere references ali, h & baruna h (2015). one-stop services: quality of service and accessibility to the investor loyalty: the investment coordinating board. international journal of bisnis and commerce arikunto, suharsimi, (2008). prosedur penelitian suatu pendekatan praktek. jakarta: rineka cipta. azwar, syaifuddin, (2007). validitas dan reliabilitas, yogyakarta: pustaka pelajar. bhatt, a.k, (2016). measuring customer satisfaction using servqual model -an empirical study. international journal of trend in research and development, volume 3(1), issn: 2394-9333. bhatt, a.k., divya sahil bhanawat (2016). measuring customer satisfaction using servqual model – an empirical study chamidah, s. (2016). analisis pengaruh dimensi kualitas jasa terhadap kepuasan nasabah dan dampaknya pada loyalitas nasabah (studi pada nasabah pt.bpr raya surya nuansa ponorogo). kalimantan scientiae, 67, 45-57. the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 80 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 christina, fransisca sandra (2014). pengaruh kualitas pelayanan dan citra korporasi terhadap kesetiaan pelanggan melalui kepuasan pelanggan daud, denny (2012). promosi dan kualitas layanan pengaruhnya terhadap keputusan konsumen menggunakan jasa pembiayaan pada pt. bess finance manado febriana, nina indah (2016). analisis kualitas pelayanan bank terhadap kepuasan nasabah pada bank muamalat indonesia kantor cabang pembantu tulung agung ghozali, imam. 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(2014). principles of marketing (10th ed.). upper saddle river, n.j.: pearson prentice hall. krishna naik, k.(2010)service quality (servqual) and its effect on customer satisfaction in retailing european journal of social sciences –16, ( 2). lestari.r & hertati.l.(2020). bagaimana pengaruh strategi bisnis, kekuatan produk terhadap kualitas sistem informasi akuntansi manajemen: studi kasus pada usaha kecil dan menengah di indonesia. kajian akuntansi. 21(1)1-12 lomendra.ettall (2019) assessing the impact of service quality dimensions on customer satisfaction in commercial banks of mauritius.studies in business economic no 14 (1)2019 looy, a., dierdonck, roland van., & gemmel, paul. (2018). service management: an integrated approach. great britain: redwood books. http://revenue.lppmbinabangsa.id/index.php/home/issue/view/2 the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 82 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 lovelock, h., wirtz, j., tat keh hean, (2012). services marketing in asia: managing, people, technology, and strategy. new jersey: prentice-hall. manyi agbor, j. (2011) the relationship between customer satisfaction and service quality: a study of three service sectors in umea. umeå school of business spring semester (2011). master’s thesis, two-years, 30hp munisih dan soliha (2015). pengaruh kualitas produk terhadap nilai pelanggan dan kepuasan pelanggan dan dampaknya pada loyalitas pelanggan apotek dela semarang nazir, mohammad. 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(2014). consumer behavior. upper saddle river, new jersey: pearson prentice hall. sefiani,a.,fauzi a., arifin z.(2015). pengaruh relationship marketing (pemasaran relasional) terhadap kepuasan nasabah serta dampaknya pada loyalitas nasabah.( malang ) brawidjaya. sheth, n. and mittal, banwari (2014), customer behavior: a managerial perspective(2nd ed). australia: thompson, south-western. sugiyono. (2015). statistika untuk penelitian. bandung: alfabeta. supranto, j. (2010). statistik: teori dan aplikasi. jakarta: erlangga. syarifin (2014). analisis pengaruh marketing mix terhadap keputusan pembelian reagen kimia aldirich. syafarudin. a masyhdzulhak, badawi.a. (2020). the effect of market orientation of services quality in visitor of starts hotel in pekanbaru city indonesia the impact of aligning successful application of market orientation on e-commerce’s service quality strategy: the case of starred hotel visitors on the indonesian islan of sumatera proposing conceptual framework. (ijecm) uk 2020. the effect of product quality on customer satisfaction implications on customer loyalty in the era covid-19 syafarudin 83 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 syaparudin.a & hertati.l.(2020). penerapan human capital, kualitas pelayanan pada sistem informasi manajemen. @is the best : accounting information systems and information technology business enterprise volume 5, nomor 1 (2020) hal. 31-45 syafarudin a, saluy, a.b, masyhudzulhak. (2020). the impact of aligning successful application of market orientation on e-commerce sevice quality strategy: the case of starred hotel visitors on the indonesian island of sumatera proposing conceptual framework. international journal of economics, commerce, and management vol viii. syaparudin.a & hertati.l.(2020). penerapan human capital, kualitas pelayanan pada sistem informasi manajemen. @is the best : accounting information systems and information technology business enterprise volume 5, nomor 1 (2020) hal. 31-45 syafarudin.a. (2016). strategy of leadership and innovation in improving company performance against competitive advantage, international journal of economics, commerce and management. international journal of economics, commerce and managementunited kingdom. 4 (6) 471-482. syafarudin.a, mulyana.b.(2019). formulation strategy of pt. bandara internasional jawa barat bandung indonesia, kertajati in business aerocity (aerotropolis). international review of management and marketing, 2019, 9(3), 106-111 safkaur.o, & hertati.l.(2020). perubahan struktur modal menyebabkan perubahan kinerja keuangan jurnal ekonomi dan perbankan 9(2) 94-105 uyanto, s. s. (2016). pedoman analisis data dengan spss. yogyakarta :graha ilmu. yana dan yanti (2015). bauran pemasaraan dan kepuasan pelanggan; studi kasus jamu gendong di jawa tengah. yasin (2012). analisis pengaruh variabel bauran pemasaran terhadap keputusan pembelian botol plastik pt prima kalplas zabeen, n.m. (2019). assessing the impact of service quality dimensions on customer satisfaction in commercial banks of mauritius sumodhee zeithaml, valarie a., & bitner, mary jo. (2013). service marketing: integrating customer focus across the firm (3rd ed.). new york: mcgraw zabeen, n.m. (2019). assessing the impact of service quality dimensions on customer satisfaction in commercial banks of mauritius sumodhee zeithaml, valarie a., & bitner, mary jo. (2013). service marketing: integrating customer focus across the firm (3rd ed.). new york: mcgraw-hill http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp: 41-58 https://www.ilomata.org/index.php/ijtc 41 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) jajang suherman jajang321@yahoo.com submitted: dec 6th 2019. revised: january 13th 2020. published: march 30th 2020 abstract this article aims to determine the awareness and compliance of the taxpayer identification number (npwp). this article also discusses obstacles in obtaining npwp ownership. the research was conducted using qualitative descriptive research methods. to obtain the data, researchers observe document studies and interviews with the informant, the officers, and staff of stimlog. based on the results of the research, npwp ownership has not been done effectively. some obstacles encountered, that is for the employees do not remain to think that not always work in stimlog, so that ownership of npwp is less concerned. the recommendations given to solve such problems need to involve the tax office, foundation, stimlog and need to be socialized both to the permanent officer and the permanent employees to have an npwp. keywords: awareness, compliance, ownership, taxpayer-identification number. introduction indonesia's high school of management and logistics (stimlog) is a college founded by yayasan pendidikan bhakti pos indonesia. sim log has the role of designing, developing, implementing and simultaneously evaluating the activities of tri dharma colleges, namely education and teaching, research, and community service. in the implementation, these three important tasks are fully responsible lecturers and students (civitas akademika), together with administrative officers. the management of academic and educational personnel in stimlog still needs improvement to follow the principles of human resources management conducted by best practices. the current rules of the foundation are largely said to be complete, but in its implementation, it is necessary to set the mechanisms in the stimlog. some of the foundation's rules provide opportunities to stimlog institutions to determine their details, making it a good opportunity for development. the officer at stimlog is entirely stipulated by the foundation based on the decree, consisting of academic personnel (lecturers) and education personnel. for academic personnel consisting of permanent academic personnel, namely academic who has been appointed and entitled to a salary, other allowances, and teaching honor, which is paid monthly, while the academic force is not fixed that is tenga academic in charge of teaching only, so that the salary gained only from the teaching results, without any other perks. however, for the educational workforce, the employees are still. payroll systems are conducted in stimlog, calculated based on each group, principal salary and other allowances by the provisions. every month tax payments for employees are fully awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 42 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 accounted for, which are subsequently deposited to the post office and bank, then reported to the tax office online. the withholding tax in stimlog refers to the self-assessment system, which is a taxwithholding system that authorizes, trusts, responsibilities to taxpayers (wp) to calculate, account, pay for, and report on its tax amounts be paid. with the self-assessment system is expected to implement taxation administration will be more effective and efficient. in support of the self assessment system, tax service is expected to make it easier for wp to get the information needed. good service will increase the trust of the community itself. according to ningsih and rahayu (2016:1) in the self assessment system, it is hoped that there is a taxpayer at the level of understanding the taxpayer in the tax regulation. one of the taxpayer's obligations is to register to obtain an npwp (taxpayer identification number), the npwp is the number given to the taxpayer as a means in the tax administration which is useful as a self-identification or the tax payer's identity to exercise the rights and obligations of taxation. the scope of the directorate taxpayer compliance in stimlog there are several employees, both academic and educational personnel in carrying out their tax obligations, there are some employees who do not have an npwp, which is permanent academic personnel and academic personnel not, while the education personnel in large part does not have a npwp. a permanent and impermanent employee of education and educational personnel who have had a npwp and who do not have a taxpayer year 2017 up to the year 2019, as follows: table 1 permanent officer and inpermanent officer who owns and does not have an npwp number years permanent employees unfixed employees amount has a npwp no npwp has a npwp no npwp has a npwp no npwp 1 2016 20 4 4 25 24 29 2 2017 22 5 7 26 29 31 3 2018 24 5 14 25 38 30 source: high school logistics management indonesia for more details are illustrated with the following diagram: source: high school logistics management indonesia figure 1. permanent officers and unfixed officers who have and do not have a npwp year 2016-2018 permanent employees has a npwp permanent employees no npwp unfixed employees has a npwp unfixed employees no npwp amount has a npwp awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 43 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 from the table above, it shows that from 2016 to 2018, which did not have the most npmw, the employees were not fixed. this shows that in the taxpayer compliance stimlog, especially the employee is not still required to questionable reason does not have a npwp, while its income every month there, although the magnitude is not necessarily. taxpayers are individuals or entities including taxpayers, tax cutters, and tax collectors, who have tax rights and obligations in accordance with the provisions of taxation laws and regulations. government regulation no. 46 year 2013 explains the income tax on income from the accepted or acquired taxpayers that have a certain gross circulation. one of the factors that affects taxpayer compliance in fulfilling its taxation obligations is the npwp's benefit. the benefit of npwp is the purpose obtained by the taxpayer on the ownership of the npwp. the benefits of npwp include taxpayers can pay and report taxes in order. the more benefits that taxpayers receive for npwp ownership, the taxpayer compliance will also increase. tax understanding is also one of the factors affecting taxpayer compliance. the lack of taxpayers ' understanding of taxation regulations tends to be disobedient to its tax obligations, but if the taxpayer understands the taxation regulations it will encourage to comply with the obligations of taxpayers who do not understand taxation regulations are obviously likely to become unobedient taxpayers(windiarti & sofyan, 2018). it is clear that the understanding of taxpayers to taxation regulations, the more understanding of the taxpayer to the sanction that will be accepted when neglect of taxation obligations. where taxpayers are fully aware, they will know the administrative sanctions and criminal sanctions in connection with the spt and npwp. the factors influencing taxpayer compliance are awareness. awareness to improve taxation compliance is necessary because it is a means to realize the sense of nationalism, love to the nation and the country where the result of the tax is used for the development and welfare of the whole community, julianti (2014:24). the higher the level of taxpayer awareness, the understanding and implementation of taxation obligations is better so that it can improve compliance (muliari and ery, 2009 in susilawati and budiartha, 2013:5). according to ritonga, 2011 in tri wahyuningsih 2013:51), consciousness is the behavior or attitude towards an object involving the assumption and feelings and the tendency to act according to the object. thus, the taxpayer's awareness of paying taxes is a taxpayer's behavior in the form of views or feelings involving knowledge, beliefs and reasoning accompanied by a tendency to act in accordance with the rules provided by the system and the tax provisions. although the self assessment system is already running. but in practice it is difficult to walk as expected or even abused. this can be seen from the number of taxpayers who are deliberately disobedient, the taxpayer awareness is still low or the combination of the two, so as to make taxpayers are reluctant to implement the obligation to pay taxes. this lack of compliance and taxpayer awareness can be seen from the very small number of those who have a taxpayer identification number (npwp) and those who report their annual notification letter (spt), (tarjo and indra kusumawati, 2005 in hardiningsih and yulianawati 2011:5). the phenomenon of problems for employees who do not have a npwp is as follows: 1. less socialization of stimlog to permanent employees and not permanent employees who do not have a npwp 2. low taxpayer compliance level awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 44 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 3. the assumption of the management and ownership of the npwp is considered sufficient and incriminated for employees 4. no awareness as taxpayers 1. tax definition tax is a familiar term for us, in the development of a country is also very large. therefore in indonesia many laws and regulations that explain the tax. from the period to the tax regulation period is always changed, likewise in indonesia. so the new terms of taxation should be known by the crowd. according to the law no. 16 of 2009, tax is the mandatory contribution to the state owed by a personal person or a forced body under the law, by not obtaining direct remuneration and use for the purposes of country for the maximum prosperity of people. according to law no. 36 of 2008, income tax (pph) as mentioned in article 2 shall be the tax imposed on the subject of tax on the income received or earned in the tax year with the subject of income tax are as follows: a. personal tax subject that is a private person residing in indonesia, a person who is in indonesia more than 183 (one hundred eighty three) days within the period of 12 (twelve) months, or a private person who in a tax year is in indonesia and has the intention to reside in indonesia. b. the subject of the property's inheritance tax has not been divided, i.e. the inheritance of someone who has died and has not been divided but generate income, the income is taxed. c. the subject of tax body established or located in indonesia, except for certain units of government agencies that meet the criteria: its establishment under the provisions of the legislation. the financing is sourced from the state budget of revenue and expenditure or regional budget (apbn). its acceptance is included in the budget of the central government or local government, and its disposal is examined by the functional supervisory apparatus of the state. d. permanent establishment that is a form of business used by a person who does not reside in indonesia or is in indonesia no more than 183 days in a period of twelve months, or a body that is not established and domiciled in indonesia, who do activities in indonesia 2. type of tax according to siti (2009:7), there are various types of taxes, grouped into three namely: 1) by group based on the tax group are grouped into two namely: direct tax and indirect tax. a direct tax is a tax that must be borne by the taxpayer and shall not be delegated or charged to any other person or party. tax shall be the taxpayer's burden in question. while indirect taxes are taxes that may eventually be charged or delegated to any other person or third party. indirect taxes may occur if there is an activity, event or deed that causes the tax recurrence, such as the submission of goods or services. 2) according to the nature based on the tax is grouped into two, namely: subjective tax and objective tax. a subjective tax is a tax that is concerned about the personal circumstances of taxpayers or the imposition of taxes observing the subject. while the objective tax is the tax on which the object will be paid in either objects, conditions, actions, or events resulting in the awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 45 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 obligation to pay taxes, regardless of the personal circumstances of the subject tax (taxpayer) or residence. 3) according to the winding board based on the collector institution, the tax is grouped into two, namely: state tax (central tax) and local tax. the state tax is a tax imposed by the central government and used to fund the country's households in general. while the local tax is a tax imposed by the local government of either the level i (provincial tax) and the level ii area (district tax/city) and is used to finance the household area respectively. 3. tax function tax is a source of acceptance of the state that has two functions (mardiasmo 2011:1), namely: a. budgetair function as a source of funds for the government, to finance its expenses b. function regulerend as regulator or implement government in socio-economic field 4. taxpayer compliance a. definition of taxpayer compliance obedience is the motivation of a group or organization to do or not to do according to the established rules (saraswati, 2012 in wahyuningsih, 2016:42). obedience is a form of the will of individuals, groups, and organizations in a ward. taxpayers are individuals or entities, including tax payments, withholding taxes, and tax levies, which have the right and obligations of taxation in accordance with the provisions of taxation legislation. taxpayers of certain personal entrepreneurs are taxpayers who conduct business activities in the field of trade in wholesale or retail consumer goods through a place of business/outlets scattered in several locations, excluding the trading of motor vehicles and restaurant (mardiasmo, 2011:135). simon & clinton (2010:29) defines the following taxpayer compliance: "the definition of tax compliance in its most simple from is usually cast in terms of the degree to which taxpayers comply with the tax low". this means that the definition of tax compliance in the simplest form usually refers to the level in which the taxpayer complies with its tax obligations in accordance with the applicable law. according to article 1 of the law no. 28 of 2007 on the general provisions and procedures of taxation, taxpayers are individuals or entities, including taxpayers, tax cutters, and tax collectors, who have the tax rights and obligations in accordance with the provisions of the taxation laws and regulations. as mentioned in this sense that wp consists of two types of personal taxpayers, taxpayer body(rulandari & sudrajat, 2017): 1) the taxpayer of the private person, is any individual person who has a income on a taxable income. in indonesia, each person must register and have a taxpayer identification number (npwp), unless otherwise specified in the law. 2) taxpayer agency, is any company established in indonesia and already has a taxpayer identification number (npwp) and has the rights and obligations stipulated in the provisions of the tax laws applicable in indonesia. understanding the body is a group of people and/or capital that is a good entity that does business and who do not do business that includes a limited liability company, a company, other company, stateawareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 46 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 owned enterprises or regions with name and in any form, firm, joint, cooperative, pension fund, fellowship, association, foundation, mass organization, socio-political organization, or any other organization, institution and other body form including collective investment contracts and the form of a permanent establishment. taxpayer compliance is the fulfillment of taxation obligations that conduct tax payments in order to provide a contribution to the development of today that is important aspect considering the taxation system of self asessment system where in the process to provide an absolute trust to the taxpayer to calculate, pay and report its obligations, (ningsih and rahayu, 2016:3). b. taxpayer compliance criteria the taxpayer criteria complies with financial regulations no. 74/pmk. 03/2012 are as follows: 1) timely in delivering the letter of notification 2) has no tax arrears for all types of taxes, except for tax arrears that have been granted permission to nod or delay the tax payment 3) the financial statements are audited by a public accountant or a government financial supervisory agency with a reasonable opinion without exception for 3 (three) consecutive years. 4) has never been sentenced for criminal acts in taxation based on a court ruling that has had a fixed legal force within the last 5 (five) years. c. factors influencing taxpayers ' compliance according to dessy (2017:18-33) factors that affect the taxpayer compliance, namely: 1) taxpayer understanding the understanding of the meaning is to understand and understand the general provisions and procedures of taxation on how to pay taxes, report the spt (notification letter), know where to pay taxes, know when the payment deadline reporting and to find out what sanctions will be earned if they do not pay taxes. 2) knowledge base taxation the knowledge of the taxation of communities through formal and non-formal education will positively impact the taxpayer awareness to pay taxes. taxation knowledge in the new taxation system, taxpayers are entrusted to calculate, pay and report their own tax. 3) taxpayer awareness awareness is the state of knowing or understanding, while taxation is the subject of tax. so that taxation awareness is a condition of knowing or understanding tax matters. the government's positive assessment of the taxpayer's implementation of the state's function will move the community to comply with its obligations to pay taxes. 4) level of education the higher level of education will cause the public to understand the provisions and regulations in the field of taxation prevailing. the low level of education will be a chance to take lazy taxes to carry out tax obligations because of their lack of understanding of the taxation system that has been implemented. the higher the level of education of a person will make the person easier to understand and understand all things, in terms of taxation one will be able to understand the ordinances of the awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 47 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 taxation and law provisions applicable. while the low level of education one will most likely complicate the person to understand something and allow the taxpayer not to carry out its obligations as taxpayers due to lack of understanding of the taxation system and lack of understanding how to pay taxes. 5) service quality quality service is a service that can provide satisfaction to the taxpayer and remain within the limit meet the standard of service that can be accountable and must be done continuously. if the service is done by the tax authorities both and give a good impression on taxpayers there is a possibility that taxpayers will be diligent in reporting the spt and pay taxes, and vice versa, thus the quality of tax service is predicted to be one of the factors that affect taxpayer compliance. 6) taxation administration tax administration can be seen as a function, system, or institution. as a function, tax administration includes planning, organizing, mobilization, and supervision functions. tax administration as a system is a set of interconnected elements that work together to accomplish a goal or complete a particular task. as a tax administration agency is one of the directorate of the treasury. 7) reform, administration, taxation, modernization, system of taxation administration. taxation administration reform aims to achieve effective and efficient taxation administration. renewal of taxation requires a thorough improvement of taxation administration, both concerning procedures and adequate work and equipment. the taxation administration should function efficiently and effectively, promptly responsiveness to developments in society. government policy on taxation is often changed, but the change in taxation policy by the government will not run properly if the administrative administration system is also not good. 8) modernization of taxation administration system taxation modernization is part of taxation reform. there is a distinctive nuance that makes it more technical, focused, and dynamic in line with the taxation reform itself. 9) application of e-filing e-filing is the delivery of annual spt through the internet, having previously taxpayers get an e-fin number. the e-fin number itself can be obtained by submitting an application to the nearest tax service office or directly through the website. the reason behind the holding of e-filing is because there are still low levels of taxpayer compliance compared to the number of taxpayers registered 10) supervising account representative (ar) with the account representative (ar) carrying out supervision duties on the implementation of obligations by taxpayers and serving the completion of the taxpayer, also for consultation if taxpayer requires information or other related implementation of the rights and obligations of its tax. so that account representative serves as a bridge or mediator between taxpayers and tax services office 11) compliance costs tax planning targets not only minimizing tax burden, but also suppressing taxation costs in general. therefore, we need to understand the meaning of taxation costs. the awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 48 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 amount of costs to be incurred by the taxpayer in fulfilling the tax obligations in various literature is called the compliance cost. 12) socialization of taxes taxation socialization is an effort undertaken by the directorate general of taxation to provide information, understanding, and coaching to the community in particular taxpayers on taxation and taxation laws. counseling is a form of socialization conducted through various media both electronic and print. sometimes it is done directly to areas, areas that are of great tax potential and need a lot of information about taxation. 13) income level poor people will find it difficult to pay taxes. most of them will meet the needs of life first before paying taxes. thus, the income level of a person can affect how the person has awareness and compliance with the legal and obligation provisions. according to ningsih and rahayu (2016:3-4) factors that influence taxpayer compliance, among others: a) the taxpayer's benefit npwp is the number given to the taxpayer as a means in the tax administration which is used as a personal identification or identity taxpayer in exercising the rights and obligations of taxation. benefits of having a npwp: ease of administration management, filing bank credit, bank account creation in banks, submission of siup/tdp, payment of final tax (pph final, vat and bphtb, etc.), passport making, the auction in the intansi government, bumn and bumd, ease of service tax, tax collection, tax payment deduction, deposit and tax reporting b) taxpayer understanding in taxation understanding taxpayer is very important, every taxpayer should have an understanding of taxation in order to know how to calculate the tax that should be paid or tax owed, understand what is npwp, how to report it, how to deposit it or pay tax that must be paid and replenishment of the notification letter. because the tax system in indonesia is a self assessment system, taxpayers must have a good understanding of the prevailing taxation regulations in order to fulfill the tax obligations. c) quality of service quality of service is a form of judgment. taxpayer satisfaction in the service field is an important and decisive element in the taxpayer compliance to pay the taxes that must be paid. one of the purposes of service is to increase the taxpayer compliance to perform its responsibilities in taxation, the tax authorities must always provide good and qualified service to the taxpayer in order to increase the satisfaction and compliance in conducting the tax obligations so that the quality of service can increase the taxpayer's compliance in fulfilling its obligations. d) taxation sanctions sanctions are a real guardrail for the implementation of a regulation that materts rights and obligations. sanctions constitute a breach of the right of a party or unfulfilled obligations that have been made under the laws and regulations of the derivatives. d. taxpayer compliance indicator awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 49 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the indicators used to measure compliance of taxpayers according to chaizi nasucha (2004:9) include: 1) registration of taxpayer identification number (npwp) means that smes are registered as taxpayers and have a taxpayer identification number (npwp) so as to facilitate taxpayers in the taxation administration used as identification or identity taxpayer in exercising the rights and obligations of the tax. 2) the calculation of the tax owed which includes the recording of turnover as the basis of tax imposition, the calculation of tax payable, as well as the calculation of less paying taxes. 3) payment of tax that is the settlement of tax owed both period and yearly in accordance with the obligation. 4) reporting of the spt is a correct and timely submission of the notification letter in accordance with the provisions of the legislation. 5. benefits of npwp a. understanding npwp's benefits according to law no. 28 of 2007 on the third amendment of law no. 6 of 1983 concerning the general provisions and procedures of taxation in article 1 stated that: "taxpayer identification number is the number given to the taxpayer as a means in the taxation administration used as a personal identification or identity of taxpayer in carrying out the rights and obligations of the tax." article 2 states that: "any taxpayer who has fulfilled the subjective and objective requirements in accordance with the provisions of the taxation legislation shall enroll in the office of the directorate general of taxation whose working area includes the residence or the taxpayer's position and to him is given a taxpayer identification number. " the benefit of npwp is as a self-identifying or taxpayers identity and to maintain order in tax payment and supervision of taxation administration (mardiasmo, 2011:26). if the taxpayer has an npwp, then all taxation activities conducted by the taxpayer will be recorded and monitored by the directorate general of taxation by npwp as a means of taxation administration, (ningsih and rahayu, 2016:4). princess (2012) in the masruroh (2013:20) says that taxpayers will be obedient to enroll when benefiting the npwp's ownership. the research conducted by putri (2012) in masruroh (2013:39) shows that the perceived benefit of taxpayers affects the compliance of smes owners in having npwp. however, the ownership of the npwp is not a guarantee that the taxpayer will carry out the obligation to pay and report the tax. many taxpayers do not perform such obligations even if they have a npwp. the taxpayer's ownership must be able to provide benefits in accordance with the taxpayer's interest so that taxpayers will be motivated to pay and report tax after having a npwp. various benefits that can be obtained over the npwp ownership are expected to increase taxpayer compliance. therefore, the benefit of npwp is alleged to be one of the factors that may affect taxpayer compliance in paying and reporting taxes. the more benefits that taxpayers receive for npwp ownership, the taxpayer compliance will also increase. b. npwp registration awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 50 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 according to mardiasmo (2011:26), the obligation to register for a taxpayer is limited to the term, as it relates to when the tax is owed and the obligation to impose a tax owed. npwp registration period is: 1) for taxpayers who run a business or free worker and taxpayer body, must register at least 1 month after the start of the business. 2) taxpayers of private persons who do not carry out an attempt or do not do any free work when the amount of income up to 1 month is annualized has exceeded the tax intaxable, the taxpayer registers the latest later next month. 3) to the taxpayer who does not register for the npwp will be penalized. c. npwp benefit indicator according to heny (2017:5) used to measure the benefits of npwp, among others: 1) as a self-identification or a taxpayer identification, it means that the taxpayer already has a npwp, it can be used as a taxpayer identification card. 2) facilitate administrative management, it means that taxpayers who have a npwp will get easy administrative management in the scope of taxation, and the tax authorities can supervise the fulfillment of taxation obligations of each taxpayer through npwp as a means of taxation administration. 3) facilitate the tax service, which means that the taxpayer making the deposit, tax reporting or other related tax will be recorded and monitored by the tax authorities in the presence of npwp ownership then the taxpayer shall be in order. 6. taxpayer understanding a. understanding taxpayers ' understanding knowledge and understanding of taxation regulations is the process by which taxpayers know about taxation and apply that knowledge to pay taxes (official, 2013 in nurhakim and pratomo 2015:2). understanding is something we understand and we understand it correctly. understanding is how one retains, distinguishes, suspects, explains, expands, concludes, generalizing, giving examples, rewriting, and warning (arikunto, 2009:118). the taxpayer's understanding can also be interpreted as a taxpayer's view on the knowledge of taxation. while the taxpayer is a personal person or entity, includes tax payments, tax cutter, and tax collection, which has the rights and obligations of taxation in accordance with the provisions of taxation legislation. taxpayers of certain personal entrepreneurs are taxpayers who conduct business activities in the field of trading wholesale or retail consumer goods through the business/outlets scattered in several locations, excluding the trading of motor vehicles and restaurant (mardiasmo, 2011:135). benjamin s. bloom in heer (2007) describes the following understanding: comprehension is defined as the ability to grasp the meaning of material. this may be shown by translating material from one form to another (words or numbers), by interpreting material (explaining or summarizing), and by estimating future trends (predicting consequences or effects). these learning outcomes go one step beyond simple remembering of material, and represent the lowest level of understanding. that is, understanding is defined as the ability to capture a sense of (understanding) a thing. it can be seen from the ability to interpret a thing from one form to another (word or number), by interpreting something (explaining or summarizing), and by estimating or awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 51 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 predicting the incident. the outcome of this sense refers to understanding one level above the lowest level of understanding. cook & geuraud in reed (2011:277) argues that understanding is the way an individual utilizes knowledge to understand a new idea. that is, understanding refers to how an individual understands a topic or how one examines an event. according to mardiasmo (2011:50) the understanding of taxpayer understanding is as follows: "the taxpayer's understanding is the taxpayer's understanding of the tax system in indonesia and all applicable taxation regulations". according to carolina (2009:7) the taxpayer's understanding is as follows: "taxpayer understanding is tax information that can be used taxpayers as a basis for acting, making decisions, and to pursue certain directions or strategies in relation to the implementation of its rights and obligations in the field of taxation". according to waluyo (2011:20) taxpayer understanding is as follows: "taxpayer understanding is the process by which taxpayers know and understand about taxation and apply it to pay taxes". from this sense, it can be concluded that a taxpayer's understanding is a taxpayer knowledge of its tax obligations as in the case of acting, making decisions, and knowledge of taxation regulations. government regulation of the republic of indonesia no. 46 year 2013 on income tax on income from accepted or acquired taxes that have a certain gross circulation or commonly called pp no. 46 year 2013 is a policy of taxation that is relatively new. this regulation shall be effective since published on 1 july 2013 and must be carried out maximum per 1 january 2014. the purpose of the issuance of this regulation is to provide convenience to the taxpayers of individuals and bodies that have a certain gross circulation in carrying out their tax obligations. therefore, the government has given a separate treatment regarding the provisions on counting, depositing, and reporting of income tax owed. article 2 pp 46 year 2013 mentions criteria that become the object of this tax regulation as follows: 1) for income from an accepted or acquired taxpayer who has a certain gross circulation, is subject to a final income tax. 2) the taxpayer having a certain gross circulation as intended in paragraph (1) is the taxpayer who meets the following criteria: a) the taxpayer's personal or taxpayer body does not include a permanent establishment; dan b) accepting income from the business, excluding income from the service in connection with the free work, with gross circulation not exceeding rp 4.800.000.000, 00 (four billion eight hundred million rupiah) in 1 (one) tax year. 3) excluding the individual taxpayers as intended in paragraph (2) is the taxpayer of the individual who conducts the business of trading and/or services in his business: a) use facilities or infrastructures that can be disassembled, whether settled or unsettled; dan b) use part or all of the place for the public interest that is not intended for a place of business or selling. 4) excluding the taxpayer as intended in paragraph (2) is: a) the taxpayer body is not yet commercially operating; or awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 52 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 b) the taxpayer body within 1 (one) year after commercial operation obtained gross circulation exceeding rp 4.800.000.000, 00 (four billion eight hundred million rupiah). taxpayer's understanding of pp no. 46 year 2013 is the level of knowledge and ability of taxpayer in the validity of pp no. 46 year 2013, both content and administration. taxpayer knowledge related to pp no. 46 year 2013 will provide a rational picture for taxpayers in order to carry out its tax obligations. as for the compulsory ability to interpret the contents of pp no. 46 year 2013 tax is expected to encourage the taxpayer to technically fulfill its tax obligations in conducting its administration, calculation, payment, or reporting. b. taxpayer understanding indicator: based on the concept of knowledge and understanding of tax according to rahayu (2010:141) some taxpayer indicators know and understand taxation regulations, namely: 1) knowledge related to the general provisions of pp no. 46 year 2013 which includes the enforcement of regulations and the content of regulations (objects and subjects that are subject to regulation). 2) knowledge of taxation system in indonesia taxation system applied in indonesia is a self asessmnt system that is a tax-collection that gives the trust, the responsibility to the taxpayer to calculate, take into account, deposit, and report the amount of the tax to be paid. 3) knowledge of taxation function there are two functions of taxation as follows: a) budgetair function tax as a source of funds for the government to finance its expenditures, both routine expenditure and development. b) function set tax as a tool to govern or enforce government policies in the social and economic sphere. 7. taxpayer awareness a. definition of taxpayer awareness taxpayer awareness is a taxpayer's conduct in the form of a view or perception involving confidence, knowledge and reasoning as well as a tendency to act in accordance with the stimulus given by the system and the provisions of the taxation applicable, ritonga (2011:15). it can therefore be concluded that the taxpayer awareness is a condition where the taxpayer knows and understands the tax matters. the taxpayer awareness is necessary, if the taxpayer has been aware to pay the tax, the tax compliance will be fulfilled, so that the tax payment will continue to increase and no more taxpayers who refuse to pay taxes. according to the english great dictionary (2011) the definition of taxpayer awareness is as follows: "taxpayer awareness in paying taxes is a taxpayer's behavior in the form of views or feelings involving knowledge, beliefs and reasoning is accompanied by a tendency to act according to the stimulus given by the system and the tax provisions ". awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 53 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 according to mardiasmo (2013:50) the definition of taxpayer awareness is as follows: "taxpayer awareness is a condition where one knows, understands and understands how to calculate, pay and report taxes and adhere to the rights and obligations as taxpayers ". meanwhile, according to waluyo (2011:12) the definition of taxpayer awareness is as follows: "taxpayer awareness is to know, acknowledge, respect, and adhere to the prevailing taxation provisions and to have the seriousness and desire to fulfilling its tax obligations. " out of these three understandings, it can be said that a taxpayer's awareness is the willingness and view of the taxpayer to perform its tax obligations in accordance with the prevailing taxation regulations. according to muliari and setiawan (2011:9-10) in anggraeni (2017:7) taxpayers are said to have awareness in accordance with the following things: 1) aware of the laws and regulations of taxation. 2) know the tax function for state financing. 3) understand the tax function for state financing. 4) counting, paying, reporting taxes willingly. 5) calculating, paying, reporting taxes correctly. b. taxpayer awareness indicator the indicators used to measure taxpayer awareness according to (suandy, 2002:95) in agustiningsih (2016:61) are: 1) taxpayer discipline (tax dicipline) taxpayer discipline means taxpayer in carrying out its exposure obligations on time in accordance with the prevailing provisions and regulations. 2) the willingness to pay taxes from taxpayers (tax mindedness) tax mindedness means taxpayer in him has a high desire and desire to pay his taxes to perform the obligations of taxation the tax legislation governing the general provisions and procedures of taxation is law no. 6 of 1983, as amended by law no. 9 of 1994, by law no. 16 of year 2000, last with lawundanmg number 28 year 2007. the law on general provisions and taxation procedures is based on the philosophy of pancasila and the constitution 1945. the law no. 28 of 2007 essentially regulates the rights and obligations of taxpayers, authorities and obligations of tax collector officers, and taxation sanctions. the tax system adopted in indonesia is self assesment, i.e. taxpayers are given the confidence to register, calculate the taxes owed, rectify them, and report the calculations and deposits of the taxes, while the function the directorate general of taxation is to supervise the self assessment system so that the taxpayer in accordance with the provisions of the taxation law. the calculation of tax payable is governed by the taxation act as such in the pph act and the vat act. meanwhile, the registration, deposit, and tax reporting, and the authority of the directorate general of taxation are governed by the formal tax law method the research methods used in this study are qualitative descriptive methods. the type of approach used is a case study research approach with the hope that the case study was implemented to understand the implementation of npwp in indonesia logistics management awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 54 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 high school in bandung. data acquisition is done by choosing the informant that is directly involved in taxation activities, which is derived from two sides. 1. internal aspects the organization consists of working on its own taxation from the head of general and financial administration, financial staff. the reason is that concerned are considered the most knowing and directly involved in the implementation of taxation the information that will be obtained from the concerned is to determine the implementation and barriers of withholding tax carried out at the indonesian logistics management high school 2. external aspect tax office is a tax office and lecturer. the reason is that concerned as people directly involved in the implementation of the teaching. so concerned is considered the most knowing and directly involved and feel the benefit of the officers given by the indonesian logistics management school. 3. the data collection techniques conducted by researchers are observations, interviews, and document studies. the data processing techniques carried out are models developed by miles and huberman (sugiyono 2012:247) consisting of data collection stages or data collection, reduction of data or data reduction, presentation data or display data, and final withdrawal of conclusions or conclusion drawing/verifying. result and discussion 1. conducting socialization tax socialization in stimlog should be done regularly because the regulation and socialization of taxation held must be able to convey all information into the taxpayer. tax socialization should be clearly communicated so that taxpayers can understand the information provided. clarity in providing socialization can be influenced by the way or socialization media that may be easy to understand by taxpayers. through intensive tax socialization can increase the knowledge and understanding of prospective taxpayers regarding all matters relating to taxation. without effective socialization to the taxpayer, especially to the employees are not fixed. convey information that the better to give the extension of taxation regulations that apply will increase compliance to have a npwp. 2. low taxpayer compliance level awareness of paying taxes comes from oneself, then instilling understanding and understanding of taxes can be initiated from the nearest family environment, widened to neighbors, then in certain forums and certain ormas through socialization. with the high intensity of information received by the community, it can gradually change the community's mindset on taxation in a positive direction. various forms of socialization can be grouped based on: methods of delivery, segmentation or media. the delivery can be through formal or informal events. formal events usually use the format of events that are arranged in a formal manner. for example: socialization is done by stimlog finance section, seminars and so on. informal events usually use more casual and unofficial event formats. for example: casual chatting with journalists, with employees and so on. awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 55 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 socialization can be done through electronic media and printed media. for example: done with a talk show on campus, creating opinions, reviews and questions and answers rubric. other forms of propaganda include: banners, banners, billboard/billboards, etc. taxpayer understanding of government regulation no. 46 year 2013 is the level of knowledge and ability of taxpayers on the effect of government regulation no. 46 year 2013 both on content and administration. taxpayer knowledge related to pp no. 46 year 2013 will provide a rational picture for taxpayers in order to carry out its tax obligations. as for the compulsory ability to interpret the contents of government regulation no. 46 year 2013 tax is expected to encourage the taxpayer to technically fulfill its tax obligations in conducting its administration, calculation, payment, or reporting. taxpayer awareness is a taxpayer's conduct of views or feelings involving knowledge, beliefs, and reasoning accompanied by a tendency to act in accordance with the rules provided by the system and the tax provisions. the higher the taxpayer's awareness gained, the higher the level of compliance. this is because they have a positive thought that the taxpayer awareness is the taxpayer's behavior in the form of views or feelings involving knowledge, beliefs, and reasoning accompanied by a tendency to act in accordance with the rules provided by the system and the tax provisions 3. the assumption of the management and ownership of the npwp is considered sufficient and incriminated for employees provide convenience in all matters fulfillment of tax obligations and improve the quality of service to taxpayers. if the service is incorrect or less satisfactory then it will cause a taxpayer reluctance to step into the tax service office. the service must be a friend of hospitality, elegance and comfort. quality service is a service that can create a dynamic condition that relates to products, human services, processes, and environments that meet or exceed taxpayer expectations. quality service is a service that can provide satisfaction to the taxpayer and remain within the limit meet the standard of accountable services and must be done consistently and continuously. improve administration efficiency by implementing reliable system and administration and utilization of appropriate technology. the computerized-based service is one of the efforts to use the right information technology to facilitate the service of taxpayers. improve the image of good governance that can cause mutual trust between the tax office, officers and taxpayer institutions, so that the tax payment activity will be a necessity and a willingness, not an obligation. thus the pattern of relationship between state and employee stimlog in fulfilling the rights and obligations based on mutual trust. through education is expected to encourage the individual toward the positive and able to produce a positive mindset that will then be able to give positive influence as a driver to carry out the obligation to pay taxes. perhaps an idea to establish a special school in the field of taxation can be realized to print experts and skilled in the field of taxation. 4. no awareness as taxpayers taxpayer awareness is very difficult to realize if in tax definition there is no phrase that can be enforced and that is pushy. the starting point of this phrase suggests paying taxes is not merely voluntary deeds or because of an awareness. this phrase gives understanding and understanding that the community is required to carry out a state obligation by paying awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 56 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 voluntary and conscious tax as an actualization of the spirit of and team or national solidarity to build national economy. until now the awareness of employees did not remain in stimlog in paying taxes still did not reach the level as expected. generally still cynical and lack of confidence in the tax existence because it still feels equal to the tribute, incriminating, the payout often has difficulty, what is the inconsistency and how tax and ribet count and report it. but there are still efforts that can be done so be fully aware to pay taxes and this is not something that is impossible to happen. when having awareness then paying taxes will be made voluntarily instead of compulsion. awareness of paying this tax not only brings up a obedient, obedient and disciplined attitude but is followed by a critical stance as well. the more advanced the community and its government, the higher the awareness of paying tax but not only to stop there, they are increasingly critical in addressing taxation problems, especially against the policy material in the field of taxation, such as the implementation of the rate, the mechanism of taxation, its regulation, the impact of practice in the field and the expansion of subjects and objects. according to rochmat soemitro (oyok abuyamin, 2014:14) tax is the contribution of the people to the state treasury by law (which can be imposed) with no reciprocal services (counter accomplishment), which can directly be demonstrated and that used to pay for general expenditure. this means that taxes are only available in the community, if there is no tax. the income of the country is derived from the public through a tax collection, or from the natural wealth that exists within the country. so the income is to finance the public interest which eventually also includes the personal interests of individuals such as people's health, education, welfare, and so on. so where there is public interest, there is a tax collection arise, so that the tax is a compound with the public interest. negative factors that impede the level of tax awareness and concern include: a. negative prejudice to the taxation apparatus should be replaced with positive prejudice. this negative prejudice will cause taxpayers to be defensive and closed. they will tend to hold information and not co-operative. they will try to minimize the value of the taxes imposed on them by providing as little information as possible. it needs to be hard work from tax agencies and mass media to help eliminate these negative prejudice. b. barriers or lack of intensity of cooperation with other agencies (third parties) to obtain data on the potential of new taxpayers, especially with local agencies or non-vertical agencies. c. for prospective taxpayers, the self assessment system is considered profitable, so that most of them are reluctant to register themselves even avoiding the obligation of npwp. the data about him is always sought to be covered so that it is not touched by dgt. d. still at least information that should be disseminated and acceptable to the public regarding the role of tax as a source of acceptance of the country and other positive terms. e. there is a presumption that the reciprocal (counter accomplishment) tax can not be enjoyed directly, even the form of infrastructure development is not yet evenly, widespread, let alone touch the corners of the homeland. specifically, the factors that influence it is awareness of paying taxes, knowledge and understanding of taxation regulations, and good perception of the effectiveness of the taxation awareness and compliance analysis taxpayer identification number (study at high school logistics management indonesia) suherman 57 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 system. if the taxpayer has an awareness of paying taxes, the obligation to pay the tax will not be further strengthened and voluntarily shall pay the tax. alternative measures build awareness and taxpayer care. there needs to be support from all stakeholders. raising taxpayers is a major challenge. before determining the alternative steps to build a taxpayer's awareness and concern, the need to rationate our thinking that the awareness of paying taxes must come from themselves. conclusion taxpayer identification number (npwp) must be essentially owned by any individual person or entity that belongs to the taxpayer. this obligation is emphasized in line with tax socialization through various media. not only that, the government through the directorate general of taxation also increasingly demonstrates its seriousness about taxation. this is evident by the improvements in the tax system several years. one such improvement was the amendment of the amended income tax law for the fourth time and in the year 2008. this change is a major change because there is perbedaantarif tax between the taxpayer/person who does not have a taxpayer registration with the tax id. based on income tax law no. 36 year 2008, which entered into force in 2009 adheres to tariff discrimination, where a mandatory personal or agency that does not have a npwp will be charged higher tax when compared with the taxpayer who has npwp. such discrimination, for example, the rate of tax tariff of pph 20% higher, compared with the taxpayer who has the npwp. some of the recommendations that can be given from the study results, among other things is to raise the taxpayer awareness as a tax authority that has the duty of tax collector agencies from taxpayers should continue to raise taxpayer awareness through socialization and counseling to employees in stimlog, so that they know and understand the importance of paying taxes. this will greatly help increase taxpayer awareness, because if taxpayers have been aware to pay taxes the taxpayer will continue to improve. taxpayers should be able to further increase their compliance in fulfilling their tax obligations by increasing the taxpayer awareness to their tax obligations through socialization and counseling conducted by stimlog, so that the taxpayer is willingly without compulsion to fulfill the tax 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(2018). analisis efektivitas penerimaan pajak bumi dan bangunan kota depok. jurnal ilmiah ekbank, 1(2). the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 262-267 262 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc empirical evidence from the indonesian stock exchange: the impact of dividend policy decisions on sharia share prices abdul kadir ms1, burhannudin2, khuzaini3, bustani4 1,3lecturer, faculty of economics, islamic university of kalimantan mab banjarmasin 4collegiate, faculty of economics, islamic university of kalimantan mab banjarmasin 2tutorize, banjarmasin open university, indonesia 1correspondent: kadirabdul8452@gmail.com received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: ms, a.k., burhannudin, khuzaini, bustani (2021). empirical evidence from the indonesian stock exchange: the impact of dividend policy decisions on sharia share prices. ilomata international journal of tax & accounting.2(4),262-267. https://doi.org/10.52728/ijtc.v2i4.352 abstract: this paper aims to obtain empirical evidence of the impact of dividend policy decisions on sharia share prices. an exploratory investigation on 26 selected firms listed on the indonesia stock exchange's jakarta islamic index with the criteria of reporting complete financial statements for the 2014-2018 period. the secondary data were examined with 130 data and then processed using spss 23 packages, which were then included in the analysis using standard regression. the investigation's findings provide empirical evidence that dividend policy decisions have a significant effect on sharia share prices. this study provides a theoretical contribution to a limited study that explores dividend policy with islamic share prices in the context of the stock exchange. in practice, this research provides significant insight regarding the dividend policy that the company decides to increase the effectiveness of financial management in the context of a company that is considered to have sharia shares on the stock exchange, considering that the company's business success can increase the economic growth of a country. keywords: syaria stock, stock price, dividend policy, jakarta islamic index this is an open access article under the cc-by 4.0 license. introduction the capital market is viewed as crucial and significant as a driver for any country's economic sustainability (bustani, 2020; lusiana, 2020; syofyan et al., 2020; usman et al., 2021). in the framework of financial management, long-term viability is essential for future business challenges involving the company's dividend policy (irton, 2020; nambukara-gamage & peries, 2020; yan & zhu, 2020). dividend policy and its impact on share prices have always been a contested issue among experts (alali et al., 2019; ayunku & apiri, 2020; jovković et al., 2021; nambukaragamage & peries, 2020). however, balancing the competing interests of various shareholders, and the dividend policy they pick may have a good or negative influence on the share price (khan et al., 2018; v, 2021). profit retention and profit-sharing are linked to dividend policy (tiwari & pal, 2020). profit-sharing can take the form of dividends or the buyback of issued shares (charith & davydenko, 2021), https://www.ilomata.org/index.php/ijtc mailto:kadirabdul8452@gmail.com mailto:kadirabdul8452@gmail.com https://doi.org/10.52728/ijtc.v2i4.352 empirical evidence from the indonesian stock exchange: the impact of dividend policy decisions on sharia share prices ms, burhannudin, khuzaini, bustani 263| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc therefore as result, one of the company's greatest strategic considerations is dividend policy decisions to show company performance (khan et al., 2018; rono & omoro, 2020; v, 2021). dividend policy refers to a company's choice to distribute profits to shareholders in the form of dividends (silalahi et al., 2021). further explained by (kim et al., 2020; song et al., 2021), one of the most essential managerial decisions is dividend policy, which has been thoroughly researched in the financial literature. before making profit-sharing investment decisions, dividend distribution policies should be thoroughly evaluated (al-sharif, 2020; alnori & alqahtani, 2019). many theoretical and empirical research has concentrated on finding the elements that determine dividend policy, which has an impact on share prices. however, there is currently a scarcity of research on dividend policy and share prices in the context of islamic companies. (abedifar et al., 2020; jaballah et al., 2018). due to the uniqueness and nature of their commercial activities, the policy system of firms whose shares are categorized as sharia differs from conventional shares, making research on dividend policy on share prices crucially interesting for good management. (shehata, 2021). the empirical literature study (syofyan et al., 2020), confirmed that dividend policy decisions affect share prices. the findings of follow-up research (lasisi et al., 2020), show that dividends are essential for businesses, implying that signal theory is essential and that investors trust the information sent in dividend policy decisions. the paper goes on to say that corporations should make sure that good dividend policies and earnings per share rules are in place, as these have been shown to improve share price inflationary pressures empirically. other studies disagree with the findings, such as (adam et al., 2020; barros et al., 2020), which found that dividend policy, along with asset growth, indicates a statistically irrelevant association to the company's stock market price, implying that dividend payments and share prices have a weak relationship. the researchers discovered a dearth of studies related to this problem in numerous asian nations after studying and evaluating the relevant literature. thus, utilize data from the indonesian stock exchange, this research aims to give empirical evidence of the impact of dividend policy decisions on sharia share prices. the report's implications can assist the management of companies with sharia-compliant shares in developing and analyzing more efficient dividend policies and financial management. this study is more essential from a larger perspective since the financial success of companies whose shares are categorized as sharia influences the economic growth of a country. departing from the main issue and objectives of this study, the following set of hypotheses have been established: h1: there is a significant impact of dividend policy decisions on sharia share prices. secondary data were processed using spss 23 statistical package, which was applied to perform standardized regression analysis. method this research is an explanatory study using a quantitative approach to analyze the impact of dividend policy decisions on sharia share prices. the investigation was carried out in indonesia's sharia stock market, which is represented by the jakarta islamic index. the policies of companies whose shares are classified as sharia are different from conventional shares due to the uniqueness and nature of their business activities, which makes research on dividend policy with share prices very essential for effective management. the research population is 30 islamic stock companies listed on the jakarta islamic index. the sample is 26 companies using sampling criteria, namely, only companies reporting complete financial statements for the 2014-2018 period. the secondary data were analyzed by 130 data and then processed using spss 23 packages, which is then applied using standard regression analysis. https://www.ilomata.org/index.php/ijtc empirical evidence from the indonesian stock exchange: the impact of dividend policy decisions on sharia share prices ms, burhannudin, khuzaini, bustani 264| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion the study's findings show that dividend policy decisions have a significant impact on sharia share prices. the dividend policy explains 56.9% of the variance (r2 = 0.569) of the share prices. beta is 0.754 and p-value is 0.000 (p < 0.05). this study found that dividend policy decisions have a significant impact on sharia share prices. thus the hypothesis proposed h1 is accepted. dividend policy decisions have a significant impact on sharia share prices and contribute a 56.9% impact on sharia share prices. this study shows that companies whose shares are classified as sharia greatly affect the role of dividend policy in increasing share prices. in addition, in the stock sector which is categorized as sharia in the context of indonesia, it is essential to listen attentively to dividend policy decisions, because it has its own characteristics. the findings of the study are consistent with those of prior investigations (syofyan et al., 2020), revealing that dividend policy has an effect on share prices. according to a study by (imamah et al., 2019), sharia companies have larger dividend payouts, which is mostly due to large insider and external ownership. furthermore, the firm size of sharia stocks has a significant impact on corporate governance because it is negatively associated with dividend payments when firm growth is high, but beneficial when firm size is low. likewise (lasisi et al., 2020), revealed that dividends are relevant for investors, meaning that signal theory is relevant, and investors believe in the information transferred in dividend policy decisions. companies must ensure that good dividend policy decisions are enforced and the earnings per share policy are maintained because it has been empirically proven to increase share prices movements. as a result, the present value of share prices on dividend changes increases over time (esteve et al., 2019), however, shareholders prefer early quick dividends, arguably a risk management tool used to reduce payback periods (barros et al., 2021). the implications of this study add to the realm of academic theory and practice. this research contributes to theory and practice in a variety of ways. as a result, current research fills the knowledge gap about dividend policy with islamic share prices in indonesia. at the identical time, the research stock is currently on the rise. furthermore, this research contributes to the current empirical regard to the impact of dividend policy decisions on sharia share prices. this investigation has a wide range of implications for business management because it shows the business success of companies whose shares are classified as sharia greatly affects the economic growth of a country, this study has greater importance from a broader perspective. table 1 regression model model model summary regression dividend policysharia share price independent variable dividend policy r .754a dependent variable sharia share price r square .569 constant 2428.367 adjusted r square .566 b 27.761 std. error 2.134 beta .754 p-value .000 conclusion h1: accepted source: secondary data processed, 2021 https://www.ilomata.org/index.php/ijtc empirical evidence from the indonesian stock exchange: the impact of dividend policy decisions on sharia share prices ms, burhannudin, khuzaini, bustani 265| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the study's findings show that in the context of the indonesian stock market, dividend policy decisions have a significant impact on sharia share prices. the findings also show that dividend policy intervention is needed to increase share prices in the context of companies classified as sharia. in future research, it will be useful to explore dividend policy with share prices by comparing stock exchanges across countries. reference abedifar, 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(2020). peer influence on dividend policy: evidence from the chinese stock market. economics letters, 192, 1–3. https://www.ilomata.org/index.php/ijtc ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.225-242 https://www.ilomata.org/index.php/ijtc 225 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province uli wildan nuryanto1, masyhudzulhak djamil mz2, achmad hidayat sutawidjaya3, ahmad badawi saluy4 1234mercu buana university correspondent: uli.wildan11@gmail.com submitted : september 20, 2020 revised : october 10, 2020 published : october 31, 2020 abstract in current dynamic business environment, the competition is getting stiffer and performance organizational becomes issue, the caracteristics that occurred in the industrial revolution 4.0. this condition requires organizations to increase the performance to be sustain. competence and knowledge management as internal resources that reffer to rbv are strengths hat are very important as predictors in improving performance. for this reason, the study has explored the indicators of each of the predictors and also test the relationships between latent variable that have been hypothesized. this research focus to the industrial chemical manufactur at banten province indonesia which is become the province with the third largest number of chemical firms in indonesia. regarding to the central bureau statistics of indonesia, the values of productivity and human resources capability from downstream chemical manufactur sector below the target. this research using sem-pls method to measure 97 respondents from the level supervisor and manajerial. the final results provide a positive and significant relationship between competence and knowledge management through competitive advantage and organizatioan performance. competitive advantage also increasse the relationship between competence and knowledge management through the organizational performance. this result has implication for managerial levels to increase human resources performance so it can improve the firm competitive advantage. keywords: organizational performance, competitive advantage, financial sector manufacturing industry introduction an increasingly competitive market and consumer awareness of the quality of products purchased at competitive costs, as well as product trends that change according to customer demands have changed the industrial business to be more dynamic (ko, 2015). this competition started in 1990 when the market was intensified to get the right products and services to their place in a fast and low cost manner (li et al., 2006). this raises impacts and problems, especially for companies that are accustomed to formulating their business strategies by relying on the ability to predict trends in the next five to ten years to change their habits by making changes and rapid innovation (munir, 2011). to be able to maintain their existence, many companies have made various ways to make changes according to the demands of customers, such as expanding market share (hertati., 2015), making innovations related to products and services provided to customers (hertati, 2015), improving production system, make improvements to organizational systems and make cost savings (hertati, 2016). organizations that are not able to keep up with environmental changes will find it very difficult to be able to compete in this competition so that inevitably the organization must be https://www.ilomata.org/index.php/ijtc mailto:uli.wildan11@gmail.com the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 226 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 able to create a competitive advantage so that its business can survive (kusuma and devie, 2013). hertati research results, (2016) state that competitive advantage is an advantage over competitors that can be obtained by offering greater consumer value, at lower prices or providing greater benefits to customers and providing services that are able to provide more value to customers. customers (porter, 1985). competitive advantage is also defined as the ability of an organization to maintain a defensive position against its competitors (li et al, 2006) with indicators of each being price, quality, delivery, dependability, product innovation, and time to market. this is in line with the formulation of competitive advantage proposed by porter (1985) for companies, namely low cost or product differentiation. in the last 4 years, there has been a very significant decline in growth in the chemical manufacturing sector in indonesia where the economic growth value of this sector is still below the national economic growth. this decline occurred in the chemical industry and chemical goods sub-sector, which is the downstream chemical manufacturing industry. the value of productivity and human resource capability in the downstream sector is still below the average value of the non-oil and gas sector where the average value of the productivity and capability of the human resources in the non-oil and gas sector in the last 5 years has been at 398.5 million / person, while the average value of productivity and human resource capabilities the downstream chemical manufacturing industry sector amounted to 336.8 million / person in 2017. this is different from the upstream chemical manufacturing industry sub-sector which has a productivity value and human resource capacity of 1,211.9 million / person in 2017. hertati research (2019) reveals that an increase in existing competitive advantage will be obtained if it is supported by the potential for superior and high-quality human resources to support companies in achieving predetermined quality goals. but unfortunately in fulfilling the needs of human resources itself, there are quite a number of obstacles for the industry today. based on the results of the focus group discussion (fgd) between key persons of manufacturing industry entrepreneurs, there were problems related to skill gaps, especially in middle-level human resources as well as shortages of supply and skill mismatch at the level of skilled human resources. hertati, et, all (2020) stated that this is what makes the position of the domestic industry difficult to innovate and develop so that based on the results of the 2017 global innovation index report, the domestic position ranks 87 out of 137 countries in terms of innovation. this illustrates the vulnerability of the industry's ability to be able to develop technology in order to produce high competitiveness. for this reason, a competency-based hr improvement is needed to be able to increase competitive advantage so that it can support an increase in company performance. hertati research (2019) states that in addition to free competition, a potential threat but can also be an opportunity in the chemical manufacturing sector is the development of science and technology that has shifted the third industrial revolution into an industrial revolution 4.0 which has a very fast disruptive technology pattern. and threatens incumbent companies. on the other hand, technological developments can actually be used as an opportunity for the industrial manufacturing sector by using automation technology to replace manual systems. research by hertati (2016) states that the faster flow of information due to technological advances will help companies to get the flow of information quickly and at low cost. but back to the extent to which the level of human resources in mastering existing competencies and knowledge management to adapt so that they can master renewable technology and even be able to innovate for the company. for this reason, this study seeks to explore existing information related to the influence of competence and how knowledge management plays a role in increasing the competitive advantage of companies in order to improve organizational performance. the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 227 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the manufacturing sector is still the largest contributor to the national gross domestic product (gdp) with an achievement of 20.16% in 2017. while the next largest contributor to gdp is the agriculture, forestry and fisheries sector at 13.14%, the trade sector at 13.01%, the construction sector was 10.38% and the mining sector 7.57%. the industrial classification used in the processing industry survey is a classification based on the 4th revision of the standard industrial classification of all economic activities (isic) which has been adapted to conditions in indonesia under the name indonesian standard industrial classification (kbli) in 2009. furthermore, the main groups kbli is divided into 24 industrial subsectors where the chemical industry is included in the 11th classification called the chemical industry and goods made of chemicals. in the last 5 years, the chemical manufacturing industry sector has been able to generate an average export per year of us $ 10.83 billion and has been able to absorb 284,887 productive workforce with 1,376 companies spread across 22 provinces in indonesia. of the 22 provinces, there are 3 provinces that have the highest number of chemical companies, including west java with 388 companies, east java with 333 companies and banten province with 292 companies. emillia (2015) and hertati, et, all (2020) state that the manufacturing sector, including the chemical industry, is the foundation for the development of the national economy and is an important sector for sustainable and productive economic growth. the development of the chemical industry in indonesia is also inseparable from the competitiveness of the industry itself, based on data from the international institute for management development (imd), the competitiveness of the indonesian manufacturing industry in the last 11 years is not very good, namely in the 40th rank out of 193 countries registered with the un. this is an attraction for researchers to conduct more in-depth research related to competitive advantage and organizational performance in the chemical manufacturing industry sector. the definition of performance is used in various disciplines and depends on the field of the organization itself (jenatabadi, 2015: hertati, et, all, 2019). performance can be defined as an achievement of results that can be seen from the extent to which the organization can achieve goals based on predetermined goals. performance is the result of collaborative activities among members or organizational components in order to achieve organizational goals. within the organizational framework, there is a relationship between individual performance and organizational performance. organizations in achieving predetermined goals must go through activities driven by a person or group of people who actively play a role as actors, in other words the achievement of organizational goals is only possible because of the efforts made by people in the organization. friedlander and pickle (1968) and safkaur, (2020) consider performance as a variable that can measure the success of the company and also measure the extent to which the company's ability to achieve its targets measured through efficiency, effectiveness and others depending on the organizational context. hertati, et, all (2020) stated that effectiveness refers to the extent to which the production function can meet the demands and requirements of stakeholders such as customers, top management and shareholders. while efficiency is how the organization's resources are economically utilized through the achievement of functions. this study uses the dimensions of competitive advantage from the perspective of rbv into four dimensions, namely valuable resources, scarce resources, unmatched resources and irreplaceable resources. with the number of indicators as many as seven indicators that refer to the conditions of the research place and also the results of research such as li and liu (2018), ding et al (2018), gautam and ghimiee (2016), stefanikova and masarova (2014) and awaad (2014). the indicators are commitment and ability to provide satisfaction to customers (ca1), ability to innovate (ca2), ability to withstand risks (ca3), use of technology (ca4), commitment to achieving goals at any cost (ca5). related to rbv, competence is a capital that comes from internal organizations and has value for the organization to be able to produce competitive advantage. in a company, core competence is an absolute force that underlies the company in operating, while in relation to competitive advantage, researchers also use differentiating competencies as a dimension of the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 228 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 competence. as for professional competence, researchers also use it as a dimension and predictor of competitive advantage and organizational performance, so that it is expected to represent the diversity of meanings related to competence. otoo and mishra (2018) and hertati & syafarudin (2018) define competence as a group of knowledge, skills, personal qualities and experiences, while hellrigel and slocum (2011) define competence into the dimensions of employee ethical competence, self-competence, diversity competence, cross-cultural competence, communication competence, team competence and changing competencies as the seven main competencies that affect individual competence, team and organizational effectiveness (hertati, et, all, 2020). companies make various kinds of efforts to have a competitive advantage as a powerful weapon in improving organizational performance, one of which is by calculating and using core competencies as an internal strength that can produce added value, strong differentiation (hamel and prahalad, 1994). there have been many studies from academics which have concluded that core competencies are a very vital force for organizations as a means of gaining competitive advantage (hafeez and abdelmeguid, 2003). srivastava (2005) states that core competencies are the basis of all internal resources which can be used as competitive advantages. banerjee (2003), core competence as anything that is information and knowledge about the success or failure of using knowledge sources. chen and wu (2007), core competence as the ability to operate efficiently in a business environment in order to respond to existing challenges. leonard and barton (2000), core competencies as competencies that differentiate a company from its environment. meanwhile, according to sanchez and heene (1997) what is meant by core competence is the result of a collective learning process which is manifested in business activities and processes. professional competence according to mccelland (1973) is defined as the ability needed in the workplace which is related to a person's personal capacity related to one's performance in doing their job. professional competence refers to the accuracy, skills and exemplary behavior, so that employees must strengthen the professional aspects of competence in order to be competent in carrying out their duties (mansfield, 1978). lysaght and altschuld (2001) stated that the core of professional competence is knowledge, skills, standards, competences and identification. distinguishing competencies are abilities, activities and capacities that are unique compared to competitors (stoner, 1987). producing higher quality products, innovating, having knowledge and skills in the workplace, or the ability to respond quickly to customer requests compared to customers. tsou et al (2014); garcia and velasco (2008), competencies that differentiate the ability to be able to innovate that produce new methods or materials using technology and leave previous methods. this study uses core competencies as a dimension with three main indicators that refer to the results of research from hertati, lestari (2020), otoo & mishra (2018) and agha et al (2012), the three indicators are competence in communication (com1), competence in ethics (com2) and competence to work together (com3). meanwhile, professional competence uses two indicators, namely cognition or understanding of materials (com4), and the ability to operate existing facilities (com5) which refers to ko's research (2015). whereas for differentiating competence, researchers use one indicator, namely competence to innovate (com6) which refers to the research of tsou et al (2014). knowledge management is the formalization of and access to experience, knowledge, and expertise that creates new capabilities that enable superior performance, drive innovation and increase customer value (khan, 2012). knowledge management is a process that helps the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 229 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 organizations to find, select, organize, disseminate and transfer important information and expertise needed for organizational activities (zaied et al, 2012). companies that are efficient in acquiring knowledge will be able to create and maintain a competitive advantage in a knowledgebased economy. meanwhile, other companies that are unable to acquire and create knowledge will have difficulty in maintaining their competitive position (deed and hill, 1996 in khan 2012). knowledge is an important source of competitive advantage available to an organization in the twenty-first century (mcfadyen and canella, 2004). the twenty-first century is an era of knowledge economy, where most organizations have knowledge that enables them to improve their organizational performance (zaied et al, 2012). in today's world of aggressive competition, knowledge management is the main vehicle for organizations to achieve their goals and to compete well. knowledge management is recognized as an important weapon to maintain competitive advantage and improve performance (zaied et al, 2012). through knowledge management, organizations identify their knowledge and use it to improve performance and produce various innovations (munir, 2011). organizations must recognize the importance of effective knowledge management, because the costs of ignoring it are enormous (ling et al, 2008). so that the evaluation of knowledge management becomes important because it provides a reference to direct the organization in increasing competitive advantage so that it can create good organizational performance. the dimensions of knowledge management in this study are identified into five stages of knowledge selection that have been adjusted to the place of research and refer to the research of mahdi et al (2018), turulja and bajgoric (2018), cahyaningsih et al (2017), mahdavi and pirzad (2017). al-refaie and al-tahar (2016), hazen (2015) into the process of knowledge identification, knowledge creation, knowledge storage, knowledge sharing and knowledge use. with the number of research indicators as many as six indicators, namely data collection on potential knowledge (km1), converting and formalizing knowledge into reference standards (km2), protection of knowledge (km3), transfer of knowledge (km4), sharing of knowledge (km5) and use of knowledge into activities operational routine (km6). this study integrates the resources based view (rbv) theory and knowledge based theory (kbv), so that the researcher calls the concept of renewal in this study as the gain competitive advantage for a reliable industry, this study also develops several hypotheses to extend the existing model into a new model. from the description above it can be formulated a research hypothesis that competitive advantage, organizational performance affects the manufacturing industry sector methods this research is designed to answer problems that have been formulated through hypotheses. kerlinger's (2000) design is an investigation structure structured in such a way as to help researchers get definite answers. using a deductive approach consisting of exploratory research to find some relatively new relationships and detailed explanations. by applying a deductive approach, the researcher tries to see the data empirically and systematically which is then compared with existing theories. causal studies attempt to explain the relationship between the influence of competence, knowledge management, and competitive advantage on organizational performance in the chemical manufacturing sector. the conceptual framework proposed by the researcher is as follows: the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 230 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 figure 1. research framework, 2020 this research was conducted on chemical companies in the province of banten which are scattered in serang regency, cilegon city and tangerang regency involving 97 respondents. the sampling technique uses purposive sampling technique and the unit of analysis measures the managerial level employees as policy makers in their respective companies with a minimum working period of one year. the variables in this study are grouped into three groups, the first exogenous variables are competence and knowledge management. , the second is the intervening variable, namely competitive advantage and the last is the endogenous variable, namely organizational performance. this study uses a questionnaire with a likert scale with a value of 15 where scale 1 states strongly disagree, scale 2 disagrees, scale 3 is neutral, scale 4 agrees and scale 5 strongly agrees. results and discussion this study aims to obtain the best model in explaining the influence of competence, knowledge management and competitive advantage on organizational performance in the chemical manufacturing sector. while the indicators used are those that refer to previous research and are related to the place of this research. the data analysis technique uses sem pls, according to ferdinand (2002) sem is very suitable for confirming various kinds of constructs that exist for latent variables. test model compatibility or accuracy based on observed empirical data. test the causal relationship between the factors observed in the model. based on the results of an in-depth literature review of each relationship between variables, the following relationships and influences were obtained. the results of previous research show that competence and quality have a significant effect on competitive advantage in small and medium companies (ismail et al, 2014). meanwhile, the research results of adiputra and mandala (2017) show that competence and capability have a positive effect on company performance, but competence does not have a significant effect, while capability has a significant effect. agha et al (2012), jamhour and agha (2010) and hastjarjo, et al (2016) show that competence has a significant effect on competitive ability and competitive advantage and can improve organizational performance. based on the research that has been done above in relation to the relationship between competence and competitive advantage, the researchers took the following provisional conclusions: competence knowledge management competitive advantage organizational performance the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 231 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 hi: competence has a significant effect on competitive advantage in the industrial sector chemical manufacturing the results of research related to the relationship between knowledge management and competitive advantage found that there is a significant relationship between knowledge management and competitive advantage (mahdi et al, 2018). meanwhile, kusuma and devie's (2013) research results show that knowledge management has a positive and significant impact on competitive advantage and organizational performance. nazarpour and shirin (2017) the human resource process has a positive and significant influence on knowledge management and competitive advantage, as well as knowledge management which has a significant effect on competitive advantage where the measurement of competitive advantage is through the vrio approach. almasi and pirzad (2017) conclude that intellectual capital has a significant effect on knowledge management and competitive advantage, but knowledge management has no significant effect on competitive advantage, while lee et al (2016) conclude that knowledge management has a significant effect on technological innovation and competitive advantage. and technological innovation has a significant effect on competitive advantage. based on the research that has been done above in relation to the relationship between knowledge management and competitive advantage, the researchers took the following provisional conclusions: h2: knowledge management has a significant effect on competitive advantage in chemical manufacturing industry sector. previous research that discussed the relationship between competitive advantage and organizational performance such as cantele and zardini (2018) concluded that there was a significant influence on the sustainability dimension of the long-term company on competitive advantage and a significant effect on competitive advantage and company performance. lorenzo et al (2017) concluded that competitive advantage has a significant effect on the performance of beverage companies in spain, this is in line with the research of othman et al (2015), kusuman and devie (2013) and gyampah and acquaah (2008) where their research also emphasizes that the source the company's existing power originating from the internal company will determine the company's competitive advantage. based on the research that has been done above in relation to the relationship between knowledge management and competitive advantage, the researchers took the following provisional conclusions: h3: competitive advantage has a significant effect on organizational performance in the sector chemical manufacturing industry previous studies that examined the relationship between competence and organizational performance include otoo and mishra (2018) which concluded that good human resources will increase employee competence and the impact will have a significant effect on organizational performance, while nimsith et al (2016), agha et al. (2012), jamhour and agha (2010) and hastjarjo et al (2016) concluded that the dynamic ability of organizations to existing environmental risks and competence has a significant effect on organizational performance. so that it can be concluded that competence is a very valuable internal resource for the company to be able to improve its organizational performance. based on the research that has been done above in relation to the relationship between competence and organizational performance, the researchers took the following temporary conclusions: h4: competence has a significant effect on organizational performance in the sector chemical manufacturing industry the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 232 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the influence between knowledge management on organizational performance, it is concluded that there is a positive and significant relationship, this is in line with the results of almudallal's research (2015), but in his research he has a very high amount of influence, which is 70%. knowledge management supported by information technology applications will also have a significant effect on company performance (lopez and alegree, 2011). meanwhile, nowacki and bachnick (2015) concluded that there is a significant influence between knowledge management on company effectiveness in terms of innovation ability, company revenue, competitiveness. meanwhile, muthuveloo et al (2017) stated that there was a significant influence on the dimensions of knowledge management, namely socialization and internalization on company performance. based on the research that has been done above in relation to the relationship between knowledge management and organizational performance, the researchers draw the following temporary conclusions: h5: knowledge management has a significant effect on organizational performance on chemical manufacturing industry sector. based on the results of the descriptive test of respondents, the majority of the results were as follows: the majority of respondents were male (69.1%), the majority of respondents were 3040 years old (46.4%), the majority of the working years were 11-15 years (36.1%). the majority of education is undergraduate (76.3%), the majority position is supervisor (29.9%). tabel 1. demographic respondents profile frequency % 1. gender male 67 69,1 female 30 30,9 2. age < 30 years 11 11,3 30-40 years 45 46,4 41-50 years 32 33 >50 years 9 9,3 3. service years 0-5 years 11 11,3 6-10 years 18 18,6 11-15 years 35 36,1 16-20 years 22 22,7 21-25 years 8 8,2 >25 years 3 3,1 4. education diploma 13 13,4 bachelor degree 74 76,3 master degree 10 10,3 5. position supervisor 29 29,9 sect. head 18 18,6 ass. manager 24 24,7 manager 22 22,7 gm 4 4,1 source: data processing results, 2020 the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 233 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 outer model analysis result. the results of the convergent validity indicators of each variable are as follows; competency variables with indicators com1, com2, com3, com4, com5 and com 6 respectively 0.734, 0.823, 0.657, 0.717, 0.688 and 0.793. knowledge management variable with indicators km1, km2, km3, km4, km5 and km6 respectively 0.777, 0.795, 0.799, 0.820, 0.817 and 0.801. the variable of competitive advantage with indicators ca1, ca2, ca3, ca4 and ca5 respectively 0.809, 0.697, 0.911, 0.774 and 0.842. organizational performance variables with indicators op1, op2, op3, op4 and op5 respectively 0.745, 0.822, 0.756, 0.812, and 0.869. the result of the loading indicator test is recommended to be above 0.70, but as long as the model is still in the development stage, the loading indicator value of 0.60 is still tolerable. from the test results above, it shows that each indicator of each competency variable, knowledge management, competitive advantage and organizational performance shows a result above 0.60. composite reliability table 2. value of composite reliability construct composite reliability competence 0,877 competitive advantage 0,904 knowledge management 0,915 organizational performance 0,900 source: data processing results, 2020 the expected composite reliability value from the test results is ditas 0.70 which illustrates that each indicator has high consistency for measuring latent variables. the results showed that each construct had a composite reliability value above 0.70, which indicates the consistency of the construct to measure high latent variables. average variance extracted (ave) table 3. average variance extract construct ave competence 0,544 competitive advantage 0,656 knowledge management 0,642 organizational performance 0,643 source: data processing results, 2020 the ave value shows the variance value for each indicator in the construct that is captured by these variables more than the variance caused by measurement errors. the recommended ave value is> 0.5. from the analysis, it was found that the ave value for each construct was greater than 0.50.cronbach's alpha. table 4. cronbach’s alpha construct cronbach’s alpha competence 0,9738 competitive advantage 0,9419 knowledge management 0,9863 organizational performance 0,9482 source: data processing results, 2020. goodness of fit test. the goodness of fit test results obtained r2 value for the construct of competitive advantage of 0.651 which can be interpreted that competence and knowledge the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 234 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 management have an impact on competitive advantage by 65.1% while the remaining 34.9% is influenced by other variables. whereas for the value of r2 construct organizational performance has r2 of 0.678 which means, organizational performance is influenced by latent variables of competitive advantage, competence and knowledge management by 67.8%, while the remaining 32.2% is influenced by other variables. table 5. value of r-square construct r-square organizational performance 0,678 competitive advantage 0,651 source: data processing results, 2019 hypothesis test. to answer the hypothesis that has been, it is seen the significance of the influence between independent constructs on the dependent at the 5% significance level. the results of the t-statistics value are as follows: tabel 6. coefficients value (original sample), standard error and t-statistics significance test original sample (o) standard error (sterr) t statistics (|o/sterr|) p values result competence -> competitive advantage 0,206 0,094 2,196 0,029 significant competence -> organizational performance 0,212 0,126 1,979 0,046 significant competitive advantage -> organizational performance 0,532 0,018 4,494 0,000 significant knowledge management -> competitive advantage 0,653 0,080 8,173 0,000 significant knowledge management -> organizational performance 0,571 0,112 5,103 0,000 significant source: data processing results, 2019 hypothesis 1. bootstrapping test results obtained the coefficient value of the latent variable competence on competitive advantage of 0.206 indicating that competence has a positive influence on competitive advantage. as for the t-statistic value, the value is 2.196 where this value is greater than 1.96 and the p value of 0.0296 is smaller than 0.05, which indicates that competence has a significant effect on competitive advantage, so that h1 in this study can be accepted. this significance is in line with the results of research by ismail et al. (2014) which showed a significant relationship between competence and competitive advantage in small and medium enterprises (smes), as well as the results of research by hastjarjo et al (2016) which showed the same results in the real industry. estate. meanwhile, agha et al (2012) and jamhour and agha (2010) show the same results in the painting industry. hypothesis 2.the bootstrapping test results show that the coefficient of knowledge management latent variable on competitive advantage is 0.653 indicating that competence has a positive influence on competitive advantage. as for the t-statistic value, the value of 8.173 is obtained where this value is greater than 1.96 and the p value of 0.000 is less than 0.05, which indicates that knowledge management has a significant effect on competitive advantage, so that h2 in this study can be accepted. this significance is in line with the results of research conducted by mahdi et al (2018) whose research was conducted at universities in relation to the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 235 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 industry as users. meanwhile, kusuma and devie (2013) show the same relationship results where their research was conducted on 100 managerial private companies in surabaya. meanwhile, the research results of nazarpour and shirin (2017) show the same results, but in the port industry in iran. almasi and pirzad (2017), show the results of the same relationship between knowledge management and competitive advantage in the banking industry and lee et al (2016) in small and medium enterprises (smes) in malaysia. hypothesis 3. bootstrapping test results show that the coefficient of the latent variable of competitive advantage on organizational performance is 0.532, indicating that competitive advantage has a positive influence on organizational performance. whereas for the t-statistic value, the value is 4.494 where this value is greater than 1.96 and the p value is 0.000 less than 0.05, which indicates that competitive advantage has a significant effect on organizational performance, so that h3 in this study can be accepted. this significance is in line with the results of research conducted by cantele and zardini (2018) which show significant results for small and medium industries in italy, while lorenzo et al (2017) in the spanish wine industry, othman et al (2015) on cooperatives registered in malaysia, kusuma and devie (2013) for private companies in surabaya, and gyampah and acquaah (2008) for companies in ghana. hypothesis 4. bootstrapping test results obtained the coefficient value of the latent variable competence on organizational performance of 0.212, indicating that competence has a positive influence on organizational performance. as for the t-statistic value, the value is 1.979 where this value is greater than 1.96 and the p value of 0.046 is smaller than 0.05, which indicates that competence has a significant effect on organizational performance, so that h4 in this study can be accepted. this significance is in line with the results of research conducted by otoo and mishra (2018) which show significant results for the hotel industry in india, while hastjarjo et al (2016) on the real estate industry in indonesia, nimsith et al (2016) on the banking industry in sri lanka. , agha et al (2012) and jamhour and agha (2010) on the painting industry in the uae. these results indicate that competence is a predictor of organizational performance that can increase employee commitment to the company, economic performance, social performance and environmental performance. hypothesis 5. the results of bootstrapping test showed that the coefficient value of the latent variable competence on organizational performance was 0.571 which shows that competence has a positive influence on organizational performance. whereas for the t-statistic value, the value of 5.103 is obtained where this value is greater than 1.96 and the p value of 0.000 is less than 0.05, which indicates that knowledge management has a significant influence on organizational performance, so that h5 in this study can be accepted. this significance is in line with the results of research conducted by meiranto et al (2012) showing significant results for the banking industry in indonesia, while almudallal et al (2015) in the public sector in palestine, nowacki and bachnik (2015) on private companies in poland and muthuveloo et al (2017) in local and foreign manufacturing industries registered with the federation of malaysian manufacturers. these results indicate that knowledge management is a predictor of organizational performance. competitive advantage as a mediator variable a. the indirect coefficient of competence on organizational performance through competitive advantage is 0.206 x 0.532 = 0.1096. calculation of the z value using the sobel test is obtained as follows: 𝑧 = 𝑎𝑏 √(𝑏2𝑆𝐸𝑎 2) + (𝑎2𝑆𝐸𝑏 2) the effect of organizational performance, competitive advantage on the financial sector of chemical manufacturing industry in banten province nuryanto, djamil mz, sutawidjaya, & saluy 236 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 𝑧 = 0.206 𝑥 0.532 √(0.2062𝑥0.0942) + (0.5322 𝑥 0.0182) 𝑧 = 0.1096 √0.00045 𝑧 = 5.48 where : a = coefficient of influence of competence on competitive advantage b = coefficient of influence of competitive advantage on organizational performance sea = standard error of competence on competitive advantage seb = standard error of competitive advantage on organizational performance with a z score of 5.48 greater than z 1.98, it can be concluded that competitive advantage is able to mediate the relationship between competence and organizational performance. a. the indirect coefficient of knowledge management on organizational performance through competitive advantage is 0.206 x 0.532 = 0.1096. calculation of the z value using the sobel test is obtained as follows: 𝑧 = 𝑎𝑏 √(𝑏2𝑆𝐸𝑎 2) + (𝑎2𝑆𝐸𝑏 2) 𝑧 = 0.653 𝑥 0.532 √(0.5322𝑥0.0802) + (0.6532 𝑥 0.0182) 𝑧 = 0.3474 √0.0019 𝑧 = 7.89 where : a = coefficient of influence of competence on competitive advantage b = coefficient of influence of competitive advantage on organizational performance sea = standard error of competence on competitive advantage seb = standard error of competitive advantage on organizational performance with a z score of 7.89 greater than z 1.98, it can be concluded that competitive advantage is able to mediate the relationship between knowledge management and organizational performance. conclusion the role of competitive advantage on organizational performance is very important, this can be proven where competitive advantage is able to increase the influence of competence and knowledge management on organizational performance. competence has a positive and significant effect both on competitive advantage and on organizational performance, as well as knowledge management which has a positive and significant effect on competitive advantage and organizational performance. this study has implications for managers and control holders in the company to be able to improve the competence of existing human resources by using the existing dimensions of professional competence, core competence and unique differentiating competences. by improving these three competencies, it will be able to improve company performance in terms of commitment, economic performance, social performance and environmental performance. another implication is related to knowledge management which can be used as a predictor for company managers which in this study is described into the dimensions of knowledge identification, knowledge creation, knowledge storage, knowledge sharing and knowledge use. the existence of good management of knowledge 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e-issn: 2714-9846 vol. 1 no. 3 july 2020 pp.145-151 https://www.ilomata.org/index.php/ijtc 145 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the effect of capital adequacy ratio on return on assets with problem credit ratio moderation case study in the sub-sector of the national private foreign exchange national bank listed on the indonesia stock exchange in 2014-2018 deni sunaryo faculty of economics and business university of serang raya correspondent: denisunaryomm@gmail.com submitted : june 24, 2020 revised : july 14, 2020 published : july 30, 2020 abstract the study aims to determine the effect of capital adequacy ratio on return on asset with the moderatiom of non-performing loan sub sector of national foreign exchange private banks listed on the indonesian stock exchange (idx) in 2014-2018 with a population of 22 banks. the analysis technique used are simple linear regression and moderated regression analysis (mra). the result showed that the capital adequacy ratio has a positive and significant effect on return on asset. while the capital adequacy ratio of non-performing loan is not able to moderate the capital adequacy ratio with return on asset. keywords : return on asset, capital adequacy ratio, non-performing loan. introduction the existence of financial intermediaries institution namely banks, is very important in a modern economic system. as an intermediary institution, banks must have good financial performance, because with good financial performance, banks will more easily get the trust of their customers. one of the main objectives of bank operations is achieving maximum profitability. profitability is the most important indicator to measure the performance of a bank. the ratio commonly used to measure profitability performance is the return on asset (roa). roa is important for banks because roa is used to measure the effectiveness of the company in generating profits by utilizing its assets. the greater the return on assets (roa) of a bank, the greater the level of profit achieved by the bank and the better the bank's position in terms of the use of its assets. the effort to increase the growth of a bank can be seen from the bank's financial performance that can affect the return on assets (roa) in terms of financial ratios, such as capital adequacy ratio (car), and non-performing loans (npl). according to kuncoro and suhardjono (2011: 519) capital adequacy ratio is the capital adequacy ratio that shows the ability of banks to identify, measure, monitor, and control risks that arise that can affect the amount of bank capital. the issue of capital adequacy is an important thing in the banking business. banks that have a good level of capital adequacy, show indicators as a healthy bank. based on bank indonesia regulations, the minimum capital adequacy requirement for each bank is 8% (pbi no.15 / 12 / pbi / 2013 concerning the minimum capital requirement for commercial banks). https://www.ilomata.org/index.php/ijtc mailto:denisunaryomm@gmail.com the effect of capital adequacy ratio on return on assets with problem credit ratio moderation sunaryo 146 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 in achieving optimal roa, banks are faced with various risks including credit risk. credit risk can be seen from the amount of non-performing loans (npl). the amount of npl will affect roa and car, because the greater the credit risk faced by banks will increase the formation of allowance for earning asset losses (ppap) from owned equity, so that the reduced share of equity which is a component of capital adequacy. some previous studies show inconsistent results. this encourages this research. judging from the background of these problems, then a study entitled "the influence of the capital adequacy ratio (car) on return on assets with the moderation of problematic credit ratios". based on the background described above, it can be concluded the formulation of the problem from this study: (1) how the effect of the capital adequacy ratio (car) on return on assets (roa) on private commercial banks listed on the indonesia stock exchange for the period 20142018? (2) how does non-performing loans (npl) moderate the effect of capital adequacy ratio (car) with return on assets (roa) on private commercial banks listed on the indonesia stock exchange for the 2014-2018 period? findings from previous studies regarding factors that affect the profitability of the banking sector show inconsistent results. research conducted by sri septiarini and i wayan ramantha (2014) shows that car has a positive and not significant effect on profitability proxied by roa. this study is in line with the results of research of riski agustiningrum (2014) shows that car has no significant effect on roa. however, this is different from the results of putu agus atmaja and ketut sujana (2014) research that shows that car has a positive and significant effect on profitability proxied by roa. the results of gusti ayu dwi a and nyoman abundanti (2018) showed that car had a positive and significant effect on roa. this study is in line with the research results of samsurizal and astohar (2016) and shows that car has a positive and significant effect on profitability (roa). research conducted by sri septriani and iw ramantha (2014) shows that npl has a positive effect and significant effect on the relationship between car and roa. research conducted by wayan suardita and m. asri dwija putri shows that credit risk has a significant effect on car's relationship with profitability. this study is not in line with the results of putu agus and ketut sujana's (2014) research showing that npl results have a negative effect on the relationship between car and profitability. based on these results, the research hypothesis is: hypothesis-1: it is suspected that the capital adequacy ratio has a positive and significant effect on return on assets. hypothesis-2: t is suspected that the non-performing loans can moderate the influence of capital adequacy ratio with return on assets. method the population in this study is the national private foreign exchange bank in 2014-2018 using data collection methods used are secondary data, namely financial statements from 20142018 by accessing www.idx.co.id the determination of the sample is done by purposive sampling with the following sample criteria: 1) public private national bank foreign exchange public listed on the idx; 2) having the most complete and published financial statements from 2014-2018; 3) present the audited annual financial statements for the 2014-2018 period; 4) present information in the financial statements relating to the research variables; 5) presenting in full the ratio data needed in this study during the 2014-2018 periods. based on these criteria, the sample used in this study were 10 banks http://www.idx.co.id/ the effect of capital adequacy ratio on return on assets with problem credit ratio moderation sunaryo 147 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 from 22 banks with five years of observation. the variables used: 1) the independent variable is the capital adequacy ratio; 2) the independent variable is the troubled credit ratio; 3) the moderating variable is return on assets. hypothesis testing in this study was conducted using simple linear regression and moderated regression analysis (mra). mra is a special application of linear multiple regression where the regression equation contains an interaction element (ghozali, 2011: 223). according to (sugiyono, 2010: 270) the equation of a simple linear regression model is: y = a + bx .....................................................................................................(1) information : y = subject in the predicted dependent variable (roa) x = independent variable that has a certain value to be predicted (car) a = price of y if x = 0 (constant price) b = direction number or regression coefficient, which shows the number of increase or decrease in the dependent variable based on the independent variable. if b (+) then rises, and if (-) there is a decrease. while the moderated regression analysis model equation. y= a + 𝑏1𝑋1 + 𝑏2𝑀1 + 𝑏3𝑋1𝑀1 + e .................................................................(2) information : y = dependent variable return on assets (roa) a = constant b = regression coefficient x_1 = independent variable capital adequacy ratio (car) m_1 = variable problem ratio (npl) moderation e = confounding variable linear regression test is done after the data is free from the classic assumption test, that is, a normality test is performed to test whether in the regression model the independent variable and the dependent variable have a normal distribution or not (ghozali, 2012: 160), the heteroscedasticity test aims to test whether in the regression model there is an inequality of variance from the residuals of one observation to another. according to (ghozali, 2012: 110) the autocorrelation test aims to test whether in a linear regression model there is a correlation between the interruption error in the t period and the confounding error in the t-1 period (before). result and discussion table 1 source: spss data processing results 23 descriptive statistics n minimum maximum mean std. deviation roa 50 .24 3.86 1.6336 .84859 car 50 15.17 35.12 21.2324 4.93967 npl 50 .34 6.11 2.6440 1.10158 interaction 50 5.59 126.08 55.9674 24.92706 valid n (listwise) 50 the effect of capital adequacy ratio on return on assets with problem credit ratio moderation sunaryo 148 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 in table 1, the minimum roa value is 0.24 obtained by cimb niaga bank, the maximum value is 3.86 obtained by mestika dharma bank, and the mean (average) roa value is 1.6336 and the standard deviation is 0, 84859. standard deviation values that are smaller than the average value indicate that roa data are normal. the smaller the standard deviation the better, because the small standard deviation indicates a small deviation. the capital adequacy ratio shows that the minimum value of 15.17 obtained by bank maybank indonesia, the maximum value of 35.12 obtained by bank mestika dharma, and the mean (average) car value of 21.2324 and the standard deviation of 4, 93967, standard deviation values smaller than the mean indicate that the data from the car are normal. the non-performing loan ratio shows the result that the minimum value of 0.34 obtained by capital indonesia bank, the maximum value of 6.11 obtained by bank artha graha international, the mean value (average) of npl of 2.6440 and the standard deviation of 1, 10158. standard deviation values that are smaller than the average value indicate that the data from the npl is normal. the interaction between the capital adequacy ratio and the non-performing loan shows that the minimum value is 5.59, the maximum value is 126.08, the average value is 55.9674 and the standard deviation value is 24.92706. the standard deviation of interactions between the capital adequacy ratio and the non-performing loan is smaller than the average, indicating that the car and npl data are normal. tabel 2 normality test results source: spss data processing results 23 based on the results of the classic assumption test value kolmogrov smirnov test, it can be seen that the asymp value. sig (2-tailed) of 0,200. asymp value sig that exceeds the level of significant (0.05), shows that there is no centralization or grouping of data at one point, so that it can be said that the residual data in this study are normally distributed. figure 1 heteroscedasticity test results source: spss data processing results 23 one-sample kolmogorov-smirnov test unstandardized residual n 50 normal parametersa,b mean ,0000000 std. deviation ,64833365 most extreme differences absolute ,072 positive ,072 negative -,046 test statistic ,072 asymp. sig. (2-tailed) ,200c,d the effect of capital adequacy ratio on return on assets with problem credit ratio moderation sunaryo 149 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 based on the picture above it can be seen that the residual data in the two regression models spreads both above and below the 0 point and does not form a specific pattern. thus the regression model proposed in this study does not occur symptoms of heteroscedasticity. table 3 autocorrelation test results model summaryb model r r square adjusted r square std. error of the estimate durbin-watson 1 ,522a ,273 ,241 ,58475 1,844 a. predictors: (constant), lag_interaksi, lag_x1 b. dependent variable: lag_y source: spss data processing results 23 based on the d-w table, obtained du = 1.5849 and dl = 1.5035. value of du 1.5849 <dw 1,844 <4 1.5849 = 2.4151 means that there are no autocorrelation symptoms. table 4 simple linear regression test results model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -,627 ,424 -1,477 ,146 car ,106 ,019 ,620 5,469 ,000 r ,620 r square ,384 adjusted r square ,371 source: spss data processing results 23 y = 0,627 + 0,106 car + e ............................................................................(3) the results of the simple linear regression equation show that the coefficient of the independent variable car which is positive means it has a direct effect on return on assets. simple linear regression results can also be seen adjusted r ^ 2 value of 0.371. this value shows that 37.1% of the variation in return on assets (roa) which can be explained by the capital adequacy ratio (car), while the remaining 62.9% is explained by other indicators that can affect roa. table 5 uji moderated regression analysis model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -1,817 1,530 -1,188 ,241 car ,185 ,078 1,079 2,388 ,021 npl ,435 ,535 ,565 ,813 ,420 interaksi -,029 ,028 -,859 -1,062 ,294 r ,652 r square ,425 adjusted r square ,387 source: spss data processing results 23 the effect of capital adequacy ratio on return on assets with problem credit ratio moderation sunaryo 150 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 y=-1,817+0,185car+0,435 npl-0,029 car*npl +e ...................................(4) based on the calculation of the hypothesis test, it can be concluded that the effect of capital adequacy ratio (car) on return on assets (roa) in the t test obtained sig. 0,000 <0.05 and t arithmetic = 5.469 and t table = 1.677 then t arithmetic> t table. so it can be concluded that in terms of capital adequacy ratio has a significant effect on return on assets. so the first hypothesis can be accepted. the second hypothesis states that non-performing loans are able to moderate the effect of capital adequacy ratio with return on assets. persistently obtained t count of -1.062 and a significance of 0.294. these results indicate that the non-performing loan has a negative effect on the relationship between the capital adequacy ratio and the return on asset or the credit ratio is not able to moderate the relationship between the capital adequacy ratio to the return on asset. conclusion based on the results of testing and discussion that has been done, it can be concluded that: 1) capital adequacy ratio has a significant effect on return on assets. so the first hypothesis can be accepted; 2) non-performing loans negatively affect the relationship between capital adequacy ratio and return on assets or credit ratio is not able to moderate the relationship between capital adequacy ratio to return on assets. based on that conclusions, suggestions for further authors to add or replace other variables such as those that affect return on assets such as bopo, ldr, roi and are expected to be able to examine with other variables outside this variable in order to obtain more varied results that can describe things anything that can affect roa and can extend the observation period last 7 years. reference agustiningrum, riski. 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(2015). pengaruh kecukupan modal dan penyaluran kredit pada profitabiitas dengan pemoderasi resiko kredit. e-jurnal akuntansi universitas udayana. vol.11.no. (2). 426-440. the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 https://www.ilomata.org/index.php/ijtc 59 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the effect of accounting information systems (ais), leadership style, motivation, and working the environment on the employee’s performance at badan keuangan daerah (bkud) regency semarang dyah pramesti nur azizah, mohamad hasanudin*, toni hartono accounting division of politeknik negeri semarang mohammad.hasanudin@polines.ac.id submitted : jan 3th 2020 revised : feb 18th 2020 published : march 30th 2020 abstract this study aims to determine whether the accounting information system, leadership style, motivation, and work environment together have a significant effect on the performance of employees at badan keuangan daerah (bkud) kabupaten semarang. samples that met the criteria in this study were 65. the analysis used is multiple regression analysis preceded by a classic assumption test consisting of the normality test, multicollinearity test, and heteroscedasticity test. while hypothesis testing is done using the f test and t-test. the results of data analysis or regression results indicate that partially the accounting information system, leadership style, motivation, and work environment influence employee performance. simultaneously the accounting information system, leadership style, motivation, and work environment contributed 84.6% of the effect on the level of the dependent variable, namely employee performance. keywords: accounting information systems (ais), leadership style, motivation, working environment, employee’s performance. introduction employee’s performance is one of the important factors for the success of an organization. employees are one of the very valuable organizational assets that must be managed properly by the organization to provide an optimal contribution. employees are always involved in every process and operational management within the organization. each organization will always strive to improve the performance of employees in the hope of what the company goals can be achieved. the survival of an organization is influenced by human resources quality and quantity to achieve organizational goals quickly and be able to compete globally(rulandari et al., 2018; sofyan, 2016). accounting information systems (ais) is good for the organization because it can help the process of operation and information more effectively and efficiently. not only to save costs and time, but accounting information systems (ais) also has an impact on the company's activities after the decision-making in an organization and used by an external party organization in business activities. the successful development of qualified human resources comes from the influence of a leader. leaders as a source of human resource managers are required to have a style of leadership in working together to reduce the possibility of conflicts that can occur in the mailto:mohammad.hasanudin@polines.ac.id the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 60 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 working group to achieve an organizational goal or company. the success or failure of an organization is usually perceived as a success or a failure of leadership. employee’s performance can also be influenced by motivation. motivation can be interpreted simply as a condition or action that encourages a person to be able to do a job as much as possible to produce a good performance. the influence of motivation is also very important to cultivate the discipline and responsibility of employees in the work. another factor to be considered by the company is working environment. working environment better if it could have a positive influence on employee’s performance. the working environment can also foster employee morale and affect the results of the employees. based on the analysis of swot method carried out by badan keuangan daerah (bkud) kabupaten semarang to determine the condition of the strategic environmental organizations, there are some weaknesses and threats, as follows: weaknesses: 1. as a newly formed regional organization. 2. the number of financial technical rules that are interpretative. 3. comunications on line system in the financial administration system with satuan kerja perangkat daerah (skpd) has not been created yet in the area of semarang distric goverment. 4. lack of accounting. 5. the socialization to taxpayers has not been optimal yet. threats: 1. lack of understanding of the budget users on performancebased budget. 2. administration of finances in skpd has not been orderly yet. 3. accounting implementation in skpd has not been optimal yet. 4. users time allocation are less effective source: profile of badan keuangan daerah (bkud) kabupaten semarang (2018). based on the formulation of the problem, this study has the following objectives: 1. to determine and analyze the significance affect of accounting information system (ais) partially on the employee’s performance. 2. to determine and analyze the significance affect of the leadership style partially on the employee’s performance. 3. to determine and analyze the significance affect of motivation partially on employee’s performance. 4. to determine and analyze the significance affect of working environment partially on employee’s performance. to determine and analyze the significance affect of accounting information system (ais), leadership style, motivation, and working environment simultaneously on employee’s performance. accounting information systems (ais) krismiaji (2010) states accounting information systems is a system that processes data and transactions in order to generate information useful for planning, controlling, and operating a business. according to susanto (2013:22) in melasari (2017:3), there are three functions of accounting information system. the third function of accounting information systems can be explained as the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 61 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 follows: 1. supporting company daily activities 2. supporting the decisions making process 3. the company helps business fulfilling its responsibilities to external parties there are five (5) the role of accounting information systems (ais) according to susanto (2013) in melasari (2017), namely: 1. collecting and entering data into accounting information systems 2. the transaction data processing 3. storing data for the purpose of future 4. giving users or decision makers (management) information they need 5. controls all the processes that occur leadership styles hasibuan (2016) states that leadership style is a way a leader influences the behavior of subordinates, in order to work productively to achieve organizational goals. the leadership style according to hasibuan opinion (2016) leadership style is divided into three parts, namely: 1. authoritarian leadership authoritarian leadership is if the power or authority, the absolute majority remain in the leadership or the leadership if it adopts a centralized authority. decision-making and policies defined only by the leaders, subordinates are not included to provide advice, ideas, and other considerations in the decisions making process. orientation leadership is focused only to increase employee productivity with little regard for the feelings and welfare of subordinates. 2. participative leadership participative leadership is one where the leadership is done by persuasion, creating a harmonious cooperation, foster loyalty and participation followers. leaders motivate subordinates to feel co-owns the company. subordinates should participate to give advice, ideas, and other considerations in the decision-making process. leaders with a participative style will encourage their subordinates make decisions. thus, the leadership will always nurture subordinates to accept greater responsibility. 3. delegative leadership delegative leadership when a leader delegate authority to subordinates rather incomplete. thus, subordinates may take decisions and wisdom with free or free to do the job. leaders do not care how subordinates make decisions and do his job is left entirely to subordinates. motivation according to hasibuan (2016) motivation is the cause, distributes, and supports human behavior so that they work hard and enthusiastically to achieve optimal results. sutrisno (2017) motivation as a psychological process in a person will be affected by several factors. factors these factors are: 1. internal factors a. the desire to live b. the desire to be able to have c. the desire to gain an appreciation d. the desire for recognition e. the desire for power the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 62 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 2. external factors a. working conditions b. adequate compensation c. good supervision d. employment security e. status and responsibility f. flexible regulation working environment sedarmayanti (2011) dalam furthermore, according to sedarmayati (2011) in qomariah (2016) the work environment is the entire machine tools and materials at hand, the surrounding environment in which a person is working, working methods, as well as the arrangement works both as individuals and as a group. according sedarmayanti (2011) in inbar et al (2018) outlines, the type of work environment is divided into two, namely: 1. physical work environment physical work environment are all located around the workplace that may affect the employees either directly or indirectly. physical work environment can be divided into two categories, namely: a. environment is directly related to the employees as the work center, chairs, tables, and so on. b. environmental intermediary or the general environment can also be called a work environment that affect the human condition, such as temperature, humidity, air circulation, lighting, noise, mechanical vibration, odor, color, etc. 2. non physical work environment non-physical work environment are all circumstances that occur relating to the employment relationship, either with superiors or with fellow colleagues or relations with subordinates. employee performance according to moeheriono (2014) employee performance is an overview of the level of achievement of the implementation of a program of activities or policies in realizing the goals, objectives, vision and mission of the organization that poured through the strategic planning of an organization. dimensions and performance indicators employees (mathis, 2006): 1. hard skill a. quantity b. quality 2. soft skill a. punctuality b. presence c. interoperability method population is a generalization region consisting of the objects/subjects that have certain qualities and characteristics defined by the researchers to learn and then drawn conclusions (sugiyono, 2016). the population in this study were all employees who worked at the badan keuangan daerah (bkud) kabupaten semarang by the total number of 78 people. the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 63 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 according sugiyono (2016), research variable is an attribute or trait or value of a person, object or activity which may have certain variations defined by the researchers to learn and then drawn conclusions. the independent variable is the variable that affects or is the cause of the change or the emergence of the dependent variable. (sugiyono, 2016). in this case the independent variables that will be relevant to the issues to be studied are accounting information systems (ais) (x1), leadership style (x2), motivation (x3), and working environment (x4). the dependent variable is the variable that is affected or which become due, because of the variable free (sugiyono, 2016). in this study, the dependent variable is employee’s performance (y). in this study, the measurement scale used is likert scale. likert scale is a tool used to measure attitudes, opinions, and the perception of a person or group of social phenomena (sugiyono, 2016). result and discussion the effect of accounting information systems on performance the results showed that the hypothesis said there was a positive influence between accounting information system performance against was proven. this is evidenced by the significant value of less than 0.05 (0.016 < 0.05). accounting information system is an information system in an organization that is responsible for presenting the accounting information for the interested parties both within the organization and outside the organization obtained through the process of data collection and processing of transactions. accounting information systems used by the wearer is important decision-making process in an organization. according to parjanti (2014) accounting information systems affect the performance of employees and it is significant. the better the information systems in an organization also increases the performance of employees in the organization. the effect of leadership style on performance the results showed that the hypothesis that said there was a positive influence between leadership style against performance was proven. this is evidenced by the significant value of less than 0.05 (0.000 < 0.05). the leadership style is one of the ways used by a leader in influencing, directing, and controlling employee behavior to achieve the purpose of the organization or group. parjanti (2014) states leadership has significant influence on employee performance. the better the leadership style applied by a manager in leading his team the better the performance of employees in the organization. the effect of motivation on performance the results showed that the hypothesis that said there was a positive influence between motivation on performance was proven. this is evidenced by the significant value of less than 0.05 (0.000 <0.05). motivation can be interpreted simply as a condition or action that encourages a person to be able to do a job as much as possible to produce a good performance. the influence of motivation is also very important to cultivate the discipline and responsibility of employees in the work. by having employees who have a high motivation to work, the employee can perform their duties optimally. according to lestari (2017) motivation has positive and significant effect on the performance of employees, this means that an increase in motivation will improve the performance of employees in the company. the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 64 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the effect of working environment on performance the results showed that the hypothesis that said there was a positive influence between work environment with performance has been proven. this is evidenced by the significant value of less than 0.05 (0.000 < 0.05). the working environment is the social, psychological, and physical within the company that affect the workers in their duties. human life can not be separated from the various circumstances surrounding environment, between man and the environment there is a very close relationship. in this case, people will always try to adapt to different circumstances surrounding environment. similarly, when doing the job, the employee as a human being can not be separated from the various circumstances surrounding their place of work, the work environment. according fachreza, musnadi, and majid (2018) working environment has significant and positive effect on employee’s performance. effect of accounting information systems, leadership style, motivation and working environment on employee’s performance the results showed that the hypothesis that said the accounting information systems, leadership style, motivation and work environment simultaneously affected the performance is acceptable with a significance value of 0.000. accounting information systems relevant to the field of work will support employee performance. similarly, the leadership style. model or the right leadership style will be able to maximize performance results. motivational factors and work environment can also support the performance of employees to be able to support any workload that was the obligation of the employee. accounting information systems (ais), leadership style, motivation, and working environment have a role in improving employee performance which is an important part of the organization's activities. by using four variables, it makes it possible to measure how the performance of the organization's employees. conclusion results of research and discussion that has been presented based on the data research, as follows: 1. accounting information system affect the performance of employees. these results indicate that the better the information systems in an organization, it also increased the performance of employees in the organization. 2. leadership style influence on employee performance. these results indicate that the better the leadership style applied to a leader of the working group the better the performance of employees in the organization. 3. motivation affect the performance of employees. this means that an increase in motivation will improve the performance of employees in the company. 4. working environment influence on employee’s performance. this means that an increase in the working environment will improve the performance of employees in the company. 5. accountinginformation systems, leadership style, motivation and working environment simultaneously affect the performance of employees. referring to the limitations of the study above, the agenda of future studies, should examine the factors that affect performance such as organizational culture, work discipline and compensation. the effect of accounting information systems (ais), leadership style, motivation, and working environment on the employee’s performance at badan keuangan daerah (bkud) semarang regency azizah, hasanudin, and hartono 65 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 besides it is necessary to increase the number of research samples in order to obtain results that are more varied. reference ghozali, i. (2018). aplikasi analisis multivariate dengan program ibm spss 25. semarang: badan penerbit universitas diponegoro. hasibuan, m. s. (2016). manajemen sumber daya manusia. jakarta: pt bumi aksara. krismiaji. (2010). sistem informasi akuntansi. yogyakarta: upp amp ykpn. mathis, j. h. (2006). manajemen sumber daya manusia. jakarta: salemba empat. melasari, r. (2017). pengaruh sistem informasi akuntansi terhadap kinerja karyawan dengan integritas karyawan sebagai variabel pemoderasi pada perbankan di tembilahan. akuntansi dan keuangan, 1-15. moeheriono. (2014). pengukuran kinerja berbasis kompetensi. jakarta: rajawali pers. noor rika dinata inbar, e. s. (2018). pengaruh lingkungan kerja terhadap disiplin kerja dan semangat kerja karyawan (studi pada karyawan pdam kota malang). jurnal administrasi bisnis (jab), 84-92. qomariah, n. (2016). pengaruh program kemitraan lingkungan kerja, dan motivasi terhadap kinerja karyawan umkm di kecamatan. jurnal riset ekonomi dan manajemen, 145-159. rulandari, n., rusli, b., mirna, r., nurmantu, s., & setiawan, m. i. (2018). valuation of production sharing contract cost recovery vs gross split in earth oil and gas cooperation contracts in indonesia and the aspect of public service. journal of physics: conference series, 1114(1), 12132. sofyan, m. (2016). pengaruh suku bunga kredit modal kerja, capital adequacy ratio dan loan to deposit ratio terhadap kredit modal kerja bank perkreditan rakyat (studi kasus pada bpr di kabupaten provinsi jawa timur tahun 2010–2015). jurnal ekonomika, 9(2), 131– 137. sugiyono. (2013). metodelogi penelitian kuantitatif, kualitatif dan r&d. bandung: alfabeta. sutrisno, e. (2011). manajemen sumber daya manusia. jakarta: kencana. ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 61-70 https://www.ilomata.org/index.php/ijtc 61 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction satria mulia chaerudin1, afriapoll syafarudin2 12mercu buana university jakarta-indonesia correspondent: satria.mulia@ymail.com submitted : january 4, 2021 revised : january 18, 2021 published : january 31, 2021 abstract this study aims to provide empirical evidence regarding the influence of product quality, service quality, and price on the decision to purchase medical device products and their implications for consumer satisfaction. this study uses the pls (partial least square) analysis method. this study uses primary data in the form of a questionnaire and is distributed to 141 (one hundred and fortyone) respondents who are users of medical device products, namely apheresis machines. based on the overall exposure of statistical calculations on structural model analysis and testing that partially, product quality is proven to have a positive and significant effect on purchasing decisions for medical device products, service quality is proven to have a positive and significant effect on purchasing decisions for medical device products, prices are proven to have a positive and significant effect. significant towards the decision-making of medical device product purchasing, product quality proved to have a positive and significant effect on consumer satisfaction of owned medical device products, service quality proved to have a positive and significant effect on consumer satisfaction of medical device products, price proved to have a positive and significant effect on consumer satisfaction of medical device products health. the purchase decision is proven to have a positive and significant effect on consumer satisfaction with medical device products. keywords: product quality, service quality, price, purchase decision, customer satisfaction introduction the industrial revolution 4.0 also brought changes in the health sector. technology is increasingly playing an important role for doctors and health practitioners, for the realization of better health quality for patients, which is a multinational company engaged in medical device products. the medical device products offered are apheresis products, which are automatic blood processing products used by pmi (indonesian red cross) and hospitals. apheresis products are medical device products that are used to process blood components, especially for platelet components. this medical device product was introduced in indonesia in 2014. this product comes from the united states. currently, 3 companies sell different brands for this apheresis machine. companies with other brands are from the united states and germany. this apheresis product is a durable machine product, where for its routine use, it will use sustainable consumables that are a closed or closed system. apheresis medical device products have several advantages that have added value to the product, including the high quality of the product because it has a fast time to process the blood. optimal service quality by preparing qualified application staff and technicians in the operational process of the apheresis machine. it is hoped that the added value possessed by this apheresis medical device product, namely product quality, service quality, and price can influence the selection of apheresis health products in https://www.ilomata.org/index.php/ijtc mailto:satria.mulia@ymail.com the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 62 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 indonesia and also increase consumer satisfaction. table 1. apheresis product sales data for 2015-2019 year number of consumables/year (pcs) apheresis single disposable product (rp) 2015 1,211 2,088,907,363 2016 1,423 2,148,730,000 2017 1,572 2,373,720,000 2018 2,022 3,053,220,000 2019 1,728 2,609,280,000 source: data processed by researchers in 2020 from the sales data above, it can be seen that there is a decrease in sales in 2019. after analyzing consumers of this apheresis medical device product used in the 2015-2019 timeframe, some consumers are satisfied with the quality of the product and the quality of service provided, but some are not satisfied. the dissatisfaction that was conveyed regarding the quality of the product was that there were too many alarms that appeared when this apheresis product was used which led to the failure of the process. meanwhile, the dissatisfaction that was conveyed related to the quality of service was the limited number of technicians and application personnel in indonesia, so that the service process at pmi and the hospital were hampered when the apheresis product had problems. as for the price, consumers expressed their objection because the price offered for this apheresis health product is slightly more expensive than other apheresis medical device products. and based on the results of a presurvey conducted via telephone to 35 respondents, there were problems encountered in some consumers (hertati, 2o15: syafarudin & heratati, 2020: safkaur. & hertati, 2020: lestari & heratati, 2020): (1) the product quality, too many alarms arise when this apheresis product is used which leads to failure of the process; (2) quality of service, limited technicians, and application personnel in indonesia, so that the service process at pmi and hospitals is hampered when the apheresis product occurs problems; and (3) price, consumers express their objection because the price offered for this apheresis medical product is slightly more expensive than other apheresis medical device products. based on the data that has been collected by researchers, the purpose of this study is to see how strong the influence of product quality, service quality, and price can influence consumers in making medical device product purchasing decisions and the implications for consumer satisfaction. kotler (2012) product quality is one of the main positioning tools for marketers. quality is closely related to customer value and satisfaction. according to kotler and armstrong (2012), product quality is a characteristic of a product related to its ability to meet stated customer needs or implied meanings. kotler (2012) has revealed that there are eight dimensions of product quality as follows (syafarudin & mulya 2019: hertati 2018): (1) performance or product performance is the main characteristic or function of a product. this is the main benefit or benefit of the products we buy; (2) reliability or product reliability, which is the chance that a product will correct itself from failure while performing its functions; (3) product features or features feature is a characteristic or additional features that complement the basic benefits of a product; (4) durability or durability shows the age of the product, which is the number of uses of a product before it is replaced or damaged. the longer the durability, the more durable it will be. durable products will be perceived as having higher quality than products that run out quickly or the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 63 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 quickly replace them; (5) dimensions of conformance or suitability conformance is the conformity of product performance with the stated standards of a product. this is the kind of promise that a product must fulfill. a product that has the quality of this dimension means that it conforms to the product's standard; (6) serviceability or repairability under the meaning, here the quality of the product is determined based on repairability: easy, fast, and competent. products that can be repaired are of a higher quality than products that are not or difficult to repair; and (7) aesthetic or the beauty of the product appearance aesthetic or beauty concerns the appearance of a product that makes consumers like it. this is often done in the form of product design or packaging. some brands update their faces to make them more beautiful in the eyes of consumers. 8. perceived quality perceived quality. this concerns consumer assessment of the image, brand, or advertisement. products with well-known brands are usually perceived to be of higher quality than unheard brands. that is why products always try to build their brands so that they have high brand equity. kotler and keller (2012) state that service quality is the totality of the features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs. so it can be concluded that service quality is the level of the company's ability to provide services under consumer expectations. to measure the quality of service, five key elements deserve attention, based on tjiptono (2015) the five key elements are as follows (hertati., safkaur, simanjuntak, 2019: syaparudin & hertati. 2020): 1. reliability. reliability is the ability to perform the promised services reliably and accurately. examples, in this case, include the ability of employees to provide the best service, the ability of employees to handle customer needs quickly and correctly, the company's ability to provide good service under consumer expectations. 2. assurance. namely the knowledge and politeness of employees and their ability to show trust and confidence. in the form of employees' ability to generate confidence and trust in promises that have been made to consumers. examples, in this case, include the knowledge and skills of employees in carrying out their duties, employees can be relied on, employees can give confidence to consumers, employees have good technical expertise. 3. tangible (form). the appearance of physical facilities, equipment, personal, and communication materials. 4. empathy. the condition of paying attention and giving personal attention to customers. for example, employees should try to position themselves as customers. if a customer complaints, an immediate solution must be sought, to maintain a harmonious relationship, by showing a genuine sense of care. 5. responsiveness. willingness to help customers and provide services on time. the willingness of employees and employers to help customers and provide services quickly as well as hear and resolve consumer complaints. kotler and keller (2012) state that price is the amount of money exchanged for a product or service. furthermore, price is the amount of value that a customer can exchange for several benefits by owning or using a good or service. kotler and armstrong (2012) explain that four measures look at the price, namely price affordability, price compatibility with product quality, price compatibility with benefits, and priced according to price capability or competitiveness. the four price measures are as follows (syafarudin saluy, masyhudzulhak. 2020: hertati & safkaur, 2020: safkaur. & hertati, 2020: hertati & safkaur, 2019). 1. affordability of customer prices can reach prices set by the company. products usually the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 64 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 have several types in one brand, the price is also different from the cheapest to the most expensive. with the price set, many customers buy the product. 2. match price with product quality. price is often used as an indicator of quality for customers, people often choose a higher price between two goods because they see a difference in quality. when the price is higher, people tend to think that the quality is better. 3. the suitability of price with customer benefits decides to buy a product if the benefits felt are greater or equal to what has been spent to get it. if the customer feels the benefits of the product are less than the money spent, the customer will think that the product is expensive and the customer will think twice about making repeat purchases. 4. prices according to the ability or price competitiveness of customers often compare the price of a product with other products, in this case, the cost of a product is considered by the customer when buying the product. buying decision kotler and armstrong (2012), "consumer buyer behavior refers to the buying behavior of final consumers individuals and households that buy goods and services for personal consumption", this definition can be interpreted that the buying decision behavior refers to the buying behavior. kotler and keller (2012) that the dimensions of purchasing decisions are product choice, brand choice, dealer choice, purchase time, and payment method. and the dimensions of the purchase decision used in this study are only from 3 aspects, namely (hertati. fery, safkaur, .2020. hertati, et, al, 2020: hertati. & sumantri 2016): (1) brand decisions; (2) time decisions; and (3) payment method decision. kotler (2012) customer satisfaction is a feeling of pleasure or disappointment for someone who appears after comparing their perceptions or impressions of service being below expectations, customers are not satisfied. but if the service exceeds expectations, the customer is very satisfied and happy and buys back. this satisfaction will certainly be felt after the customer has consumed the product. irawan (2012) states that customers are satisfied if their expectations are met or under what the customer wants are exceeded. there are 5 main dimensions of customer satisfaction, among others (hertati & safkaur, 2020: hertati, syafarudin, safkaur.o. fery.i. 2020: syafarudin, 2016:). 1. price for sensitive customers, usually low prices are an important source of satisfaction because they will get high value for money. this price component is relatively insignificant for those who are not priced sensitive. 2. service quality depends on three things, namely systems, technology, and people. customer satisfaction with service quality is usually difficult to imitate because the formation of attitude and behavior that is in line with the company's wishes is not an easy job. improvement must be carried out starting from the recruitment process, training, and work culture. 3. product quality customers feel satisfied after buying and using the product if the product quality is good. 4. emotional factor (emotional factor) emotional factors are shown by consumers on the satisfaction they get in using a product/service that creates a sense of pride and selfconfidence. the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 65 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 5. efficiency (ease) ease of obtaining these products or services and ease of payment can make customers more satisfied if it is relatively easy, comfortable, and efficient to get a product or service. methods this type of research is a type of quantitative descriptive research. this study used a questionnaire with a numerical scale and an ordinal scale with a likert scale 1-5. the sample consisted of several members selected from the population as many as 220 (two hundred and twenty) people, wherein in this study, 141 (one hundred and forty-one) users using the apheresis machine were sampled. this research uses the slovin formula so that the sample range that can be taken from the slovin technique is between 5% of the study population. the data obtained from this study were then processed using data analysis techniques, namely by using partial least square (pls). still, according to ghozali (2014), pls is an alternative approach that shifts from a covariance-based sem approach to a variance-based approach. the pls design is intended to overcome the limitations of the sem method, namely when the data has problems such as measuring data on a certain scale, a small number of samples, missing values, abnormal data, and the presence of multicollinearity. besides, pls can be used on any type of data scale (nominal, ordinal, interval, ratio) as well as more flexible assumption requirements. image research framework, 2020 there are three path analysis models in pls, namely the inner model which specifies the relationship between latent variables, the outer model which specifies the relationship between the latent variable and the manifest variable, the weight relation which estimates the value of the latent variable. the inner model is a model that describes the relationship between latent variables based on the substantive theory. the inner model is commonly referred to as the inner relation of a structural model. meanwhile, the outer model is a model that describes the relationship between latent variables and their indicators. the outer model is commonly referred to as the outer relation or measurement model. in the outer model, there are two models, namely the reflexive indicator model and the formative indicator model. the reflexive model is often referred to as the principal factor model, which means that the manifest variable is influenced by latent variables. the formative model is the opposite of the reflexive model where the formative model assumes that the manifest variable affects the latent variable. in its use, pls has several evaluations of existing structural models and measurement models. in evaluating the measurement model, tests for convergent validity, discriminant validity, composite reliability, and average variance extracted were carried out. meanwhile, in the structural model evaluation, the r-squared (r2) test and the path coefficient estimation test are performed. results and discussion an indicator is said to have good validity if it has a loading factor value greater than 0.70. product service quality price, purchase decision customer satisfaction the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 66 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 while the loading factor of 0.50 to 0.60 can still be maintained for models that are still in the development stage (ghozali, 2014). table 2 value of loading factor variable indicator outer loading product quality (xi) kp1 0.822 kp2 0.841 kp3 0.775 kp4 0.753 kp5 0.729 quality of service (x2) kl1 0.704 kl2 0.827 kl3 0.835 kl4 0.787 kl5 0.841 price (x3) hg1 0.863 hg2 0.852 hg3 0.803 hg4 0.883 purchase decision (z) km1 0.851 km2 0.752 km3 0.866 km4 0.763 km5 0.784 customer satisfaction (y) kk1 0.788 kk2 0.840 kk3 0.834 kk4 0.858 kk5 0.843 source: loading factor test results, 2020 based on the calculation results, it appears that there is no variable indicator whose outer loading value is below 0.5 so that all indicators are declared eligible or valid for research use and can be used for further analysis. table 3. value of cronbach's alpha, composite reliability, and average variance extracted (ave) source: test results, 2020 based on the table above, it can be seen that all constructs have cronbach's alpha and composite reliability values that are greater than 0.70. the same thing is seen in the ave value, all constructs have ave values that are greater than 0.50. thus it can be concluded that all exogenous and endogenous measurement constructs are reliable. variable cronbach alpha composite reliability cronbach alpha ave product quality (x1) 0.845 0.889 0.845 0.617 quality of service (x2) 0.860 0.899 0.860 0.641 price (x3) 0.872 0.913 0.872 0.724 purchase decision (z) 0.863 0.901 0.863 0.647 customer satisfaction (y) 0.890 0.919 0.890 0.694 the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 67 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 table 4. results of the path coefficient value and the r square value hypoth esis parame ter original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/ste rr|) p values result r square h1 x1 -> z 0,237 0,242 0,096 2,469 0,014 be accepted 0,735 h2 x2 -> z 0,359 0,356 0,085 4,216 0,000 be accepted h3 x3 -> z 0,357 0,354 0,073 4,866 0,000 be accepted h4 x1 -> y 0,242 0,242 0,091 2,646 0,008 be accepted 0,827 h5 x2 -> y 0,156 0,154 0,078 2,007 0,045 be accepted h6 x3 -> y 0,209 0,210 0,070 2,999 0,003 be accepted h7 z -> y 0,397 0,399 0,097 4,086 0,000 be accepted source: test results, 2020 based on the data presented in table 3 above, it can be seen that of the five hypotheses proposed in this study, all of them are acceptable because each of the effects shown has a pvalues value <0.05 and t-statistical value that is greater than the critical value. (1.96). based on the table above, it can also be seen that in substructure 1, the variable product quality (x1), service quality (x2), and price (x3) simultaneously contributed to influencing the purchasing decision variable (z) by 0.735 or 73.5%. and from the table, above it can be seen that the variable product quality (x1), service quality (x2) price (x3), and purchase decision (z) have a simultaneous effect on the consumer satisfaction variable (y) of 0.827 or 82.7%, while the rest 17.3% is influenced by other variables not observed in this study. conclusion based on the overall statistical calculations on structural model analysis and hypothesis testing, it can be concluded that: variable product quality (x1), service quality (x2), and price (x3) have a positive and significant effect on purchasing decisions (z) owned medical devices; variables of product quality (x1), service quality (x2), price (x3), and purchase decisions (z) have a positive and significant effect on consumer satisfaction (y) medical devices. service quality and price have a greater influence on consumers to do purchasing decisions product quality, service quality, and price have a greater influence on customer satisfaction if through the intervening variable purchasing decisions. suggestions to all related parties working in medical device companies, among others, are that medical device companies can: improve product quality by continuously monitoring the quality of products currently used continuously where the results of this monitoring will be informed to the factory for continuous improvement. improve the quality of service by increasing the number of technicians available to speed up the process of repairing tools and increasing the response speed and accuracy of machine repair work if the machine is damaged. evaluating the prices that will be applied in the following year so that the new prices that apply will be more competitive. it is hoped that researchers who will research further in further research are expected to be able to add or develop other variables as a reference for research at the next research stage. the effect of product quality, service quality, price on product purchasing decisions on consumer satisfaction chaerudin, & syafarudin 68 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 references agus, a. 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(2019). healthcare service quality and in patients satisfaction: an empirical investigation on healthcape’s tangible quality. global journal of arts, humanities, and social sciences vol.7. http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 javascript:void(0) javascript:void(0) javascript:void(0) ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 1 october 2019 page:12-17 https://www.ilomata.org/index.php/ijtc analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles jonrisman sinaga1, machfud sidik2 12master of administration science, institute of social science and management stiami, jakarta correspondence: johnsinaga@yahoo.com submitted: 6 august 2019. revised: 26 august, 16 sept 2019. published: 30 october 2019. abstract this research discussed an increase of non-taxable income that expected to be able to step-up the purchasing power, especially in consumption. increase on non-taxable income which applies has not reflected the equality principle in taxation like what people feel, where non-taxable income has not touched the sense of equality. it becomes a dilemma to the government for expanding the taxation base by increasing nontaxation income. increase in non-taxable income can reduce the taxation base. practice in simplicity or easy of tax administration concept make the application on equality principle in taxation is not maximal, because non-taxation income equalizes all taxpayers’ —rich nor poor, sick nor health, and citizens who are on education. implementation of this concept is inseparable from taxpayer database condition which based on identity number that has not beneficial. increase of non-taxable income also decreases the tax revenue article 21 where the revenue decreased by 4.65% in 2016. increase in non-taxable income is expected to boost the purchasing power of citizen, hence demand on goods and service will increase. with the increase of demand, production to absorb the employment that becomes the object of non-taxable income article 21. keywords : non-taxable income, implementation on justice principles, principles in expanding taxation base introduction non-taxable income that has been set has a value that could not be changed or the value is considered fixed. increase in non-taxable income only could be done by the government. from early 1983 to the adjustment of non-taxable income in 2016, the limitation to non-taxable income has adjusted with development on the economic world (saez, slemrod, & giertz, 2012). table 1. increase on non-taxable income (in rupiah) 12 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.ilomata.org/index.php/ijtc mailto:johnsinaga@yahoo.com analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik legal basis taxpaye r addition for married taxpayer addition for depende nts addition if wife income accumulat ed law no.8 year 1983 960.000 480.000 480.000 960.000 law no. 10 year 1994 1.728.00 0 864.000 864.000 1.728.000 law no.17 year 2000 2.880.00 0 1.440.000 1.440.000 2.880.000 564/mofd.03/2004 12.000.0 00 1.200.000 1.200.000 12.000.000 137/mofr.05/2005 13.200.0 00 1.200.000 1.200.000 13.200.000 law no.36 year 2008 5.840.00 0 5.840.000 5.840.000 5.840.000 162/ mofr.011/2012 24.300.0 00 2.025.000 2.025.000 24.300.000 mofr.010/122/ 2015 36.000.0 00 3.600.000 3.600.000 36.000.000 no.101/ mofr.010.2016 54.000.0 00 4.500.000 4.500.000 54.000.000 source: www.pajak.go.id related to government discourse on adjusting the amount of nontaxable income (nti), many parties commented that increase on nti could make the target of government’s tax revenue increment from income tax (it) 21 or employee this year will not be reached. (pudyatmoko, 2017) the government changed the limit of non-taxable income with some considerations, i.e: first, to keep citizen’s purchasing power. as known in a few years, there are some movements on basic necessities goods. second, the increase in non-taxable income is one of the tax stimuli that could boost consumption and economic growth. increase on non-taxable income is expected to have a good impact on tax revenue rate. although there is a decrease in non-taxable income, this new implementation could increase the tax revenue that in micro will be decreased, and an increase in citizen’s purchasing power. non-taxable income and layered-tax rate that could be implemented in the taxpayer’s taxable income (nafia & sunandar, 2016), (lewa, kalangi, & pontoh, 2018). the problem that faces in implementation of non-taxable income, first, non-taxable income equalized the condition of taxpayer except marital status and numbers of dependents. thus, taxpayers and individuals will face the inequality of non-taxable income which that person gets is the same with non-taxable income that healthy person get. 13 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 http://www.pajak.go.id/ analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik second, non-taxable income assumes as if all people do not need education expenses. taxpayers who professionally work such as programmer, lecturer, accountant, or doctor, that needs further education for upgrading the skill, third increase in numbers of nontaxable income can be done by minister of finance regulation. means that the amount of non-taxable income always has to be suitable for the condition. fourth, non-taxable income could not differentiate taxpayers bases on the domicile. the difference in living cost between taxpayers which lives in jakarta will bear the bigger business cost and make the net income smaller than same taxpayer’s business cost in papua. according to the performance report of director-general of tax in 2016, the realization of it revenue article 21 in 2016 is rp109.153,00 billion (84,39%). income tax revenue article 21 in 2016 decreased by 4,65% compared to 2015, which caused by a decrease in instalment deposit it article 21. this related to government policy about adjustment of non-taxable income amount year 2016 which have an impact in decreasing number of individual employee taxpayers that decreased with it 21. policy on increasing the non-taxable income year 2016 is regulated in minister of finance regulation number 101/pmk 010/ 2016 issued in june 22nd 2016 about the adjustment for amount of nontaxable income that has been set. based on this regulation, the taxpayer’s income tax for individual increased from rp 36 million to rp 54 million per year. in counting the amount of non-taxable income, individual taxpayers must reduce the net income with non-taxable income. basically, to count the amount of tax that must be paid, gross income individual taxpayer could be reduced by the expenses that the person paid to get, charge, and keep the income until the taxpayer gets net income. after that, individual taxpayer can reduce non-taxable income to get taxable income (weol, nangoi, & wangkar, 2018). the cause on increase in nti is increase on province minimum wage. if the increase of pmw is not followed by increase on nti, the tax which bore by taxpayer will be higher, because the income is higher but there is not any increment in nti [ citation jen19 \l 1057 ]. the evidence shown that elasticity of taxable income related to marginal tax-rate which at least one or even higher (feldstein, 1995). low-level of exclusive income tax buoyancy conclude that enormous taxation reduce added by increasing the limit of taxable income in cross-destination (bilquees, 2004). in increasing the tax revenue, taxpayers is one of important aspects and the backbone of tax revenue, all taxpayer’s activity in running their taxation responsibility has been regulated in general provision and taxation procedures (susanti & andi, 2019). 14 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik method this research used a qualitative approach, means that gaining as much information from taxation literature (primary data) and informant (secondary data) also field observation for analyzing increase on nontaxable income (nti) in relation with implementation of principles of justice and principles of taxation base expansion. informants were not decided by statistical mathematics but depend on the saturation of data that was obtained like stated by guba and lincoln (1985:202) “informatinal redundance, not a statistical confidence level” level of answer saturation in this analysis was reached on the sixth informant. questions in the in-depth interview were submitted to the informant who believed to understand and master the research topic. guba and lincoln (1985:199) stated that in a qualitative approach, sampling must be decided before for a certain purpose; sampling purpose, to get the necessary information from the right individual. the informants that have been chosen based on purposive sampling: (1) 3 (three) person from taxation academician or taxation lecturer; (2) 2 (two) person from taxation practitioner or tax consultant; and (3) 1 (one) person, director of potential, obedience and tax revenue directorate general of tax. result and discussion non taxable income in implementation of principles in tax equality equality in taxation can be divided into 3 categories. those are horizontal equality, vertical, and special. horizontal equality is people who have the same income, will pay an equal amount of tax. meanwhile, vertical equality is people who have a bigger income should pay a bigger amount of tax. meanwhile special or zonation equality is one of equality in taxation which applied based on zonation or taxpayer domicile. in the implementation of the equality principle of taxation must be followed by principles of paying ability. although there are things about tax collection is arranged by law or have a legal foundation. this has been reflected from the french revolution when one of the causes of the french revolution is discrimination on tax collection. the principle on the ability to pay tax is one of a sensible way to pay public good and service supply such as national defence, health, people’s education, and quality of the environment. in the implementation of the taxation system, indonesia uses simplicity principle or easy of tax administration, where in implementation of these principles, taxation regulation tends to be 15 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik discriminative. the government made all of the tax regulations easy to implement although it becomes unequal. increase in non-taxable income by numbers or non-taxable income by regulations or policy has not reflected equality principles. this can be seen by non-taxable income is one for all, meaning that nontaxable income for a healthy or sick person is the same. people who undergo education or self-development education has not given an extra allowance, meanwhile, rich people who do not need non-income taxation are given the non-taxation income. simplicity concept in implementation of non-taxable income has made the equality principle become not maximal in indonesian taxation. non-taxation income (nti) in relation with principles of taxation base expanding increase of non-taxation income certainly decreases tax revenue article 21. like in table 2 which shows that income tax revenue from 2013 to 2015 had increased, and in 2015 had decreased. on 2014 increased by 17.15%, in 2015 increased by 8.52%, and in 2016 decreased by 4.78%. this decrease caused by increase on non-taxable income from rp36,000,000 to rp54,000,000. so does in it article 25/29 undergo the same thing, in 2016 decreased by 36.12%. table 2. ratio of realization in domestic tax revenue non-oil and gas and vat 2013-2016 (in billion rupiah) n o tax revenue 2016 (+/-) 2015 (+/-) 2014 (+/-) 2013 1 it article 21 109.1 53 4,77% 114.6 25 8,52% 105.6 25 17,15 % 90.16 3 2 it article 25/29 op 5.275 36,12 % 8.258 75,55 % 4.704 7,32% 4.383 3 domestic it 273.4 67 2,34% 280.0 09 16,29 % 240.7 86 6,18% 226.7 64 source: researcher’s result, 2018 from descriptions in this discussion, thus this result can be pictured like this: 16 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 nontaxable income (ptkp) inflationtax developme nt simplicity concept taxation base tax revenue tax equality purchasin g power analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik picture 1. result model from the result of the model picture, described that there is a new entity that researchers have to put inside because this new entity strongly influenced the final result from answering these research question. this new entity is implementation on simplicity concept in indonesia taxation practice. this concept becomes a little contradictory with tax equality concept, where simplicity concept emphasized on giving the same non-taxable income facility to all taxpayers, besides status and dependents. meanwhile, according to tjahjono hussen, the same tax collection is a discriminative action towards taxpayers. conclusion increase on non-taxable income has not reflected the implementation of tax equality. indonesia uses simplicity concept of ease of tax administration. the simplicity concept, based on the first and sixth informant, is not fair. equality and simplicity concept is toilsome to do simultaneously, because, in this case, dgt has not had a good and competent taxpayer database to back up the implementation of equality principle in increasing the non-taxation income. considering the awful taxpayer’s database comes from dgt side, then ease of tax administration concept or simplicity concept is the most rational concept in implementation of equality principle because a tax regulation cannot be or hard to fulfil the public satisfactory element. in the future, if taxpayer database has become better—status, dependent, education, and health, can be detected from the database, the equality concept of equality in taxation especially in the implementation of the increase in non-taxation income can be implemented. meaning that implementation of the value of types of reducing items in non-taxable income can be customized with the necessities and condition of taxpayers. increase of non-taxation income is expected to boost people’s purchasing power to consume taxable goods with the hope that other taxation base like value-added tax (vat) could help in taxation income. implementation on non-income tax or tax allowance supposed to be more precise to people who need. meanwhile, people that do not need non-taxable income should not get the tax allowance, thus people who do not need non-taxable income can contribute more in development where this thing could be energy boost for dgt in extended taxation base concept (isnawati, hilendri, isnaini, & jumaidi, 2018). 17 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik as a part from researchers’ responsibility in conducting scientific research in this thesis, suggestions and recommendation that concluded are: government, in this case, directorate general of tax, is suggested to fix the regulations, especially in personal allowance or non-taxable income from simplicity concept to complexity concept to fulfil the element of equality principle. for institution of directorate general of tax should always upgrade the taxpayer database system and taxation database itself. the government is also suggested to dig other taxation bases through taxation socialization to areas that have been touched in terms of implementation of income tax, or government, in this case, to agency or government department to keep an eye of taxation base probability in case of non-tax state collection. references bilquees, f. (2004). elasticity and buoyancy of the tax system in pakistan. the pakistan development review, 43(1), 73–93. https://doi.org/10.30541/v43i1pp.73-93 feldstein, m. (1995). the effect of marginal tax rates on taxable income: a panel study of the 1986 tax reform act. journal of political economy, 103(3), 551–572. https://doi.org/10.1086/261994 isnawati, i., hilendri, b. a., isnaini, z., & jumaidi, l. t. (2018). analisis kehilangan penerimaan negara di sektor pajak sebagai konsekuensi dari pengukuhan besaran kenaikan ptkp (studi kasus pada dirjen pajak nusa tenggara). jurnal aplikasi akuntansi, 2(2), 076–101. https://doi.org/10.29303/jaa.v2i2.24 jeniliasari, d., susyanti, j., & wahono, b. (2019). analisis perbandingan penerimaan pajak penghasilan (pph) wajib pajak orang pribadi sebelum dan sesudah kenaikan penghasilan tidak kena pajak pada kantor pelayanan pajak (kpp) pratama malang selatan. e-jurnal riset manajemen, 8(8), 40-53. retrieved from http://riset.unisma.ac.id/index.php/jrm/article/view/4108/3585 lewa, m., kalangi, l., & pontoh, w. (2018). analisis perubahan tarif penghasilan tidak kena pajak (ptkp) tahun 2015 dan tahun 2016 terhadap penerimaan pajak penghasilan (pph) pasal 21 di kantor pelayanan pajak pratama bitung. going concern : jurnal riset akuntansi, 13(04), 244–253. https://doi.org/10.32400/gc.13.03.20120.2018 nafia, d., & sunandar. (2016). analisis perbedaan penerimaan pajak penghasilan sebelum dan sesudah kenaikan penghasilantidak kena pajak (ptkp) pada kantor pelayanan pajak pratama tegal. senit 2016 (pp. 170-174). tegal: politeknik harapan bersama. retrieved from https://ejournal.poltektegal.ac.id/index.php/prosiding/article/view/ 18 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles sinaga, sidik 375/359 pudyatmoko, y. s. (2017). pengaturan batas penghasilan tidak kena pajak bagi anak antara keadilan distributif dan pelindungan anak (studi terhadap pandangan mahasiswa fakultas hukum uajy). justitia et pax, 31(2), 57–85. https://doi.org/10.24002/jep.v31i2.1344 saez, e., slemrod, j., & giertz, s. h. (2012). the elasticity of taxable income with respect to marginal tax rates: a critical review. journal of economic literature, 50(1), 3–50. https://doi.org/10.1257/jel.50.1.3 susanti, n., & andi. (2019). pengaruh kenaikan penghasilan tidak kena pajak (ptkp) dan jumlah wajib pajak efektif terhadap penerimaan pph pasal 21. jrb-jurnal riset bisnis, 2(1), 32–49. https://doi.org/10.35592/jrb.v2i1.255 weol, s. c., nangoi, g. b., & wangkar, a. (2018). analisis efektivitas dampak peningkatan jumlah besaran penghasilan tidak kena pajak terhadap penerimaan pajak penghasilan orang pribadi pada kpp pratama manado. going concern : jurnal riset akuntansi, 13(04), 365–372. https://doi.org/10.32400/gc.13.03.20273.2018 19 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp : 66-73 https://www.ilomata.org/index.php/ijtc 66 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 iman supriadi, kusumaadi rahardjo ,miya dewi suprihandari accounting major faculty of economics, stie mahardhika surabaya iman@stiemahardhika.ac.id submitted : jan 3th 2020 revised : feb 14th 2020 published : march 30th 2020 abstract this paper talks about the impact from the commercial transformation 4.0 on accounting scientific research and accounting education and learning patterns. the commercial transformation can be turbulent and make development throughout accounting scientific research and designs from accounting knowing or education and learning in the future. to ensure that the adjustment needs from accounting professionals and trainees that are taking accounting research studies are required to have the ability to instantly adapt to the instructions from modifications in market 4.0 that are currently operating. it‘s anticipated that accounting will modification to "huge information" based upon accounting innovation, consisting of automation from journaling and monetary coverage. besides, using synthetic knowledge will be huge in analysis of monetary declarations and examining the behavior from companies or businesses. consequently, this impacts the knowing patterns from representing trainees that will place much more focus on grasping info systems regarding the real truth from the business globe. keywords: industry 4.0, internet of things, the accounting profession, artificial intelligence, accounting learning patterns. introduction the fast advance from wise innovation has resulted in the development of market 4. 0. this development includes the 'internet from points which is anticipated to offer huge info accessibility with limitless interconnectivity (kagermann, 2015). this offers a method where people, info, and interaction innovation expand with each other (pisaniello j & burritt rl, tingey-holyoak j, 2014). this evolution was followed by the emergence of cloud-based computing, large-scale data or known as big data, genetic experiments, changes in neurotechnology that are possible for humans to further maximize the role of the brain (world economic community, 2016) while deloitte (deloitte, 2017) portrays industry 4.0 so that the integration of digital information from several sources and places that start on manual activities in doing business is easier and more effective(aisyah et al., 2019; amelia et al., 2019; hartasetiadi & sidik, 2019). market 4.0 initially began in germany and after that complied with by various other nations such as the us, japan, and china. nevertheless, it‘s expected that market 4. 0 will result in considerable reductions in labor-intensive people, which consequently can result in high unemployment prices, particularly amongst grads around the world (grey j & hughes m, 2016). this is because the market 4. 0 atmosphere will tend to get rid of a regular job and many more jobs (deloitte, 2015). as a consequence, industry 4.0 will revolutionize the industry (davies r, mailto:iman@stiemahardhika.ac.id expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 supriadi, rahardjo, suprihandari 67 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 2015) so that current jobs no longer exist in the next 50 years. the country echoes the use of high computerized technology in manufacturing or manufacturing work. the word "industry 4.0" appeared around 2011 at the hannover fair, and in 2013 at the same place, a working group was led by siegfried dais (robert bosch gmbh) and henning kagermann a german academy of sciences and engineering. the design principles used are divided into four things, namely interconnection, information transparency, technical assistance, and decentralized decisions(andrayanti, 2019; kumala, 2019; meilani & pandoyo, 2019; sinaga & sidik, 2019). the world economic forum foresees that industry 4.0 is probably going to bring about a total deficit of more than 5 million employments in 15 created and creating nations, and malaysia is no special case right now. the result is where the malaysian government may need to confront rising joblessness and salary disparity, combined with a contracting shopper based business. the most influenced in the industry 4.0 condition are the middle of the road abilities employments (cormier d and magnan m, 2015). the information that most undergrad bookkeeping understudies will be utilized in the middle of the road abilities occupations raises concerns whether these alumni will have the option to verify work after graduation. along these lines, to guarantee the employability of graduates, educating, and learning exercises of bookkeeping, understudies should be acclimated to the desires for businesses of bookkeeping graduates in industry 4.0 (cooper b, 2015). as a result, given the likely employment domain, accounting students must be prepared to meet industry 4.0 demand. during the industrial revolution, 4.0 is projected to have relevant and admirable effects on several factors, especially on products, supply chains, customers, and workers. elements of workers who are either trapped directly or indirectly will be reviewed in this paper. the accountant is a career that is trapped in a direct way in it, which of course, has a disruptive impact on how an accountant carries out the job he carries, not only has to adjust to increasing his ability to face the 4.0 industrial revolution that has been initiated. from bloomberg.com data in 2016, developments in the order of the company were witnessed by market capitalization throughout the last decade (2006 and 2016). around the year 2016, large companies were dominated by technology-based companies and produced information technology products. it can be analyzed if the capitalization of the first number company in 2016, namely apple, is 38% greater than exxon mobil in 2006, which means that the development of technology companies is 2x that of companies operating in the sector not only in information technology. according to gerd leonhard in 2015, which predicts that globally, the era of the digital industry will get rid of 1 to 1.5 million jobs from the period of 2015 to 2025 due to the fact the human element can be replaced by engine power. also, data obtained from the us department of labor predicts 65% of school students in the world will face jobs or careers that never exist now, which means there will be new obstacles and new experiences in work and types of work in the world of work. cutler and lewis (2016) said that in the uk alone, technology has the role of removing 800,000 jobs. however, in addition to the positive side, the digitalization period has the potential to increase the new workforce of around 2.1 million to 2025, which means there are career choices and varied occupations. also, mechanization and digitalization can reduce the strength of carbon emissions by 26 billion metric tons (world economic community, 2016). from the description of the character and concentration of industry 4.0, it is clear that the career sequence of accountants needs to follow the fast rhythm and rhythm of the revolution. moving moving eroded or can survive on that development. until the accountant will face the sequence that is the admit to noise signal where the accountant has understood the expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 supriadi, rahardjo, suprihandari 68 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 existence of intimidation and will be prepared to take advantage of the moment of intimidation so that it can be taken part of, changes take hold which is where the accountant has felt there is a development in his activities but feels no need to take a stand because it has not disrupted the "status quo", the inevitable transformation, that is, accountants have changed because the capacity "status quo" has been disturbed by the existence of this revolution and accountants must carry out the rapid transformation of development and the best way is only for several factors seen as needing and adapting to the new normal namely the transformation of accountants 'careers in detail by the demands of the new mode of industry 4.0 or accountants' careers will be lost if they cannot adjust to that development. industry 4.0 is characterized as another period that constructs and extends the effect of digitalization in new and sudden manners; which can likewise be portrayed as the rise of "physical-digital frameworks" that include altogether new capacities and network for people and machines (davies, 2015; liu and xu, 2017). it is trusted that this period will influence work helplessness (seele p, 2016), particularly among graduates. work recently done by people will to a great extent be supplanted by computerization (christ kl, burritt rl, 2015). their exploration found that somewhat less than half of the employments in the us are presented to the danger of being inefficient because industry 4.0 because robots can perform routine assignments as well as refined obligations outside daily practice. their discoveries suggest that while industry 4.0 gives a chance to the individuals who are prepared to acknowledge it, this period likewise presents extraordinary difficulties for the conventional calling, including the bookkeeping calling is no special case. in the bookkeeping calling, bookkeepers can get ready for another time by bringing issues to light, building information through expert improvement and proceeding with training, empowering the advancement of abilities in new contestants, and working together with different experts (cooper, 2015). representing framework mix in industry 4.0 is probably going to be at an elevated level, and association with neighborhood bookkeeping issues in the business condition will be at a significant level of availability (kagermann, 2014). industry 4.0 is relied upon to impact bookkeeping rehearses because bookkeepers can acquire information that beforehand couldn't be gotten progressively, improve information quality through more noteworthy exactness and practicality in improving information proficiency and information confirmation, just as other dynamic objectives. moreover, this period is relied upon to expand the believability and pertinence of revealing (burritt and christ, 2016). to put it plainly, bookkeepers will have the chance to be less engaged with robotized activities and spotlight more on enormous picture systems, for example, asset productivity. in any case, bookkeepers need involvement with innovation to stay in solid interest. for newcomers to the bookkeeping calling, proficient bodies can help scholastics and colleges in giving pertinent educational plans to graduates who may need to battle with the industrial 4.0 time since it includes new computerized network. regularly, researchers and colleges react by changing existing course content or presenting new courses and instructing strategies to defeat new conditions. the activity is planned to expand the employability of their alumni. this is conceivable through putting resources into innovation for functional experience and furnishing involvement in pretending in the industry 4.0 situation. accordingly, working with proficient bodies and bookkeepers can help scholastics and colleges in conveying courses appropriate for bookkeeping graduates to be significant in the industrial 4.0 time. in this expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 supriadi, rahardjo, suprihandari 69 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 manner, bookkeeping graduates must be prepared at colleges to become qualified workers who can conquer the groundwork for confronting industry 4.0 (wübbeke j and conrad b, 2015). portfolios in instructive innovation have gotten more differing than any other time in recent memory in light of the fact that different kinds of programming are presently accessible to help scholastics in making educating and learning encounters all the more convincing. the digitalization of training has given more options in contrast to scholastics in their educating and learning strategies (burrit and roger. 2016). apparently, this gives a chance to scholastics to devise methodologies to scatter their insight to understudies, in a way that is significant and pragmatic, with the goal that graduates will have the option to adjust and stay popular in reality (cormier d and magnan m, 2015). be that as it may, the instructing and learning procedure must be successful when scholastics and colleges know the desires for business visionaries bookkeeping graduates in the coming time. method in the examination procedure methodology, a lot of general and explicit logical strategies that are psychological are utilized. this sort of research is qualitative, where in contemplating the hypothetical position and the ebb and flow condition of bookkeeping tasks, the utilization of hypothetical speculation techniques, gathering, correlation investigation and combination, perception, and verifiable methodologies are actualized. improved meaning of the association and practice of bookkeeping tasks utilizing the strategies for acceptance and finding, gathering, hypothetical speculations. unmistakable technique is utilized to give an outline to speak to the aftereffects of the investigation. result and discussion from the accountant's position description, there are obstacles and impacts on accountants' careers, including where technology changes change business as relevant as many assets that are in the form of "technology" and not in physical form, requiring less hrt counted, including accounting staff, where the company has no idea "place" or "premises" because it is controlled through the "virtual office" and most recently about the market steps and steps to sell through the "market place" or "online store" all of which will just be towards the point of equilibrium or new equilibrium which will later create own standards. in the next five years, where 5g technology in telecommunications devices has been fully adopted, high-speed internet connections per second and human hardware have also been connected both with iot or iop, which will change the role of accountants replaced by ai (artificial intelligence) technology. as well as robotics in doing the fundamental accountant's job, namely recording transactions, processing transactions, separating operations, mechanizing the work of the balance sheet as well as analyzing the financial balance independently without any human involvement. the following self-managed fundamentals role of accountant scheme, which, of course, increases the efficiency and effectiveness of work, and the results are immediately found at that time (real-time). many companies have improved this because it has been supported by the existence of standardization of financial control processes and standardization of the ideal information scheme architecture and in accordance with the demands of the fourth generation industry until important competencies are needed for accountants after that the potential for data analysis, follow changes in information technology and update style leadership. expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 supriadi, rahardjo, suprihandari 70 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 furthermore, the effect is that accountants and accounting firms will be "forced" to improve mobile applications so they can connect data directly from handheld devices, tablets, and virtual reality. the balance sheet audit is carried out on a real-time basis where regulators and auditors automatically pull the required data directly from the scheme and sensors attached to operational work so that the transparency and accuracy of the data made can be justified. if the accountant does not have the ideal skills in information technology, another career can replace the role of the accountant, so that it can be mentioned that info technology is a core requirement that needs to be studied and understood by the accountant. taken from the december 2016 edition of the international edition of accounting and business magazine, roger leonard burrit and katherine christ said four steps that accountants need to take in the face of the industrial revolution 4.0 namely : a. awareness. if the industrial revolution gave birth to new opportunities or opportunities. this opportunity is growing new businesses that never existed initially. hence, the example of germany as the initiating country has 80% of companies ready to implement industrial revolution 4.0 or china that understands if development is needed on the knowledge factor and targets 60% investment in this field. not only these two countries but many countries are already in the initial step of disseminating information, which after that, will grow deeper to run with the whole revolution 4.0. b. education. regulators or the government and education activists are required to be able to make a curriculum related to changes in digital connectivity, such as coding training, information management between several programs, and unequal basis or implementation of real-time accounting intended for all departments and company organizations as holders stock. c. career development. increase the career capacity of accountants and programs that support their development by doing online presentation exercises or face to face discussions (face to face discussion) and assessing their effects on the career capabilities of accountants in the future. d. application of high standards. so the accountant is required to have optimal control over the data created, where data or physical information is generally obtained under the responsibility of several engineers (engineer) so that the fabric of work between the accountant and engineer must go hand in hand so that the data and accounting information are well maintained. the four steps in the development of the role of accountants during the 4.0 industry revolution described above should have been initiated at the beginning of the evaluation process on campus or college where the curriculum and method of evaluation must also be in accordance with the actual business world now and in the future. until the campus or college needs to look for and use evaluation methods that improve the most important factor, namely human literacy where the important concentration is to improve students' cognitive abilities, so they can think seriously and systemically because human literacy can play a good role when referring to "humanity"; communication and design. until the evaluation focused on factors namely skills in terms of leadership and working together in teamwork, agility and cultural maturity (cultural agility) so that students with some background can work in environments that are not the same either domestically or outside the environment state and entrepreneurship counted in it "social entrepreneurship" which means entrepreneurship that can contribute to expectations and standards for accounting professions and implications in the learning pattern in industrial 4.0 supriadi, rahardjo, suprihandari 71 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 social development with sustainability and on target. each student must possess the following point of fundament. aoun (2017) said that to arrive at an efficient evaluation factor. by the desired direction, it is needed a thematic study that unites between the university environment and the real work world (base learning project). this thematic study can give a factual description to students about the latest state of the world of work and all the obstacles encountered. northeastern (2014) indicates the implementation of practical work or apprenticeship activities in the company, so one of them is an inefficient reference evaluation. referring to the formulation of the kkni team (indonesian national qualification framework) evaluation directorate (2015), college or university graduates must be prepared (not only human literacy) to have data literacy potential, namely reading, analyzing and using info in big data format (big data) and technological literacy. technology literacy means understanding the work steps of a machine, application of technology, artificial intelligence, and engineering principles. until the combined human literacy, data and technology can answer the obstacles of the industrial revolution 4.0. so it's evident that the obstacles of the industrial revolution of the past could change the overall role and standard of current accountants. the development of the accountant's role includes providing views or opinions about the data. accountants are required to be able to identify questions on data, statistical analysis, tracking data quality and interpretation of data processing results, acting as an adviser, either as a business advisor, specialist, or acting as a business partner. can work together in the struggle for technology that includes data fraud, work with robots or the like and become a trainer in the section of artificial intelligence and accountant careers grow not only in financial factors but will extend to non-financial reporting factors and data security in cyberspace (cyber security). accountants from the industrial revolution are not becoming "bookkeepers" but are expanding into something new that cannot be genuinely touched by financial factors. exploration of new things naturally led to the specialization that did not yet exist at this time. the specialty here, if you look at the information above, increases to a new part of work that demands different abilities and abilities as well because it is needed to be able to see the strength of development in a short or long period. intermediate between the real world of work and the academic world should be bridged for further analysis and research in which research results can be used to provide a solution that is informative and can be applied later in the teaching and learning process in the campus, college, and career. conclusion and recommendation industry 4.0 gave birth to several new things that would affect the careers of accountants and students who were studying accounting. industrial digitalization and real-time transactions can monitor quickly and quickly the performance of organizations or companies both in manufacturing, supply chains, and customers. accountant careers are expected to be able to adjust to this, and more importantly, campuses and universities must change and revolutionize the evaluation process to be able to follow the fast rhythm of changes in information technology. further studies and analysis are needed to summarize the ways and evaluations of accountants' careers and accounting students so that the accounting stigma becomes "bookkeeper" more full and has more valuable value by the characteristics 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(2019). analysis of increase in non-taxable income (nti) in relation with implementation of equality principles and taxation base principles. ilomata international journal of tax and accounting, 1(1), 12–17. tingey-holyoak j, pisaniello j, burritt rl (2014) the need for engineering accounting: identifying current and future demand and supply. report to the institute of chartered accountants in australia, sydney world economic forum (2016).carbon waste management.www.weforum.org/reports wübbeke j, conrad b (2015) industrie 4.0: will german technology help china catch up with the west? china monitor 23:1–10 the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 37-43 https://www.ilomata.org/index.php/ijtc 37 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the effectiveness of the motor vehicle tax tracker team in rawalumbu district, bekasi city rissa ayu cameliawati1, ratih kumala2 12institute of social and management studies stiami, jakarta correspondence: rissacamelia@gmail.com submitted : december 13, 2020 revised : december 26, 2020 published : january 31, 2021 abstract the number of motorized vehicles has increased from year to year, but this has not been matched by the increase in the number of vehicles that have re-registered at the samsat (onestop integrated service) office in bekasi city. with the activities of the investigating team, the investigating team plays an important role especially for tax actors who do not re-register at samsat bekasi city, where they remind taxpayers to pay motor vehicle tax. this study aims to analyze the effectiveness of the motor vehicle tax inspection team as well as the obstacles and efforts made in increasing motor vehicle tax revenue in rawalumbu village, bekasi city. the author uses the theory of david krech, richard s, crutchfield, and egerton l. ballachey danim (2012: 119-120) in a book entitled leadership motivation and effectiveness. this research is expected to be useful academically and practically. the method used in this research is descriptive qualitative. the results showed that the performance of the motor vehicle tax inspection team in rawalumbu village, bekasi city was effective when measured by beni pekei's (2016) effectiveness criteria with a score of 100.38%. the obstacles faced in the effectiveness of the investigating team are the distance that is too far, the taxpayer's data is not up to date, and inadequate supervision by p3dw and samsat. meanwhile, efforts have been made, among others, rawalumbu village to cooperate with investigative teams and sub-districts to update taxpayer data periodically and to conduct socialization and education to taxpayers. keywords: vehicle tax, development of ktmdu, effectiveness of tracking team. introduction taxes are mandatory contributions made by individuals or entities to local governments without balanced direct compensation that can be enforced based on the prevailing laws and regulations. the tax is designated to finance governance and regional development. motor vehicle tax is a tax that is included in the direct tax category and is a local (regional) tax. collected from motor vehicle holders. in this implementation, we still pay attention to the rules in improving services, namely the joint instruction of the minister of home affairs, minister of security, and minister of finance regarding the implementation of samsat no. ns / 03 / m / x / 1999, no. 29 of 2009 and no. 06 / mk.014 / 1999 concerning the implementation of samsat in the issuance of stnk, stck, tnkb, pkb and bbnkb, and swdkllj collection. the realization of motor vehicle tax revenues in 2016 reached 876,694,509,350, around 103.24%, of the target set by samsat bekasi city. in 2017, the revenue reached 953,111,404,325, around 104.44% of the target set by samsat bekasi city. whereas in 2018 the https://www.ilomata.org/index.php/ijtc mailto:rissacamelia@gmail.com the effectiveness of the motor vehicle tax tracker team in rawalumbu district, bekasi city cameliawati, & kumala 38 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 revenue reached 1,054,502,291,475, around 104.87%. from the target set by samsat kota bekasi. every year the number of motorized vehicles increases but is not matched by an increase in the number of vehicles that re-register at the bekasi city samsat office. taxpayer compliance, especially for motor vehicle taxes, has decreased with the increase in the number of non-registered vehicles (ktmdu), indicating that taxpayer compliance is low. so that it becomes the potential for tax revenue from pkb taxes that must be explored. it can be seen that vehicles that do not re-register have decreased and increased in terms of percentage. in 2016 the percentage only reached 30.91%, then in 2017 the percentage increased to 34.97%, then in 2018, it decreased by a percentage of 25.60%. data on the achievement of the tracking team's performance in 2019 has been accepted that there is no target set by the bekasi city samsat while for the achievement of its performance it reaches 957 taxpayers. based on the circular of the governor of west java no. 973/1483-dispenda regarding the intensification of motor vehicle tax levies in west java, a vehicle not re-registration (ktmdu) search was carried out since 2016. the search was a collaboration between the west java samsat advisory team consisting of the west java province revenue service (dispenda), west java police, and pt. naga bendu. in 2019 the regional opinion management center office in the bekasi city region collaborates with the stiami institute number 073/931/mou/p3d-kota bekasi/viii/2019 and number 031/mou/institut-stiami/viii/2019 regarding strengthening regional taxes in cities bekasi to search with 87 students. the student is an active student of the stiami campus in the expansion a with the public administration study program in the concentration of taxation who volunteers and serves as a motor vehicle tax tracking team at the regional regional revenue management center (p3dw) bekasi city. however, addressing the high motor vehicle taxpayers who do not re-register their vehicles. the problem lies in the ktmdu which is indicated by the number of taxpayers who avoid taxes. this is a problem faced by the search team or tax volunteers, namely because in its implementation it takes too long to wait for the data so that the search team has to wait until the data is available and the search team also experiences difficulties when visiting the motorized vehicle taxpayer. one of the intensively carried out efforts to make taxpayers obey is by providing a notification letter of the obligation to pay motor vehicle tax to taxpayers after the payment is due. taxpayers often fail to respond to these letters due to inequality in providing socialization or understanding of tax knowledge by tax officials. with this tracking team activity, the tracking team has an important role, especially for taxpayers who do not re-register at samsat bekasi city, namely by reminding taxpayers to make motor vehicle tax payments. the purpose of the problem to be discussed in this paper is to analyze the effectiveness of the motor vehicle tax tracking team in rawalumbu district, bekasi city, what obstacles are faced in the effectiveness of the motor vehicle tax tracking team, and what efforts are made to the obstacles that occur in the effectiveness of the tracking team. motor vehicle tax in rawalumbu district, bekasi city. methods the research method used in this research is the descriptive qualitative research method. this type of research based on the objectives used by researchers is descriptive research. the effectiveness of the motor vehicle tax tracker team in rawalumbu district, bekasi city cameliawati, & kumala 39 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 descriptive research according to neuman (2011:30) “descriptive research presents a picture of the specific details of a situation, social setting, or relationship. the outcome of a descriptive study is a detailed picture of the subject”. sources of data in this study are primary data, primary data used are interviews with one of the parties in the rawalumbu district of bekasi city and secondary data which are indirectly taken by researchers in the form of target data and realization of motor vehicle taxes, the ktmdu development list at samsat bekasi city. and data on tax revenues made by the tracking team in rawalumbu district, bekasi city. the operationalization of the concept used in this study focuses on the problems in 2019 which consist of the effectiveness of the motor vehicle tax tracking team in rawalumbu district, bekasi city, as well as the obstacles and efforts faced by the motor vehicle tax tracking team in rawalumbu district, bekasi city. data collection techniques in this study used several techniques that were needed regarding the object to be studied, namely by interview, documentation, and observation. in this study, the data analysis techniques used were credibility, transferability, dependability, and confirmability. results and discussion analysis of this study is related to the effectiveness of the motor vehicle tax tracking team in rawalumbu district, bekasi city. this study uses the theory of david krech, richard s. crutchfield, and egerton l. ballachey in danim (2012:119-120) which has 4 indicators, namely the number of results that can be issued, the level of satisfaction, creative products, and the intensity to be achieved. effectiveness is a measure of the success or failure of an organization to achieve its goals. effectiveness indicators describe the range of consequences and impacts (outcomes) of the program outputs in achieving program objectives. the greater the output contribution generated for the achievement of specified goals or objectives, the more effective the work process of an organizational unit will be. table 1. list vehicle development does not re-register in the 2016-2019 fiscal year year ktmdu potential realization rate effectiveness (%) criteria 2016 1.472.551 1,017,433 30.91 ineffective 2017 1,593,978 1,038,526 34.97 ineffective 2018 1,697,512 1,262,892 25.60 ineffective 2019 1,609,441 1,200,674 25.40 ineffective total 5,833,482 4,519,525 77.48 less effective source: samsat kota bekasi, 2020 based on the table above which was sourced from samsat kota bekasi and processed by the author, it can be seen that the lack of awareness of motor vehicle taxpayers. this table explains that ktmdu has experienced a fairly good increase is in 2016 and 2017 alone. although it increases every year, it is still classified as ineffective. in the table listing the development of ktmdu at the regional regional revenue management center (p3dw), bekasi city is still classified as ineffective, this is evident in 2018 only reaching 25.60% and 25.40% for 2019. and from 2016 to 2017 only experienced an increase of just 4%. meanwhile, the effectiveness calculation formula described in beni pekei's theory (2016) explains that the effectiveness criteria are said to be effective if the percentage of effectiveness reaches 90%. the effectiveness of the motor vehicle tax tracker team in rawalumbu district, bekasi city cameliawati, & kumala 40 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 however, in this case, the regional regional revenue management center (p3dw) is only able to reach less than 60%. as described above, to realize and support the program created by the bekasi city p3dw, namely the motor vehicle tax tracking team, is an organization that makes it easier for taxpayers and reminds us to pay motor vehicle taxes. table 2. target data, realization of taxpayers and tax revenues conducted by the rawalumbu district tracking team in 2019 year for target achievement pkb payment (idr) % 2019 (sept-oct) 3,300 3,322 32,623,400 100.68 2019 (nov-dec ) 4,252 4,259 43,258,000 100.16 total 7,552 7,581 75,881,400 100.38 in table 2 above that the data on tax revenue for the rawalumbu sub-district tracking team was carried out for 4 months, namely in the sept-oct month, the achievement was only 3,322 data and payment of motor vehicle tax of idr 32,623,400. in november, the achievement increased to 4,259 data, and taxpayers who paid motor vehicle tax were idr 43,258,000, then the total tax revenue of the rawalumbu sub-district tracking team for 4 months, the taxpayer made payments amounting to idr 75,881,400. based on the data above, it seems clear that the performance of the tracking team, rawalumbu district, bekasi city has been effective. this has proven to be able to realize the tax revenue target that is above the targeted amount. in 2019 month (sept-oct) the realization of tax achievement was 3,322 data with a tax revenue target of 3,300, so the effectiveness of tax revenue for the tracking team of rawalumbu district, bekasi city. it is known from the following calculations: effectiveness = 3.322 3.300 𝑥 100% = 100,68% based on the classification of the 2016 beni pekei effectiveness criteria, the tax achievement in rawalumbu district, bekasi city is very effective. in 2019 month (nov-dec) the realization of tax achievement was 4,259 data with a tax revenue target of 4,252, so the effectiveness of the tax revenue of the tracking team of thedistrict rawalumbu of bekasi city. this is known from the following calculations: effectiveness = 4.259 4.252 𝑥 100% = 100,16% based on the classification of the 2016 beni pekei effectiveness criteria, the tax achievement in rawalumbu district, bekasi city is very effective. so, based on the description above, the effectiveness of the motor vehicle tax tracking team in rawalumbu district, bekasi city has been very effective. if measured by the beni pekei 2016 effectiveness criteria which shows that the effectiveness in 2019 (sept-oct) is the target of 3,300 vehicle data from taxpayers and the realization exceeds the target of 3,322 vehicle data from taxpayers with a percentage of 100.68% and at (nov-dec) the target was 4,252 and the realization exceeded the target of 4,259 vehicle data from taxpayers with a percentage of 100.16%, then with a total percentage of 100.38%. meanwhile, based on the size according to halim in ma et al (2013), it can be seen that the percentage of taxpayer awareness through ktmdu in 2016 is 30.91% in 2017, namely the effectiveness of the motor vehicle tax tracker team in rawalumbu district, bekasi city cameliawati, & kumala 41 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 34.97% in 2018, namely 25.60% and in 2019, namely 25.40. %. in this measure of effectiveness, if the percentage is below 60%, it is categorized as ineffective. the results of this study are supported by previous researchers, namely jifly and syamsah (2018) who revealed that there are still many taxpayers who do not actively report ownership or sales of motorized vehicles, so the realization of motor vehicle tax arrears is still low. while the results of research by puspaningtyas dyah (2015) state that motor vehicle tax revenue has been effective, but in the process, it has not been effective, because there are still several external obstacles such as the mediocre economic level of the community, low public awareness, many cases of motor vehicle theft, there is a low-cost green car program and there is no increase in a motorized vehicle. conclusion the effectiveness of the motor vehicle tax tracking team in rawalumbu district, bekasi city has been running very effectively. if measured by the beni pekei 2016 effectiveness criteria which affect effectiveness in 2019 (sept-oct), the target is 3,300 vehicle data from taxpayers and the realization exceeds the target of 3,322 vehicle data from taxpayers with a percentage of 100.68% and on (nov-dec) the target was 4,252 and the realization exceeded the target, namely 4,259 vehicle data from taxpayers with a percentage of 100.16%, then with a total percentage of 100.38%. meanwhile, based on the size according to halim in ma et al (2013), it can be seen that the percentage of taxpayer awareness through ktmdu in 2016 is 30.91% in 2017, namely 34.97% in 2018, namely 25.60% and in 2019, namely 25.40%. in this measure of effectiveness, if the percentage is below 60% it is considered ineffective. the obstacles faced include the distance that is too far, the lack of data updates, and there is still a lot of data that has not been changed so that when the search team searched the field it was not right on target, lack of awareness of motor vehicle taxpayers, lack of supervision of taxpayer data regarding addresses in spkp2kb, the time constraints of the search team with a student background, form the motorized vehicle taxpayer data that was printed from the bapenda was too long. efforts were made to overcome the program rawalumbu district in collaboration with both the search team and the sub-district so that the distance traveled could be reached easily, updated again taxpayer data so that the tracking team can perform their duties properly and on target, provide socialization and education to taxpayers, provide education to the search team, distribute tasks to the tracking team so that areas in the ktmdu list can be reached properly, evaluation of the ktmdu program so that the target set can be maximally realized, and provide education to the tracking team so that they are not mistaken in providing information to taxpayers, speed up the printing of bapenda forms. references abdul, r. 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(2010). pajak daerah dan retribusi daerah. jakarta: rajawali pers. sjamsuddin., i. s. (2016). dasar-dasar dan teori administrasi publik. malang: intrans publishing. sugiyono. (2015). metode penelitian kuantitatif kualitatif r&b. bandung: : aflabeta. syamsyah, j. z. (jurnal living law issn 2087-4936 volume 10 no 1 januari 2018). efektivitas pajak progresif kendaraan roda dua pada sistem administrasi manunggal satu atap (samsat) di wilayah bogor program studi ilmu hukum sekolah pascasarjana universitas djuanda bogor. https://unida.ac.id/ojs/livinglaw/article/view/1492/1134, diakses pada tanggal 17 mei 2020. undang-undang no 28 tahun 2009 pasal 1 angka 12 dan 13 tentang pajak kendaraan bermotor. waluyo. (2011). perpajakan indonesia. jakarta : salemba empat. https://unida.ac.id/ojs/livinglaw/article/view/1492/1134 the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume , issue page no. 166-174 https://www.ilomata.org/index.php/ijtc 166 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 implementation of earmarking tax policy on motor vehicle taxes in bekasi city citra novlyani institute of social and management studies stiami, jakarta correspondence: citranovlyani@gmail.com submitted : april 5, 2021 revised : april 20, 2021 published : april 30, 2021 abstract the phenomenon in the research is that there are still many congestion points due to the lack of road construction, lack of infrastructure related to road maintenance, and inadequate transportation modes. this study aims to analyze the implementation of the earmarking tax policy on vehicle tax collection in bekasi city along with the constraints and efforts in implementation. the theory used in this study is the implementation theory of ripley and franklin with 3 indicators of implementation, the level of compliance, smooth routines and functions, and the realization of desired performance and impact. the research method used a qualitative approach with descriptive specificity. the result of the research is the implementation of the earmarking tax policy on the collection of motor vehicle tax in bekasi city for the compliance of the implementer in the matter of levying already under the regulation, but the allocation has not been maximal yet. functional routine implementers are not yet maximal because there are still few technical issues and separation of funding post/account in the allocation, and no further regulations regarding the technical and standard operating procedure (sop) for earmarking tax funds cannot be seen and controlled. the realization of the performance and the desired impact is also not optimal because there are still many congestion points and road structures that are still not good and adequate public transportation for the entire reach of the city of bekasi. keyword: earmarking tax policy, motor vehicle tax, standard operating procedure introduction the role of taxes is increasingly felt by the state when the state develops regions to achieve high growth. regional development is a task that must be carried out by each regional government. regional autonomy and decentralization are the authority of local governments to regulate and manage their households under constitutional regulations. the implementation of regional autonomy is an important main point to improve people's welfare. the development of a region can be adjusted by local governments with the potential and uniqueness of each region. in this case, the independence to manage the government, for the sake of the realization of people's welfare and optimizing regional revenue. regional revenue is an important financing component in the implementation of local government activities. regional revenue can describe the fiscal capacity of a region. one of the major sources of revenue for regional revenue is local taxes. one of the types of local taxes that is often become the spotlight is motor vehicle taxes. motor vehicle tax is a kind of provincial tax with the largest source of income and can help increase local revenue sources. with this, motor vehicle taxes provide a large contribution to local revenue each year. in supporting the increase in motor vehicle taxes, there is a large potential for motor vehicles in bekasi city as follows: https://www.ilomata.org/index.php/ijtc mailto:citranovlyani@gmail.com implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 167 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 table 1. the potential of motor vehicles in west java province, especially bekasi city 2016-2017 year the number of motor vehicles potential amount % province bekasi city 2016 16,085,121 1,593,978 10 2017 14,864,898 1,459,933 10 source: samsat bekasi city, the data is processed by the researcher based on the data above, motorized vehicles in west java province from 34 cities and districts, there is a potential amount of motorized vehicles from bekasi city of 10%. the large potential for vehicles in the city of bekasi can increase regional revenue, especially motor vehicle tax, the amount of motor vehicle tax revenue continues to increase in bekasi city. in this case, motor vehicle tax revenue can be seen as follows: table 2. receipt of regional revenue in bekasi city 2016-2017 (in billions) year pad pkb effectiveness (%) contribution % target (rp) realization (rp) target (rp) realization (rp) pad pkb 2016 1,876,76 1,982,58 849,18 876,69 105,63 103,24 44,21 2017 1,917,42 2,056,83 881,33 935,11 107,27 106,10 45,46 source: pppd for bekasi city, data was processed by researchers based on the data above, it shows that every year the realization of motor vehicle tax from 2016-2017 continues to increase and always exceeds the target. motor vehicle tax revenue provides a very large contribution to regional revenue. as a source of revenue that contributes the largest portion of regional revenue, revenue originating from local taxes, especially motor vehicle taxes must be managed well. this management is of course considering the increasingly high demands of society for public services. as a manifestation of the government's responsibility to the society, it issued law number 28 of 2009 regarding regional taxes and regional retribution. the law states that certain tax revenues are allocated or earmarked to finance activities that are related to the tax. table 3. earmarked tax that was mandated in law number 28 of 2009 tax type earmarked tax in uu no 28 year 2009 article allocation amount allocation objectives vehicle tax 8 clause 5 minimal 10% *construction and road maintenance *increase mode and means of transportation cigarette tax 31 minimal 50% *funding for public health services *law enforcement by authorized official street lighting tax 56 clause3 partially *providing of street lighting source: law number 28 of 2009, processed by researchers one of the allocated tax revenues is the motor vehicle tax which is allocated to finance the construction and/or maintenance of roads as well as an increase in modes and public transportation facilities, a cigarette tax which is allocated to finance public health services and law enforcement, and a street lighting tax that is allocated to finance street lighting. motorized vehicle implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 168 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 tax is a type of regional tax at the provincial level. so there is a sharing of tax revenue between the provincial government and district/city governments to increase road construction and maintenance in financing service functions to the community, provincial tax distributes proceeds to districts/cities with different proportions for each type of provincial tax. the composition of the profit-sharing between the province and the regency / city according to the regional regulation of west java province number 57 of 2017. concerning regional taxes in paragraph 1 of article 5 states that results of acceptance of motor vehicle taxes and bbnkb are distributed to the regency / city government by 30% (thirty percent), from the increase of motor vehicle taxes revenue, road users can feel the benefit from paying the tax. by paying motor vehicle tax, the society hopes that there will be concrete forms of paying the tax, one of them is the road infrastructure. based on data from the bekasi city police regarding portraits of conditions, security, safety, orderliness, smooth traffic, there are several points of traffic congestion such as on jl. sultan agung, jl. ahmad yani, jl. ir. h. juanda, jl. kh. noer ali and jl. joyo martono was caused by many large vehicles were parked on the side of the road, the lack of bus stops, and public transportation that stopped for too long. this paper tries to see what the earmarking tax application looks like or the allocation fee obtained from the motor vehicle tax in bekasi city, the obstacles faced in implementing earmarking tax, and the efforts to resolve these obstacles. methods the research approach that is used by researchers is a qualitative approach with a specificity of qualitative descriptive, it is an approach that seeks to collect, present, and analyze data so that it can provide a sufficient overview that is researched. qualitative descriptive research has objectives to describe the existing phenomena qualitatively to obtain data sources through literature research and field research, such as direct observation to samsat office of bekasi city and bapenda, documentation related to research, and interviews with administrative officers of the bekasi city samsat office and bapenda officers of bekasi city. the focus of the research is a detailed description of the researcher on the concept to be studied which contains the measurements or parameters that will become the basis of the interview guidelines, observations, and the documents used. in this case, the research focuses on 2016-2017 regarding the implementation of the earmarking tax policy on motor vehicle tax collection in bekasi city, the obstacles faced by the bekasi city government in implementing policies, as well as the efforts made by the bekasi city government in overcoming those obstacles. data collection techniques used in this study consisted of interviews, observation, and documentation. meanwhile, the data analysis technique uses credibility, transferability, dependability, and confirmability. results and discussion as a form of application of the principle of benefits in taxes, it is hoped that the concept of earmarking tax can provide benefits for taxpayers and society. this study applies the theory of repley and franklin (in alfatih 2010: 51-52). the success of the implementation can be seen from 3 indicators, namely the level of compliance, the smoothness of routines and functions as well as the realization of the desired performance impact. the acceptance of motor vehicle tax revenue can be seen from the regional revenue service (dispenda) of bekasi city province branch, as shown in the following table: implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 169 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 table 4. acceptance of motor vehicle tax of bekasi city 2016-2017 year pkb pkb effectiveness % target (rp) realization (rp) 2016 849,189,000,000 876,649,509,350 103,24 2017 881,334,000,000 935,111,404,325 106,10 source: regional revenue service provincial branch of bekasi city from table 4 shows that the targets that were set by the bekasi city government in 2016 and 2017 always increased, the increase in the targets that were set by the local government is in line with the revenue received by the local government from the motor vehicle tax sector, the realization of the acceptance of the revenue from the motor vehicle tax sector always exceeds the target set by the regional government of bekasi city. thus in the implementation of the west java provincial regulation number 57 of 2017 can be said that it was running well, with the realization of tax revenue acceptance that exceeds the target set by the regional government of bekasi city. with the achievement of the motor vehicle tax target, it shows that the performance of the provincial branch revenue service in bekasi city is quite good. the acquisition of motor vehicle taxes, besides the amount, is big and continuously increased, the percentage of regional original income is also quite big. this shows that motor vehicle tax is a regional tax sector that greatly influences regional income because of the enormous potential for motor vehicles. the percentage of motor vehicle tax to regional income is shown in the following table: table 5. pkb contribution to pad of bekasi city 2016-2017 (billion rupiah) year target (rp) realization(rp) contribution % 2016 1,982,58 876,69 44,21 2017 2,056,83 935,11 45,46 source: regional revenue service provincial branch of bekasi city the data is processed by researcher from the table above, it can be seen that the motor vehicle tax increases every year. with a very large contribution, which means that motor vehicle tax revenue is almost half of the contribution to regional revenue. based on law no. 28 of 2009 and west java provincial regulation no. 57 of 2017 which states that the yield of motor vehicle tax revenue of at least 10% (ten percent), including those shared to districts/cities, are allocated for road construction and/or maintenance and improvement modes and means of public transportation. the department responsible for these related matters is the department of transportation which carries out technical matters such as checking, repairing, and developing transportation. data from the transportation department shows the realization of the budget for road construction, road maintenance and transportation modes as follows: implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 170 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 table 6. realization of transportation agency's budget of bekasi city 2016-2017 year realization of pkb revenue sharing from province fund realization realization of fund allocation from pkb% road maintenance road construction means of transportation total cost 2016 29,62% 2,512,998,000 269,999,392,000 2,744,619,000 275,257,009,000 31,40 259,686,295,680 2017 29,62% 1,967,601,440 352,310,661,889 10,376,807,500 364,655,070,389 39 276,968,107,440 source: transportation agency of bekasi, data was processed by researchers from table 3 it can be seen that the sharing funds of pkb revenue from the province has not been able to finance the allocation for road maintenance, road construction, and means of transportation. it can be seen that the percentage of revenue sharing from the province has not been suitable yet with the law, become the maximum action for the realization of the allocation of funds from pkb. so the first indicator has been fulfilled, namely the compliance of the implementer as the implementer of the policy and the compliance of the tax subject in terms of fulfilling tax payment obligations. the second indicator is the smooth implementation of routine functions and the minimum number of problems that arise. the word routine means a regular procedure. the procedure itself is certain stages in a program that must be carried out to achieve a goal, with the smooth of routine, and implementation of the activity program, it can make good implementation as well so that the successful policy implementation can be marked by the smooth routine of functions and there were no problems encountered. before knowing the collection and budgeting processes in the field technically, we can see an overview of the motor vehicle tax revenue process to its allocation as follows: picture 1 pkb acceptance process until its allocation source: primary data, processed by researchers pkb revenue sharing to province 70% apbd pad of bekasi city (bpkad) profit sharing of 30% pkb to bapenda bekasi city pkb of bekasi city, west java province (samsat) budgeting to transportation agency of bekasi city for: 1) road construction 2) road maintenance 3) means of transportation mode implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 171 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 from the picture above, it explains that the motor vehicle tax that has been received by bapenda of bekasi city is in the form of profit-sharing from west java province of 30% which is then managed by the regional financial and asset management agency through the apbd process. . through the apbd, it can be budgeted for dishub as the agency that responsible for road construction, road maintenance and means of transportation, so motor vehicle tax receipts will be returned to the public. so the second indicator has been fulfilled because it has been running based on the established procedure. as there was no problem occurred in the field, it can show the level of success of a policy implementation where all those concerned understand their duties and carry out them well. the transportation agency must improve more about the services and facilities that many bekasi city residents complain about congestion, many roads with holes and lack of discipline for public transportation, for example by adding traffic officers, making a shelter or places for public transportation to stop, making call centers so that if there are reports about damaged roads, it can be immediately followed up, and it is hoped that all related parties, such as bependa, bpkad, and non-governmental parties, namely the bekasi city regional government budget team, will coordinate more with each other and prioritize public facilities in bekasi city. the third indicator is the realization of the performance and impact that is wanted which is the form of successful policy implementation. the success of the policy or work program is also reviewed from the perspective of the implementation process and the perspective of the results. if it is observed from the perspective of the existing process in the field, namely the less optimal service process carried out by the transportation agency, in the form of good public facilities services whereas the funding source exceeds the allocated budget, but has not been able to touch areas that are far from the center of bekasi city. if it is viewed from the perspective of the results, we can see that the intended results are public facilities in the area of bekasi city. the lack of public facilities in bekasi city indicates that the services provided by the transportation agency are not optimal. the lack of optimal performance of the transportation agency is due to the limited work support facilities the budgeted funds are quite large, but the clarity of the source of the fund cannot be seen namely that the form of the allocation of funds for its allocation and the need for activities besides construction, road maintenance and several means of transportation modes, it becomes the funds that should have been able to be realized then it is delayed based on the interview with mr. tejo as the executor in the field of development "concerning the budgeting costs, for example, if we allocate 1 billion, and it is given only 600 million, we end up doing efficiency". the obstacles faced in the implementation of the earmarking tax policy on motor vehicle tax collection in bekasi city are first, the bekasi city regional government does not seem to have any preparations related to the implementation of the earmarking policy for motor vehicle taxes. the source of funds that will be allocated for the construction, maintenance of roads and means of transportation modes have not specifically come from pkb. both for the construction, maintenance of roads and means of transportation modes as the technical implementer is the transportation agency, all of these expenses are financed by the bekasi city apbd. second, there is still a lack of preparation of the parties related to the implementation of the earmarking policy. skpd that related to the implementation of the earmarking policy on motor vehicle taxes includes the bapenda, the transportation agency, and the bekasi city bpkad. third, unclear implementing regulations for the implementation of earmarking policies on motor vehicle taxes. based on the obstacles that have been explained, the efforts made by the government so that the implementation of the earmarking policy runs well and under applicable regulations, the implementation of earmarking tax policy on motor vehicle taxes in bekasi city novlyani 172 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 first thing that must be done by bpkad as budget management is to make funding posts from the tax sector to be allocated as mandated by laws and regional regulations, for example, for road maintenance, a source of funding from the pkb revenue sharing, so that it is clear and measurable where the funding come from. the second skpd related to the implementation of earmarking policies, such as the bapenda, dishub, and bpkad in bekasi city, are more updating information on applicable regulations for the realization of good government and the creation of good services for the community. third, governments are trying to review the regulations regarding profit sharing so that the percentage given is not only 30% for districts/cities but increases to 40% so that the funds can be used optimally for allocations from pkb, then make specific regulations for the tax sector to be allocated and percentage the allocation can also be mentioned so that it can be seen clearly and measurably. if the regulations exist, the public will know that there is an allocation of taxes that have been paid for the sake of creating a clean government. conclusion the implementation of the earmarking tax policy on motor vehicle tax collection in bekasi city which is done by the west java provincial government has been suitable with applicable regulations. regarding the allocation of the results of the motor vehicle tax in bekasi city, it has not been maximized, which is only 29.62%, while what is mandated by the regional tax and retribution law is 30%. the smoothness of the routines and functions in terms of collecting motor vehicle taxes is suitable with the applicable sop. meanwhile, the allocation of funds from the yield of motor vehicle tax at the bekasi city transportation agency for public facilities and transportation infrastructure has not been maximized, as proved by a large number of inadequate facilities. the obstacles faced by the government of bekasi city in implementing this policy are that the bekasi city government has not had a special funding post / account for the allocation of funds and sop on earmarking tax. besides, skpd related to the implementation of earmarking tax are still not active with the prevailing regulations and policies. likewise, no specific regulations are governing the allocation of funds. efforts made by the regional government of bekasi city in overcoming these obstacles, namely the local government creates a special post/account for allocation and making sop on earmarking tax. second, local governments make socialization about the earmarking tax policy for skpd related to the implementation of earmarking tax so that skpds have a 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2012. studi tentang administrasi publik. jatinagor: erlangga. sebayang, karolina br dan rina tri setiasih. 2018. analisis kebijakan earmarked tax atas pajak kendaraan bermotor sebagai upaya peningkatan pelayanan publik (pembangunan dan pemeliharaan jalan) di provinsi jawa tengah. analysis journal 7 (1), fakultas ekonomi, universitas negeri semarang (economics development tahun 2018) tax di indonesia. http://www.fiskal.depkeu.go.id/2010/m/edef-kontenviewmobile.asp?id=20131028104645787550783 . diakses 16 maret 2019. http://www1.jabarprov.go.id/index.php/pages/id/1062. diakses tanggal 11 juni 2019. undang-undang no 28 tahun 2009 tentang pajak daerah dan retribusi daerah the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 295-303 295 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city mainita hidayati1, wuwuh andayani2, ratih kumala3, agus subagiyo4, pebriana arimbhi5 12345institut ilmu sosial dan manajemen stiami, jakarta, indonesia correspondent: mainita.h@gmail.com1, wuhanku1112@gmail.com2, rhaty07@gmail.com3, agussbagiyo@gmail.com4, pebriana.arimbhi@gmail.com5 received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: hidayati, m., andayani, w., kumala, r., subagiyo, a., arimbhi, p. (2021). modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city. ilomata international journal of tax & accounting 2(4),295-303. https://doi.org/10.52728/ijtc.v2i4.367 abstract: tax modernization seems to be very necessary in the current digital era. this considers that taxes are one of the largest sources of tax revenue, both in the central and regional regions. this study focused on the scope of the regions, one of the sources of regional tax is parking tax. the phenomenon that occurred in this study was the low acceptance of parking tax on regional taxes. in order to increase regional income and prevent any leakage of funds, the bekasi city regional revenue agency has installed a data management application in several places of business, namely tapping box. tapping box is a machine or transaction recording device that can record all transaction data that occurs and sends it to the bekasi city regional revenue agency server through the global system for mobile network (gsm). the purpose of installing the tapping box is as a means of monitoring and testing taxpayer compliance that displays the financial reports of transaction in a transparent and accountable way. this study used a descriptive type of research with a qualitative approach. also, the data was analyzed by using qualitative method. the results of this study indicated that parking tax supervision has not gone well because there were still some taxpayers who have not installed the tapping box. the result of this tapping box installation is that the realization of parking tax receipts has not reached the set target, but the parking tax revenues have increased comparing to those in the previous year. moreover, if the installation of the tapping box is evenly distributed, the parking tax revenue will be maximized. keywords: modernization, tapping box, local tax this is an open access article under the cc-by 4.0 license. introduction for a country, taxes are a source of income used for infrastructure development, employee costs, paying foreign debts, and so on. taxpayer compliance determines the achievement of tax revenue targets in a country. (bird & zolt, 2005; tscharaktschiew & reimann, 2021) in the era of regional autonomy, one of the sources of income for the region or local revenue comes from local taxes or https://www.ilomata.org/index.php/ijtc mailto:mainita.h@gmail.com mailto:wuhanku1112@gmail.com mailto:rhaty07@gmail.com mailto:agussbagiyo@gmail.com mailto:pebriana.arimbhi@gmail.com https://doi.org/10.52728/ijtc.v2i4.367 modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 296 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc levies. one source of income for the region comes from levies or parking taxes. parking tax is a tax levied by the region or private parties who provide parking spaces in an area. (feitelson & rotem, 2004; gragera et al., 2021). so far, parking tax revenues in the regions have not been effective in increasing local revenue even though the potential for parking tax revenues is quite large. this indicates that there are problems in the effectiveness of parking tax receipts, including not achieving the target or realization of parking tax receipts (ostermeijer et al., 2021; parmar et al., 2021) nowadays, the modernization of tax administration carried out by the government is certainly not only to pursue and reach the optimization of tax collection, but there is another side that is also important to do together in order to lead to a change in the taxation paradigm. (mardiasmo, 2016). tax provisions, procedures, and activities are also continuously directed to improve services, so they become business friendly for the community, especially for business people (pandiangan, 2008). modernization of tax administration affects the quality of tax services because it is one of the important steps taken by the government as a tangible manifestation of concern for the importance of service quality (rahayu, 2010). the modernization of tax administration is a reform process of reformation in the field of tax administration that is carried out comprehensively. this includes aspects of information technology, namely software, hardware, and human resources with the aim of achieving a level of tax compliance and achieving high productivity of tax officials. thus, it is expected this can reduce the practice of corruption, collusion, and nepotism (kkn) (sadhani, 2012). furthermore, the modernization of tax administration can be interpreted in terms of a more sophisticated information technology (it) application (rosdiana & irianto, 2012). the phenomenon occurred in this study is the low revenue of parking taxes on regional taxes. this is due to the lack of supervision of the performance of parking tax collection. this supervision was carried out because many taxpayers did not pay taxes owed as they should, were late in paying taxes, and manipulated the turnover they receive. (ardeshiri et al., 2021). therefore, a data management and reporting application which can display financial transaction reports in total to support the transparency of tax payments was needed. in order to increase regional income from the tax sector and prevent tax leakage, regional revenue agency (bapenda) bekasi city has collaborated with bjb bank to install an online system for regional taxpayer transactions in the form of a tapping box tool. the installation of the tapping box is regulated in bekasi mayor regulation number 132 of 2019 concerning collection and management of regional taxes through online system transactions. tapping box is a machine or transaction recording device that can record or capture all transaction data that occurs, then sends it through the global system for mobile (gsm) network to bapenda’s server. this tool is functioned to record taxpayer transaction data, so it avoids fictitious internal reports as it can find out real income. meanwhile, for local governments, this tool is useful for transparency, accountability, effectiveness and efficiency in tax collection. thus, through the tapping box system, it is expected that this is able to increase the income of bekasi regency (atmaja, 2019). the results of research conducted by (fauzi, 2019) from the university of lampung (2019) shows that the use of the tapping box in an effort to overcome the crime of regional tax corruption is an electronic monitoring system for regional tax collection (e-billing) utilizing modern technology, namely the tapping box and the government is using more efforts not to be taxed on taxpayers who commit fraud. local tax corruption. another study conducted by the use of the tapping box can lead to leakage of restaurant taxes, especially if the restaurant pays taxes, namely restaurant entrepreneurs. during the use of this tool in 2019, there was an increase in restaurant https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 297 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax revenues compared to 2018 so that its implementation had a positive impact on increasing restaurant tax results in bandar lampung city. based on the description above, the author is interested in discussing and describing it in a paper entitled "modernizing of administration of parking tax collection with tapping boxes as a supervision and compliance function of regional taxpayers in bekasi city.” last, the authors provided limitations on what will be studied further. as for what is discussed in this study was regarding to the parking tax supervision using tapping boxes in an effort to increase regional taxes of bekasi city, as well as the obstacles and efforts made by the bekasi city regional revenue agency. moreover, the purpose of this study was to find out and analyze parking tax supervision using the tapping box along with the obstacles and efforts in parking tax supervision using the tapping box. method research approach and type the research approach used in this study was a qualitative approach and the type of research was descriptive. this was to facilitate an objective description of parking tax supervision using the tapping box, as well as the obstacles and efforts made by the bekasi city regional revenue agency in parking tax supervision by using the tapping box. as a result, it was expected to increase the parking tax revenue at the bekasi city regional revenue agency. data collection technique data collection techniques are the most strategic steps in research as the main purpose of research is to obtain data (sugiyono, 2017:224). the data collection techniques used in this study were interviews, observation and documentation. the data collection techniques based on the way to obtain in this research were primary data and secondary data. the primary data is the data collected directly by research from the first source at the research site, while the secondary data is data collected by organizations that have been legalized or published. data analysis technique the data analysis technique used in this research was descriptive qualitative. the data analysis in qualitative research is a stage consisting of systematic activities to build links of data research in an effort to form meaning that will be used to answer research questions. the data analysis technique used by the author in this study had four criteria, namely: credibility, transferability, dependability, and confirmability. research sites this research was conducted at the bekasi city regional revenue agency office which was located at jl. ir. h. juanda no. 100, east bekasi, margahayu, bekasi city, west java 17530. result and discussion the results obtained were based on the results of interviews, observations and documentation. the interviews were conducted with the parties involved in this research such as regulators, academics, and taxpayers. next, it was also by analyzing the data obtained to determine parking tax supervision using the tapping box, along with the obstacles and efforts made by the bekasi city regional revenue agency. https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 298 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc discussion is the most important thing in a study. from the results obtained from the research, the authors describe the discussion as follows. 1. the supervision of parking tax by using tapping box in the effort of improving local tax in bekasi city supervision is the process of determining performance measures and taking actions that can support the achievement of the expected results in accordance with the predetermined performance. tax supervision by using this tapping box is regulated in bekasi city mayor regulation number 132 of 2019 concerning collection and management of regional taxes through online system transactions. in this theory, there are three indicators that must be analyzed, namely indicators of increasing discipline, indicators of achieving targets for carrying out tasks, and indicators of reducing leakage. a) improvement of discipline tax supervision is important to improve taxpayers’ discipline in reporting and paying taxes. by installing this tapping box, it is expected to increase the discipline of parking taxpayers in reporting turnover and paying taxes. after the installation of this tapping box, every 1x24 hours or every 12.00 a.m., the taxpayers are required to send and report transaction data originating from the tapping box to the regional revenue agency using the global system for mobile (gsm) network. then, from the data sent by the taxpayer, it will be represented in the form of a dashboard interface and the bapenda tax office can monitor whether the tax paid by the taxpayer is correct or not. the following is the data on the number of parking tax payers who reported and paid both ‘on time’ and ‘not on time’ in 2019. table 1. number of parking taxpayers who reported and payed ‘on time’ and ‘not on time’ in 2019 information number of taxpayers on time 2913 not on time 147 source: bekasi city regional revenue agency based on the table above, it can be seen that there are 2,913 taxpayers who report and paid taxes on time, while those who were not on time in reporting and paying taxes were 147 taxpayers. from these data, it can be concluded that the level of discipline of taxpayers was quite good and only 4.8% left who have not been disciplined in reporting and paying their taxes. b) less leakage in reporting and paying parking taxes, there were still some taxpayers who did not pay taxes owed as they should, were late in paying taxes, and manipulated the turnover received, causing tax leakage. this is due to the lack of supervision of the performance of tax collection. the purpose of installing an online system in the form of a tapping box is to prevent fraud, so that local tax revenues are maximized. this tool is functioned to record all taxpayer transactions. thus, it was expected to avoid fictitious internal reports, because from this tapping box, the real income can be known. https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 299 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc bapenda's tapping box taxpayers of parking bapenda self assesment system regional treasury figure 1. flow of parking tax collection by using tapping box source : the results of the researcher's interview with the supervision section of the bekasi city regional revenue agency the regional revenue agency cooperates with bjb bank in the installation of the tapping box system at the parking tax payer's place of business. previously, parking taxpayers had received a circular letter from bapenda for the installation of the tapping box. after the installation of the tool, all transactions for parking taxpayers will be recorded by the tapping box machine and every 1x24 hours the taxpayer must send or report the data recorded by the tapping box to the regional revenue agency using the gsm network. every month, the taxpayer pays parking tax in accordance with the existing rates in the bekasi regional regulation number 03 of 2010 by means of a self-assessment system. here, the tapping box is not a tax determination tool, but a tool to monitor how far transactions are made by parking taxpayers. from here, the bekasi city regional revenue agency can check whether the amount of tax paid by the taxpayer is appropriate or not. if the taxpayers intentionally misuse the tapping box, they will receive an appeal and sanctions. based on the tapping box flow above, it is certain that there will be no tax leakage until the money enters the regional treasury. thus, through the tapping box system, it is expected to be able to increase the income of the city of bekasi. regarding the income after the installation of the tapping box, based on table 2 regarding the target and realization of parking tax revenue, it can be seen that the realization of parking tax receipts after the installation of the tapping box has increased to rp 10.740.424.485. if the installation of this tapping box is further maximized, the increase in parking tax revenue will be maximum. c) achievement of duties’ goal the bekasi city regional revenue agency is less optimal in carrying out its duties to install the tapping box. based on data on the realization of the installation of the tapping box, the number of parking taxpayers was 261 taxpayers, but only 51 tools had been installed. this was because there were still several obstacles, including many taxpayers who have not used cash register payments or digital-based cash registers, taxpayers did not provide access to the installation of tapping boxes and the impact of the covid-19 outbreak. however, bapenda has attempted to conduct socialization or approach to taxpayers directly or through printed media or radio. for parking taxpayers who have not installed the tapping box, they are still on a waiting list, which will definitely be installed in the future. 2. obstacles that occurred in parking tax supervision by using tapping boxes in an effort to increase bekasi city taxes in the implementation of parking tax supervision activities by using the tapping box, several obstacles are often found. by doing more in-depth interviews on the parties concerned and that plays a role in the implementation of the supervision tax, researchers found some obstacles faced by revenue agency of city of bekasi in the supervision of the parking tax by using tapping box. the obstacles occurred which making tax control activities using the tapping box difficult were as follows. https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 300 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a) power out the power failure caused the tapping box machine unconnected, so every transaction would not be detected or recorded. b) the tapping box could be turned off by the taxpayer himself. there are several taxpayers who deliberately turn off the tapping box tool, so the transactions that occurred were not detected. therefore, it could minimize the taxes paid. c) there were still some taxpayers who have not used the cash register or digital-based-cash register tapping box can only be installed on taxpayers who have used the cash register. d) the installation of tools has not been evenly distributed due to being constrained by covid19. the government's policies regarding social distancing and large-scale social restrictions (psbb) have made it difficult for officers to meet taxpayers. in addition, several places of business were forced to close due to the government's policy regarding the handling of covid-19. 3. efforts made in overcoming obstacles that occurred in parking tax supervision by using tapping boxes in an effort to increase bekasi city taxes in the implementation of tax supervision activities by using the tapping box, surely, there are several efforts made to overcome the obstacles that arose in the tax supervision activities. based on the results of the study, the efforts made by the bekasi city regional revenue agency were as follows. a) a sim card and battery should be provided. when the power is out, there is still battery power and a sim card to store transactions that occur during a power outage. b) the taxpayers who turned off the tapping box tool will be detected through the dashboard in bapenda. bapenda will directly contact the taxpayers who intentionally turned off the tapping box tool and urges them to turn the tapping box back on. if the taxpayer makes the same mistake, they will receive administrative sanctions listed in the bekasi mayor regulation number 132 of 2019. c) bapenda will prepare tools outside the tapping box this tool will be installed specifically for taxpayers who have not used the cash register so that in the future tax supervision will be maximized. d) the taxpayers were still on the waiting list. there are still some taxpayers who are still on the waiting list, which will all be installed in the future. https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 301 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of the research, discussion, and interpretation that have been described previously, and with reference to the supervisory theory according to arifin abdul rachman (2001: 23) and the results of previous studies, the conclusions can be drawn as follows. 1) tax supervision by using the tapping box carried out by the bekasi city regional revenue agency as a whole has not been running well. here, based on the results of the study indicated that the implementation of tax control using the tapping box has not reached the predetermined target. the realization of parking tax receipts after the installation of the tapping box did increase by 10 m, but this has not yet reached the predetermined target. this was because the installation of the tapping box tool has not been evenly distributed and there were still many taxpayers who have not used a cash register for payment or a digital-based cash register. thus, the tapping box could not be installed. if the installation of the tapping box was carried out evenly, regional income from parking taxes will increase more. 2) the obstacles in the implementation of parking tax supervision by using the tapping box, namely power outages, the reluctance of taxpayers in implementing the tapping box installation, there were still many taxpayers who have not used cash register payments or digital-based-cash registers and the impact of covid-19 which made it difficult for officers to meet the taxpayers. 3) the efforts made by the bekasi city regional revenue agency in overcoming tax control obstacles by using the tapping box, namely the regional revenue agency should prepare a sim card and battery that can accommodate transactions that occur during a power outage. then, the regional revenue agency should approach and socialize to taxpayers to provide understanding to them about the purpose and benefits of the tapping box. moreover, the agency should ensure that entrepreneurs will not be harmed, so the taxpayers want to install the tapping box tool. regarding to the parking taxpayers who have not used the cash register, the bekasi city regional revenue agency will prepare a special tool outside the tapping box for taxpayers, so in the future tax supervision will be maximized. next the bekasi city regional revenue agency also urges each regional technical implementation unit (uptd) to carry out regular monitoring and evaluation to ensure that the tool functions properly. moreover, they should take an inventory of existing problems/obstacles and report the results of the monitoring and evaluation to the head of the regional revenue agency every friday for every week. based on the discussion of the conclusions that have been submitted, the authors provide the following suggestions: 1) related to the limited human resources in the installation of the tapping box tool, the bekasi city regional revenue agency should increase the number of tapping box installation officers. it is because the tapping box installation officer is not proportional to the number of parking taxpayers registered in the city of bekasi. such lack of human resources also causes the implementation of socialization regarding the benefits and importance of using the tapping box has not been maximized. 2) for taxpayers who do not want their business to be installed with a tapping box and those who have been installed but they misuse the tapping box, the bekasi city regional revenue agency should provide strict sanctions in the form of closing the business for entrepreneurs who do https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 302 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc not obey, giving fines, or sanctions in the form of confinement by renewing existing regulation of mayor (perwal). 3) for taxpayers who have not used cash register payments or digital-based-cash registers, the bekasi city regional revenue agency should immediately launch a special tool that has the same function as the tapping box. it is for a tax control and increasing local tax revenue. reference ardeshiri, a., safarighouzhdi, f., & hossein rashidi, t. (2021). measuring willingness to pay for shared parking. transportation research part a: policy and practice, 152, 186–202. https://doi.org/10.1016/j.tra.2021.08.014 atmaja, e. s. (2019). tapping box wajib pajak kabupaten bekasi. jurnal indonesia baru. https://jurnalindonesiabaru.com/2019/12/17/tapping-box-wajib-pajak-kabupaten-bekasiakan-di-pasang-560-se-wilayah-bekasi/ bird, r. m., & zolt, e. m. (2005). the limited role of the personal income tax in developing countries. journal of asian economics, 16(6), 928–946. https://doi.org/10.1016/j.asieco.2005.09.001 fauzi, d. r. (2019). penggunaan tapping box dalam upaya penanggulangan tindak pidana korupsi pajak daerah (studi di kota bandar lampung) [universitas lampung]. https://docplayer.info/187751410-penggunaan-tapping-box-dalam-upaya-penanggulangantindak-pidana-korupsi-pajak-daerah-studi-di-kota-bandar-lampung-skripsi-oleh-desta-riskafauzi.html feitelson, e., & rotem, o. (2004). the case for taxing surface parking. transportation research part d: transport and environment, 9(4), 319–333. https://doi.org/10.1016/j.trd.2004.04.002 gragera, a., hybel, j., madsen, e., & mulalic, i. (2021). a model for estimation of the demand for on-street parking. economics of transportation, 28, 100231. https://doi.org/10.1016/j.ecotra.2021.100231 mardiasmo. (2016). perpajakan (mardiasmo (ed.); iii). andi. http://www.library.usd.ac.id/web/index.php?pilih=search&p=1&q=0000133697&go=det ail ostermeijer, f., koster, h., nunes, l., & van ommeren, j. (2021). citywide parking policy and traffic: evidence from amsterdam. journal of urban economics, 103418. https://doi.org/10.1016/j.jue.2021.103418 pandiangan, l. (2008). modernisasi & reformasi pelayanan perpajakan berdasarkan uu terbaru (l. pandiangan (ed.); i). pt elex media komputindo. https://opac.perpusnas.go.id/detailopac.aspx?id=491531 parmar, j., das, p., & dave, s. m. (2021). a machine learning approach for modelling parking duration in urban land-use. physica a: statistical mechanics and its applications, 572, 125873. https://doi.org/10.1016/j.physa.2021.125873 rahayu, s. k. (2010). perpajakan indonesia : konsep dan aspek formal (s. k. rahayu (ed.); i). graha ilmu. http://inlislite.uin-suska.ac.id/opac/detail-opac?id=19839 rosdiana, h., & irianto, e. s. (2012). pengantar ilmu pajak: kebijakan dan implementasi di indonesia (h. rosdiana (ed.)). cv rajawali. http://lib.ui.ac.id/detail?id=20339121 https://www.ilomata.org/index.php/ijtc modernization of administration of parking tax collection with tapping box as a supervision and compliance function of regional taxpayers in bekasi city hidayati, andayani, kumala, subagiyo, arimbhi 303 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sadhani, d. (2012). pajak menuju good governance melalui modernisasi (d. sadhani (ed.); ii). pt rineka cipta. tscharaktschiew, s., & reimann, f. (2021). on employer-paid parking and parking (cash-out) policy: a formal synthesis of different perspectives. transport policy, 110, 499–516. https://doi.org/10.1016/j.tranpol.2021.07.002 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 3 july 2020 pp.161-169 https://www.ilomata.org/index.php/ijtc 161 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the effect of applying blockchain to the accounting and auditing iman supriadi1, hendra dwi prasetyo2 ,miya dewi suprihandari3 123faculty of economics, stie mahardhika surabaya correspondent : iman@stiemahardhika.ac.id submitted : june 26, 2020 revised : july 9, 2020 published : july 30, 2020 abstract blockchain provides an extreme brand-brand new method towards document, procedure, as well as keep monetary info and deals. it has actually the prospective towards essentially alter the yard of the bookkeeping occupation as well as improve business community. within this particular short post, our team talk about the ramifications of blockchain in the business of bookkeeping as well as bookkeeping. using a blockchain can help provide clarity on asset ownership and the existence of liabilities, and can dramatically increase efficiency for an accountant. blockchain offers the potential for accounting and auditing. blockchain helps auditors to track an account. blockchain technology for auditors has conducted audit traces that they follow. for an accountant, blockchain helps reconcile, trace the ownership of assets and authenticate transactions through features found in the technology. blockchain can be used as a source of verification for data reported by accountants to users of the information generated by accounting. keywords: blockchain, internal control, accounting, auditing. introduction the facts prove the presence of the industrial revolution 4.0 forced to change human life and work fundamentally. "digitalization, computing power, and data analytics have given birth to surprising breakthroughs in various fields. industrial revolution 4.0 is capable of disrupting human life and even disrupting civilization on this dear earth. disruption of the industrial revolution 4.0 forced people to bring innovations. separation of the industrial revolution 4.0 has changed the human culture on this earth. blockchain is known as the technology underlying cryptocurrency like bitcoin, and blockchain has actually been actually thought about among one of the absolute most considerable turbulent innovations after the web (swan 2015; yermack 2017). this has actually wide ramifications for information handling, gear box, storing as well as safety and safety (brandon 2016; gross, hemker, hoelscher, as well as reed 2017), as well as has actually the prospective towards produce a brand-new community for dealing with bookkeeping info (dai as well as vasarhelyi 2017; kokina, mancha, as well as pachamanova 2017). technology disruption attacks the discipline of accounting, known as blockchain technology. blockchain technology emerged in the 1990s by presenting a digitizing system. blockchain is a promising technology for real-time accounting records and continuous monitoring (supriadi et al., 2020). blockchain technology is a giant set that registers all assets and accounting systems to transact on a global scale. blockchain technology encourages the emergence of ifrs (international financial reporting standards) because globalization is inevitable. the use of blockchain can increase the accounting profession's potential by reducing maintenance costs and reconciling ledgers. however, the blockchain can be a threat to accounting because the blockchain will take over the work of accountants. the reality shows that the blockchain empowers the accounting profession to validate economic existence. https://www.ilomata.org/index.php/ijtc mailto:iman@stiemahardhika.ac.id the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 162 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 blockchain is a crucial technology that supports efficiency and transparency. so blockchain, which is a disruption, should not be avoided by running. but the blockchain must be welcomed because the blockchain provides benefits that enhance the professional potential, one of which is the accountant. accountants, as a profession in accounting, can be educators, management accountants, and accountants (auditors) to carry out their duties and be brave to make changes. by making changes makes the accounting profession a necessity for an organization. it was thus making accounting a relevant discipline in helping human life. this research is a development from previous researchers namely the holy scriptures, william raphael, jon riviello, matthew taylor, peter valiente, iliana oris (2017) that analyzed blockchain innovation as well as its own prospective effect on the investigate as well as guarantee occupation, liu, manlu wu, kean xu , jennifer jie (2019) that analyzes exactly just how will certainly blockchain innovation effect bookkeeping as well as bookkeeping: permissionless versus permissioned blockchain. this research study is actually likewise the advancement of a comparable subject, specifically examine carried out through firmanto, yuki (2017), as well as nuraliati, ayke azwari, peny cahaya (2019). this research study attempts to discuss the innovation as well as its own feasible effect on company, particularly on the bookkeeping occupation, in addition to exactly just how innovation can easily create a distinction that's various coming from typical as well as demonstrate how these functions steer prospective requests coming from the blockchain. although there's no question some technical as well as lawful difficulties that should relapse prior to the blockchain could be completely integrated right in to the globe monetary audio body. the distinct mix of technological understanding as well as company bookkeeping, creates accounting professionals extremely well fit to assist style atmospheres as well as services that could be depended on due to the blockchain. in the blockchain brand-brand new deals are actually acquired with each other right in to obstructs as well as contributed to the chain of all of previous acquisitions, along with a cryptographic procedure that's complex to perform, however that makes it simple towards verify that the background of all of deals is actually genuine. blockchain is actually a community journal, where teams of purchases or even occasions are actually tape-taped as well as kept in information frameworks like chains (simoyama, grigg, bueno, as well as oliveira 2017). this deal team is actually referred to as a obstruct as well as purchased a chain based upon the deal opportunity. the following obstruct is actually included throughout of the string while preserving the hash of the previous obstruct (crosby, pattanayak, verma, as well as kalyanaraman 2016). in the blockchain there's the phrase hash, which is actually a type of electronic trademark, electronic impact, or even recap of the obstruct utilized for the verification procedure as well as its own location in the chain. blockchain jobs with an agreement procedure. all of nodes will certainly have the ability to determine the lengthiest as well as very most current journals as well as settle on exactly just what they are actually. blockchain can easily enhance the effectiveness of bookkeeping procedures, particularly in the deals as well as possessions area, which runs as a global entrance bookkeeping body. this will certainly produce assurance over legal civil liberties as well as responsibilities as well as funds, which will certainly equip the bookkeeping occupation towards broaden its own range towards document much a lot extra kinds of tasks compared to prior to. besides, accounting professionals can easily likewise check out much a lot extra carefully the financial truths that underpin deal documents. the blockchain's outline consist of brand-brand new deals coming from coming from one individual however infect an similar journal system, without a main operator, all of deals as the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 163 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 well as documents are actually long-term, cannot be actually tampered along with or even erased, as well as numerous programmable blockchains, enable the automation of brand-brand new deals as well as manages with the wise agreement. blockchain is actually a mix of company designs such as financial rewards that sustain advanced innovation. dealing with blockchain experts, accounting professionals can easily assist collection requirements that will certainly press blockchain advanced. a simple simulation of blockchain as shown below: a b public figure 1. triple entry accounting source : digitalis.id blockchain isn't uncommon for interesting innovation patterns. within this particular situation, it is actually a back-office service for moving possession of possessions as well as audio information on the internet. it could be stated that blockchain is actually a system for bookkeeping as well as company to perform. within this particular research study, our team have actually summed up exactly just what our company believe to become the essential elements of blockchain innovation, right in to 3 primary phrases that discuss exactly just what creates blockchain various coming from journals. the huge reserve that's much a lot better understood today in the bookkeeping procedure is actually a data source had as well as operate through one celebration. blockchain is actually various. the outline of blockchain are actually as observes: 1. proliferation: certainly there certainly are actually numerous duplicates of the blockchain journal, as well as there's no 'master' duplicate. all of individuals have actually accessibility towards the ledger's complete text message, plus all duplicates are actually comparable and similar. no celebration has actually command of the bookkeeping. brand-brand new deals could be published rapidly as well as will certainly infect printings of all of individuals. 2. long-term: along with each individual possessing their journal duplicate, the reality is actually identified through agreement. previous deals cannot be actually modified without bulk authorization, which implies that blockchain documents are actually long-term. all of journals are actually maintained through each individual as well as could be confirmed and inspected. 3. configured: some blockchains enable course code to become kept in it, in addition to journal entrances create automated diary entrances that are actually performed immediately when set off. this is actually exactly just what is actually referred to as 'smart contract'. in out in out in out the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 164 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 whether blockchain could be been applicable in a specific company or even industry will certainly depend upon whether this high top premium is actually a preferable option towards current techniques. an outstanding blockchain request fixated expense as well as opportunity benefits gets rid of the main celebrations of the body, as well as enhanced safety and safety as well as assurance coming from possessing an agreement body. blockchain isn't a solitary innovation, however instead a procedure a method of performing points towards document deals. unlike the web, where information is actually discussed, blockchain possession could be moved coming from one celebration towards one more. blockchain is actually an innovation design that's commonly talked about for a number of factors. for instance, in a market or even company procedure along with numerous celebrations carrying out deals, it can easily get rid of the have to combine/reconcile various journals. this journal is actually dispersed amongst all of individuals to ensure that it can easily decrease the expense of certainly not needing to pay out the main authorization towards preserve the precision of the bookkeeping. each individual in the journal can easily monitor all of previous deals, therefore enabling enhanced openness as well as blockchain towards carry out self-audits. the very initial 2 of the 3 outline proliferation as well as long-term are actually intrinsic towards the blockchain as well as are actually certainly not optional. this implies that every prospective request should desire (or even a minimum of be actually neutral along with) these important high top premiums. for instance, long-term documents create some tasks certainly not appropriate for blockchain services, like those including keeping unencrypted individual information. along with each individual possessing accessibility fully journal, various other requests might be actually constricted if there's an issue of opening up readily delicate information. while information on the blockchain could be secured, a duplicate of the secured information will certainly still be actually offered towards all of individuals. a few other challenges of the blockchain could be decreased or even conquer through concentrated advancement, however these high top premiums are actually an essential component of exactly just how the blockchain is actually developed. the basic journal body that's dispersed outdoors the blockchain might disregard or even decrease these high top premiums, however it should be actually traded for safety and safety or even various other high top premiums. method this research is qualitative research with library research. literature research is more than just serving the functions mentioned to obtain research data. strictly library research limits library collection materials activities without the need for field research (zed, 2008). qualitative research library research is used to examine the effect of the blockchain on accounting and auditing. the data source used in this study is secondary data. in this study, secondary data is derived from literature, articles, journals, and websites on the internet regarding the research conducted. secondary data taken is the literature on the workings of the blockchain that will affect the field of accounting and auditing. in this study, the data collection technique used was a documentary technique. this research is a qualitative study with a literature study to produce a blockchain concept that can be applied in the field of accounting and auditing through various literature concerned with these problems. in this study, data analysis techniques began with data reduction, then carried out the content analysis, and then conducted verification and confirmation of conclusions. the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 165 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 result and discussion the potential of blockchain technology for accounting and auditing blockchain is actually an accounting-based innovation. this associates with the move of possession of possessions as well as ways to preserve a journal of monetary info to become constantly precise. the bookkeeping occupation is actually extensively connected with the dimension as well as interaction of monetary info, in addition to the evaluation of that info. very most professions associate with guaranteeing or even determining legal civil liberties as well as responsibilities over residential or commercial home or even preparation the very best method towards assign funds. for accounting professionals, utilizing a blockchain can easily assist offer clearness on possession as well as the presence of obligations, as well as can easily significantly enhance effectiveness. blockchain has actually the prospective towards enhance the bookkeeping occupation through decreasing the expense of reconciling journals and preserving. furthermore, the blockchain likewise offers outright assurance over the possession as well as background of possessions. blockchain can easily assist accounting professionals obtain clearness around offered sources as well as their business responsibilities. it can easily likewise maximize sources towards focus on preparation as well as evaluation, instead of simply audio. together with various other automation patterns like artificial intelligence, blockchain will certainly likewise trigger much a lot extra bookkeeping deals to become performed, certainly not through accounting professionals. rather, effective accounting professionals function towards evaluate genuine financial interpretations of the blockchain document, integrating documents along with financial appraisal and truth. for instance, a blockchain may create private debtors exist, however their recoverable worth as well as financial worth are actually debatable. possession could be confirmed along with blockchain documents, however the real problem, place, as well as worth still have to be actually verified. through getting rid of reconciliation as well as offering assurance over deal background, the blockchain can easily likewise enhance bookkeeping protection. within this particular situation, it can easily carry much a lot extra factor to consider towards points that are actually presently thought about as well challenging or otherwise dependable towards determine, like the worth of information had due to the business. blockchain is actually a replacement for reconciliation function and bookkeeping. this, obviously, can easily endanger the function of accounting professionals in these areas. however, blockchain can easily likewise include stamina towards those that concentrate on offering worth somewhere else, for instance, in as a result of diligence in acquisitions and mergers. dispersed agreement on essential numbers enables much a lot extra opportunity to become invested in the area of evaluation as well as guidance, therefore the procedure is actually quicker general. blockchain implications for auditors blockchain has actually a request in an outside investigate. confirming the company's monetary condition will certainly be actually much less required if some or even every one of the deals underlie that condition show up in blockchains. this proposition will certainly offer a considerable alter in the method auditors function. blockchain services, when integrated along with suitable information analytics, can easily assist refix transactional issues that include the investigate procedure faster. auditor abilities could be utilized for much a lot extra serious issues. for instance, the investigate certainly not just examinations the information of that the deal is actually as well as just the amount of is actually the financial quantity however likewise exactly just the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 166 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 how the deal is actually categorized and tape-taped. if a deal credit rating money, is actually this cost triggered by purchases or even sets you back, or even performs it pay out creditors, or even produce possessions. this evaluation aspect frequently needs a circumstance that isn't offered towards the public however needs company understanding. along with the assist of the blockchain, auditors will certainly have actually much a lot extra opportunity towards concentrate on these concerns. how the accountant and audit profession increases its capacity with the blockchain transferring to a monetary body along with a blockchain aspect considerably provides numerous chances for the bookkeeping occupation. accounting professionals are actually viewed as professionals in audio, using complicated regulations, company establishing requirements, and reasoning. they have actually the chance towards direct as well as affect exactly just how the blockchain is actually dental implanted as well as utilized later on. besides, accounting professionals are actually likewise anticipated towards have the ability to establish services as well as solutions that are actually directed due to the blockchain. to become an essential component of the monetary body, blockchain should be actually industrialized, enhanced, and standard. this procedure will certainly most probably get years. it is been actually 9 years because bitcoin began running, as well as there's still a lot function to become performed. certainly there certainly are actually numerous blockchain as well as startup requests within this particular area, however certainly there certainly are actually few past the evidence of idea or even fly examine phase. accounting professionals have actually taken part in the research study, however certainly there certainly are actually much a lot extra occupations to perform. establishing regulations as well as requirements towards deal with the blockchain is actually no little difficulty. prominent companies as well as bookkeeping body systems ought to have the ability to carry their proficiency towards this function. accounting professionals can easily likewise function as business advisors that think about the advantages of signing up with the blockchains on their own. it likewise offers guidance on evaluating the sets you back as well as advantages of the brand-brand new body. the mix of company as well as monetary accounting professionals will certainly setting all of them as crucial advisors for business coming close to this brand-brand new innovation towards search for chances. skills for the future of accounting & auditing the blockchain as well as wise agreement method will certainly change the bookkeeping areas associating with transactional assurances as well as moving residential or commercial home legal civil liberties. decreasing task in require for reconciliation as well as administration of conflicts, integrated along with enhanced assurance around legal civil liberties as well as responsibilities, will certainly enable higher concentrate on ways to profile think about deals and for. it likewise offers growth in exactly just what locations could be accounted for. numerous present bookkeeping division procedures could be enhanced with blockchain as well as various other contemporary innovations, like information evaluation or even artificial intelligence. this will certainly enhance the effectiveness as well as worth of the bookkeeping work. due to the over, the range of abilities stood for in bookkeeping will certainly alter. some tasks, like reconciliation as well as assurances of beginning, will certainly be actually decreased or even gotten rid of, while various other areas like innovation, advisory, as well as extra value-added tasks will certainly establish. towards investigate the business effectively along with considerable chain-based deals, the auditor's emphasis will certainly change. the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 167 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 there's little bit of have to verify the precision or even the presence of blockchain deals along with outside resources. nevertheless, there's still a great deal of focus on spend for exactly just how these deals are actually tape-taped as well as acknowledged in the monetary declarations. it is actually likewise exactly just how the evaluation aspect is actually choosing. over time, much a lot extra documents can easily change towards the blockchain. if this has actually been actually accomplished, auditors as well as regulatory authorities accessing the files will certainly have the ability to analyze the deal in real-time as well as understand the beginning of the procedure much a lot extra precisely. accounting professionals don't have to be actually designers along with outlined understanding of exactly just how blockchain jobs. however they have to understand ways to recommend on the fostering of the blockchain as well as think about the effect of the blockchain on their customers and company. they should likewise have the ability to serve as a connect, after possessing discussions along with company stakeholders and technologists. accountant abilities have to be actually broadened towards consist of an comprehending of the blockchain's primary features and functions. for instance, the blockchain has actually shown up on the syllabus for aca icaew certifications. conclusion conceptually, the blockchain is actually a relocation coming from the factor where the count on coming from the journal originates from the main operator that preserves it, throughout where it originates from self-peace of mind in the body that motivates document maintaining. besides, the prospective for executing wise agreements creates it feasible to earn programmable journals. it can easily essentially alter the method all of plans run. presuming that technical challenges can easily relapse, blockchain has actually fantastic prospective. if our team just think about blockchain abilities without the wise agreement work, complete application can easily result in very most monetary systems' disintermediation. individual obstructs in between teams that frequently handle each other can easily change main authorizations like financial institutions, attorneys, and clearinghouses. along with the capacity towards communicate straight, as well as along with just one journal that never ever needs reconciliation, companies can easily conserve cash in paying out the journal proprietors as well as the initiative invested in reconciling along with their companions. eliminating unpredictability will certainly profit the economic climate through streamlining it, facilitating higher self-peace of mind in choice creating. what's much a lot extra, if required, tax obligation authorizations, regulatory authorities, or even comparable regulative body systems could be provided just sight accessibility towards the blockchain. they'll have the ability to observe as well as screen deals in real-time. such understandings can easily result in decreased sets you back as well as enhanced effectiveness of conformity tasks and regulative. long-term documents coming from the blockchain reduce the possibility of monetary criminal offense, therefore creating documents much a lot extra credible. blockchain can easily enhance the bookkeeping occupation through decreasing the expense of preserving as well as reconciling journals as well as offering outright assurance over historic possessions and possession. they were actually proactively taking part in the advancement of the blockchain along with a focus on danger command. the auditor ought to think about progressing towards affect as well as top the application of the blockchain. investigate business should change their emphasis towards evaluating danger management's efficiency as well as providing guidance on services as the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 168 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 well as assurances for interior command. quickly establishing innovation carries an outstanding chance for auditors. towards advertise top quality solutions, auditors should think about the longlasting possibility of transferring to constant bookkeeping. the blockchain request enables continuous audits because of real-time accessibility towards deal documents (johnson 2017). the following factor to consider is actually expanding the advisory work. along with sources launched coming from conventional proof compilation as well as screening, investigate business ought to think about executing suitable information evaluation in the blockchain, as well as broadening advisory solutions like command style, alter administration, as well as blockchain innovation. reference accounting, j., brawijaya, u., firmanto, y., accounting, j., & brawijaya, u. (2017). analysis of the application of blockchain in the context of prevention of accounting fraud. bible, w., raphael, j., riviello, m., taylor, p., & valiente, i. o. (2017). blockchain technology and its potential impact on the audit and assurance profession. cpa canada, aicpa, 1-28. https://www.aicpa.org/content/dam/aicpa/interestareas/frc/assuranceadvisoryservices /downloadabledocuments/blockchain-technology-and-its-potential-impact-on-the-auditand-assurance-profession.pdf brandon, d. (2016). the blockchain: the future of business information systems? international journal of the academic business world 10: 33-40 crosby, m., p. pattanayak, s. verma, and v. kalyanaraman. (2016). blockchain technology: beyond bitcoin. applied innovation review 2: 6-19 dai, j., and m. a. vasarhelyi. (2017). toward blockchain-based accounting and assurance. journal of information systems 31 (3): 5-21. https://doi.org/10.2308/isys-51804 gross, a., j. hemker, j. hoelscher, and b. reed. (2017). the role of secondary sources on the taxation of digital currency (bitcoin) before irs guidance was issued. journal of accounting education 39: 48-54. https://doi.org/10.1016/j.jaccedu.2017.02.001 kokina, j., r. mancha, and d. pachamanova. (2017). blockchain: emergent industry adoption and implications for accounting. journal of emerging technologies in accounting 14 (2): 91-100. https://doi.org/10.2308/jeta-51911 liu, m., wu, k., & xu, j. j. (2019). how will blockchain technology impact auditing and accounting: permissionless versus permissioned blockchain. current issues in auditing, 13(2), a19-a29. https://doi.org/10.2308/ciia-52540 nuraliati, a., & azwari, p. c. (2019). accounting for cryptocurrency. i-finance: a research journal on islamic finance, 4(2), 131-142. https://doi.org/10.19109/ifinance.v4i2.2885 rheinm. (2020). article. effect of blockchain on accounting and auditing. in https://digitalis.id/blog/blockchain-bidang-akuntansi-auditor/. accessed june 24, 2020 simoyama, f. o., i. grigg, r. l. p. bueno, and l. c. d. oliveira. (2017). triple entry ledgers with blockchain for auditing. international journal of auditing technology 3 (3): 163-183. https://doi.org/10.1504/ijaudit.2017.086741 supriadi, i., harjanti, w., suprihandari, m. d., dwi prasetyo, h., & muslikhun. (2020). blockchain innovation and its capacity to enhance the quality from accounting information systems: blockchain. international journal of scientific research and management, 8(02), 1590-1595. https://doi.org/10.18535/ijsrm/v8i02.em05 smith, s. s.(2017). blockchain, ai, and accounting. available at: https://www.ifac.org/globalknowledge-gateway/practice management/discussion/blockchain-ai-and-accounting https://doi.org/10.19109/ifinance.v4i2.2885 https://doi.org/10.18535/ijsrm/v8i02.em05 https://www.ifac.org/global-knowledge-gateway/practice https://www.ifac.org/global-knowledge-gateway/practice the effect of applying blockchain to the accounting and auditing supriadi, prasetyo, & suprihandari 169 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 swan, m.(2015). blockchain: blueprint for a new economy. beijing, china: o'reilly yermack, d. (2017). corporate governance and blockchains. review of finance 21 (1): 7-31 zed, mestika. (2008). library research methods. jakarta: indonesian obor foundation ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 1 october 2019 page:26-34 https://www.ilomata.org/index.php/ijtc analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal rudi hartasetiadi1, machfud sidik2 master of administration science, institute of social science and management stiami, jakarta correspondence: rudi.hartasetiadi@gmail.com submitted: 6 august 2019. revised: 23 august, 20 sept 2019. published: 30 october 2019. abstract based on the research of taxpayer who has done a cross-jurisdiction transaction, known that taxpayers have done several transactions with tax heaven country corporation. one of the goals of the transaction is to take advantage of the gap on tax treaty /p3b to achieve treaty benefit. tax auditing is a tool to ensure that the party who received the income in treaty partner countries is the beneficial owner (bo) thus there will be no misused of p3b/treaty abuse. exchange of information (eoi) is a tool for gaining information, evidence, and/or explanation to gain a conviction of who are truly received the benefit. considering the importance of quality of investigation to appeal in tax court, it is interesting to review about the usage of exchange of information (eoi) to increase the quality of tax investigation of bo dispute, in this case, directorate of objection and appeal. in arranging this research, researchers used a qualitative approach considering the focus of research is the usage of eoi on the investigation which has many factors and not monocausal means there is no one single cause from social reality. this research intends to know the use of eoi in increasing quality of tax auditing if it is reviewed from tax court verdict, supporting entities and the efforts which support the use of eoi in increasing the investigation of beneficial owner dispute. the result of this research explains that eoi usage to increase the quality of tax auditing of beneficial owner dispute has not been maximal or still low if it is assessed from the tax court verdict which dgt's percentage of losing verdict is higher than winning verdict. factors that contributes the usage of eoi in increasing the quality of examination is human resource, which have good quality and quantity of examiner, competent database system and good obedience of taxpayers, good technique of examining, clear and not 26| ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 https://www.ilomata.org/index.php/ijtc mailto:rudi.hartasetiadi@gmail.com analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik misinterpreted rules of bo and eoi, good cooperation between partner country, good coordination and support in internal unit of djp. meanwhile, entities that could obstruct usage of eoi in increasing investigation quality of beneficial owner dispute is the human resource, which means that investigation quality that has to be increased and quantity of the investigators that are not sufficient. directorate general of taxes not yet has competent database, low obedience of taxpayers, absence of rules about investigation technique about beneficial owner dispute, limited period of investigation, different interpretations from judges, inchoate and unclear information in eoi, answers of eoi request that has not fulfilled by cooperating countries and unclear and weak rules about beneficial owner keyword: exchange of information, eoi, beneficial owner, bo introduction in examining the obedience of taxpayers about the implementation of taxation law and regulation, the directorate general of taxation has the right to do an investigation. this is done to know the truth about transactional recording and the accuracy of financial statements that had arranged from accounting. therefore, an investigation is necessary. if the taxpayer investigation stated that the amount of loss, tax, and collection or discount is not supposed to be, then the taxpayer could submit the objection only to directorate general of taxation, and if the objection is not satisfying the taxpayer can appeal through tax court. table 1. number of dispute in tax court on 2011-2016 n o appellee / defendant numbers of document received 2012 2013 2014 2015 2016 1 directorate general of tax 5.114 5.188 7.289 7.454 7.080 2 directorate general of customs and excise 1.754 2.749 3.016 4.068 3.023 3 regional government 485 462 561 964 50 total 7.353 8.399 10.866 12.486 10.153 source: www.setpp.kemenkeu.go.id considering the importance of exchange of information (eoi) to determine the strength of a beneficial owner dispute which going to be put 27 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 http://www.setpp.kemenkeu.go.id/ analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik on trial in tax court, analysis of eoi usage is an interesting thing to do to increase the investigation quality on beneficial owner dispute (bacchetta & espinosa, 1995). the term beneficial owner has been introduced in the law of income tax, as the party who received the actual benefit from the income that has been received from a sourcing country (bacchetta & espinosa, 2000). taxpayer behavior in reality, with forming a scheme which done to get a facility, for example, a decrease of tax discount that has been provided by a tax treaty, by a tax subject which has no right to get the facility (giuliodori & beetsma, 2008). this is caused by using articles in the tax treaty that are not suitable for the purpose and objectives of the tax treaty (gallemore & labro, 2015). to prove the true receiver of the benefit, it is not sufficient to prove just based on internal data of directorate general of tax or any data from the taxpayer, because it involves the information of receiver entities in treaty cooperating country. therefore, the eoi procedure has an important role to find the necessary information to prove the benefit receiver of the income that has received. this research on eoi usage in increasing the quality of investigation about beneficial owner dispute is using the verdict of tax court in directorate of objection and appeal, main office directorate general of taxes. the verdict is the verdict of tax court of the beneficial owner that has been resolved in 2013 to 2015. table 2. numbers of dispute settlement of beneficial owner in tax court 2013 to 2015 no types of verdict 2013 2014 2015 grand total 1 partially granted 0 1 1 2 2 fully granted 19 38 24 81 3 declined application 0 6 0 6 jumlah 19 45 25 89 source: directorate of objection and appeal as seen from the table above, the verdict of the tax court about beneficial owner disputes from 2013 until 2015, there is more granted appeal than to hold the correction. this indicates the low quality of tax examination on beneficial owner disputes. more likely, a country will have a loss if a beneficial owner does not take into consideration. because for payment of interest, dividend and royalty to another country, should be decreased from 20% into 10% or 0%. 28 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik as seen from the table above, the verdict of the tax court about beneficial owner disputes from 2013 until 2015, there is more granted appeal than to hold the correction. this indicates the low quality of tax examination on beneficial owner disputes. more likely, a country will have a loss if a beneficial owner does not take into consideration. because for payment of interest, dividend and royalty to another country, should be decreased from 20% into 10% or 0%. method neuman differentiates the research approach into qualitative and quantitative approaches (neuman, 2011). in arranging this research, the researchers used a qualitative approach considering the focus of this research is the quality of examination which has many factors and monocausal, meaning that there is no one single cause of social reality. the other reason why the researchers used qualitative approach is that the research cannot be done experimentally as stated by marshall and rossman (1999:46) "….. research cannot be done experimentally for practical or ethical reasons"(marshall & rossman, 1999). quality of investigation is the tipping point of law enforcement in the general directorate of tax. consequently, qualitative approach is considered could determine the obedience level of taxpayers because the researchers themselves interviewed without any third parties. result and discussion community development effort through the self-assessment system needs to be followed by monitoring to actualize the goal of tax wisdom. consequently, the tax auditors in doing their monitoring duty, need to be supported by supporting factors, one of them is to imply strategical action to increase the amount of taxpayers' obedience. because the main goal of tax auditing is to increase tax compliance through law enforcement efforts to increase the tax revenue. related to the investigation of beneficial owner dispute basically to ensure that foreign taxpayers deserve rate discount from 20% to 10% or 0% on interest, dividend and royalty income. one of the monitoring forms on discount/collection reporting done by taxpayers about beneficial owner dispute is director general of tax regulation number 61/pj/2009 and director general of tax regulation number 62/pj/2009. those regulations 29 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik are domestic antitreaty abuse rules that can be implied and not contrary to other regulations in the tax treaty (p3b). quality of tax investigation on beneficial owner dispute, reviewed from the verdict of tax court which percentage of loss is bigger than winning is still low. usage on exchange of information in the investigation is expected to increase the quality of investigation on the beneficial owner dispute. with enhancement on the quality of investigation, it is expected to decrease the amount of tax dispute in objection level, and in the end increased the taxpayer obedience in fulfilling taxation duty (bucovetsky, marchand, & pestieau, 1998; eggert & kolmar, 2004). that in exchange of information implementation, there are principles that have to be watched out for as stated on other tax regulation, inter alia, minister of finance regulation no. 39/pmk.03/2017 about information exchanged, obligation to keep it confidential, possible condition to conduce eoi, conditions that have to be fulfilled before doing eoi. among other principles that have to be watched out, eoi implementation is strongly related to the human role, in this case, tax auditor. in monitoring beneficial owner case, is very important for tax auditors to understand the case that they are working on and regulations about thus the monitoring implementation can determine a precise investigating technique such as types of data that is used to plan eoi, choosing information of which going to be asked, understanding regulations, domestic, cross-country, international, etc (markis, 2003). according to interview results with informants from internal, practitioner, consultant, or academician, entities that supports the usage of exchange of information in increasing the quality of investigation on beneficial owner dispute is human resource, i.e, quantity, and quality of investigators, competent database, auditing technique, periods of auditing, regulations on beneficial owner, good obedience of taxpayer, cooperation between treaty partner countries, and coordination between djp units. meanwhile, the obstacles that can be found in utilizing exchange of information in order to increase the quality of tax auditing on beneficial owner disputes are human resources, i.e, quality and quantity of auditor that still considered less competent, directorate general of taxation has not had competent database, there are not yet any regulations about auditing technique about beneficial owner disputes, limited period, low obedience of taxpayers, different interpretations between judges about beneficial owner 30 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik provisions, incomplete information of eoi and answer that has not yet fulfilled by partner countries. according to interview results with informants from internal, practitioner, consultant, and taxpayers, efforts that could be done to increase the investigation quality on beneficial owner dispute are to increase the quality of investigator human resource, forming a competent database system, increase the knowledge awareness of taxpayers, arranging regulation about direction of investigation technique on beneficial owner dispute, increase the length of investigation period, arranging a clear law about beneficial owner in determining which has more authority in indonesia's law and regulation—minister of finance regulation, increasing the cooperation with tax treaty partner countries to harmonize the rules about beneficial owner and maintain the coordination among internal unit of directorate general of tax. conclusion according to result about analysis of the exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to the verdict of tax court from 2013 to 2015 in directorate of objection and appeal, main office of directorate general of tax can be concluded along these lines: 1. eoi usage in tax auditing about bo has a significant role in increasing the quality of investigation. information in eoi can be used as evidence in conducting fiscal correction. usage of eoi procedure in the investigation has to consider the principles that have been set in tax regulation, i.a, information that could be exchanged, obligation to keep it confidential, possible condition to conduct eoi, conditions that should be fulfilled before conducting eoi. implementation of eoi has a strong relationship with the human role, in this case, the tax auditor. it is important for tax auditor in investigating beneficial owner dispute, to understand the case and related regulation so that in investigating there is precise investigation technique such as types of necessary, planning the eoi, choosing information that probably will be requested, understanding the regulation—domestic, cross country, international, etc. therefore, in investigating, understanding and experience are necessary for investigators about the importance of eoi and regulation of bo itself. coordination among internal units in directorate general of tax who are in charge of eoi and support from 31 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik institution in form of, i.a, courses, training, or supervision, are important for supporting eoi implementation. tax audit quality in beneficial owner dispute is still low, reviewed from the verdict of tax court where the losing percentage of directorate general of tax is higher than winning percentage. 2. according to the result, known the quality level of tax auditing can be reviewed from many angles, such as weakness of data, low competence of auditor, the period of investigation, and unbinding regulation. supporting entities that can back up the usage of eoi in increasing the quality of tax auditing on bo dispute is human resource, those are good quality and quantity of adequate investigator, competent database, obedience of taxpayer, appropriate investigation technique, and clear and unambiguous regulation of bo and eoi, good cooperation between partner countries, solid coordination and support around dgt internal unit. entities that obstruct eoi usage in increasing the quality of investigation on beneficial owner dispute are human resource, those are quality of investigator that needs to be improved, inadequate quantity of investigator, incompetent database of dgp, limited period of investigation, judge's misinterpretation, insufficient and unclear information in eoi, answer of eoi request that has not immediately fulfilled by government, and ambiguous and undependable bo regulation.. after an in-depth interview to the informants from judges of tax court, revenue officer, practitioner, and academician, the results of this research are: 1. eoi can increase the quality of the investigation. following taxation general provisions law article 29 section (2), the opinion and conclusion of the investigator shall be based on strong and coherent evidence also based on provisions of the taxation law and regulation. 2. quality of tax auditing on beneficial owner dispute is still low of assessed from tax court verdict where the percentage of dgt losing is bigger than winning. 3. an effective method in conducting eoi procedure is eoi by request or eoi which conducted through request. 4. the main elements of eoi are the demand of information alongside the evidence about bo's transaction and adjusted with applicable tax provisions. 32 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik 5. related to tax provision that arranged beneficiary owner criteria, especially director general of tax regulation number per-61/pj/2009 stdd per24/pj/2010 and per-62/pj/2009 stdd per-25/pj/2010 have clearly stated, but there are still some conditions about bo that make possible to different interpretation that could provoke the dispute with the taxpayer. 6. in conducting eoi, dgt does not need to ask the competent authority for determining the party that receives the benefit (bo) from the income received from indonesia. considering now every citizen has the right to issue the provision about the definition and determination of foreign taxpayer (ft) as a beneficial owner. under oecd model, un model and treaty indonesia and contracting state highlighted that interpretation on terminology that used in the double tax treaty (international meaning) should be interpreted based on the definition in which regulated on domestic law (domestic meaning) from the country that holds the treaty. 7. director general of tax regulation number per-61/pj./2009 about the administrative procedure as the clue for discounters to get treaty benefits. if the discounter can make use of the treaty, then discounter can get as much as a treaty (relief of source) if taxpayer complaint can be done a refund effort (relief at refund). director general of tax regulation number per-62/pj./2009 for the prevention of treaty misuse, a treaty for expediting the service and good flow is not only for treaty benefit. 8. form dgt-1 and dgt-2 in per-61/pj/2009 and beneficial owner criteria in per-62/pj/2009 have not sufficiently proved that the party who received foreign income is the beneficial owner. beneficial owner examining can be used with the approach of misuse of tax treaty (treaty abuse). to examine this treaty abuse, it is done by conducting an exchange of information. based on result data of that exchange of information, the beneficial owner is analyzed, a company is not a beneficial owner if fulfill the conditions: a. the company was established in tax treaty cooperating state or the structure setting / transaction scheme was not only aimed for tax treaty utilization; b. business activity is managed by own management which has sufficient authority to do transactions c. the company has employees ; d. have business activity or active business; 33 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik e. income from indonesia is in tax debt in received country; and f. not using 50% (fifty percent) of the total income to fulfill the liability to any other party in form of: interest, royalty, and any other honorarium. 9. director general of tax regulation number 61/pj./2009 and director general of tax regulation number 62/pj./2009 about the anticipation of treaty abuse that has been changed into per-25/pj/2010, in this case, it is a form of domestic anti-treaty abuse rules that could be applied with provisions from tax treaty. the weakness of director general of tax regulation number per-61/pj./2009 and per-61/pj./2009 is the legal force because director general of tax regulation is not included in the hierarchy of law and regulations and not mandated by law. 10. the related case of beneficial owner in the world that can be used as references such as indofood (uk), prevost 2006 (canada) and v. sa sweden (2001) 11. entities that supports the eoi usage in increasing the quality of tax auditing on beneficial owner dispute are good quality and quantity of investigator, competent database, obedience of taxpayer, appropriate investigation technique, and clear and unambiguous regulation of bo and eoi, good cooperation between cooperating countries, solid coordination and support around dgt internal unit. 12. entities that obstruct eoi usage to increase the quality of investigation of beneficial owner dispute are human resource, those are inadequate quality and quantity of investigator, incompetent database of dgp, limited period of investigation, weak regulations about beneficial owner, judge's misinterpretation, insufficient and unclear information in eoi, answer of eoi request that has not immediately fulfilled by cooperating government. 13. efforts that could be done to support eoi usage in increasing the quality of tax auditing and beneficial owner dispute are to increase the quality of investigator human resource, forming a competent database system, increase the knowledge awareness of taxpayers, arranging regulation about direction of investigation technique on beneficial owner dispute, adding length of investigation period, arranging a clear law about beneficial owner in determining which has more authority in indonesia's law and regulation—minister of finance regulation, increasing the cooperation with tax treaty cooperating countries or oecd and harmonizing the coordination among internal dgt units (michalos, 2019) 34 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik suggestions that the researchers could give related to the result of research are among these lines: 1. investigator human resource policies a. increasing in human resource capacity through programs: socialization, sharing knowledge, seminars, crash courses, in-house training about the theory and eoi implementation or international taxation theory especially about beneficial owner dispute from international directorate of tax. increasing in the capacity of human resource is done thoroughly, considering there are not any specialization in investigators that only handling beneficial owner investigation. b. forming the international taxation team but still refers to international taxation provision that applicable and other country provisions that applied technical guidance or assistance to the functional including truth investigator and appeal officers about eoi usage and beneficial owner disputes. c. improvement in mutation pattern with looking at specialization note owned by each investigator 2. forming competent database with: a. maximizing the exchange of information with tax treaty cooperating countries' taxation authority. hence, complete data from exchange of information can be obtained in a short time i.a, financial report, deed of incorporation, cooperation income tax return, list of directors and commissioners, and photos of cooperation in cooperating countries. the database is also necessary for spontaneous or automatic eoi with the database which indonesia have can do spontaneous and automatic eoi so that cooperating countries are delightfully expected to do the same treatment and give the answers on every requested information in eoi; b. synergy and cooperation with the related institution on database forming; c. forming an integrated database in tax authority in indonesia about the cross-border transaction which occurs to the indonesian taxpayer. 3. investigation policies: 35 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 analysis on exchange of information (eoi) to increase the quality of investigation on beneficial owner dispute (bo) according to verdict of tax court from 2013 to 2015 in directorate of objection and appeal hartasetiadi, sidik a. making provisions about investigation technique guidance on beneficial owner disputes. thus, the technique can be used as investigating reverence in order to investigating beneficial owner dispute related especially how to take advantage or investigation period with eoi usage about getting eoi answer from competent authority (ca) of cooperating states or possibility about evidence information development or explanation that requires eoi with previous cooperating country ca, or even other countries ca. b. extended period of investigation. investigation period in special criteria is 4 months, with that time, investigators found it hard to do investigations because the eoi data has not yet received. for comparison, in india only for bo investigation that requires eoi, the period is set for 2 years. 4. policies about bo with arranging new clear and unambiguous regulations about beneficial owner for taxpayer and investigator in determining beneficial owner which has more authority in indonesia's law and regulation, in this case, minister of finance. 5. dgt organization policies a. increasing the cooperation between tax treaty countries and oecd especially in harmonizing law about the beneficial owner. b. maintain strong coordination among internal units of dgt. 6. increasing the obedience and knowledge on taxpayer on beneficial owner dispute through: a. socialization to taxpayer to increase the obedience about the investigation in beneficial owner dispute, for example, deliverance and filing of certificate of domicile, data deliverance or document, and definition. b. routine socialization on 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(2011). social research methods: qualitative and quantitative approaches. in pearson education. 37 | ilomata international journal of tax & accounting vol. 1 no. 1oct2019 reference the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 171-182 171| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) mainita hidayati1, cintya safira putri2, wuwuh andayani 3, vandyarman mulya priyanda4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: mainita.h@gmail.com1 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: hidayati, m., putri, c.s., andayani, w., priyanda, v. m. (2022). an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020). ilomata international journal of tax and accounting, 3(2), 171-182. https://doi.org/10.52728/ijtc.v3i2.456 abstract: the background of this study was pandemic covid-19 which created some effects on the economic or taxation sectors. also, it gave an impact on the decline of companies’ income which led to cutting the salaries of many employees and termination of the working relationship. thus, it required the government to allocate the incentives pph 21 dtp to relieve the burden on taxpayers and can help restore people's purchasing power. the purpose of this study was to analyze the policy of allocation of pph 21 dtp incentives in the context of handling corona virus disease 2019 at west bekasi kpp pratama based on an analysis of effectiveness, obstacles faced and efforts made to overcome obstacles. this research was descriptive qualitative. the data collection was using observation, documentation, and interviews. the results of this study were that allocating pph 21 dtp on west bekasi kpp pratama was still not effective because many taxpayers did not take advantage of this incentive because of the lack of information and socialization given. this was based on the achievement of objectives, integration, and adaptation. the obstacles encountered were the socialization was less rigorous as many taxpayers were ill-informed, many taxpayers who did not take advantage of the policy well, and the lack of awareness of mandatory taxes by not reporting the realization of the utilization of pph 21 dtp. last, the efforts made by kpp pratama, west bekasi were to conduct socialization thoroughly and maintain the synergy/cooperation between the kpp and the taxpayers. keywords: effectiveness, tax, incentives tax. this is an open access article under the cc-by 4.0 license. introduction pandemic corona virus disease (covid-19) is an incident spread of a disease that is caused by a coronavirus, which has spread in almost any country (abdelrahman & ismail, 2022; habib et al., 2021; han et al., 2020; padovani & iacuzzi, 2021; stebbins, 2020; sulistiani & wijaya, 2021; tsui et al., 2021). in indonesia itself, covid-19 has started to enter in early march until now. here, so far, there are no signs of a scheme to reduce the spread of the virus (anggarini, 2021; djalante et al., 2020; nugraha, 2020; utami & kafabih, 2021; wiryawan, 2020). based on the record on july https://www.ilomata.org/index.php/ijtc mailto:mainita.h@gmail.com https://doi.org/10.52728/ijtc.v3i2.456 an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 172 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 7, 2021, the number of patients that confirmed the virus covid-19 reached 2,379,397 people with accretion case 34,379 confirmed people and 62,908 victims died from the covid-19 virus. the increasing number of victims has resulted in several countries, including indonesia (unicef, 2021). here, it was experiencing lockdowns and closing access to foreign nationals (de la rosa et al., 2022; martín-rodríguez et al., 2022; orfali et al., 2021; scivicco et al., 2022). thus, it reduced income in the economic sector. table 1 target and realization of tax revenue in west bekasi kpp pratama in 2018-2020 year target realization goal 2018 1,331,140,230,000 239,895,723,343 93.15% 2019 1,270,884,947,000 233,407,823,413 97.05% 2020 1,164,123,018,000 985,521,248,476 84.66% source: data and processing section, west bekasi kpp pratama based on the data obtained from the west bekasi kpp pratama, the achievement receipts tax years 2018-2019 experienced an increase but in the year 2020 the achievement of tax revenue has decreased by comparing the covid-19 pandemic is only 86%. during the covid-19 pandemic, the tax revenue in almost all countries in the world has experienced a decline. in addition, the impact was also on the employment and income of companies that declined drastically, so that the company must perform the reduction of employees (layoffs) or cutting salaries of employees (aulawi, 2020; kumala & junaidi, 2020; masdi, 2021; padyanoor, 2020; rahmawati & apriliasari, 2021; wijaya & melati, 2021). this happened because many companies do not want to close their business and were unable to pay for operational activities and employee salaries. thus, so many employees have been sent home. based on the data of workers’ status per december 2020, it was reported by the company to the department of labor bekasi city, as many as 411 workers were laid off (discharged), as many as 923 workers were excluded, as well as 1601 workers, were exposed termination of relationship work or fle (ayuningtyas et al., 2021; damayanti, 2021; kusumastuti, 2020; nabilah et al., 2021; resmi & barmawi, 2022). in such a pandemic condition, how shall taxpayers be able to pay taxes when the economy was not as stable as it is today. on the condition of the economy that was not healthy and many employees were affected by the termination of the relationship work, reduced fieldwork, as well as a decrease in receipts taxes; it made the government formulate a policy of taxation which was appropriate to assist the public in the middle of this pandemic. the government made policies to ease the burden on society. one of them was the allocation of incentives income 21 covered by government (dtp). incentive income 21 dtp is a tax that is covered by the government, or the taxes owed are paid by the government to limit the budget that has been set out in the budget revenue and expenditure state that where a policy is contained in the pmk 110/ pmk.03/ 2020. in such conditions, the government was faced with a difficult challenge. on another hand, the government should collect tax revenue following the targets of the state budget. however, on the other hand, the government should provide incentives to help the taxpayers and companies that did not shut down their business and could survive and back to recover. as the economy in this country was not stable and declined, it was very impossible if the government still had to add the burden of society to continue to pay taxes. https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 173 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in this study, the researcher used several references taken from previous studies that had similar themes to the problems that the authors took. there are researches which examines to the role of government-borne tax incentives (dtp) in the era of the covid-19 pandemic (marlina & syahribulan, 2021), and regarding policy studies on tax incentives in overcoming the impact of the virus (selvi & ramdhan, 2020). there are studies regarding the analysis of tax incentive policies in the midst of the covid-19 outbreak in indonesia and indonesia's tax policy in response to the covid-19 crisis (kumala & junaidi, 2020; kumar & aribowo, 2021; padyanoor, 2020; sarjono, 2021; song et al., 2020). there are some international journal about efficiency of tax incentives during covid-19 pandemic (andrew et al., 2022; cui et al., 2022; dai & chapman, 2021; garnov et al., 2020; tarkom, 2021). therefore, the objective of the study was to analyze the effectiveness, obstacles, and efforts in the income tax incentives article 21 dtp in the handling of corona virus disease in 2019 at the west bekasi kpp pratama in 2020. it was by using the theory of effectivity consisting by three sizes of effectivity: achieving purpose, integration, and adaptation. those three sizes would be elaborated, so it would reveal the obstacles of the implementation of the policy and later could be analyzed (duncan, 1985; prasetyo et al., 2020; sun & sankar, 2022; wittfoth et al., 2022; zhang et al., 2020). figure 1. conceptual model source: author, 2021 method this study employed a qualitative approach with descriptive methods, i.e. the data are collected in the form of words, pictures instead of numbers and try to describe a symptom, events, events that adaptation goal’s achieving integration obstacles efforts effectiveness of allocation on article 21 income tax incentive covered by the government (pph 21 dtp) teory: duncan (1985) (in zulkarnain,2012) https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 174 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc happened when present. in the study, the researchers used the theory of effectiveness (duncan, 1985), which there are 3 indicators, namely: 1. achievement of objectives. the whole effort to achieve the goal is considered a process. the achievement of objectives consists of several entities, namely the work plan and the length of time in the implementation program. 2. integration. the level of organizational capability (west bekasi kpp pratama) is conducted by dissemination of consensus development (regarding collective agreements) and communication with taxpayers. integration consists of several entities, namely procedures and socialization. 3. adaptation. the ability of the organization (west bekasi kpp pratama) is to adapt to its environment. adaptation consists of several entities that reject measure the process of procurement and replenishment labor/ hr. the data collection techniques in this study were through structured interviews, where researchers used interview guidelines and recording tools, thorough observation where researchers observed and collected data from west bekasi kpp pratama, and through documentation where researchers obtained documents or written data from west bekasi kpp pratama. the data analysis was carried out using three stages of data analysis techniques (rahmadhani et al., 2020; sugiyono, 2019), namely data reduction, data display, and data verification (withdrawal of conclusions). result and discussion based on the data and the results of interviews obtained researchers elaborated the effectiveness of policy of allocation on income tax incentives article 21 covered by the government (dtp) in the context handling corona virus disease in 2019 by using the theory of effectiveness (duncan, 1985), as follows: • achievement of objectives based on the pmk 110/ pmk.03/ 2020 which is now refurbished into fmd 9/ pmk.03/ 2021 on incentive taxes to mandatory tax affected by epidemic virus covid-19 where the policy of income tax incentives article 21 by the government (dtp). it was the help of stimulus that has not been long in applied by the government to the taxpayer at the time of the pandemic covid-19 which has been in force from april to december 2020, then the policy is extended back to june 2021. the policy was aimed at helping to ease the burden of tax on compulsory taxes, especially employees to survive from economic hardship due to the pandemic covid-19 and can restore the purchasing power of people in the middle of the outbreak covid-19. table 2 number of taxpayers received tax incentives of pph 21 dtp description total number of applicants of pph 21 dtp’s incentives 525 number of applicants approved 452 number of applicants rejected 73 source: data processing section, west bekasi kpp pratama table 3 https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 175 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc number of klu registered in west bekasi kpp pratama number of klu received the incentives 1,119 source: data processing section, west bekasi kpp pratama table 4 target and realization of tax incentives of pph 21 dtp in west bekasi kpp pratama in 2020 income tax incentives article 21 covered by the government (dtp) realization of tax incentives of pph 21 dtp 8,438,430,556 target of tax incentives of pph 21 dtp no source: data processing section, west bekasi kpp pratama if viewed from the perspective of overall taxpayers in this policy, based on the data from west bekasi kpp pratama and through interviews with informants 1,2,3,4,5; it can be seen that only 452 applicants were approved for income tax incentives of article 21 of this dtp and there are 1,119 klus that have received pph 21 dtp incentive facilities registered at west bekasi kpp pratama. then, if the data can be compared with the approved applicant data and calculated using the effectiveness ratio formula ((452: 1.119) x 100%) then only 40% of applicants take advantage of these incentives. thus, it can be concluded that by using the effectiveness table that the allocation of this pph 21 dtp incentive has not been said to be effective because the number of taxpayers who have not utilized this policy is more than the taxpayers who have utilized this incentive policy of pph 21 dtp. this is because there were still many taxpayers who did not aware of any policy of allocation of tax income article 21 dtp incentives. thus, this allocation of incentives was not optimally used by the taxpayers because of strategy and administration of the socialization of the policy was not complete and has not been effective yet. however, related to the taxpayers who take advantage of tax incentives 21 dtp, it can be seen that despite the absence of the target in the granting of these incentives, its realization has been exploited by the taxpayers which amounted to rp. 8,438,430,556 which was well-implemented. moreover, the taxpayers, especially the employees who received tax incentives 21 dtp, felt that this policy has been effective. it was because they have taken the advantage of the incentive, felt very helped, and received full income. • integration in terms of procedures, based on the results of research through interviews with the tax authorities of west bekasi kpp pratama, academics, and taxpayers; the procedures must be carried out, so the taxpayers can receive incentives for pph 21 dtp. also, the companies where taxpayers/employees worked and that have met the criteria, must apply to receive the pph 21 dtp incentive to the west bekasi kpp pratama or through the dgt official website. the entire taxpayers affected by the pandemic covid-19 were eligible for income tax incentives under articles 21 dtp. if the klu company that filed the petition incentive was registered in the pmk 110/ pmk.03/ 2020 and met other requirements such as income employees will get tax relief 21 dtp did not exceed rp.200,000,000/year or equivalent to rp. 16.600.000/month and fulfilled other requirements following the regulation of the minister of finance. also, later the account https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 176 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc representative (ar) would examine if the company experienced refusal in applying pph 21 dtp incentives related to the applicable requirements and criteria. based on total data of incentive income 21 dtp in west bekasi kpp pratama, it can be known that as many as 525 companies that apply for tax relief 21 dtp and only 452 applicants were approved amounting to 84% the percentage of approved applicants and as many as 73 applicants, or 14% of applicants who suffered rejection. it was when the company and its employees were also qualified according to the criteria, then the company is entitled to request incentives related to approved tax income article 21 of dtp. however, conversely, if companies did request that was not following the requirements and criteria applied or any incomplete document, the application will experience rejection by the west bekasi kpp pratama. in terms of socialization, based on the results of research through interviews that the socialization of the pph 21 covered by the government (dtp) has been carried out by the west bekasi kpp pratama either through social media or online. it was done because when the pandemic covid-19, west bekasi kpp pratama has imposed restrictions on face-to-face access. thus, the socialization was carried out online by the kpp. however, the socialization delivered by the tax authorities was not comprehensive and was not conveyed properly to the public. based on the results of interviews with taxpayers, there was no socialization carried out by the kpp regarding the existence of the incentive’s policy of pph 21 dtp. this means that the socialization conducted by the lto regarding the incentive’s policy of pph 21 dtp was not maximized and not exhaustive. therefore, this resulted in many taxpayers who were not aware of their policy of incentives. • adaptation based on the results of the research through interviews with informants 1,2,3,4,5; it states that the measurement of incentive’s policy of pph 21 dtp is said to be effective if the policy is used and implemented properly and on target. it means that the taxpayers who received this incentive were following the applicable criteria and requirements. besides that, the policy is said to be effective if the taxpayers who took advantage of the pph 21 dtp incentive were satisfied and very helpful with this policy. in terms of human resources (hr), the quality of human resources at west bekasi kpp pratama was quite good and alert and always conducted some training and education to improve the performance quality of west bekasi kpp pratama’s employees. if there is a tax policy or new regulations, then the employees conduct some training. thus, the new regulations and policies can be implemented and socialized properly. however, the extension of the system of socialization in giving information on taxation was needed, especially on new policies such as the pph 21 dtp incentive. it was because of the quality of the performance or the human resources at kpp pratama well, it also will affect the increase of the tax revenues in the future. during the covid-19 pandemic, the west bekasi kpp pratama must be able to adapt or adjust its organizational capabilities, which previously carried out direct or face-to-face socialization through visits to various places. however, during a pandemic like this, the socialization must be adjusted according to the existing conditions, namely by online socialization. this can reduce effectiveness when providing important information regarding taxation because not all taxpayers want to join in online socialization and seminars conducted by the kpp. this made many taxpayers did not know the latest and most important information. this became an important challenge for the kpp in adjusting its policies and activities during the current pandemic. https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 177 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the obstacles in implementing this policy are in terms of adjusting education and socialization activities during the covid-19 pandemic. because of the presence of a pandemic, as now, the cause of education and socialization are less well received by the community which resulted in the socialization is not complete because of the limitations of face-to-face in direct and routed entirely through the media online, things that result in not all people can understand well informed presented by the lto and still many mandatory taxes, especially employees who do not know information about their policies tax incentives 21 dtp and do not take advantage of the policy. another obstacle is reporting on the realization of the use of pph 21 incentives borne by the government (dtp), in which the company's employees/employees have approved the application for pph 21 incentives, but the company forgot or did not report the realization of the use of pph 21 incentives. this has resulted in the kpp experiencing obstacles in processing data regarding the utilization of the incentives provided. the effort that must be made is that the kpp must continue to provide information through comprehensive education and socialization activities, so it can be well-received by all taxpayers, especially regarding new policies during this pandemic. one of them was the allocation of incentives for pph 21 dtp and reporting on the implementation of pph 21 dtp incentives. thus, the taxpayers can understand the information and did not forget to report the realization of the incentive policy. in addition, the efforts were made by maintaining the synergy between the kpp with the taxpayers and also by having cooperation with various companies to conduct seminars or webinars as well as dissemination through electronic media, radio, social media, and television in the form of information through advertising and broadcast news about information taxation and new taxation policies. next, another effort was by simplifying the scheme/procedure in terms of submitting applications for pph 21 dtp incentives to make it easier for companies to apply for incentives for their employees, so these incentives would be maximally absorbed. moreover, the kpp should continue to check related to the reporting of the incentive of income tax 21 dtp, so the incentives given by the government can be measured and targeted. based on the result and discussion, there were several researches which examines to the role of government-borne tax incentives (dtp) in the era of the covid-19 pandemic (marlina & syahribulan, 2021), and regarding policy studies on tax incentives in overcoming the impact of the virus (selvi & ramdhan, 2020). there are studies regarding the analysis of tax incentive policies in the midst of the covid-19 outbreak in indonesia and indonesia's tax policy in response to the covid-19 crisis (kumala & junaidi, 2020; kumar & aribowo, 2021; padyanoor, 2020; sarjono, 2021; song et al., 2020). there are some international journal about efficiency of tax incentives during covid-19 pandemic (andrew et al., 2022; cui et al., 2022; dai & chapman, 2021; garnov et al., 2020; tarkom, 2021) the similarity was all of them discussed the policy of incentives covered by the government in the covid-19 pandemic and the tax revenue. however, there was also the difference between this research towards the others which was the research object, research sector, and the different regulation involved. conclusion based on the results of research, discussion, and interpretation that have been carried out in previous chapters, as well as by referring to the theory and results of previous research, the https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of the policy of allocation on income tax incentive covered by the government in the context of handling corona virus disease 2019 (a case study of west bekasi kpp pratama in 2020) hidayati, putri, andayani, and priyanda 178 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc researcher can conclude that the effectiveness of the allocation of article 21 income tax incentives covered by the government (dtp) in the context of handling corona virus disease 2019 at west bekasi kpp pratama can be said to be ineffective because the number of applicants who take advantage of the income tax incentive article 21 dtp was lower compared to the registered klu, which is only 40%. this was because the socialization and strategy in implementing the pph 21 dtp incentive have not been comprehensive and not optimal. thus, there were still many taxpayers who did not know about this policy. however, based on the side of taxpayers who took advantage of the income tax incentives article 21 dtp, it is stated that this policy has been said to be effective because it has greatly helped and eased the tax burden and the economy during the covid-19 pandemic. the obstacles that occur in implementing the provision of income tax incentives article 21 covered by the government (dtp), namely from education and socialization that were not comprehensive due to the limited direct face-to-face access due to the covid-19 pandemic. thus, socialization was completely diverted through online media. this made many taxpayers did not know information about the existence of pph 21 dtp incentive policies and the latest tax information. in addition to the obstacles, the procedures and requirements were quite complex, and still, the taxpayers who did not do reporting the implementation of the utilization of pph 21 dtp incentive dtp may result in the kpp that will have problems in processing the data regarding the use of incentives. the efforts made by the west bekasi kpp pratama, namely by carrying out comprehensive socialization and education activities. thus, it can be well-received by all taxpayers, especially related to new policies during this pandemic. one of them is the allocation of incentives for pph 21 dtp and reporting on the implementation of allocation of pph 21 dtp incentive, as well as maintaining the synergy/cooperation between the lto with the taxpayers to conduct seminars or webinars at several companies as well as the dissemination through electronic media, radio, media social and television both in the form of information through advertising and broadcast news regarding taxation information and a new policy taxation authorities. next, the kpp must swiftly conduct a thorough inspection and re-collection of the requirements for the pph 21 dtp incentives, and whether the incentives are conveyed by their employees or not, as well as other efforts, namely by simplifying schemes/procedures in terms of filing a permit. the application for 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(2020). what influences the effectiveness of green logistics policies? a grounded theory analysis. science of the total environment, 714, 136731. https://doi.org/10.1016/j.scitotenv.2020.136731 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 22-34 22 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era notika rahmi1, damith gangodawilage2 1institut ilmu sosial dan manajemen stiami 2sri lanka institute of taxation, sri lanka correspondent: notika.rahmi@gmail.com1 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: rahmi, n., gangodawilage, d (2022). swot analysis of indonesian tax administration innovation in the digitalization era. ilomata international journal of tax & accounting.3(1), 22-34. https://doi.org/10.52728/ijtc.v4i1.423 abstract: with the innovation in tax administration services in indonesia in the digitalization era, it is hoped that it can increase taxpayer compliance and is expected to continuously have a positive effect on state revenues. the purpose of this study is to analyze what are the strengths, weaknesses, opportunities and threats in the implementation of tax administration innovations in indonesia in the digitalization era. the research method used is qualitative with a descriptive approach. the results of the study show that the strengths and opportunities that can be utilized are the reliability of human resources that have been fulfilled, as evidenced by the satisfaction index of dgt service users reaching a scale of 4.1. technology that can still be developed is also a strength. the high participation of taxpayers in following the innovation policy of tax administration is a very big opportunity with the number of manual spt users recorded which has decreased by 88.8% in the last five years. weaknesses and threats encountered are the lack of maintenance on the server where server downs often occur during the deadline for reporting spt. taxpayers also admitted that they had not fully received directions on how to operate the new tax administration system. taxpayers need to adapt to the digitalization that is being carried out. so it is the government's duty to pay extra attention to the understanding of taxpayers in the application of the digital tax administration system. keywords: swot analysis, tax administration innovation, digitalization era. this is an open access article under the cc-by 4.0 license. introduction the rapid development of technology makes all aspects must follow the flow and innovate so as not to be left behind. technological developments have also changed global trends, ranging from an all-digital administration system to public services that are usually provided directly and can be enjoyed online through a mobile phone screen (kudrle, 2021). in some developed countries and even developing countries, public sector organizations are still lagging behind and have not been able to make maximum use of technology to gain profits, especially in providing services to the public (mergel et al., 2019). the tax authority is one part that plays an important role in the public sector and is in the spotlight in carrying out its institutional functions (schauffel et al., 2021). high https://www.ilomata.org/index.php/ijtc mailto:notika.rahmi@gmail.com1 https://doi.org/10.52728/ijtc.v4i1.423 swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 23 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc expectations of public services in the taxation sector are expected by the community so that taxation also utilizes technology in providing services (cheba et al., 2021). the technological developments referred to include digital payments, data-based currencies and technology infrastructure in effective and efficient services. tax administration is the backbone in fulfilling taxation rights and obligations in order to run a legal business in each country. the role of the public sector in the field of tax administration must be able to adapt to technological innovations that have developed in the midst of thesector private (bai et al., 2021) in the research conducted by (barnay et al., 2018) related to tax authorities, from several countries in the world (21 countries) there are four important things that need to be paid attention to by the public sector in the field of tax administration to be able to encourage technological innovation to be able to run the function of public services well, namely firstly on interaction with taxpayers using digital technology (wulandari, 2021). in this study, it was explained that the tax authority could create a channel digitalin responding to taxpayers' requests for tax services. there is easy access to public services in the field of taxation. the function of digitizing on a large scale can also be carried out by integrating taxpayer monitoring in the form of an integrated accounting management system architecture . with this technology function, data becomes centralized, workflows can be reviewed digitally in each department, starting from the audit process, tax collection, restitution process and others (syafitri, 2018). the technology function can also help in terms of service customer, analyze tax non-compliance to be able to resolve tax collection issues. the second thing is data analysis, several tax authorities have carried out further data analysis functions in terms of mapping the importance of taxpayer compliance levels so that tax audit priorities can be formed. several countries have also innovated by changing the way of conducting audits, collecting taxes and creating a monitoring system for taxpayer compliance . several developed countries in europe have implemented the tax innovation function by mapping the level of taxpayer liquidity, so that they were able to increase tax revenues by us$ 800 million and reduce operating costs by around us$ 8 million (barnay et al., 2018). the third thing that needs to be paid attention to by the public sector in the field of tax administration is to be able to encourage technological innovation to be able to carry out the function of public services properly, namely procession automation. this includes the use of efiling, data checking automation, reminders, and other automation (abdelfattah & aboud, 2020). currently the public sector is in the stage of reorganization in the digitalization process. they carry out the process of recruiting and training employees to be able to adapt to the use of digital technology in their business processes (batrancea et al., 2019). but what happened was a shift in the function of the workforce by digitizing the entire business process without any help from humans. several asian countries are currently implementing innovation by doing automation. one example is the launch of an online machine to help speed up the digital justice process. this is to speed up the dispute process which usually takes a long time and is very inefficient (adi, 2020; rusli, 2019). next, the fourth is talent management or human resource management. most current tax authorities are still inadequate in terms of technology to understand the factors that influence hr excellence so that it has an impact on organizational health in assessing organizational governance. according to research (barnay et al., 2018) as many as 60% of public organizations fail to carry out the transformation process due to the absence of clear directions and goals (mckinsey and company, 2017). https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 24 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in general, net tax revenues in 2020 reached rp. 1,072.11 trillion or 89.43 percent of the 2020 state budget target of rp. 1,198.82 trillion. the realization of the tax revenue grew negative 19.55 percent compared to the realization in 2019, slower than the growth in 2019 which was still able to grow slightly at 1.47 percent. the government has made two adjustments to the tax revenue target in the 2020 state budget in response to the impact of the covid-19 pandemic. the last adjustment was made through presidential decree no. 72 of 2020, the tax revenue target was adjusted to rp1,198.82 trillion. however, until the end of 2020 the realization of revenue was only able to reach 89.43 percent of the target. table 1 performance of 2016-2020 tax revenue realization source: financial report of dgt 2016-2020 the government has also focused on developing by utilizing technology, one of which is by accelerating digital transformation in government administration. the strategic activities carried out are providing base transceiver stations (bts) in 3t villages, providing internet access, building national data centers, digital literacy, digital transformation of strategic sectors, digital technopreneurs, controlling the implementation of electronic systems, and supporting digitalization of education such as procurement of ict tools. and learning media (kementerian keuangan, 2021). the directorate general of taxes is currently implementing tax reforms to provide optimal state revenue. one of the efforts made is by using a digital system in tax transactions (anggraini et al., 2021; sulistyowati et al., 2020). tax administration innovations that are currently being implemented are the provision of services in npwp registration (e registration), tax payment services (e-billing), and services in tax reporting (e-filing, e-form, einvoice), all of which have been can be done electronically (hasanah & indriani, 2013; lintang et al., 2017). with the innovation in tax administration services, taxpayers are given convenience, get cost efficiency and get real time in terms of carrying out tax obligations which include registration, payment and tax reporting (faúndez-ugalde et al., 2020; olivares, 2018). this ease of access to tax administration is expected to increase taxpayer compliance and is of course expected to have a positive effect on state revenues (bahmid & wahyudi, 2018). in this study, the author will find out what are the strengths, weaknesses, opportunities and threats in the implementation of tax administration innovations in indonesia in the digitalization era. 2016 2017 2018 2019 2020 with oil and gas income tax 1,105.97 1,151.03 1,313.32 1,332.66 1,072.12 without oil and gas income tax 1,069.87 1,100.71 1,248.61 1,273.49 1,039.08 0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 tr ill io n r u p ia h https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 25 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this study uses a qualitative method, which according to strauss and cobin, qualitative is a type of research that obtains findings whose results cannot be obtained by statistical means (ghozali, 2016; sugiyono, 2019). the type of research is descriptive research, namely research that has the aim of describing, describing facts, properties and combining the phenomena to be studied including activities, attitudes, views and ongoing plots and the influence of a phenomenon or to determine the frequency distribution of a symptom that is mutually related (silaen & widiyono, 2013). the concept in this study is to analyze the strengths of tax administration innovation activities in indonesia, analyze the weaknesses and opportunities and challenges in implementing tax administration innovations in indonesia. data collection techniques were carried out starting from making observations at the directorate general of taxes of the republic of indonesia, followed by collecting data relating to state revenues and legal products produced during the tax administration innovation process and then conducting interviews with resource persons from various groups, starting from representatives tax officers, taxpayers to academics to strengthen the information obtained. result and discussion era of digitalization has been one of the triggers for volume iii tax reform in indonesia, which began in 2016. in addition to constantly updating tax policies, the tax administration system also participates in reforms along with the times and changing administrative dynamics. the government has planned an agenda for the reform of the tax administration core system (psiap), but in 2020 the covid-19 pandemic hit the entire country, including indonesia. various impacts ranging from health to the economy must be faced. the very fast transmission of the virus makes tax services, which are still through face-to-face visits, now impossible. this has the effect of decreasing tax returns (spt). although tax reporting facilities have been provided through efilling and e-forms, there are still many taxpayers who are still accustomed to reporting taxes by getting direct face-to-face guidance from tax officials. the use of digital technology is not only focused on services, but also on supervision of taxpayers. this is done to make the tax administration information system easy, reliable, accurate, integrated and optimize services and supervision. digitization carried out by the directorate general of taxes starts from taxpayer registration services to online payments and reporting with the following details: 1. e-registration. is a taxpayer registration service that is done online. regarding the registration procedure, the taxpayer identification number and/or inauguration of taxable entrepreneurs and changes to the data of taxpayers and/or taxable entrepreneurs with the system eregistration regulated in the regulation of the director general of taxes number 24/pj/2009 as last amended by regulation director general of taxes number per-02/pj/2018 concerning the second amendment to the regulation of the director general of taxes number per20/pj/2013 concerning procedures for registration and granting of taxpayer identification numbers, business reporting and inauguration of taxable entrepreneurs, deletion of taxpayer identification numbers , and revocation of the inauguration of taxable entrepreneurs as well as changes to data and transfer of taxpayers. 2. e-billing. it is an electronic tax payment service system where before the existence of e-billing, taxpayers are required to come to the designated bank to make payments and obtain proof of payment. regarding the procedure for implementing the trial implementation of the electronic https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 26 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax payment system (billing system) in the state revenue module system, it is regulated in the regulation of the director general of taxes number per-47/pj/2011 as last amended by the regulation of the director general of taxes number per-05/pj /2017 concerning electronic tax payments. 3. e-filling. it is an electronic tax reporting service system. previously, tax reporting was carried out by directly visiting the domicile tax service office following office hours by bringing the filled spt form. but now tax reporting can be done anywhere and anytime. regarding the procedure for submitting annual notification letters for individual taxpayers who use forms 1770s or 1770ss by e-filling through the website of the directorate general of taxation (www.pajak.go.id) it is regulated in the regulation of the director general of taxes number per-39/pj/2011 as the latest amended by the director general of tax regulation number per1/pj/2014 regarding the procedure for submitting annual notification letters for individual taxpayers who use forms 1770s or 1770ss by e-filling through the website of the directorate general of taxes (www.pajak.go.id). furthermore, the director general of taxes issued an eform in 2017 which is included in the e-filling service. the e-form service has almost the same function as e-filling. in this service, taxpayers download the annual spt formula first and can fill it out offline and then upload it when it is finished via the previous page. 4. e-faktur, is an electronic system application provided by the dgt to make it easier for taxable entrepreneurs to make tax invoices in a uniform format and e-invoices provide services for making tax invoices electronically. this e-invoice is expected to save processing time. before the existence of e-invoices, the creation of tax invoices manually and had a big chance of not being uniform in the format of tax invoices. the new e-faktur application was launched in 2014 where the procedure for making and reporting tax invoices in electronic form is regulated in the director general of tax regulation number per-16/pj/2014 as last amended by per-31/pj/2017. in july 2021, the directorate general of taxes has also introduced four new analytical data-based applications to support supervision, namely compliance risk management (crm)function transfer pricing (tp), ability to pay (atp), smartweb, and dashboard office taxpayer (wp). madya tax service (kpp) (redaksi ddtcnews, 2021). the use of these technologies has been in line with trends in several countries. about 75% of the authorities have plans to continue working to move field inspections to digital. nearly 60% of the authorities are expanding the application of innovative technology in calculating compliance levels and identifying when there is fraud or fraud in taxation (organization for economic cooperation and development, 2021). swot analysis on tax administration innovations in indonesia swot analysis is a tool used to analyze companies from internal and external perspectives to produce strategies for the company (cheng et al., 2021). swot consists of strengths, weaknesses, opportunities and threats (zhou et al., 2019). in this study, the company in question is the government agency of the director general of taxes as a policy maker (jannah et al., 2017). every organization has strengths and weaknesses in the functional areas of the business that can be used as the basis for the goals and strategy setting of an organization (erawati & wance, 2021). the author has conducted interviews with various parties, namely the head of the section on counseling guidance and document management at the directorate general of taxes, central jakarta, interviews were also conducted with taxpayers who utilize tax administration innovation facilities as well as academics, tax lecturers at the stiami institute of social sciences and https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 27 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management. the following is a swot analysis on the implementation of tax administration innovations in indonesia in the digitalization era. a. strength consists of internal factors that support the company in achieving a goal. these supporting factors can be in the form of resources, expertise or other advantages that may be obtained from financial sources, market advantages, image or good relations between policy makers and those who use the policy. an efficient tax administration system can change the basic process of taxpayer compliance. however, of course, human resources are still needed to be relied on in managing the tax administration system. with the increasing number of taxpayers, the use of technology in the tax administration system is a solution to simplify administrative complexities. so that later the tax authorities can reduce the need for human resources in managing the implemented system (surya, 2020). every year the number of taxpayers has increased, although not significantly, but is increasing. if the tax administration process is still done manually, of course this must be balanced with increased human resources to assist registered taxpayers in fulfilling their tax obligations. however, because the current tax administration process has been adapted to the digital era, it is not something to worry about if the number of taxpayers continues to increase. on the contrary, it will be a great opportunity for state revenue from the tax sector. the following is data on the growth of taxpayers from 2016 to 2021: table 2 number of registered taxpayers 2016-2021 source: ministry of finance of the republic of indonesia, 2021 in the performance report of the directorate general of taxes for 2020, it was recorded that in indonesia there were 46,305 dgt employees spread over 595 dgt offices. with details as many as 8,182 employees in the sumatran region, 29,382 employees on the island of java, 2,958 employees in kalimantan, 2,850 employees in sulawesi and north maluku, 1,997 employees in bali and nusa tenggara and 852 employees in the papua and maluku regions. it was explained that the dgt service user satisfaction index had exceeded the target of 4.1 from the target of 4 points (maximum scale of 5). if the percentage is achieved, the satisfaction index is 102.50%. the directorate general of taxes has also claimed that the achievement of the quality index for managing information and communication technology (ict) systems is 118.83% (direktorat jenderal pajak, 2020). 33.22 36.51 39.15 42.51 46.38 49.82 0 10 20 30 40 50 60 2016 2017 2018 2019 2020 2021 number of registered taxpayers (in millions) https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 28 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the international monetary fund, together with the organization for economic co-operation and development (oecd), the intra-eurpean organization of tax administrations (iota) and the asian development bank (adb) have conducted a joint survey called the international survey on revenue administration (isora). the types of technology that are currently developing and are used as aspects of a survey of innovative technology developments in the application of digital tax administration. 1. blockchain. a digital data storage system consisting of transaction record data or data spread over ainternet network multiserver. this data structure can be disseminated and managed globally at the same time of course with guaranteed information security. this technology has been widely used by banking, logistics, e-commerce companies, and including in the world of taxation. this will make it easier for taxpayers to pay taxes and can support the transparency of tax transactions in indonesia. 2. robotic process automation (rpa). technology that offers new ways of doing data analysis, risk management and can help improve performance efficiency. many companies have utilized this technology in their work processes. work processes that are done manually and repeatedly are no longer effective and take up a lot of time. 3. artificial intelligence. the application of artificial intelligence technology can help examine large amounts of data and make it possible to carry out surveillance in the identification of suspicious transactions more practically. 4. chatbots. technology in the form of conversation products using technology artificial intelligence (ai). this technology can connect between parties with the resulting discussion easy to learn and understand by users. 5. identification biometric. technology to achieve transparency and accountability in financial transactions. information can include fingerprint recording, iris scanning, and voice and face recognition. this technology has been applied in india in the field of taxation. the strength of the internal factors in this innovation is the presence of adequate human resources in terms of quantity and quality in carrying out administrative digitization. good service has also been provided by the tax authorities as a tax officer where this is evidenced by the taxpayer's statement saying that the innovations made are good and the services provided are good enough and the policies made are right on target. taxpayers have also benefited from the innovation of tax administration, namely paying taxes is easier, there is no need to queue and the process is not difficult. innovation in the field of taxation can still be developed with a wider scope. as information obtained by bintang perdana putra as one of the delegates from ddtc at the international tax conference in mumbai. the proposed new idea related to the application of tax administration and regulation systems in the digital era was presented by the director of global tax policy center at the institute for austrian and international tax law, wu (vienna university of economics and business). mr. jeffrey ownes stated that the traditional compliance model requires the completion time is quite long because various administrative processes must be passed. the process starts from recording accounting data, analyzing tax costs, filling out tax reporting forms, submitting tax reporting forms to waiting for the audit process by the tax authorities. basically the process can be shortened by digital compliance model (redaksi ddtcnews, 2019). https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 29 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. weakness includes internal factors that can hinder the company in achieving its goals. inhibiting factors can be in the form of inadequate facilities, lack of funding sources, lack of ability to manage, inadequate marketing skills and poor company image. in the results of interviews that have been conducted, representatives from the tax authorities stated that they did not find any weaknesses in conducting tax administration innovations. this means that from facilities, sources of funds to the ability to manage and expertise in introducing innovations to the tax administration system, they are adequate. however, the author found different things in interviews with academics, he said that the weakness encountered was in the management of technology. in its use, several times the server was down so that it interfered with tax administration activities. this usually happens with the use of e-filling at crucial times, such as the deadline for reporting the annual spt. we also found weaknesses in socialization, which means in terms of introducing innovations made to taxpayers. the rapid development of technology must be accompanied by the rapid acceptance of all new information, especially related to digitalization. but unfortunately there are still many taxpayers who actually have difficulty in accessing these digital-based services. they are used to and comfortable with manual service so it is quite difficult to adapt to new things. of course, this is the task of the tax authorities to be able to convey properly the procedures for applying programs related to digital innovation in tax administration. the difficulty of taxpayers adapting to this alldigital change is also supported by data on the level of taxpayer compliance which is unstable every year. the following is data on taxpayer compliance from 2016 to 2020: table 3 taxpayer compliance ratio income tax source: ministry of finance, 2020 from the data above, it can be seen that from 2016 to 2020, the level of taxpayer compliance has never reached the target set. although quantitatively the realization of taxpayer compliance in the last three years has increased although not too much, namely in 2018 the realization was 71% then increased by 2% from the previous year to 73% in 2019. furthermore, in 2020 there was an increase of 5% from last year to 78%. with the various innovations in the tax administration system in indonesia, it is certainly expected to be able to encourage taxpayer compliance. this is because digitalization can provide convenience to taxpayers. but in reality, taxpayers also need to make adjustments and adaptations to the digitalization that is being carried out. so it is the government's duty to pay extra attention to the understanding of taxpayers in the application of the digital tax administration system. 72.5 75 80 85 80 61 73 71 73 78 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 target realization https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 30 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. opportunity as external factors that support the company in achieving its goals. it can be in the form of changes in policy, technology, competition and the development of relations between policy makers and policy users. by utilizing digital technology in the tax administration system, it can help reduce or even eliminate human errors, operations backend in services to taxpayers, even with this digitalization it is no longer necessary to have a meeting between taxpayers and tax officers directly, considering the current covid virus. -19 is still ongoing. if it is necessary to have a meeting between the taxpayer and the tax officer, this can be done online. to be able to achieve this, the tax authorities must continue to make changes and organizational transformation in a sustainable manner by utilizing technology. in research conducted by (syafitri, 2018) shows that with the implementation of tax administration digitization services, the increase in taxpayer compliance with digitalization service users is proportional to the increase in taxpayer compliance. and the increase in taxpayer compliance ratio is proportional to tax revenue. the same thing is proven in research conducted (wulandari, 2021) showing a positive influence from the implementation of efilling and e-invoicing on taxpayer compliance. this proves that there are more opportunities for tax revenue if the taxpayer has been able to adapt well to the digitalization of tax administration. taxpayers who have understood and can take advantage of tax administration innovations tend to be more obedient to tax provisions. this is also the hope of tax officials, with the convenience of tax services, tax compliance and revenue are also expected to increase. especially during the current pandemic, digitizing the tax administration system can help reduce the occurrence of virus transmission due to face-to-face meetings that were previously held when they wanted to report spt. volunteering in paying taxes because of the convenience was also conveyed by the taxpayers we interviewed. he said that the easy process of tax administration gives pleasure so that taxpayers are not burdened in the administrative process. the following is a summary of tax administration activities before and after the innovation in the tax administration system in indonesia: table 4 tax services before and after tax administration innovation types of services before innovation after innovation product & legal basis making npwp come directly to the tax office can be accessed online e-registration per-02/pj/2018 tax payments come directly to the perception bank can be accessed online e-billing per-05/pj/2017 tax reporting come directly to the tax office can be accessed online e-filling per-1/pj/2014 tax invoice making manual. potential for misuse of tax invoice automatic. cannot be misused e-faktur per-31/pj/2017 source: processed by author, 2022 it can be concluded that with the digitalization of the tax administration system, the tax service process becomes easier and more effective and efficient both in terms of time, effort and cost. besides being able to improve service performance, digitizing tax administration can also solve tax problems at the local government level because currently there are still many fraudulent practices https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 31 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and tax leakages and the weak mapping of tax potential. with digitalization, local governments can oversee various tax activities, as well as provide fast service. currently, the benefits of innovation in the tax administration system have been felt. gradually, taxpayers have taken advantage of the facilities provided as follows: table 5 development of submission of e-filling, e-form, e-spt and manual year spt received e-filling e-form e-spt spt manual 2016 8.817.614 8.389.730 17.919.891 2017 10.875.117 103.650 8.738.750 15.179.738 2018 17.095.207 344.346 4.309.794 3.953.281 2019 22.083.186 913.040 1.552.185 1.859.495 2020 22.003.662 995.243 1.346.463 1.591.422 source: directorate of tax data and information, 2020 from the data above, it can be seen that the use of manual tax returns from 2016 to 2020 has decreased, while the use of e-filing and e-forms has always increased every year. this is indeed the main goal of the directorate general of taxes in innovating tax administration in indonesia. d. threat external factors that hinder the company in achieving its objectives can be a new competitor, the market growth is slowing, technological changes, policy changes and increased bargaining power than the policy makers and policy. from all the conveniences and benefits that come from digitizing the tax administration system, there are also threats that must be faced, such as the opportunity for digital crimes (cybercrimes). lack of understanding and competence in the field of digital technology and challenges during the transition period due to changes in the tax administration system (redaksi ddtcnews, 2019). the tax authorities also fear for the damage to the server if it is not in the maintanance of good programs that have been run. the same thing was conveyed by representatives of academics who were interviewed by the author that it was necessary to gradually improve the system to reduce the chance of damage and even damage to the system by irresponsible people. as previously explained, taxpayers also experience difficulties in accessing digitization programs. with frequent changes to the system, taxpayers must adapt again to existing algorithms. the latest features that are presented to tax officers are certainly an achievement, but for taxpayers it is a threat, especially for taxpayers who are not familiar with everything technology-based. technological developments must also be balanced with knowledge about technology itself. in this case, information is not only needed by human resources who are in the environment of policy makers, but information is also needed by taxpayers as policy users. because the policies that have been made in practice will be used by taxpayers. it is a task that cannot be ignored by the government to continue to pay attention to the knowledge of taxpayers regarding the use of administrative system services in the digital era. the more taxpayers who understand the use of digital administration systems, the greater the potential to be able to improve taxpayer compliance. increased taxpayer compliance will also provide an increase in tax revenue. https://www.ilomata.org/index.php/ijtc swot analysis of indonesian tax administration innovation in the digitalization era rahmi and gangodawilage 32 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion innovating the tax administration system in the digital era is a must. the acceleration of technological change must also be balanced with the ability to adapt, both by policy makers and policy users. tax administration innovations carried out in indonesia have been running well. strengths and opportunities that can be exploited are in the form of adequate human resources to accompany the increasing number of registered taxpayers. the reliability of hr has also been met as evidenced by the satisfaction index of dgt service users of 4.1 from the target of 4 points (maximum scale of 5). technology that can still be developed is also a force for tax administration innovation. the high participation of taxpayers in following the innovation policy of tax administration is a very big opportunity with the number of manual spt users recorded which has decreased by 88.8% in the last five years. weaknesses and threats were encountered, namely from the internal side of the tax office, they felt that there were no weaknesses, but according to academics and taxpayers they found that there was still a lack of maintenance on the server where often occurred server downs during the spt reporting deadline. taxpayers also admitted that they had not fully received directions on how to operate the new tax administration system. taxpayers need to adapt to the digitalization that is being carried out. so it is the government's duty to pay extra attention to the understanding of taxpayers in the application of the digital tax administration system. the more taxpayers who understand the use of digital administration systems, the greater the potential to be able to improve taxpayer compliance. increased taxpayer 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(2019). a selection model based on swot analysis for determining a suitable strategy of prefabrication implementation in rural areas. sustainable cities and society, 50, 101715. https://doi.org/10.1016/j.scs.2019.101715 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp : 115-121 https://www.ilomata.org/index.php/ijtc 115 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 does the value of the company affected intellectual capital with financial performance as interesting variables? rio ahmad junaedi1, elva nuraina2 dan nur wahyunig sulistyowati3 1fkip, universitas pgri madiun, indonesia 2pendidikan akuntansi, universitas pgri madiun indonesia ahmadrio120696@gmail.com submitted : jan 13th 2020 revised : feb 13th 2020 published : march 30th 2020 abstract this study aims to examine the effect of intellectual capital on firm value through financial performance as an intervening variable in the property and real estate sub-sector companies which is quantitative research by applying hypothesis testing and conducting path analysis using linear regression. to test the influence of mediation in this study applying the sobel test with the results of financial performance cannot mediate the relationship of intellectual capital and firm value because financial performance is not the only factor that influences the movement of company values, and intellectual capital itself is a factor that cannot be measured directly different from financial performance. keywords: intellectual capital, company value, financial performance. introduction at present the growing variety of investments is investing in land or property which has an impact on the high level of development of the property and real estate industry plus more and more companies are participating in taking advantage of this opportunity (hamidy, wiksuana, & artini, 2015). in the business world, a company must be faced with conditions where an increase or decrease in the value of the company. the stock price index experienced a decline in early 2018, one of which was the property sub-sector companies cited through rti buisness namely pt bumi serpong damai decreased by 75 points to 4.09% or rp 1,760. pt alam sutera realty decreased 18 points to 4.55% or rp. 378. pt ciputra development has decreased by 40 points to 3.01% or rp. 1,290. pt agung podomoro land has decreased by 12 points to 5.31% or rp. 214. pt lippo karawaci, which decreased by 30 points to 5.61% or rp. 505. pt summarecon agung also decreased by 45 points to 3.81% or rp. 1,135. idx director tito sulistio stressed that the weakening was caused by perceptions originating from the state of the world economy, namely the united states, if the company's output in 2017 was good the economy would be good. all perceptions are only temporary due to good economic and corporate fundamentals (ningrum, 2018). with this phenomenon, it encourages researchers to find out about the weakening of company performance and value in the property and real estate sub-sector companies, is it because the company is not maximally utilizing the existing wealth (tangible and intangible assets), namely intellectual capital, because some theories state that intellectual capital is the most important part in increasing a company's wealth. mailto:ahmadrio120696@gmail.com1 does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 116 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 intellectual capital is no different from the insights and expertise inherent in the organization of the intellectual community, intellectual capital can also be said to be a high-value resource and has the ability to take action based on knowledge as conveyed by ulum (2009) and if intellectual capital is used to its full potential , has an impact on the quality of the company's financial performance where the financial performance itself is the same as the analysis carried out to find out how far the company operates its business based on effective and efficient financial implementation standards in the opinion of fahmi (2018) which as a whole influences the movement of company value, its relation with this topic is a reflection of the price to be paid by potential buyers if the related company is to be sold, because in essence the value of the company is the perception of all investors in the position of success value that is often linked with stock value and profitability as stated by (brigham & houston, 2010). judging from the discussion above, several previous researchers have conducted intellectual capital, company value, and financial performance studies such as sudibya & restuti (2014) which empirically proved that intellectual capital has a positive influence on financial performance, in contrast to andriana's (2014) research which states that intellectual capital and human capital have insignificant negative effect on financial performance, even though employed capital and structural capital show positive coefficients. the different results of research conducted by several researchers such as sudibya & restuti (2014) states that intellectual capital has a positive influence on financial performance, in contrast to andriana (2014) which provides a statement that intellectual capital and human capital insignificantly have a negative effect on financial performance . this encourages researchers to carry out the next research that is the application of roa as a measure of financial performance which is used as a connecting variable of the two other variables as well as researched data focusing on property and real estate sub-sector companies that are incorporated in the bei period 2015 to 2017 because the related sectors have the lowest movement in the stock price index while the price of the property is getting higher and this becomes more interesting to study because the development of the property and real estate sector is part of the indicator of economic growth in indonesia in particular. some of the explanations above, then this study aims to examine the influence of intellectual capital on firm value and financial performance and to test the ability of financial performance to mediate the relationship of intellectual capital with firm value which theoretically has a contribution to increase knowledge in the accounting world, specifically discussing related to value added information which is the output of intellectual capital and its influence on the optimization of financial performance and corporate value. in addition, this research is practically aimed at stakeholders to examine the importance of intellectual capital that encourages the business processes of an entity or company to be able to produce added value that gives more points to the company, while for subsequent researchers as a reference source in developing research in the field of intellectual capital. method this study includes quantitative research using secondary data sources, in several property and real estate sub-sector companies included in the indonesia stock exchange period 2015-2017 with a research period of approximately 4 months, from march to june 2019. the sample of companies in this study amounted to 31 companies with a purposive sampling technique, because there are several companies whose financial statements are incomplete so that does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 117 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 it becomes a consideration in determining the sample of companies to be studied. this study uses intervening variables with path analysis because path analysis is an extended regression analysis to estimate the causality relationship between variables that have been selected before, in accordance with existing theories and path analysis is included as part of a broad multiple regression analysis (ghozali, 2013). this analysis directly occurs if 1 (one) variable influences other variables without using a connecting variable whereas indirectly it can occur if there are other variables mediating the two variables with an equation like the following: ( ) ( ) information: a. roa (return on assets) as a proxy for financial performance. b. vaictm (value added intellectual coefficient) as a proxy for intellectual capital. c. pbv (price to book value) as a proxy for company value. d. e. f. g. h. mediation test through multiple test, to test the indirect effect of the independent variable with the dependent variable passing through the connecting variable which is calculated as follows: √ information: a. sab : standard error coefficient ab b. a : coefficient a c. b : coefficient b d. e. result and discussion a. results of analysis of intellectual capital regression (x1) on financial performance (x2) after conducting a partial significance test (t test), the results obtained are a constant value and vaictm of 0,000 which can be observed from table 1. table 1. results (t test) model t significant constant -15,505 0,000 vaictm 5,475 0,000 source: spss version 22 table 1 shows that the significance value is 0,000 below 0.05, so it can be concluded that intellectual capital has a significant influence on financial performance. this is based on resources bassed theory which states that a company can be said to excel in a stock market competition and produces good quality financial performance on condition of owning, controlling and being able to use all important assets (tangible or intangible assets), reinforced by ozkan research , cakan, & kayacan (2016) which states that the intellectual capital has a positive influence on roa, the greater the intellectual capital, the profits created directly increase and the value of roa also increases. does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 118 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 b. results of analysis of intellectual capital regression (x1) on firm value (y) the partial significance test (t test) produces a constant value and vaictm of 0,000, which is found in table 2 as follows: table 2. results (t test) model t significant constant -4,418 0,000 vaictm 4,298 0,000 source: spss version 22 table 2 shows that the significance value obtained from the test was 0,000 below 0.05. thus it can be concluded that intellectual capital has a significant effect on firm value. based on satakeholder theory which states that intellectual capital is believed to have an important influence in increasing the value of a company, in line with the opinion of hamidah & sari (2014) which proves that intellectual capital is included in the source of knowledge, can significantly have an impact on increasing the wealth of a company, agree also with nuryaman (2015) which states that intellectual capital has a positive influence on company value, and supported by sudibya & restuti (2014) which proves that intellectual capital has a good influence on firm value. this is because the maximum utilization of intellectual capital can affect the attractiveness of investors, thereby directly increasing their perception of the value of a company. c. financial performance mediates the relationship between intellectual capital and company value testing the presence or absence of the influence of financial performance in mediating the relationship of intellectual capital to the value of the company, researchers look for the influence of financial performance first for the value of the company, then the next step is to do a mediation test and a sobel test. 1. results of analysis of intellectual capital regression (x1) and financial performance (x2) against corporate value/pbv (y) after a regression analysis the results obtained are constant values of 0.010, vaictm of 0.000, and roa of 0.705 which can be observed from table 3. table 3. intellectual capital_ic regression model and financial performance of pbv model coefficient t significant constant -1,690 -2,627 0,010 vaictm 0,716 3,899 0,000 roa -0,043 -0,379 0,705 source: spss version 22 table 3 shows the multiple linear regression equation as follows: y= -1,690+0,716vaictm-0,043roa the above equation is a model obtained from data that has been transformed to a log because at the beginning of testing the classical assumptions, the assumption of normality is not met. the equation with the anti-log value to return to the original data is as follows: y= 0,185+2,046vaictm+1,044roa based on table 3 and the above model can be explained if the variable intellectual capital and financial performance both have a value of 0, so the variable y or the value of the company (pbv) is worth 0.185. if intellectual capital (vaictm) experiences an increase of 1 (one) unit, it does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 119 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 can cause the value of the company (pbv) to increase to 2,046 units provided the other variables are constant or zero. then if the financial performance (roa) has increased by 1 (one) unit, the company value (pbv) will experience a decrease of 1,044 units provided the other variables are constant or zero. furthermore, after a partial significance test (t test) was obtained, the results obtained a constant value of 0.010, vaictm of 0.000, and roa of 0.705 as can be seen from table 4. table 4. results (t test) model t significant constant -2,627 0,010 vaictm 3,899 0,000 roa -0,379 0,705 source: spss version 22 table 4 shows the results of the t test for the analysis of intellectual capital regression and financial performance to firm value (pbv). variable intellectual capital_vaictm t value is 3,899 and significance is 0,000. significant value of 0,000 is far below 0.05 so it can be concluded that the intellectual capital variable (vaictm) partially has an influence on firm value (pbv) and the financial performance variable (roa) has a t value of -0.379 with a significance of 0.705. the significance value of 0.705 exceeds the value of 0.05 so it can be concluded that financial performance (roa) partially has no effect on the value of the company (pbv). 2. mediation test to detect influence of financial performance (roa) in mediating intellectual capital_vaictm relationship to firm value (pbv). mediation test is done by calculating the coefficient obtained from the results of intellectual capital regression to financial performance and the results obtained from the regression test of intellectual capital variables and financial performance to the company value whose results can be observed from table 5. table 5. intellectual capital regression tests on financial performance model coefficient standard error constant -4,854 0,313 vaictm 0,810 0,148 sumber: spss versi 22 table 5 shows a value of 0.810 and sa of 0.148 and other coefficient values needed for the test sobel are in the regression equation with the results shown in table 6. table 6. intellectual capital_ic regression tests and financial performance of company values koefisien standar eror constant -1,690 0,643 vaictm 0,716 0,183 roa -0,043 0,113 source: spss version 22 table 6 shows the coefficient b is -0.043 and the coefficient sb is 0.113. then continue the sobel test as follows: √ √( ) does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 120 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the calculation using the formula above shows the value of the sobel test 0.09326. then proceed with the calculation of the value of t which is done to test whether financial performance is able to mediate the relationship between intellectual capital and firm value. ( )( ) the above calculation results in the calculated t value of | -0.37346 | or 0.37346. then compare with the value of t table (significant 0.05 and degree freedom 157) of 1.986 so that it can be determined that the value of t arithmetic (0.37346) is below the t table (1.986). thus, it can be concluded that there is no effect on the roa_ financial performance in mediating the relationship of intellectual capital to the firm_pbv value. agree with lestari (2017); lestari & sapitri (2016) who did not succeed in proving the influence of ic on the value of the company, contrary to the results of research by hadiwijaya & rohman (2013); jayanti & binastuti (2017) which states that intellectual capital (ic) has a good influence on financial performance and corporate value. conclusion intellectual capital has a significantly positive effect on financial performance and firm value, while intellectual capital does not have a significant influence on firm value through financial performance as an intervening variable because financial performance continues to increase and is stable does not mean that it can increase the value of a company and the value of a company is the perception of a number of investors regarding the success rate of a company that is often linked based on the level of stock prices, and that perception does not always occur only in the company's financial performance, but it can be from the quality of company management, resources, asset utilization or from other factors that attract investors in increasing their perception of a company. the limitation of this study is that the researcher has difficulty in analyzing financial statements due to differences in terms of the accounts in the financial statements such as net income accounts written as net sales accounts at several companies. the next researcher is expected to learn more about the terms in writing accounts in the financial statements so that the differences in terms do not become obstacles in the process of analyzing the financial statements of each company. reference andriana, d. (2014). pengaruh intellectual capital terhadap kinerja keuangan. jurnal riset akuntansi dan keuangan, 2(1), 251–260. https://doi.org/10.17509/jrak.v3i2.6615 brigham, & houston. (2010). dasar-dasar manajemen keuangan. jakarta: salemba empat. fahmi, i. (2018). manajemen kinerja teori dan aplikasi. bandung: alfabeta. febrianty, & divianto. (2020). business owner’s perspective on strategic execution, technological transformation, competitiveness potential, and services level on the implementation of strategic it alignment. humanities & social sciences reviews, 8(1), 567–585. https://doi.org/10.18510/hssr.2020.8169_1 ghozali, i. (2013). aplikasi analisis multivariate dengan program spss. edisi ketujuh. semarang: badan penerbit universitas diponegoro. hadiwijaya, r. c., & rohman, a. (2013). pengaruh intellectual capital terhadap nilai perusahaan dengan kinerja keuangan sebagai variabel intervening. jdiponegoro journal of accounting, 2(3), 1–7. does the value of the company affected intellectual capital with financial performance as interesting variables? junaedi, nuraina, sulistyowati 121 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 hamidah, & sari, d. p. (2014). pengaruh intellectual capital terhadap kinerja keuangan pada bank go public yang terdaftar di bursa efek indonesia (bei) tahun 2009-2012. jurnal riset manajemen sains indonesia, 5(2), 186–203. hamidy, r. r., wiksuana, i. g. b., & artini, l. g. s. (2015). dengan profitabilitas sebagai variabel intervening pada perusahaan properti dan real estate di bursa efek indonesia. e-jurnal ekonomi dan bisnis universitas udayana, 4(10), 665–682. jayanti, l. d., & binastuti, s. (2017). pengaruh intellectual capital terhadap nilai perusahaan dengan kinerja keuangan sebagai variabel intervening pada perusahaan perbankan yang terdaftar di bursa efek indonesia. jurnal ekonomi bisnis, 22(3), 187–198. lestari. (2017). pengaruh intellectual capital & kepemilikan institusional terhadap nilai perusahaan. jurnal dinamika ekonomi dan bisnis, 14(1), 17–39. lestari, n., & sapitri, r. c. (2016). pengaruh intellectual capital terhadap nilai perusahaan. jurnal akuntansi, ekonomi dan manajemen bisnis, 4(1), 28–33. ningrum, d. a. (2018). ketidakpastian global bikin saham properti di indonesia melemah. retrieved july 22, 2019, from www.merdeka.com website: https://www.merdeka.com/uang/ketidakpastian-global-bikin-saham-properti-diindonesia-melemah.html nuryaman. (2015). the influence of intellectual capital on the firm’s value with the financial performance as intervening variable. procedia social and behavioral sciences, 211(september), 292–298. https://doi.org/10.1016/j.sbspro.2015.11.037 ozkan, n., cakan, s., & kayacan, m. (2016). intellectual capital and financial performance: a study of the turkish banking sector. borsa istanbul review, 17(3), 190–198. https://doi.org/10.1016/j.bir.2016.03.001. sofyan, m. (2019). rasio keuangan untuk menilai kinerja keuangan. jurnal akademika, 17(2), 115-121. retrieved by http://jurnal.stieimalang.ac.id/index.php/jak/article/view/173/97. sudibya, d. c. n. a., & restuti, m. m. d. (2014). pengaruh modal intelektual terhadap nilai perusahaan dengan kinerja keuangan sebagai variabel intervening. benefit jurnal manajemen dan bisnis, 18(1), 14–29. ulum, i. (2009). intellectual capital. yogyakarta: graha ilmu. the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.264-266 https://www.ilomata.org/index.php/ijtc 264 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the direction of tax policy in 2021 in the context increase tax revenue in the 19th covid recovery agus subagiyo1, diana prihadini2, mainita hidayati3, dwikora hardjo4, pebriana arimbhi5 12345the stiami institute for social sciences and management. submitted : september 25, 2020 revised : october 10, 2020 published : october 31, 2020 abstract the covid-19 pandemic has changed economic and social developments and arrangements throughout the world. this pandemic requires the government together with elements of the community to make efforts to prevent the spread of the virus and economic recovery. in the context of maintaining sustainable development in the midst of dynamic fundamental challenges, the national budget as an instrument of fiscal policy is designed to be more productive, effective, and efficient in order to accelerate economic growth for welfare and improve the government's balance sheet. global economic activity has been disrupted due to lockdown policies in a number of indonesia's major trading partners, which has reduced supply of important components for industries from abroad. the increasing exchange rate of the us dollar makes the price of imported materials more expensive. on the consumption side, many companies experience cash flow difficulties, thereby reducing their ability to pay taxes resulting in significant tax revenues such as corporate income tax. significant reduction in international trade activities also resulted in lower tax revenues from imports and import duties. tax revenues also experienced pressure from falling world oil prices, minerals, and cpo which are important components in calculating oil and gas pph and export duties. tax revenue performance is expected to weaken in 2020 with a tax ratio potentially below 9 percent. the government has made the first policy of relaxing the taxation by reducing the burden of business activities and helping to improve the condition of the company's cash flow, especially during and after the covid-19 epidemic. the company can use a reduction in corporate income tax rates, exemption from import pph and certain sector import duties, as well as various other tax facilities to cover increases in input material prices and decreased sales so that it continues to operate normally. both governments have made efforts to expand the taxation base and improve tax administration. third the addition of new tax objects, one of which the government levies taxes on trade through electronic systems (pmse) and other object sources of excise products such as plastics, sweetened drinks, and fuel oil (bbm). fourth, from the aspect of tax subject by extending the taxpayers (wp), which are sector-based and regional, increase wp voluntary compliance through effective education and service improvement, including the high net worth individual (hnwi) group. the fifth government seeks to improve tax governance and administration starting from business processes, information technology, databases (core tax), organizations, and hr. from government policies in the effort to accelerate economic recovery, there are still various obstacles, especially in terms of regulations or policies prepared as well as technology as a means of infrastructure in supporting these regulations. the regulation or policy must touch on all aspects, namely aspects of tax law, aspects of tax justice, and aspects of the double tax avoidance agreement (p3b) for cross-border transactions. keywords: tax policy, tax revenue, 19th covid recovery https://www.ilomata.org/index.php/ijtc the direction of tax policy in 2021 in the context increase tax revenue in the 19th covid recovery subagiyo, prihadini, hidayati, hardjo, & arimbhi 265 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 introduction the covid-19 pandemic has changed economic and social developments and arrangements throughout the world. this pandemic requires the government together with elements of the community to make efforts to prevent the spread of the virus and economic recovery. in order to maintain sustainable development in the midst of dynamic fundamental challenges, the national budget as an instrument of fiscal policy is designed to be more productive, effective, and efficient in order to accelerate economic growth for welfare and improve the government's balance sheet. global economic activity has been disrupted due to lockdown policies in a number of indonesia's major trading partners, which has reduced supply of important components for industries from abroad. the increasing value of the us dollar makes the price of materials more expensive. on the consumption side, many companies increase cash flow difficulties and therefore lose the ability to receive taxes that receive tax revenues such as pph. reduced international trade activities also significantly reduce important revenue taxes and import duties. tax revenues also reduce world oil prices, minerals, and cpo which are important components in the calculation of oil and gas pph and export duties. method the purpose of this research is to find out the direction of tax policy in 2021 in order to increase tax revenue during the covid-19 pandemic in indonesia. in this writing the researcher used a study literature that is in the process of taking the data researchers do not need to go directly into the field but take various reference sources that support this research. this type of research is qualitative research. data collection techniques are listening and recording important information in conducting data analysis by means of data reduction, data display and conclusions so as to get a picture of conclusions about the study of literature to be developed in this study and to validate the data using triangulation of data sources. results and discussion the government has made the first policy of relaxing the taxation by reducing the burden of business activities and helping to improve the condition of the company's cash flow, especially during and after the covid-19 epidemic. both governments have made efforts to expand the taxation base and improve tax administration. third the addition of new tax objects, one of which the government levies taxes on trade through electronic systems (pmse) and other object sources of excise products such as plastics, sweetened drinks, and fuel oil (bbm). fourthly, from the aspect of tax subject by extending the taxpayers (wp) based on sector and territorial basis and improving services, including to the high net worth individual (hnwi) group. the fifth government seeks to improve tax governance and administration ranging from business processes, information technology, databases (core tax), organizations, and hr. conclusion the covid-19 pandemic has changed economic and social developments and arrangements throughout the world . the government has made five policies, the first is to relax taxation especially during and after the covid-19 epidemic. reduction of corporate income tax rates, exemption from import tax and certain sector import duties, the two governments have made efforts to expand the taxation the direction of tax policy in 2021 in the context increase tax revenue in the 19th covid recovery subagiyo, prihadini, hidayati, hardjo, & arimbhi 266 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 base and improve tax administration. third, the addition of new tax objects through the electronic system (pmse). fourth is the extensification of taxpayers (wp) that is sector-based and regional, increasing wp voluntary compliance through effective education and service improvement, including the high net worth individual (hnwi) group. the fifth government seeks to improve tax governance and administration starting from business processes, information technology, databases (core tax), organizations, and hr. reference albu, l. l., preda, c. i., lupu, r., dobrotă, c. e., călin, g. m., & boghicevici, c. m. (2020). estimates of dynamics of the covid19 pandemic and of its impact on the economy. romanian journal of economic forecasting, 23(2), 5. arboleda, d., & zambrano, a. (2020). vulnerability after covid-19 and the response of a developing city: the case of bogota, colombia. documento cede, (36). berardi, c., antonini, m., genie, m. g., cotugno, g., lanteri, a., melia, a., & paolucci, f. (2020). the covid-19 pandemic in italy: policy and technology impact on health and non-health outcomes. health policy and technology. ekanem, s. a., imarenezor, e. p. k., & okolisah, c. p. (2020). an essencist evaluation of socioeconomic impacts of coronavirus disease (covid-19) pandemic in nigeria. mediterranean journal of social sciences, 11(5), 70-70. ham, a. (2020). social and economic impact of the covid-19 and policy options in honduras. kennelly, b., o'callaghan, m., coughlan, d., cullinan, j., doherty, e., glynn, l., ... & queally, m. (2020). the covid-19 pandemic in ireland: an overview of the health service and economic policy response. health policy and technology. welfens, p. j. (2020). corona world recession and health system crisis: shocks not understood so far (no. disbei273). universitätsbibliothek wuppertal, university library. the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp : 74-88 https://www.ilomata.org/index.php/ijtc 74 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 review on fraud research: a study of vote-counting yeni priatna sari1, ari kuncoro widagdo2, evy gantyowati3 1politeknik harapan bersama tegal central java, indonesia 23sebelas maret universitysurakarta, central java indonesia yeni.priatna@gmail.com submitted : jan 11th 2020 revised : feb 8th 2020 published : march 2020 abstract this study was aimed to conduct a literature study on research related to fraud. the research method used is to use the literature study method by using the vote-counting model. this research would identify papers relating to fraud that has been obtained from various existing databases. next, the researcher classified the paper by classifying the focus of research at the paper stage in fraud prevention, detection, investigation or remediation. the results of this study were recommendations for researchers, in terms of what is still open as material in research related to fraud. keyword: fraud, vote-counting, review introduction the occurrence of fraud in private companies or the public sector is currently symptomatic in various ways. there are millions of businesses and government organizations operating throughout the world that have been vulnerable to fraud committed by employees or managers who manage these entities (dorris, 2018). fraud and fraud are now considered as one of the main problems and become a serious challenge for all types of organizations, both business and public entities (law, 2011; perri and brody, 2012). to survive, every organization must be able to detect the problem of fraud and deal with it wisely (button et al., 2011). the total losses due to fraud in various sectors that occur in western europe are around $ 200,000, in south asia around $ 100,000, in eastern europe and central asia around 4150,000, in latin america $ 193,000 in the middle east and north africa around $ 200,000 and in canada around $ 200,000 according to the report from report to the nations in 2018 published by the acfe. (dorris, 2018). the fraud in the form of corruption in the current government is also an important problem that cannot be underestimated in indonesia. some of the news included the arrest of 18 regional heads in indonesia who were only 17 months as regional heads (gabrillin, 2018), of course, raising concerns about the conditions of fraud that occurred in the public sector. what is even more concerning is that the statement delivered by the minister of home affairs also stated that during 2014 until 2017 there were 313 regional heads affected by corruption cases (kuswandi, 2017). to overcome this fraudulent practice, various researchers have conducted a series of studies relating to fraud. fraud studies have been carried out by researchers both inside and mailto:yeni.priatna@gmail.com review on fraud research:a study of vote counting sari, widagdo, gantyowati 75 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 outside the country. various researches on the theme of fraud generally explain the factors that influence fraud, fraud prevention and fraud detection methods. some of the studies related to fraud include the factors that influence the level of corruption such as research (heriningsih, 2013), (wulandari, 2015) (yuliyana&setyaningrum, 2016) which examines the influence of audit opinion and regional financial level at the level corruption in local government. while research on determinants of fraud is also carried out by researchers from abroad such as (kelvin & arnold, 2015); (anuar et al., 2014); (bonner, palmrose, & young, 1998). likewise, research relating to fraud prevention was also carried out by several researchers in indonesia such as (widaningsih, 2015) who examined the effect of internal auditor professionalism on fraud prevention and detection. likewise, research on fraud detection methods using the beneath m score method examined by (efitasari, 2013) and from abroad (perols, 2011); (yue, wu, & shen, 2009) and (kaminski, sterling wetzel, & guan, 2004). trend and development in fraud research are still developing to find the best format to be able to detect, prevent, cope with and follow up on the impact of fraud (dorminey, fleming, kranacher, & riley, 2012). at present, the latest development in research synthesis is by integrating, quantifying the knowledge gained from empirical studies that have been carried out on certain themes using meta-analysis. research using the method vote-counting is a study that simply calculates and finds all studies on the same topic and then calculates all studies that significantly influence or not on a topic. one study that uses the vote-counting method to look at various methods of fraud detection is research from (abbasi et al., 2018) research conducted by previous researchers including research (hastuti&gozali, 2015) which revealed difficulties in detecting fraud in financial reporting. research (hastuti&gozali, 2015) explains that the level of corporate liability, liquidity, roa, independence of the board of directors and internal control systems does not affect the intention to manipulate financial statements. also, research from (kanapickiene&grundiene, 2015) which tries to identify financial ratios that can detect fraudulent financial reporting. while research (rivest, 2017) examines the reporting mechanism that can reduce the occurrence of fraud. in this paper, rivest concludes that an effective reporting mechanism must be followed by the existence of an effective whistleblowing system to ensure the absence of fraud(sinaga & sidik, 2019). because a lot of research on fraud has been done, therefore in this study, researchers conducted a literature review using the vote-counting method as a method in this study. to see and analyze the results of existing empirical research on fraud committed in the public or private sector. which later can be used as reference material for further researchers about the next steps that can be investigated and carried out to reduce fraud. method the research method was carried out by reviewing existing publications related to fraud / fraud. the literature review method in this study was the count review method. the count review method, also known as a counting review, is a literature review method that evaluates the strengths of the study results compared to the overall results of the study under study (cwikel& hare, 2000). the researcher reviews several publications related to fraud both in the public sector and the private sector. the purpose of this review process is to be able to understand, analyze and reveal how the development of research related to fraud has existed so far; regulate, classify and categorize publications according to topics and themes that focus on review on fraud research:a study of vote counting sari, widagdo, gantyowati 76 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 fraud; and provide input on new research agendas based on research gaps that have been identified from existing literature. this study reviewed papers obtained from popular databases such as emerald, ebscohost, sciencedirect, elsevier, wiley, google scholar by using keywords (or a combination of keywords) such as fraud, fraud, and fraudulent financial reporting. the process of reviewing the manuscript is done in the following manner: keyword articles published make a choice of the relevant paper choose the paper that is suitable for the purpose of the study this study would review the paper and classify the paper with the theme of fraud or fraud into several classifications including: how many articles per year published, the classification of the independent variables used, the classification of the dependent variables studied, the classification of frauds is that research including the detection, prevention, investigation or remediation of fraud (dorminey et al., 2012), and the classification of papers in this study including the use of the galliers taxonomy, namely the classification of forms of research whether positive or interpretive (choudrie&dwivedi, 2005). review methods in this research can be described in a diagram as follows (gangwar, date, & raoot, 2014): paper selection based on keywords looking for articles on the database making choices on existing papers identifying types of research developing understanding of the research stages about fraud building and developing research trends on fraud in the public sector or in the private sector writing research results and conclusions. the following are the stages in this study: in this study, researchers would identify research based on the taxonomy found by galliers. the classification found by galliers 1992 is widely used for research in the field of information security which describes laboratory experiments, field studies, surveys, case studies, proof of theory, forecasting, action research, subjective / argumentative, dialectic investigations, grounded research and ethnography. galliers divides the method into two major parts, namely positivistic and interpretivistic. the following is a table of taxonomy in (choudrie&dwivedi, 2005). looking for a paper with the keyword "cheating, fraud, sorting out papers sourced from non scientific papers and conducting classificatio ns based on year, stage of fraud category, perform quantitative calculations of selected papers review on fraud research:a study of vote counting sari, widagdo, gantyowati 77 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 galliers taxonomy tables result and discussion researchers have conducted this research for several months in 2018. research conducted by searching all papers from google scholar, page science direct, procedia economics and finance, business ethics journal, emerald, springer, issues in accounting education, the accounting review, accounting and finance review, journal of forensic and investigative accounting, journal of advanced management science, sage publication, american accounting association, and from journals in indonesia from the scientific and business journal, diponegoro journal of accounting, multiparadigm accounting journal, rinjani scientific journal, journal of civilization accounting, i finance, trikonomika journal, accounting and tax journal, business and economic journal, accounting journal and business, accountant and financial journal, and national symposium of accounting. the researcher has conducted a survey of 127 articles from 2000 to 2018 consisting of articles sourced from journals and proceedings both inside and outside the country. from the whole article the researcher selects articles from journals or comes from student theses. the result is that there are 100 journals from trusted national and international journals and proceedings. the following are the details of the journal sources studied: the entire downloaded paper 127 papers reduced bythesis / non-scientific journals 27 papers -paper studied 100 papers review on fraud research:a study of vote counting sari, widagdo, gantyowati 78 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 graph 1. source of paper studied source: secondary data processed (2019) national articles sources included from multi-paradigm accounting journals, accounting and tax journals, accounting and finance journals, accounting and business journals, sriwijaya management and business journals, accounting research journal going concern, journal of accounting and finance research, bulletin of monetary economics and banking, regional development management journal , journal of accounting research, and journal of accounting and islamic finance and a few more. whereas for international articles such as those originating from journal of network and computer application, decision support systems, journal of advanced management, journal of forensic and investigative accounting, issues in accounting education, journal of business ethics, international journal of education and research, journal west university of timisoara, and journal of business and management. whereas for national proceedings articles came from the national xix accounting symposium in lampung, and the national innovative research seminar. whereas for proceedings originating from abroad originating from procedia computer science, proceeding of management, procedia economics and finance, procedia social and behavioral sciences from elsevier, workshops on legal ontologies and web base legal information management, and the pacific asia conference on information system proceedings. the number of publications per year that have been searched by researchers is shown in the following graph: figure 1 number of publications by year 50 31 5 14 0 10 20 30 40 50 60 nasional internasional jurnal prosiding review on fraud research:a study of vote counting sari, widagdo, gantyowati 79 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 source: secondary data processed (2019) from the graph above, it can be seen that the development of research related to fraud was increasing. the number of researches is mostly carried out by researchers in 2016. and the number of studies that are above 10 studies per year begins in 2014 until 2018. in 2000 to 2004 the number of studies published and monitored by researchers amounted to 1 study per year. likewise, for 2010 there were only 1 paper related to fraud that had been carried out. analysis: from these data, it can be analyzed that research on fraud has been carried out by many researchers and began to develop in 2008 and began to develop even greater in 2014. this can be seen as a development because more and more cases of fraud have occurred. this was also expressed by modugu in his research that in recent years, professionals have believed that the development of accounting fraud will increase in the next few years (modugu, 2012). from the whole study, the following is a distribution of themes published by each researcher. the following is the distribution of the theme of the article about cheating that has been traced by researchers. graph 2 research themes source: secondary data processed (2019) from the graph above it can be seen that the research theme that was least carried out by researchers was the theme of fraud remediation. fraud remediation investigated by (farber, 2004) conveys the impact of institutional ownership on fraud in companies that focuses on corporate governance to get out of fraud problems. while the most sought-after theme by researchers was the theme of fraud detection which occupies 44 paper titles during 2000 to 2008. the themes of fraud determinants were 33 paper titles and fraud investigation totaling 21 paper 1 1 1 1 3 6 4 1 5 5 3 12 15 17 14 11 0 5 10 15 20 thn… thn… thn… thn… thn… thn… thn… thn… number of publications by year 1 4 21 30 44 research theme fraud remidiation (1) fraud prevention (4) fraud investigation (21) fraud determinan (30) fraud detection (44) review on fraud research:a study of vote counting sari, widagdo, gantyowati 80 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 titles and fraud prevention in 4 paper titles. research that examines fraud prevention or about prevention of fraudalso conducted by several researchers in indonesia such as (miminwidaningsih, 2015) who examined the effect of internal auditor professionalism on fraud prevention and detection. this research includes fraud research in the public sector because of conducting research or surveys on state-owned enterprises headquartered in the city of bandung. from the results of the above research it can be seen that the researchers were more interested in conducting research on fraud in the detection section. where what is meant by fraud detection is the implementation of several indicators that show the organization to detect the initial signs of fraud (sow, basiruddin, mohammad, zaleha, &rasid, 2017). fraud detection can be done with various methods. several studies have examined what tools can be used to detect fraud. some studies show these things. among them are research from (abdallah, maarof, &zainal, 2016) and (west & bhattacharya, 2015). abdallah presents data on the use of fraud detection devices in the areas of banking, insurance, telecommunications and internet marketing fraud. the most commonly used fraud detection techniques are artificial neural networks (ann), support vector machines (svm), rule induction, decision trees, logistic regression and meta heuristic techniques. unlike abdallah, west investigated fraud detection in several different areas, namely fraud areas in banking, companies and insurance. where each has a cheating area that is typical of each company. the figure below shows the cheating area that is most often done in private sectors according to (west & bhattacharya, 2015) figure 2 corporate fraud area source: taken from research (west & bhattacharya, 2015) in his research, west concluded that each fraud detection technique such as (logistic regression, support vector machine, neural network, and decision tree) have a high enough ability to learn and adapt to be highly effective to the evolving tactics of fraudsters. after a table of annual fraudulent studies, the following will be shown about the distribution of research themes per year. figure 3 distribution of themes per year review on fraud research:a study of vote counting sari, widagdo, gantyowati 81 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 source: processed secondary data (2019) from the graph above it can be seen that the theme of fraud detection is dominant in 2008, 2014, 2015, 2016, and in 2017. the highest theme of fraud detection occurred in 2014 and 2015 while the theme which was only conducted once by researchers occurred in 2005, namely the theme of cheating remediation. the theme of fraudulent determinants and fraud investigations is in second and third place in 2014 to 2018. the theme of fraudulent determinants is second only to fraud detection. the determinants of fraud that have been studied have many aspects. among the determinants of fraud is about factors that influence the level of corruption such as research (heriningsih, 2013) which examines the influence of audit opinion and the level of regional finance on the level of corruption in local governments. furthermore, cheating research was also conducted by (wulandari, 2015), namely on the influence of accountability of local government financial reports and regional financial performance on the level of regional government fraud, where the accountability of financial statements was seen in audit opinions, spi weaknesses and compliance with the act, while the regional financial performance studied is the independence ratio, activity ratio and growth ratio of the local government. another study was conducted by (yuliyana&setyaningrum, 2016) on the effect of e-government implementation and accountability on corruption perceptions in ministries / institutions. this research takes the object of research in ministries / institutions not in the local government. research on determinants of fraud carried out from abroad, including those conducted by (xu, zhang, & chen, 2018) who examined the age of the board of directors affecting the existence of fraud in the company. in addition, research on the determinants of fraud is also carried out by (yang, jiao, & buckland, 2017) who examined the influence of corporate governance on fraud in the company. the theme of fraud detection is in the highest position possible due to the increasing number of frauds occurring both from the private sector and the public sector. among the frauds that occurred in 2000 to 2014 were fraud that occurred with enron and worldcom. this triggered the researchers to detect fraud as an effort to prevent and overcome fraud that resulted in losses. several studies examining fraud detection were conducted by efitasari who conducted research on fraud detection methods using the beneish m-score method examined by (efitasari, 2013). other research examining fraud detection methods is also done by (beneish, 2015). almost all fraud detection research using methods of private company objects. as is the case with research by (wiralestari, 2017) which examines fraud detection using investigative forensic accounting and accounting that can detect fraud in private companies or public sector organizations. another study was conducted by (alamsyah&rahardjo, 2013) who examined fraud detection using social network analysis. overseas research on fraud detection methods is also more diverse such as research by (adrian, 2015) which detects fraud using data analysis, 0 2 4 6 8 10 in v es ti g a si d e te k si in v es ti g a si d e te k si r em id ia si d e te r m in a n in v es ti g a si d e te k si in v es ti g a si d e te k si in v es ti g a si d e te k si d e te k si d e te r m in a n in v es ti g a si d e te k si d e te r m in a n in v es ti g a si p r ev en ti o n d e te r m in a n d e te k si d e te k si p r ev en ti o n in v es ti g a si d e te r m in a n d e te k si d e te r m in a n in v es ti g a si d e te k si d e te r m in a n p r ev en ti o n in v es ti g a si d e te r m in a n d e te k si in v es ti g a si d e te r m in a n d e te k si in v es ti g a si 20002001200320042005200520052008200820092009201020112011201120122012201220122013201320142014201420142015201520152016201620162016201720172017201820182018 theme distribution per year review on fraud research:a study of vote counting sari, widagdo, gantyowati 82 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 research by (dalnial, kamaluddin, sanusi, &khairuddin, 2014) that detects fraud by using financial statement analysis and research by (meenatkshi&sivaranjani, 2016) who examined fraud detection using data mining methods. there are still many studies on fraud detection with various methods such as (yue et al., 2009) detection using logistic regression, and (zainudin&hashim, 2016) which examine the use of ratios to detect fraud. the researcher divides the type of research with the classification of the taxonomy of gralliers (choudrie&dwivedi, 2005) which divides the research into two major groups namely positivistic and interpretative. the following are the results of calculations based on the type of research: figure 4 types of research source: processed secondary data (2019) from the results of these calculations it can be seen that the type of positiveistic research is quite dominant among the researchers. this can be seen from 100 papers, 72 papers have been carried out using positiveistic methods. this type of positiveistic research is a type of research that sees that there is truth out there and to be able to understand the world we need to predict and control it all. according to positivists, the world is operated by the law of cause and effect which we can learn by using a scientific approach (sekaran & bougie, 2016) and the type of interpretative research that is contrary to positivity. the researcher looks more deeply at each type of research, the following is a breakdown of the types of positive and interpretive research: figure 5 types of positive research 72% 28% types of research positifistik (72%) interpretatif (28%) review on fraud research:a study of vote counting sari, widagdo, gantyowati 83 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 source: processed secondary data (2019) of the overall positivist research, the most widely used theorem proof research methods, followed by field experiments, simulations, surveys, laboratory experiments and case studies. the proof theorem is widely used for research with themes of fraudulent determinants to prove the theory of fraud triangle, or diamond fraud and the latest is the pentagon fraud. while field experiments are widely used by research with the theme of fraud detection. while other research methods are used for various research themes. from the results of research on the type of research it appears that the method most often used by researchers is proof theorem and field experiments because it is the method that is most preferred by researchers. the theorem proof method can be done using spss, sem or eviews analysis with technical analysis is logit regression and simple or multiple linear regression. while field experiments are used to test several detection methods for cheating beneish and altman methods, bayesian methods, non-financial measurement methods, data mining and so on. current methods are simulation and survey. this method is widely used for researchers who want to know the opinion of a group of people about fraud. with student respondents who have taken certain criteria such as having taken auditing or financial courses to see their reaction to the questions provided by the researcher. figure 6 object of fraud research source: processed secondary data (2019) from the results of the research in the form of object data for cheating research, it can be seen that the most object of research in fraud research is public companies. public companies mean companies that have published their financial statements to the public. where it is considered as a company disclosure to the public that can be trusted. the researcher analyzes that empirical testing of fraud is easiest to do with proof of financial reporting. this can be seen from the results of the above research, that the object of research in the form of public companies is most widely used by researchers with the theme of fraud. furthermore, other research objects, such as government employees, students, auditors 34 23 6 5 3 1 positive theorema proof (34) field experiments (23) simulation (6) surveys (5) laboratory experiments (3) case studies (1) 1% 1% 1% 1% 3% 4% 5% 6% 25% 53% akuntan eksternal (1%) eksekutif perusahaan (1%) pemerintah pusat (1%) transaksi perusahaan (1%) pegawai pemerintah daerah (3%) review on fraud research:a study of vote counting sari, widagdo, gantyowati 84 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 and external accountants are used in research to find out their characteristics (including ability, education level) to detect fraud or to ask for opinions about fraud. of all public companies, the most studied are public companies in general, financial companies, manufacturing and non-financial companies. figure 7 types of public companies source: secondary data processed (2019) researchers analyze that in addition to public companies, companies that have a large opportunity to commit fraud are financial and manufacturing companies. so that many researchers take in the area. the researcher also looked at the composition of the study whether in the private or public sector, the following is a description: figure 8 types of entities source: secondary data obtained (2019) from the results of the above research it can be seen that cheating research in the public sector is still low 19 papers from the entire paper about cheating. this happens because data in the public sector is more difficult to prove and data is taken because it relates to trust funds managed in the public sector. conclusion in this study the researchers concluded that the theme or topic often raised by researchers about fraud is about fraud detection. detection of fraud investigated included a variety of fraud areas that were subjectively expressed by each researcher. fraud detection is among others in the area offraudelectronic commerce system (credit cards) (abdallah et al., 2016), bank fraud, insurance fraud, securities and commodities fraud, and other financial fraud investigated by (ngai, hu, wong, chen, & sun, 2011). in addition to the area of fraud in detecting this research, it was also concluded that the techniques for detecting fraud could be done in a variety of ways. some techniques for fraud detection can be data analytics methods (adrian, 2015), anonymous reporting channels (johansson & carey, 2016), co evolutionary anomaly algorithms (wu, john, & banzhaf, 2008), financial ratios (kaminski et al., 2004) and (kanapickiene&grundiene, 2015b), bayesian fraud risk formula (srivastava, mock, & turner, 39% 4% 4% 6% perusahaan publik berbagai bidang (39%) perusahaan manufaktur (4%) 19 81 publik privat review on fraud research:a study of vote counting sari, widagdo, gantyowati 85 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 2009), integrated language model (liao & chen, 2014), benefit model (sergius, 2015) and (hantono, 2018) , forensic accounting and investigative audits (wiralestari, 2017), non financial measures (brazel, jones, &zimbelman, 2009), financial statement analysis (dalnial et al., 2014), and data mining (ngai et al., 2011). this study also concluded that the object of research that is often done is for go public companies, and the observed area of the entity was private company rather than public entity such as government. from many public companies studied by financial and manufacturing companies that are often used as the object of research. it can be concluded that in the future research on the theme of fraud in the public sector such as government and non-government organizations will be an interesting topic. in the other side, the theme related to fraud predicted by the author will be a trend in the future is the development of fraud detection using a variety of techniques and methods that are increasingly developing. this is because many studies state that in each detection method still has vulnerabilities and each model cannot be used for various fraud areas. while the area of the research entity relating to fraud in the future is still a private area and is followed by a more developed public sector. researcher provide suggestions for further research to further explore research on fraud detection in the government sector or in non-government organizations. although the foundation of the government and ngo sectors is for the benefit of the community, these entities cannot be separated from the potential for fraud. in addition, the researcher also provides suggestions to explore more about the possibility of conducting research related to various methods of fraud detection and the level of accuracy. the fraud detection model that currently has several uses technology in detecting fraud. and this can be further improved, such as the use of data mining in fraud detection. this is important because it will help companies and public entities in detecting and early detection of fraud that occurs in each entity. beside of the deepening of fraud detection methods, further research can also explore the follow-up of fraud. such classification has been done by (dorminey et al., 2012) in the form of fraud prevention, detection, investigation and remediation. research related to fraud remediation is still very limited. it is hoped that the existence of research on cheating remediation can enrich the repertoire of literature study research on fraud. this study has limitations with a short research time, researchers hope if more time will be able to obtain more paper to study. in addition, the classification of research phases of fraud only uses the classification obtained from (dorminey et al., 2012), which is related to fraud prevention, investigation, and remediation reference abbasi, a., albrecht, c., vance, a., hansen, j., albrecht, c., vance, a., & hansen, j. 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(2016).pengaruh penerapan e government dan akuntabilitas terhadap persepsi korupsi di kementerian / lembaga.in seminar nasionalakuntansi xix (pp. 1–25).lampung. zainudin, ef, &hashim, ha (2016).detecting fraudulent financial reporting using financial ratio.journal of financial reporting and accounting, 14(2), 266–278. https://doi.org/10.1108/jfra-05-2015-0053. https://doi.org/10.1016/j.cose.2015.09.005 https://doi.org/http:/dx.doi.org/10.17509/jrak.v3i1.6606 https://doi.org/10.1016/j.lrp.2017.08.001 https://doi.org/10.1016/j.techfore.2017.06.035 https://doi.org/10.1109/aici.2009.421 https://doi.org/10.1108/jfra-05-2015-0053 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 304-312 304 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati1, indra sumarna sobari2, rudi kristanto3 123indonesia institut ilmu sosial dan manajemen stiami jakarta, indonesia correspondent: ambaryusuf26@gmail.com1, indra@stiami.ac.id2, rudikristanto@stiami.ac.id3 received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: ambarwati., sobari, i.s., kristanto, r. (2021). the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city. ilomata international journal of tax & accounting 2(4),304-312. https://doi.org/10.52728/ijtc.v2i4.369 abstract: indonesia has recorded a total of 1,626,812 positive cases of covid 19, 44,172 people died, recovered 1,481,449 people (last update: april 22, 2021; data source www.covid19.go.id). the outbreak of the coronavirus or covid-19 that hit the whole world, indonesia was also affected by changes in the economy becoming unstable, causing the wheels of business to be hampered or even some have stopped their activities for the next few days. the impact experienced by all taxpayers throughout the country is affected, at least it is enough to make activities in this country not conducive. the decline in the level of the indonesian economy experienced a very significant decline. the government's policy in fighting this epidemic must be supported from all aspects and levels of society, in line with the government's policy of the directorate general of taxes (dgt) of the ministry of finance providing relaxation in the form of simplifying the submission of documents for completing annual notification letters or spt, in conditions of the covid-19 pandemic this relaxation is provided for corporate taxpayers and individual taxpayers. the low tax revenue due to the impact of the covid-19 pandemic is a consequence that the government must accept. this study is to find out whether there is an influence on understanding tax regulations, the method used in this study uses a quantitative method based on tax rates and the principle of justice on mandatory compliance, the impact of the covid 19 pandemic disaster on the level of compliance with the annual spt reporting of individual and corporate taxpayers. the utilization of information technology significantly affects taxpayer compliance. keywords: covid 19 pandemic ; impact ; spt reporting this is an open access article under the cc-by 4.0 license. introduction the covid-19 pandemic has affected tax revenues for all countries in the world, this is a challenge for countries that have targeted an increase in tax revenues in the 2021fiscal year. (brodeur et al., 2021; thomson et al., 2021). the government was forced indirectly to correct tax revenue targets in line with the economic crisis that occurred due to the covid-19 pandemic. (azad et al., 2021; tibulca, 2021) even the government must issue a budget for economic recovery https://www.ilomata.org/index.php/ijtc mailto:ambaryusuf26@gmail.com1 mailto:indra@stiami.ac.id mailto:rudikristanto@stiami.ac.id3 https://doi.org/10.52728/ijtc.v2i4.369 the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 305 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to maintain people's purchasing power and prevent an increase in poverty. (guo & shi, 2021; susanti & widajatun, 2021). the government has considered various fiscal policy strategies that support the post-pandemic economic recovery (lin & zhang, 2020) . tax policy must be designed comprehensively so that the fiscal system can provide a balance of both growth, equity and sustainability, with several main considerations that must be considered by policy makers to formulate optimal tax policies during the covid-19 pandemic. (deriu et al., 2021; lahiri & yang, 2021) tax is one of the main sources of government revenue in carrying out state development. as the largest source of funds in the implementation of the government and development, the role of tax revenues from year to year will increase in supporting national development, this is reflected in the increase in tax revenue plans. the existence of taxes is expected to improve the welfare of all people's lives. the system adopted in collecting taxes in indonesia is the self assessment system, which is a full trust given to taxpayers to calculate, deposit, and report all their tax obligations. this system is used by taxpayers because they are required to fill out an annual spt tax return, which means that taxpayers are required to calculate and report their income tax payable without going through a third party or tax authorities. fiskus plays a role in researching the completeness and correctness of reporting as well as conducting inspections to find out the truth of the material in the taxpayer's report, or this case the tax return. in practice, this system can increase acceptance because it is carried out by the system that has been implemented. (cahyadini et al., 2021) the strategy carried out by the direktoral jenderal pajak (djp) amid the covid-19 pandemic is to optimize state revenues from the tax sector through the expansion of the tax base and continue to play a role through improving the national economy, by encouraging investment convenience that can improve the national economy. this was taken by the direktoral jenderal pajak by making a breakthrough in perppu 1/2020 regarding state financial policies and financial system stability for handling the 2019 coronavirus disease (covid-19) pandemic and/or in dealing with threats that endanger the national economy and/or system stability. finance, providing tax facilities in the form of incentives, and facilitating business processes to become it and user friendly. the submission of the annual spt completeness documents in the form of complete financial reports and various required completeness documents by the direktoral jenderal pajak regulation number: 02/pj/2019, no later than 30 june 2020 by using the corrected spt form (djp, articles, your taxes help erase covid-19). (susanti & widajatun, 2021) it was recorded that until april 19, 2020, it reached 52.97% or 9,712,537 taxpayers out of a total of around 18 million taxpayers. meanwhile, when compared to last year in the same period, the number of taxpayers who reported reached 11,682,289 taxpayers (media indonesia, april 22, 2020). indonesia's economic recovery trend in 2021 is projected to continue with an accelerated vaccination program with an on-track supply of vaccines. tax revenue until february 2021 reached idr 181.8 trillion. this achievement represents 12.6% of this year's tax revenue target. several tax components grew positively when compared to february last year or the period before the covid-19 pandemic was enacted. (realization of apbn 2021, ministry of finance). the ministry of finance's direktoral jenderal pajak noted that individual income tax (pph) receipts until the end of february 2021 experienced a contraction or minus 12.51%. compared to the same period last year, revenue still grew by 19.76%.pph receipts will continue to move until the reporting period for the annual individual tax return (spt) ends on march 31, 2021. the government also provides an extension of the government-borne income tax article 21 incentive (djp) until june 2021. (cahyadini et al., 2021) https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 306 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the reporting system carried out by individuals, which often occurs in the field is the misunderstanding of individual taxpayers reporting their spt returns, mistakes occur such as taxpayers being less careful in calculating the amount of income tax that must be paid. or underpaid pph especially using online services using e-spt which not all taxpayers can understand. with the tax relaxation carried out by the direktoral jenderal pajak it is hoped that taxpayers can carry out their tax obligations properly and do not delay depositing taxes owed, the taxes paid are very much needed by the state in handling the covid-19 pandemic. the problems that will be studied in this research are, how is the level of compliance of individual taxpayers in submitting annual spt reports during the covid-19 pandemic, as well as what efforts and strategies are carried out by the pondok aren tax service office, south tangerang city in increasing tax revenues due to impact of the covid 19 pandemic. this study aims to examine the effect that occurs on individual taxpayer compliance with the impact of the covid 19 pandemic and the efforts that will be made to achieve an increase in individual taxpayer compliance in reporting spt returns during the covid 19 pandemic. the investigation of the coronavirus that causes covid-19 is still ongoing. initial information that this virus originated from the huanan seafood market in wuhan, china is still conjecture and has not become a certainty. allegedly since september 2019 launching scmp (17/4/2020), the research team from the university of cambridge, england investigating the origin of the virus has analyzed a large number of strains from around the world and calculated that the start of the outbreak occurred between september 13 and december 7, 2019. the results of the research were published in a scientific journal published in the proceedings of the national academy of sciences (pnas). the team analyzed the strains using phylogenetic networks, mathematical algorithms that can map the global movement of organisms through mutations in their genes. while the coronavirus strains found in europe are largely descended from east asian variants, the journal only examined the first 160 strains collected after late december 2019. several institutions predict a weakening of the world economy, including the international monetary fund (imf) which projects the global economy to grow at minus 3%. the government is wary of the impact of the covid-19 pandemic, considering that this outbreak only began to spread in indonesia in the second week of march 2020. along with the regulations related to work from home (wfh) for both the government and private sectors, a slowdown in business activities began at the end of march 2020 which has the potential to reduce domestic deliveries which will then reduce the receipt of pajak pertambahan nilai dalam negeri (ppn dn) in april 2020. this condition is likely to continue and contract further in may, considering that in april some regions had implemented pembatasan sosial berskala besar (psbb) in several affected areas. in line with the implementation of work from home (wfh) and pembatasan sosial berskala besar (psbb). the government provides tax facilities in the form of relaxation of article 29 individual income spt pph returns, which has an impact on the not yet optimal realization of article 29 pph receipts. there are a total of 2,004,445 people to date in indonesia who have been confirmed positive for the coronavirus that causes covid-19. so, accumulatively in indonesia, 1,801,761 patients have recovered and are negative for covid-19 so far. the data from several studies carried out above affect the economic conditions throughout the world, as well as the indonesian economy which is not immune from the impacts caused by the covid 19 pandemic. the government's commitment to maintaining the sustainability of state finances to realize the safety and welfare of the community is shown by the government's efforts https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 307 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to manage the fiscal as well as possible through optimally increasing state revenues, prudent debt management and continuously making efforts to improve the performance of budget absorption. the impact of the pandemic on the business world at the layer of turnover below idr 5 billion was most significantly affected by the percentage of taxpayers who recorded a decline in sales on the spt period of ppn dn by 88%, which resulted in a decrease in the source of state revenue. the slowdown in economic activity and the contraction of gdp can also be seen from the decline to minus 2% of state revenue sources in 2020. the 2020 national economic recovery budget allocation reached idr 695.2 trillion with a realization of up to 83% the budget allocation for umkm with a ceiling of idr116.31 trillion with a realization of idr 112.44 trillion (96.6%) with the aim of the program to support umkm capital and cash flow during the covid 19 pandemic in the form of capital assistance either through banks or directly. in 2021 the national recovery budget will increase to idr 699.43 trillion, the budget allocation for umkm and corporations is idr 193.74 trillion with the realization of idr 41.73 trillion (21.5%). taxation support for the economy and handling the pandemic to help maintain people's purchasing power. the government provides pph article 21 facilities borne by the government for workers in sectors affected by the pandemic and have an income of no more than idr 200 million a year. utilization of fiscal incentives the 2020 tax has helped maintain business resilience of 464,316 taxpayers in pph article 21 incentives to increase people's purchasing power 131,889 employers, 1.97 million employees amounting to idr 1.71 trillion, incentives to help umkm pph final (pp 23 umkm) ) for 248,275 umkm amounting to idr 0.67 trillion. continued until may 17, 2021, incentives to increase people's purchasing power on pph 21 for 89,608 employers amounting to idr 1.01 trillion and umkm pph final (pp 23 umkm) for 124,736 umkm amounting to idr 0.26 trillion. method this research was conducted using quantitative methods, a process of finding knowledge that uses data in the form of numbers as a tool to analyze information about what you want to know (kasiram (2008: 149). this study aims to test whether there is an effect on taxpayer compliance. individuals for the impact of the covid 19 pandemic and the efforts that will be made to achieve an increase in individual taxpayer compliance in reporting spt during the covid 19 pandemic. this study also uses secondary data in the form of the 2020 and 2021 rapbn budget realization reports obtained in psbb volume 2 pen (tax for accelerating national economic recovery, ministry of finance). data collection technique the data analyzed in the study used secondary data with dependent and independent variables. the dependent variable is the independence of kpp pratama pondok aren, south tangerang city in tax revenue with the achievement of the number of taxpayers, and the independent variable is the service and performance of kpp pratama pondok aren, south tangerang city to taxpayers, about; 1) government regulation 23 of 2018 is a government regulation that discusses income tax on income from businesses received by taxpayers who have a certain gross turnover, the government provides a pph final rate for umkm of 0.5%. https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 308 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) government regulation (perpu) instead of law number 1 of 2020. state financial policies and financial system stability for handling the 2019 coronavirus disease (covid-19) pandemic and/or in dealing with threats that endanger the national economy and/or stability financial system. 3) ministry of finance regulation (pmk) no. 28/pmk.03/2020, which regulates the facilities for income tax articles 21, 22, 23, and pph 22 for imports from april to september 2020. to provide tax incentives for taxpayers affected by the coronavirus, the relaxation provided is pph 21 borne by the government for 6 months for workers with a gross income of not more than 200 million. the absence of pph 21 deductions that are not deducted is expected to maintain people's purchasing power. (www.kemenkeu.go.id. pemerintah berikan insentif pajak untuk dukung dunia usaha dan masyarakat selama pandemi covid-19 20/04/2020) result and discussion the data analysis strategy used with a quantitative approach between one strategy and another is mutually reinforcing. the strategy is taken to improve and maintain taxpayer compliance with the impact of the covid 19 pandemic. descriptive statistics explain the research variables seen from the amount of data obtained from the kpp pratama pondok aren, south tangerang city, the results obtained are as follows; table 1. income tax article 21 year 2016 to 2020 year number of individual taxpayers amount of tax revenue 2016 244.338 545.255.707.959 2017 261.503 635.410.462.181 2018 280.567 772.084.813.373 2019 299.735 881.907.237.581 2020 312.943 858.269.334.510 table 2. total taxpayer op pph 21 2016 to 2020 100,000 200,000 300,000 400,000 2016 2017 2018 2019 2020 244,338 261,503 280,567 299,735 312,943 to ta l w p year total taxpayer op pph 21 2016 to 2020 https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 309 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data obtained from the pondok aren pratama tax service office, which is presented in the form of a graph, shows that the awareness of individuals to become taxpayers shows an increase from year to year, as well as the level of compliance made by individual taxpayers in reporting annual spt. improving the quality and quantity of services is expected to increase satisfaction to taxpayers as customers to increase compliance in the taxation sector. tax officials make improvements to service quality by increasing taxpayer satisfaction and compliance as well as innovations made to increase awareness to become taxpayers. the tax-friendly umkm program, which is run by kpp pratama pondok aren, has been running since august 2016 and has received outputs, the results of which can be seen directly that the establishment of the tax-friendly umkm community, whose management structure is not from tax officials, but umkm figures who become administrator and member of this community. so that the members of this community feel more comfortable sharing their understanding about business and tax. the tax-friendly umkm program can increase the level of participation of umkm in carrying out their rights and obligations in the field of taxation, monitoring and evaluating activities, and the main obstacles faced and how to overcome them. it can be seen that the rate of increase in the number of taxpayers is an average of 4.09 percent a year. table 3. increase in the number of individual taxpayers from 2016 to 2020 year number of individual taxpayers increase in number of wp op % 2016 244.338 0 0 2017 261.503 17.165 4,00 2018 280.567 19.064 3,60 2019 299.735 19.168 3,58 2020 312.943 13.208 5,19 amount 1.399.086 68.605 16,37 the average increase per year(%) 4,09 with an average achievement of 4.09 percent per year, it can be seen that the performance of kpp pratama pondok aren in providing awareness to private individuals, including umkm to become taxpayers who report annual tax returns. during the covid 19 pandemic between 2019 and 2020, there was an increase in the number of taxpayers 1.61 percent so that it can be interpreted that taxpayer awareness of the importance of fulfilling tax obligations and tax benefits during the pandemic, one of which is to finance the health settlement program in indonesia. after the entry of positive cases of covid-19 in indonesia was first detected on march 2, 2020. covid-19 caused an economic contraction in indonesia. restriction policies and restrictions on people's mobility have hampered global and domestic economic activities. as a result, gdp contraction hit many countries, including indonesia, which affected the indonesian economy, especially the micro economy, which greatly affected umkm, and people's purchasing power decreased. descriptive statistics explain the data obtained from the kpp pratama pondok aren, south tangerang city, in the receipt of pph 21 from 2016 to 2020 the results obtained are as follows; https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 310 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. income pph 21 years 2016 to 2020 year total income pph 21 2016 545.255.707.959 2017 635.410.462.181 2018 772.084.813.373 2019 881.907.237.581 2020 858.269.334.510 table 5. income pph 21 years 2016 to 2020 from the data obtained in tax revenue which is illustrated with a graph, there is an increase every year from 2016 to 2018 the efforts made are seen to increase tax revenue by running an innovation program with umkm, independence by kpp pratama pondok aren to increase tax revenue with the program program done. government regulation 23 of 2018 is a government regulation that discusses income tax on income from businesses received by taxpayers who have a certain gross turnover, the government provides a pph final rate for umkm of 0.5% which can be an element that affects the increase in income from pph 21. table 6. increase and decrease in income pph 21 from 2016 to 2020 year amount increase and decrease in revenue pph21 % 2016 545.255.707.959 2017 635.410.462.181 90.154.754.222 3,73 2018 772.084.813.373 136.674.351.192 2,46 2019 881.907.237.581 109.822.424.208 3,07 2020 858.269.334.510 23.637.903.071 0,97 total 3.692.927.555.604 313.013.626.551 from the statistical data above, it can be seen that there was an increase in tax revenues from 2016 to 2019 with a total percentage of 9.26 and an average for 3 years of 3.09%. in the period before the covid 19 pandemic, there was an increase in tax revenue by reaching the amount of idr 2,834,658,221,094,with an increased rate of idr 336,651,529,622,it can be interpreted that the level of compliance of individual taxpayers in paying and reporting the annual spt can still run 200,000,000,000 400,000,000,000 600,000,000,000 800,000,000,000 1,000,000,000,000 2016 2017 2018 2019 2020 545,255,707,959 635,410,462,181 772,084,813,373 881,907,237,581 858,269,334,510 a m o u n t r e ce iv e d year income pph 21 years 2016 to 2020 https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 311 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc well. in 2019 to 2020 the decline in income from pph 21 was idr 23,637,903,071,percentage value 0.97%. government regulation instead of law (perpu) number 1 of 2020. state financial policies and financial system stability for handling the 2019 coronavirus disease (covid-19) pandemic and/or in the face of threats that endanger the national economy and/or financial system stability, and ministry of finance regulation (pmk) no. 28/pmk.03/2020, which among others regulates the article 21 income tax facility and the provision of tax incentives for taxpayers affected by the coronavirus, the relaxation provided is pph 21 borne by the government for 6 months for workers with a gross income of not more than 200 million. the absence of pph 21 deductions that are not deducted is expected to maintain people's purchasing power. (www.kemenkeu.go.id. pemerintah berikan insentif pajak untuk dukung dunia usaha dan masyarakat selama pandemi covid-19 20/04/2020). so that the efforts made by the government in the program to support umkm capital and cash flow during the pandemic are in the form of capital assistance either through banks or directly. the decline in pph21 revenue in 2020 by 0.97% that occurred at the pondok aren kpp pratama was the impact of the covid-19 pandemic, with the tax relaxation, taxpayers were still reporting and paying annual spt. relaxation is well implemented. even though there was a decrease in income from pph 21, with the addition of the number of taxpayers with a decrease in taxpayer income due to the impact of the covid-19 pandemic. conclusion based on the results of research and discussion on the effect of the impact of the covid 19 pandemic on the compliance level of individual taxpayer annual tax returns at the pondok aren tax service office, south tangerang city, it can be concluded that understanding of regulations and tax benefits has a positive effect on individual taxpayer compliance. . with the policy from the government in tax relaxation during the covid-19 pandemic and the benefits obtained from this policy, taxpayers continue to comply with annual spt reporting even though there is a decline in pph 21 revenue that occurred in 2020 due to a decrease in people's income and purchasing power. based on the results of the research that has been submitted, the authors suggest the following; first, to further improve innovation more consistently to involve the public in general in the pioneering of systematic annual spt by approaching online counseling or seminars on how to make good use of the policies provided by the government during the covid 19 pandemic. second, to provide support to umkm in increasing turnover by preparing cash flow and financial reports which are very important for reporting the annual spt. third, tax policies and treatment are continuously implemented by involving all levels of society. https://www.ilomata.org/index.php/ijtc the impact of the covid-19 pandemic on the compliance level of annual spt reporting for individual taxpayers at the pondok aren tax service office, south tangerang city ambarwati, sobari, kristanto 312 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference azad, n. f., serletis, a., & xu, l. 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(2021). the impact of the covid-19 pandemic on tax revenues in the eu. economic research-ekonomska istraživanja, 1–18. https://doi.org/10.1080/1331677x.2021.1954967 https://www.ilomata.org/index.php/ijtc ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp : 89-102 https://www.ilomata.org/index.php/ijtc 89 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 how to align management commitments to the successful implementation of management accounting information systems in manager decision making 1lesi hertati, 2.otniel safkaur, 3aoron m. simanjuntak. 1departement of accounting, stie rahmaniyah – indonesia 2.3 departement of accounting, faculty of economics and business universitas cendrawasih, sorong papua indonesia. hertatilesi@yahoo.co.id submitted : jan 3th 2020 revised : feb 18th 2020 published : march 30th 2020 abstrak this study investigates the effect of management commitment on the successful application of management accounting information systems and their implications for manager decision making. the unit of analysis in this study is the functional unit in small and medium enterprises in indonesia. this research also implies that the responsiveness of organizations to the successful implementation of management accounting information systems is very important not only for internal and external but for the organization itself in building a sustainable corporate image, and successes that enhance organizational reputation and manager's understanding of financial and non-financial information. finance is in line with the increasing commitment of the management in the company. furthermore, this study states that management commitment influences the success of management accounting information systems and their implications for manager decision making. the lisrel sem modeling results confirm that management's commitment to the success of management accounting information systems and their implications for managerial decision making have a significant effect. keywords: management commitment, management accounting information systems, manager decision making introduction die industry era 4.0 the government launched the e-smart program of small and medium industry programs to expand the market share of small and medium industries through online promotional information. furthermore, hertati (2019) states that e-smart small and medium industries are small and medium industry database systems that provide information on industry profiles, central products that are integrated with various existing marketplaces. furthermore susanto (2016) states that information is the glue of the organization, the better the quality of information, the better the communication within the organization and the better the integrity of the organization. the value of an information depends on the quality of the information presented (susanto, 2016). quality information according to mc leod and schell (2007: 65) must have characteristics relevant, accurate, timely and complete. hertati (2016) states that information can be said to be relevant if the information contained therein can influence users' decisions by helping them evaluate past or present events, and predict the future, and confirm or correct the results of their evaluations in the past. the importance of quality information in decision making as stated by laudon and laudon (2008: 13) that quality information can be used for decision making where the results are the right decision, better allocation of resources and response times to provide benefits and reduce costs. mailto:hertatilesi@yahoo.co.id how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 90 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 seeing the role of information that is so high for the organization, the organization becomes very dependent on the information system (susanto, 2008: 11). then hall (2011: 7) states that the information system is part of the information system that is a set of formal procedures where data is collected, processed into information and distributed to users. furthermore, mcleod & schell (2007: 19) states that the role of information systems prioritizes data into information and emphasizes administrative work into problem-solving activities, then information systems are developed specifically to assist managers in the decision making process. furthermore, gelinas and dull (2008: 11) state that to process business activities and provide information for management in making decisions, the information systems used by companies must be designed, implemented and operated effectively). regarding the importance of an adequate information system intermezzo (2019) states that small and medium business entrepreneurs have difficulty in increasing their business levels. the business they run does not develop and the turnover obtained does not increase. at present, the number of small and medium business products that can penetrate the international market is still very small. one reason for the difficulty of small and medium business products to compete in foreign markets is the low competitiveness of products. moreover, if related to the price offered, indonesian sme products are still far from the quality offered by foreign products(meilani & pandoyo, 2019). according to laudon and laudon (2008: 9) that companies that invest more in their information systems specifically to achieve six strategic business objectives: operational excellence; new products, services, and business models; customer and supplier relations; better decision making; competitive advantage; and business continuity. management accounting information systems provide information, both financial and non-financial information to managers and employees of the organization because the information needed by decision-makers includes financial information and non-financial information such as product quality, customer satisfaction and service response levels (atkinson et al. , 2009: 3). the same thing was conveyed by taicu (2009) which stated that management accounting information systems are the main providers of information needed by management to make decisions in the company. the importance of an adequate management accounting information system is in line with the opinion of mitchell et al., (2000) which states that a management accounting information system is needed that provides information to management regarding pricing, costs, and cash flow and to assist the decision making process, operational considerations and programs long-term strategy in a dynamic and competitive environment. the phenomenon that occurs is related to the accounting information system difficulties in product innovation, by applying a new formula or production method. do not open up and join the training held by the ministry of cooperatives and small and medium businesses and companies that give special attention to small and medium businesses. small and medium businesses are not active in analyzing competitors' products. sajady (2008: 10) that the function of management accounting information systems provides important information to help managers control their activities, and reduce environmental uncertainty, so that it is expected to help the company towards achieving its goals successfully. the phenomenon of the importance of an adequate management accounting information system related to the unavailability of accounting information as stated by, intermezzo (2019) states that many are not aware that manual bookkeeping is a small and medium problem. manual bookkeeping is prone to loss, damage and even recap errors. thus, entrepreneurs cannot analyze the sales results appropriately. for example: if the sales report on a certain day suddenly disappears, then the overall sales report will be in shambles. a good accounting is the key to an adequate business evaluation. with good bookkeeping, you can how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 91 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 analyze your business sales more precisely as a consideration for making further decisions. in addition, good bookkeeping is also a mandatory requirement for all entrepreneurs who want to borrow business capital from banks. so, the problem of bad business bookkeeping, then certainly difficulties in getting business capital loans from banks. according to susanto (2008: 17) management accounting information systems are information systems used by companies which include financial and non-financial information. in order to obtain adequate information both financial and non-financial information, a management accounting information system is needed as stated by hansen and mowen (2007: 8) that a management accounting information system is a process that explains activities such as collecting, measuring, storing, analyzing, reporting, and managing information (the management accounting information system is processes, there are described by activities such as collecting, measuring, storing, analizing, reporting and managing information). hansen and mowen (2007: 5) states that management accounting information systems have three general objectives, namely to: 1) provide information for the cost of services, products, and other objects desired by management. 2) provide information for planning, controlling, evaluating, and continuously improving. 3) provide information for decision making. according to horngren, et al. (2017) that decision making is choosing from among an alternative set of programs of actions designed to achieve several objectives that require accounting information. furthermore according to harris (2009: 4) states that decision making is a process of identifying as many alternatives as possible and choosing one alternative that has a probability of success or effectiveness in accordance with the goals, desires, lifestyle, and desired values. decision making is a fundamental aspect of the management function and management decision making is a major role of management (teale, et.al., 2003: 10). the same thing was conveyed by j. salusu (1996: 46) who stated that decision making plays a role in every organization, including the principles of the organization that will guarantee the right decision is taken, as well as must include the principles that will ensure effective action. according to laudon & laudon (2008: 12) that not a few company managers run business activities without a clear source of information and almost never have the right information at the right time for decision making, so more trust in predictions, guesses and luck. yet according to robbins and a judge (2008: 189) every manager should behave to maximize or optimize certain results through the decision making process. another phenomenon that has caused losses to the state due to failure in decision making occurs in the case of banking service companies, namely the century bank case. chairman of the house commission xi, ahmad zawawi (2009) asked bpk to evaluate and audit century bank regarding the failure of the decision-making process that was detrimental to the state. failure to make such a decision is not only because it was taken without making a detailed assessment of all information, but also because of abuse of authority by bank indonesia. a similar statement was made by abraham samad as the chairperson of the corruption eradication commission (2013) which stated that the corruption eradication commission had indicated a criminal act of corruption in the century bank case because there had been an incorrect decision-making, due to inaccurate data giving. laudon and laudon (2008: 13) state that problem solving will not be effective without accurate information. decision making has an important meaning for the back and forth of an organization, especially because the future of an organization is largely determined by decision making the important role of management commitment was conveyed by englund and buchero (2006) that the relationship between management commitment and information system development is the participation of top management and middle management in the formulation of objectives and how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 92 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 clarifying the development of information systems, work commitments in documenting work plans for accountability in directing business, approving, measure, supporting activities from the beginning to the end of the development project as a form of active role of top management and middle management. understanding commitment as a relationship between the actor (actor) with the entity (entity) stated by abrahamsson and iivari (2002). a similar opinion was conveyed by meyer and herscovitch (2001: 31) which states that commitment is a force that binds an individual to an action that is relevant to one or more targets. according to cooper (2006) that management commitment as a form of involvement in behavior and maintaining behavior to achieve a goal. furthermore, management commitment must be directed into a strong desire to improve the quality of the entire business of the company as stated by yousaf (2006) that: in line with the orientation of values and organizational goals, malthis and jackson (2008: 21) states that organizational culture is a form of values and confidence in an organization. luthan (2006: 45) states that organizational culture is the norms and values that guide the behavior of organizational members. each member will behave according to a culture apply, in order to be accepted by the environment. kreitner and kinichi (2001: 68) state that organizational culture is a shared group, implicitly that groups hold and determine how they perceive, think, and react to various conditions. furthermore according to robbins and a judge (2008: 258) organizational culture is related to how employees understand the cultural characteristics of an organization where organizational culture seeks to measure how employees perceive their organization so that it is expected that individuals who have different backgrounds or are at different levels in organizations will understand organizational culture with a similar understanding. based on the above phenomenon, it can be concluded that the picture is related to the following phenomenon: 1) it is not uncommon for the information generated to require further processing so that information can be used as needed up to date. 2) difficulties in tracking prospective customer information and providing maximum service support to customers. 3) lack of information technology used requires interface facilities so that information can be integrated. 4) there are difficulties in determining certain financial items accurately and up to date 5) sometimes have difficulty in determining, including because it is not supported by an adequate database so it is difficult to determine an effective sales and marketing system. 6) it is not uncommon mistakes in decision making at the level of line managers, because decisions are not supported by adequate information and analysis, such as the occurrence of decision outcomes that harm the company, 7) there is a missed communication in the decision making process that results in suboptimal decisions made because lack of good coordination between line managers, such as failure to communicate the number and type of facilities that must be prepared in a particular event or activity. 8) there are times when the decision making process does not go through the process of selecting the best alternative, such as selecting a vendor providing a product or service. 9) lack of good cooperation as teamwork often causes losses for companies 10) lack of top management participation in overseeing and directing line managers in disseminating corporate goals and programs that are currently and will be carried out. chalk (2008: 3) that management commitment is a leadership style in which managers and subordinates participate together in achieving work goals, determine the level of authority, and clarify performance commitments. (management by commitment is a style of leadership where both the manager and subordinate participate jointly in the establishment of work objectives, define authority level, and clarify performance commitment) furthermore wood (1996: 35) states that the management commitment model as a management model that aims to bring up commitment, so that individual behavior is more independent not because it is controlled by external sanctions or pressures, and how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 93 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 relationships within the organization are based on a high level of trust. the failure in achieving the company's goals related to management commitment as stated by abrahamsson (2000) explains that one of the causes of failure in company activities including the software development process is management commitment which usually includes aspects of depth, focus and terms where these three aspects are psychological aspects that are can be divided into three different forms of commitment, namely: affective, normative and continuance commitment based on the above study, it can be said that management commitment can be measured using: (abrahamson and jokela (2000), wood (1996), cooper (2006), meyer (1997), meyer et al. (2002)) 1) affective commitment (i want to is a feeling of love for an organization that raises the willingness to stay and foster social relations and appreciate the value of relationships with the organization because it has become a member of the organization. 2) continuance commitment (i need to) is the level to which employees believe and accept organizational goals, as well as the desire to stay together or leave the company is ultimately reflected in employee absence and turnover rates. 3) normative commitment (i ought to) is a feeling that requires to survive in the organization due to obligations and responsibilities to the organization based on consideration of norms, values and beliefs of employees. ashfaq (2007: 12) states that management commitment in addition to providing adequate resources must also be actively involved in the development process. another statement that supports the importance of management commitment in the successful implementation of management accounting information systems is chen's statement (2001) which states that management commitment is not only limited on granting the blessing of the application of the information system but must continue until completion. management's commitment implies that they are willing to spend a significant amount of time leading and supervising the team implementing the system. according to abrahamsson (2000) without management commitment, most initiatives in developing information systems will fail and the results will not reach far. hertati (2016) states that many studies show the importance of management support for the successful implementation of information systems, including the successful application of management accounting information systems. the importance of a manager having a commitment to the implementation of the program including the application of management accounting information systems as stated by brah and rao, (2002) that the greater a person's commitment to his company, the greater the consistency of the person's behavior and attitudes towards organizational goals. these signals need to be spread throughout the organization, so that all members of the organization feel a commitment to the implementation of the program. furthermore larsen (2003) states that the level of commitment possessed by managers and employees can encourage the successful application of information systems in the company, because the attachment and loyalty of an employee to the company will encourage them to always work in various situations in the company. other research results that support the influence of management commitment to the successful implementation of management accounting information systems are the results of research conducted by bhanu et al. (2004), which states that: top management support is an important factor for the success of key organizational activities. these results form a framework for understanding the impact of top management support on the management accounting information system function. furthermore esteves et al (2002) stated that the component of management commitment in implementing the enterprice resources planning system is affective commitment related to the involvement of top management in entering into the price of how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 94 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 resource planning project activities, because they show their identification with the project through participation in various project events that shown that they share the value of the project. then hertati (2016) states that normative commitment is related to the obligation to remain in company activities until completion. ongoing commitments are related to costs associated with leaving or leaving projects and organizations in some cases. the results of this study are in line with the results of research by kırmızı and orkun (2009) which states that the influence of affective commitment is higher among it professionals than continuance commitment and normative commitment. normative commitment is at the lowest level. it professionals work in organizations because they want to, rather than they need or are forced by moral obligations. the importance of management support as a very important factor in the implementation of information systems is also supported by the results of research by sharma and yetton (2003) which states that management support is considered an important factor in the successful implementation of information system innovation. thus the discussion with research conducted by pabedinskaite (2010) which states that: support top management. this is one of the most significant determinants of the successful implementation of enterprise system resource planning in an organization. based on the theories as concepts in this study mentioned above and some of the results of research that support these theories, based on this premise, it can be said that management commitment influence the successful application of management accounting information systems. hypothesis1: management's commitment influences the successful on of management accounting information systems. this success model is a simple model but is considered quite valid by researchers. the delone and mclean (1992) model is a model based on theoretical and empirical studies of information systems created by researchers in the 1970s and 1980s. the understanding of management accounting information systems according to hansen and mowen (2007: 8) is a process that describes activities such as collecting, measuring, storing, analyzing, reporting, and managing information (the management accounting information system is processes, there are described by activities such as collecting, measuring, storing, analizing, reporting and managing information). management accounting information systems according to horngren, sundem and stratton (2011) are stated as follows management accounting information system is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating information that can help managers meet organizational goals. similar delivered by mitchell and smith (2000) states understanding management accounting information systems is a management accounting information system is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating financial information used by management to plan, evaluate and control an organization and to ensure and account for the use of resources). according to susanto (2008: 17) management accounting information systems are information systems used by companies which include financial and nonfinancial information. chenhall (1986) states that there are four characteristic dimensions of management accounting information systems, namely: 1) scope of information system is the scope of accounting information encompasses its range, quantitative measurement and time period. thus, the expressions of various external factors, mostly non-economic, should dominate in information management. moreover, in the context of information management, the possibilities of future events and their prediction should be estimated. 2) timelines of management accounting information is accounting timeliness is defined by the time required to present the information (since it has been ordered) and the frequency of the presentation how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 95 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 (periodical reports). timeliness of information increases the management accounting possibilities to inform about the latest events and forwards managerialdecisions. 3) aggregation management accounting may provide aggregated information in various ways: consummately raw primary data, aggregated with regard to time or goal. that might be aggregated data with regard to functional subdivisions, responsibility centers, year, quarter, month, and week information. in the same way the information is aggregated to provide for particular decision making. 4) integrative information is integrative information is one of the most important aspects of the organization is the coordination of activities of its various subdivisions. to help managers, management accounting should provide them with information on how purposive activities' indicators are influenced by the interrelations of various departments. in the management accounting system there should be information on how decisions in one area might affect the results of the performance of the whole department. santrock (2008: 12) states that decision making is a thought in which individuals evaluate various choices and decide on the choices of the many choices. this statement is supported by jackson, sawyers and jenkin (2009) stating that decision making is the process of identifying different actions and choosing one decision that is right for a particular situation). the same thing was conveyed by hansen and mowen (2006) who stated that "decision making is the process of choosing among. competing alternatives (decision making is the process of choosing among competitive alternatives). harrison in teale et al. (2003: 6) states the definition of decision making is decision making is when, in an ongoing process for evaluating alternatives to meet objectives, where expectations about certain actions by decision makers to choose that actions that are most likely to be expected to achieve goals). according to terry and franklin (2000: 97) decision making is the selection of certain behavioral alternatives from two or more existing alternatives. another opinion is from hertati (2016) which states that decision making is a process used to choose an action as a way of solving problems. this is in line with the opinion of hertati (2015) which says that decision making is a process of identifying as many alternatives as possible and choosing one alternative that has a probability of success or effectiveness and which is in accordance with the objectives, desires, lifestyle, values, chill. based on the above studies it can be said that managerial decision making specifically related to the outcome (outcome) of decision making in conditions of uncertainty and doubt can be measured using: (schwalbe (2010), teale et al. (2003), suryadi (2007), j salusu (1996), simon (1986) 1) event (problem or event) occurs is an event that is real, actually happens but is not bound by time. in other words, a factual event could have happened in the past or present 2) act (measures) that include measures are seen as behavior that is formed by the perpetrators in lieu of the response of human actions to produce different characters as a result of the form of the process of interaction in itself. to act an individual must know in advance what he wants. an individual must try to determine his goals, describe the direction of his behavior, estimate the actions of others, check himself and describe what is done by other factors. 3) outcome / pay off, is covering a business, profit is king. profit is defined as the amount of income minus the amount of expenditure, i.e. the amount of money "earned" by a business during a certain calculation period. then (break even point is a point where costs or expenses and income are balanced so there are no losses or profits. how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 96 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 kaplan (1998) states that management accounting information improves decision making, guides strategy development and evaluates existing strategies, and focuses related efforts to improve organizational performance and to evaluate the contribution and performance of organizational units and members. furthermore hansen and mowen (2007) which states that the main role of management accounting information systems is to provide information that facilitates decision making (a major role of management accounting information systems is to supply information that facilitates decision making). according to taicu (2009) management accounting information systems are the main providers of information needed by management to make decisions in companies. information plays a role in solving management problems, problem solving is the main activity that is often used as a reference for the success and failure of manager's career. this statement is reinforced by the statement of laudon and laudon (2008) that problem solving will not be effective without the presence of relevant information. the importance of relevant information in decision making is stated by rose in teale et al. (2003) that decision making is an act of choosing between alternative programs designed to obtain certain results, and a review of relevant information is made guided by explicit criteria. furthermore according to chenhall (1986) that the design of management accounting systems, is influenced by information features that are useful for management decision making. from some of the statements above, strengthen the conclusion that the successful application of information systems affects the decision making process as stated by gul (1994) which states that the management accounting information system is an organizational control mechanism and is an effective tool in providing useful information for noraizah (2001 ) that there is a relationship between the four categories of information dimensions namely scope, timeliness, aggregation and integration in the availability of information to managers and how they use that information is very important for the decision making process especially for those at managerial and financial levels. other results that are in line are the results of research by sajady et al. (2008) stated that the application of accounting information systems in companies led to an improvement in the manager's decision making process, internal control, the quality of financial statements in facilitating the company's transaction process. the accounting information system is considered an organizational mechanism which is very important for the effectiveness of decision making and control in the organization. the results of research by feredon and mahmoodi (2012) states that there is a significant influence on management accounting information systems based on decision support and business intelligence on profitability. based on the theories as concepts in this study that have been mentioned above and some research results that support the theory, the success of the application of management accounting information systems affects manager's decision making. hypothesis 2: management accounting information systems in manager decision making on decision making method the target population of this study is the managers of related units in small and medium enterprises in indonesia. keep in mind the conceptual model shown in figure 1, the review instrument established by utilizing previous studies. the characteristics of the variable hypothesis were designed using sem-lisrel five answers from 1 to 5. the measurement items from the current study consisted of three variables which included emergency scientific findings mc, mais and mdc. the research data was collected by sending a questionnaire through the company's e-mail address and then collected from how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 97 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 a total of one hundred and twenty four small and medium enterprises in indonesia. small and medium enterprises in indonesia located throughout indonesia. after sending questionnaires to managers for their responses. the process of selecting and knowledge managers is very important for data collection for researchers, when investigating creativity, emphasizes the centralization of employee knowledge that is relevant to the concept of management accounting information systems and thus can provide meaningful responses (dul et al., 2011). therefore, a total of six hundred and twenty questionnaires were sent to the relevant sub-units, from which 357 managers responded. overall, the data collection process has been taken for three months. this research was not funded by any association. investigation has also followed the rules of dillman (1978) in considering moral and ethical actions. figure 1: research model source: picture of a research framework results and discussions data analysis of this study was completed using sem lisrel statistical software. the final valid sample of this study was 357 after testing it was obtained that the data processed were, respectively. shown in table 1 is the structure and composition of the data responses used in this study. thus to test the problem of multicollinearity, the flow of research follows hair et al. (2014) found that all values in the pearson correlation matrix were <0.90. therefore, confirmation of the absence of multicollinearity among predictors (hair et al., 2014). this study uses a type of principal component that is highly favored for factoring which brings together a total of 28 questionnaire item-scaled ratios into three final variables. to check for adequacy samples, the kaiser-meyer-olkin value (0.895) indicates that the data is appropriate for making factors because the kmo value is greater than the cut-off value of 0.7 as suggested by (barkus et al., 2006). moreover, the results of the bartlet test from the ball were also found to be significant (p <0.05), so rejecting the null hypothesis represented the absence of an identity matrix correlation (afshan et al., 2018). the last seven factors succeeded in defining 78.6% of the total variance described. the explanation of the rotated component matrix highlights a total of twenty-eight items which show a factor of more than 0.70 and above the 0.55 benchmark as suggested by tabachnick and fidell (2007). the results of factor loading for each variable item are shown in table 1. furthermore, the samples collected were further examined for convergent validity, reliability and relevance. table 1 evaluation results of dimension relevance measurement latent dimension weight defaul t error value z value p sig relevant managemen t commitmen affective commitment 0,19 0,011 17,12 0,000 sig relevant continuance commitment 0,44 0,006 78,65 0,000 sig relevant normative commitment 0,76 0,007 101,30 0,000 sig relevant manager decision making good human resource planning successful application of management accounting information systems employee loyalty long-term goals how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 98 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 t mais scope of information system 0,44 0,013 33,94 0,000 sig relevant timelines of management accounting information 0,46 0,014 33,86 0,000 sig relevant aggregationis management accounting may provide information aggregated 0,45 0,013 34,25 0,000 sig relevant integrative information is integrative information 0,43 0,013 33,44 0,000 sig relevant decisionmaking event 0,40 0,017 22,67 0,000 sig relevant act 0,45 0,017 26,32 0,000 sig relevant out come/pay off 0,46 0,011 39,99 0,000 sig relevant source: results of calculation of score components with the r program based on information obtained from table 1, showing a p-value smaller than 0.5 then all dimensions are relevant as a measurement tool for each variable. tabel 2 parameter model struktural conse quenc e mediato r cause standard estimate estimate d default error valuez value-p information mais mc 0,60 0,360 0,20 1,81 0,965 significant mdc 0,58 0,061 0,07 1,86 0,196 significant source: results of calculation of score components with the r program theoretically, the better the management commitment, the better the application of management accounting information systems, this study proves influential. the phenomenon of decision-making quality is not yet high because the application of management accounting information systems has not been able to design management commitments flexibly and integrated accurately and timely in the face of effective commitments, ongoing commitments and normative commitments. the better the application of management accounting information systems the better decision making, this study states influence. the phenomenon of decision-making quality is not yet high because the application of management accounting information systems places human resources that are not in accordance with the expertise that exists in a company, namely the relevance of identity, shared value, personal involvement. the better the application of management accounting information systems, the better the decisions taken by managers. the phenomenon of decision-making quality is not yet high because the application of management accounting information systems is still too late in the completion of problematic work on recording, summarizing and reporting that is not accurate, timely so that it cannot be used as a basis for decision making. conclusion the findings of this study highlight the most important role of management commitment in influencing the application of management accounting information systems. this implies that organizations must consider this management commitment as a measure of threat to the successful how to align management commitments to the successful implementation of management accounting information systems in manager decision making hertati, safkaur, simanjuntak 90 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 implementation of management accounting information systems and has the potential to inhibit the successful implementation of management accounting information systems. in this case, the present study proposes managers and human resource experts to assess carefully the possibility of external risks with a diversified approach to organizational dependence on limited options. furthermore, the importance of successful implementation of management accounting information systems is also highlighted as an important driver of successful implementation of useful management accounting information systems. this shows that an error in understanding or measuring human resources causes a decrease in the true purpose of management commitment. therefore, managers are recommended to observe the measurement process in determining the environmental costs and related components to ensure the reliability of data accumulation. an orderly assimilation of organizational data and accurate data is the basis for achieving efficiency and successful application of management accounting information systems. the focal point for the successful implementation of management accounting information systems is on physical natural data, it must also consider how this data can be coordinated with company measurements and thus empower more important scope in providing benefits to organizations, and government. finally, this research also calls for the need to maintain quality if the commitment of management by placing people who are experts in their fields so that they work according to their expertise, good human resources have the skills, abilities will encourage healthy companies to lead in the future. acknowledgement we would like to thank our colleagues and related units from indonesian msmes who were willing to be interviewed and filled out the questionnaire well and provided insights and expertise that greatly assisted this research, even though they might not agree with all interpretations / conclusions from this paper . references abrahamsson, pekka & iivari, netta. 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(2007), using multivariate statistics. boston, ma: allyn and bacon/pearson education. wood, stephen. 1996. high commitment management and organization in the uk. the international journal of human resource management. pp 41-58 yousaf, nadeem. 2006. top management commitment for tqm a process model. pakistan’s 10th international convention on quality improvement icqi` ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.243-255 https://www.ilomata.org/index.php/ijtc 243 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) yohanes susanto1, panji suminar2, sugeng suharto3 1bengkulu college of administrative sciences 23bengkulu university correspondent: yohanessusanto31@gmail.com submitted : september 25, 2020 revised : october 10, 2020 published : october 31, 2020 abstract this study aims to measure how the degree of fiscal independence of bengkulu province in the era of autonomy and to find out how the policies of the bengkulu province local government in supporting fiscal independence in the era of autonomy. this research uses descriptive quantitative method using secondary data. data analysis was performed using multiple linear regression model data analysis techniques. based on the results of the study, it is known that the degree of fiscal independence of bengkulu province in the period 2013-2017 is for the proportion of pad to tpd obtained an average of 31.79% based on the interval scale is stated to be sufficient, bhpbp against tpd obtained an average result of 4, 37% based on the interval scale was stated to be very poor, while the dau and dak against the tpd obtained an average result of 54.30% with the interval scale declared very good. the policy of the bengkulu province local government in supporting fiscal independence has made policies to create a conducive climate for investors, policies to encourage regional economic growth and regional spending are strived to support the achievement of development goals effectively and efficiently. keywords: government policy, fiscal independence, income per capita, investment, government expenditure, pad introduction one form of the implementation of regional autonomy is autonomy in the aspect of regional financial management called fiscal autonomy or fiscal decentralization. local governments are given financial resources to carry out government affairs which fall under the authority of the regional government. fiscal decentralization gives authority to regions to manage their regional finances. regions are given the authority to explore revenue sources according to their potential. law number 25 of 1999 concerning financial balance between the central and regional governments which was later replaced by law no. 33 of 2004 concerning central and regional financial balance regulates the financial relationship between the central government and regional governments. this policy regulates regional authority in extracting local revenue and transfer funds from the central government. the principle of fiscal decentralization is money flow functions, where regional governments have the authority to carry out service and development functions in their regions. the central government provides support by submitting revenue sources to the regions to be managed optimally so that they are able to finance their regions in carrying out their duties and functions. in addition, the central government also provides transfer funds that can be managed by regions in financing regional government administration. the aim is to address fiscal imbalances with the central government and among other regional governments. to minimize the dependence of the regional government on the central government through the transfer fund, https://www.ilomata.org/index.php/ijtc mailto:yohanessusanto31@gmail.com policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 244 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 regions are required to optimize their ability to explore potential revenue. the sources of local revenue are in the form of: local taxes, local levies, regional business profits and other legal income. regions are also required to be able to increase the per capita income of their people so that people have the ability to pay taxes to the regions, besides that, the creation of a good investment climate is also needed so that more investors invest their capital in an area so that the economy in that area can rapidly advance and develop, then regulation of expenditure local government also really needs to be considered and considered properly so that there is no waste of regional finances, making it more difficult for the region to be independent. law no. 33 of 2004 concerning financial balance between the central government and the regions, mandates that regions may increase their own regional revenues in accordance with applicable laws and regulations. then with the enactment of law number 28 of 2009 concerning regional taxes and charges, the implementation of fiscal decentralization has improved with the addition of regional revenue sources in the form of regional taxes and levies. this policy basically expands the region to explore the sources of local opinion from the components of local taxes and levies. looking at the regional financial conditions throughout indonesia in the era of regional autonomy, it is very different from the regional financial conditions before the implementation of regional autonomy. the form of balancing funds, especially transfer funds from the center, which are allocated to finance regional autonomy activities, have flowed and increased from year to year in relatively large numbers. data obtained from the ministry of finance of the republic of indonesia (2000) states that the transfer funds from the center to the regions prior to fiscal decentralization, namely in 1999/2000 amounted to 25.9 trillion rupiah. likewise what happened in bengkulu province, in the speech of the governor of bengkulu ridwan mukti in a fiscal policy seminar stated that the 2016 state budget allocation for transfers to bengkulu increased by rp. 10,325 billion from the previous 2015 which only amounted to rp. 8,853 billion. data on the proportion of balancing funds to the bengkulu province apbd from 2012 to 2016 consisting of profit sharing funds (tax and non-tax), general allocation funds (dau) and special allocation funds (dak) originating from the central government shows a very large value. and increasing from year to year. the total balance funds received by the regions, namely bengkulu province, always increased from year to year, in 2013 the total balance funds received by bengkulu province was rp. 977,347,954, then increased steadily until in 2017 the total balance funds reached rp. 1,997,884,640, and the amount of allocated funds general (dau) the amount has also increased from year to year, in 2013 the amount of dau was rp. 854,647,828, continues to increase until 2017 is rp. 1,301,538,847, -. this indicates that the large amount of balancing funds distributed to the regional government of bengkulu province shows how strong the role of the central government is in budget allocation and the high dependence on the central government. the proportion of original regional revenue to total regional revenue in bengkulu province during the last 5 years was 28.08%. and this proves that most of bengkulu province's total regional revenue still comes from the central government. regional financial independence and fiscal independence can actually be realized by making policies that emphasize increasing the growth of regional original income (pad) because pad is the backbone of regional financing. the ability of a region to explore pad will affect the development and development of the area. the greater the contribution of pad to the apbd, the less dependence on central government assistance will be. to increase pad, there are several factors that need to be empowered, including investment and gdp per capita. in addition, there is a need for policies to reduce regional expenditures that are not necessary for regional progress. policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 245 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 investment plays an important role in driving the economic life of the nation, because the formation of capital increases production capacity, increases national income and creates new jobs, in this case it will further expand job opportunities. per capita income is one measure of prosperity for a region. the higher a person's income, the higher the real per capita income of an area and the greater the ability of the local community to finance government expenditures and government expenditure (government expenditure) is part of fiscal policy (sukirno, 2004), namely a government action to regulate the running of the economy. by determining the amount of government revenue and expenditure each year which is reflected in the apbn document for the national and apbd for regions / regions. from the description that has been described above, it is appropriate for the bengkulu provincial government to strive to make appropriate policies to develop regional potential to meet every blood needs of bengkulu province which is increasing every year, because from existing data the value of pad, investment and income per capita, which is the development potential of bengkulu province, has also increased every year. therefore, the authors conducted a study entitled "analysis of regional government policies of bengkulu province in supporting fiscal independence in the era of autonomy. fiscal policy is a policy of adjustment in the field of government spending and revenue to improve economic conditions. or it can also be said that fiscal policy is an economic policy in order to direct economic conditions to be better by changing government revenues and expenditures. according to zaini ibrahim (2013) "fiscal policy is a government policy related to regulating economic performance through the government revenue and expenditure mechanism". the objectives of fiscal policy according to john f. due (1967) are: (1) to increase national production (gdp) and economic growth or improve economic conditions; and (2) to expand employment and reduce unemployment or seek employment opportunities (reduce unemployment), and maintain stability of prices in general. fiscal decentralization is defined as the delegation of authority in the field of budget or financial revenue which was previously centralized, both administratively and in its utilization, which is regulated or carried out by the central government with the delegation of a portion of authority over revenue sources in the regions, it is hoped that regions can carry out routine tasks, public services and increase productive investment (capital investment) in the region. according to kartasasmita in triastuti (2005: 70), that independence is the essence of independence, namely the essence of every nation to determine its own destiny and determine what is best for itself. one of the objectives of implementing autonomy is to provide opportunities for regional autonomy to manage their own finances through the delegation of authority in the form of fiscal decentralization. fiscal independence is very important for the regions, especially in relation to the fiscal contribution to the regional economic growth itself. according to udjianto (2005), to measure the growth rate of regional original revenue (pad) and regional revenue and expenditure budget (apbd) to obtain regional financial conditions are as follows: padt 1 tp padt = x 100 % padt 1 and to measure how much the degree of fiscal autonomy, it can be seen from the formula below: padt dof = x 100 % tpdt policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 246 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the higher the independence of a region, it shows that the region is more able to finance its own expenses without assistance from the central government. when combined with the degree of fiscal decentralization used to see the contribution of local revenue to regional revenue as a whole, it will show the overall regional financial performance. (figure 1. post-research sources, 2018) methods this type of research is a quantitative descriptive research that aims to provide an overview of the degree of fiscal independence in bengkulu province. in addition, it also provides an overview of the bengkulu provincial government policy in supporting fiscal independence in bengkulu province in the autonomy era. from the description of fiscal independence and existing government policies, it will be analyzed, whether everything has gone as expected or not. the focus and research aspects are as follows: table 1. the focus and research aspects focus aspects benchmarks government policies in support of fiscal independence enhancement pad a. local tax b. regional retribution c. bumd profits d. other legal pad per capita income increase a. total population b. grdp nvestment value a. gross fixed capital formation b. change in stock government expenditure arrangement a. direct shopping b. indirect shopping this research uses secondary data (time series) during the period 2012 to 2016. the use of secondary data with a relatively short study period of 5 (five) years is a problem of inaccurate data collection and limited data from various institutions. the data source used in this study is annual data which is converted into quarterly data, so that linear interpolation is carried out with the following formula: qk1 = ¼ [(qt 4,5 / 12 (qt qt-1)] qk2 = ¼ [(qt 1,5 / 12 (qt qt-1)] qk3 = ¼ [(qt + 1,5 / 12 (qt qt-1)] qk4 = ¼ [(qt + 4,5 / 12 (qt qt-1)] enhanc ement pad ncome per capita investation degree of fiscal independence government expenditure government policies in support of fiscal independence policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 247 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 where : qk1 = first quarter qk2 = second quarter qk3 = third quarter qk4 = fourth quarter qkt = quarter in year t qkt-1 = quarter in the previous year the quarterly result data will then be shifted, the calculation result for the first quarter will become the fourth quarter of the previous year, and the second quarterly result will be the first quarter of the year thereafter. for example in 2012/2013, the first quarterly result will be the fourth quarter of 2012 and the second quarter result will be the first quarter of 2013. analysis of the data used to determine whether or not there is an effect of the variable per capita income (x1), investment (x2) and government expenditure (x3) on the increase in regional original income (y) bengkulu province used multiple linear regression with the following formulation (sudjana, 1996). : 70): y = α + b1 x1 + b2 x2 + b3 x3 + e where : y: pad α: constant b1, b2, b3: regression coefficient x1: income per capita x2: investment x3: government expenditure e: standard error then after knowing the effect of these three variables on pad in supporting fiscal independence, the degree of fiscal independence is measured by the formula below: padt x 100 % tpdt bhpbpt x 100 % tpdt dau/dakt x 100 % tpdt where : padt = total pad year t bhpbpt = total non-tax income sharing for year t dau / dakt = general allocation fund / special allocation fund, year t tpdt = total regional revenues year t as for finding out how much the level of fiscal dependence is used the criteria for the degree of regional decentralization made by the research and development agency of the ministry of home affairs and the faculty of social and political sciences ugm (1991) as follows: policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 248 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 table 2. interval scale of degree of fiscal independence percentage degree of fiscal independence 0,00-10,00 % very less 10,01-20,00 % less 20,01-30,00 % moderate 30,01-40,00 % enough 40,01-50,99 % well >50,00 % very good source: research and development team of the ugm department of home affairs-fisipol. the higher the independence of a region, it shows that the region is more able to finance its own expenses without assistance from the central government. when combined with the degree of fiscal decentralization used to see the contribution of local revenue to regional revenue as a whole, it will show the overall regional financial performance. results and discussion development of regional original income (pad) bengkulu province 2013-2017 if observed thoroughly during the period 2013-2017, revenue of pad is as shown in table below: table 3. realized pad growth regional government of bengkulu province 2013-2017 (thousand rupiah) year total (rp) growth (%) 2013 525.207.935 8,56 2014 672.064.469 27,96 2015 701.300.384 4,35 2016 731.556.734 4,31 2017 804.575.838 9,98 source: bps bengkulu province in figures of 2018 the target of original regional revenue in the regional revenue budget during the 2013 fiscal year to 2017 as a whole has experienced a significant increase. this growth is in line with the determination of the target of the region's own revenue and taking into account the various economic indicators that exist and the efforts that have been made to support the maximum achievement of targets for regional revenue, especially local revenue. overall, local revenue can be seen from table as a whole that has increased significantly from year to year. growth of per capita income in bengkulu province for the period 2013-2017 the income per capita of bengkulu province from year to year has increased in value in rupiah, but the percentage is still small, namely in 2013 the real income per capita was rp. 22,358,053, or 10.14% and continues to increase in 2017 amounting to rp. 30,904,945, or 6.25%. table 4. development of pdrb perapita bengkulu province in 2013-2017 based on the 2010 effective price (thousand rupiah) year score real per capita pdrb growth (%) 2013 22.358.053 10,14 policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 249 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 year score real per capita pdrb growth (%) 2014 24.605.949 10,05 2015 26.849.718 9,12 2016 29.085.841 8,34 2017 30.904.945 6,25 source: bps bengkulu province in figures of 2018 investment growth in bengkulu province 2013-2017 the development of investment in bengkulu province from year to year has increased from 2013-2017, in 2013 pdrb usage of bengkulu province was rp. 2,444,983, or 111.10% and decreased in 2017 amounting to rp. 7,116,156, or (11.04%) for details can be seen in the following table. table 5. bengkulu province investment in 2013-2017 based on the 2010 effective price (thousand rupiah) source: bps bengkulu province. in figures from various editions, data processed year 2018 growth in bengkulu province government expenditure for the period 2013-2017 during the period of fiscal year 2013-2017, in 2013 realized rp. 1,696,369,921, or a growth of 8.56%, while in 2017 the realization was rp. 2,867,213,326, or a growth of 41.25%, is presented in the table. table 6. growth of regional expenditure realization in bengkulu province 2013-2017 fiscal year (thousand rupiah) year realization regional shopping growth (%) 2013 1.696.369.921 8,56 2014 1.986.238.994 17,09 2015 2.180.678.757 9,79 2016 2.029.690.295 0 2017 2.867.213.326 41,26 source: bps bengkulu province. in figures from various editions, data processed year 2018 table 7. multiple linear regression analysis independent variable regression coefficient std.error prob. t-count constant 7.938e8 4.717e8 0.341 1.683 income per capita -25.489 27.715 0.527 -0.920 investation 59.482 30.489 0.302 1.951 year investation growth (%) 2013 2.444.983.00 111,10 2014 5.344.896.74 118,60 2015 5.770.444.05 7,96 2016 7.999.699.00 38,62 2017 7.116.156.00 (11,04) policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 250 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 independent variable regression coefficient std.error prob. t-count government expenditure 0.103 0.079 0.415 1.309 f hitung : 19,859 r2 : 0, 983 n : 15 from the estimation results, if the r-squared (r2) value is getting closer to one, it means that the model is getting better at explaining the variations that occur in the dependent variable. in other words, variations on the independent variable are able to explain variations on the dependent variable. the r2 criterion which is able to explain the variation of the dependent variable based on the variation of the independent variable is if it is> 0.50 (50 percent). the value of r2 is between zero to one, where the closer to one, the model is better at explaining the relationship between the dependent and independent variables. from the results of the research that has been done, the calculation results obtained with a value of r2 of 0, 983, which means that the variable per capita income, investment and government expenditure on local revenue (pad) can be explained by 98.3 percent and the remaining 1.7 percent is explained by other variables not included in this study. this means that overall per capita income, investment and government spending have a strong relationship to the increase in pad in bengkulu province. the estimation results in table can also show partially the effect of each of the existing variables by first doing the t-test with a confidence level of α = 10%. so that the estimation results for the variable per capita income obtained tcount -0.920 <ttable 1.796, which means that the independent variable does not significantly influence the dependent variable. the estimation results show that the variable per capita income does not have a significant effect on the increase in pad bengkulu province with tcount <ttable. this is because the value of tcount <ttable of income per capita is smaller than the real level. for the investment variable partially on the dependent variable, it is obtained that tcount 1.951> ttable 1.796 means that the independent variable has a significant effect on the dependent variable. the estimation results show that the investment variable has a significant effect on the increase in pad in bengkulu province with tcount> ttable. meanwhile, for the government expenditure variable partially on the dependent variable, it was found that tcount 1.309 <ttable 1.796 means that the independent variable did not significantly influence the dependent variable. the estimation results show that the government expenditure variable does not have a significant effect on the increase in pad bengkulu province with tcount <ttable. based on the results of the calculations carried out, the multiple linear regression equation is obtained as follows: y = 7,938 25,489 x1 + 59,482x2 ** + 0,103x3 information : x2 ** = x2 has a significant effect until α = 10 percent from the equation above, it can be partially described the coefficient of the variables of the effect of per capita income, investment and government expenditure on regional revenue (pad) in bengkulu province as follows: (1) the income per capita variable does not have a significant effect on local revenue (pad) in bengkulu province; (2) the investment coefficient value (x2) of policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 251 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 59.482 shows that every 1 percent increase in investment, it can increase bengkulu province's own revenue (pad) by 59.48 percent; and (3) the government expenditure variable does not have a significant effect on local revenue (pad) in bengkulu province after knowing the effect of per capita income, investment and government spending on local revenue (pad), the authors measured the degree of fiscal independence in bengkulu province in a period of five years, namely 2013-2017 so that it is obtained as in the following table: table 8. recapitulation of the calculation of the degree of fiscal independence bengkulu province 2013 – 2017 (in percent) year pad/tpd bhpbp/tpd dau & dak/tpd 2013 30,96 4,20 53,42 2014 33,84 4,81 50,80 2015 32,16 4,54 50,90 2016 31,10 3,30 65,34 2017 28,06 2,10 67,54 total 31,22 3,79 57,60 from the calculations in table, it shows that in an average period of five years, 2013-2017, the proportion of pad to tpd averaged 31.22% based on the interval scale of the degree of fiscal independence which was stated as sufficient. then the proportion of bhpbp to tpd within a period of five years, namely 2013-2017 on an average of 3.79% based on the scale of the degree of fiscal independence interval is stated to be very poor, where if you pay attention to the development, it shows that there is a significant decrease in bhpbp contributions. meanwhile, the proportion of the general allocation fund (dau) and the special allocation fund (dak) to the tpd in the five-year period, 2013-2017, is an average of 57.6% based on the interval scale, degree of fiscal independence is declared very good. based on the results of research estimates in table and after the t-test was carried out to see the effect of the independent variables partially on the dependent variable with a confidence level of α = 10%. obtained tcount -0.920 <ttable 1.796 means that the independent variable does not significantly influence the dependent variable. the estimation results show that the variable per capita income does not have a significant effect on the increase in pad bengkulu province with tcount <ttable. this is because the value of tcount <ttable of income per capita is smaller than the real level. the results showed that per capita income had no effect on pad and it would also cause per capita income to have no effect on fiscal independence in bengkulu province. the effect of investment on the increase of pad and fiscal independence of bengkulu province with a variable coefficient of 59.482, this indicates that every 1 percent increase in investment value will increase the pad level by 59.482 percent, assuming that the other factors are considered constant. based on the results of research estimates in table, it is known that investment has a significant effect on the increase in pad bengkulu province. to see the effect of the investment variable partially on the dependent variable, a t-test was carried out with a confidence level of α = 10%. obtained tcount 1.951> ttable 1.796 means that the independent variable has a significant effect on the dependent variable. the estimation results show that the investment variable has a significant effect on the increase in pad in bengkulu province with tcount> ttable. policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 252 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the effect of government expenditure on the increase in pad and fiscal independence of bengkulu province from the results of regression calculations, the coefficient value of the influence variable on government spending is 0.103. this indicates that any change in government spending by 1 percent will increase pad by 0.103 percent, assuming that the other factors are considered constant. based on the results of research estimates in table, it is known that government expenditure is significant in the increase in pad in bengkulu province. to see the effect of government expenditure variables partially on the dependent variable, the t-test was carried out with a confidence level of α = 10%. obtained tcount 1.309 <ttable 1.796 means that the independent variable does not significantly influence the dependent variable. the estimation results show that the government expenditure variable does not have a significant effect on the increase in pad bengkulu province with tcount <ttable. degree of fiscal independence of bengkulu province from the calculation of the degree of independence, it shows that in an average period of five years, 2013-2017, the proportion of pad to tpd in 2013 was 30.96 percent, in 2017 it was 28.06 percent and an average for five years was 31, 22 percent so that based on the interval scale the degree of fiscal independence is declared sufficient. this means that the regional financial capacity of bengkulu province is only sufficient to finance indirect expenditure needs, while direct expenditure cannot be financed by the bengkulu provincial government itself, which comes from local revenue (pad) so that the bengkulu province government still needs assistance or transfers from the government. center. if seen from the average percentage, the proportion is 31.22 percent. this means that pad has not contributed significantly to the total regional revenue of bengkulu province. then the proportion of bhpbp to tpd in a period of five years, namely 2013-2017 on an average of 3.79% based on the scale of the degree of fiscal independence interval is stated to be very poor, where if you pay attention to the development, it shows that there is a significant decrease in bhpbp contributions. meanwhile, the proportion of the general allocation fund (dau) and the special allocation fund (dak) to the tpd in the five-year period, 2013-2017, is an average of 57.60% based on the interval scale, degree of fiscal independence is declared very good. bengkulu provincial government policies in support of fiscal independence based on the results of research and discussion of bengkulu provincial government policies in supporting fiscal independence, there are several things that need attention so that fiscal independence can occur properly, especially for the bengkulu provincial government, including: 1. in the per capita income sector: (a) develop resource-based industries, especially agriculture, tourism, and development of agricultural centers; (b) build network and industrial patterns (industrial clusters) in each district / city according to the potential of their respective regions; (c) developing the trade and service sector as a driving force for the people's economy; and (d) increase data availability and development planning synergy; 2. optimization of agricultural, marine and fishery revitalization policies: (a) domestic trade efficiency improvement program; (b) farmers' welfare improvement program; and (c) program to increase rural community empowerment; policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 253 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 3. in the investment sector: (a) increasing investment promotion with local, regional, national and international dimensions; (b) increase and increase the amount, type and value of investment both within the country and abroad; (c) domestic and foreign investment procedures debureaucracy; (d) ensuring security and a favorable business climate; (e) investment deregulation which is oriented towards reducing high cost economy; (f) improvement in terms of business and investment climate; (g) improvement of regional infrastructure; (h) increase investment promotion; (i) strengthening capital for business actors through land title certification; (j) people's business credit; (k) partnership of state owned enterprises with business actors; (l) capital loans for business actors; 4. in the government expenditure sector: (a) optimizing and expanding sources of regional income; (b) optimizing the management and management of regional assets; (c) efforts shall be made for regional expenditures to support the achievement of development goals efficiently and effectively; (d) prioritizing regional expenditure budget allocations in sectors for improving quality basic services, education, health, social facilities and public facilities as well as developing a social security system, in accordance with the mandate of the law, as well as the vision, mission and programs of the regional heads / deputy heads; (e) increase the regional budget for poverty alleviation programs; (f) directing the regional budget allocation for infrastructure development that supports the development of the agricultural, plantation and livestock sectors; (g) increasing awareness of the application of the principles of spending efficiency in public services in accordance with government regulation number 38 of 2007, which includes economic benefits, externalities, gaps in economic potential and administrative capacity, people's tendencies towards public services, and maintenance of macroeconomic stability; (h) increase the effectiveness of regional expenditure policies through the creation of harmonious cooperation between the executive, legislative and public participation in the discussion and determination of regional expenditure budgets. 5. in the sector of increasing pad; (a) intensifying the system of collection procedures for sources of regional income in accordance with the applicable laws and regulations whose management authority is exercised by each regional revenue management agency / agency in accordance with the main tasks and functions; (b) improve the quality of human resources; (c) improve coordination with all local revenue management agencies / agencies; (d) to bring motor vehicle tax payment services closer to the public, the bengkulu province revenue service has opened a samsat nakau service unit, samsat mega mall bengkulu, samsat corner bencolen mall (bengkulu indah mall); (e) improve coordination in the management of balanced funds, especially those from profit sharing such as pbb, bphtb and pph articles 21 and 29 together with the bengkulu lampung regional tax office and the regency / city revenue service; (f) intensification and extensification of regional income; (g) improved coordination and supervision of the collection of regional revenues; (h) increasing organizational resources efficiently and effectively; (i) increasing services to the community; (j) control of regional revenue collection systems and procedures; (k) increased socialization of tax collections. policy analysis of the regional government of bengkulu province in supporting fiscal independence in the autonomy era (case study on revenue department of bengkulu province) susanto, suminar, & suharto 254 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 conclusion the degree of fiscal independence of bengkulu province during the study period (20132017) is concluded: (1) the proportion of pad to total regional revenue (tpd), the average result is 31.22% based on the interval scale, which is stated as sufficient; (2) the proportion of tax and non-tax revenue sharing (bhpbp) to total regional revenue, the average yield is 3.79% based on an interval scale which is stated to be very insufficient; (3) the proportion of general allocation funds and special allocation funds to total regional revenue (tpd), the average result is 57.60% based on an interval scale which is declared very good. bengkulu provincial government policies in supporting fiscal independence include programs to increase agricultural production, plantations, livestock and fisheries, investment deregulation which is oriented towards reducing high-cost economies and improving the business and investment climate, regional spending is strived to support the achievement of development goals efficiently and effective and regional expenditures are prepared on the basis of the real needs of the community, in accordance with the development strategy to improve services and public welfare and increase the capacity of the regional tax management apparatus in order to improve services and increase regional income from the regional tax sector. accelerate regional economic growth through investment, particularly foreign investment (pma) and domestic investment (pmdn) through a climate that is conducive to investors so that regional economic activity increases, job opportunities increase, population incomes increase, people's purchasing power increases, and government revenue is getting bigger. in an effort to increase regional independence, local governments are also required to optimize the potential income they have and one of them is to provide a greater proportion of capital expenditure for development in productive sectors in the region. regional governments should continue to pursue expansionary regional autonomy policies, especially in the pad sector. exploration of regional sources that have the potential to increase regional revenues continues to be carried out so as to reduce the dependence on regional financial sources originating from the central government. references adisubrata, winarma surya. 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(2008). analisis kemandirian fiskal di era otonomi (studi kasus di provinsi sulawesi tengah). “tesis” tidak dipublikasikan. universitas diponogoro.semarang. suparmoko. (2002). ekonomi publik untuk keuangan dan pembangunan daerah. edisi pertama. andi, yogyakarta. todaro, michael p. (2000). pembangunan ekonomi di dunia ketiga. erlangga. jakarta. triastuti, darwin m. & ratminto. (2005). analisis kemandirian keuangan daerah kota jogjakarta. jurnal sosio sains,volume 18no. 2, april 2005 : 293-310. undang-undang nomor 7 tahun (2017) tentang perubahan atas peraturan daerah provinsi bengkulu nomor 6 tahun 2016 tentang rencana pembangunan jangka menengah daerah provinsi bengkulu tahun 2016-2021. udjianto, didi. welly, (2005). kemampuan keuangan daerah dalam mendukung pelaksanaan otonomi daerah (studi kasus di kabupaten sragen periode 1998 – 2002).ekobis, vol. 6, no. 1, januari 2005. ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 2 april 2021 page no. 113-121 https://www.ilomata.org/index.php/ijtc 113 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia edy anan department of accounting, universitas amikom yogyakarta, indonesia correspondent: edyanan@amikom.ac.id submitted : january 28, 2021 revised : february 20, 2021 published : april 30, 2021 abstract the infrastructure sector is the top priority of the indonesian government's development from 2014 to 2019. indonesia corruption watch (icw) data shows that the number of corruption cases in infrastructure projects has increased during 2015-2018. the value of losses in corruption cases in infrastructure projects is estimated at 1.1 trillion rupiah. the results of various studies on the factors affecting fraudulent financial statements show inconsistent results. this research aims to determine the impact of the stimulus, ability, opportunity, rationalization, and self on companies' fraudulent financial statements in the infrastructure industry listed on the indonesian stock exchange (idx). this study uses quantitative research methods. sampling techniques use purposeful sampling, that is, hypothesis testing using logistic regression analysis models. the results showed that the stimulus measures had a positive and significant impact on fraudulent financial statements. competence, opportunity, and rationalization have a positive and insignificant impact on fraudulent financial statements. the impact of self on fraudulent financial statements is negligible. the research supports the agency theory that management can commit fraudulent financial statements and achieve the company's financial goals. keywords: fraudulent financial statement, s.c.o.r.e model, infrastructure sector. introduction companies have business complexity and significant business risks, potential targets for fraud. no company or organization is immune to fraud (purba, 2015: 3). this kind of fraud can occur in all types of companies, including small companies and companies publicly listed on the world stock exchange, including in indonesia. the infrastructure sector is a top priority for the indonesian government's development for the 2014-2019 period. indonesia corruption watch (icw) data shows that the number of corruption cases in infrastructure projects has increased during 2015-2018. in 2015, there were 106 cases of corruption in this sector. the number increased to 133 in 2016 and 2017 to 158 cases. in 2018 there were 167 cases with an estimated loss value of idr 1.1 trillion (jayani, 2019). fraud factors can be explained in several fraud theories. they are starting from the fraud triangle introduced by cressey in 1953. wolfe and hermanson with the fraud diamond in 2004. crowe (2011) refines the theory that cressey has put forward with the crowe's fraud pentagon. vousinas (2019) introduced the s.c.o.r.e model theory as a fraud pentagon. the elements of fraud in the s.c.o.r.e model are almost the same as those in the crowe's fraud pentagon. the results of research by acfe (2016:4) showcases asset misappropriation fraud by 83%, with an average loss of usd 125,000. furthermore, there were 35.4% fraud cases due to https://www.ilomata.org/index.php/ijtc mailto:edyanan@amikom.ac.id determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 114 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 corruption with an average loss of usd 200,000. then cases of fraud due to fraudulent financial statements amounted to 9.6%, with an enormous average loss, amounting to usd 975,000. although cases of fraud due to fraudulent financial statements are small, they cause enormous financial losses. research on fraudulent financial statements such as bawekes et al. (2018), quraini and rimawati (2018), puspithaa and yasab (2018), nindito (2018), setiawati and baningrum (2018, tessa and harto (2016), agustina and pratomo (2019, and pratiwi and nurbaiti (2018). researchers used the pentagon's "the crowe's fraud" theory to test financial statements for fraud. these researchers showed inconsistent results. this study is a replication of several previous studies. the determinant of fraudulent financial statements used by vousinas (2019) is the s.c.o.r.e model. another difference is that the study population used infrastructure industry companies listed on the indonesian stock exchange for five years (2013-2017). a company is a contract (loosely defined) between shareholders or shareholders and company managers. the agency theory was proposed by jensen and meckling (1976). the agency theory explains that one or more individuals (as principals) hire one or more other individuals (agents) to operate the company as an agency relationship. principals or owners of capital have access to information relating to the company to make decisions. in contrast, management as agents who have access and information regarding the company's operations is responsible for providing information to the principal. meisser et al. (2006:7) explained that this agency relationship causes two problems: asymmetric information (information asymmetry) and the occurrence of a conflict of interest due to different objectives. in practice, agency theory states that it will be difficult to believe that management (agents) will always act based on shareholders' interests (principal). agency theory explains where a conflict of interest will arise, where management will act for personal interests and not maximize shareholder interests. fraud is an action against the law with an element of intent, which aims to cover up the mistakes that have occurred (tuanakotta, 2013). tunggal (2012) explains that fraud is defined as "deliberate fraud in finance, which is intended to take assets or rights of other people or parties." the institute of internal auditors (2013) of the iia (tuanakotta) explained that fraud refers to any illegal behavior characterized by deception, concealment, or breach of trust. these actions do not rely on the use of violence or threats of force. individuals and organizations fraudulently property, obtain money, services, service loss, avoid payment, and ensure personal or business advantages. from the various meanings above, it can be concluded that fraud is an act committed by an individual or organization intentionally to cheat, hide, or gain an advantage in a condition where such action can harm other parties. according to acfe (2014), fraud consists of 3 categories: asset misappropriations, corruption, and financial statement fraud. fraudulent financial statements can be interpreted as making the information displayed in the financial statements not show its original state so that the information makes the users of the financial statements make wrong decisions and suffer heavy losses. arens et al. (2008) explained that fraudulent financial statements are deliberately deceptive statements, understatement of amounts, or disclosures to deceive users. most cases of fraudulent financial statements involve deliberate misstatements of undisclosed amounts. omitting amounts is rare, but companies can exaggerate revenue by omitting accounts payable and other liabilities. although not so frequent, there are several notable cases of fraudulent financial statements involving adequate disclosure. determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 115 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 sarwoko et al. (2001) explained that fraudulent financial statements are a misstatement or deliberate omission of the amount of disclosure in financial statements. act/law no. 20 of 2001 of republic indonesia states that fraudulent acts and actions that harm state finances are corruption types. effendi (2006) mentioned three reasons for fraud in financial statements, namely: (1) manipulation, forgery, alteration of financial report notes and supporting documents of financial statements provided; (2) false material misinformation in financial statements statement, (3) misuse of accounting standards on the amount, classification, presentation, and disclosure. s.c.o.r.e are models that explain the factors of fraud. s.c.o.r.e are stand from the stimulus, capability, opportunity, rationalization, and ego (vousinas, 2019). the following describes the elements of the s.c.o.r.e model: 1. stimulus (incentive). fraud is caused by high pressure, which is financial. there are different forms of stress. for example; due to the pressure to achieve goals (especially in times of crisis), the frustration of the work environment, professional ambitions, and the desire to achieve these goals as soon as possible, the company has high financial needs or requires the company to report higher performance as much as possible. due to economic recession and pressure in the crisis years, the possibility of fraud has dramatically increased. 2. capability. ability refers to a person's traits and personality. without proper personnel to implement the fraud's details, many scams will not occur, especially the multi-billion dollar financial statement fraud. 3. opportunity. opportunity is the ability to deceive. criminals think they can commit and commit fraud without being discovered. it should be noted that participants believe that opportunities are real, which means they are not hidden. fraud research emphasizes that the position and authority of individuals in the company also provide opportunities. 4. rationalization. rationalization is an essential factor in the occurrence of fraud. in this kind of fraud, the perpetrator seeks justification for his behavior. for example, his behavior makes his family and relatives happy, and the company has made considerable profits. account for a small part of these profits. 5. ego. ego is a theory from psychology based on a person's criminal behavior view. the ego is a personality, which can help solve problems by mediating between the needs of the company, the self, and the company environment. self prevents us from taking action on every impulse of ourselves. stotland (1977) in vousinas (2019) asserted that one of the main motivations for cheating is power and a high degree of superiority. methods this research is quantitative. such data uses annual financial reports and auxiliary data in the form of annual reports. sampling techniques use purposeful sampling methods, and hypothesis testing uses logistic regression analysis techniques. the research sample is infrastructure companies listed on the indonesian stock exchange (bei) from 2013 to 2017. the following is a variable measurement table: determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 116 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 the logistic regression model is as follows: ffsi = ß0 + ß1roai + ß2dchangei + ß3bdouti + ß4audi + ß5ceopici + description ffs = fraudulent financial statements β0 = constants β1,2,3,4…. = variable coefficients roa = return on asset dchange = changing of directors bdout = ratio of independent commissioner’s board aud = changing of independent auditor ceopic = the number of ceo' picture in the annual report ε = error results and discussion there are 60 infrastructure sector companies listed on the indonesia stock exchange (idx) in 2013-2017. however, according to the criteria of the purposive sampling method, there were 30 sample companies. the following is a research sample selection table: the hosmer and lemeshow goodness-of-fit tests in table 2 above show that the chisquare value is 11.816 and df is 8. this chi-square value does not show a significant value, which is 0.160 or (p> 0.05) in probability α 0.05. therefore, the null hypothesis cannot be rejected. the model can predict the observed value or because the model fits the observed data. it can be said that the model is feasible in identifying fraudulent financial statements of companies. determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 117 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 table 4 shows the overall model assessment test (block number 0: beginning block). the result of the test for -2 log-likelihood on block number 0: beginning block is 167.593. the value of -2logl is significant with the sig value. equal to -1,116 (p <0.05). this result means that the model rejects the null hypothesis, which means that only constants do not fit the data. the value -2logl (block number = 1) is shown in the table 5 below: table 5 shows that the value of -2 log-likelihood (-2logl) in the block number = 1 after entering the independent variables, namely roa, bdout, aud, dchange, and ceopic becomes 161.227. the following is the value of -2 log-likelihood (-2logl), which can be seen clearly in table 6. as shown in table 6 the initial -2logl value (block number = 0) is 167.593 and the next 2logl (block number = 1) is 161.227. this result means that there is a decrease in the value of 2 logl of 6.366. the occurrence of a decrease from this value of -2 logl indicates a better regression model or, in other words, hypothesized. cox and snell r2 and nagelkerke r2 above show that each of these tests has a value of 0.042 and 0.062. therefore, these results indicate that the dependent variable's variability is 6.2%, which can be explained by the independent variable's variability. this result means that 93.8% of the dependent variable's variability can be explained by other independent variables outside the research model. determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 118 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 the regression model formed based on table 8 is as follows: ffs = -1,402 + 4.777 roa + 0,159 dchange + 0,071bdout + 0,009 aud – 0,025 ceopic + ε from the regression equation above, it can be explained as follows: 1. a constant value of -1.402 indicates that if all the free variables are zero, the company will experience fraudulent financial statements amounting to -1.402. 2. the roa variable's regression coefficient value is 4,777, meaning that each increase of one unit of the roa variable will increase the fraudulent financial statements of 4,777, assuming the other independent variables remain. 3. the regression coefficient value of the dchange variable is 0.159, which means that each increase of one unit of the dchange variable will reduce the fraudulent financial statements of .159, assuming the other independent variables remain. 4. the regression coefficient value of the aud variable is 0.071, meaning that every increase of one unit of the aud variable will reduce the fraudulent financial statements by 0.071, assuming the other independent variables are fixed. 5. the regression coefficient value of the ceopic variable is -0.025, meaning that each increase of one unit of the ceopic variable will increase the fraud in financial statements by -0.025 with the assumption that the other independent variables are fixed. the logistic regression results test the significance of the stimulus measures on the detection of fraudulent financial statements. it shows a positive direction with significant value, with roa alternative stimulus measures with financial goals. these results can be seen from the significance probability value of roa, which is equal to 0.033 or (p<0.05) in probability α 0.05. it can be concluded that the stimulus can affect fraudulent financial statements or accept hypothesis 1 or h1 as acceptable. these results are by the results of research by setiawati and baningrum (2018), pratiwi and nurbaiti (2018), and puspitha and yasa (2018). however, these results are not supported by research by bawekes et., al (2016); quraini and rimawati (2018); nindito (2018); agustina and pratomo (2019), and tessa and harto (2016), where stimulus with financial targets has no significant effect on fraudulent financial statements. return on asset (roa) is a measure of the company's operating performance used to identify how efficient the use of assets is (skousen et al., 2009). setiawati and baningrum (2018) say that managers will be more ambitious so that whatever means will be taken to get the target they should. if the lower the roa value indicates, the lower the profit generated so that the company's performance looks terrible, the possibility of financial statement fraud is relatively high. the logistic regression results to test the significance of the effect of capability on report fraud show that capacity has a positive direction with a little value. capability is proxied by a change of directors or dchange. these results can be seen from the dchange significance probability value of 0.797 or (p> 0.05) in probability α 0.05. it can be concluded that capability cannot affect fraudulent financial statements or reject hypothesis 2 or h2. the board of directors is fully responsible for carrying out its duties in the company's interests in achieving its aims and objectives. the board of directors is also obliged to ensure that all the company's assets have been used according to their intended use in the company's determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 119 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 interests and the company's shareholders the change of directors is not a factor in detecting fraudulent financial statements. these results support the research of bawekes et al. (2018), quraini and rimawati (2018); nindito (2018); and agustina and pratomo (2019). however, these results do not support the research conducted by puspithaa and yasa (2018), where directors' change has a significant effect on fraudulent financial statements. the logistic regression results to test the significance of opportunity on report fraud show a positive direction with little value. opportunity is proxied by effective monitoring, namely the proportion of independent commissioners in a board structure in a company or bdout. these results can be seen from the significant value of 0.892 or (p> 0.05) in the probability α 0.05. it can be concluded that the opportunity cannot affect fraudulent financial statements or reject hypothesis 3 or h3. these results support the research of tessa and harto (2016), nindito (2018); setiawati and baningrum (2018); quraini and rimawati (2018); and pratiwi and nurbaiti (2018). however, this study's results do not support puspithaa and yasa (2018); agustina and pratomo (2019), where ineffective monitoring with the proportion of the commissioners' board has a significant effect on fraudulent financial statements. adequate supervision can minimize fraud. an independent board of commissioners in a company is one factor in increasing the company's operational supervision. the independent board of commissioners will supervise objectively, independently, away from certain parties' intervention to not trigger managers to commit fraud in financial reports (setiawati and baningrum, 2018). the logistic regression results for the significance test of rationalization on report fraud show a positive direction with little value. rationalization is proxied by an audit opinion or aud. these results can be seen from the significant value of 0.999 or (p> 0.05) in the probability α 0.05. it can be concluded that rationalization cannot affect fraudulent financial statements or reject hypothesis 4 or h4. these results support research conducted by setiawati, baningrum (2018); agustina and pratomo (2019); nindito (2018); quraini and rimawati (2018); bawekes et al. (2018) and pratiwi and nurbaiti (2018). this study's results do not support puspithaa and yasa (2018) research, which states that rationalization has a significant effect on fraudulent financial statements. rationalization is a variable that is difficult to measure from the fraud model (skousen et., al., 2009). the auditor's inability to detect irregularities that occur in the financial statements affects the audit opinion results. the accrual basis of accounting allowed by the financial accounting standards allows management to modify the financial statements to freely produce the desired profit. the logistic regression results for the significance test of the effect of ego on report fraud show a negative direction with little value. ego is represented by the number of ceo's pictures or ceopic. these results can be seen from the significant value of 0.911 or (p>0.05) in the probability α 0.05. it can be concluded that rationalization cannot affect fraudulent financial statements or reject hypothesis 5 or h5. these results support the research of setiawati and baningrum (2018), agustina and pratomo (2019); nindito (2018); quraini and rimawati (2018); and pratiwi and nurbaiti (2018). determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 120 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 however, in contrast to the research of bawekes et al. (2018), puspithaa and yasa (2018), and tessa and harto (2016), who state that ceopic affects financial statement fraud. the ceo's photo emblazoned in the company's annual report is the transparency of who is in charge of and is responsible for the leadership of the activities carried out by the company. the more ceos of the company, the more ideas for running the company. if the idea is mutually beneficial to each other and the company, it is hoped that fraud will not arise in the preparation of the company's financial statements. conclusion the stimulus has a significant positive effect on fraudulent financial statements. capability, opportunity, and rationalization have a positive and insignificant effect on fraudulent financial statements. capability, opportunity, and rationalization cannot affect fraudulent financial statements. ego has a not positive or negative insignificant effect on fraudulent financial statements. further research can add proxy variables such as external auditors' quality, institutional share ownership, and audit opinions covered by the fraud s.c.o.r.e. model. elements of fraud, such as rationalization and capability, are challenging to measure using quantitative methods alone. for that, future research can use various methods, like mixed method or qualitative method. further research can also be developed into the public funding sector, such as the government or social sector. references agustina, ratna d. dan dudi pratomo. (2019). pengaruh fraud pentagon dalam mendeteksi kecurangan pelaporan keuangan. jurnal ilmiah manajemen, ekonomi, & akuntansi (mea), 3(1), 44-62. arens, alvin., randal j.elder, mark s.beasley. (2008). jilid i, edisi ke duabelas. auditing dan jasa assurance, alih bahasa oleh herman wibowo. jakarta: erlangga association of certified fraud examiners. (2016). report to the nations on occupational fraud and abuse. association of certified fraud examiners. bawekes, helda f, aaron m.a. simanjuntak, sylvia c. daat. (2018). pengujian teori fraud pentagon terhadap fraudulent financial reporting. jurnal akuntansi & keuangan daerah volume 13, nomor 1, mei 2018: 114–134 effendi, arief. (2006). “fraudulent financial reporting: tanggung jawab auditor independen”. seminar umum universitas internasional batam. jayani, d.h. (2019). korupsi di sektor infrastruktur mengalami peningkatan sepanjang 20152018, 21/10/2019, diakses 25 nopember 2019 dari https://databoks.katadata.co.id/datapublish/2019/10/21/korupsi-infrastruktur-20152018-semakin-meningkat jensen, m., c., dan w. meckling. (1976). “theory of the firm: managerial behavior, agency cost and ownership structure”, journal of finance economic 3:305360, messier, w.f., glover, s.m., dan prawitt, d.f. (2006). auditing and assurance services a systematic approach. edisi keempat. penerbit salemba 4. mcgraw-hill irwin.singapore determinants fraudulent financial statements using the s.c.o.r.e model on infrastructure sector companies in indonesia anan 121 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 nindito, marsellisa. (2018). financial statement fraud: perspective of the pentagon fraud model in indonesia. academy of accounting and financial studies journal volume 22, issue 2. pratiwi, novianti r. dan annisa nurbaiti. (2018). analisis fraud pentagon dalam mendeteksi kecurangan laporan keuangan dengan metode f-score model. e-proceeding of management: vol.5, no.3 puspithaa, made y. dan gerianta w. yasa. (2018). fraud pentagon analysis in detecting fraudulent financial reporting. international journal of sciences: basic and applied research (ijsbar). volume 42, no 5, pp 93-109 quraini, fidyah dan yuni rimawati. (2018). determinants fraudulent financial reporting using fraud pentagon analysis. journal of auditing, finance, and forensic accounting (jaffa) vol. 6, no. 2, october 2018 page. 105 – 114 republik indonesia, undangundang nomor 31 tahun 1999 sebagaimana yang diubah dengan undangundang nomor 20 tahun 2001tentang tindak pidana korupsi. sarwoko, imam., l. sensi, d. bede. (2001). kumpulan materi kulia praktek audit. salemba empat. jakarta. hal.22. setiawati, erma dan ratih m. baningrum. (2018). deteksi fraudulent financial reporting menggunakan analisis fraud pentagon. riset akuntansi dan keuangan indonesia, 3(2). skousen, c. j., smith, k. r., & wright, c. j. (2009). detecting and predicting financial statement fraud: the effectiveness of the fraud triangle and sas no. 99. corporate governance and firm performance journal, 13, 53-81 tessa g, chyntia dan puji harto. (2016). fraudulent financial reporting: pengujian teori fraud pentagon pada sektor keuangan dan perbankan di indonesia. simposium nasional akuntansi xix, lampung. tuanakotta, t. m. (2012). akuntansi forensik dan audit investigatif edisi 2. jakarta: salemba empat. tunggul, a.w. (2012). audit kecurangan dan akuntansi forensic. harvarindo. jakarta. vousinas, georgios l. (2019). "advancing theory of fraud: the s.c.o.r.e. model", journal of financial crime, vol. 26 issue: 1, pp.372-381 ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 2 april 2021 page no. 134-145 https://www.ilomata.org/index.php/ijtc 134 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 the effect of service quality on gojek online customer satisfaction muhammad rizqi1, afriapollo syafarudin2 1feb student management study program, mercu buana university, jakarta 2 feb lecturer management study program, mercu buana university, jakarta correspondent: afriapollo88@gmail.com submitted : march 3, 2021 revised : march 30, 2021 published : april 30, 2021 abstract good service quality can be a competitive advantage for service companies. quality of service is also the key to success. whether or not the quality of service for goods or services depends on the ability of producers to consistently meet consumer expectations. service quality is said to be satisfactory if the service felt is the same or exceeds the expected service quality. services like this are perceived as quality and satisfying services. these consumer expectations are reflected in good service, warm hospitality, courtesy, punctuality, and speed which are important values expected by consumers. satisfied consumers will indirectly encourage word-of-mouth recommendations, and can even improve the company's image in the eyes of consumers. therefore, service quality must be the main focus of company attention because it can create customer satisfaction. this study aims at the influence of service quality on customer satisfaction. respondents of this study used 100 research samples on gojek brothers, the tools used in this study were using the pls (partial least square) analysis method. the results of the analysis of this study are the effect of service quality on customer satisfaction. keywords: service quality, customer satisfaction, gojek online introduction in this modern era, people have various activities and to fulfill these activities people need transportation as a means of support/aid in carrying out their activities. therefore, transportation service entrepreneurs are competing to attract their customers by improving services, ease of ordering, fleet convenience, punctuality, and so on. in indonesia, it is often found that motorbikes also function as public transportation, namely transporting people/goods and charging an agreed fee. this type of transportation is known as an ojek. (agus, 2019). along with the development of technology, there are currently applications that introduce motorcycle taxi ordering services using technology and using service standards. previously, ojek used an area-based base system at the bends and mouths of the alleyways. ojek riders from other areas cannot “hang around” in an area without permission from ojek riders in that area. even to use the ojek service, service users have to pay cash and often bargain. currently, there are many online motorcycle taxi service providers known as go-jek, grab, and uber. all provide almost the same services, starting from delivering people at different costs, but with the same ordering system, namely ordering via mobile phone applications. (azwar, 2007: chao, et, al 2015). one of the transportation service companies that is developing in indonesia is gojek. pt. the karya anak bangsa application was founded on october 13, 2009 by nadiem makarim and michaelangelo moran. this company is engaged in transportation services as an intermediary that connects motorcycle taxi drivers with customers. in 2010, the company launched a locationbased search-based gojek mobile application for android and ios (apple) based mobile phones. https://www.ilomata.org/index.php/ijtc mailto:afriapollo88@gmail.com the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 135 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 through this application, ojek riders can see incoming orders and where to respond to them, and customers can monitor the position of ojek riders who respond to orders. gojek has operated in the areas of medan, jabodetabek, surabaya, bali, yogyakarta, makassar and balikpapan. gojek services and services develop not only as transportation for people (transport), but can also be used as delivery of goods, documents, or packages (instant courier), as partners for online and offline companies that require delivery on the same day, even the newest ones can be used as an introduction to ordered food (gofood). (dharmmesta, 2009: diyanthini, 2014). go-jek has become the pioneer of motorbike taxi services based on mobile applications through its go-ride service. with this, go-jek application users can simply order an ojek via an online mobile application, and later they will be picked up by an ojek driver who responds to user orders or potential passengers. payment transactions are made when the user reaches the destination of the motorcycle taxi driver. the rates charged vary based on the distance traveled or based on the flat rate applied. some of the companies that are competitors to go-jek are grab and uber, but now uber is no longer there because of the acquisition by grab. these two companies have services that are similar to go-ride services from go-jek. (guttier, & silveira, 2017) the increasing number of online motorcycle taxis has an impact on the tighter competition. the factors that cause this is the existence of price competition and the many choices for online motorcycle taxi services. this makes consumers more selective. consumers will choose one of the alternative options according to what they want. anticipating this situation, online motorcycle taxi companies, especially gojek, must be able to create customer satisfaction (hartono, 2019). customer satisfaction is a very important factor for the existence, continuity, and development of a company. today many companies are increasingly understanding the importance of customer satisfaction and implementing strategies to provide satisfaction to their customers. herawati, (2017). customer satisfaction is a post-purchase evaluation where at least it gives the same or exceeds customer expectations. meanwhile, dissatisfaction arises when the results obtained do not meet customer expectations. kotler (2010) in general, satisfaction (satisfaction) is the feeling of happy or disappointed someone that arises because of comparing the product's perceived performance (or results) against their expectations. the theory that explains how consumer satisfaction or dissatisfaction is formed is the expectancy disconfirmation model, which suggests that satisfaction and dissatisfaction are the effects of the comparison between consumer expectations before purchase and what consumers get from the product purchased. when consumers buy a product, consumers have expectations about how the product functions. if the product functions better than expected, the consumer will be satisfied. kaplan, & dennis (1993) customer satisfaction has a big impact on the company. keeping and satisfying current customers is much easier than constantly trying to attract or prospect new customers, the cost of retaining customers is less than the cost of finding new customers. satisfied customers can make the relationship between the company and customers harmonious, provide a good basis for repeat purchases and customer loyalty, become an advocator for the company especially when the company's reputation or product is being harassed by others, and form positive words of very strong mouth recommendations. profitable for the company. (indratama, et, al, 2014). one of the kotlers. (2012). defining service quality is a dynamic condition related to service products, people, processes, and the environment that can meet and or exceed consumer expectations. kotler, & kevin (2009) stated that service quality includes several aspects which the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 136 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 include: the ability to provide immediate and satisfying services (reliability); the desire of employees to help customers and provide responsiveness services (responsiveness); ability, politeness, and trustworthiness of employees (assurance); ease of doing good communication relationships and sincere attention to customers (empathy); and evaluation of physical facilities (tangibles). kotler, & keller, (2016) also argued that service quality affects customer satisfaction, where good service has a greater impact on customer satisfaction. even though service/service is an intangible item, service can be assessed based on someone's experience and reasoning. service quality can affect customer satisfaction because of the interaction between consumers and the company. under the concept of customer satisfaction, that customer satisfaction can be achieved if the performance or results felt are under consumer expectations. so, whether or not the services provided by the company greatly affect customer satisfaction. service quality research was conducted by kotler, & armstrong, (2012). the results showed that service quality had a significant effect on customer satisfaction. however, research conducted by kotler, et, al. (2009). concerning "the effect of service and product quality on customer satisfaction and loyalty of kentucky fried chicken in south tangerang" shows that service quality does not affect customer satisfaction. the second factor that affects customer satisfaction is the price perspective. price is the amount of money (possibly several items weighed) needed to obtain several combinations of a product and service that accompany it (kotler and keller, 2010). price is something that can be controlled and determines whether or not a product is accepted by consumers. the price depends solely on company policy but of course taking various things into account. the cheap or high price of a product is very relative. the company must always monitor the price set by competitors so that the price determined by the company is not too high or vice versa. the selling price is essentially an offer to consumers. if the consumer accepts the price at the time of making a purchase, the product will sell, on the contrary, if the consumer refuses it at the time of making a purchase, it is necessary to review the selling price. there is a possibility that consumers have a discrepancy after purchasing because maybe the price is considered too expensive or because it is not under the previous wishes and descriptions (syafarudin, 2020). thus a correct pricing strategy is needed. the results of research conducted by hertati., asmawati, widiyanti. (2021). reinforces the theory put forward above. inman, & zeelenberg (2002) conducted a study on "the effect of service quality and price on customer satisfaction for service users of anugerah glagah indah hotel temon kulon progo yogyakarta". the results showed that service quality and price had a positive and significant effect partially and simultaneously on customer satisfaction at anugerah glagah indah hotel. be careful. & safkaur. (2020). also proved that price has a positive and significant effect on customer satisfaction at dyriana bakery & café pandanaran semarang. however, there are different research results from syafarudin. & mulyana.b. (2019). researched "the influence of service quality, price and customer value on customer satisfaction of service users service workshop ahas 0002 semarang honda center". the results showed that price did not affect member satisfaction. the phenomenon above is relevant to the results of a pre-survey conducted by researchers on october 1, 2020, of 30 gojek online motorcycle taxi customers. the pre-survey results illustrate the dissatisfaction of several gojek online motorcycle taxi customers. based on the results of a pre-survey to 30 gojek online motorcycle taxi customers by asking open questions about "what is your assessment of the quality of gojek online motorcycle taxi services?". the pre-survey results showed that most respondents (18 people / 60%) had a bad the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 137 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 perception of the quality of gojek online motorcycle taxi services, while as many (12 people / 40%) had a good perception of the quality of gojek online motorcycle taxi services. kotler's (2016) purchasing decisions are the final decisions of individuals and households who purchase goods and services for personal consumption. syafarudin. (2016) purchasing decisions consist of internal policies and external policies. internal policies include consumer knowledge of products and awards in the form of consumer assessments of products. external policies include differentiation and relevance. differentiation is a product property that differentiates it from other products. relevance is a product characteristic that has the same function as other products that have similar functions and uses. syafarudin & mulya. (2019). adding that the purchasing decisions made by consumers or buyers are also influenced by habits. purchasing habits include when a purchase is made, in what quantity the purchase is made, and where the purchase is made. then (mungu, (2013) states that purchasing decisions are a part of consumer behavior. consumer behavior is an action that is directly involved in obtaining, determining products and services, including the decision-making process that precedes and follows these actions. munisih, & soliha, (2015). repurchase behavior is closely related to the concept of brand loyalty, which is pursued by most companies because it contributes to great stability in the market. repurchases usually indicate that the product meets consumer approval and is willing to use it again and in an appropriate amount. very large. service quality hertati, feri, puspitawati, gantino, ilyas., 2021) stated that the quality received by consumers is "an entity's overall excellence or superiority". it is said that the quality of service that is assessed by consumers is in the form of something that is the best overall. added by kotler and keller (2012) that: a service will be formed because of the process of providing certain services from the service provider to the parties being served. whether done based on the volunteerism of each party (non-commercial), commercial purposes between personal or because people have work attachments in organizations with commercial or non-commercial purposes. kotler and keller (2012) state that service is any action or performance offered by one party to another which is in principle intangible and does not cause any transfer of ownership. the production may or may not be bound to a physical product. be careful. mustopa, widiyanti.m. safkaur. (2020). believes that services are all economic activities whose results are no products in the form of physical or construction, which are usually consumed at the same time as they are produced and provide added value (such as comfort, entertainment, pleasure, irawan. (2012) argues that service quality is the level of excellence expected and control over the level of excellence is to meet customer expectations. based on these two opinions, it can be concluded that service quality is a level of excellence obtained by consumers in using a service through how far the difference is between reality and expectations felt by consumers after using it. kotler, philip (011) in general, services have several special characteristics with goods. services have a major influence on their marketing, namely, they are intangible, cannot be separated between the production process and consumption, have high variability, no ak can be saved, and do not result in possession. syaparudin. & hertati (2020). there are 5 (five) main characteristics of services that distinguish them from goods, namely: 1. intangibility. services are different from goods. if the item is an object, tool, or thing, then the service is an act, performance, or effort. 2. inseparability. goods are usually produced, then sold, then consumed, while services are sold first, then produced and consumed simultaneously. the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 138 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 3. variability. services are variable because they are non-standardized outputs, meaning that there are many variations in shape, quality, and type, depending on who, when, and where the service is produced. 4. perishability. perishability means that services are not durable and cannot be stored. 5. lack of ownership. is the basic difference between services and goods. in purchasing goods, consumers have full rights to the use and benefits of the products they buy. in purchasing services, customers have personal access to a service for a limited period (for example hotel rooms, cinemas, aviation services, and education). 6. perceived physical facilities (tangibles), namely physical evidence of services, can be in the form of physical facilities, equipment used, physical representations of services. 7. credibility, namely honesty and trustworthiness. credibility includes company name, reputation, company, personal characteristics, personnel contacts, and customer interactions. in everyday terms, customers are people whose activities are to buy and use a product, both goods, and services, on an ongoing basis. customers or users of a product are people who are directly or indirectly related to business enterprises. umar, husein. (2002) argue that customers are people who buy and use products. in a company engaged in the service sector, customers are people who use services. griffin stated that the customer (customer) provides an in-depth view which is important to understand why a company must create and maintain customers and not just attract buyers. the definition comes from custom which is defined as "making something into a habit or usual" and "practicing a habit. customers are different from consumers (consumers), that is, a person can be said to be a customer if that person begins to get used to buying products or services offered by a company. this habit can be built through repeated purchases within a certain period, if within a certain period there is no re-purchase, then that person cannot be said to be a customer but as a buyer or consumer (wulandari, hertati, antasari, nazarudin. (2021). a customer is someone who buys, uses, and gets used to making purchases periodically within a certain period. pakpahan, (2019.) a purchase decision is defined as a choice of two more choices. kotler, philip; keller, kevin. (2007). the purchasing decision is a process in which consumers recognize the problem, seek information about a particular product or brand, and evaluate properly each of these alternatives can solve the problem, which then leads to a purchase decision. kotler, philip; keller, kevin (2007). the factors that influence customer purchasing decisions are the emotional bonds that exist between customers and producers after customers use products and services from the company and find that these products or services provide added value. the value dimensions consist of 4, namely: 1. emotional value, a utility that comes from feelings or affective or positive emotions arising from consuming a product. if consumers experience positive feelings when buying or using a brand, then the brand provides emotional value. in essence, emotional value is related to feelings, namely what positive feelings consumers will experience when buying a product. 2. social value, the utility obtained from the product's ability to improve the consumer's social self-concept. social value is the value held by a consumer, regarding what is considered good and what is considered bad by consumers. 3. value of quality, the utility obtained from the product due to the reduction of short-term costs and long-term costs. 4. functional value is the value obtained from product attributes that provide functional utility to consumers. this value is directly related to the functions provided by the product or service to consumers. the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 139 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 5. broad problem solving if consumers do not have established criteria for judging a particular product category or brand within that category or do not limit the number of brands they will consider to a small, manageable range, their decision-making efforts can be classified as solving a broad problem. . at this level, consumers need a variety of information to establish a set of criteria for judging certain brands and a lot of appropriate information about each that will be considered. 6. limited problem-solving. at this level of problem-solving, consumers have established basic criteria for judging a product category and the various brands within that category. however, they have not fully chosen from a particular brand group. their search for additional information was more of a "tweak" they had to gather additional brand information to see the differences between the various brands. 7. behavior as a routine response at this level, consumers already have some experience with the product category and a well-defined set of criteria for judging the various brands they are considering. in some situations, they may be looking for additional information; in other situations, they simply review what they already know. the results showed that the product, price, distribution, and promotion affected purchasing decisions. ((wulandari, hertati, antasari, nazarudin. (2021) then the results of research by gantino, hertati, ilyas (2021) show that the indirect effect of service quality on customer satisfaction through purchasing decisions has a positive and significant effect. the direct effect of location on customer satisfaction is positive. , but not significant the indirect effect of location on customer satisfaction through purchasing decisions is negative and insignificant the direct effect of price on customer satisfaction is positive, but not significant the indirect effect of price on customer satisfaction through purchasing decisions is positive and significant direct effect of purchasing decisions on customer satisfaction. positive and significant. the results of this study indicate that with the path analysis test the discount variable has the most significant effect on purchasing decisions, the discount variable has a significant effect on customer satisfaction, and research decisions (wulandari, hertati, antasari, nazarudin. (2021). purchasing research (herawati, 2017). prove empirically that product quality and service quality affect consumer satisfaction and repurchase interest. it is empirically proven that product quality and service quality affect customer satisfaction. it is empirically proven that product quality and service quality affect repurchase interest. it is empirically proven that consumer satisfaction affects repurchase interest. herawati research, (2017). the partial promotion has a positive effect on purchasing decisions with the value of t count compared to the value of ttable so that the promotion variable (x1) is 3,800> 1,985. product innovation has a partially positive effect on purchasing decisions on azzahra batik with the t value compared to the table value so that the product innovation variable (x1) is 2.016> 1.984. it can be concluded that f count (10.302)> f table (1.984) and the significance level is 0.000 <0.05, which indicates that promotion and product innovation together affect purchasing decisions. the results of this study indicate that the variable price, promotion, and product quality simultaneously influence purchase intention. price, promotion, and product quality variables also have a partial influence on purchasing decisions. the contribution of the independent variables (price, promotion, and product quality) to the dependent variable (buying interest) is 68.9%. the independent variable which has the most dominant influence on the dependent variable is the product quality factor. hypothesis h1: service quality affects customer the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 140 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 satisfaction of online gojek service users. the stages of service quality to customer satisfaction can be described in a model below: a. methods this research was conducted to analyze the quality of e-service, pricing strategies on customer loyalty through customer satisfaction using the go-jek online motorcycle taxi service. this research and examine the significance of the influence of exogenous variables on endogenous variables both partially and collectively. the population in this study were users of the go-jek online motorcycle taxi service. sugiyono (2012) population of a generalization area consisting of objects or subjects that have certain qualities and characteristics. the values of these different characteristics are then determined to be studied and then conclusions drawn. the sample is a portion of the population that can represent the characteristics of the population. in conducting research, it will use more sample data than the population. the samples taken can then be used as a tool for verifying the truth of the population so that the probability level of truth is needed. because there is no 100% level of truth, it requires a level of error that can be tolerated or so-called α. in practice, α is determined arbitrarily (the arbitrator) to a maximum of 10% (hair, et, al, 2014). in this study, researchers set a confidence level of 95% and a precision value of 10%. quantitatively, the value of precision is called the standard error, where the larger the sample, the smaller the standard error, because the estimated value is close to the parameter value ((hair, et, al, 2014). in this study, sampling using simple random sampling as many as 100 go-jek online motorcycle taxi service users. primary data comes from the collection of answers to questions that are distributed to each tenant of the go-jek online motorcycle taxi service, service quality, consumer interest, and purchase decisions which are then tabulated and then analyzed. to obtain secondary data, it is done by collecting documentation that supports the research. this technique is done by collecting data by studying written data sources regarding the organizational structure and other general descriptions of go-jek online motorcycle taxis. the instrument in this study was a questionnaire designed to measure the research variables by providing a scale score for the answers to the statements. the scale used is a likert scale. each statement has 5 (five) alternative answers. each statement is measured using a likert scale. calculating the value of the respondents' achievement level (tcr) for each category from the variable descriptive data. the formula used is (ghozali, imam. 2014) tcr = rs / n x 100% information : tcr = level of achievement respondent rs = average score of respondents' answers n = value of the answer score introduction to problems informati on search service rama consumer loyalty customer satisfaction source: images of stages in the customer satisfaction decision process, 2021 the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 141 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 validity is a measure that shows the validity of an instrument. an instrument is declared valid if it can measure what is desired. the validity test is a test conducted to determine whether or not an item in the questionnaire is made. testing the validity of the question items with an ordinal measuring scale was carried out through item analysis, namely correlating the score of each item with the total score which is the number of each item score using the pearson product moment method. ( )  ( )       −− − = 2222 ))(( yynxxn yxxyn ryx information : ryx = pearson product moment correlation coefficient x = item score y = total item score n = number of respondents if the correlation coefficient is positive and significant, then the item in question is valid, otherwise, if it is not significant or negative, then the item is invalid and must be removed from the questionnaire (sugiyono, 2014). furthermore, according to sugiyono, a question item is said to be valid or can measure the research variable in question if the value of the validity coefficient is more than or equal to the r table value obtained from the critical value r table for pearson product moment correlation. reliability is a term used to indicate the extent to which a measurement result is relatively consistent when measuring instruments are used repeatedly. (umar, 2002). reliability includes three important aspects, namely: the measuring instrument used must be stable, reliable (dependability), and predictable (predictability) so that the measuring instrument has high reliability or can be trusted (natzir, 2013). results and discussion a set of questions to measure a variable is said to be reliable and it succeeds in measuring the variables we measure if the reliability coefficient is more than equal to 0.70 (ghozali, 2014). kaplan stated: "it has been suggested that reliability estimates in the range of 0.70 to 0.80 are good enough for most purposes in basic research." before the questionnaire was used for data collection, it was first tested through validity and reliability using the correlation method. pearson product moment and cronbach's alpha. the following shows the results of the validity and reliability tests for all statements. table 1 recapitulation of instrument validity and reliability test results variable item validity reliability r critical points information α critical points information quality of customer service (x1) x1 0,871 0,361 validity 0,907 0,70 reliability x2 0,872 0,361 validity x3 0,834 0,361 validity x4 0,866 0,361 validity x5 0,832 0,361 validity x6 0,866 0,361 validity x7 0,866 0,361 validity customer y1 0,869 0,361 validity 0,880 0,70 reliability the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 142 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 satisfaction (z) y1 0,819 0,361 validity y2 0,802 0,361 validity y3 0,858 0,361 validity y4 0,827 0,361 validity y5 0,802 0,361 validity y6 0,802 0,361 validity y7 0,802 0,361 validity source: processed data, 2021 based on the results of the recapitulation presented in the table above, it can be seen that all statement items show valid results, where the coefficient value of the validity of each statement item is greater than the critical point of 0.361. likewise, the reliability test results show reliable results across all factors tested, where all the reliability coefficient values obtained are greater than the critical point of 0.70. thus the research instrument has good validity and reliability and can be used for further analysis. ghozali (2014) "descriptive statistics are performed to provide an overview or description of data seen from the mean, standard deviation, variance, maximum, minimum, sum, range, kurtosis and skewness (distribution slope)". sugiyono (2012) "descriptive statistics are statistics that are used to analyze data that has been collected as is without the intention of making generalized conclusions or generalizations. questionnaire results data for the price strategy variable are measured through 5 statement items. based on the calculation results, an overview of the price strategy variable can be seen in the following table. from the responses of 100 respondents and 5 statement items, the percentage of total score achievement towards the ideal score was 78.88%, where the percentage is between the range of 68% to 83.99%. thus it can be concluded that based on respondents' responses. customer satisfaction is included in the "good" category. model specifications. this stage relates to the formation of the initial model of the initial structural equation model before the estimation is carried out. this initial model is formulated based on a theory or previous research. through the conceptual diagram image above, it can be seen that the path model consists of 2 (two) sub-structures. the first stage assesses the criteria for convergent validity. an indicator is said to have good validity if it has a loading factor value greater than 0.70. while the loading factor of 0.50 to 0.60 can still be maintained for models that are still in the development stage (ghozali, 2014). table 2 value of cross loadings evaluation of outer model dimension quality of customer service (x1) customer satisfaction (z) x1 0,855 0,625 x2 0,896 0,731 x3 0,808 0,569 x4 0,817 0,621 x5 0,845 0,662 x6 0,721 0,653 x7 0,725 0,745 y1 0,809 0,688 y2 0,832 0,708 y3 0,691 0,652 y4 0,432 0,769 y5 0,521 0,653 y6 0,558 0,745 y7 0,645 0,816 source: processed outer model evaluation cross loadings data, 2021 the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 143 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 based on the picture above, it appears that all loading factors are above 0.50. thus it can be concluded that the construct has good convergent validity. the value of cross-loadings presented in the table above also shows good discriminant validity, where the correlation value of the indicator with its construct is higher than the correlation value of the indicator with other constructs (ghozali, 2014). this is indicated by the green color in the coefficient values presented in the output table of the smartpls application above. the next stage assesses cronbach's alpha, composite reliability, and average variance extracted (ave) criteria. each construct is said to be reliable if it has cronbach's alpha and composite reliability that is greater than 0.70, while the ave value is expected to be greater than 0.50 (ghozali, 2014: arikunto, 2008). table 3 value of cronbach's alpha, composite reliability, and average variance extracted (ave) variable average variance extracted (ave) quality of customer service (x1) 0,877 customer’s satisfaction 0,85 source: processing data of 3 cronbach's alpha scores based on the table above, it can be seen that all constructs have cronbach's alpha and composite reliability values that are greater than 0.70. the same thing is seen in the ave value, all constructs have ave values that are greater than 0.50. thus it can be concluded that all exogenous and endogenous measurement constructs are reliable. by using the help of the smartpls 3.0 application program, the estimated results of the mean difference and probability value are as follows: table 4 value of path coefficients and value of r square parameter original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/sterr|) p values r square x1 -> y 0,603 0,600 0,092 6,563 0,000 0,724 source: data processed path coefficients and r square value based on the table above, it can be seen that in substructure 1, the variable service quality (x1) contributes simultaneously in influencing the customer satisfaction variable (z) of 0.702 or 70.2% with the details that the hypothesis: the influence of customer service quality (x1) on satisfaction customer (z) has a path coefficient of 0.526 with a statistical value of t that is greater than the critical value (6.459> 1.96). thus h0 is rejected and h1 is accepted, meaning that eservice quality (x2) has a significant effect on customer satisfaction (z). conclusion after the author discussed "analysis of e-service quality, against customer satisfaction through customer loyalty (case study of pt. aplikasi karya anak bangsa (go-jek indonesia))", based on the overall analysis of statistical calculation analysis on structural model analysis and hypothesis testing, then it can be concluded that partially, the pricing strategy is proven to have a positive and significant effect on customer loyalty of go-jek's online motorcycle taxi services. based on the overall presentation of statistical calculation analysis on structural model analysis and hypothesis testing, it can be concluded that partially, the quality of the effect of service quality on gojek online customer satisfaction rizqi, & syafarudin 144 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 e-service is proven to have a positive and significant effect on customer satisfaction of go-jek's online motorcycle taxi services. references agus, a. 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(2015). pengaruh kualitas produk terhadap nilai pelanggan dan kepuasan pelanggan dan dampaknya pada loyalitas pelanggan apotek dela semarang. proceeding fakultas ekonomi. nazir, mohammad. 2013. metode penelitian. jakarta: ghalia indonesia. pakpahan, h.h. 2019. analisa pengaruh kualitas produk, harga, dan ketersediaan produk terhadap keputusan pembelian dan implikasinya pada kepuasan konsumen obat sakit kepala. wulandari.w, hertati.l, antasari.r, nazarudin .(2021). the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance. ilomata international journal of tax & accounting (ijtc) 2, (1) 17-36 http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 3 july 2020 pp.139-144 https://www.ilomata.org/index.php/ijtc 139 | ilomata international journal of tax & accounting vol. 1 no. 1 oct 2019 bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange erni prasetiyani1, mohammad sofyan2 12institut ilmu sosial dan manajemen stiami correspondent: erni@stiami.ac.id submitted : june 23, 2020 revised : july 15, 2020 published : july 30,2020 abstract the business environment in the retail experience turbulence, strong now many companies to reduce the impact outlets greater losses. reduction in earnings a problem most of all , and this has potential in bankruptcy retail company in the future this research is analyzing about retail companies affected by the deterioration in performance that has been registered in indonesia stock exchange. model and data processing used to calculate potential harm is a model altman z score and models springate. discussion result there is a retail companies go public has the potential to be the calculated use bankruptcy model altman z score as well as a model springate namely pt modern international. information, proceedings in potential for bankruptcy at annual report is not disclosure , was recommended to the stakeholders to oblige any new issuers give this information in the annual financial report made that release every year. to be accurate information and credible over the companies condition the truth. keyword: altman z-score, springate, tato, roe, roa, npm, market to book value introduction by the end of the third quarter of 2008, the intensity of the crisis grew with the collapse of the largest us investment bank lehman brothers, which was followed by increasingly severe financial difficulties in a number of large-scale financial institutions in the united states, europe and japan. the global financial crisis has affected the indonesian economy as reflected by the turmoil in the capital market and money market (bi, 2009). for measuring the financial health of a business firm with altman’s z-score to predict possibilities of bankruptcy. altman (1968) defines five predicted factors that can be used to test the validity of multivariate model. using financial ratios to predict bankruptcy can be accurate up to 90% (chen & shimerda, 1981). any several other models have been introduced to predict bankruptcy such as springate (1978); ohlson (1980); zmijewski (1983); and grover and lavin (2001). in predicting the bankcruptcy, these models have different levels of accuracy based on their measurements used (purnajaya and merkusiwati, 2014). retail trading companies are currently struggling in a defensive position in the industrial era 4.0 or innovative disruptive. with the condition of public go performance, retail company is increasingly declining. the writer detects bankruptcy potential is a condition which the company is unable to operate the company properly because of the very severe in financial difficulties experienced (dwiprihantini, 2014). https://www.ilomata.org/index.php/ijtc mailto:erni@stiami.ac.id bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange prasetiyani & sofyan 140 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 table 1. the financial performance of retail trading company listed in indonesia stock exchange 2013-2018 company name tato roe roa npm market to book value pt matahari dept. store, tbk 2,1229 0,3920 0,2029 0,0953 90,7268 pt hero supermarket tbk 1,7411 0,0457 0,0203 0,0121 41,5167 pt ramayana lestari sentosa tbk 0,6386 0,0594 0,0430 0,0336 10,1833 pt mitra adiperkasa tbk 1,3294 0,0849 0,0293 0,0226 10,6733 pt modern international tbk 0,5362 0,2801 (0,2477) (0,8952) 4,2050 pt matahari putra prima, tbk 2,0142 (0,0939) 0,0009 0,0033 33,0033 (data source : approximately 6 years) if we see the conditions based on the data above, how big the bankruptcy potential of the public retail company going is, along with the decline in financial performance and in the stock market value of the go public retail company over the period from 2013 to 2018 by using the altman z-score theory and the springate's model. this study aims to provide information about the go public retail companies bankruptcy potential to the stakeholders. furthermore, effendi, et al (2016) used the bankruptcy prediction model of the springate to estimate the stock prices of the telecommunication companies, while andriawan and salean (2016) used the almant model and analyzed its impact to the pharmacy company’s stock prices. adrian and khoiruddin (2014) applied the almant model and analyzed its impact to the manufacturing company’s stock prices. method the data is in the form of go public retail company financial reports obtained through the website from www.idx.co.id or the indonesia stock exchange and has been audited by the public accountant. the range of financial statement data is over the period of december 31, 2013 to december 31, 2018. types of data are internal data with quantitative data classification released by go public trade retail companies. data processing techniques the calculation of potential bankruptcy using the altman z score and springate's model. the altman z score data process model: x1 (working capital) = current assets current liabilities) / total assets x2 (return earning on assets) = retained earnings / total assets x3 (return on assets) = profit before interest and tax / total assets x4 (market value of shares on net book value of liabilities) = market value of ordinary and preferred shares / total book value of liabilities x5 (total assets turn over) = sales / total assets springate's data process model: a (working capital) = working capital / total assets b (return on assets) = net profit before interest and tax / total assets c (ebt on current liabilities) = net profit before tax / current liabilities d (total assets turn over) = sales / total assets bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange prasetiyani & sofyan 141 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 result and discussion table 2. the prediction result of altman z-score and springate’s no company altman zscore prediction springate's prediction 1 pt. matahari putra prima 2,648 grey area 0,818 potentially bankrupt 2 pt. modern international -1,370 potentially bankrupt -0,993 potentially bankrupt 3 pt. mitra adi perkasa 2,535 grey area 1,062 no potential 4 pt. hero 2,431 grey area 0,613 potentially bankrupt 5 pt. ramayana lestari 3,345 no potential 1,520 no potential 6 pt. matahari dept. store 7,622 no potential 3,003 no potential source: data research in 2019 the calculation results using the altman z-score method clarification of a healthy and bankrupt company is based on the altman z-score value, namely: 1. z value < 1.81, including a bankrupt company 2. value 1.81 < z < 2.99, including the gray area (cannot be determined whether the company is healthy or bankrupt) 3. z value > 2.99, including non-bankrupt companies the bankruptcy prediction calculation: the calculations results of pt matahari putra prima over the past 6 years found an average value of 2.648. this value is between 1.81 < 2.648 < 2.99, including the gray area (cannot be determined whether the company is healthy or bankrupt). pt modern international over the past 6 years found an average value of -1,370. this value is < 1.81, including the bankrupt company. pt mitra adi perkasa over the past 6 years found an average value of 2.535. this value is between 1.81 < 2.535 < 2.99, including the gray area (cannot be determined whether the company is healthy or bankrupt). pt hero for the last 6 years found an average value of 2,431. this value is between 1.81 < 2,431 < 2.99, including the gray area (cannot be determined whether the company is healthy or bankrupt). pt ramayana lestari over the past 6 years found an average value of 3.345. this value > 2.99, including the non-bankrupt companies. and pt matahari dept. store for the last 6 years found an average value of 3,345. this value > 2.99, including the non-bankrupt companies. the calculation results with springate's method the clarification of a healthy and bankrupt company is based on the s-score of the springate method, namely: 1. s score > 0.862 is a company that does not have the potential to go bankrupt. 2. s score < 0.862 is classified as an unhealthy and potentially bankrupt company. the bankruptcy prediction calculation: the calculations results of pt matahari putra prima over the past 6 years found an average value of 0.818. this value < 0.862 is classified as an unhealthy and potentially bankrupt company. pt modern international over the past 6 years found an average value of -0.993. this value < 0.862 is classified as an unhealthy and potentially bankrupt company. pt mitra adi perkasa over the past 6 years found an average value of 1.062. this value > 0.862 is classified as a company that bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange prasetiyani & sofyan 142 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 has no potential to go bankrupt. pt hero for the last 6 years found an average value of 0.613. this value < 0.862 is classified as an unhealthy and potentially bankrupt company. pt ramayana lestari over the past 6 years found an average value of 1.520. this value > 0.862 is classified as a company that has no potential to go bankrupt. and pt matahari dept. store for the last 6 years found an average value of 3.003. this value > 0.862 is classified as a company that has no potential to go bankrupt. the calculation of pt. matahari putra prima (mppa) produced different predictions. altman calculation results are in an area that cannot be determined whether the company is bankrupt or not in the future (gray area). meanwhile, according to springate's calculations, it predicted bankruptcy. because in the third quarter of 2018, mppa posted a loss of rp 335 billion, below from the company's loss in the same period of the previous year which was rp 385 billion (putri, 2018). whereas in the third quarter of 2019, mppa's net sales still fell by 19.8% year on year (yoy) to rp 6.64 trillion (intan, 2019). pt. modern international, tbk, both methods predict bankruptcy. this company was unable to meet its obligations when it was billed because it had experienced a negative number (handayani & andrianingsih, 2019). pt. mitra adi perkasa produced different predictions. altman calculation results are in the gray area or the financial condition requires special attention (anissa, 2016). meanwhile, according to the results of springate, it is predicted not to go bankrupt. pt. hero produced different predictions. altman calculation results are in the gray area. meanwhile, according to springate's, it is predicted bankruptcy. the cause of bankruptcy is because the company's financial performance has been weak since the third quarter of 2018 which caused termination of employment about 532 employees until the third quarter of 2018. not only that, 26 giant retail outlets also stopped operating (tristiawati, 2019). and pt. ramayana lestari and pt. matahari dept. store, both methods predict bankruptcy. it shows that the financial condition of the two companies is in good health and it is unlikely that the company will experience bankruptcy (rahmatullah, sunarya, & jhoansyah, 2019). conclusion based on this discussion, it is known that the altman z-score calculation results show that there is 1 company that will go bankrupt, namely pt modern international, while springate's predicts that 3 companies will go bankrupt, namely pt matahari putra prima, pt modern international, and pt hero, as shown in table 4.14 below: table 4. 1. number of prediction comparison results method result number of companies go bankrupt grey area no potential altman z-score 1 3 2 6 springate’s 3 0 3 6 the annual financial statements of go public companies do not present the potential bankruptcy. it can have a negative impact on investors and stakeholders because there is no disclosure of information. in the industry era 4.0 or disruptive era which the life cycle of an industry does not take place normally, it is recommended that industries affected are required to make a potential bankruptcy analysis with special parameters determined by the decision makers, in this case we can say the financial services authority (ojk). bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange prasetiyani & sofyan 143 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 further studies can conduct similar research, and compared with different types of companies, so as to provide wider results related to altman z score and springate's model reference altman, e. (1968). financial ratios, discriminant analysis and the prediction of corporate bankruptcy. the journal of finance, 23(4), 589-609. doi:10.2307/2978933. anissa, n. (2016). penggunaan metode z-score untuk memprediksi kemungkinan kebangkrutan pada pt. mitra adi perkasa, tbk. jurnal ekonomi bisnis, 21(3), 209-215. retake from https://ejournal.gunadarma.ac.id/index.php/ekbis/article/view/1520. bower, c. m. (1995). disruptive tecnologies catching the wave. harvard business review. chen, k., & shimerda, t. (1981). an empirical analysis of useful financial ratios. financial management, 10(1), 51-60. retrieved august 3, 2020, from www.jstor.org/stable/3665113. grover, j., & lavin, a. (2001). financial ratios, discriminant analysis and the prediction of corporate bankruptcy: a service industry extension of altman’s z-score model of bankruptcy prediction. working paper. southern finance assosiation annual meeting. handayani, m. o., & andrianingsih, v. (2019). model altman, springate dan zmijewski untuk memprediksi probabilitas kebangkrutan (studi kasus sektor perusahaan property yang terdaftar di bei periode 2014-2018). seminar nasional optimalisasi sumberdaya lokal di era revolusi industri 4.0, (hal. 331-341). intan, k. (2019, november 11). matahari putra prima (mppa) membidik perbaikan profitabilitas hingga akhir tahun. diambil kembali dari kontan.co.id: https://investasi.kontan.co.id/news/matahari-putra-prima-mppa-membidik-perbaikanprofitabilitas-hingga-akhir-tahun ni made evi dwi prihanthini, m. m. (2013). prediksi kebangkrutan dengan model grover, altman z score, springate dan zmijewski pada perusahaan food and beverage di bursa efek indonesia. e-jurnal akuntansi universitas udayana. ohlson, j. (1980). financial ratios and the probabilistic prediction of bankruptcy. journal of accounting research, 18(1), 109-131. doi:10.2307/2490395. purnajaya, k. d. m., & merkusiwati, n. k. l. a. (2014). analisis komparasi potensi kebangkrutan dengan metode z-score altman, springate, dan zmijewski pada industri kosmetik yang terdaftar di bursa efek indonesia (comparison analysis of bankruptcy potency with altman z-score, springate, and zmijewski method in cosmetic companies that listed in indonesia stock exchange). e-jurnal akuntansi. vol. 7(1): 48-63. putri, e. l. (2018, november 6). tekan kerugian, matahari putra prima (mppa) andalkan efisiensi di kuartal iv-2018. retake from kontan.co.id: https://investasi.kontan.co.id/news/tekankerugian-matahari-putra-prima-mppa-andalkan-efisiensi-di-kuartal-iv-2018 rahmatullah, m., sunarya, e., & jhoansyah, d. (2019). analisis laporan keuangan dengan model z-score sebagai alat dalam memprediksi bankcruptcy (studi kasus pada pt. ramayana lestari sentosa tbk, pt. matahari putra prima tbk, dan pt. mitra adiperkasa tbk). jurnal riset inspirasi manajemen dan kewirausahaan, 3(1), 22-29. retake from https://www.researchgate.net/publication/333107015_analisis_laporan_keuangan_de ngan_model_zscore_sebagai_alat_dalam_memprediksi_bankcruptcy_studi_kasus_pada_pt_ramaya na_lestari_sentosa_tbk_pt_matahari_putra_prima_tbk_dan_pt_mitra_adiperkasa_ tbk/link/5cdc. bankruptcy analysis using altman z-score model and springate model in retail trading company listed in indonesia stock exchange prasetiyani & sofyan 144 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 springate, g. l. (1978). predicting the possibility of failure in a canadian firm. (unpublished thesis). british columbia, canada: simon fraser university. tristiawati, p. (2019, januari 11). 26 gerai giant supermarket tutup, hero phk 532 pegawai. retake from liputan6.com: https://www.liputan6.com/bisnis/read/3868947/26-gerai-giantsupermarket-tutup-hero-phk-532-pegawai. undang-undang nomor 4 tentang kepailitan. (1998). jakarta. zmijewski, m. (1983). predicting corporate bankruptcy: an empirical comparison of the extant financial distress models. document de travail. state university of new york at buffalo. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 91-102 91 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia dwikora harjo1 , fauzilah salleh2 1institut ilmu sosial dan manajemen stiami, indonesia 2universiti sultan zainal abidin, malaysia correspondent: dwikora.harjo@stiami.ac.id1. received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: harjo, d., salleh, f. (2022). analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia. ilomata international journal of tax and accounting, 3(1), 91-102. https://doi.org/10.52728/ijtc.v4i1.429 abstract: individual taxpayers awareness and compliance are predicted to be below expectations in numerous indonesian regions, as evidenced by the yearly tax reporting (spt), which is still below the expected aim. the number of taxpayers who submit the spt is one indicator of compliance; the higher the number of taxpayers who report the spt, the higher the level of compliance. the goal of this study is to look into how the cileungsi pratama tax service office in west java, indonesia, implements annual tax reporting for personal taxpayers. the authors apply van meter van horn's policy implementation theory to six test variables: standards and policy objectives, resources, interorganizational linkages, implementing agent characteristics, social, economic, and political situations, and implementer disposition. the qualitative descriptive approach was adopted in this study. observation, documentation, and interviews were utilised to collect data, which was then analysed through data reduction, data display, and drawing conclusions. the study's findings demonstrate that, from 2018 to 2020, individual taxpayers' yearly tax reporting at the cileungsi tax office complied with applicable rules and regulations, but that it fell short of the aim. keywords: annual tax report, implementation, individual taxpayer this is an open access article under the cc-by 4.0 license. introduction in the structure of the indonesian state revenue and expenditure budget, from year to year taxes provide the largest its role in raising funds from the public to the state where the funds collected from the community are used to meet the needs of the state in the welfare of the people (setiowati et al., 2020). in collecting public funds through this tax, of course, it is necessary to have public awareness, concern and compliance in carrying out their tax obligations (kumala & junaidi, 2019). one form of public compliance in fulfilling their tax obligations is to register as a taxpayer, pay taxes correctly and on time and report a annual tax return (surat pemberitahuan) in accordance with the applicable tax provisions (perdana & dwirandra, 2020). https://www.ilomata.org/index.php/ijtc mailto:dwikora.harjo@stiami.ac.id https://doi.org/10.52728/ijtc.v4i1.429 analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 92 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to data from the ministry of finance's government performance report, the taxing sector made the highest revenue contribution to the 2019 apbn, accounting for 86.5 percent of total income (direktorat jenderal pajak, 2013). the remaining money came from non-tax state revenue and grants. its contribution to state revenue is becoming increasingly important due to the fact that taxes are the foundation of state finance. the amount of net tax revenue realised in comparison to the tax revenue target is referred to as realised tax revenue (direktorat jenderal pajak, 2020). the directorate general of taxes undertakes a variety of initiatives to ensure that the tax revenue target is met each year. these initiatives include tax regulatory reform. not only does tax reform seek to boost public revenue in the form of taxes, but it also seeks to improve taxpayer understanding and compliance with the law (ciptaningsih, 2013). the online tax reporting by taxpayers represents the most significant effort on the part of the directorate general of taxes in the implementation of tax reform (melando & waluyo, 2013). the online service system (tax digitalization administration) aims to improve services to taxpayers so that it is expected to increase taxpayer awareness and compliance in carrying out their tax obligations. the current tax digitalization administrations are e-registration, e-invoicing, e-filing, e-form, and e-billing (latofah & harjo, 2020). it is suspected that in several regions of indonesia, taxpayers' level of awareness and compliance with tax obligations is still below the level expected by the government (rusli, 2019; sinuhaji, 2019). one indicator of this is the fact that there are still taxpayers who do not fulfil their obligations, such as filing the annual tax return (spt), which is a report on the annual tax obligations of taxpayers (ernita & sudjiman, 2021). this spt reporting serves as an indicator of the level of taxpayer compliance; the more the number of spts submitted by a taxpayer, the higher the level of taxpayer compliance is considered to be (adi, 2020; rahmadani & munawaroh, 2017). one of the areas in indonesia that experiences ups and downs in receiving spt reporting is the cileungsi pratama tax service office, bogor regency, west java province, indonesia. this area was chosen to be used as a research location in the writing of this scientific paper on the grounds that the reporting fluctuations are quite high and the data obtained is as expected. to find out an overview of this, the following table shows the target and realization of spt receipts from taxpayers in the working area of the cileungsi pratama tax service office from 2018 -2020: table 1 target and realization of taxpayer annual tax reporting at the cileungsi pratama tax service office, bogor regency https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 93 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc description 2018 2019 2020 target 15,58 juta 18 juta 19 juta realization of wp reporting 11,19 juta 12,19 juta 10,9 juta corporate tax payer 854.000 961.666 657.000 employee personal tp 993.754 2.29 juta 1.2 juta non employee personal tp 9.35 juta 10.11 juta 9.1 juta source: pdi kpp pratama cileungsi section, 2021 from the table above, it is found a phenomenon that occurs that there are still many taxpayers who have not reported through the spt every year, especially in the area of the cileungsi pratama tax service office, bogor regency where in 2019-2020 spt reporting was disrupted, one of the causes was the impact of the pandemic. covid-19 where the reporting is no longer through face-to-face but through e-filling and e-spt. therefore, this makes a lot of taxpayers still do not know and understand the mechanism for reporting the spt, so that the reporting has decreased from the previous year. the research objectives to be achieved by the author in writing this scientific work are as follows: 1. to analyze how the implementation of the annual tax return reporting policy for individual taxpayers at the cileungsi pratama tax service office. 2. to analyze what obstacles are faced in the implementation of the policy for reporting annual tax returns for individual taxpayers at the cileungsi pratama tax service office. 3. to analyze what efforts are being made in overcoming the obstacles of the implementation of the reporting policy for annual tax returns for individual taxpayers at the cileungsi pratama tax service office. annual tax reporting by both individual taxpayers and corporate taxpayers is a manifestation of the implementation of public policies issued by the government with the aim of knowing that the implementation of tax collection has been carried out well in an area (norzhela et al., 2019; widiastuti, 2017). public policy itself according to william dunn is an activity that is interrelated and created by government stakeholders from all aspects as a whole (pasolong, 2019). the definition of tax is a people's contribution to the state treasury based on the law (which can be enforced) by not receiving reciprocal services (counter performance), which can be directly shown and which is used to pay general expenses (hidayat & afiyanti, 2019). there are five important elements in taxation, namely, first, there is a contribution from the community to the state, secondly, tax collection must be based on tax laws and regulations, thirdly, in its implementation, the tax regulator can impose tax collection on the community, the fourth, community does not get a direct counter achievement, and fifth, the results of tax revenues will be used to finance state expenditures with the aim of improving people's welfare (harjo, 2019). https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 94 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the definition of a tax return is a letter used by a taxpayer to report tax calculations and/or payments, tax objects and/or non-tax objects, and/or assets and liabilities in accordance with the provisions of tax laws and regulations (diana & setiawati, 2017). annual tax report spt) is a basic obligation for both individual taxpayers and corporate taxpayers where this report will summarize all activities related to taxpayer's taxation during the current tax year. this annual report has the following functions (rahman et al., 2015): 1) income tax tax payer the function of the annual tax report (spt) for income taxpayers is as a suggestion to report and account for the calculation of the actual amount of tax owed and to report on: a. payment of tax obligations in the current tax year or part thereof. b. income which is a tax object or is not a tax object. c. assets & liabilities. d. deposits from withholding/collectors for withholding or collecting taxes in the current year 2) taxable entrepreneur for taxable entrepreneurs, the function of the spt is a reporting forum for calculating vat and luxury goods sales tax payable, including : a. crediting input tax and output tax; b. periodically pay or settle taxes by taxpayer 3) for tax withholder or collector spt functions as a means to report and account for taxes withheld or collected and deposited. electronic filling (e-filing) is one way of submitting annual spt which is carried out online in real time providing application service provider (asp) services (rusli, 2019). companies providing application services provide facilities and infrastructure for taxpayers who wish to submit their tax returns electronically (batrancea et al., 2019). apart from being the party that provides the means for submitting electronic tax returns, asp also functions as a mediating institution or intermediary that connects taxpayers with tax officials (wulandari, 2021). in addition, asp can also provide tax information needed by taxpayers through the website that has been provided (supriatiningsih & jamil, 2021). meanwhile, the definition of electronic tax return (e-spt) according to chairil anwar pohan is "taxpayer spt data in electronic form made by taxpayers using the e-spt application that has been provided by the directorate general of taxes" (pohan, 2017) policy implementation is an activity to carry out policies, fulfill promises as stated in policy documents (to fulfill), to produce outputs as stated in policy objectives, and to complete the mission that must be realized as contained in the policy objectives (handoyo, 2012). policy implementation according to van metter and van horn is an action taken by the government and the private sector either individually or in groups intended to achieve the goals of public policy through activities involving various stakeholders . policy implementation is a very complex process because it not only involves various actors or organizations, but also https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 95 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc because the implementation process is influenced by various variables, both individual variables and organizational variables that interact with each other. van meter and van horn explain that there are 6 (six) variables that affect implementation performance (subarsono, 2019), namely: 1. policy standards and objectives standards and policy objectives must be clear and measurable, so as not to cause implementation which can lead to conflicts between implementation agents. 2. resource policies need to be supported by resources, both human and non-human resources. 3. relationships between organizations the existence of cooperation with related institutions in carrying out a policy will influence and determine the success of the policy or program being implemented. 4. characteristics of implementing agents it includes the bureaucratic structure, norms and patterns of relationships that occur in the bureaucracy, all of which will affect the implementation of a program. 5. social, political and economic conditions this variable consists of several aspects originating from conditions in the surrounding environment that have the potential to succeed in implementing the policies implemented. 6. implementor's disposition the disposition of this implementor includes three important things, namely: a. the willingness and speed of the implementer in responding to the current policy will affect the success of the policy itself; b. understanding of the policy also determines the success of the policies implemented c. fast intervals about the disposition of the implementor, affecting the accuracy and success of a policy six variables are significant factors and influence each other and must run accumulatively well so that the performance of this implementation can be fulfilled properly. richard elmore, michael lipsky and benny hjern, david porter also produced an implementation model based on the type of public policy that encourages people to do their own policy implementation or still involves government officials but only at a low level. several previous studies that are similar to this research include anda puspitarini whose research entitled implementation of the e-filing system of the annual pph individual personal tax return at the kpp pratama surabaya pabena cantikan revealed that the implementation of efiling at the kpp pratama surabaya pabean cantikan was not effective enough, the implementation of e-filing was not effective enough. -filing has also not gone well and the expected intensity has not been maximized due to technical and non-technical constraints. another factor is that many taxpayers do not know and know the e-filing procedure. the application of e-filing for the annual personal income tax return will be maximized if the kpp pratama surabaya pabean cantikan provides repairs and improvements to services and facilities to taxpayers (puspitarini, 2016). janika and friends also conducted research on the implementation of electronic spt reporting in the bintan area in 2019 with the title analysis of tax policy implementation regarding annual https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 96 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc electronic notification letters (e-spt) at the bintan pratama tax service office with research results in the process of implementing tax policies regarding the annual electronic notification letter (e-spt) at the bintan pratama tax service office, it has been running as expected, but researchers find that there are still taxpayers who do not understand the procedure for filling out this electronic notification letter (janika et al., 2019). khalishaheti and aldilla gadis in 2017 also researched electronic spt reporting in klaten regency with the title electronic annual tax return (spt) reporting implementation (study on e-filing programs at the klaten pratama tax service office) where the results of their research show that implementation e-filing at the klaten pratama tax service office has been running well, as evidenced by the increase in individual taxpayers using e-filing and the preparation steps taken before implementation (khalishaheti, 2017). herawati, tabroni and lusiana conducted research on the effectiveness of tax regulations, dissemination of taxpayer understanding and compliance strategies in implementing their tax obligations in 2018, from the results of their research they suggested that in order to increase state revenue from taxes, the government should be active in making people aware of their obedience in paying tax. they also argue that the importance of socialization of taxation by kpp to taxpayers through various media. socialization is carried out not only face-to-face, but also through mass media according to current conditions. the output of this research is the formalization of appropriate socialization standards for kpp in order to increase awareness of taxpayers so that tax revenues automatically increase (herawati et al., 2018). from some of the previous studies above, it can be concluded that the implementation of reporting annual tax returns for individual taxpayers has a role, and plays an important role in terms of state revenue receipts. the similarity between several previous studies and this research is that they both examine the implementation of reporting individual taxpayers' annual tax returns in an effort to increase taxpayer compliance. what distinguishes this research is the location of the research carried out at the cileungsi pratama tax service office and the year of research. method a descriptive qualitative research approach is used to analyze the problems in this study because the authors want to explore in detail and intensively the policies of the modern tax administration system in an effort to improve taxpayer compliance. in addition, another reason the author chooses a qualitative approach is the study of the literature in this study and the pattern of inductive research thinking. this research is not to test the truth of a theory, but to draw conclusions about what happened. the type of research used in this research is descriptive research which describes and explains in detail the phenomena or problems that exist in the status of human groups, objects, conditions and systems of thought or events in the present. this type of research seeks to explain certain social phenomena. https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 97 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the data collection techniques used were conducting observations, conducting interviews with several informants and documenting some data that were considered important and relevant to this research. this technique is in accordance with what was stated by sugiyono that "data collection methods are the methods used by researchers to collect data." data analysis technique is an activity that begins with collecting data, then choosing the validity of the data that has been collected, choosing a particular coding with the aim of being effective in conducting research and drawing a decision to do research (moleong, 2018). in carrying out data analysis techniques, the authors use the techniques proposed by miles & huberman, namely through the stages of data reduction, displaying data and drawing conclusions (sugiyono, 2019). the data reduction stage is sorting and selecting the collected data with the aim that the author will choose valid and relevant data to the research to be carried out, so not all the collected data will be used as research data. the next stage is to display the data in this case the author uses verbatim coding to facilitate data analysis and the last stage is to draw conclusions based on the analysis carried out. in conducting interviews, the writer chose several informants with the criteria that the informants knew and understood about the problems to be analyzed, also the informants were needed to explore the information that became the basis and the theoretical design that was built. in determining informants in qualitative research, it is possible to use three methods, namely the purposive procedure (deliberate), the quota procedure and the snowball procedure. purposive sampling is the author's choice in selecting informants. the selected informants represent 1 person from the policy maker, 5 taxpayers and 1 person from academics. this research was conducted by focusing on the implementation of the reporting policy of the annual tax return of individual taxpayers at the cileungsi pratama tax service office, west java province. the author uses the theory of van meter and van horn policy implementation with the reason that the variables described in the theory are in accordance with the research theme that the author examines. in researching a policy, the author needs to examine what are the standards and targets in the policies that have been implemented, whether human resources (hr) are sufficient in implementing the policy, whether there is inter-organizational communication in the implementation of the policy. what is the attitude of the implementing agents in their performance of implementing the policy, then whether the social, economic & political conditions can support the successful implementation of the policy and how is the implementor's disposition in committing to implement the policies that have been made. from the conceptual framework that has been explained, the author puts it in the research model chart, where this chart is a simple flow that describes the pattern of the relationship between the variables contained in the main theory of the research used. this simple flow is in the form of an image or flow chart which the author describes as follows: https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 98 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1 conceptual model result and discussion in conducting the analysis the author refers to the theory of policy implementation donald s. van meter and carl e. van horn which has 5 variables, namely standards and targets of policy implementation, inter-organizational communication, characteristics of implementing agents, social, political and economic conditions and implementator disposition with the results discussion as follows: 1. standards and targets for policies implemented in the implementation of the annual tax reporting policy for individual taxpayers at kpp pratama cileungsi. a. from the analysis carried out by verbatim, which was based on interviews with informants, it appears that the standards and targets for implementation of the policy for reporting annual tax returns for individual taxpayers are in line with the regulation of the minister of finance. it is the reference number 9/pmk.03/2018 that taxpayers should use when submitting their annual tax letters in order to prevent having them returned. the result concluded that kpp pratama cileungsi has a sufficient https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 99 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc number of human resources to help taxpayers in completing and filing their annual income tax forms. b. the outcome of the inter-organizational communication variable in the implementation of individual taxpayer annual tax reporting policies at kpp pratama cileungsi demonstrates that communication between organisations is a reference for the successful implementation of annual spt reporting policies, particularly communication between dgt and kpp, kpp and companies, because communication can direct taxpayers to report their annual tax returns in accordance with the provisions. for example, the dgt instructs taxpayers to report electronically so that they do not have to visit the tax office. c. the findings on the variable characteristics of implementing agents in the implementation of the policy for reporting annual tax returns for individual taxpayers at kpp pratama cileungsi revealed that implementing agents' attitudes in implementing the annual spt reporting policy are in accordance with sops and applicable laws and regulations, namely through online efilling with the procedure mechanism contained in the minister of finance of the republic of indonesia no.9/pmk.03/2018 d. the result of social, political, and economic conditions in the implementation of the policy for reporting annual tax returns for individual taxpayers at kpp pratama cileungsi revealed that social, economic, and political conditions have a significant impact on the success of annual taxpayer spt reporting individuals, particularly issues circulating in the community, which can influence taxpayers to report or not report their spt. however, many taxpayers are still confused about how to file spt via electronic filing. e. the disposition of the implementator of the reporting policy of the annual tax return of the individual taxpayer at kpp pratama cileungsi demonstrated that the disposition of the implementer was carried out according to the direction and commitment with the support of competent policy implementers and has the capacity to perform services without discriminating against taxpayers. 2. obstacles faced by kpp pratama cileungsi in the implementation of the policy for reporting annual tax returns for individual taxpayers at kpp pratama cileungsi. the findings revealed that the obstacles encountered in the implementation of the policy for reporting annual tax returns for individual taxpayers at kpp pratama cileungsi included server errors, problems with the djp online system, a high volume of spt reporting that causes the server to overload, difficulties in filling out spt, a lack of completeness of attachments, a poor internet network, and a lack of understanding by taxpayers about whether they should submit spt every year or not. 3. efforts made by kpp pratama cileungsi if there are obstacles in the implementation of the reporting policy on annual tax returns for individual taxpayers at kpp pratama cileungsi. in order to deal with the obstacles to the implementation of the policy for reporting annual tax returns for individual taxpayers, kpp pratama cileungsi made improvements https://www.ilomata.org/index.php/ijtc analysis of the implementation of annual tax reporting policy among personal tax payer in indonesia harjo and salleh 100 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to the oc (operator console) to find out what problems were being encountered, can also do socialisation and pick up the ball and appeal to taxpayers to submit their spt, and finally by increasing the number of existing human resource. conclusion based on the research and analysis that has been done by the author regarding the analysis of the implementation of reporting annual tax returns for individual taxpayers at kpp pratama cileungsi, the authors draw conclusions including: 1. implementation of reporting annual tax returns for individual taxpayers at kpp pratama cileungsi from 2018 to 2020 has been good and in accordance with applicable laws and regulations but has not reached the set target 2. obstacles experienced by kpp pratama cileungsi in the implementation of reporting annual tax returns for individual taxpayers including server errors, problems with the djp online system, high intensity of spt reporting which causes server overload, difficulties in filling out spt, lack of complete attachments, internet network , and the lack of understanding of taxpayers to submit spt. 3. efforts made by kpp pratama cileungsi to overcome obstacles include making improvements to the oc (operator console), conducting socialization and picking up the ball in giving an appeal to taxpayers to submit their spt, even though in serving a decrease in income during this covid-19 pandemic period, as well as by add existing hr reference adi, i. k. y. 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(2021). digitalisasi sistem administrasi perpajakan dan biaya kepatuhan pajak terhadap kepatuhan wajib pajak orang pribadi. journal of accounting science, 5(1), 36–70. https://jas.umsida.ac.id/index.php/jas/article/view/1131 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 2 april 2021 page no. 158-165 https://www.ilomata.org/index.php/ijtc 158 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 the determinant factors of capital expenditure jouzar farouq ishak1, yeni priatna sari2, yevi dwitayanti3, hasbi assidiki mauluddi4 1,4accounting department, politeknik negeri bandung, bandung, indonesia 2accounting department, politeknik harapan bersama, tegal, indonesia 3accounting department, politeknik negeri sriwijaya, palembang, indonesia correspondent: jouzar.farouq@polban.ac.id submitted : march 17, 2021 revised : march 30, 2021 published : april 30, 2021 abstract this study examines the determinant factors of capital expenditure government, through local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund. the data was collected from 23 provincial governments in indonesia. the method used is multiple regression in provincial government in 2010-2019. the regression results support all hypotheses, but not the fourth hypothesis. this study shows that the provincial government cannot be autonomous and need funding from the central government. this study offers a robust link between local own-source revenue and balance funds by examining how their interaction produces a variation in the level of capital expenditure. keywords: local own-source revenue, revenue-sharing fund, general allocation fund, special allocation fund, capital expenditure introduction since the reform system was initiated in 1998, there has been a change in the government system from centralization to decentralization in indonesia. understanding the spatial variation of public funds allocation is essential because it speaks to the question of whether public funds are being used to strengthen neighborhoods and reduce inequities, or supports a development infrastructure (talen & anselin, 2021). government public spending depends on individuals’ propensity for income and wealth redistribution through the democratic process (bellani & scervini, 2020). the principle of regional autonomy is implemented by the indonesian government after the reformation in this country. the activities that have been done by the government have changed from centralization to decentralization so that the local government does not depend on the state government and the local government can take their rights and obligations independently and autonomously (pemerintah indonesia, 2014). mentayani & rusmanto (2013) explained that regional autonomy is implemented in the authority of local government to manage and develop their region. the grant of autonomy to the local government is aimed to accelerate the realization of community welfare by improving service, empowerment, and public participation (rifai, 2017). the regional autonomy makes reformation of various government fields, including capital expenditures (sholikhah & wahyudin, 2014). rizal & erpita (2019) explained that the regional government allocating the fund in the form of a local government budget to increase the fixed assets. this capital expenditure allocation is based on the regional needs of facilities and infrastructure, either for the implementation of government duties and for public facilities. the scale and structure of public expenditure for productive investments by local governments will probably have a strong effect on economic https://www.ilomata.org/index.php/ijtc mailto:jouzar.farouq@polban.ac.id the determinants factors of capital expenditure ishak, et. al 159 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 growth as well as other advantages (gao, 2019). according to priambudi (2017), capital expenditure is related to long-term financial planning, particularly in funding the maintenance of fixed assets generated from each of the public’s money by managing all regional cash to be used for public services in the regions. to develop the regional potential, the local government needs to increase the capital expenditure budget, the source of funds to fund the capital expenditure, which consists of local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund (wandira, 2013). despite its importance, little research on capital expenditure has been published: recent studies have focused on local own-source revenue (mentayani & rusmanto, 2013; pelealu, 2013; suryani & pariani, 2018; wertianti & dwirandra, 2013), revenue sharing fund (rifai, 2017; sholikhah & wahyudin, 2014; susanti & fahlevi, 2016; wandira, 2013), general allocation fund (priambudi, 2017); wandira, 2013; juniawan & suryantini, 2018; mentayani & rusmanto, 2013), and special allocation fund (juniawan & suryantini, 2018; nuarisa, 2013; syukri & hinaya, 2019). driven by these research gaps, this study explores capital expenditure through four important determinants, namely local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund. especially, this study is intended to assess the direct effect on capital expenditure. this study conducted by provincial governments in indonesia has a capital expenditure ratio under average as national. this study is written in several sections. in the next section, this study provides relevant literature reviews to further develop the research hypotheses. in the third section, this study discloses the methodology that is appropriate to meet the research objectives herein. results of data analysis are shown in the third section and discussion part. in the last section, a conclusion is provided with managerial implications, limitations, and potential topics for future research studies. according to suryani & pariani (2018), fiscal decentralization grants great authority to the region to explore their potential as the source of local revenue to fund local expenditure in the context of public services. local own-source revenue is a routine revenue obtained by utilizing the potencies of regional financial sources to fund their duty and responsibility to provide flexibility to the local government to fund the implementation of regional autonomy based on the regional potential (wertianti & dwirandra, 2013). the enhancement in the investment of the capital expenditure is expected to be able to improve the public quality and in turn be able to increase the level of public participation in development, which is reflected in an increase of the local own-source revenue so that the development of public sector facilities will be affected on increasing the local own-source revenue (pelealu, 2013; mentayani & rusmanto, 2013). thus, in the context of local own-source revenue towards capital expenditure, the following hypothesis is formulated: h1: local own-source revenue affects capital expenditure. the transferred revenue sharing fund by the state government to local government consists of some types, such as revenue sharing fund of tax, revenue sharing fund of land and building tax, revenue sharing fund of tobacco product excise, revenue sharing fund of oil and gas, revenue sharing fund of natural resources, and revenue sharing fund of income tax (susanti & fahlevi, 2016). revenue sharing fund is the potential sources of local income and one of the basic assets of the local government in obtaining the development fund and fulfilling the local expenditure that does not come from the local own-source revenue, except general allocation fund and special allocation fund (sholikhah & wahyudin, 2014). the determinants factors of capital expenditure ishak, et. al 160 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 the local government will be able to determine the larger capital expenditure if the revenue sharing budget is larger as well, likewise, the smaller capital expenditure will be determined if the revenue sharing budget is getting smaller (wandira, 2013). based on this discussion, the relationship among revenue sharing fund and capital expenditure are hypothesized as follows: h2: revenue sharing fund affects capital expenditure. according to priambudi (2017) that one of the balance fund forms is the general allocation fund which allocation emphasizes the equality aspect and justice that are under the administration of government affairs, and it is expected that with a transfer from the state government, the local government will be able to allocate the local own-source revenue which they get to fund the capital expenditure. general allocation fund is a fund that comes from the allocated state budget with the aim of financial equality between regions to fund the expenditure needs in the context of decentralization implementation (wandira, 2013; juniawan & suryantini, 2018). mentayani & rusmanto (2013) explained that the role of general allocation fund is for horizontal equalization by covering the fiscal gap between financial needs and the local economic potential. accordingly, the following hypothesis is formulated as follow: h3: general allocation fund affects capital expenditure. juniawan & suryantini (2018) stated that a special allocation fund is a fund sourced from the state budget for certain regions to fund the specific needs that comprise the regional needs and under the national program. this funding is prioritized for certain regions that meet the criteria for obtaining additional funds from the state government through the special allocation fund. special allocation fund, which is a part of the balanced fund, is a fund that comes from the allocated state budget for the region to fund regional needs in the context of development implementation (syukri & hinaya, 2019). with the allocation of the special allocation fund, it is expected that it can affect capital expenditure because the special allocation fund tends to increase the fixed assets owned by the government to improve public services (nuarisa, 2013). thus, the following hypothesis special allocation fund and capital expenditure is proposed: h4: special allocation fund affects capital expenditure. the capital expenditure ratio is used to measure the share of capital expenditure spent on total local expenditure in providing the services to the public. capital expenditure is a type of expenditures used for procurement of tangible fixed assets that have the benefit of more than 12 months to be used in government activities, for example, land purchases, building construction, and road improvements. rifai (2017) explains that by transferring funds from the state government, it is expected that the local government can allocate more of the local own-source revenue they get to fund the capital expenditure in their regions. several studies have tried to measure capital expenditure. the past studies (juniawan & suryantini, 2018; mentayani & rusmanto, 2013; sholikhah & wahyudin, 2014; nuarisa, 2013), the local own-source revenue has an effect on the capital expenditure. then, the studies (sholikhah & wahyudin, 2014; susanti & fahlevi, 2016; wandira, 2013) explained that revenue sharing fund affects capital expenditure. the other studies explained that general allocation fund affects capital expenditure (priambudi, 2017; suryani & pariani, 2018; wandira, 2013). lastly, the study on a factor that affected capital expenditure is special allocation fund, and the result is special allocation fund affects capital expenditure (nuarisa, 2013; wandira, 2013). this discussion suggests that the link the determinants factors of capital expenditure ishak, et. al 161 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 between local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund to capital expenditure. h5: the relationships between the constructs tested are significantly on capital expenditure. methods the population of this research is the provincial government in indonesia. the sampling technique used in this research is nonprobability sampling by using non-probability sampling and the sample capital expenditure ratio below the national average. in 2017, there was 14 provincial government that had ratios below the average value. meanwhile, in 2018, there was 16 provincial government that had ratios below the average value so sampling this study 23 provincial government. the research period is 9 years by using panel data analysis, thus the amount of observation is 230 by taking the data from the website of the directorate general of fiscal balance ministry of finance of the republic of indonesia. in collecting the data classified the type and technique of data collection. the type of data chosen in this research is secondary data and the data collection technique chosen is documentation technique. as seen from the period of data collecting, it is time-series data, which is the data that had been collected for years starting from 2010 to 2019. data normality has become the main requirement in this research. it is tested with the kolmogorov-smirnov test. if the data generated is not normal, this means that the requirement has not been met, so the next step is adjusting the data by changing it in the z-score (oneill & stern, 2012; tasdan & yeniay, 2014). the multiple regression equation models as follows: capital expenditure = α 1 + β 1 local own-source revenue + β 2 revenue sharing fund + β 3 general allocation fund + β 4 special allocation fund + ε 1 the classic assumption test started with testing the model normality to analyze whether the regression model will be normally distributed or close to normal. then, the existence of heteroscedasticity in the data can be tested with the glejser test (gujarati, 2004; priyatno, 2014). besides, we used the multicollinearity test to identify whether the independent variables have a mutual correlation or not. if the tolerance value more than 0.10 and the vif does not reach 10, so there is no multicollinearity between independent variables. the autocorrelation test is a measure for determining the existence of autocorrelation problem using durbin-watson (dw) if du<dw<4-dl, so the autocorrelation on the regression model is not available (ghozali, 2016; priyatno, 2014). the structural equation or also called structural model is if each of dependent variable (y) circumstances uniquely are determined by a set of an independent variable (x). hypothesis testing can use the f-test and the t-test. f-test is used for testing the influence of independent variables on dependent variables simultaneously. gujarati (2004) states that the t-test is used for determining whether the independent variables partially affecting the dependent variable or not. to determine how much the proportion of the variance value in the independent x variable defines the variance value in the y variable, it can be known through the coefficient of determination (r2). as stated by gujarati (2004) that r2 can be used for finding out the proportion of donations from independent variable towards dependent variable. the coefficient of determination aims to measure the simultaneous influence of the x variable on the y variable. the coefficient of determination is between 0 and 1. if the r2 approaches 1, this means the independent x variable increasingly influential in defining the dependent y variable. otherwise, if the r2 approaches 0, this means the independent x variable’s influence on the independent y variable. the determinants factors of capital expenditure ishak, et. al 162 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 in testing the relevance of the capital expenditure determinant, it is using a statistical test (ghozali, 2016; gujarati, 2004; sekaran & bougie, 2016). the test used is the one-tailed test. the criteria of testing are if p-value < 0.05, this means the capital expenditure of the provincial government is not relevant with local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund. otherwise, if p-value > 0.05 this means the capital expenditure of the provincial government is relevant with local own-source revenue, revenuesharing fund, general allocation fund, and special allocation fund. results and discussion normality testing is useful for examining whether the data is normally distributed or outside of it. the test was performed with a confidence level of 5%. table 1 describes the test result in detail. the test result of the examination in table 1 shows that asymp.sig value is 0.139. the result of the equation model normality test shows that it is higher than the confidence degree α=0.05. thus, the theoretical approach to capital expenditure can be stated as normally distributed. table 1. one sample kolmogorov-smirnov test asymp sig (2 tailed) sig 0.139 0.05 next, the ordinary least square is performed to recognize the equation models by using the best linear unbiased estimator. this result can be reviewed in table 2. in table 2, besides the normality model fulfilled, there is also no heteroscedasticity in the capital expenditure equation. this result is indicated by all the variables coefficients have a significance level of more than 0.05. in the analysis of the multicollinearity test, it is stated that each of the independent variables in the regression equation has a tolerance level of more than 0.10 and vif value < 10, thus it shows that it is independent of multicollinearity in all regression equations. in the model, there is also no autocorrelation, as indicated by du < dw < 4-dl, where the model is 1.671 (between 1.592 and 1.758). table 2. ordinary least square tolerance vif durbin watson constant 1.671 pad 0.417 2.391 dbh 0.807 1.240 dau 0.410 2.441 dak 0.318 3.143 the results of this study confirm the significant importance of local own-source revenue, revenue-sharing fund, general allocation fund, and special allocation fund simultaneously to capital expenditure in provincial government (h5). first, the results point out that local own-source revenue positively affects capital expenditure. this result is coherent with past studies, which underline the impact of local own-source revenue on capital expenditure (juniawan & suryantini, 2018; sholikhah & wahyudin, 2014; nuarisa, 2013; priambudi, 2017; wertianti & dwirandra, 2013). this indicates that the benefits from local own-source revenue provide authority to the provincial government to fund the implementation of regional autonomy under the regional potential as a manifestation of decentralization. thus, there is support for hypothesis h1. second, this study suggests that a revenue-sharing fund makes a significant contribution to capital expenditure. therefore, hypothesis h2 is partially supported. this study corroborates with the determinants factors of capital expenditure ishak, et. al 163 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 past studies on the positive effect of revenue sharing funds on capital expenditure (sholikhah & wahyudin, 2014; susanti & fahlevi, 2016; wandira, 2013). this result indicates that the behaviour of capital expenditures is greatly affected by the source of revenue sharing funds. a revenuesharing fund is a component of a balanced fund that becomes one of the supporting factors for capital expenditures that comes from tax and regional natural resources (sholikhah & wahyudin, 2014). local revenue, which is a revenue-sharing fund from the central government, demands the local government to develop and prosper their people by managing the regional wealth proportionally and professionally, and building sustainable infrastructure, one of them is allocating the budget to the capital expenditure sector (rifai, 2017). third, the next findings show general allocation fund has a positive and significant on capital expenditure. the previous studies also support this research finding that confirms h3 that general allocation fund an effect on capital expenditure (juniawan & suryantini, 2018; nuarisa, 2013; priambudi, 2017; suryani & pariani, 2018). the relation of regional infrastructure development is because the general allocation fund sent from the central government and used by local government is intended to fund local government activities or program through local expenditure, especially on capital expenditures (juniawan & suryantini, 2018). therefore, the general allocation fund encourages the local government to obtain more of this fund so that it will have an impact on capital expenditure activities implemented by the local government. lastly, this study discloses that the consequence of special allocation funds on capital expenditure is insignificant. besides, the last study also confirms the h4, which lend support with past studies (syukri & hinaya, 2019) reporting not impact of special allocation fund on capital expenditure. it means that special allocation fund is not one of the determining factors of the formulation of the expenditure budget on local government. the special allocation fund is large so that it will do not have an impact on the capital expenditure budget management of a local government. special allocation fund not an effect on capital expenditure indicating that special allocation fund is more used to fund the personnel expenditure. in realizing the budget for operational activities, especially personnel expenditure, is still very high and dominating when compared to the amount of realization for capital expenditure. the balancing fund transferred by the central government to local government is mostly used to cover the operational expenditure compared to capital expenditure (sholikhah & wahyudin, 2014). conclusion from a government perspective, this study demonstrates the important impact of local ownsource revenue, revenue-sharing fund, and general allocation fund on capital expenditure. the findings of this study suggest that it is important for the provincial government to focus on increasing local own-source revenue as this is the key success. thus, the decentralization era began in 1999, the provincial government is need by the central government. this study implies that balanced funds such as revenue sharing funds and general allocation funds from the central government affect expenditure allocation for the provincial government. while this study provides some important findings, this study has carried some limitations which can be addressed in future researches. first, this study focuses on the provincial government in indonesia, limiting the generalization of the findings. thus, the sample of this study is not fully typical of local government. this issue can be solved by replicating this study in different provincial the determinants factors of capital expenditure ishak, et. al 164 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 and regency governments. second, this study used a relatively small sample size which not allowing the authors to run a more powerful statistical analysis, such as structural equation modeling (sem). it is encouraged for future researchers to enlarge the sample size for more statistical results. last, besides local own-source revenue, revenue-sharing fund, and general allocation fund that were found to directly impact on capital expenditure, it is also to identify other constructs beyond variables used in this study such as local taxation, local retribution, local own source assets, and other lawful local revenue factors which have a potential effect on capital expenditure. references bellani, l., & scervini, f. 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(2013). pengaruh pertumbuhan ekonomi pada belanja modal dengan pad dan dau sebagai variabel moderasi. e-jurnal akuntansi, 4(3), 567–584. the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 2 march 2020 pp : 103-114 https://www.ilomata.org/index.php/ijtc 103 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 fakhri rana sausan, lardin korawijayanti, , arum febriyanti ciptaningtias program studi akuntansi manajerial jurusan akuntansi politeknik negeri semarang lardinkorawijayanti@polines.ac.id submitted : dec 12th 2019 revised : jan 31th 2020 published : march 30th 2020 abstract this research aims to analyze the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017. the sample of this research is consists of 21 property and real estate companies with 6 years period so a total of sample is 126 samples. sources data is secondary data. the data analysis method in this research is used multiple linear regression. the result shows that debt to equity ratio (der), total asset turnover (tato) and exchange rate of rupiah/us dollar partially has got a significant effect on stock return while return on asset (roa) and earning per share (eps) partially has got an insignificant effect on stock return, its mean return on asset (roa) and earning per share (eps) can’t be determinant of stock return to investors who want to invest in the capital market. keywords: return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato), exchange rate and stock return. introduction the capital market can be interpreted as a vehicle that brings together those who need funds with those who provide funds, in accordance with the rules established by institutions and professions related to securities. law no. 8 of 1995 concerning the capital market has outlined that the capital market has a strategic position in national economic development. from the economic point of view the capital market has a function as a long-term fund mobility for the government, because through the capital market the government can allocate funds to the public through potential and profitable sectors. investment activities are activities that place funds in one or more assets during a certain period in the hope of earning income / profits or an increase in the value of the initial investment (capital) that aims to maximize returns (future). in investing in the capital market analysts and investors can take an investment approach that can be broadly divided into two namely technical analysis and fundamental analysis (tandelilin, 2010 in amor marundha, 2014). according to suad husnan (2005: 358) that technical analysis is an attempt to estimate stock prices and market conditions by observing changes in the stock price (market conditions) in the past. meanwhile, according to ang (1997) that technical analysis is a study conducted to the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 104 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 study various influential forces on the stock market and the implications that this has on stock prices. according jogiyanto (2014: 189) fundamental analysis is an analysis to calculate the intrinsic value of a stock using corporate financial data. fundamental analysis looks at the development of financial ratios in terms of solvency, liquidity, profitability and corporate financial policy in investing and financing. in addition, the development of performance and dividend policy complements fundamental analysis(rulandari et al., 2018; sofyan, 2016). the good financial performance of a company is a major consideration for investors. the better the level of financial performance of a company is expected to increase stock prices and will provide profits (return) for investors, because stock returns are the difference between current stock prices and previous stock prices. high stock return is one of the attractions for investors to invest their funds in the capital market. thus, if the company's ability to generate profits increases, the share price will also increase. the higher the return or profit obtained, the better the position of the owner of the company (suad husnan, 2001 in defrizal 2015). the presence of the capital market in indonesia is marked by the number of investors who have begun to invest in the property and real estate industry. the property and real estate business, both residential and commercial, have shown quite rapid development in indonesia, as evidenced by the increasingly widespread development housing, business center and supermall in the last years. the rapid development of the property sector is followed by the higher demand for boards, so property companies need funds from external sources. many people invest their capital in the property industry because land prices tend to rise. the reason is that the land supply is fixed while demand will always be large as population grows. head of the central statistics agency suhariyanto said that the highest improvement in business conditions is expected to occur in the real estate business field with an itb value of 111.20 (sindonews.com, 2017). the stock price has increased and decreased which is influenced by various factors. these factors are macroeconomic factors and fundamental factors. macroeconomic factors stem from broad economic problems, for example economic policy, inflation, interest rates, currency exchange rates, public income and others. fundamental factors are factors originating from within the company that issued the shares themselves (the issuer). if a company that issues shares is in good condition, its stock price will tend to increase and if the stock price increases, the return it receives will also increase. this is because investor confidence in the issuer is getting better, investors have the expectation of getting a large share of profits or dividends. this fundamental factor can be seen from financial statements. the issuer's financial statements can be seen the level of financial performance both in terms of ability to generate profits (profitability), ability to pay debts (solvency), as well as the level of efficiency and effectiveness in managing their wealth (activities). problems in this study arise because of the research gap that shows the results of different studies regarding the related variables in this study. previous research that became a reference in this study is a study conducted by agung tri atidhira and andi ina yustina (2017) by adding 2 other variables, namely total asset turnover (tato) and rupiah exchange rates to the us dollar. this study uses property and real estate companies as research objects starting from 2012-2017. the reason researchers chose this company is because the property and real estate companies have bright prospects in the future by seeing the potential population continues to grow and the increasing number of developments in the housing sector, apartments, shopping the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 105 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 centers, and office buildings that attract investors to invest their funds so that the prospect of stock trading is expected to continue to increase. method the type of data used in this study is secondary data that is data obtained from other parties in the form of data that is ready to be processed or published. secondary data refers to information collected by a person, and not to a researcher who is carrying out a sophisticated study. the data can be internal or external to the organization and accessed through the internet, document searches, or publication of information (now, 2006: 65). these data include quantitative data because in their calculations use numbers (nominal) and are a type of panel data (pooled data), that is data that uses multiple objects (cross section) in several research periods (time series) based on a summary of january's performance 2012 december 2017 in property and real estate companies. in this study, the data used are secondary data including return on assets (roa), debt to equity ratio (der), earning per share (eps) and total asset turnover (tato) derived from the financial statements of sample companies obtained from the stock exchange indonesian securities through its official website, namely www.idx.co.id and us dollar exchange rate data obtained from bank indonesia (bi) through its official website, namely www.bi.go.id. specifically stock return data is obtained by processing stock closing price data from the indonesian capital market directory (icmd) or the site http://finance.yahoo.com. the population in this study were 57 (fifty seven) property and real estate companies listed on the indonesia stock exchange (idx) and published their data in the indonesian capital market directory (icmd). based on the purposive sampling technique, 21 (twenty one) companies were obtained in the property and real estate sector that met the requirements and were suitable for use as research samples. there are two variables used in this study, namely the independent variable (x) and the dependent variable (y). the independent variable (x) consists of return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah / us dollar exchange rate, while the dependent variable (y) is return stock. data analysis method used in this study is multiple linear regression analysis used to test the effect of two or more independent variables on one dependent variable (imam, 2013: 13). other than that classic assumption tests are also used to test whether the regression model really shows a significant and representative relationship consisting of: autocorrelation test, normality test, multicollinearity test, and heterokedasticity test; and determination testing and hypothesis testing consisting of the f test and t test. the f test is used to determine the effect of the independent variables on the dependent variable simultaneously. t test is used to determine the effect of the independent variable partially on the dependent variable. result and discussion the results of the multiple regression test in this study are as follows: multiple linear regression test results http://finance.yahoo.com/ the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 106 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 source: secondary data processed. based on the test results with multiple linear regression methods, then an equation can be arranged as follows: stock return = 86,290 0,173 (roa) 16,697 (der) + 0,013 (eps) + 111,972 (tato) 0,007 (kurs) the regression equation can be described as follows: a. α = 86.290 means that if the value of other variables equal zero, then the value of stock returns is 86.290. b. x1 = 0.173 means that for every 1% increase in roa, stock returns will decrease by 0.173 assuming the other variables are constant. c. x2 = 16,697 means that every 1 time increase in der, the stock return will decrease by 16,697 assuming the other variables are constant. d. x3 = 0.013 means that for every increase of rp 1 eps, the stock return will increase by 0.013 assuming the other variables are constant. e. x4 = 111,972 means that every 1 times increase in tato, then stock returns will increase by 111,972 assuming the other variables are constant. f. x5 = 0.007 means that for every increase of idr 1 kurs, the stock return will decrease by 0.007 assuming the other variables are constant. determination coefficient test results (r2) source: secondary data processed. based on the results of the coefficient of determination (r2) test, it is known that the value of r square in the sample companies is 0.165 while the adjusted r square value is 0.130 or 13%. thus it can be concluded that the magnitude of the effect of return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 107 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 exchange rate on stock returns is 13% while the remaining 87% is influenced by other variables outside the study. anova f (simultaneous) test results source: secondary data processed. based on the results of the f test above it can be seen that the fcount value was 4.726 and the significance value was 0.001. it can be seen that the value of fcount 4.726 is greater than f table. ftable is determined by reading table f, with the number of independent variables of 5 (five) variables (k = 5) and the number of samples of 126, with a degree of freedom (df) of df = (nk) that is equal to 121, so it can be determined ftable of 2.29. the significance value of 0.001 is less than the significance level of 0.05 (α = 0.05) and fcount is greater than ftable, then ho is rejected and ha is accepted. this shows that the independent variables namely return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rates simultaneously or jointly able to explain changes in variables the dependent is stock returns, so it can be concluded that return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rates simultaneously affect stock returns. the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 108 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 t test results (partial test) source: secondary data processed. based on the results of the t test above, it can be seen that debt to equity ratio (der), total asset turnover (tato) and rupiah exchange rate partially have a significant effect on stock returns because they have a significance value of more than 0.05 or 5% significance level, whereas return on asset (roa) and earning per share (eps) partially have no significant effect on stock return because the significance value is less than the significant level of 0.05 or 5%. effect of return on assets (roa) on stock return. return on assets (roa) as one of the independent variables that do not have a significant effect on stock returns as the dependent variable. based on the results of the multiple linear regression model equation, it is known that the roa value of -0.173 means that if roa increases by 1% then stock returns will decrease by 0.173. return on assets (roa) shows the result of t count of -0.217, where t arithmetic is greater than t table that is equal to -1.97976. besides being seen from t arithmetic can also be seen from the significance of return on assets (roa) of 0.829. this value above the significance level of 0.05 indicates that return on assets (roa) has no significant effect on stock returns on property and real estate companies listed on the indonesia stock exchange (idx). this research shows that a high roa does not really attract investors in the capital market. this shows that the good profitability performance of the company can really be seen when investors also consider other profitability ratios such as gross profit margin (gpm), net profit margin (npm), return on equity (roe), and operating ratio. so, roa itself is difficult to attract investors to buy company shares if other profitability ratios have different conditions. with the increase in roa from the previous period, that does not mean that economic conditions are good. poor economic conditions can also cause a decrease in stock returns despite increased roa. the research period for 6 (six) years from 2012 to 2017 property and real estate companies experienced fluctuations. this shows that companies with fluctuating return on assets (roa) do not have the potential to attract investors to invest their shares. this condition makes the company's stock price increase so that return on assets (roa) that experience fluctuations will not affect the company's stock return. in this research, return on assets (roa) cannot be used as a basis for determining stock returns. the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 109 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the results of this test are supported by previous research conducted by agung tri (2017) and farda eka (2016), which in his research concluded that return on assets (roa) had no significant effect on stock returns. effect of debt to equity ratio (der) on stock returns. debt to equity ratio (der) as one of the independent variables that has a significant effect on stock returns as the dependent variable. based on the results of the multiple linear regression model equation, it is known that the der value is -16,697 which means that if the der increases once, the stock return will decrease by 16,697. debt to equity ratio (der) shows the result of t count of -2.197, where t count is smaller than t table of -1.97976. in addition to the t count, it can also be seen from the significance of the debt to equity ratio (der) of 0.030. this value is below the significance level of 0.05, indicating that debt to equity ratio (der) has a significant effect on stock returns on property and real estate companies listed on the indonesia stock exchange (idx). in this study it can be interpreted that debt to equity ratio (der) can be used as a basis for determining stock returns. debt to equity ratio (der) measures how far property and real estate companies are financed by debt. this debt arises because not all company needs can be met by the company's own capital. debt to equity ratio (der) ratio calculation of property and real estate companies has a fairly high der value. the higher the der reflects the relatively high risk of the company, consequently reducing the interest of investors to invest in companies that have a high debt to equity ratio (der). if there are no investors who are interested to invest, it will have an impact on the decline in the company's stock price and will affect the stock return. the results of this test are supported by previous research conducted by ni kadek raningsih (2015) and ihsan s. basalama et al. (2017), in which his research concluded that debt to equity ratio (der) had a significant effect on stock returns. effect of earning per share (eps) on stock return. earning per share (eps) as one of the independent variables that does not have a significant effect on stock returns as the dependent variable. based on the results of the equation of the multiple linear regression model, it is known that the eps value of 0.013, which means that if eps increases by rp 1, stock returns will increase by 0.013. earning per share (eps) shows the result of tcount of 0.821, where t arithmetic is smaller than t table of 1.97976. besides seen from t arithmetic can also be seen from the significance of earning per share (eps) of 0.413. this value above the significance level of 0.05 indicates that earning per share (eps) has no significant effect on stock returns on property and real estate companies listed on the indonesia stock exchange (idx). this is due to fluctuations in earnings per share (eps). property and real estate companies have fluctuating eps which causes the company in generating net profit after tax to experience instability. this indicates that a declining eps indicates that investors no longer want to invest their shares in the company. as a result, company profits will decline, so that eps does not affect stock prices. the absence of influence on the stock price will also affect the company's stock return. this insignificant result, it can be concluded that the eps variable cannot be used as a reference in determining the investment strategies of investors in investing their shares in the capital market in the study period. the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 110 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 the results of this test are supported by previous research conducted by ferdinan eka (2016) and verawaty et al. (2015), in which his research concluded that earning per share (eps) had no significant effect on stock returns. effect of total asset turnover (tato) on stock returns. total asset turnover (tato) as one of the independent variables that has a significant effect on stock returns as the dependent variable. based on the results of the equation of the multiple linear regression model, it is known that the tato value is 111.972 which means that if tato increases 1 time the stock return will increase 111.972. total asset turnover (tato) shows the result of tcount of 2.125, where t arithmetic is greater than t table of 1.97976. in addition to the t count can also be seen from the significance of the total asset turnover (tato) of 0.036. this value is below the significance level of 0.05 indicating that the total asset turnover (tato) has a significant effect on stock returns on property and real estate companies listed on the indonesia stock exchange (idx). in this study it can be interpreted that the total asset turnover (tato) can be used as a basis for determining stock returns. the level of total asset turnover (tato) owned by property and real estate companies in supporting sales activities can explain the stock returns received by investors. the company's ability to optimize all its assets effectively and efficiently can bring in revenue for the company, so that it can attract investors to buy the company's shares. if many investors invest their shares, the company's stock price will increase, so the company's stock returns received by investors will also increase. the results of this test are supported by previous research conducted by tantri bararoh (2015) which concluded that total assets turnover (tato) has a significant effect on stock returns. effect of rupiah exchange rates on stock returns. rupiah exchange rate as one of the independent variables that has a significant influence on stock returns as the dependent variable. rupiah exchange rate shows the t-value of -3.094, where the t-count is smaller than t-table of 1.97976. aside from looking at t arithmetic can also be seen from the significance of the rupiah exchange rate of 0.002. this value is below the significance level of 0.05 indicating that the rupiah exchange rate has a significant effect on stock returns on property and real estate companies listed on the indonesia stock exchange (idx). in this study it can be interpreted that the rupiah exchange rate can be used as a basis for determining stock returns. based on the results of the multiple regression equation model, it is known that the exchange rate of the rupiah (exchange rate) of -0.007, which means that if the exchange rate increases rp 1, the company's stock return will decrease by 0.007 and investors will not reinvest their shares in the company which will cause the stock price to also decrease , if the share price decreases, stock returns that will be received by investors will also decrease. besides the weakening of the rupiah against the us dollar can affect stock returns to be received by investors. the results of this test are supported by previous research conducted by ariyani indriastuti (2017) and ni kadek suriyani (2018), which in his research concluded that the rupiah exchange rate (exchange rate) has a significant effect on stock returns. effects of return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rates on stock returns the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 111 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rate have an influence on stock returns. these results can be seen fcount value of 4.726 and a significance value of 0.001. it can be seen that the calculated f value of 4.726 is greater than the f table of 2.29 and the significance value is below the significance level of 0.05. this states that return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rates simultaneously affect stock returns. the coefficient of determination (r2) is known that the value of r square in the sample companies is 0.165 while the adjusted r square value is 0.130 or 13%. thus it can be concluded that the magnitude of the effect of return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rate on stock returns is 13% while the remaining 87% is influenced by other variables outside the study. other variables outside this study that might have a major influence on stock returns are net profit margin (npm), current ratio (cr), price to book value (pbv), inflation and interest rates. this is supported by the results of research conducted by anistia nurhakim (2016) and ferdinan eka (2016) stating that net profit margin (npm) affects stock returns. research conducted by farda eka (2016) states that current ratio (cr) has a significant effect on stock returns. research conducted by lardin korawijayanti (2014) states that price to book value (pbv) has a significant effect on stock returns. research conducted by sri suyati (2015) states that inflation and interest rates have a significant effect on stock returns. conclusion a. return on assets (roa) partially does not significantly influence the return of shares of property and real estate companies listed on the indonesia stock exchange in 2012 to 2017. conditions of return on assets (roa) of property and real estate companies that experience fluctuations do not have the potential for power attract investors to invest their shares. this can make the company's stock price increase so that fluctuating return on assets (roa) will not affect the company's stock return b. debt to equity ratio (der) partially has a significant effect on the stock returns of property and real estate companies listed on the indonesia stock exchange in 2012 to 2017. property and real estate companies have a high der value, so the risk borne by the company is also relatively high. this can reduce the company's stock returns and reduce investor interest in investing in the company. c. earning per share (eps) partially has no significant effect on stock returns of property and real estate companies listed on the indonesia stock exchange in 2012 to 2017. the results of this study indicate that earning per share (eps) cannot be used as a basis for determining stock returns . property and real estate companies have fluctuating eps which causes the company in generating net profit after tax to experience instability. this shows that investor's disinterest in seeing eps in investing can increase the company's stock price so that fluctuating eps does not have an impact on stock returns to be received by investors. d. total asset turnover (tato) partially has a significant effect on the stock returns of property and real estate companies listed on the indonesia stock exchange in 2012 to 2017. the ability of the company to optimize all its assets effectively and efficiently can the effect of return on asset (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and exchange rate on stock return of property and real estate companies at indonesia stock exchange period 2012-2017 sausan, korawijayanti, ciptaningtias 112 | ilomata international journal of tax & accounting vol. 1 no. 2 march 2020 bring revenue to the company, so that it can attract interest investors to buy the company's shares. if many investors invest their shares, the company's stock price will increase, so the company's stock returns received by investors will also increase. e. the rupiah exchange rate partially has a significant effect on the stock returns of property and real estate companies listed on the indonesia stock exchange in 2012 to 2017. the weakening of the rupiah exchange rate against the us dollar can affect the stock returns that will be received by investors. this will make investors prefer investing in dollars rather than investing in shares. if investors no longer invest their shares in these companies, it will cause the stock price to decline so that the stock returns that investors will receive will also decline. f. return on assets (roa), debt to equity ratio (der), earning per share (eps), total asset turnover (tato) and rupiah exchange rates simultaneously affect the stock returns of property and real estate companies listed on the indonesia stock exchange year 2012 to 2017. companies that have high roa will also generate high profits. this will increase the company's stock returns for investors. if the der is high then this is not good for the company because it can result in a decrease in the company's stock return. if the company has high eps, the company's ability to generate profits is also high. this can increase the company's stock return. a high level of corporate tato can also increase the company's stock return because of the company's ability to utilize all its assets efficiently in generating profits. in addition, the weakening of the rupiah against the us dollar can reduce the company's stock return if the company has foreign loans in the form of dollars with a high amount. reference aisah, ayu nurhayani dan kastawan mandala. 2016. pengaruh return on equity, earning per share, firm size dan operating cash flow terhadap return saham. e-jurnal manajemen unud. vol. 5, no. 11. issn 2302-8912. alipudin, asep dan resi oktaviani. 2016. pengaruh eps, roe, dan der terhadap harga saham pada perusahaan sub sektor semen yang terdaftar di bei. 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international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 1-12 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati1 , hendra darmawan2 , muhammad sofyan3 , tatiana serebryakova4 1,2,3institut ilmu sosial dan manajemen stiami, indonesia 4moscow city university, russia correspondent: ukhti.ra@gmail.com received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: irawati, darmawan, h., sofyan, m., serebryakova, t (2022). the effect of the implementation of e-invoice 3.0 and taxable person compliance on vat revenue in kpp pratama pasar rebo indonesia. ilomata international journal of tax and accounting, 3(1),1-12. https://doi.org/10.52728/ijtc.v4i1.412 abstract: compliance of taxable person (pkp) is a complicated problem related to the implementation of an einvoice application, especially the knowledge and perceptions of those who consider that making electronic-based tax invoices is difficult to do. this study aims to determine and analyze the effect of the e-invoice 3.0 application and taxable person compliance on the increase in vat revenues. to obtain the research sample, the author used a non-probability sampling technique with the convenience sampling method. the results showed that e-invoice 3.0 implementation and taxable person compliance simultaneously had a positive and significant effect on vat revenues with a value of 113,819. the author provides suggestions for the primary tax office of pasar rebo, jakarta to continue improving its services in providing information and campaign related to the use of einvoice 3.0 to taxable person to improve their compliance and also to increase the amount of tax revenue which can affect vat revenues. keywords: e-invoice 3.0, taxable person compliance, vat revenue this is an open access article under the cc-by 4.0 license. introduction the development of a country can be seen from the independence of the country to achieve its development (arvin et al., 2021; gnangnon, 2021). to carry out its development, the state needs revenue / revenue allocation (apbn). the revenues of the state provide for various receipts both into the property and at the disposal of the state (amendolagine et al., 2021; lahiri & yang, 2021). state revenues create a financial basis for the performance of external and internal functions of the state, including socio-economic policy, ensuring the defense and security of the country, as well as the functioning of state bodies (ndoricimpa, 2021; suárez serrato & zidar, 2018). one of them comes from the tax industry. most countries in the world impose taxes on their citizens, but some taxes are used as the main source of income for the country except for countries rich in natural resources that do not collect taxes (holm-hadulla, 2020; yang & zhou, 2021). tax provisions in each country vary but generally follow the same tax principles or rules. the tax state structure is one of the main links of the market economy (hasan et al., 2021; kammas & https://www.ilomata.org/index.php/ijtc mailto:ukhti.ra@gmail.com https://doi.org/10.52728/ijtc.v4i1.412 the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sarantides, 2020). it represents the main instrument of the state's influence on the formation of economic relations, determines the priorities of the economy and social relations. it is necessary that the tax system should be adapted to all social relations, and also not contradict world practice (mardones & flores, 2018; tarufelli et al., 2021). in indonesia, taxes are used as one of the state revenues (hajawiyah et al., 2021). after all, the tax sector is considered the most efficient option because the tax amount is relatively stable and the public can actively participate in realizing development in paying taxes (kraal, 2019). the instability of taxation, constant changes in tax legislation, carry a negative trend, hinder investment in the domestic economy (saad, 2014). in addition, taxes have the vision to raise public awareness of taxpayers as well as their responsibility and honesty towards their obligations because basically, taxes are a form of self-devotion to the state in helping the development of the country (sinuhaji, 2019). control by the state is one of the most important functions performed by it in the framework of fiscal activities. the inconsistency of the emphasis on fiscal activity in the tax sphere shows that by making excessive demands on taxpayers, increasing the number of tax payments, first of all, the tax base decreases and cash receipts to the state budget decrease, lead to illegal violations of tax legislation (rahwani et al., 2019). summarizing the above, it should be concluded that it is important to carry out activities to consolidate the basic principles and foundations, legislative regulation and control over the collection of taxes and their transfer to the state budget. table 1. realization of state revenue year realization 2014 rp1.071.081.522.710 2015 rp1.301.925.637.162 2016 rp1.502.453.591.310 2017 rp1.476.007.768.990 2018 rp1.493.470.325.826 2019 rp1.770.168.479.281 2020 rp1.479.937.061.153 source: kpp pratama pasar rebo (2020) effective tax collection is assessed from how procedures are implemented that do not interfere with the economic functions of activities, production, trade and services. therefore, the tax collection process should be designed to simplify the tax collection system. way, it will be easier to implement and taxpayers will not experience difficulties when paying taxes or reporting taxes, both in terms of calculation and time. at present, developments related to taxation have undergone digitalization, considering that taxation activities are still considered ineffective so improvements are still needed in terms of facilitating, improving, and maximizing services to taxpayers. these problems make e-invoices a connecting road made by the directorate general of taxes to achieve these things. the implementation of the e-invoice itself has been stipulated in directorate general of taxation regulation no. per-16/pj/2014 concerning procedures for making and reporting electronic tax https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc invoices, and per-41/pj/2015 which regulates the security of electronic transactions for online tax services (direktorat jenderal pajak, 2014, 2015). to overcome the occurrence of practices that can be detrimental to state income from taxes, the directorate general of taxes has again developed an e-invoice application. until the development of the latest e-invoice, namely e-invoice 3.0 for the change in e-invoice 2.2. this change is based on per-11/pj.09/2020 concerning the national implementation of e-invoice application version 3.0 (direktorat jenderal pajak, 2020). table 2. taxable person perceptions of research variables variable percentage information benefits of e-invoicing 3.0 72,29% pkp benefit from e-invoice 3.0 taxable person compliance standard 72,82% corporate taxpayers consciously register themselves as taxable person (pkp) tax revenue factor 71,31% tax revenue is influenced by the public economy source: survey research data, processed 2021 based on the taxpayer's perception that the level of achievement recorded is in a good category, it's just that this achievement has not fully provided maximum results. this gives the perception that the government's participation in providing information and understanding related to taxation has not been fully realized. based on the description above regarding the background of the research problem, the following research objectives can be obtained: 1) to find out and analyze the effect of implementing e-invoice 3.0 in increasing vat revenue. 2) to find out and analyze the effect of taxable entrepreneur compliance in increasing vat revenue. 3) to know and analyze simultaneously the application of e-invoice 3.0 and the compliance of taxable person in increasing vat revenue. the implementation of e-invoicing and taxable entrepreneur compliance and emphasizes the level of reporting of vat tax returns and the magnitude of the effect on vat receipts and axable entrepreneur compliance (lintang et al., 2017). previous researches determine the effect resulting from the modernization of the tax system on the level of compliance of taxable person and the effect on vat receipts from the application of e-invoicing. 3.0 and analyze the effect of taxable entrepreneur compliance on vat receipts (fasmi & misra, 2014). the other researches are discussing e-faktur and tax receipts using a moderating variable or a connecting variable to test between the independent variable and the dependent variable, while the variables used by the researcher are only the independent variable and the dependent variable, the effect of the application of e-invoicing on taxable entrepreneur compliance and determine the effect of the application of e-invoicing on vat receipts (angraini et al., 2017; astuti & panjaitan, 2017; awaloedin et al., 2021). previous researches discussed e-faktur and tax receipts using moderating variables or connecting variables to test between the independent variable and the https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dependent variable, while the variables used by the researcher are only the independent variable and the dependent variable and the effect of vat revenue on tax revenues (anggia, 2019; nurtin et al., 2021; sulistyowati et al., 2020). based on the several studies above, it can be concluded that in the implementation of e-invoicing, the taxable person (pkp) has been able to implement the implementation of the e-invoice system launched by the fiscus. when operating it. regarding the e-invoicing system, which still has to be refined, the taxation policy must also keep pace with the changes that occur. that way, increasing state income is no longer difficult to do. e-invoice 3.0 e-invoice is a tax invoice created through an application or electronic system provided by the djp and tax system service providers.e-invoice is a tax invoice as proof of vat collection which is carried out electronically and made by a taxable entrepreneur whose procedures are regulated in tax regulations (sakti & hidayat, 2015). the e-invoice form is an electronic document that can be printed on paper or in pdf file format. furthermore the benefits obtained by the djp from this e-tax invoice application in addition to providing the function of collecting bkp/jkp data through the pkp mechanism, it also increases the effectiveness of tax invoices there are several factors that influence behavior obedient to taxes or often known as tax compliance (ciptaningsih, 2013). these factors are deterrence, norms, both personal and social, fairness and trust in the tax administration, opportunity and complexity,and the role of government and the broader economic environment (walsh, 2012). the delone & mclean (d&m) is used to measure the dimensions of information system success (tam & oliveira, 2016), while the dimensions of success are as follows: 1) system quality, related to the characteristics of information systems. for example ease of use, the flexibility of use, system reliability, and ease of learning; 2) quality of information, related to the characteristics of the system output. for example reliability of the information, ease of understanding, accuracy, completeness, and timeliness; 3) service quality, namely the level of support received by system users; 4) use of the system, namely the capacity of the use of the system such as the amount of system use and the purpose of use; 5) satisfaction of use, namely the comfort and interest felt by users of the information system; 6) net profit, relates to the extent to which an information system can contribute to system users. for example, instant decision making, increased sales, reduced costs, revenue improvisation, market efficiency, consumer perception, and others (roky & meriouh, 2015). at the same time, it should be noted that it is possible to achieve high success rates only with objective, equal positions of all taxpayers, including the presence of uniform technical conditions, financial literacy, transparency of the tax system (aldholay et al., 2018). taxable person compliance tax compliance can be defined as a condition for taxpayers to comply with all their tax obligations and exercise their tax rights (rahayu, 2017). taxpayer compliance is a taxpayer's tax obligation to promote development, and currently it is hoped that this obligation can be fulfilled voluntarily. considering that the indonesian tax system adheres to a self-assessment system, taxpayer compliance is an important aspect in this process taxpayers have absolute confidence in calculating, paying and reporting their obligations to obtain the best tax revenue (widodo et al., 2013). https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxpayer compliance includes taxpayer registration compliance, tax notification compliance, calculation and payment of tax payable, and tax arrears payment compliance (rahayu, 2017). from the explanation above, it can be concluded that the taxable entrepreneur compliance indicators are divided into 3, namely: 1) register to become a taxable person 2) deposit period spt. 3) calculate and pay taxes owed. tax receipts from vat vat (ppn) and ppnbm are one of the types of taxes that exist in indonesia. this indirect tax is imposed on consumption at every level of production or distribution. although the imposition of ppn and ppnbm is carried out on the added value that occurs at every level of production and/or distribution of goods or services, the burden of this tax is indirectly borne by the final consumer (sukardji, 2017). according to the central statistics agency explaining that state income or national income is an economic measure to assess the economic performance of a country. this national income can be defined as the net value (net) of all economic goods produced by a country where the value of the product is specifically linked to labour, capital, and entrepreneurial ability. one of the main indicators used to obtain a measure of national income is the gross domestic product (badan pusat statistik, 2021). furthermore, tax revenues are influenced by economic level, poverty level and taxation policy. this means that an improving economy, lower poverty rate, and tax policies will lead to higher tax revenues in indonesia. on the other hand, the economic recession, increasing poverty, and taxation policies will lead to a decrease in indonesia's tax revenues (handoko et al., 2014). based on the description of the research variable theories above, it can be arranged and presented in the form of a research paradigm or theoretical framework as follows: chart 1. research paradigm the hypotheses in this study are as follows: h1 = application of efaktur 3.0 https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (x1) has an effect on vat revenue (y) h2 = taxable person compliance ( x2) affects vat revenue (y) h3 = implementation of e-invoice 3.0 and compliance with taxable persons affects value added tax (vat) revenue for research to be carried out, it is necessary to determine the variables based on the research hypothesis. the variables of a study are everything that the researcher decides to form and informs to conclude (sugiyono, 2019). method the research method used in this study is a quantitative method with a correlational approach. the data used in this study is primary data, in the form of questionnaire data filled out by a predetermined sample (ghozali, 2016; sugiyono, 2019). the population in this study are taxable person (pkp) who are registered at the pratama jakarta pasar rebo tax service office, amounting to 4,482 taxable person. the sampling technique used is convenience sampling, where the determination of the sample is based on certain considerations. the samples used in this study were 97 samples. determination of this sample is using the following formula:𝑛 = 𝑁𝑍2.𝑝(1−𝑝) 𝑁𝐷2+𝑍2.𝑝(1−𝑝) n = sample size n = total population z = normal variable value (1.96) for 0.95 confidence level p = the largest possible proportion (0.50) d = degree of deviation (10% or 0.10) the data analysis technique used multiple regression analysis, partial test, and simultaneous test, in which the test was used to determine the relationship between the variables studied (creswell, 2017; lynch, 2017). the regression equation used is as follows: information : y = vat revenue α = coefficient constant β = regression coefficient x1 = application of e-faktur 3.0 x2 = taxable person compliance result and discussion 2211 xxay  ++= https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3 multiple linear regression equations vat revenue = 1.114 + 1.987(e-invoice 3.0) – 1.297 (taxable person compliance) based on these equations, it can be described as follows: 1. α value of 1,114 is a constant or condition when the vat revenue variable (y) has not been influenced by other variables, namely the variable application of e-invoice 3.0 (x1) and taxable person compliance (x2). if the independent variable does not exist, then the vat revenue variable does not change. 2. b1 value (x1 regression coefficient) is 1.987, indicating that the variable application of einvoice 3.0 has a positive influence on the vat revenue variable. this means that the variable application of e-invoice 3.0 affects the vat revenue variable, assuming that other variables are not examined in this study. 3. b2 value (x2 regression coefficient) is -1.297, indicating that the taxable entrepreneur compliance variable harms the vat revenue variable. the results of this study found that pkp compliance affects vat receipts. when viewed from the direction of the relationship, it has a negative effect, which means that if pkp compliance decreases, vat revenue also decreases. table 4. simultaneous test of the implementation of e-faktur 3.0 and compliance of taxable persons against vat revenue anova model sum of squares df mean square f sig. 1 regression 32,751 2 16,375 113,819 ,000b residual 13,524 94 ,144 total 46,275 96 a. dependent variable: vat revenue b. predictors: (constant taxable person compliance, application of e-invoice 3.0 source: data processed 2021 coefficients dependent variable: vat revenue model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 1,114 ,192 5,793 ,000 application of einvoice 3.0 1,987 ,173 2,127 11,459 ,000 taxable person compliance -1,297 ,163 -1,482 -7,982 ,000 source: data processed 2021 https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc f value obtained is 3.09. based on the table above, it can be concluded that the significance value is 0.000 < 0.05 and 113.819 > 3.09, this indicates that the variable application of e-invoicing 3.0 and the compliance variable of taxable person have a simultaneous (together) effect on the vat revenue variable, which means that the hypothesis is accepted. table 5 coefficient of determination test results model summary model r r square adjusted r square std. error of the estimate 1 ,841a ,708 ,702 ,37931 a. predictors: (constant), taxable person compliance and application of e-invoice 3.0 source: data processed 2021 the adjusted r square value is 0.072, it can be illustrated that the magnitude of the influence of pkp compliance and the application of e-invoices is 0.702 or 70.2% and the remaining 29.8 is influenced by other variables not used in the study. table 6. summary of multiple regression analysis results effect between variables regression coefficient value t-value coefficient of determination value application of einvoice 3.0→ vat revenue 1,987 11,459 0,702 taxable person compliance → vat revenue -1,297 -7,982 source: research data 2021, processed application of e-faktur 3.0 to vat revenue based on the results of the regression test, there is evidence that the application of e-invoice 3.0 affects vat receipts. this is evidenced by the value of the regression coefficient which is positively distributed that is equal to 1.987. as for the t value which is worth 11.459 more than the table value of 1.98552 indicating that there is a significant influence from the application of e-invoice 3.0 on vat receipts. compliance with taxable persons against vat revenue based on the results of the regression test, it was found evidence that taxable entrepreneur compliance affects vat receipts. this is evidenced by the value of the regression coefficient which is negatively distributed that is equal to -1.297. the calculated value which is -7.982 is more than the table value, which is 1.66071, indicating that there is a significant effect of taxable entrepreneur compliance on vat receipts. the results of this study found that pkp compliance affected vat receipts. when viewed from the direction of the relationship, it has a negative effect, which means that if pkp compliance decreases, vat revenue also decreases. implementation of e-faktur 3.0 and compliance with taxable persons on vat revenue https://www.ilomata.org/index.php/ijtc the effect of the implementation of e-invoice 3.0 and taxable person compliance to value added tax revenue at kpp pratama pasar rebo irawati, darmawan, sofyan, serebryakova 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the results of the simultaneous test (f test), it was found that the implementation of einvoicing 3.0 and taxable entrepreneur compliance affected vat receipts. this is evidenced by the simultaneous test (f test) which shows the results in the form of a significance value of 0.000 less than 0.05 and an f-count value of 113.819 which is greater than the f-table value of 3.94. this shows that the variable application of e-invoice 3.0 and the variable of taxpayer compliance have a simultaneous (together) effect on the vat revenue variable. conclusion 1. the application of e-invoice 3.0 has a positive and significant effect on vat receipts. the magnitude of the increase in effectiveness from the application of e-invoice 3.0 to vat receipts is 1.987. the significance level of the application of e-invoice 3.0 to vat receipts is 11.459. this shows that the increasing effectiveness of the application of e-invoice 3.0 will also increase vat receipts. this increase is influenced by the instruments in the study. 2. taxable person compliance has a negative and significant impact on vat receipts. the magnitude of the increase in taxable entrepreneur compliance with vat receipts is -1.297. the significance level of the taxable entrepreneur's compliance with vat receipts is -7,982. this shows that the compliance of taxable persons (pkp) has an effect on vat receipts, but shows a negative effect. this means that if the compliance of taxable persons decreases, it will result in a decrease in revenue from value added tax. 3. the application of e-invoice 3.0 and the compliance of taxable persons together (simultaneously) have a positive and significant effect on vat revenues of 113,819. the results of the study illustrate that the application of e-invoicing 3.0 and the compliance of the taxable entrepreneur (pkp) have a simultaneous effect on the acceptance of value added tax (vat). recommendation 1. for kpp pratama jakarta pasar rebo, to continue to improve its services in providing information and socialization related to the use of e-invoice 3.0 to taxable person (pkp) to increase compliance and also to increase the amount of tax revenue that will affect vat revenue. 2. for taxable persons (pkp), to be able to better understand and learn about the use of e-invoice 3.0 to facilitate taxable persons (pkp). so that the goal to provide convenience and benefit from the directorate general of taxes can be achieved. 3. for further researchers, to be able to examine more deeply to find out whether there are differences in results related to the 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(2021). does industrial clustering mitigate the sensitivity of firm relocation to tax differentials? the role of financing. finance research letters, 40, 101681. https://doi.org/10.1016/j.frl.2020.101681 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 3 july 2020 pp.152-160 https://www.ilomata.org/index.php/ijtc 152 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the influence of growth opportunity and return on equity (roe) toward company capital structure (empirical study of automotive and component sub sector companies listed on the indonesia stock exchange in 2014-2018) hamdan1, deni sunaryo2 12faculty of economics and business, serang raya university correspondent: hamdanunsera@gmail.com submitted : june 24, 2020 revised : july 10, 2020 published : july 30, 2020 abstract this study aims to determine the effect of growth opportunity and return on equity the capital structure of the automotive sub-sector companies and components listed on the indonesia stock exchange (idx) in 2014-2018. the sample used in this study is the automotive sub-sector companies listed on the indonesia stock exchange (idx) in 2014-2018. the sampling technique used was purposive sampling method and obtained 8 companies. the data collected is secondary data with the method of documentation through www.idx.com in the form of a company annual report. the analytical tool used for hypothesis testing is spps 20. the results of this study are (1) growth opportunity does not have a significant effect on the company's capital structure. (2) return on equity has a significant effect on the company's capital structure. keywords: company capital structure, growth opportunity and return on equity introduction the development of financial management is now so dynamic. this happens along with the high level of business activities and human life in the current era of globalization. this condition causes a variety of discussions about the science of financial management to be so interesting for managers, bureaucrats, and academics and researchers in general are no exception. the national automotive industry is one of the drivers of the indonesian economy. the automotive industry has a business chain starting from component manufacturing, vehicle manufacturing itself, distribution network and after-sales service, both formal and public workshops, including parts sales networks throughout indonesia. in making innovations, funds that are not insignificant are needed, so that to meet these sources of funds, the automotive industry can raise funds from internal and external sources. this is because automotive companies have favorable prospects where transportation is one of the most important needs of the community. one of the factors that makes a company competitive in the long run is because of the strength of its capital structure. so the decision on the sources of funds used to strengthen the capital structure of a company cannot be seen as a simple decision but has strong implications for what will happen in the future. factors that influence fluctuations in capital structure can come from internal and external. the internal factors include depreciation reserves, profits not shared, or retained earnings, etc. https://www.ilomata.org/index.php/ijtc the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 153 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 meanwhile, external factors. this external funding source is obtained by issuing bonds and various other long-term debt. companies with high growth opportunities tend to keep their debt ratios at a low level, this is done to maintain their credit capacity in difficult times. this means that the higher the growth of the company, the lower the debt used. . thus companies with low growth opportunities will use more long-term debt. growth opportunity for every company is different, this causes different spending decisions taken by financial managers. companies with high growth opportunity tend to spend investment expenditure with their own capital to avoid the problem of underinvestment, namely not implementing all investment projects that are positive by the company manager (chen, 2004). measuring the net profit gained from using assets. in other words, the higher this ratio, the better the productivity of assets in obtaining net profits. the company will not be separated from debt in meeting operational financing. companies that have a large enough debt always expect a large profit as well, because in theory increasing debt will certainly also stimulate an increase in profits from the company. the greater the level of ability of a company in the greater the rate of return on the net profit of automotive companies and components, it will cause the position of the company's capital owner to be stronger according to irham fahmi (2015: 82) this ratio examines the extent to which a company uses its resources to be able to provide a return on equity. (irham fahmi, 2015: 82) from the above definition, it can be concluded that roe is one of the factors that influence the fluctuation of a company's capital structure. roe also serves to determine the company's profit from the rate of return through long-term debt. according to hasni yusrianti (2013) explains that return on equity has a significant effect on capital structure. according to arma pertiwi (2014) explains that return on equity has a significant effect on capital structure. according to mochamad yahdi khairin (2014) explains that growth opportunity has a significant effect on the positive direction of the capital structure. based on the description of previous research evidence and problems in the background above, researchers are interested in conducting research with the title: "the influence of growth opportunity and return on equity on the capital structure of the company in the automotive sub sector and components listed on the indonesia stock exchange in 20142018 ". formulation of the problem 1. does return on equity (roe) have a significant effect on the capital structure of automotive sub-sector companies and components listed on the indonesia stock exchange? 2. does return on equity (roe) have a significant effect on the capital structure of automotive sub-sector companies and components listed on the indonesia stock exchange? 3. does growth opportunity and return on equity simultaneously have a significant effect on the capital structure of the automotive sub-sector companies and components listed on the indonesia stock exchange in 2014-2018? research purposes according to the problem formulation above, the objectives of this study are as follows: the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 154 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 1. to determine the effect of growth opportunity on the capital structure of automotive subsector companies and components listed on the indonesia stock exchange in the 2014-2018 period. 2. to determine the effect of return on equity (roe) on the capital structure of automotive sub sector companies and components listed on the indonesia stock exchange in the 20142018 period. 3. to find out the simultaneous influence of growth opportunity and return on equity (roe) on the capital structure of automotive sub-sector companies and components listed on the indonesia stock exchange in the 2014-2018 period. theoretical basis another definition of growth opportunity or growth opportunity is the change in the total assets of the company (kartini and arianto, 2008). growth = total year assets (t) total year assets (t-1) total year assets (t-1) (rita puji astuti, faculty of economics, pandanaran university semarang, 2015) according to irham fahmi (2015: 82) return on equity (roe) this ratio examines the extent to which a company uses its resources to be able to provide a return on equity. (irham fahmi, 2015: 82) roe = net profit equity (irham fahmi, 2016) according to irham fahmi (2014: 53) capital structure is a comparison of long-term funding sources that are loans with own capital. debt equity ratio (der) = long-term debt owner's equity (hasni yusrianti, fund research report, faculty of economics unsri 2013) figure 1 framework the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 155 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 hypothesis h1: there is a significant influence between growth opportunity (x1) to the capital structure (y) of the automotive and components sub-sector manufacturing companies listed on the indonesia stock exchange in 2014-2018. h2: there is a significant influence between return on equity (x2) to the capital structure (y) of the automotive and components sub-sector manufacturing companies listed on the indonesia stock exchange in 2014-2018. h3: there is a significant influence between growth opportunity (x1), return on equity (x2) to the capital structure (y) of the automotive and components sub-sector manufacturing companies listed on the indonesia stock exchange in 2014-2018. method the population used in this study is the automotive and component sub sector companies that have been listed on the indonesia stock exchange in 2014-2018. this study uses a purposive sampling method in determining samples. the criteria applied by researchers in the selection of samples are as follows: 1. automotive companies listed on the indonesia stock exchange during the period 2014-2018. 2. the automotive company publishes financial statements for the fifth year in a row namely 2014-2018. 3. automotive companies that have complete data during the study for factors examined are growth opportunity, return on equity and capital structure, namely 2014-2018. based on these criteria, researchers have determined that there are 8 automotive sub-sector and component companies that meet these criteria. the 8 companies will be used as a research sample with 40 observations. result and discussion table 1. descriptive statistics testing results source: results of data processing in spss 20 table 1 presents statistics from the study sample that illustrates the minimum, maximum, average and standard deviation of each variable. n value indicates the amount of data used in this study, namely the length of the year period according to the data included in the criteria. the normality test results show the point spreads around the diagonal line and follows the direction of the diagonal line, then the regression model meets the normality assumption. the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 156 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 figure 2. normality test results source: results of data processing in spss 20 table 2. normality test source: results of data processing in spss 20 the results of the normality test show table 2 can be seen in the column of significance kolmogorov-smirnov asymp.sig (2-tailed) values show above 0.05. that means that the regression model is said to be normal. table 3. multicollinearity test results source: results of data processing in spss 20 the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 157 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 based on the table above, it can be seen that all independent variables, namely growth opportunity and return on equity (roe) have a tolerance value greater than 0.10 and a vif value smaller than 10. this means that there is no multicollinearity, so good data is used in the regression model. figure 3 heteroscedasticity test results source: results of data processing in spss 20 based on the picture above, it can be seen that the residual data in both regression models spreads above and below the 0 point and does not form a specific pattern. so it can be concluded that in this study there were no symptoms of heteroscedasticity. table 4. autocorrelation test results source: results of data processing in spss 20 based on table 4. above shows that the value of durbin-watson is 1.944. this means that in this study the number is located between -2 and +2 which means there is no autocorrelation in the regression model used. table 5. multiple linear regression test results source: results of data processing in spss 20 the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 158 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 based on the above table, the regression equation can be arranged: y = a + b1x1+ b2x2+ e .......... capital structure = 29,712 growth (2,007) roe (0,033) constant coefficient (y) of 29,712; meaning that if there is no growth opportunity and roe then the beta value of 29.712. that is if the amount of growth opportunity and roe is equal to zero, then the capital structure is 29.712. regression coefficient (x1) of 2.007, each increase in the value of growth opportunity increases by one unit, then it will be followed by a capital structure value of 2.007. regression coefficient (x2) of 0.033 means that every roe addition of one unit will be followed by a capital structure value of 0.033. table 6. results of the determination coefficient analysis source: results of data processing in spss 20 based on table 6 above produces an adjusted r square value of 0.365 (36.5%). this r square value indicates the contribution of the independent variable to the dependent variable is 36.5%, while the remaining 63.5% is influenced by other variables not included with the studied variables such as liquidity, firm size, business risk and others. table 7. t-test source: results of data processing in spss 20 based on the results of the above calculation, it is known that in the first equation, the value of t (t-count) obtained in regression shows the effect of partially independent variables on the dependent variable. regression results are known that the magnitude of the value of the growth opportunity variable is 0.821 while the value of the table is 2.0261 because tcount <ttable or a significance level of 0.417> 0.05 then h1 is rejected, which means growth opportunity has no significant effect on the company's capital structure. from the regression results it is known that the value of the t-count variable return on equity (roe) is 3.973 while the value of t-table is 2.0261 because tcount> t-table or a significance level of 0,000 <0.05 then h2 is accepted, which means return on equity (roe) has a significant effect on the company's capital structure of the company. the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 159 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 table 8. f test source: results of data processing in spss 20 from the calculation results obtained, the value of fcount in the amount of 12,225. next, compare fcount with ftable. where if fcount> ftable, simultaneously the independent variables significantly influence the dependent variable. using α = 0.05, a f value of 3.25 was obtained. so the value of fcount is 12.225 and ftable 3.25 means that fcount> ftable (12.225> 3.25) or a significance value of 0.000 <0.05. thus all the independent variables in this study in the form of growth opportunity and return on equity (roe) together (simultaneously) have a significant effect on the company's capital structure. conclusion this study aims to determine the effect of growth opportunity and return on equity (roe) on the capital structure of automotive sub-sector companies and components listed on the indonesia stock exchange (idx) during 2014-2018. based on the analysis of the data that has been done, the researcher will give some conclusions as follows: (1) based on the t test results growth opportunity variable with a significant level of 0.417> 0.05, so partially the growth opportunity variable does not significantly influence the company's capital structure; and (2) based on the results of the t-test variable return on equity (roe) with a significant level of 0,000 <0.05, so partially the return on equity variable (roe has a significant effect on the company's capital structure. bound to the limitations of the research previously mentioned, here are some suggestions for further research: (1) it is expected that researchers who will conduct similar research can add or replace other variables such as liquidity, firm risk, and others. future studies can also replace different research objects; (2) the next researcher can use company size in terms of sales growth.; and (3) for companies, the current economic condition turns out to be very dependent on funding issues, especially in the case of companies that are growing constantly dealing with the issue of capital increase which aims to develop production scale and expand markets to achieve more efficient operational levels. the company must determine how much debt to capital to the company in order to achieve better financial ratios to finance the company's operational activities. reference ana, safitri (2017). pengaruh ukuran perusahaan, pertumbuhan asset, profitabilitas dan pertumbuhan penjualan terhadap struktur modal pada perusahaan cosmetics and household yang terdafar di bursa efek indonesia tahun 2011-2014. jurnal akuntansi dan pajak fakultas ekonomi universitas islam batik surakarta , vol.18, no.01 the influence of growth opportunity and return on equity (roe) toward company capital structure hamdan & sunaryo 160 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 astuti, rita puji (2015). pengaruh profitabilitas, size, growth opportunity, liquiditas dan struktur aktiva terhadap struktur modal pada perusahaan perbankan di bursa efek indonesia periode 2009-2013. fakultas ekonomi universitas pandanaran, semarang. fahmi, irham. 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october 2020 competitive performance is affected by a competitive strategy with supply chain moderates herlin rosalina febriyanti1, elva nuraina2, nur wahyuning sulistyowati3 123pgri madiun university correspondent: nurwahyu@unipma.ac.id submitted : september 20, 2020 revised : october 10, 2020 published : october 31, 2020 abstract this study aims to examine the effect of competitive strategies on company performance with supply chains as moderating. this type of research is quantitative research. the sampling technique was purposive sampling. data analysis techniques used simple linear regression and subgroups using moderated regression analysis. the results of the study show that competitive strategies have an effect on company performance. supply chain as a moderating variable strengthens the relationship of competitive strategies to company performance. low cost strategies and differentiation are used in measuring competitive strategies. where differentiation strategies are more applied than low cost strategies due to the object of research in the fields of property, real estate, building construction that produces limited and unique products at high costs. keywords: competitive strategy; supply chain; company performance introduction success in the economic sector is one of the indicators he says of an independent and prosperous society. along with the development of the globalization era and the development of industry in the 21st century, it demands an increasingly fierce business competition. the success of a competition is seen from the company's performance. the ideal company performance generates a growing profit. the indonesia stock exchange noted that up to november 1, 2018 there were 87% of companies with a total of 519 companies that had reported their third quarter 2018 financial statements. total assets increased by rp. 510 trillion, namely an increase of 6% from the previous year. the end of 2017 amounted to rp 9,177 trillion to rp 9,687 trillion in the third quarter of 2018. the highest increase in assets was by the mining, miscellaneous industry, and property, real estate and building construction sectors. net profit increased by 12% or rp. 26 trillion. the third quarter of 2017 amounted to rp 218 trillion to rp 244 in the third quarter of 2018. increase in the percentage of net profit by the basic industry and chemical, miscellaneous industry, and property, real estate and building construction sectors (bursa efek indonesia, 2018). the indonesia stock exchange recorded increased performance in the property, real estate and building construction sectors. shares in this sector have grown to 7.37% year to date. several issuers who have penetrated the target market include pt pp properti tbk, which is targeting marketing sales of around 3.8 trillion in 2019. as for the realization of the sales target sudah didapatkan oleh pt pp properti tbk pada tahun 2018 sebesar rp 3,4 triliun (anonim, 2019). head of primary division of the fiscal policy agency (bkf) asep nurwanda said that the construction sector and the real estate sector are expected to continue to grow steadily in line with the progress of building investment and the sustainability of infrastructure provision and public housing https://www.ilomata.org/index.php/ijtc mailto:nurwahyu@unipma.ac.id competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 186 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 programs. revenues from the property sector increased by 6.9% from 2017 to 2018. taxes received by the state originating from this sector can be realized up to idr 83.51 trillion per period 31 december 2018. in 2019 the government will continue to be committed to supporting the housing program through the state budget of idr 10.39 trillion (rama, 2019). philosophical assumptions underlie the stewardship theory which explains that humans can basically be trusted, their behavior is full of responsibility, have integrity, and are always honest with other parties (kholid & bachtiar, 2014). managers are motivated to have their attitudes and behaviors reflected collectively for the benefit of the organization so that the main characteristic in this theory is cooperation between all components in the organization. this theory design is useful for testing the situation, executives in the company as stewards which are usually done by managers to be motivated to take actions according to the wishes of the principal in order to achieve organizational goals donaldson & davis (in suhartati & rosietta, 2012). an increase in company assets and profits will reflect an increase in company performance. performance can be assessed both financially and non-financially. performance is a description of how much the achievement of a policy or activity plan is achieved in the process of realizing the targets, aspirations, vision and mission of the organization in the form of a structured plan directed by an organization. performance indicators from a financial perspective are the level of sales growth, profit level, return on capital employed, and level of investment use (moeheriono, 2012). company performance can be calculated using tobin's q ratio. tobin's q value comes from the total value of the stock market and compares the market value of debt with the total value of capital related to production activities tobin (in sudiyatno & puspitasari, 2010). the success of achieving a performance cannot be separated from the implementation of a company's strategy. strategy is a tool that is useful in the process of achieving the ideals of an entity where these ideals are related to the formulation of long-term goals, planned follow-up programs, and priority placement of each resource, the resources in question include non-human components as well as humans (fitriadi, soekarto, & sunarti, 2013). the size of the suitability of a strategy determines the success or failure of a strategy that has been made (slamet, nainggolan, ramdani, hendriyanto, & ilma, 2016). there are two generic competitive strategies, namely cost advantage and differentiation. cost advantage can be achieved by implementing cost reduction, while differentiation in achieving profit is the means of providing increased service levels porter (in ritonga, 2018). the success of a competitive strategy cannot be separated from the interference of the business network or what is often known as supply chain management. supply chain management is the coordination of all supply chain activities, starting from the procurement of raw materials until the product is received by the customer and the customer is satisfied. the implementation of supply chain management uses a set of methods to streamline the functions of suppliers, manufacturers, warehouses, distributors, wholesalers or retailers, as well as logistics activities so that the resulting products can be distributed in an accurate total, the right location according to target achievement, on time without delay so that minimizing the value of the load and customer service satisfaction is fulfilled simchi-levi (in rahmasari, 2008; heizer and render (in ilmiyati & munawaroh, 2016). there are ways to measure activities in supply chain management that can apply a combination of scor and roa performance measurement models, including company wealth, cost, time, reliability, capacity, responsiveness, productivity, flexibility sidarto (in hanugrani, setyanto, & efranto, 2013). competitive strategy with indicators of low cost strategies affects company performance and competitive strategies with indicators of differentiation strategies have an effect on company competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 187 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 performance (fadlilah, 2013). competitive strategy has a significant positive effect on company performance with indicators of low cost strategies and differentiation strategies, in line with ulfa (2015) arguing that the role of supply chain management is able to strengthen the relationship of competitive strategy with company performance. previous research examined manufacturing companies listed on the idx, while the novelty in this study was aimed at property, real estate, and building construction companies which aimed to examine the effect of competitive strategy on company performance, test whether the supply chain was able to strengthen the relationship between the two. this study also aims to determine whether the results will be the same as previous studies even though the types of products produced are different due to different research objectives. the theoretical uses of research include: 1) providing scientific contributions that are useful in understanding company management starting from competitive strategies, supply chain, and company performance, 2) can describe the effect of competitive strategy on company performance that is influenced by supply chain. 3) as a reference for comparing and developing future research in the field of financial management. while the practical uses of research include: 1) the author can implement the knowledge gained during the lecture period, 2) companies can source additional information about competitive strategies and supply chain in making decisions, improve or plan for better company performance, 3) results this research can be used as a reference for investors in making investment decisions, namely the competitive strategy used by the company can have an impact on improving company performance, 4) adding a university reference collection for academics regarding the effect of competitive strategies on financial performance with the supply chain as a moderating variable. methods this research is a quantitative research with secondary data sources in the form of annual financial reports audited by the company and published by the official website of the indonesia stock exchange and the official website of property, real estate, and building construction companies. the population in this study was 58 with a total sample of 32 property, real estate, and building construction companies listed on the indonesia stock exchange (bei) in the 2015-2017 period. this study uses nonrandom sampling because not all elements of the population have the same criteria. while the sample was taken based on the purposive sampling method because in determining the sample the researcher considered and based on the criteria set by the researcher. the data analysis technique used is descriptive statistical analysis, simple linear regression analysis and the moderate regression analysis (mra) test to determine the results of moderation. the calculation of a competitive low cost proxy strategy analysis uses asset utilization efficiency, namely the ratio of total sales revenues to total assets. the analysis of competitive differentiation proxy strategy calculation using price premium capability, namely the ratio of gross margin compared to total sales revenues (gani & jermias, 2006). asset utilization efficiency = total sales revenues total asset price premium capability = gross margin total sales revenues the calculation of supply chain is based on a combination of the two financial ratios, namely the measure of cash generation and asset efficiency. first, calculating the cash generation ratio by comparing cash inflows from the entity's operating activities with sales. second, the calculation of competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 188 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the asset efficiency ratio by comparing sales to total assets minus debt christopher (in suhartati & rosietta, 2012). supply chain = cash flow from operation total asset – current liabilities meanwhile, the calculation of company performance uses tobin's q ratio, which is the ratio of the market value of the entity's shares compared to the book value or the acquisition value of the entity's equity tobin, jose et al. (in ulfa, 2015). kp = (closing price x total outstanding common shares) + (total payable + stock – current assets) total company assets results and discussion table 1. simple linear regression test coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) ,010 ,004 2,523 ,013 sk_aue ,757 ,055 ,818 13,783 ,000 a. dependent variable: kp source: results of data processing of spss version 24 (2019) table 2. simple linear regression test coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) ,000 ,000 1,525 ,131 sk_ppc ,993 ,004 ,999 223,194 ,000 a. dependent variable: kp source: results of data processing of spss version 24 (2019) based on table 1. the results of hypothesis testing indicate that competitive strategy has a positive effect on company performance. the test results are in accordance with the results of the proposed research hypothesis. competitive strategy t-test with low cost proxy (sk_aue) shows t count> t table (13,783> 1,661) and a sig value of 0,000 (0,000 <0.05). this means that competitive strategies with low cost proxies have an effect on company performance. meanwhile, based on table 2. the results of the t test for competitive strategy with differentiation proxies (sk_ppc) show t count> t table (223,194> 1,661) and a sig value of 0,000 (0,000 <0.05). this means that competitive strategies with differentiation proxies have an effect on company performance. the competitive strategy of a company can be measured using a low cost indicator that is calculated or formulated using asset utilization efficiency. when implementing a competitive strategy with a low cost strategy indicator, it will directly have an impact on improving company performance. this identifies its importance in the efficiency of the company's operational activities. the less expenses incurred to fulfill operational activities; the less utilization of company assets is used. the impact of the minimal use of company assets is an increase in company performance (ulfa, 2015). low cost applications are usually carried out by large-scale businesses that promote standard products or services with relatively small differentiation and are acceptable to most buyers. in addition, companies usually provide discounts to customers in order to maximize sales and competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 189 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 increase market share (sarwono, 2011). a low cost competitive strategy (cost leadership) seeks to improve efficiency and cost control throughout the organization's supply chain. low costs can be minimized through the economies of scale approach to production, studying the effect of curves, tight cost control, and minimizing costs in areas, for example research and development, services, sales or advertising porter (in aji, 2015). competitive strategy with differentiation indicators using price premium capability measurement. the use of differentiation shows that the company can impose a price premium on its customers. the charging of prices is carried out through techniques of using strategies that innovate their products and provide attractive services (ulfa, 2015). organizations have been successful in differentiating their products through improved quality functions, both more reliable after-sales service and delivery and through improved functionality porter (in aji, 2015). when customers feel satisfaction with the quality provided by the company, the customer will pay loyal with a special price (price premium). in addition, with the existence of a differentiation strategy, customers or consumers will indirectly provide a good image assessor to the entity, the impact on the brand's popularity followed by increased sales, this will improve company performance. the characteristics of organizations that operate using a competitive strategy with differentiation indicate that the organization has an above average profit margin due to being unique in the market and will continually update its products or services to meet customer needs (aji, 2015). the findings in this study are the application of low cost strategies or competition for cost control carried out by several companies, including the company duta pertiwi tbk using a marketing strategy through a price lock program by giving discounts to customers when making down payment purchases. in addition, there is a price amnesty program, namely the availability of discounts to customers. products from duta pertiwi tbk include landed houses, shop houses and offices, industrial estates, commercial lands, and apartments. some companies that use a low cost strategy by optimizing operational costs but combined with a differentiation strategy, namely the company pt nusa raya cipta tbk, pp (persero) tbk, wijaya karya tbk. meanwhile, the research findings of several companies that use differentiation strategies are more than those of low cost strategies. property, real estate, and building construction companies usually use a differentiation strategy in terms of improving customer service and innovating the uniqueness of the resulting product. some companies that use a differentiation strategy include companies: alam sutera realty tbk, bekasi fajar industrial estate tbk, bhuwanatala indah permai tbk, bumi serpong damai tbk, cowell development tbk, ciputra development tbk, duta anggada realty tbk, nusa kontruksi enjiniring tbk, intiland development tbk, nirvana development tbk, indonesia prima property tbk, plaza indonesia realty tbk, pp (persero) tbk, danayasa arthatama tbk, total bangun persada tbk, wijaya karya tbk. competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 190 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 table 3. moderate regression analysis test coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) ,008 ,007 1,121 ,267 sk_aue 1,087 ,188 1,185 5,782 ,000 sc ,038 ,127 ,028 ,299 ,766 interaction1 ,103 ,051 ,418 2,030 ,047 a. dependent variable: kp source: results of data processing of spss version 24 (2019) tabel 4. uji analisis regresi moderat coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -,001 ,002 -,432 ,667 sk_ppc ,889 ,042 ,904 20,998 ,000 sc ,048 ,027 ,035 1,788 ,079 interaction2 -,028 ,013 -,090 -2,157 ,035 a. dependent variable: kp source: results of data processing of spss version 24 (2019) based on the results of hypothesis testing with the mra model in table 3. and table 4. it shows that the supply chain can strengthen the effect of competitive strategy on company performance is indicated by a significance value <0.05. that is, the moderating variable can strengthen the relationship between x and y variables. the results of the interaction relationship in table 3 are shown from the significant value of the interaction between the competitive strategy variable with low cost proxies and the supply chain at a sig value of 0.047 (0.047 <0.05). whereas in table 4. the significance value of the interaction relationship between the competitive strategy variable and the proxies for differentiation and supply chain is a sig value of 0.035 (0.035 <0.05). this means that in this case it can be concluded that the supply chain strengthens the influence of competitive strategies on company performance. the implementation of the correct supply chain management according to the supply chain management concept will contribute to the impact of increasing competitive advantage in terms of its products and in the supply chain system implemented by the entity. the entity must prove that the implementation of the supply chain is able to drive the entity's competitive strategy heyzer and render (in ulfa, 2015). supply chain illustrates that an approach whose use aims to achieve efficient integration of several parties, for example suppliers, distributors, manufacturers, retailers, logistics, and customers. the existence of a supply chain has an impact on cost control and a rapid increase in service quality. supply chain management can be used as a set of tools for the creation of a competitive strategy in implementing better company performance growth than before. qi, zhao, & sheu (2011) suggest that supply chain strategies can be used to support the implementation of competitive strategies. the implication of supply chain management has three objectives, namely costs can decrease according to the limits set by the entity, decrease the use of capital, renew and improve services to buyers. achieving cost reductions by minimizing logistics costs, for example in the selection of transportation and warehousing tools and models with the lowest prices. minimizing the level of investment in logistics will have an effect on reducing capital. service improvement activities are competitive performance is affected by a competitive strategy with supply chain moderates febriyanti, nuraina, & sulistyowati 191 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 jointly carried out actively in order to have an influence on the company's profitability and revenue anatan and ellitan (in suhartati & rosietta, 2012). the test results between the interaction of supply chain variables and competitive strategies with low cost proxies and differentiation are proven to have an effect on strengthening the relationship to company performance. so it can be concluded that the sample companies that implement supply chain management in an effort to focus in terms of fulfilling buyer demand on the lowest price. the total costs incurred are minimized using supply chain relationships with other parties and good product and service innovation strategies. this implementation will have an impact on the creation of a good competitive strategy and the realization of an increase in company performance. research findings in the implementation of supply chain management, almost all property, real estate, and building construction companies implement it, namely through cooperative relationships with other parties, for example with bumn, bumd, foreign parties, raw material providers, advertising media marketing parties, event organizers, banking parties, and companies in other sectors. conclusion the results of research and discussion indicate that competitive strategy has a positive effect on company performance. a competitive strategy with two proxies of low cost and differentiation has an effect on financial performance. supply chain strengthens the influence of competitive strategy on company performance. this means that the supply chain variable is a moderating variable. the findings in this study are that some companies use more differentiation strategies because the products of companies engaged in this sector produce products with a selling value of tens of millions so that the costs incurred in the product manufacturing process are very large. in addition, the products produced have characteristics and uniqueness that cannot be separated from the imposition of premium prices on buyers. the implementation of supply chain management involves many parties, both internal and external, starting from the processing of the supply of raw materials until the product is ready to be purchased. the limitation in this study is that not all of the companies' financial statements in the researched sector describe the account closing price and the number of ordinary shares outstanding. in addition, there were several companies in the 2015 2017 period that did not publish their financial reports either on the idx website or on the company's official website. so this will affect the number of research samples. it is hoped that the next research, when using secondary data, can conduct research on more than one sector of the company and increase the period of years in the study. references aji, p. 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(2015). pengaruh strategi bersaing dengan supply chain management sebagai variabel moderating pada perusahaan manufaktur di bursa efek indonesi. perbanas institutional repository, 1–18. http://wartakota.tribunnews.com/2019/01/24/perkembangan-infrastruktur-dongkrak-pertumbuhan-properti-2019?page=2 http://wartakota.tribunnews.com/2019/01/24/perkembangan-infrastruktur-dongkrak-pertumbuhan-properti-2019?page=2 the illomata international journal of management ijjm ilomata international journal of management p-issn: 2714-8971; e-issn: 2714-8963 vol. 1 no. 3 july 2020 pp.132-138 https://www.ilomata.org/index.php/ijjm 132 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the effect of return on equity (roe) and earning per share (eps) on stock prices in indonesia stock exchange 2015-2018 herlina lusiana management study program, faculty of economics kalimantan islamic university muhammad arsyad al banjari banjarmasin, indonesia correspondent: lusiana.muyoto@gmail.com submitted : may 25, 2020 revised : june 15, 2020 published : july 30, 2020 abstract this study aims to analyze the source of a company's profitability by choosing two main factors namely, return on equity (roe) and earning per share (eps) as the strength and resilience of companies engaged in food and beverage listed on the indonesia stock exchange. this study uses time series data from 2015 to 2018. the dependent variable is the stock price. meanwhile the independent variables are return on equity (roe) and earning per share (eps). the determination of the sample uses positive sampling, the sampling technique uses two special criteria from researchers. the first criterion, only food and beverage companies that publish financial statements in full during the period 2015 to 2018, and the second criterion, food and beverage companies that have financial statement data in accordance with the studied variables, namely return on equity (roe) and earning per share (eps). samples that meet the criteria are 11 registered food and beverage companies on the indonesia stock exchange for the period 2015 to 2018. data analysis techniques using multiple linear regression with the help of the spss program. the findings show that return on equity (roe) has a positive and significant impact on stock prices, while earning per share (eps) has an impact negative and significant to stock prices. this finding confirms that strength the profitability of a company through return on equity (roe) affects the stock prices of food and beverage companies in indonesia. therefore, it is important to maintain the company's profitability through return on equity (roe) from the investor's perspective, not from the company's view. meanwhile, interesting findings from a company's profitability through earning per share (eps) do not affect the stock prices of food and beverage companies in indonesia. because earnings per share or earning per share (eps) is obtained from the perspective of the company's financial statements where there are differences in the size and size of the company's expenses other than earning per share (eps) can turn out to be high if the number of shares outstanding is reduced. keywords: profitability, return on equity (roe), earnings per share (eps), stock prices, indonesia stock exchange (idx) introduction the current global conditions make it relatively difficult for investors to make investment choices in the types of companies that provide many benefits to their shareholders. companies that maximize profits show that the company has a correlation with corporate financial indicators such as return on equity (roe) and earning per share (eps). therefore, company management can design and review the determination of strategies in order to improve the company's financial performance to show better financial indicators (firdaus, 2020). good financial indicators will be of interest to investors, especially investing in the indonesian capital market, because they produce maximum profits (kai et al., 2018). therefore, it becomes an important factor in the company's https://www.ilomata.org/index.php/ijjm mailto:lusiana.muyoto@gmail.com the effect of return on equity (roe) and earning per share (eps) on stock prices in indonesia stock exchange 2015-2018 lusiana 133 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 financial fundamentals. the issuer's financial statements can be seen the level of ability of the company's performance to generate profits and the ability of the company to pay debt and how effective and efficient the level of managing company wealth (fakhri et al., 2020). for measuring the financial health of a business firm, there are lots of techniques available. but the altman’s z-score has been proven to be a reliable tool across the globe. this model devotes to predict possibilities of bankruptcy of manufacturing concerns. there is evidence that it has 76.9% accuracy in predicting the bankruptcy of the underlying sample (begley et al. 1996). altman (1968) defines five predicted factors that can be used to test the validity of multivariate model. the model is based on financial ratios. using financial ratios to predict bankruptcy can be accurate up to 90% (chen & shemerda, 1981). hence, this research aims to bankruptcy prediction using altman z-score model in retail trading company in indonesian. return on equity (roe) is a ratio used to measure net income after tax with their capital (kasmir, 2015). return on equity (roe) can also show the power to the extent of generating investment returns based on the book value of shareholders. the higher the return on equity (roe), the better, because the position of the owner of the company is getting stronger, so investors can measure the extent of the return on investment they have done (asraf & desda, 2020). the results of empirical studies strengthen return on equity (roe) has an effect on stock prices, such as empirical studies (lumingkewas, 2013); (sanjaya, 2015); (riani, 2016); (sumaryanti, 2017); and (nurlia & juwari, 2019). the interesting thing is that there are differences in findings that return on equity (roe) has no effect on stock prices, such as empirical studies conducted (aning tyas & septa saputra, 2016); (susanto, 2016); (zaky, 2016); (sumaryanti, 2017); (latifah & laila, 2017); (utara, 2017); (andry, 2017); (amalya, 2018); (winda tristanti & sari marliani, 2019); and (prima & ismawati, 2019). furthermore, earning per share (eps) is a form of giving benefits to shareholders from each sheet owned (fahmi, 2018). the existence of high profit giving to shareholders, then the demand for shares of the company will be high. the company's stock price, thereby encouraging investor interest to invest (indriawati & nurfadillah, 2020). the results of empirical studies prove that earning per share (eps) has an influence on stock prices, such as empirical studies (marcellyna & hartini, 2011); (choirani, 2013); (muksal, 2015); (yumia & khairunnisa, 2015); (wicaksono, 2015); (saryanti, 2015); (mujiono, 2017); (fajrian & sumawidjaja, 2018); (lilianti, 2018); (azmy, ahmad; lestari, 2019); (alifiawan et al., 2019); and (indriawati & nurfadillah, 2020). however, there are also contradictory findings that earning per share (eps) does not have an effect on stock prices, such as empirical studies (aning tyas & septa saputra, 2016); (sumaryanti, 2017); and (andry, 2017). the research was conducted on 11 food and beverage companies listed on the indonesia stock exchange (idx) in 2015-2018. fluctuating capital market conditions today are important because they have an impact on investment interest, even though the number of companies that register increases. the formulation of the problem is proposed based on the business phenomenon and the research gap phenomenon mentioned above, 1) does return on equity (roe) affect stock prices; and 2) do earning per share (eps) affect stock prices. while the research objective is to analyze the source of a company's profitability by choosing two main factors, namely, return on equity (roe) and earning per share (eps) as the strength and resilience of companies engaged in food and beverage listed on the indonesia stock exchange. the effect of return on equity (roe) and earning per share (eps) on stock prices in indonesia stock exchange 2015-2018 lusiana 134 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 method table 1. research samples no company code company name 1. alto tri banyan tirta tbk 2. dlta delta djakarta tbk 3. icbp indofood cbp sukses makmur tbk 4. indf indofood sukses makmur tbk 5. mlbi multi bintang indonesia tbk 6. myor mayora indah tbk 7. psdn prasidha aneka niaga tbk 8. roti nippon indosari corpindo tbk 9. sklt sekar laut tbk 10. sttp siantar top tbk 11. ultj ultra jaya milk industry tbk source: secondary data processed, 2020 (www.idx.co.id) this research uses a descriptive method through a quantitative approach, with the reason that the research variable return on equity (roe), earning per share (eps) and share price focuses on the problem of novelty and the phenomena that occur at this time. furthermore, the results of the study are explained in the form of numbers that have meaning. return on equity (roe) with the symbol (x1) and earning per share (eps) with the symbol (x2) are used as research independent variables. while the stock price with the symbol (y) is used as the dependent variable of research. the data used in the form of secondary data, namely, the 2015-2018 financial statements that have been published by the indonesia stock exchange. the study population numbered 25 food and beverage companies listed on the indonesia stock exchange in 2015-2018. determination of the sample using purposive sampling, the sampling technique uses two criteria from researchers. the first criterion, only food and beverage companies that issue financial reports in full 2015-2018, and the second criterion, food and beverage companies that have financial report data in accordance with the studied variables, namely return on equity (roe) and earning per share (eps). so the samples that meet the criteria are 11 food and beverage companies listed on the indonesia stock exchange 2015-2018. data analysis techniques using multiple linear regression with the help of the spss program. the regression equation used is as follows: y= α + 1 x1 + 2 x2 + e y = stock prices α = constant x1 = return on equity (roe) x2 = earnings per share (eps) 1, 2, = regression coefficient e = error the research consists of two hypotheses to be verified. h1= return on equity (roe) has a significant positive effect on stock prices h2= earnings per share (eps) has a significant negative effect on stock prices the framework for this research is as follows: return on equity (roe) (x1) earnings per share (eps) (x2) stock price (y) h1 h2 http://www.idx.co.id/ the effect of return on equity (roe) and earning per share (eps) on stock prices in indonesia stock exchange 2015-2018 lusiana 135 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 figure 1. conceptual framework result and discussion table 1. results of regression analysis using spss version 23 variable regression coefficient beta t-value sights information constant (b0) 818,425 return on equity (x1) 363,780 ,805 6,504 ,000 significant earnings per share (x2) -27,232 -,397 -3,209 ,003 significant adjusted r square = 48,4% r square = 50,8% r = 71,3 f value = 21,171 sig. f = 0,000 asp. sig. (2-tailed)=0,200 vif =1,278 abs_res x1=(sig.) 0,061 abs_res x2=(sig.) 0,095 source: data processed, 2020 based on table 1 above, that the multiple regression coefficients for the variables return on equity (roe) (x1) of 363.780 and a variable earning per share (eps) (x2) amounted to 27.232. so the regression equation is as follows: y= 818,425 + 363,780 x1 27,232 x2 the coefficient value (β1) amounts to 363,780, if return on equity (roe) (x1) increases 1 percent, then it can be predicted that the stock price will increase by 363.780 percent with the assumption of other variables such as earning per share (eps) fixed. coefficient return on equity (roe) p-value, the return on equity (roe) has a positive effect on stock prices. value coefficient(β2) amounted to -27.232, if earning per share (eps) (x2) increased 1 percent, then the stock price can be predicted to be down at 363.780 percent, assuming other variables such as return on equity (roe) remained. the coefficient of earning per share (eps) is negative, so the earning per share (eps) has a negative influence on stock prices. based on the t test results in table 1. above, it can be seen that return on equity (roe) (x1) has a positive and significant effect on stock prices, because it has a significance value greater than 0.05 (sig.0,000>0.05 ). furthermore earning per share (eps) (x2) has a negative and significant effect on stock prices, because it has a significance value greater than 0.05 (sig.0.003>0.05). effect of return on equity (roe) on stock prices the results of t-test return on equity (roe) (x1) have a positive and significant effect on stock prices that move on food and beverage companies on the indonesia stock exchange can be proven or accepted. the findings show that return on equity (roe) has a positive and significant impact on stock prices. if return on equity (roe) (x1) has increased, then it can be predicted that stock prices will increase. return on equity (roe) is a ratio used to measure net income after tax with their capital (kasmir, 2015). the higher the return on equity (roe), the better, because the effect of return on equity (roe) and earning per share (eps) on stock prices in indonesia stock exchange 2015-2018 lusiana 136 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the position of the owner of the company is getting stronger, so investors can measure the extent of the return on investment they have done (asraf & desda, 2020)(asraf & desda, 2020). this finding confirms that the strength of a company's profitability through return on equity (roe) can affect the stock prices of food and beverage companies in indonesia. therefore, it is important to maintain the company's profitability through return on equity (roe) whose substance is the investor's view, not the company's view. the findings of this study, strengthen the results of empirical studies conducted by (lumingkewas, 2013); (sanjaya, 2015); (riani, 2016); (sumaryanti, 2017); dan (nurlia & juwari, 2019). effect of earning per share (eps) on stock prices test results earning per share (eps) (x2) a significant negative effect on stock prices moving in the food and beverage company in indonesia stock exchange can be proven or acceptable. findings show that earning per share (eps) has a negative and significant impact on stock prices. an interesting finding is that the profitability of a company through earning per share (eps) does not affect the stock prices of food and beverage companies in indonesia. because earnings per share or earning per share (eps) is obtained from the perspective of the company's financial statements where there are differences in the size and size of the company's expenses other than earning per share (eps) can turn out to be high if the number of shares outstanding is reduced. earnings per share (eps) is a form of giving benefits to shareholders from each sheet owned (fahmi, 2018). given the high profits to shareholders, the demand for the company's shares will be high. the high demand for shares has an impact on increasing the company's stock price, thus encouraging investor interest to invest (indriawati & nurfadillah, 2020). the findings of this study, strengthen the results of empirical studies conducted by (aning tyas & septa saputra, 2016); (khairani, 2016); (sumaryanti, 2017); dan (andry, 2017). conclusion return on equity (roe) has a positive and significant impact on stock prices. if return on equity (roe) (x1) has increased, then it can be predicted that stock prices will increase. the strength of a company's profitability through return on equity (roe) can affect the stock prices of food and beverage companies in indonesia. therefore, it is important to maintain the company's profitability through return on equity (roe) whose substance is the investor's view, not the company's view. furthermore earning per share (eps) does not affect the stock prices of food and beverage companies in indonesia. because earnings per share or earning per share (eps) is obtained from the perspective of the company's financial statements where there are differences in the size and size of the company's expenses other than earning per share (eps) can turn out to be high if the number of shares outstanding is reduced. this study is limited to the effect of return on equity (roe) and earning per share (eps) on stock prices engaged in food and beverage companies listed on the indonesia stock exchange. this study also has limited sampling in only 11 companies. it is hoped that further studies will take more samples so that research results can be generalized. reference alifiawan, m. m., ramadhan, a. m., & radianto, d. o. 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(2016). pengaruh analisis fundamental terhadap harga saham (studi empiris pada saham perusahaan sement yang terdaftar di bursa efek indonesia periode 2011 – 2014). jurnal ekonomak. https://doi.org/10.1192/bjp.205.1.76a the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 202-214 202| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc trust analysis, service quality on purchase interest, atome payment moderation koerniawan hidajat1, fais datul fidad nurul islam2 12university august 17, 1945, indonesia correspondent: koerniawan.hidajat@uta45jakarta.ac.id1, faisdatul129@gmail.com 2 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: hidajat, k., islam, f.d.f.n. (2022). trust analysis, service quality on purchase interest, atome payment moderation. ilomata international journal of tax and accounting, 3(2), 202-214. https://doi.org/10.52728/ijtc.v3i2.442 abstract: the shopping center at bata sunter mall in jakarta experienced a decline in sales due to the covid-19 pandemic, entering the new normal experienced a change in shopping. the aim of this approach is to fulfill consumer trust and make positive use of digital technology. the research method of this research is casual associative quantitative and the data obtained through a questionnaire. the results of this study indicate that entering the new normal is a step for consumers to shop during the pandemic. since its implementation, physical distancing has been in the rules of the indonesian government and its policies. keywords: trust x1; service quality x2; interest in buying batay shoes; easy payment z. this is an open access article under the cc-by 4.0 license. introduction cases in indonesia experienced the covid-19 pandemic starting friday, march 2, 2020, the spread of this virus had a major impact on the economy (atmojo et al., 2020; el-chidtian et al., 2021; karyono et al., 2020; yusmar et al., 2021). especially in the economic sector that sells in stores, some of the shop entrepreneurs are closed so that people find it difficult to meet their daily needs (arianto, 2020; dai et al., 2021; damayanti, 2021; kusumastuti, 2020; schwab et al., 2019; wardana, 2021). to overcome this situation, people turn to social media, such as shopping, traveling and everyday life preferring online. the phenomenon in the field shows that the covid-19 pandemic has caused changes in people's lifestyles, which are increasingly shopping online compared to previous years (liu et al., 2020; shang et al., 2020; themba et al., 2021; wei & dong, 2022; wulandari et al., 2021). trust is a foundation in a business process, a transaction between two or more parties will occur if both parties trust each other. trust in the business world will not appear instantly, but must be built from the start of a business. consumer trust according to consumer ratings is a seller's reliability in experience and the fulfillment of consumer expectations and satisfaction (firdayanti, 2012; hsin chang & wang, 2011). the number of digital transactions among indonesians during the covid-19 pandemic has increased significantly. shopee is an e-commerce platform, which recorded an increase in transactions in q2-2020 up to 130% compared to the same period last year (bahrah & fachira, 2021; liu et al., 2020; pranata, 2022; supartono, 2022). mailto:koerniawan.hidajat@uta45jakarta.ac.id mailto:faisdatul129@gmail.com https://doi.org/10.52728/ijtc.v3i2.442 trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 203 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consumers can adapt fluidly or flexibly to conditions and situations by immediately switching to the use of digital wallets and service applications and buying and selling. through the internet, making it easier for consumers to find out about the goods they want to buy from the brand or color. of course, digital wallets make it easier in the current era as an alternative to payment transactions so you can keep your distance (aulia, 2020; beeler et al., 2022; ferrari, 2022; tupikovskaja-omovie & tyler, 2021; vrain et al., 2022). 1. does consumer safety trust have a positive effect on buying interest in brick shoes? 2. does service quality have a positive effect on buying interest in brick shoes? 3. does the ease of payment have a positive effect on buying interest in brick shoes? 4. does the ease of payment have the ability to strengthen or weaken the significant positive effect of security trust on buying interest in brick shoes? 5. does the ease of payment have the ability to strengthen or weaken the positive significant effect of service quality on buying interest in brick shoes?  consumer trust 1. definition of trust trust is a basic thing in doing a business. trust arises if it can be proven, so that customer satisfaction can occur (huang et al., 2022; prakoso, 2017; yuwen et al., 2022). trust indicator according to wiedenfels, the indicators of trust include: integrity, honesty and ability to keep promises from trusted parties (seller) kindness. attention and motivation to act in the interests of consumers by providers of goods (cheng et al., 2022; farohi, 2017; li et al., 2021). 2. service quality the definition of quality is all the characteristics and characteristics of a product or service that have the ability to affect the satisfaction of a need that can be implied (kotler & keller, 2016). quality is a characteristic of a product and service to meet existing needs. services are activities provided by one party to another without any transfer of rights/ownership and are intangible. we can think of this service as a service. business will continue to exist and be successful with competitors if it can create a good, quality and affordable product for the community. to meet these conditions, companies must understand consumer behavior, what consumers want and that can provide satisfaction to the consumers concerned. the development of science, technology and the ease of all reach of access make consumers demand the provision of good quality and service from all. 1) tangible, namely the quality that can be directly felt by the community both in terms of appearance and treatment felt in service 2) reliability, namely the service felt by consumers in accordance with the promises previously delivered, which is a minimal service 3) responsiveness (responsiveness), namely responsive behavior in serving. 4) assurance, which is a guarantee of quality and safety. 5) empathy, namely an attitude that really pays attention to customers, cares about the interests of customers which is carried out individually. trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 204 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. interest in buying bata shoes interest is one of the psychological aspects that has a considerable influence on attitudes and behavior (schiffman & kanuk, 2007). buying interest is the tendency of a consumer to buy a brand, or take an action related to a purchase (aries et al., 2018). there are several indicators to measure buying interest, namely: 1) interested in finding information about the product. 2) want to know the product. 3) interested to try. 4) consider buying. 5) want to own the product (hadithya & hidayah, 2021). 4. ease of payment digital payments have more advantages than disadvantages analyzing the effect of non-cash payment instruments on the stability of the indonesian financial system, the results of which are based on an analysis of transactions using debit cards and e-money which have a positive impact on the flow of money. although the e-money variable has no direct effect on inflation, it still has an impact on increasing the money supply, the existence of electronic money as a modern financial transaction tool with the results, the development of start-up businesses has an increasing effect on electronic money such as go-jek and grab transportation transactions (hardiky et al., 2021). the use of a qr code payment system is a popular system today. well-known brands have started using qr codes. even msmes are now a target for mobile payment service providers. this is evidenced by the proliferation of msmes that provide online payment services, especially qr code-based. not only that, even vegetable traders at bintaro market and cloth sellers at mayestik market, south jakarta have used the qr code as a payment medium (musyaffi & kayati, 2020). the phenomenon in the field shows that the covid-19 pandemic has caused changes in people's lifestyles, which are increasingly doing online shopping compared to previous years and indicators of ease of payment. ease of payment technology, ease of shopping, ease of application payments (wulandari et al., 2021). method in his study of quantitative research, the research was conducted using causal associative quantitative research methods, with survey techniques using questionnaires. in this study, the researcher looked for a cause-and-effect relationship (permana, 2020). the population is a generalization area consisting of objects/subjects that have certain qualities and characteristics that are determined by researchers to be studied and then drawn conclusions (sugiyono, 2019). the population is all consumers of bata shoe shop making purchases in north jakarta. the reason the researchers chose the sunter mall area is known to have high investment opportunities and is close to residents who are also frequently visited from young children to adults. the sample is the number and characteristics of the population. for example, if the population is larger, it is impossible for researchers to study the entire population due to limitations, energy trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 205 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and time, as researchers can use samples taken from the population (sugiyono, 2019). this sample is based on calculations using formula as follows: n = z2p ( 1-p ) d2 n = 1,962 0,5(1-0,5) = 3,8416 x 0,25 = 0,9604 = 96,04 0,12 0,01 0,01 information: n: number of samples required z: normal distribution value at 95% significance level (.96) p: maximum estimate 50% = 0.5 d: sampling error 10% or alpha (0,10) (lemeshow et al., 1994) the quantity z represents the number of standard errors that are far from the average. the quantity d is called precision and can be made as small as desired simply by increasing the sample size. in particular, if z is chosen to be 1.960, then 95% of all sample proportions will fall within the standard error of 1.960 of the population proportion p, where the standard error is equal to p(1-p)/n. unfortunately, this standard error is a function of the unknown population parameter p. however, it should be noted that p(1-p) takes the following values for the different p options. p p(1-p) 0,5 0,25 0,4 0,24 0,3 0,21 0,2 0,16 0,2 0,09 figure 1. lemeshow rumus formula source: (lemeshow et al., 1990, p. 11) based on this formula research, the minimum known researcher is 96 respondents, which will be rounded off by the researcher to 101 respondents. the reason the researcher uses the formula is because it is highly recommended, especially for researchers who do not know the true population value (lemeshow et al., 1994).  data collection technique this study uses a likert scale, its function is to measure how strongly the subject agrees or disagrees with statements related to concepts or variables. likert scale is used to measure physical distancing, security trust in buying interest with ease of payment or about an event or social phenomenon (singarimbun, 2007). in filling out the questionnaire, respondents are asked to provide opinions or answers to statements that are positive in the form of: trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 206 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. collecting data using a likert scale a. strongly agree weight 5 b. agree weight 4 c. enough weight 3 d. do not agree weight 2 e. strongly disagree weight 1 (source: (yunita et al., 2019, p. 96) this study uses the pls-sem method using smartpls 3.0 software. pls can analyze and test the relationship between variables (mustofa et al., 2022). pls is a powerful analytical method because it is not based on many assumptions, the data does not have to be normally distributed, and the sample does not have to be large (barrett et al., 2021; sarstedt et al., 2022). testing of instruments and hypotheses was carried out through the smart pls 3.0 program. before testing the validity and reliability, it will be tested through confirmatory factor analysis or cfa (de oliveira bussiman et al., 2022; sun et al., 2022). testing through the cfa is done on the grounds that one of the variables in this study, namely the service quality variable (x) has sub-variables (leeb, 2021). testing through cfa is called second order technique testing (al zarooni et al., 2022). if the cfa test has been carried out, it will be tested for validity and reliability. and if the validity and reliability test has met the requirements of ave > 0.7, then this test can be continued with hypothesis testing. table 2. respondent data information amount percentage gender man woman 33 68 32.3% 67.3% age < 28 years 28 – 40 years > 40 years 50 46 5 49.5% 45.5% 5% job status student / student entrepreneur private jobs 29 52 21 28.7% 51.1% 20.8% i once bought bata shoes yes not 99 2 98% 2% i once bought bata shoes cash card 31 41 30.7% 40.6% trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 207 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc atom 32 31.7% number of respondents 101 source: edited by the author, 2021 judging from the occupations of the respondents, there are 52 (51.1%), students (28.7%) and private/bumn employees 21 (20.8%). respondents who had bought bata products from 101 respondents more than > 4 were 99 (98%) of 101 respondents and the remaining 2 (2%) who did not buy bata products. it is known that buying bata shoes with cash payment method is 31 (30.7%), the greater the respondent's data is atm card 41 (40.6%) while atome is 32 (31.7%). based on the results of this study, the largest percentage is when people feel more secure and easy to make payments, when the conditions for the spread of the corona virus are ordered to keep their distance and not to make physical contact when making purchases with atm card transactions on bata shoes offline. figure 2. figure of discriminant validity (outer loading) value that several loading factor values for each indicator of each latent variable still have a factor loading value that is not the largest or there is an outer loading value <0.5) compared to other loading values. so that must be done by correcting the question and redistributing it to respondents. but there is no guarantee if it repeats again to get valid data. this means that each latent variable does not yet have good discriminant validity where some latent variables still have gauges that are highly correlated with other constructs. trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 208 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3. figures of all constructs that meet the reliable criteria. composite reliability values above 0.70 and ave above 0.50 are declared valid, but otherwise the results are invalid. table 3.inner test of r-square model source: edited by the author, 2022 coefficient determination (r square) to measure how much the dependent variable is influenced by other variables. this test is done by looking at the r square value of the pls output. based on table 3, the r square value is 0.914 (from the path diagram) or 0.914299 (from the text output). according to sarwono and narimawati (2015) the value of r square > 0.7 is categorized as strong(son, 2021, p. 91). here are the test results using smartpls.  hypothesis test hypothesis testing was carried out using the bootstrapping resampling method developed by geisser & stone (ghozali, 2014). the size of the significance of the hypothesis support can be used to compare the values of the t-table and t-statistics. if the t-statistic is higher than the ttable value, it means that the hypothesis is supported or accepted. in this study, for the 95 percent confidence level (alpha 95 percent), the t-table value for the one-tailed hypothesis is >1.68023.(son, 2021, p. 88). it can be considered significant if the t-statistic is more than 1.96 and another way is to look at the p-value less than 0.05. the following are pictures and tables of research results that have been tested using pls so that significant data and non-significant data can be seen. r-square minat beli sepatu bata 0,818 trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 209 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 4. gambar path coefficient penelitian result and discussion  discussion of the first hypothesis based on the description of the picture above, it can be seen that the path coefficients after bootstrapping can be said that the x1 trust has a positive effect, which is indicated by the original sample value of 0.339. the t statistical value is 4.053 > 1.96 t. the table is proven to be significant at the p value 0.000 < 0.05, thus that ho rejected: security trust has no significant effect on buying interest while, h1 is accepted: security trust has a significant positive effect on buying interest. the results of this hypothesis are in accordance with the journal which states that research conducted by nurlina (2017) says that trust has a positive effect on consumer buying interest at the tokopedia online store. also described by wenny et al,(sarjita, 2020, p.75). based on research conducted by rafidah (2017) says that security has a positive effect on consumer buying interest at lazada's online store. anwar and afifah (2018) also explained that security has a positive effect on consumer buying interest on the lazada online site.(sarjita, 2020, p.75).  discussion of the second hypothesis based on the information above, it can be seen that the path coefficients after boostraping can be said that x2 of service quality has a positive effect as indicated by the original sample value of 0.552. statistical value 5.465 > 1.96 t. the table is proven to be significant at p value 0.000 <0.05, thus ho is rejected. : there is no relationship of influence between service quality and interest while h2 is accepted: there is a positive influence relationship. sothe results of this hypothesis test stated in mugiono's research (2010) regarding the analysis of the influence of service quality on consumer satisfaction (buyers) in malang city market. the purpose of this study was to analyze the effect of service quality variables on consumer satisfaction in malang city market. from the results of the study it can be concluded that the service quality variables simultaneously affect customer satisfaction in malang city market. partially, service quality variables affect customer satisfaction in malang city market.(runtunuwu et al., 2014, p. 1805).  discussion of the third hypothesis based on the information above, the part coefficients state that the variable z ease of payment of the y variable (buying interest) after boostraping is shown to have an original value of 0.063, the ho test is accepted: ease of payment (z) does not have the ability to partially strengthen physical distancing significantly against the y variable ( buying interest) and h3 is rejected: ease trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 210 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of payment does not have the ability to strengthen a significant effect on buying interest, as shown by the tstatisk value of 0.890 <1.96 t.table and p.value 0.374> 0.05 significant. the results of this hypothesis are in line with febriyani's research (2019), which states that ease of use partially has a positive and significant effect on buying interest. the ease of use indicator used when shopping online has a great value,(taan, 2021, p. 93).  discussion of the fourth hypothesis based on the description of the part coefficients, it states that the variable ease of payment of the variable y (buying interest) after boostraping is shown to have an original value of -0.230 then, the ho test is accepted: ease of payment does not have the ability to strengthen the influence of security trust on buying interest and h4 is rejected: ease of payment has the ability strengthen the influence of trust on buying interest shown tstatisk value 1.518 <1.96 t.table and p.value 0.130> 0.05 significant. the results of this hypothesis are not in accordance with dewa et al (2015) that someone will find it easier to use the system by making benefits and using it continuously in a sustainable way. increased user trust and productivity can be done through the digital wallet venkatesh et al., this hypothesis is in accordance with the journal from priyambodo and triyanto (2021:8) which was processed based on multiple linear regression with tstatistics of 1.005 < 1.96 t.table and p value 0.317 > 0.05 significance. it is stated in the journal that trust in the security of the payment system is crucial in buying and selling transactions, if the payment system is facilitated and obtained in convenience, it will increase shopping akbardi (2017) and oney et all (2017). ease of payment if it is not accompanied by trust in security in payments, consumers feel that shopping comfort will be disturbed (priyambodo, 2021, p.13 ).  discussion of the fifth hypothesis based on the description of the part coefficients, it states that the variable ease of payment of the variable y (buying interest) after boostraping is shown to be an original value of 0.183, then ho test is accepted: ease of payment does not have the ability to strengthen the influence of service quality on buying interest and h5 is rejected: ease of payment has the ability to strengthen the effect of service quality on buying interest is shown by the tstatisk value of 0.995 <1.96 t.table and p.value 0.320> 0.05 significant. conclusion  first hypothesis resultshypothesis testing based on the table above shows that the relationship between trust (x1) and purchase interest (y) is significant with t-statistic > 1.96 which is 4.053 which means that based on this hypothesis 2 in this study is accepted. this states that trust in the business world is very important, especially in the midst of the implementation of social distancing and life in carrying out activities due to the covid-19 pandemic.  second hypothesis the results of hypothesis testing based on the table above show that the relationship between service quality (x2) and purchase interest (y) is significant with t-statistic > 1.96, which is 5.465, which means that based on this hypothesis 3 in this study is accepted. in terms of service quality, providing satisfaction to consumers, especially during the pandemic, people see the services and equipment to check for those who are affected or have symptoms of covid-19. trust analysis, service quality on purchase interest, atome payment moderation hidajat and islam 211 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc such as the supply of masks, convenient communication even though it is limited by distance and vaccine information certificates to prevent the spread of the virus.  third hypothesis the results of testing this hypothesis based on the table above show that the relationship between ease of payment (z) and purchase interest (y) is not significant with t-statistic > 1.96 which is 0.890 which means that based on this hypothesis 4 in this study is not accepted.  fourth hypothesis resultshypothesis testing based on the table above shows that the relationship between trust as a moderating variable of ease of payment is not significant to purchase interest with t-statistic <1.96 ie 1.518 which means based on this hypothesis 6 in the study is not accepted. that reducing the risk of trust weakens the relationship moderated by ease of payment in shopping.  fifth hypothesis resultshypothesis testing based on the table above shows that the relationship between service quality as a moderating variable of ease of payment is not significant to purchase interest with t-statistic <1.96 which is 0.995, which means that based on this the hypothesis in the study is not accepted. explaining that the quality of service during the pandemic is so tight, which makes some consumers reluctant to make purchases even with the easy provision of digital payments, but during this pandemic, people are afraid to shop directly. so the quality of service weakens the relationship moderated by ease of payment. reference al zarooni, m., awad, m., & alzaatreh, a. 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(2022). consumers’ perceived trust evaluation of cross-border e-commerce platforms in the context of socialization. procedia computer science, 199, 548–555. https://doi.org/10.1016/j.procs.2022.01.067 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 323-331 323 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia hendy satria1, muhammad isa alamsyahbana2, rachmad chartady3, fauzi4, novi chandra saputra5 12345 stie pembangunan, tanjungpinang, indonesia 1correspondent: hendysatria91@gmail.com received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: satria, h., alamsyahbana, m.i., chartady, r., fauzi., saputra, n.c. (2021). corporate governance, characteristics on dividend policy : evidence from indonesia. ilomata international journal of tax & accounting.2(4),323-331. https://doi.org/10.52728/ijtc.v2i4.364 abstract: this research aims to explore the instability of the dividend distribution policy of listed companies on the indonesian stock exchange. researchers use several main variables as indicators to measure their impact on dividend policy. the samples used are 75 manufacturing companies. data analysis technology uses descriptive statistical analysis and e-views 6.0 as data processing tools. the results of this study show that the audit committee has a negative and insignificant influence on dividend policy. at the same time, independent committees, public interest, company size and profitability have a positive and significant impact on dividend policy. keywords: corporate governance, dividend policy, evidence from indonesia this is an open access article under the cc-by 4.0 license. introduction corporate governance is the art of directing and controlling an organization by balancing the various needs of stakeholders. this often involves conflicts of interest between various stakeholders and ensures that the organization is well managed, which means that processes, procedures and policies are implemented in accordance with the principles of transparency and accountability (gyimah et al., 2021). whenever talking about corporate governance, it must be remembered that organizations have duties and responsibilities towards their shareholders and stakeholders and therefore must be regulated in accordance with the law and with due regard for the interests of stakeholders and shareholders. (lehn, 2021) the next aspect of corporate governance is that the notion of economic efficiency must be followed when directing, managing and controlling an organization. for example, the fact that a company exists to make a profit and hence profitability and revenue should be a goal that a company should strive for (ahmad et al., 2021). of course, this does not mean that companies can cut corners in the pursuit of profit and power and hence like the principles in the previous paragraph, corporate governance means that companies should strive to generate revenues and profits in a transparent and accountable manner. this means that the way the corporation is managed and directed must be carried out in accordance with the norms and standard procedures that apply to ethical and normative behavior (van hoang et al., 2021). corporate governance has been in the news over the past decade following a spate of scandals engulfing companies that led to their collapse due to mismanagement. this prompts regulators https://www.ilomata.org/index.php/ijtc mailto:hendysatria91@gmail.com https://doi.org/10.52728/ijtc.v2i4.364 corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 324 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc around the world to implement various measures and rules to control irresponsible companies that will damage the prospects of companies and harm their shareholders and stakeholders. broadly speaking, corporate governance includes various fair treatment and treatment of shareholders and the interest to follow ethical business conduct and integrity practices (ali et al., 2021). alot of companies mostly use sources of finances from liability or capital while working their business. both sources of financing can be conducted within the capital market. the company’s capital market will be used for growth while at the same time creating profits for the company that is operating (tang, 2021). the capital market develops every time, and the company's goal is to increase their capital in bussiness (puspitaningtyas et al., 2019). company leaders can manage these funds by re-investing in the form of operating assets, repaying liability, or dispersing them to shareholders in the form of dividends. yet, when the company formulates a dividend policy, problems arise. whether dividends are distributed in cash, stock profits, or else other forms. while investors make investments, they have to initially choose a company with good performance so that they can make accepted profits. however, since only organization or insiders see the company's performance, investors are constrained by the trouble of incomplete data. so, investors have to see financial statements to give an indication of the company's performance in order to provide a foundation for taking investment choices. (afriani et al., 2013) topic related to profit policy and payment will have an impact for investors. investors certainly assume the dividend sharing to stabilize and increase year by year. milton clarified that this would be a problem for investors in a country where the capital gains mechanism is particularly low (asiri et al., 2018). questions about profit policy are also connected to the agency issues. according to the agency theory by jansen and meckling, there is a clash of interest between the principal and the manager because they work for individual profit. then again, this is not the case in underdeveloped countries, where the idea is quiet not extensively worn in businesses. (agustia & suryani, 2018) the agency conflict inside the capital market occurs among large and small shareholders. most large shareholders have a tendency to take over. then, a mechanism to ensure minor and medium shareholders is needed (sriayu & mimba, 2013). one such mechanism is good corporate governance. if the corporate governance mechanism does not effort within the company or does not function normally, it forced to lower the trust of shareholders and the price of the company. concurring to setiawan and phua (puspitaningtyas et al., 2019), there are two hypotheses related to the agency theory of profit policy and corporate governance, is the income theory and the substitution theory. income theory holds that companies along with excellent capital gains give more safety for investors' privileges because companies with improved governance will give more profits than instruments with little capital gains (dewata et al., 2017). the company's profitability in addition has a positive affect at the dividend policy, and companies that recieved more profits will give extra dividends to their investors. it is means, companies with minor profit will give investors lesser dividends. the company size variable is characterized as the range by which the company size can be classified in numerous other ways, expressed in the form of whole assets, stock market price, etc. the results present that the size of the enterprise can have a advanced level of growth opportunities and can give extra dividends. this is for the reason that the advanced the company’s growth rate, the larger the company’s scale and the need for more capital for reinvestment. in addition, the company must monitor the behavior of managers consequently so they are not narrow minded, and the company owner have to be prepared to give agency fees. solitary way to cut this situation is to boost the management ownership of the company. because managerial ownership aligns the interests of management and shareholders, it can decrease agency conflicts. the table below shows the performance of one manufacturing https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 325 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc business recorded in the indonesia stock exchange (idx) since 2018 to 2020. (natasa & trisnawati, 2021) table 1. dividend policy (in billion) no name in 2018 in 2019 1 unilever indonesia tbk 6,981,450 11,401.150 2 indo kordsa tbk 5,968,610 9,346,491 3 shoes bata tbk 18,538,000 9,194,150 source : www.idx.co.id the issue wonders that the shoes bata tbk company practised profit flimsiness in its company which caused a diminish within profits, which can be seen from the table 1 over in 2018 and 2019 with a huge ostensible contrast, not as it were so as to the unilever indonesia tbk, it really expanded within the past 2018 with 6,981,450 whereas in 2019 it got to be 11,401,150 with an inconsequential rise in profits, conjointly happened to indo kordsa tbk in 2018 with 5,968,610 and in 2019 with 9,346,491. profit flimsiness happens in fabricating companies recorded on the indonesia stock trade for the 2018-2019 cycle, watching the unsteady profit approach stage each year in benefit contribution. not as it were to the company's capacity to create benefits is communicated by the level of benefit, where the benefits gotten by the company will decide how much profits will be paid afterwards to shareholders and the rest will move into held profit. hence, the title of this research is "corporate governance, characteristics on dividend policy: evidence from indonesia". from the up-stories, the questions above, this research will analyze the characteristics of corporate governance and dividend policy of manufacturing firms that listed on the indonesian stock exchange. judging by the results of the investigation, it would be manifest as the questions: 1. does the audit committee affect the dividend policy? 2. does the independent committee affect the dividend policy? 3. will public ownership affect dividend policy? 4. does the size of the company affect the dividend policy? 5. will the dividend policy affect profitability? 6. do the audit committee, independent members, public ownership, company size, and profitability affect dividend policy? the limitations in this research are: 1. in terms of governance, the researchers just limited the three audit committee indicators, independent members and public ownership, because these three indicators have a big effect in the improved of stocks and are responsible for shares to investors. 2. on the characteristics of the firm, the we limited the size and profitability of the company as two indicators, because many investors buy shares to see the size and profitability of the company. 3. the data used for the time since 2018-2020 then, the purpose for this research is: 1. to test whether the audit committee affects the determination of the company's dividend policy 2. to test whether the independent committee affects the determination of the company's dividend policy 3. testing the influence of public ownership in determining the company's dividend policy 4. inspect the company size affects the determination of the company's dividend policy https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ http://www.idx.co.id/ corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 326 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5. test company profitability to determine dividend policy 6. test audit committee, independent members, public ownership, company size, and profitability affect the company to determine dividend policy framework the framework may be an abstract framework of however theory is connected with indicators outlined as vital issues. therefore during this analysis is seen the shape of the framework as follows: picture 1. framework source: concept developed for research 2021 hypothesis the hypothesis is within the variety of a brief answer to the analysis downside suggestion that has been expressed in the form of an issue and answer sentence whereas stated relies on the relevant theory, and isn't supported empirical proof obtained from knowledge collection. the hypotheses planned by this study are: h1: the size of the audit committee has an effect on dividend policy h2 : independent commissioners have an effect on dividend policy h3: public ownership have an affects dividend policy h4: firm size has an effect on dividend policy h5: profitability has an effect on dividend policy h6 : corporate governance and characteristics affect dividend policy method the population is a collection of all objects in the study. the population is an area of generalization made up of objects / subjects that have certain qualities and characteristics that are determined by the researcher under study and then draw conclusions (sugiono, 2013). manufacturing companies listed on the indonesian stock exchange for the period 2018-2020, consisting of 135 manufacturing companies. the sample is part of the number and characteristics of the population, what is learned from the sample, the conclusions are applied to the population so that the sample drawn is considered representative of the entire population studied (sugiono, 2013). the sampling method used in this study is based on the deliberate sampling technique targeted sampling is a sampling audit committee independent commissioners public ownership firm size profitability dividend policy https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 327 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc technique with specific considerations or criteria (sujarweni, 2016). the sampling criteria selected in this research include the following: 1. the manufacturing companies that listed in the indonesian stock exchange (idx) in the period 2018-2020 2. the manufacturing companies that publish annual statements in the rupiah currency 3. the manufacturing companies that publish complete and consistent annual and financial reports in the indonesian stock exchange ( idx) for the period up to december 31, 20182020 table 2. sampling procedure no criteria amount 1 the manufacturing companies that listed in the indonesian stock exchange (idx) in the period 2018-2020 135 2 the manufacturing companies that publish annual statements in the rupiah currency (33) 3 the manufacturing companies that publish complete and consistent annual and financial reports in the indonesian stock exchange ( idx) for the period up to december 31, 2018-2020 (27) sum selected companies sum sample taken (75x3 period) number of samples 75 225 225 therefore, the sample used in this study includes 75 manufacturing companies that are listed on the indonesian stock exchange (idx) for the period 2018-2020. variable operational definition this section explains the definition of each variable used, along with their operations and measurements. according to the title of the study, namely, "corporate governance, characteristics on dividend policy: evidence from indonesia", the operational variables are the following: table 3 operational variables no. variable definition scale 1. audit committee (x1) it is a group of people chosen from a larger select group to perform specific tasks, to perform specific tasks. in ratio 2. independent commissioner (x2) independent commissioners are members of the board of directors who are close to the management, other members of the board of directors and majority shareholders who are free from business or other relationships. in ratio 3. public ownership (x3) public ownership is shares owned by the public in ratio https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 328 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. company size (x4) company size is a form of company size measured in terms of assets, the sales value of stocks. in ratio 5. profitability (x5) this index measures the company's ability to generate profits (profitability). in ratio 6. dividend policy (y) dividend policy is a policy that determines whether the profits generated by the company will be used to pay dividends. in ratio source: by the author 2021 . result and discussion hypothesis test both the simultaneous effect test (ftest) and the local effect test (ttest) are based on the cem model, as shown in table 4, again as follows: table 4 common effect model (cem) test results variable coefficient std. error tstatistic prob. c 6.167006 33.02077 0.186761 0.8520 x1 -0.062269 0.048811 -1.275723 0.2034 x2 0.478843 0.160465 2.984097 0.0032 x3 5.274384 3.593955 1.467571 0.1437 x4 0.010012 0.011233 0.891271 0.3738 x5 0.222517 0.108723 2.046637 0.0419 root mse 25.96883 r-squared 0.082818 mean dependent var 41.29333 adjusted r-squared 0.061878 s.d. dependent var 27.17639 s.e. of regression 26.32216 akaike info criterion 9.405004 sum squared resid 151735.5 schwarz criterion 9.496100 log likelihood -1052.063 hannan-quinn criter. 9.441771 f-statistic 3.954977 durbin-watson stat 0.969936 prob(f-statistic) 0.001873 source: researcher process 2021 multiple linear regression analysis the purpose of multiple regression analysis is to analyze the influence of independent variables on the dependent variable. if the value of the dependent variable increases or decreases, it also determines whether the direction of the relationship between the independent variable and the dependent variable is positive or negative. . this study uses multiple regression analysis to test the independent variables, that is, the impact of the audit committee, independent members, public ownership, company size, and profitability on the company's dependent variable dividend policy. according to the data in table 12, the panel data regression equation of the value of manufacturing companies listed on the indonesian stock exchange from 2018 to 2020 can be obtained as follows: y = 6.16 – 0.06x1 + 0.47x2 + 5.27x3 + 0.01x4 + 0.22x5 + e the following is an explanation of the regression equation for the above panel data: https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 329 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. the constant value (a) 6.61 can be interpreted as if the value of the variables such as audit committee, independent members, public ownership, company size and profitability were zero, the value of the dividend policy is 6 , 61 2. value of the multiple regression coefficient of the audit committee variable it is negative, which is 0.06. it can be explained that the audit committee reduces by one unit, assuming that other variables have fixed values, the dividend policy will be reduced by 0.06 units. a negative coefficient means that the smaller the audit committee, the lower the dividend policy by 6%. 3. the value of the multiple regression coefficient of the independent committee variables is 0.47 positive, that is,. therefore, it can be explained that for each additional unit of the independent commissioner, under the assumption that other variables have fixed values, the dividend policy will increase by 0.47 units. a positive coefficient means that an increase in the number of independent committee members will increase the dividend policy by 47%. 4. the value of the multiple regression coefficient of the publicly owned variables is positive 5.27, that is,. therefore, it can be explained that, assuming that other variables are fixed values, for each additional unit of public property, the dividend policy will increase by 5.27 units. the positive coefficient means that the increase in public ownership will increase the dividend policy by 527%. 5. the value of the multiple regression coefficient for the company size variable is 0.01, which is positive. therefore, it can be explained that for each unit of increase in the size of the company, under the assumption that other variables have fixed values, the dividend policy will increase by 0.01 unit. the positive coefficient indicates that expanding the company's scale will increase the 1% dividend policy. 6. the value of the multiple regression coefficient of the profit variable is 0.22, which is positive. therefore, it can be explained that for each unit of increase in profitability, the dividend policy will increase by 0.22 units under the assumption that other variables have fixed values. the positive coefficient means that the increase in profitability will increase the dividend policy by 22%. partial effect significance test (t-test) the following is an explanation of the regression equation for the previous panel data: 1. the count of the audit committee variable is 1.275723, so tcount <ttable> 0.05 (0.2034> 0.05). from these results it can be seen that the role of the audit committee is negative and insignificant. 2. the tcount of the independent commissioner's variable is 2.984097, so tcount <ttable> 1.970806) and a probability value. 0.0032, therefore, tcount <0> ttable (1.467571 <1> 0.05 (0.1437> 0.05). from these results, they show that public ownership has a positive effect, which can be ignored 3. public ownership variable is 1.467571, so count> ttable (1.467571 <1> 0.05 (0.1437> 0.05). these results indicate that public property has a positive and negligible effect. 4. the tcount of the company size variable is 0.891271. therefore, tcount <ttable> 0.05 (0.3738> 0.05) from these results, it can be seen that the company size has a positive effect and is not significant. 5. the tcount of the profitability variable is 2.046637, so tcount <ttable> 1.970806) and the probability value. 0.0419, so tcount <0.05 (0.0419 <0.05). these results show that the size of the company has a positive and significant impact. https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 330 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc simultaneous effect significance test (f-test) the f test is designed to examine the influence of the independent variable on the dependent variable, at the same time or at the same time. in this test, using a significance level of 0.05, the first degree of freedom (df) = k1 (where k is the number of independent variables) and the second degree of freedom (df2) = n k (where n is the number of independent variables)) research sample, k is the number of independent variables). so from this formula, calculate (df) 51 = 4, (df2) 225-5 = 220, so ftable is 2.416800. it has the following test standards: a. ho is accepted if fcount > ftable and ha is rejected if fcount < ftable the simultaneous effect test (ftest) is shown in table 12. according to table 12, it can be seen that fcount is 3.954777>f table value is 2.416800. therefore, it can be concluded that the audit committee, independent committee members, public ownership, company size, and overall profitability affect the dividend policy. determination test (r2) the coefficient of determination (r2) is used to determine the percentage of contribution of the independent variables to the dependent variable. in this study, the value of r-squared is used to see the magnitude of the coefficient of determination. this is because if the regression uses two independent variables, the r-squared value is usually used to measure the contribution of the impact. the coefficient of determination in this study is used to determine the percentage of contribution that the audit committee, independent committee members, public ownership, company size, and overall profitability (at the same time) contribute to the dividend policy. according to the test of the coefficient of determination in table 12, it can be seen that the adjusted r-squared value is 0.061878. this means that the audit committee, independent committee members, public ownership, company size, and profitability as a whole (at the same time) only affect 6.1%, with the remaining 93.9% affected by other factors. not examined in this study. conclusion according to the discussion in the previous chapter, the following conclusions can be drawn: 1. the negative influence of the audit committee on the dividend policy is negligible 2. the independent committee has a positive and significant influence on the dividend policy. 3. public ownership on dividends the policy has a positive impact and can be ignored. 4. the size of the company has a positive but negligible impact on the dividend policy. 5. profitability has a positive and significant impact on dividend policy. suggestion although the suggestions that this research can make include: 1. companies and investors should pay attention to the experience of audit committees, independent committees, public ownership, company size and profitability, as it is has been empirically demonstrated in results management based on this. investigate. 2. in future research on similar topics, other variables that affect earnings management can be added, such as the earnings ratio https://www.ilomata.org/index.php/ijtc corporate governance, characteristics on dividend policy : evidence from indonesia satria, alamsyahbana, chartady, fauzi, saputra 331 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference afriani, f., savitri, e., & aprilia, r. 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(2021). environmental transparency and performance: does the corporate governance matter? environmental and sustainability indicators, 10, 100123. https://doi.org/10.1016/j.indic.2021.100123 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 35-45 35 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax ryan nugraha1, paul bologun2 institut ilmu sosial dan manajemen stiami, indonesia1 nigeria2 correspondent: ryand.nugraha@gmail.com1 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: nugraha, r., bologun, p (2022). climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax. ilomata international journal of tax & accounting.3(1), 35-45. https://doi.org/10.52728/ijtc.v4i1.420 abstract: one of the crucial issues in indonesia is climate change. it can jeopardize indonesia's sustainable development. this article investigates a carbon tax as a climate policy option in indonesia and the directorate general of taxes readiness in imposing the new carbon tax bill in april 2022. this research analyzes the early stage of carbon tax implementation in indonesia. the author conducted a qualitative questionnaire to a small and unrepresentative sample of 32 tax officers in the dgt's head office, regional office, and small tax office in jakarta. the data collecting process took place in january 2022. the results suggest that most dgt's employees in this study are already familiar with the term "climate change", its causes, and its effects as a worldwide global catastrophe. furthermore, most respondents understand what a carbon tax is but in terms of preparedness to implement the new carbon tax, only 21 of 32 employees (65.6 percent) believe indonesia is prepared to impose the new tax. at the same time, 11 employees doubt the implementation due to lack of human resources, derived rules, and regulation dissemination. keywords: carbon tax, tax, climate change, indonesia. . this is an open access article under the cc-by 4.0 license. introduction indonesia’s geographic positioning makes it highly vulnerable to climate change. as the largest archipelagic country consists of 17,508 islands straddling the equator, its archipelago is at a crossroads between two oceans, the pacific and the indian ocean, and bridges two continents, australia and asia. from 1981-2018, indonesia experienced a trend of rising temperature around 0.03 °c per year (selvi et al., 2020). while from 2010-2018, greenhouse gas emissions (ghg) nationally experienced an upward trend of about 4.3 percent per year lead to an increased sea level of 0.8-1.2 cm/year, while about 65 percent of the population lives in coastal areas (ministry of finance republic indonesia, 2021). rising sea surface temperatures are causing the extinction of coral reefs, seaweed, mangroves, some biodiversity and marine ecosystems (ratnawati, 2016). it also raises the levels of severe floods and droughts that will exacerbate the scarcity of clean water. according to the ndc (2016), climate change can increase disaster risk hydrometeorology, which reaches 80 percent of the total disaster in indonesia (ministry of environment and forestry of https://www.ilomata.org/index.php/ijtc mailto:ryand.nugraha@gmail.com https://doi.org/10.52728/ijtc.v4i1.420 climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 36 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indonesia, 2016). overall, potential economic loss indonesia can achieve 0.66 percent to 3.45 percent of gdp by 2030 (ministry of environment and forestry of indonesia, 2020). thus, indonesia needs to prioritize climate issues and introduce its carbon tax policy to restrain energy sector emission growth, including shifting to develop lower-carbon energy markets and improving energy efficiency policy. therefore, through the directorate general of taxes (dgt), the government has been enacting policies to decrease the growth of greenhouse gas emissions from the energy sector, including transitioning to lower-carbon energy markets (septiani et al., 2017). on october 7th, 2021, indonesia passed a carbon tax of idr30 (usd0.002) per kilogram of co2 equivalent (co2e) or usd2.13 per ton of co2 emission above the stipulated cap under the law no. 7 the year 2021 on the harmonization of tax regulations (uu hpp) (simatupang et al., 2021). the carbon tax itself is based on a cap and tax system, which puts a fee on carbon emissions that exceed a predetermined cap . beginning in april 2022, the directorate general of taxes intends to trial the coal-fired power generation industry tax. while in 2025, indonesia wants to develop a carbon trading market and broaden the carbon tax to industries other than coal-fired power generating to reduce more co2 emissions. however, most indonesians, including dgt’s employees themselves, may be unaware of climate change and its carbon tax implications. climate change is not a significant concern in this developing economy (dinesh et al., 2021; nugroho, 2020). the majority of public debates in indonesia are centered on economic development and poverty eradication. according to a study conducted by bohensky (2013), 81.9 percent of interviewed families in indonesia are concerned about climate change. nonetheless, reactive activities are taken in 38.9 percent of those individuals, while proactive steps are taken in 28.2 percent (bohensky et al., 2013). these findings imply that the indonesians has not correctly understood the idea of climate change. thus, promoting adequate climate change information may be one way to enhance awareness about climate change in indonesia (selvi et al., 2020). as the apparatus responsible for enacting the new carbon tax law, dgt's employee's growing environmental consciousness would affect public awareness. therefore, it is critical to improving conversations and discourses regarding climate change and its effects on dgt's employees. as a consequence, it would strengthen the government's ability to enact policies aimed at reducing ghg emissions. this led us to our primary questions: how far is indonesia's new carbon tax implementation? how do dgt employees perceive climate change? how is indonesia's readiness, in this case, the dgt, in implementing the carbon tax? the paper applies two qualitative analyses. first, we identify the early stage implementation in indonesia's carbon tax policy (ratnawati, 2016). the article also discusses carbon policy reforms applied in japan. this is because japan is the first country in asia to run the carbon tax law and make carbon emissions reduction a state’s priority (fairbrother et al., 2019; mclaughlin et al., 2019). in the second part, the author discovers dgt employee’s perspectives of climate change and their preparedness to implement the new law in april 2022. https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 37 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the author administers a qualitative questionnaire to a small and unrepresentative sample of 32 tax officers in the dgt's head office, regional office, and small tax office in jakarta. the data collecting process took place on january 5th, 2022. the paper concludes that indonesia needs to accelerate climate change and carbon tax awareness in the dgt's employee to promote the new policy. indonesia passed a carbon tax on october 7th, 2021, at a rate of idr30 (usd0.002) per kilogram of co2 equivalent (co2e) similar to usd2.13 per ton of co2e emission above the threshold cap. law no. 7 of the year 2021 on tax harmonization (uu hpp) revised numerous existing tax statutes and established the new carbon tax. for the first time, indonesia has put a price on carbon emissions, following the lead of 26 other nations. this plan is part of indonesia's larger strategy to fulfill its 2030 aim of reducing carbon dioxide (co2) emissions by 29 percent on its own or 41 percent with international support (saputra, 2021; simatupang et al., 2021). the goal of the new carbon tax is to reduce greenhouse gas emissions from production processes and individual consumption systematically and sustainably. the policy may also cause changes in behavior toward fossil fuels and encourage the use of renewable energy and also rise government revenue. individuals and entities who purchase carbon-containing goods and engage in carbonemitting activities will face a tax. the carbon tax rate is set to be higher than or equal to the market price, with a minimum rate of idr 30 (usd0.002) per kilogram of co2 equivalent (co2e). this rate is equivalent to usd2.13 per ton of co2e emission (cap and tax). co2e is a symbol for greenhouse gas emissions, including co2, methane (ch4), and nitrous oxide (n2o) (simatupang et al., 2021). figure 1 indonesia carbon policy road map source: simatupang, et.al. (2021) the revenue generated by the carbon tax can be used to fund climate change campaign. furthermore, individuals and corporates who participate in carbon emission trading governed by environmental law may be eligible for a carbon tax deduction on their carbon tax liability. the government will https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 38 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implement the carbon tax under the roadmap for carbon tax, which the house of representatives approved (ministry of energy and mineral resources of indonesia, 2021). however, according to simatupang (2021), the new carbon tax could affect electricity affordability, jeopardizing indonesia's goal of ensuring universal energy access by 2030. the potential uptrend in electricity prices would be detrimental to low-income households, many of which are considered energy poor. because electricity costs account for up to 80 percent of production costs in some industries, rising electricity costs due to the carbon tax would raise consumer prices and make products less competitive. figure 2 indonesia carbon policy road map source: simatupang, et.al. (2021) the imf and world bank recommend a carbon tax rate of usd30 up to usd100 per ton co2e for developing countries, resulting in a revenue of 1.5 percent of gdp. in this respect, the indonesian taxation analysis (cita) estimated that the power plant sector alone could generate idr 6.5 trillion (us$ 462 million). currently, indonesia's carbon tax rate of idr30 per kg co2e (usd2.13 per ton co2e) is one of the lowest in the world. bahana sekuritas (an indonesian security firm) predicted potential income of idr 29 trillion – 57 trillion (us$ 2.0 billion – 4.05 billion), equivalent to 0.2-0.3 percent of gdp, if tax rates are set at us$ 5-10 per ton co2e and applied to 60 percent of emissions (simatupang et al., 2021). japan is a vital partner for indonesia. despite various global challenges, such as the covid-19 pandemic, relations between indonesia and japan remain strong, and there is still room for strengthening ties that can be explored. in 2020, the bilateral trade value between indonesia and japan will be usd 24.3 billion. japan consistently ranks third as indonesia's leading export destination from 2018 to 2020, with export values reaching usd 13.6 billion in 2020. this trend is expected to continue, with the value of indonesian exports to japan reaching usd7.9 billion in semester 1 – 2021. in terms of investment, japan's foreign investment (pma) in indonesia reached 12.9 billion usd from 2018 to semester i 2021. during that time, japan surpassed the united states as the thirdlargest foreign investor in indonesia. meanwhile, the total number of pma projects from japan during that period exceeded 19 thousand. fdi from japan into indonesia has reached usd 1.04 billion until the first half of 2021. the indonesian government hopes that foreign direct investment from japan entering in 2021 will exceed the 2.6 billion usd realized in 2020 2021 (ministry of communication and information technology, 2021). this fact demonstrates that indonesia remains appealing to foreign investors, including japan. https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 39 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc japan is a country with limited energy resources. the government is highly reliant on imported energy to cover its energy needs based on agency for natural resources and energy. japan is the world's fifth-largest oil consumer and fourth-largest crude oil importer (us energy information (u.s. energy information administration, 2020). it is also the world's largest importer of liquefied natural gas and the third-largest coal importer. japan's low carbon policy mix includes a carbon tax (integrated through an energy tax), two regional emission trading systems, the tokyo emission trading system and the saitama emission trading system (kojima & asakawa, 2021), and a voluntary emissions trading scheme based on subsidies, namely the “advanced technologies promotion subsidy scheme with emission reduction targets” (asset).” currently, there are two environmental taxes in japan: the vehicle tax and the energy tax: japan's carbon tax, called the 'tax on climate change mitigation” falls within the category of energy taxes (gokhale, 2021). moreover, japan has a three-tiered energy tax (1) customs duties on imported and extracted fossil fuels; (2) transportation fuel taxes (oil delivery tax, gasoline tax, diesel and aviation fuel tax); (3) electric power generation taxes (ministry of the environment of japan, 2017). the carbon tax in japan applies to fossil fuels such as petroleum, petroleum products, natural gas, and coal. japan became the first asian country to introduce a carbon tax of jpy 2,89/t-co2 (ysd2.65) in october 2012 (ministry of the environment of japan, 2017). by 2050, the tax intends to eliminate 80 percent of japan's greenhouse gas emissions. carbon taxes on covered items vary according to their carbon emissions content and are in addition to the existing petroleum and coal taxes. the tax rate is a fixed per-unit amount so that the total carbon tax on each product equals jpy 2,89/t-co2 (usd2.65) (gokhale, 2021). japan has made significant progress in decreasing its carbon emissions since the carbon tax was implemented in 2012. however, japan's existing carbon tax policy impedes solving the urgent climate problem. a study from (kawakatsu et al., 2017) found that a small or positive financial benefit is possible with appropriate tax revenue treatment. kawakatsu et al. analyzed east asia's low carbon policies. they concluded that japan's current carbon tax rate of jpy2,89/t-co2 ($2.65) has resulted in modest emissions reductions and had a negligible influence on its economic growth. when evaluating a more significant carbon tax, the authors believe that a higher tax combined with suitable revenue recycling methods results in a positive double dividend for the japanese economy (lee et al., 2012). japan's experience can be applied in indonesia as a best practice in implementing carbon tax in 2022, especially in the government readiness. method the author utilizes a constructivism approach to qualitative data analysis in this study. the essence of constructivism is an understanding formed from several perspectives that solve a problem (bungin, 2017). the answers to all situations being studied are sourced from various social perspectives or points of view. in this understanding, the researcher is tasked with narrowing down different comprehensive perspectives and interpreting the findings according to their experience and expertise (creswell, 2017). https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 40 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the author examined three dgt positions: account representative, tax auditor, and staff analyst. the questionnaires were completed by 32 participants in january 2022. each question is composed of five open-ended questions and five closed-ended question.the sample size is determined by the research design. typically, the sample size for qualitative methods is between twenty and thirty people. position number respondents percentage account representative 5 15.6% tax auditor 17 53.1% staff analyst 10 31.3% in addition, cohen et al. (2017) argued that when using purposive sampling, it is more important to obtain information from those with extensive knowledge of a particular subject and to achieve data saturation than it is to maximize the number of participants (cohen et al., 2017). participants are chosen on the basis of their knowledge, expertise, and experience within their respective organizations and fields (jamali, 2018). the respondents come from a variety of job descriptions and involved in the carbon tax's implementation process. the open questions are intended to give employees the freedom to express their opinions and responses to the questions. meanwhile, closed questions are used to confirm previous questions, allowing for the verification of the questionnaire response’s consistency. the questionnaires contain five pairs of questions. employees are asked to respond "yes" or "no" to closed questions, whereas open questions require employees to respond with some explanations, reasons, and opinions. consistency in responding to each pair of questions is measured in this study to ensure that employees provide accurate responses. employees provide consistent responses when they respond "yes" to close questions, followed by a correct response to open questions. the correct responses are highlighted in this section if they contain certain keywords, such as global warming, deforestation, and changes in season pattern. result and discussion climate change: a general overview when asked if the dgt employee’s had ever heard of climate change and could explain what it is, 31 of 32 employees (97 per cent) responded that they had. additionally, 27 of 31 employees provide consistent responses. the respondents who responded consistently used terms such as global warming, deforestation, greenhouse gases, and long-term climate variability. this means that the majority of dgt’s employees in this study are already familiar with the term "climate change." meanwhile, only one employee stated in this study that he or she was unfamiliar with the term "climate change." on the other hand, an employee who provides an inconsistent response to the first question primarily explains that climate change is a “transition from one state to another”, “weather changes”, or “temperature changes”. they may have heard about climate change, but they were unable to provide accurate responses to the questions. https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 41 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc climate change's primary causes when asked about their knowledge of the primary causes of climate change and their ability to explain the primary causes of climate change, 28 of 32 (87.5 per cent) dgt employees stated that they were aware of the primary causes of climate change. however, only 21 employees (67 percent of the 87.5 percent) were able to consistently provide responses. this demonstrates that not all dgt employees are capable of accurately explaining the primary causes of climate change. employees who provide inconsistent responses to the fourth question primarily provide reversal responses by referring to climate change impacts as primary causes of climate change, such as “weather changes”. other reasons why employee give inconsistent responses to the second question in this study are incorrect responses, such as a “sea tidal wave”, “a change in the earth's orbit”, “a change in the atmosphere”, and “a change in the amount of rain falling”, “warmer earth”, and “human and natural habits”. as a result, there is misinformation about the causes and effects of climate change among the employees in this study. additionally, 2 of 32 employees stated that they were unaware of the primary causes of climate change when responding to the third question. climate change as a worldwide global catastrophe employee responses to the fifth and sixth questions about whether climate change is a global threat and why climate change is a global threat indicate that as many as 31 of 32 (97 percent) employees believe climate change is a global catastrophe, with a percentage of consistent responses of 64 percent. this shows that the majority of employees in this study believe climate change is a serious issue. in this regard, employees who consistently respond positively to the fifth question believe that climate change can cause diseases, and also disasters, such as “sea-level rise”, “flooding”, “storms”, “heat waves”, “drought”, “animal extinction”, “food scarcity”, “forest fires”, “poor harvests”, “rising temperatures”, or “the melting of the north pole”. on the other hand, inconsistent responses to the fifth question provided at the sixth question are primarily the result of incorrect responses to the subsequent question of why climate change is considered as a global catastrophe. "air pollution," "global warming," "temperature change," and "illegal logging" are among the responses. according to one respondent, "earth is our only home." the other is unclear when the phrase "ecosystem shifting on earth" is used. the carbon tax following that, the employee responses to the seventh question about whether the employee understands what a carbon tax is and the eighth question about whether the employee understands what a carbon tax is and if they are able to explain how the carbon tax works, 29 of 32 employees (90.6 percent) understand what it is. however, there are only 25 employees (86 percent) who consistently respond. employees who consistently responded positively to the seventh question mentioned the carbon tax definition as “a tax imposed on carbon emissions that have a negative impact on the environment”. inconsistent responses to the eighth question, on the other hand, are generally the result of incorrect responses, such as "cap and tax mechanism," and a lengthy response that contradicts the sentence "carbon tax is one strategy to limit climate change." and a response stated “entrepreneur’s behavior is projected to change as a result of the carbon price, causing them to shift to low-carbon, green economic activity." https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 42 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the dgt's preparedness to implement the new carbon tax finally, employee responses to the 9th question, "do you believe indonesia is prepared to impose a carbon tax in april 2022?" and the 10th question, "can you describe how indonesia is preparing to impose a new carbon tax in april 2022?" indicate that only 21 of 32 employees (65.6 percent) believe indonesia is prepared to impose the tax, while 11 employees (34.4 percent) do not. employees who consistently answer correctly to the ninth question are 20 officers. the majority of them cited a newly enacted “carbon tax law” as evidence of the dgt's readiness. on the other hand, 11 employees who believe dgt is not prepared to implement the policy cited various reasons, including "the need for derived rules," "it is too early to prepare the human resource in dgt", "opposition and difficulties from vertical units that implement it", and "a lack of regulation dissemination." one respondent who responses dgt's preparedness stated, "there are too many elements that affect the poorest members of society, who are indirectly impacted by price increases linked with the carbon tax, so there will definitely be additional benefits and drawbacks to consider. furthermore, indonesia has only recently recovered from the pandemic". conclusion as a global environmental issue, climate change must be communicated to citizens. on the other hand, climate change may not be a significant issue for society in several countries worldwide, including indonesia (levi, 2021; onyimadu & uche, 2021). when it comes to fighting climate change using carbon tax policy, the dgt's employees are responsible for enhancing public awareness (costello, 2019). the author provides a qualitative analysis to understand awareness about climate change, carbon tax, and tax authority's readiness in enacting the new carbon tax law in april 2022. the paper also provides a best practice lesson in implementing a carbon tax in japan. the author found a slight lack of awareness about climate change among dgt employees, which may occur in other positions within the dgt on a national level. nonetheless, the dgt has made some efforts to combat climate change, including establishing a carbon tax road map and preparing the derived rule . based on these conclusions, the researcher advises policymakers, namely dgt, to increase employee’s awareness of climate change. first, we advise an increase of learning process through attendance at climate change courses that improve understanding of climate change. these environment courses are currently available through massive open online courses (moocs). additionally, the dgt could enhance its digital learning program, studia, by including climate change curricula. second, the dgt can promote media literacy. media literacy can help increase public awareness and acceptance of climate change (jürkenbeck et al., 2021; phan et al., 2021). the dgt may organize an art festival, essay competition, and poster competition to raise awareness about climate change and the carbon tax. a study by jacobson et al. (2016) proposes a climate change exhibition that combines art and science (jacobson et al., 2016). https://www.ilomata.org/index.php/ijtc climate change, carbon tax, and the indonesian directorate general of taxes preparedness in implementing the new carbon tax nugraha and bologun 43 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc finally, the dgt may achieve a high level of support from citizens by using a prominent spokesperson to campaign for climate change awareness. an effective policy reform needs interministerial strategic cooperation, non-governmental organizations, and legislative members. the dgt should communicate continuously with these stakeholders. the proposed policy incorporates the necessary precondition for resolving the issue. yet, a wellexecuted implementation is critical to achieving a positive outcome. reference bohensky, e. l., smajgl, a., & brewer, t. 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(2020). country analysis executive summary: japan. in world country energy analysis. https://www.eia.gov/international/content/analysis/countries_long/japan/japan.pdf https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 44-60 https://www.ilomata.org/index.php/ijtc 44 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the influence of internal control system, cash sales on regional asset management receipts otniel safkaur department of accounting, university cendrawasih papua, indonesia, correspondent: othissafkaur@yahoo.com submitted : december 24, 2020 revised : january 10, 2020 published : january 31, 2021 abstract the internal control system is a process, which is influenced by human resources and information technology systems, which are designed to help an organization achieve a goal. the internal control system is a way to direct, supervise, and measure the resources of a regional financial management apparatus. the purpose of the internal control system is to achieve goals and guarantee or provide accurate financial reports and ensure compliance with laws and regulations. the internal control system, consisting of policies and procedures used in company operations to provide reliable financial information and ensure compliance with applicable laws and regulations. at the regional financial management apparatus level, the objectives of internal control are related to the reliability of financial reports, timely feedback on the achievement of operational and strategic objectives, and compliance with laws and regulations on cash receipts. at a specific transaction level, internal control refers to actions taken to achieve an objective to ensure payment, receipt of cash from third parties for a service that is performed). internal control system procedures reduce process variations and cash receipt transactions and provide more accurate results. the population in this study were 44 skpds in the skouw mabo, skouw, yambe, skouw sae, and mosso areas, muara tami district, jayapura city. these four areas are the border areas of the republic of indonesia and papua new guinea. the sample collection method is purposive sampling by taking samples from the regional financial management apparatus. the data analysis technique used in this study was sem pls. the results of this study indicate that the internal control system, cash sales affect cash receipts. keyword: internal control system, cash sales, regional asset management receipts introduction in today's business world, there are quite many problems that must be faced by the leadership to maintain conditions or achieve progress for the regional financial management apparatus (ahmed, &, schneible, 2007). therefore, a regional head must have an appropriate and accountable way and be able to establish good relationships with employees to achieve these goals (atiase, 1985). the local government control environment includes the attitude of stakeholders and employees to the importance of control in the regional financial management apparatus. one of the factors that affect the control environment is the management philosophy (single management in a partnership or joint management within the company) and management's operating style (progressive or conservative management), organizational structure (centralized or decentralized), and personnel practices. this controlled environment is very important because it forms the basis for the effectiveness of the other elements of internal control. beasley, (1996) states that regional heads need to supervise employees and regional financial management officers. a leader (manager) in a https://www.ilomata.org/index.php/ijtc mailto:othissafkaur@yahoo.com the influence of internal control system, cash sales on regional asset management receipts safkaur 45 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 small company only needs a few policies and control procedures to be able to supervise his employees and lead the company. besides, company leaders can directly monitor the transactions that occur (cheon, & sohn, 2005). then choi, et al. (2007) said that the more the company develops, the complexity increases so that it will be more difficult for management to supervise tasks and all stages of operations because there are more transactions and more complex problems. in dealing with this kind of situation, managers need special tools in the form of internal control and a good accounting system to keep the activities of the regional financial management apparatus running smoothly and achieving goals effectively at a fairly efficient cost. an internal control system in the financial management apparatus in the region is very important concerning the operation of the regional financial management apparatus, this is evident that the success of a company is often related to whether the internal control system is implemented in the regional financial management apparatus is good or not. with good internal control, the company can increase the security of company assets and encourage increased efficiency and work discipline. the regional financial management apparatus which is engaged in the sale of regional assets is an activity that must receive special attention because sales are one of the important activities in the regional financial management apparatus because the size of the sales volume will affect cash receipts, then it will affect the size of the profits will be accepted, and in the end, will affect the state of the company. because the problem of sales and cash receipts is a very dominant and important factor, it is very necessary to monitor and secure things that are not desirable (choi, & wong, 2007: doyle & ge, 2007b: fasb, 2010: fasb, 2010). the phenomenon states that the internal control system must be implemented as well as possible so that all objectives of the regional financial management apparatus can be achieved as desired and expected. with good internal control, existing problems can be overcome and the possibilities that can harm the local government can be avoided from fraud or misappropriation that occurs in the assets of the regional government. mansyur (2019) as the regional secretary of semarang province stated that poor asset management in the regions is usually influenced by several things. among them are unclear legal status or disputes, the use of assets by other parties that are not following procedures, the exchange of state assets, and human resources who do not understand the administration of state asset management. whereas well-managed regional assets will have a strategic role in supporting regional budget revenues, problems in the management of state property. this condition means that the existence of assets cannot be used for regional interests. lots of asset problems are found in the regions. this problem must be addressed immediately. with so many cases found in various regions, it is a breakthrough or innovation in the management of bmd (regional property) through an asset management program that is a managed system so that it can always be monitored. well-managed regional assets will have a strategic role in supporting regional budget revenues. the important role of the internal control system is to prevent and detect fraud and protect organizational resources, both tangible (such as machinery and land) and intangible (such as reputation or intellectual property rights such as trademarks). the existence of adequate cash receipts accounting will make the accountants of the regional financial management apparatus able to provide financial information for every level of management, owners, creditors, and other the influence of internal control system, cash sales on regional asset management receipts safkaur 46 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 users of financial reports (stakeholders) which are used as the basis for decision making. the internal control system can be used by management to plan and control the operations of the regional financial management apparatus (hertati., 2015: kim, 2012: hammersley & myers, 2008: (feng & li, 2009: gintschel, a., markov, 2014: hayn, 1995): guedhami, & pittman, 2009: griffin, & lont, 2011: eleswarapu, & thomson, 2004). the system is a network of procedures that are united with each other to work harmoniously according to an integrated pattern to carry out the company's main activities to achieve its goals. a procedure is a sequence of clerical activities, usually involving several people in one or more departments, designed to ensure uniform handling of recurring corporate transactions. the accounting system is an organization of forms, notebooks, and reports that are coordinated in such a way as to provide the financial information needed by management and facilitate company management. accounting systems are methods and procedures for collecting, classifying, summarizing, and reporting on a company's operating and financial information. the accounting system is an information system within a company, which has a role as a supporting tool for management in controlling a company and as an administrative tool that can provide supervision so that parts of one another will be able to supervise each other (kwon, et, al, 2012) joh (2003) states that the internal control system has a narrow and broad meaning. the internal control system in a narrow sense is the same as an internal check, which is a system and procedure that can automatically check each other's accounting records carried out by a division or other function within a company organization. internal control system the internal control system includes structure, organization, and all methods and tools that are coordinated and used within the company to safeguard the organization's wealth, checking the accuracy and reliability of its accounting data, encouraging efficiency, and encouraging compliance with established management policies. more thirsty (coso, 1992). accounting oversight consists of the structure of the regional financial management apparatus and all methods and procedures relating primarily to, and directly related to, the safeguarding of assets and the reliability of financial records. accounting controls usually include controls such as systems of approval and approval, separation of duties between those who record and make reports with parties who implement or store assets, physical control of assets, or internal auditing. this control is made to prevent inefficiency. (printed, et, al, 2012: pcaob, 2004: washington, et, al, 2003: hogan, & wilkins, 2008: hertati, 2015).) administrative control (administrative control or feedback control). this supervision is made to improve efficiency in operations, help to ensure that nothing deviates from predetermined management policies. administrative oversight consists of the organizational structure and all methods and procedures which are primarily concerned with operating efficiency and adherence to management policies and usually have only an indirect relationship to financial records. these administrative controls usually include controls such as statistical analysis, time and motion studies, performance reports, employee training programs, and quality control. this supervision is made to obtain information about the results of operations, whether the implementation of work deviates from the plan, there are inefficiencies or not (jung, & kwon, 2002) the accounting system and the internal control system are closely related, reflected in the objectives of preparing the accounting system itself, meaning that this objective will be realized if the application of the elements of internal control can be implemented. here, the accounting the influence of internal control system, cash sales on regional asset management receipts safkaur 47 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 system is an implementing tool in the form of procedures that must be implemented, while the internal control system is a measure or implementation guideline that is achieved in the accounting system being run. sarikhani, & ebrahimi (2011) that the internal control system includes organizational structure, coordinated methods and measures to safeguard organizational wealth, check the accuracy and reliability of accounting data, encourages efficiency and encourages compliance with management policies. the internal control system is an effort or action taken by the management of the company to regulate and direct the activities of the company and to control all implementation of the plans that have been set so that goals can be achieved properly. the main elements of the internal control system as stated by lee & choi (2010) and jang, & cheon, (2003) are: 1. the structure of the regional financial. management apparatus that separates functional responsibilities. the organizational structure of the regional financial management apparatus must be formulated firmly and independently. the operational functions are the functions that have the authority to carry out an activity. the function of saving is a function that has the authority to store company assets. the accounting function is a function that has the authority to record financial events of the regional financial management apparatus. these functions must not be given full responsibility for carrying out all stages of the transaction one person). 2. authority system and procedures. records that provide adequate protection against wealth, debt, income, and expenses. with the system of authority and recording procedures, transaction business activities are under the supervision and must be based on the authority of the authorized official for the transaction. healthy practice in carrying out the duties and functions of the regional financial management apparatus. the form of supervision that is carried out is through the division of tasks between the regional financial management apparatus or between people who must carry out a work activity properly. 3. creating healthy practices. the use of printed serial numbered forms must be accounted for by the authorities. unannounced checks will encourage employees to carry out their duties according to predetermined rules. every transaction may not be carried out from start to finish by one person, one organization, without interference from one person or another organizational unit. job rotations that are held regularly will be able to maintain the independence of officials in carrying out their duties so that collusion between them can be avoided. the requirement of taking leave for eligible employees. periodically, physical assets are matched against the records. establishment of an organizational unit whose task is to check the effectiveness of other elements of the internal control system. employees whose quality is under their responsibilities. to obtain adequate employees under the needs of regional financial management employees, steps must be taken. selection of candidates for regional financial management employees based on the requirements demanded by the work. development of education for regional financial managers as long as they are employees of regional financial management, under the demands of their job development. sales activity is the main activity of a trading company, without sales activities, the company cannot grow and develop because sales are the income earned by the company and will have the effect of increasing the company's capital. therefore, income from the sale of goods or the influence of internal control system, cash sales on regional asset management receipts safkaur 48 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 services is often referred to as sales. there are times when companies use a more appropriate term, namely sales of merchandise. sales transactions that occur can be carried out in two cars, namely cash sales, and credit sales. altman (1968) states that sales or income are gross inflows of economic benefits arising from the normal activities of the company during a period when those inflows result in an increase in equity, which does not come from the contribution of investors. broadly speaking, the implementation of cash sales transactions is regulated into several procedures. a series of procedures in the cash sales system according to ashbaugh-skaife (2007: hertati., et, all, 2019) as follows: 1. sales order procedure. sales are initiated by a sales function that serves buyers. if the buyer has chosen and agreed with the goods to be purchased, the sales function will write a note on the cash sales invoice cash receipt procedure if the first sheet has been submitted to the buyer, the buyer will make a payment transaction in the cash function. the cash function accepts the cash sales invoice for the first sheet and cash from the buyer. after the money received is following the amount stated in the sales invoice, the cash function shall affix a "paid" stamp on the invoice and the invoice is also affixed to the cash register and then handed back to the buyer to collect the goods in the wrapping function. 2. goods delivery procedure the buyer will submit the first sheet to the packaging function to retrieve the goods, the wrapping function will compare the first cash sales invoice which has been affixed with a budding stamp and attached with registration tape with the second sheet (this invoice has been attached to the goods received from the sales function together with the goods received. selected by the buyer), this process must be done carefully so that there is no mistake in the delivery of the goods. when the first and second sheets match or match based on the invoice serial number, the packaging function affixes a stamp that has been taken on the cash sales invoice for the first and second sheets, then the goods are wrapped together with the second sheet and submitted to the buyer, while the first sheet is stored and submitted to the function accounting as valid evidence to record cash sales transactions for the accounting function. 3. sales recording procedure this procedure is carried out by the accounting function by recording the first cash sales invoice received from the wrapping function into the sales journal book. 4. procedure for recording cash receipts from cash sales this procedure is carried out by the accounting function by recording proof of payment received by the cash function in the cash receipts journal. 5. bank reconciliation. procedures this procedure is carried out by the internal inspection department by reading the cash register tape produced by the cash register machine every day and comparing it with the proof of deposit. periodically the internal audit department receives a bank statement from the bank and makes a bank reconciliation by matching the information in the bank statement with the cash records maintained by the accounting function. ashbaugh-skaife, et, al (2009) cash is an asset that is easily misused and used inappropriately by employees because it is the most valuable asset compared to other assets and because cash is easily transferred ”. meanwhile, cash receipts according to "niswonger et al. (2000) are all transactions that can increase the amount of cash. the source of cash receipts at the influence of internal control system, cash sales on regional asset management receipts safkaur 49 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 trading companies most often comes from cash sales and credit sales invoices from customers. cash is the most frequently manipulated activity because cash management and control must be maintained so that it can run properly, the more effective and efficient cash management is, the greater the profit that will be gained from the realization of all the company's transactions. the cash function accepts payment from the buyer and wraps it according to the purchased item accompanied by a payment receipt (cash register ribbon that comes out of the cash register) and has been stamped in full. meanwhile, the first cash sales invoice is also stamped paid and the cash function is stored as a source document for the accounting function (ashbaugh-skaife, et, al, 2008). in this company, when the situation is crowded, the accounting function is often served as a function of cash. this is due to the small number of cash functions provided. after a payment transaction occurs at the kassa section, at the end of the coming hour the cashier will count the cash from the cashier's drawer and the amount is recorded in a form (memorandum). the accounting function will take the first cash sales invoice that has been stamped in full and the cash register tape, count the money and, compare the physical amount of money, the note form made by the cashier, and the amount of money listed on the cash register ribbon. if there is a difference (cash excess or deficiency) it will be noted. bailey, et, all (2003) network procedures that form a cash receipt system from cash sales (over the counter sales) are as follows: 1. sales order procedure. the sales function takes orders from the buyer and creates a cash sales invoice to allow the buyer to pay the price of the goods to the cash function and allows the warehouse and shipping functions to prepare goods to be delivered to the buyer. 2. cash receipt procedure. the cash function accepts payment for goods from the buyer and provides a payment receipt (in the form of cash register tape and affixing a full stamp on the cash sales invoice) to the buyer to take goods purchased from the delivery function. 3. goods delivery. procedure in this procedure the delivery function hands over the goods to the buyer. 4. cash sales recording procedure. the accounting function records cash sales transactions in the volume of sales and cash receipts and records the reduced inventory of goods sold on the inventory card. 5. procedure for depositing cash to the bank. the internal control system for cash requires immediate deposits to the bank of all cash received. in this procedure, the cash function is to deposit cash received from cash sales to the bank in full. 6. procedure for recording cash receipts. the accounting function records cash receipts into the number of cash receipts based on proof of bank deposits received from the bank through the cash function. 7. procedure for recording cost of goods sold. the accounting function recapitulates the cost of goods sold based on the data recorded on the inventory card. based on this recapitulation of the cost of goods sold, the accounting function creates memorial evidence as a source document for recording the cost of goods sold into general journals. the internal control system for cash sales and cash receipts can be seen from the main elements of the control system in it. the elements of the internal control system that should exist in the cash sales and cash receipts system beneish, et, all (2008) are as designing a financial management apparatus area related to the cash receipt system from cash sales, the main element the influence of internal control system, cash sales on regional asset management receipts safkaur 50 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 of internal control can be described as the sales function must be separate from the cash function. the sales function is in the hands of the sales order department and the cash function is in the hands of the gauze division. cash receipts made by the kassa section will be checked for accuracy by the sales order department. the cash function must be separate from the accounting function. to safeguard local government property and ensure the accuracy and reliability of accounting data and prevent the use of cash from total sales by the gauze division for personal gain (callen & levant, et, al, 2006). cash sales transactions must be carried out by the sales function, cash function, delivery function, and accounting function. no cash sales transaction is carried out completely by that one function, by carrying out each cash sale transaction by these various functions will create an internal check of the work of each of these functions by other functions. receipt of orders from buyers is authorized by the sales function using the cash sales invoice form. the cash sales transaction starts with the issuance of a cash sales invoice by the sales function. the cash sales invoice must be authorized by the sales function to become a valid document, which can be used as the basis for the cash receipt function to receive cash from the buyer and an order for the delivery function to deliver goods to the buyer, as well as a source document for recording in accounting records. cash receipts are authorized by the cash receipts function by affixing a "paid" stamp on the cash sales invoice and affixing a cash register tape to the invoice. recording into accounting must be carried out by authorized regional financial management officers (choen, & rho, 2004). each recording into the accounting records must be made by the regional financial management officer who is authorized to change the accounting records, after the regional financial management apparatus has updated the accounting records based on the source document, the employee must put the signature and date on the source document as evidence of the change. the data that the accounting records on that date. to supervise all financial transactions that occur in the regional financial management apparatus, it can be done by supervising the use of the form used as a medium for authorizing the transaction. calculation of cash balances that are in the hands of the cash function periodically and suddenly by the internal examiner function. periodic and sudden cash calculations will reduce the risk of embezzlement of cash received by cashiers. in this physical cash calculation, a match is made between the calculated cash amount with the amount of cash that should be available according to the cash sales invoice and other cash receipts (for example, cash in). however well the structure of the regional financial management apparatus, the system of authorization and recording procedures, and the various means created to promote healthy practices all depend very much on the people who carry them out. among the four main elements of control, the quality element of the regional financial management apparatus is the most important element of the internal control system. honest employees and experts in the areas of their responsibility will be able to carry out their work effectively and efficiently, although only a few elements of the internal control system support it. other elements of the internal control system are quite strong, but if they are implemented by incompetent and dishonest regional financial management officers, the objectives of the internal control system will not be achieved. because humans have human weaknesses (boredom, dissatisfaction, and other characteristics), competent and trustworthy employees are not sufficient to guarantee the achievement of the objectives of the internal control system. the influence of internal control system, cash sales on regional asset management receipts safkaur 51 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the accounting system, as a series of procedures used by the management of the regional financial management apparatus, is valid for a certain period, namely the period during which the benefits of the accounting system are still felt. besides, it should also be noted that even a good and up-to-date accounting system will not guarantee with certainty that the applied accounting system will prevent fraud or fraud in local governments. a form of internal control is needed that can help achieve local government goals. kim (2009.) stated that internal control over cash receipts is very important because the better internal control is used, the less fraud that may occur in the cash. to avoid business misappropriation by the relevant division, a good accounting system is needed through a series of procedures that involve many parts, which means that cash receipts are not focused on one part only and can create healthy practices towards cash receipts so that they can fulfill the main elements of control. internal. the accounting system for cash receipts that are implemented in the regional financial manager, it is known that although in the structure of the regional financial management apparatus there is already a separation of functions, the division of tasks has not been strictly implemented, resulting in concurrent tasks performed by the accounting function which also serves as a cash function (printed in korean. kim, 2009). the accounting function also functions as a cash recipient when it is crowded and makes money deposits to the bank every working day. if this concurrency of duties is allowed to continue, it will open up opportunities for employees to commit acts of fraud. the internal control system used is the organizational structure, system of authority and recording procedures, and healthy practices. this is following the opinion of bastian and soepriyanto (2002: 204) regarding the main elements of an internal control system which consists of accounting records and accurate data. internal control at the regional financial management agency in the regional government that organizes the collection of regional revenue and synchronizes with other organizations in the design, implementation, and implementation of the collection of local revenue regional financial management bodies as government organizations that optimize local revenue efficiently and effectively in managing local revenue with active support from the community. with the increasingly complex problems experienced by the regional financial management board and the increasing scale of operations, development growth, and the development of regional government activities, both the activities and the number of employees, can lead to inadequate regional financial management. cash is one of the many assets of local government, which is the most active and easy to divert. the internal control system at the regional financial management agency is implemented to prevent leakages in the cash receipts of regional revenues and also to find out whether the management system implemented is effective or not. cash receipts in the regional financial management agency must be carried out as accurately as possible, because the limited amount of local revenue must be used following the stated objectives, namely developing regions and financing public facilities. cash receipts at the regional financial management agency derived from local revenue (chang, & hong, 2000: fan, & wong, 2002) good control does not ensure that mistakes and abuse will not occur in the organization. but at least it will minimize the occurrence of fraud and errors in appropriate ways, so that if errors occur and fraud can be quickly identified and resolved. hypothesis: the influence of internal control system, cash sales on regional asset management receipts safkaur 52 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 h1: the effect of the internal control system on regional asset management cash receipts h2: effect of cash sales on regional asset management cash receipts source: image research paradigm, 2020. methods a validity test was conducted which was used to determine the feasibility of the items in the questionnaire to determine the variables being tested. descriptive analysis was carried out with the categorization which was studied using questions 1 to 5 (firth, fung, rui, 2007). the variance known as sem pls to test the hypothesis is done to directly test exogenous variables against endogenous variables by comparing t-table and t-count. each t calculation result is then compared with the t-table obtained using an error level of 0.05. the following is the partial t-test formula as follows: where: t: distribution t r: correlation coefficient n: amount of data hypothesis: ho = 0: the internal control system affects cash receipts for regional asset management ha ≠ 0: cash sales affect cash receipts for regional asset management. results and discussion the target population of this study is small and medium enterprises in indonesia. the measurement items of the current study consist of two variables which include the scientific findings of ics, cr, ram the research data was collected by direct questionnaire and via e.mail. it was collected from 44 samples. the population in this study were 44 skpds in the skouw mabo, skouw, yambe, skouw sae, and mosso areas, muara tami district, jayapura city. these four areas are the border areas of the republic of indonesia and papua new guinea. sample. after visiting the sample at the related skpd directly by distributing questionnaires to them for respondent responses. the process of selecting and sampling in the related skpd is very important for data collection for researchers, it can provide a targeted response (kothari, 2001). overall, the data collection process has been taken for 4 months and this research was not funded by any organization. the results of data processing can be seen in the following table: vehicle building land assets cash receipts plan cast sale regional assets procedure data the influence of internal control system, cash sales on regional asset management receipts safkaur 53 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 table 1. test results loading factor no. loading factor of each indicator internal control system cash sale regional asset management cash receipts 1. indicator 1 0.731 0.802 0.804 2. indicator 2 0.894 0.810 0.889 3. indicator 3 0.796 0.792 0.862 4. indicator 4 0.827 0.761 0.770 5. indicator 5 0.452 0.773 0.889 6. indicator 6 0.371 0.684 0.879 7. indikator 7 0.666 0.889 8. indicator 8 0.662 0.849 9. indicator 9 0.382 0.889 10 indicator 10 0.382 0.839 11 indicator 11 0.382 0.889 12 indicator 12 0.382 0.899 13 indicator 13 0.889 14 indicator 14 0.829 15 indicator 15 0.889 16 indicator 16 0.819 17 indicator 17 0.889 18 indicator 18 0.889 19 indicator 19 0.869 20 indicator 20 0.889 21 indicator 21 0.889 22 indicator 22 0.889 23 indicator 23 0.889 24 indicator 24 0.889 25 indicator 25 0.889 26 indicator 26 0.889 27 indicator 27 0.869 28 indicator 28 0.829 29 indicator 29 0.889 30 indicator 30 0.849 31 indicator 31 0.859 31 indicator 32 0.889 source: spss data processing, 2020 table 2. test results. results of square roots of ave no variable square roots of ave 1. internal control system 0.829 2. cash sale 0.749 3. regional asset management cash receipts 0.832 source: spss data processing, 2020 table 3. test results composite reliability no. variable composite reliability cronbach’s alpha 1. internal control system 0.916 0.882 2. cash sale 0.910 0.886 3. regional asset management cash receipts 0.900 0.851 source: spss data processing, 2020 the influence of internal control system, cash sales on regional asset management receipts safkaur 54 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 tabel 4. test results goodness of fit pada inner model measured using r square no. model r square 1. regional asset management cash receipts 0.179 source: spss data processing, 2020 table 5. test results q-square no. model q square 1. regional asset management cash receipts 0.349 source: spss data processing, 2020 table 6. direct effect testing results no. direct influence coefficient significance information 1 internal control systemregional asset management cash receipts -0.508 0.056 be accepted 2 cash sale regional asset management cash receipts 0.570 0.006 not accepted source: spss data processing, 2020 testing carried out in the inner model in assessing the model with pls starts by looking at r2 for each dependent latent variable. changes in the value of r2 can be used to assess the effect of certain independent latent variables on the dependent latent variable whether it has a substantive effect. besides looking at the r2 value, the pls model is also evaluated by looking at the predictive relevance of q2 for the constructed model. q2 measures how well the observed value is generated by the model and also the parameter estimates. the value of q2> 0 (zero) indicates that the model has a predictive relevance value, whereas if the value of q2 <0 (zero) indicates that the model lacks predictive relevance value. ave results indicate that the indicators owned by each variable can measure the variable in question. discriminate validity is to compare the square root of the average variance extracted (ave) value of each construct with the correlation between constructs and other constructs in the model. where the ave value must be> 0.50. the results of composite reliability show that each indicator can measure the variable reliably. composite reliability indicator block that measures a construct can be evaluated with two kinds of measures, namely the internal consistency developed by werta, linn, and joreskog, and cronbach's alpha. where is the value of good composite reliability if the value is> 0.70? based on the results of the calculation of the influence of variables in the first hypothesis, it appears that the higher the internal control affects the better the cash receipts for regional asset management. this can be seen from the significance value of 0.026. therefore the hypothesis for a direct effect in this variable is accepted. the level of significance (p-value <0.05) at a level below 0.05 indicates that cash sales affect cash receipts for asset management. the second hypothesis shows a positive sign. this shows that the second hypothesis cannot be accepted because the hypothesis is negative. the reliability test was carried out by using the cronbach alpha test using spss. a construct is said to be reliable if it gives a cronbach alpha value> 0.60. structural equation model (sem) with partial least square (pls) method using warp pls 5.0 software. this method was first coined by wold as a general method for estimating the path model using a latent construct with multiple indicators. pls is an the influence of internal control system, cash sales on regional asset management receipts safkaur 55 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 indeterminacy factor in a powerful analysis method because it does not assume that the data must be measured with a certain scale and a small sample size (ghozali, 2014). respondents felt this matter was very important to achieve regional asset management cash receipts in increasing internal control. however, there are weaknesses felt by respondents, namely before the decision was taken, the regional head was sure to collect information accurately and completely before deciding to improve internal control so that regional asset management cash receipts could increase. cash is a company asset that is small in size but has a relatively large value compared to other assets owned by the organization. therefore, cash is an organizational asset that is very easily distorted. to minimize the occurrence of fraud in cash processing, it is necessary to have a control called preventive control. the policy made to detect theft or misuse of cash is called detective control. in a certain sense, detective control is also preventive (prevent) because employees will endeavor to prevent theft or misuse if they become aware that such matters are likely to be exposed (printed in korean, et, al, 2007: pawlewicz, 2011: printed in korean. kim, et, al, 2006). research krishnan, (2005) found that to prevent errors or fraud, an internal control principle is needed. the system includes differentiating duties between physical money management and bookkeeping. this system teaches employees to be able to perfect each other. cash receipts internal control system. the structure of the regional financial management apparatus, which has methods of safeguarding assets, controlling financial reports, and creating good performance. as for internal control, namely administrative control, namely control in the non-financial section which refers more to regulatory compliance and accuracy and accounting controls we are familiar with the financial reporting process, especially the cash disbursement process, which is the current discussion. (kim, & hwang, 2007) printed in korean. ogneva, et, al (2007) cash is included in the current asset which has many of the most needed functions so that it must be guarded so that it is properly aligned so that the desired objectives are achieved in payment activities in any agency. existing cash must be arranged as needed so that there is no idle cash that can lead to improper use or fraud. safkaur & herati (2020) cash is a current asset that has a very good impact on the economy in every apparatus of local government and has a very bad impact if it is misused or manipulated. cash in the form of money which has a certain amount that can be used to finance the needs of activities in government agencies. penenrimaan cash. sohn & lee, (2005) cash disbursements must use checks, but if cash disbursements are small, do not need to use checks. the benefit of using checks is that they ensure security in cash disbursements because every transaction made will be recorded reliably. cash expenditure accounting system. song (1989) states that cash is a very important element in the scope of government. cash cannot be separated from every activity in the scope of government, the amount of cash must be based on the planning of the use of the budget, cash management must be monitored properly from the planning, receiving, and disbursing processes of cash. so that no cash funds will cause fraud that can hinder activities within the scope of local government (securities and exchange, 2002: securities and exchange, 2007: printed in korean. solidarity for economic reform, 2010: printed in korean. la porta, et. all, 1999) conclusion monitoring of the internal control system will find deficiencies and increase control effectiveness. internal control can be monitored properly through special assessments or in line with management efforts. the last monitoring effort can be done by observing employee behavior or warning signs provided by the influence of internal control system, cash sales on regional asset management receipts safkaur 56 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 cash receipt accounting. specific assessments are usually carried out periodically as there are major changes in senior management strategy, corporate structure, or business activities. in large companies, the internal auditor is the party responsible for monitoring the internal control system. independent auditors also frequently assess internal control as part of an audit of financial statements. the main elements of the internal control system, namely when viewed from the organizational structure, in this company there is no strict separation of functional responsibilities because there is no function resulting in concurrent tasks performed by the cash function or the sales function. besides, if it is viewed from other elements of internal control, namely the system of authority, recording procedures, and sound practices, the implementation of the internal control system for cash sales has weaknesses due to the absence of a sales function so that the cash sales invoice used consists of only two copies. the implementation of the internal control system for cash receipts has not been going well because it has not fulfilled the main elements of the internal control system, especially in terms of its organizational structure which has not separated functions and duties so that there are still concurrent duties in the accounting function apart from being in charge of bookkeeping to allow the occurrence of misappropriation of company property. to maximize the implementation of the internal control system for cash sales at the dpp kad, each function should be held so that there are no more concurrent duties by the cash function or the sales function. besides, based on the system of authority and good recording procedures and to implement more sound practices, the cash sales accounting system should use cash sales invoices to avoid misappropriation of company assets. these functions include a sales function, a warehouse function cash function, and an accounting function. acknowledgment this research was conducted independently and the population in this study was 44 skpds in the skouw mabo, skouw, yambe, skouw sae, and mosso areas, muara tami district, jayapura city. these four areas are the border areas of the republic of indonesia and papua new guinea. we would like to thank our colleagues in the skouw mabo, skouw, yambe, skouw sae, and mosso areas, muara tami district, jayapura city, border areas of the republic of indonesia and papua new guinea who were very helpful in filling out this research questionnaire, the conclusion of this paper finally, the author would like to thank profusely. references ahmed, a., schneible jr., r., (2007). the impact of regulation fair disclosure on investors’ prior information quality – evidence from analysis of changes in trading volume and stock price reactions to 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34–47986. washington d.c.: sec august 14.shin, h.g., (2007). analysis of review reports on internal control systems. korean accounting journal 16 (1), 107–128, ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 97-112 https://www.ilomata.org/index.php/ijtc 97 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the role of accounting information system afflication in reliability financial reporting lesi hertati1, ,otniel safkaur2, dwi yanti3, irlan fery4, peny cahya azwardi5. 1.4lecturer of accounting, stie rahmaniyah sekayu-indonesia 2lecturer faculty of economics of accounting taman siswa university-indonesia 2lecturer faculty of economics of accounting cendrawasih university-indonesia 5lecturer faculty of economics and business uin raden fatah palembang-indonesia correspondent: hertatilesi@yahoo.co.id submitted : january 13, 2021 revised : january 20, 2021 published : january 31, 2021 abstract the manifestation of regional financial autonomy can be seen in the regional financial accounting information system as a good government system characterized by increasingly low problems so that the information generated by the central government and regional governments in indonesia is a form of quality financial reporting and effective application of accounting systems by various government agencies in indonesia. indonesia. this study aims to find out how the successful application of accounting information systems on financial reporting performance was produced. this study uses causality and population verification methods in this study are the district and city governments in the provinces of papua and west papua. the sampling technique uses a census so that all members of the population become research samples. the results of this study show empirical evidence that the successful application of accounting information systems and financial reporting performance is transparent and accountable. keywords: accounting information systems, financial reporting performance introduction an information system is part of an accounting information system that defects, stores and gives honest information to management about finance for useful decision making (hertati et, al, 2019). recording financial accounting information system is a collection of organizational record components that manage, analyze, collect, allocate and distribute reports that honestly all financial information to management for decision making (hertati, et, al, 2020). but the accounting information system still has problems, namely the late submission of financial statements that occur in dpkad to the government on time that is not under statutory regulations due to the low willingness and responsibility of the accounting sections and the lack of internal control of the regional head. good financial statements under applicable reporting standards are produced by a good accounting information system process under existing data without being modified with fraudulent language. romney and steinbart (2009) state that accounting information systems are systems that collect, record, process data factually to produce information for decision making (hertati, et, al, 2020). then gelinas et.al (1993) states that accounting information systems are a set of sub-systems of information systems that collect, process, and report information relating to existing financial transactions. according to susanto (2016) and hertati, et, al, 2019). an https://www.ilomata.org/index.php/ijtc mailto:hertatilesi@yahoo.co.id the role of accounting information system afflication in reliability financial reporting hertati, et. al 98 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 accounting information system is a collection of subsystems that are interconnected with one another and work together harmoniously to process financial data into financial information that is needed by management in the decision-making process in the financial sector. furthermore, susanto (2008) said, the accounting information system is the most important part of the management information system, and is the integration of various transaction processing systems that work in various operational functions of the organization. as a system composed of many components such as people, activities, data, hardware, software, and networks, accounting information systems in their application are vulnerable to problems and failures. according to choe (1996), the successful application of accounting information systems in companies is not easy to achieve and often causes problems because it is influenced by many factors, including: (1) user involvement; (2) management support; (3) user training and education; (4) workgroup factors in the organization; and (5) other organizational factors such as the size of the organization, the characteristics of the task, and others (hertati, et, al, 2020). according to burton, et.al. (1992), in addition to organizational factors such as task complexity, organizational size, leadership factors, etc., individual factors such as motivation, satisfaction, and usefulness for the user determine the success of applying accounting information systems. according to kaye (2001), the successful application of an accounting information system is a crucial issue in the company, because it is determined by factors of the situation and conditions in which the accounting information system is applied, inter alia closely related to (1) factors of the company's environment; (2) the contents of the accounting information system used, such as tasks, structure, technology, and people; and (3) the process of applying accounting information systems (hertati, et, al, 2019). theoretically, the application of accounting information systems is influenced by the success of individual factors and systems (hardware, software, networks, procedures, tasks, etc.). individual factors are related to humans who use accounting information systems which contained human aspects that have desires, wishes, motivations, likes and dislikes, satisfied and dissatisfied, which in practice affect behavior in the use of accounting information systems. according to igrabia (1984) and thompson et.al. (1990), that the problems that arise in the use of computer-based accounting information systems are related to economic problems, technology, system concepts, and aspects of individual behavior. from these factors, problems related to aspects of individual behavior using accounting information systems are the dominant problems that occur, this is because accounting information systems in practice require accuracy, perseverance, even patience in carrying out the clerical process from the beginning of the transaction until the report is produced. finance. the complexity of the process and characteristics of the accounting information system that must obey the procedures for carrying out accounting information systems requires that individuals implementing accounting information systems have a strong working power within themselves so that they can sustainably run the accounting information system process (hertati, & safkaour, 2020). this strong working power is reflected in one of an employee's organizational commitment to the company. according to hertati (2015), human resources in an organization are the psychological ties of an employee to the company that encourages the employee to work hard to achieve the company's goals. mowday, et.al. (1982) gives a more original meaning to organizational commitment, that organizational commitment has three main components: (1) the role of accounting information system afflication in reliability financial reporting hertati, et. al 99 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 acceptance of the company's values and goals; (2) putting the company's interests first; and (3) the desire to remain an employee of a company(hertati, & safkaour, 2019). then hertati (2015) explains that human resources are conceptually a pattern of behavior, intensity, motivation, in designing accounting information systems. then sounders and jones (1992), said that the successful application of accounting information systems in addition to other factors such as integration of accounting information systems with corporate planning, the quality of accounting information system outputs, the efficiency of accounting information system operations, user/management attitudes, the competence of sia implementing staff, and others. then hertati (2015) also explained that a good information system is the main determining factor for the successful implementation of an accounting information system in addition to other factors, such as the personal capabilities of the accounting information system in engineering, user involvement, user training, and education, steering committee, department location accounting information systems, formalizing the development of accounting information systems, and organizational size(hertati, et, al, 2020). according to doll (1995), stating that skilled and experienced human resources can influence the successful implementation of accounting information systems through three ways: (1) management support that can ensure the availability of adequate funding to run an accounting information system; (2) through setting company goals and policies that support the running of the accounting information system; and (3) giving priority scale for developing accounting information systems. according to cerullo (1997), organizational commitment influences the successful application of accounting information systems, among others through (1) establishing objectives and objective assessments of companies in the application of accounting information systems; (2) objective evaluation of accounting information system project proposals; (3) defining the information and processes needed; and (4) review of programs and plans for the development of accounting information systems. then lee and kim (1992) said that organizational commitment influences the successful application of accounting information systems through efforts to formalize the development of accounting information systems in companies. with the formalization of the development of accounting information systems weaknesses in user experience and personal learning can be overcome. hertati (2016) states that the complex accounting information system, the broad scope of accounting transactions that cover all parts of the company, and the existence of many procedures in the accounting information system process from the occurrence of transactions until the production of financial statements, requires a financial manager has sufficient capacity to conduct evaluations on the troubled system and then take sufficient action to overcome the problem so that it does not affect the overall accounting information system cycle. minor mistakes in the process of accounting information systems such as incorrect journaling of transactions will have an impact on the inaccuracies of financial statements. according to shaberwal et.al. (2006), the complexity of the accounting information system process requires the experience of a financial manager in both of which determine the successful application of accounting information systems. according to choe (1996), training and education of developers, managers, and users of accounting information systems (training and education developers, owners, and users) are critical determinants of successful application of accounting information systems in companies, due to the complexity of sia and the variety of financial the role of accounting information system afflication in reliability financial reporting hertati, et. al 100 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 transactions that occur in all parts of the company require careful and continuous management, to produce valid financial reports. whereas saunders and jones (1992), use the terms' manager accounting staff and staff competency (ais manager and staff competence) as a determining factor for the successful application of accounting information systems susanto (2016). the successful application of an accounting information system is indirectly thought to have an impact on financial reporting performance. according to susanto (2016), effectiveness the phenomenon of the low quality of local government financial reports also occurred in papua and west papua provinces, because based on the results of the bpk-ri examination from 2012-2016 that the average opinion was given on the financial statements of the regency and city governments in papua and western provinces is reasonable with exceptions (wdp), unnatural (tw) and not giving opinions (tmp). the following are developments in the results of the bpk-ri audit of the lkpd in the provinces and districts/cities in the province of papua and western provinces in 2012-2016 which can be seen in figure 1.1 below: source: data process by author figure 1.1 lkpd opinion for 2012-2016 in papua and west papua provinces (in%). value is important and is explicitly part of how companies do business. the manager's function is to articulate a shared sense of the values they make, and what unites stakeholders. it also encourages managers to be clearer about how they want to do business, specifically the type of relationship they want and needs with stakeholders to fulfill their goals. one of the first challenges for companies is to identify who their stakeholders are. there is general agreement among companies that the stakeholders are shareholders and investors, employees, customers, and suppliers. outside these categories, it remains a challenge because there are no clear criteria for defining stakeholders. stakeholders are individuals, companies, groups, and also the government and its subsystems that can cause and respond to external issues, opportunities, and threats. stakeholders are those who have an interest in the company's activities related to something risky. stakeholders are parties who consider the global impact of the industry such as climate change or cultural change due to marketing and advertising. according to seddon and kiew (1994), states that the successful application of accounting information systems is the use of systems, namely the use of accounting information systems to help with the completion of daily work. then according to etezadi and farhoomand (1996), the successful implementation of an accounting information system is user satisfaction, which is the level of usefulness obtained by a user of the accounting information system. then according to the role of accounting information system afflication in reliability financial reporting hertati, et. al 101 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 gelderman (1998), the successful application of accounting information systems is the intensity of the use of accounting information systems in daily work and user satisfaction with the use of accounting information systems. then hertati (2019) defines the successful implementation of accounting information systems as intended use and user satisfaction. in this study, the definition of the successful application of accounting information systems refers to straub, et.al. (1995) where the successful application of accounting information systems is the intended use of accounting information systems in various managerial tasks and user satisfaction for information generated by accounting information systems. in theory, two comprehensive models can be referred to the dimensions of the successful application of accounting information systems, namely: (1) the information success model of delone and mclean (1992) provides five dimensions to measure the successful implementation of accounting information systems, these dimensions are: (1) high usage rates are the accuracy of the way in doing things, and the ability to carry out tasks properly and appropriately without wasting money, time, and energy; (2) system user satisfaction is the quality of information produced by an information system that will provide high satisfaction for users of the information system; (3) a positive attitude is good behavior under the values and norms of life prevailing in the society. (4) the achievement of information system goals is the system is carried out in providing information when they want to make decisions for management and to carry out operations and organized procedures to maintain the achievement of messages or information from a person or group to other parties; and (5) financial returns are having the main skills needed to manage finances in a good report cannot be left to people who are not experts about the current financial situation. research by susanto (2016) found that information quality and system quality were significant predictors of user satisfaction, while user satisfaction was also a significant predictor of intended use and individual impact. livari's research (2005) shows that system quality and information quality are significant predictors of user satisfaction, but are not significant to the intended use, while user satisfaction is also a significant predictor of individual impact. it is expected to produce accurate and complete information about a transaction, while the external outcome information system can improve the company's image and service to customers. in the context of this study used aspects of the behavior of users of accounting information systems (intensity of use and user satisfaction) to measure the dimensions of the success of the application of accounting information systems, this is because the emphasis of this study is to see the effect of behavioral aspects in the use of accounting information systems. (safkaur & hertati, 2020: hertati, et,al, 2020). in general, the meaning of the word performance is defined as a record of the results or achievements that have been achieved, as explained by bernardin and russell (1993): "performance is the record of outcomes produced on a specified period". performance is a record of the outcomes generated in a period. then stolovitch and keeps (1992) explained that performance is a set of results that usually refers to the achievement of the work done. then gomes (2003) explains that performance is the level of achievement or success achieved by an organization in a certain period. in this study, the notion of corporate financial performance refers to gomes (2003), where the company's financial performance is the level of financial achievement or success achieved by a company in a certain period. the role of accounting information system afflication in reliability financial reporting hertati, et. al 102 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the level of achievement or financial success is usually associated with the level of profits obtained by the company. according to neely (1995), performance measurement is a process of quantification of various actions taken. the main purpose of performance measurement is to help companies identify performance problems and focus on the effectiveness and efficiency of the company (yuksel, 2004). therefore, performance measurement can be used to assess the success of the company and also plays an important role in the control system and organizational planning (kennerley and neely, 2003. according to the literature, there are two ways of performance measurement, namely traditional performance measurement and non-traditional performance measurement. on financial measures derived from financial statements, such as: 1. growth is impact on physical aspects (quantity), while development is related to the maturation of functions which is the result of the interaction of maturity which is influenced by the development of the system of speech, emotions, and socialization (quality). all of these functions play an important role in life as a whole. 2. profit is the size of the company is large or small, but actually, the figures mentioned do not yet reflect the net benefits that can be obtained. 3. return on investment is the return on investment is calculated based on the results of the division of income generated by the amount of capital invested. this means that roi plays an important role in providing information about the size of business profitability clearly so that all operational activities can be evaluated for their return on investment. that is why you need to know how to calculate roi appropriately. 4. economic value added is the size of a company's economic profit, which is the profit earned by the company minus the cost of financing the company's capital. accounting profit is also known as net income and is the company's income minus all of its explicit costs. 5. cash flow is movements of money coming in and going out, money earned and issued within a certain period. because the financial performance of the data is sourced from financial statements, traditional performance measurements are often criticized for presenting past data and not oriented towards the future so that they are considered less relevant to the current situation. based on this thinking, the concept of non-traditional performance measurement was born, one of which was developed by kaplan and norton (1996), which is known as performance measurement using the balanced scorecard approach. in measuring performance with the balanced scorecard approach, in addition to using financial measures as in the traditional performance measurement system, balanced scorecard performance measurement also uses nonfinancial perspectives, such as customer perspective, internal business process perspective, and learning and growth perspective. this study uses financial reporting performance measures to measure company financial performance. the measure of financial performance used is profitability, which is defined as the company's ability to generate profits. the reasons for using profitability performance measures are: (1) profitability is an important financial performance measure and is often used in research to measure corporate financial performance (barker and cagwin, 2000) profitability can measure overall company performance and can measure the level of efficiency in asset management, liabilities and company equity (fraser and ormiston, 1998); and (3) shareholders are more likely the role of accounting information system afflication in reliability financial reporting hertati, et. al 103 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 to use profitability because the stability of stock prices is highly dependent on the level of profits and dividends received in the future (agus sartono, 2001). profitability can be measured using several ratios, including return on assets (roa), return on equity (roe), and profit margin (gibson, 1992). roa is often referred to as return on investment (roi), which is a measure of the effectiveness of overall company management in generating profits with the use of available assets (gitman, 2003). roa is calculated by comparing net income with total assets. this measure is generally accepted as a measure of financial performance in empirical studies (barker and cagwin, 2000). in this study, roa was chosen as a measure of a company's financial performance because it has been used extensively in various empirical studies to measure profitability (cohen, et.al., 1997). roe is a measure of a company's ability to generate profits based on a certain amount of share capital. this ratio is a measure of profitability from the perspective of shareholders (hertati, 2016). whereas profit margin is defined as the extent of the company's ability to generate net income at a certain sales level. high-profit margins indicate the ability of companies to generate high profits at a certain level of sales. conversely, a low-profit margin indicates that sales are too low for a certain level of costs, or costs are too high for a certain level of sales. roe and profit margin as well as roa have also been widely recognized as a measure of financial performance in empirical research (salama, 2003). the impact of successful application accounting information systems on financial reporting performance. susanto (2007), states that when the factors that influence the successful implementation of accounting information systems can be overcome properly, organizational dynamics will be created and will have an impact on the company, which is to be more efficient, effective, and controlled, or also called to have good performance. as revealed by susanto (2007), the successful application of accounting information systems can not only increase the speed and quality of information produced for quality decision making but will also improve the quality of relationships between individuals within the organization. the quality of relationships between individuals will encourage a company to be more dynamic to produce high performance. according to romney and steinbart (2009), the application of accounting information systems in companies can provide added value (value-added) for users in the form of providing various financial information for planning, controlling, and decision-making activities of the company, which in turn has an impact on improving overall company performance (financial and non-financial performance). then gelinas, et. al. (1993), states that the successful application of accounting information systems can drive improvements in day-today business operations and can improve the quality of corporate decision making, both of which are major components in the creation of a corporate financial performance. (hertati,et,al, 2020). in addition to the opinions of experts above, the successful application of accounting information systems in several studies has also been proven to have an impact on corporate financial performance, including research conducted by chang and king (2005). from the results of a survey of 346 users of information systems in 149 organizations, chang and king (2005) found that the function of a scorecard information system (system performance, information effectiveness, and service performance) has a positive effect on the effectiveness of business processes and organizational financial performance. zhang (2007a) conducted a study on the the role of accounting information system afflication in reliability financial reporting hertati, et. al 104 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 effect of moderating connectivity information systems on the relationship between is support and company performance. from the results of a survey of 153 senior information systems executives of large companies in the united states, it was concluded: (1) the interaction between is support for information sharing and is connectivity has a positive effect on company performance; and (2) interaction between is support for information interpretation and is connectivity influences company performance. then zhang (2007b) researched the effect of information systems from the perspective of competitive advantage on company performance. from the results of a survey of 148 senior information system executives in large companies in the united states, it was concluded: (1) is complemented by the uniqueness of organizational culture significantly influence company performance; (2) is complemented by unique vertical integration and related diversification has a positive effect on company performance; and (3) is complemented by the unique knowledge and information have a positive effect on company performance (hertati, et, al, 2020). ais influences the successful application of accounting information systems proven to have an impact on corporate financial performance, as found by clercq and dimov (2008), researching the influence of internal knowledge and access to external knowledge on the investment performance of finance companies in the united states. from the results of a survey of 200 finance companies listed on thompson financial venture xp database, clercq and dimov (2008) concluded that the development of internal knowledge and access to external knowledge affect the investment performance of finance companies. then west and noel (2009) researched the effect of the company's knowledge resources on company performance (new venture performance). from the results of a survey of 83 new venture ceos in the us, west and noel (2009) found: (1) there are three procedural knowledge that must be possessed by a manager of a new venture company, namely knowledge of the industry to be entered, knowledge of the business, and creating, building, and harvesting new ventures; and (2) the level of knowledge of a new venture manager is very useful in developing a new venture business. based on the description above, the framework of this research can be illustrated as figure 2 below: figure 1 framework for thinking application of accounting information systems is user satisfaction with the accounting information system and the intensity of the intended use of the accounting information system in various managerial tasks (hertati, et, al, 2020). the successful application of an accounting information system consists of two dimensions, namely: (1) user satisfaction with the accounting information system and (2) intensity of the intended use of the accounting information system. the financial reporting performance of the company is the level of financial achievement or success achieved by a company in a certain period. the company's financial reporting application of accounting information systems process data financial and non-financial financial reporting performance • roa • roe • profit margin the role of accounting information system afflication in reliability financial reporting hertati, et. al 105 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 performance consists of three dimensions, namely: (1) return on assets (roa)); (2) return on equity (roe) and (3) profit margin. methods exploration of research data was carried out using smartpls version 3.2.8 (dul, et, al (2011)) and statistics. package for social sciences (v-23). the sizeable sample used in this examination was 293 by removing univariate and multivariate anomalies. the procedure for recognizing univariate and multivariate anomalies is the z-test score and mahalanobis clear (d2) using spsss (v-23) and resting the completed data investigation by utilizing smartpls. shown in table 1 is the organization and structure of the valid answers the data collected was used in this study. likewise, table 2 lights up the mean and pearson correlations of the factors used in the current examination. moreover, to identify the multicollinearity problem, this study used hair et al. (2010) initiated that so far most of the features in pearson's correlation check should be below 0.90. in this way, emphasize the absence of multicollinearity between the factors (rambut et al., 2013; sharif and raza, 2017; afshan et al., 2018). results and discussion besides, the validity of the content is confirmed if the items make use of the data analysis load with a greater value in each of them. factors then other items show in the frame, while internal consistency is practiced if the cronbach alpha value and the composite reliability exceeds 0.7 (arif et al., 2016; sharif and raza, 2017; frooghi et al., 2015; hair et al., 2013; afshan et al., 2018). factor loading and composite reliability are shown in table 3 which shows that most of the item factor loading> 0.7 also, this loading is displayed in their respective columns adjusting the threshold or internal consistency stated previously. besides, convergent validity advises on the degree to which an item of certain factors is consolidated and loaded to a factor close to where they are assumed to be loaded (dillman, (1978). at the time of examination, convergent validity was declared using an extracted average variance. (ave) for each variable (dul, et, al (2011). they provide a limit greater than and compare to 0.5 to certify convergent validity. therefore, the ave in table 3 confirms the basic steps. table 1 test results validity of application of accounting information systems item r r-table conclusion 1 0.807 0.3 valid 2 0.667 0.3 valid 3 0.658 0.3 valid 4 0.468 0.3 valid 5 0.686 0.3 valid 6 0.682 0.3 valid 7 0.652 0.3 valid 8 0.638 0.3 valid 9 0.618 0.3 valid 10 0.703 0.3 valid 11 0.772 0.3 valid 12 0.688 0.3 valid 13 0.767 0.3 valid 14 0.750 0.3 valid source: research results, 2019 the role of accounting information system afflication in reliability financial reporting hertati, et. al 106 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the results obtained indicate that the statement items in the instrument of the successful application of accounting information systems have a correlation value greater than 0.3 as the boundary value of a research questionnaire item said to be used (acceptable) based on the criteria expressed in barker, et. al. (2002). so it can be said that the questionnaire items in the variables are all valid and can be used to measure the success variables of the application of accounting information systems. reliability test results after obtaining the results of the questionnaire items used in this study are valid, then proceed with the reliability test. the results of the calculation of the split-half reliability coefficient for each variable successful application of accounting information systems can be seen in table 2 below: table 2. results of reliability calculations variable reliability coefficient (r) limit value conclusion accounting information systems e financial reporting performance 0,932 0,7 reliable source: research results, 2019 the reliability value obtained for table 2 is 0.932. the reliability value obtained for the three variables is more than 0.7 as the boundary value of a research instrument said to be used (the reliability value is included in the acceptable/good enough category) based on the criteria expressed in barker (2002). with the reliability value obtained, it can be concluded that the research instrument used has a good level of consistency so that it can be used in measuring the variables studied. successful application of accounting information systems the success variable of applying an accounting information system is measured by two dimensions, namely user satisfaction and intensity of use. the weight for this variable is 1801 (appendix 4), while the ideal weight = (14 x 5 x 38) = 2660, so the achievement of the score for the variable success in applying the accounting information system = 1801/2660 = 67.71%. this score is included in the 61% to 81% interval. based on table 4, the score is included in the high category. the achievement of this score is obtained from the distribution of the frequency of respondent responses for each dimension. the following outlines the results of achievement scores for each dimension of the success variables of the application of accounting information systems, starting with the dimensions of user satisfaction. table 4 presents the frequency distribution of respondents' responses and achievement scores for the dimensions of user satisfaction as follows. table 3. frequency distribution of respondent responses application of accounting information systems no. item questions frequency of response total score x frequency 5 4 3 2 1 1 the accounting information system has provided the right information under the needs of users at work. 0 56 72 0 0 128 2 accounting information systems have provided content that is appropriate to the needs of users at work. 0 52 75 0 0 127 3 the accounting information system has provided reports that fit the needs of 20 36 72 2 0 130 the role of accounting information system afflication in reliability financial reporting hertati, et. al 107 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 no. item questions frequency of response total score x frequency users at work. 4 accounting information systems have provided sufficient information under the needs of users at work. 5 64 54 6 0 129 5 the accounting information system has provided accurate information. 0 52 69 4 0 125 6 satisfied with the accuracy of the information generated by the accounting information system. 15 52 60 4 0 131 7 the accounting information output system is presented in a useful format. 5 44 72 4 0 125 8 accounting information systems produce very clear information. 10 44 69 4 0 127 9 the accounting information system has been presented in a familiar (userfriendly) manner. 15 52 57 6 0 130 10 the accounting information system is easy to use (easy to use). 10 56 60 4 0 130 11 accounting information systems can be obtained whenever needed. 15 64 48 6 0 133 12 accounting information systems provide up-to-date information. 15 36 72 4 0 127 weight 1542 ideal weight (12 x 5 x 38) 2280 user satisfaction score 67,63% source: research results, 2019 financial reporting performance variables the financial reporting performance of the regional governments of papua and west papua is measured by profitability, namely return on assets (roa), return on equity (roe), and profit margin (pm). financial reporting performance can be grouped into three parts, namely: high, medium, and low as seen from the interval class of each financial performance dimension. table 4 presents the frequency distribution of financial reporting performance variables. table 4. frequency distribution of financial reporting performance interval class frequency % catagory return on asset ≤ 0.031 0.032 – 0.192 ≥ 0.193 total 22 14 2 38 57.89% 36.84% 5.27% 100% low is high return on equity ≤ 0.161 0.162 – 0.752 ≥ 0.753 total 27 11 0 38 71.05% 28.95% 0.00% 100% low is high profit margin ≤ 0.126 0.127 – 0.497 ≥ 0.498 total 27 11 0 38 71.05% 28.95% 0.00% 100% low is high source: research results, 2019 the role of accounting information system afflication in reliability financial reporting hertati, et. al 108 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 from the financial performance in table 4, it can be seen that there are 44 provincial / municipal / regency dpkads in the papua and west papua region or 57.89% who have low roa, as many as 14 dpkad or 6.84% who have moderate roa, and as many as 2 dpkad or 5.27% have high roa. in financial performance using roe, it is seen that as many as 27 soes or 71.05% have low roe, and the remaining 11 dpkad or 28.95% have moderate roe. likewise, with the profit margin performance measurement, it is seen that as many as 27 dpkad or 71.05% have low-profit margins, and the remaining 11 dpkad or 28.95% have moderate profit margins. the effect of application of accounting information systems on corporate financial performance (roa) partially. to see the significance of the effect of the partial success of the application of accounting information systems on variables due to the performance of corporate financial reporting / roa, a partial hypothesis test was performed with the t-test. the statistical hypothesis tested is. • ho: xy≤ 0 (there is no positive and significant effect of partial implementation of accounting information systems on financial reporting performance / roa). • h1: xy> 0 (there is a positive and significant effect of partial implementation of accounting information systems on financial reporting performance / roa). t-test statistic for y (t-value of application of accounting information systems) from calculations using amos software version 16 in the equation calculation of the path coefficient before showing a result of 2.168. furthermore, the value is compared with the value of the ttable. based on the t-student distribution table for α = 5% and free degrees (38-3-1), the value (t0.05 / 3, 34) = 2.032 is obtained. comparison of t-value results obtained with table values is tvalue greater than t-table (2.168> 2.032). the test results based on sample data carried out expressed rejection of h0 or in other words accept h1. so it can be concluded that statistically there is a positive and significant influence on the success of the application of accounting information systems on corporate financial performance / roa. conclusion the successful implementation of accounting information systems simultaneously has a positive and significant impact on financial reporting performance (dimensions of roa, roe, and profit margin). while partially, the success of the application of accounting information systems only has a positive and significant impact on the performance of financial reporting for the roa and profit dimensions, while for the roe dimensions the success of the application of the accounting information system does not have a positive and significant impact on the company's financial performance. simultaneously the results of this study indicate that the company's financial reporting performance (roa, roe, and profit margin) can be achieved through optimizing the increase in successful application of accounting information systems. the insignificance of the partial test results between the successful application of accounting information systems and financial performance with the roe dimension is presumed to be due to: (1) very complex factors that affect the company's financial reporting performance (roe); and (2) the accounting information system as a tool to produce financial information affects the performance of financial reporting through other factors such as process efficiency and effectiveness, and others. because of the many factors that become intervening between the variables of the success of ais implementation and the roe corporate financial performance the role of accounting information system afflication in reliability financial reporting hertati, et. al 109 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 variable, directly the success of 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(2014), determinants of brand equity of mobile: a case study of pakistan. journal of management sciences, 1(1), 49-60. ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 3 july 2020 https://www.ilomata.org/index.php/ijtc 122 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 the influence of information technology covid-19 plague against financial statements and business practices hertati lesi1, otniel safkaur2 1. lecturer, departement of accounting, stie rahmaniyah – indonesia 2department of accounting, universitas cendrawasih, indonesia, correspondent: hertatilesi@yahoo.com.id submitted : june 6, 2020 revised : july 1, 2020 published : july 30,2020 abstract the covid-19 information technology develops virtually rapidly, where technology makes users able to interact with an onlinesimulated environment of tools that have a number of accurate information that can be accessed online to receive information. information technology covid-19 cause dampak adverse impact on micro small and medium business activities so that the impact goods can be using, consider the performance targets in addition to the declining profit for the company because it does not obtain sales transactions in the end the flow of funds from customers more inhibited. covid-19 epidemics effect reduced. the company's financial statements and business practices and profitabity according to. information exposition of covid-19 caused the customer to take the decision to well at home. there are no activities beyond the end of business practices and other transactions for the company. media public like web, private social networks, wiki and blog become tools for companies that are important for communication, collaboration, and sharing information about sales through the system even directly evaluations how sales take place. the data analysis techniques used in this study are structural equation modeling (sem) techniques, in micro small and medium enterprises in indonesia related and accumulated 112 samples conducted micro small and medium enterprises spread across indonesia. the results showed that the information technology covid-19 plague information technology had considerable effect on the company's financial statements and business practices. companies should consider the losses caused by the inventory and the company's revenues will decline. the research was conducted on micro smallmedium enterprises in indonesia which impact the corona pandemic. keyword: information technology covid-19 plague, company's financial performance, business practices. introduction information is needed by the organization in order to make effective decisions to support the needs of the organization (susanto, 2017: albertini 2014: hertati, 2020). then g:\ilomata\hiperlink\romney.docx ainin, g:\ilomata\hiperlink\romney.docx (2016) said that to make an effective decision, the organization must decide what decisions are made, what information is needed and how to collect and process data to generate information. g:\ilomata\hiperlink\meleod.i.docxarnfalk (2016), said that information technology can provide competitive advantage (compatitive advantage) for the company. however impact technologically information covid-19 adversely bad affects. financial reporting and business ventures itself because corona outbreak caused the purchasing power of the community to https://www.ilomata.org/index.php/ijtc mailto:hertatilesi@yahoo.com.id https://id.wikipedia.org/wiki/teknologi https://id.wikipedia.org/wiki/pengguna https://id.wikipedia.org/wiki/lingkungan file:///g:/ilomata/hiperlink/romney.docx file:///g:/ilomata/hiperlink/romney.docx file:///g:/ilomata/hiperlink/romney.docx file:///g:/ilomata/hiperlink/romney.docx file:///g:/ilomata/hiperlink/meleod.i.docx file:///g:/ilomata/hiperlink/meleod.i.docx file:///g:/ilomata/hiperlink/meleod.i.docx the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 123 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 decrease where office activities and sales activities were discontinued due to corona epidemic so that data processing results could give meaning and benefits causing financial reporting of business activities to be bad, while data is a fact or anything that can be used as input in generating information (susanto, 2017) in line with the above understanding, g:\ilomata\hiperlink\mcleod.docxasadi (2017), information technology covid-19 adversely impacts the preparation of merchandise into using and employees in the government's appeal to dwell on this matter is a fact and a number that is usually meaningless and still not processed, while information is the result of data processing that has meaning, usually tell a thing that is not known by the user. then according to g:\ilomata\hiperlink\hall.docxargyres, (1999) information is business resource. such as other business sources: raw materials, capital, and labor, information is essential and indispensable to the survival of today's business organizations (barua, 1995)." in fact, the phenomenon states that the information produced by the company is not qualified, as was discovered by the finance minister mulyani (2009). he doubted the quality of information provided by bank indonesia on bank inspection in indonesia. then boediono (2010) as vice president reminded that the bank should make a quality report. he asserted that quality information is very important, the banking financial statements must be accurate and do not do window dressings (polish financial statements) to look good. the impact of the covid-19 information can affect business sales so that a covid-19 outbreak affects the sales business and financial statements of sales as well as employee performance by can (bai, 2017). berkhout (2001) says the information technology is a system consisting of a collection of integrated computer-based components and manual components that are made to collect, store and manage data and provide information output to users. information technology is a specialized subsystem of information systems aimed at collecting, processing and reporting on information relating to financial aspects of business activities (borghans, et, all, 2009). the phenomenon of low transparency and accountability of the state's financial statements, resulted in the opinion given by the cpc against the state's financial statements is not giving the opinion (disclaimer). basic reason bpk gave the opinion disclaimer one of which is still weak accounting information system and state reporting. nasution (2009) also stated that bpk rediscovered nine points relating to the opinion of the disclaimer of central government financial statements. one of these is the absence of an alignment between the general accounting information system held by the department of finance and accounting information system of the agency held by the department/institution, so there is still difference between the two. next, the chairman of the bank century investigative audit team from the financial inspectors (bpk) hasan bisri (2010) said that there is a bank game and accounting engineering in the case of the century bank. the banker's game, the bank was made of loss, was disengaged from the inside and the account was engineered as if the assets were good '. accounting engineering is done that the true asset is not worth it but it is considered high value. further hasan bisri (2010) said the century bank case occurred due to an unyielding in the application of bank indonesia provisions. other phenomena say that there are seven issuers who belong to the bakrie group have deposits/time deposits at pt. bank capital indonesia amounting to 6.7 trillion, but bank capital's financial statements in the same period record the deposits of customers in the bank of only 2.69 trillion. according to harry nadir (2010) as the finance director of unsp, the fund has been withdrawn to finance the acquisition, but due to the administrative problems of the funds are still recorded in the one quarter financial report. therefore, ito warsito (2010) as the main file:///g:/ilomata/hiperlink/mcleod.docx file:///g:/ilomata/hiperlink/mcleod.docx file:///g:/ilomata/hiperlink/mcleod.docx file:///g:/ilomata/hiperlink/hall.docx file:///g:/ilomata/hiperlink/hall.docx file:///g:/ilomata/hiperlink/hall.docx file:///g:/ilomata/hiperlink/sri%20mulyani,%20mentri.docx file:///g:/ilomata/hiperlink/budiono.docx the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 124 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 director of the indonesia stock exchange (idx) said: ' the bakrie group issuer incorrectly implements the accounting standards, if the bakrie group's issuer has withheld the supposed funds on the date of the withdrawal noted in the financial statement '. management within an organization works to process all accounting information that is a key part of a set of information (bose 2011). accounting information used appropriately is a tool in making good business decisions (busch et al, 2001). good business decisions are made by using quality information (bergeron, bergeron,2008). quality information is one of the competitive advantages of an organization (chen, et.al, 2011). the competitive advantage of an organization is a unique characteristic of a company in producing superior products and superior in decision making than its competitors (chuang, et.al, 2016). the decision making of quality is strongly influenced by quality information (casolaro, et.al, 2007). information systems obtained from information technology and in designing information technology in strategic ways that are needed to be integrated with high capability in all service groups appropriately for data management for precise decision making. this concept was expanded by croson, et.al (2009, i.e. becoming the supporting capacity of mobile wireless ad hoc networks devices and methods. the next research, chen, (2007), uses the concept of infrastructure support as a unified support for the ease of electronic-based business transactions and ease of management. strictly ciborra (1997) says that facilities are very important in the service of information technology has become a common expression around the world ". in a broader perspective, hertati (2015) confirms information technology is a feature of information technology era and technology communication related to internet network. its funding and the launch of new pastility, especially broadband communications network with national reach became a strategic issue in small micro-medium business services. generally in developing countries the guarantee of the maintenance of the supply has not been in accordance with expectations including for small micro enterprises. in a nutshell, both new and maintenancebuilding processes involve: environmental change, funding, ownership and post-management of large economies of scale; changed access methods; and the governance of the supply and supply of pastility has not been in accordance with expectations including for small micro enterprises (ciliberto,2006: crichton,1995). method the location of this research is micro small medium enterprises in indonesia population, namely sales, finance and it. the total population in this study amounted to 45 samples taken using the slovin formula with a 5% error rate with a sample amount of 200 respondents. from a questionnaire that was spread out as much as 200, the return was as much as 105 and that can be processed as many as 102 questionnaires, as many as 3 respondents filling incomplete. this research uses quantitative methods with multiple regression analysis tools. the tool used is spss version 2.4. scales used to use the five-point likert scale (hair, et.al, 1998) result and discussion the independent variables in this study were information technology outbreak of covid19 (x1), and against financial statements and business practices (y) as a variable of its dependencies. these variable relationships can be described systematically as follows: yo f (x1) the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 125 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 table 1. variable dimensions and indicator no. conceptual definitions dimensions indicator 1. information technology outbreak covid-19 : execution of interaction restrictions when the number of sufferers covid-19 in indonesia continues to surge identification 1. provide events 2. impression 3. the there is an object 4. the impression 5. the can be seen involvement 6. important 7. relevant 8. strengths 9. knowledgeable 10. the into products financial statements and business practices : the report system is set up for users after transactions are recorded and summarized within one accounting period. profitability 11. gross profit. 2. market share 12. product price, 13. selling products 14. expanding the market area 15. production costs cost reduction 16. number of products source: result and discussion of variable dimensions and induces, 2020 research questioner is tested using spss ghozali and fuad. 2005, and the research results show that all questionnaires are said to be valid and reliable. reliability is to measure a questionnaire that is an indicator of a variable or a construct. questions are said to be reliable or powerful when a person's answer to the question is consistent. in determining significant or insignificant with mrmcompare the value of r count with the value of r table degree of freedom = n-k, and the area side testing with alpha 0.05. if r counts each question item is positive and is greater than the r table (see corrected item-total correlation) then the question item is said to be valid. from the output analysis on the above reusability test, see the corrected item-total correlation is the value of r count for each question item of each variable. the value of r count each item is both positive and negative and the value is greater than r table, hence the summed of the variable statement item in say is valid. result value is valid because the rcalculated > r table. the validity test results can be seen in table 2. table 2. the results of this study show that all questionnaires are valid and reliable variable indicator r value significance description information technology outbreak covid-19 x1 . 624** .000 valid x2 .806** .000 valid x3 .754** .000 valid x4 .833** .000 valid x5 . 731** .000 valid x6 .787** .000 valid x7 .815** .000 valid x8 .765** .000 valid x9 . 880** .000 valid x10 .804** .000 valid x11 .788** .000 valid financial statements and business practices x12 .860** .000 valid x13 .865** .000 valid x14 .853** .000 valid x15 . 749** .000 valid the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 126 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 x16 .855** .000 valid for the reliability test, if the value of alpha > 0.90 it is said to be perfect reliability, if alpha between 0,70-0,90 then called by high reliability. if the alpha is 0.50-0,70 then it is called moderate, and when the alpha value is < 0.50 then the reliability is low. the test results show that the alpha value of the entire questionnaire > 0.90, it shows that it is in the category of perfect reliability. table 3. reliability test results no variable let cronbach’s alpha description 1 2 information technology outbreak covid-19 company's financial performance & business practices .943 .847 reliable reliable source: data spss, 2020 the influence of inter-variable independent (organizational commitment) to variable dependent (financial statements and business practices) micro small business in indonesia can be seen from the results of t hitug between variable and r square value. coefficient of determination is zero and one. a small r2 value means variable deterioration – independent variables in explaining the variation of dependent variables is very limited. a value close to one means the variable – independent variables provide almost all the information needed to predict the variation of the dependent variable. the results of the t-test count and nili r square this research can be seen in table 4. table 4. test result t count and significance value coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 11.575 4.744 2.440 .000 information technology outbreak covid-19 1.239 4.162 .182 4.010 .000 company's financial performance & business practices 1.186 .230 .635 4.154 .000 nilai r square: 0,636 source: spss data, 2020 based on the data obtained it is known that it counts the variables of the calculated t variable the organization 's commitment > t value table, which is 4,010 > 1.985, this result shows that the organizational commitment is influential in the financial statements and business practices of small micro-medium enterprises in indonesia. the r square value is obtained at 0.636 or 63.6% which implies a percentage of contributions influence the independent variable against the dependent variable by 63.6%. the f test on a study served to figure out the influence of a shared independent variable-against dependent variables. table 5. test value f anovab model sum of squares df mean square f sig. 1 regression 16358.509 2 8179.255 83.133 .000a residual 9346.838 95 98.388 total 25705.347 97 a. predictors: (constant), information technology of covid-19 outbreak b. dependent variables: company's financial performance & business practices the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 127 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 based on the results of the f-test data, it can be concluded that the test value of f means that there is a variable influence on the organization's commitment to financial statements and business practices . from the results explained that hypotheses in this study were received. in addition to the f test, in order to know the relationship between dimensions of each variable, the correlation between dimensions is calculated. the correlation between dimensions can be seen in table 6. table 6. dimension intercorrelation dimensions y1.1 y1.2 y1.3 x1.1 identification .784** .681** .711** x1.2 involvement .737** .657** .579** y1.1 profitability 1 .692** .740** y1.2 market share .752** 1 .886** y1.3 cost reduction .760** .886** 1 source: data spss, 2020 based on the results of the data, it can be seen that each variable between dimensions has a strong enough relationship. table 4 shows that the correlation between the engagement dimension has the strongest relationship with the main factor dimensions in the work, as well as the dimension of loyalty has the strongest relationship with the same dimensions, the main factor in working. and the system usage dimension has a strong relationship with the system quality dimension of the information usage factor. teixeira research, et, all, 2008: hertati, (2015) the sales ingredient does not necessarily provide a comparable increase in profits, at some point . the increase in results will be reduced even though the sales factor continues to be added. infrastructure availability makes it easy for companies to make decisions when markets are saturated or over capacity products that ultimately affect the financial structure and profitability. customers have a number of accurate information that can be accessed online to purchase purchases. stewart's research, (2007), law (2005), koontz,(2005, hertati, et.al, (2019). the enterprise gets faster transactions and ultimately flows the funds from customers faster. improve the company's financial structure and profitability. infrastructure availability makes it easy for customers to take accurate and timely decisions and ultimately close transactions that benefit the company. in addition to the use of public media by companies on the web, private social networks , wikis and blogs are becoming an important enterprise tool for communication, collaboration, and sharing information about efforts to increase sales through the system even evaluating directly how sales take place. conclusion based on the results of research technology influence of covid-19 epidemics against financial statements and business practices with the data obtained researchers then concluded that the long term measures require it availability so that strategic decision making can be implemented with the right information as well as a safe and transparent process. companies can move quickly including anticipating changes with the right strategy. availability and it support is to reengineer business strategies to make business processes more flexible and adaptive to change. through it support the company operates in a wider area with more customer reach and ultimately increases profitability as well as financial structures. micro small medium enterprises obtain a flow of funds from the sale of business services faster and improve the financial structure with the support of it but experiencing kandalah the effect of covid-19 infectious viral epidemics from people to others are encouraged by the government to dwell in the home and business activities decreased so that the merchandise experienced a decrease in sales turnover and losses due to the stock of the goods experiencing the decay and company as a mediator of strategic relations with performance. strategy implementation capabilities positively impact performance. the sales operating system of business companies has changed the high-speed wireless wi-fi networks, and the influence of information technology covid-19 plague against financial statements and business practices lesi & safkaur 128 | ilomata international journal of tax & accounting vol. 1 no. 3 july 2020 laptop computers and wireless tablets. companies can increase sales by more customer reach. infrastructure growth makes customers have access to products online and closes transactions. information technology as a unified tool for ease of electronic based business transactions and the ease for management included in sales oriented to increased profits. reference albertini, e. 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(1970), the impact of computers on organizations, praeger publishers, new york, ny. file:///d:/disertasi%20siam/3%20buku%20teman/hiperlink/azhar,sim.docx file:///d:/disertasi%20siam/3%20buku%20teman/hiperlink/azhar,sim.docx file:///d:/disertasi%20siam/3%20buku%20teman/hiperlink/azhar.docx file:///d:/disertasi%20siam/3%20buku%20teman/hiperlink/azhar.docx ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 1-16 https://www.ilomata.org/index.php/ijtc 1 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 top management support functions in higher education management accounting information systems lesi hertati1, rina antasari2, nazarudin3, irlan fery4, peny cahaya azwari5, otniel safkaur6 1.4lecturer faculty economic of accounting stie rahmaniyah, sumsel-indonesia 2,3,5 lecturer uin raden fatah, palembang-indonesia 6department of accounting, universitas cendrawasih-indonesia correspondent: hertatilesi@yahoo.co.id submitted : september 16, 2020 revised : november 15, 2020 published : january 31, 2021 abstract the function of the management accounting information system is very important in universities, as it provides input to leaders for accurate decision making. higher education leaders must listen more and provide good work management and require an accounting system to survive amid the heavy workload of lecturers that are not balanced with balanced wages. accounting information systems can help universities expand their reach to remote locations, acquire new forms and workflows, and possibly change teaching patterns virtually. the management accounting information system is a collection (integration) of subsystems/components, both physical and non-physical, which are interconnected and harmoniously cooperate to process transaction data related to financial matters into financial information. the purpose of this study was to determine the effect of top management support on the function of the accounting system. the unit of analysis in this research is the related subunit within the management of higher education institutions in south sumatra-indonesia. the results showed that top management support greatly influenced the function of the management accounting information system. the results of the study found that the life cycle of accounting information system development supports top management which includes planning, design, and implementation (top management support is conceptualized as the involvement and participation of top-level management of the organization in information technology/accounting information system activities on lecturer work reports, lecturer salaries and managers. college. keywords: top management support, management accounting information system. introduction information is a business resource that an organization needs to maintain survival (hall, 2011). information can find out how the development of operations that occur in the company and avoid the risk of doing something that should not be fatal to the organization (susanto, 2013). furthermore, hertati (2019) states that information is intended for a person, organization, or anyone who needs it, so information must be managed effectively so that the organization gains a strategic advantage, tactical advantage, and operational excellence (mcleod & schell, 2007). effective information management is the process of processing data into high-value information (wilkinson et al., 2000). according to kieso et al. (2012) accounting information is the result of an accounting process that includes the process of recording, grouping, and summarizing certain entity's financial data presented in the form of financial statements. quality accounting information is accounting information that is under user needs (kieso et al., 2012), https://www.ilomata.org/index.php/ijtc mailto:hertatilesi@yahoo.co.id top management support functions in higher education management accounting information systems hertati, et. al 2 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 besides that quality information is needed in running the organization's business (o'brien & marakas, 2011), quality information is also useful for decision making ( gelinas et al., 2012) and used as a basis for overcoming problems and minimizing uncertainty (hall, 2011). accounting information for external parties is used to evaluate past performance, predict future performance, and obtain other input regarding the organization concerned (bodnar & hopwood, 2014). quality accounting information will influence capital providers and other stakeholders in making investment decisions, as well as credit (beest et al., 2009). kieso et al. (2012) added that quality information can create an efficient market. if the accounting information is not of high quality, the accounting information will be useless (kieso et al., 2012). kieso et al. (2012) say that the information function is measured by relevance, faithful representation, and enhancing qualities. then the results of hertati's (2015) research found that information technology can process management accounting information systems well if users feel it is helped. this is said by mcleod & schell (2007) and susanto (2013) which states that quality information must have characteristics relevancy, accuracy, timeliness, and completeness. then hall (2011) and hertati (2015) added that formalization can be well integrated if the measures of management accounting information that function consists of relevance, accuracy, timeliness, completeness, and summarizing. not much different, according to mcmanus & harper (2003) and hertati (2026), which states that the basic key in determining functional information is seen from determining the characteristics of the information function, namely relevant, reliable, complete, timely, understandable, verifiable and accessible. in line with schermerhorn (2011) and hertati (2016), the criteria for quality information consist of timely, high quality, complete, relevant, and understandable. laudon & laudon (2014) and hertati, et, al (2019) emphasize that accounting information systems are important for managers because most organizations need a management accounting system to survive and succeed. accounting information systems can help organizations expand their reach to remote locations, acquire new forms and workflows, and possibly change the way of doing business. hertati (2020) states that the management accounting information system is a collection (integration) of sub-systems/components, both physical and non-physical, which are interconnected and harmoniously work with each other to process transaction data related to financial issues into financial information. (susanto, 2013). a quality information system can mean a successful (successful) or effective information system (delone & mclean, 2003: hertati, et al, 2020). stair & reynolds (2010) and hertati & safkaur (2020) state that information systems can function in terms of being flexible, efficient, easily accessible, and timely. the same thing was conveyed by horan & abhichandani (2006) and hertati, et, al (2020) that the characteristics of information system quality consist of utility, reliability, efficiency, customization, and flexibility. then emphasized by heidmann (2008: 87-90) that the measure of the quality of information systems is integration, flexibility, accessibility, formalization, and media richness. delone & mclean (1992) compile a model to describe the success of information systems, including system quality, information quality, use, user satisfaction, individual impact, and organizational accounting information system is built with the main objective to manage accounting data coming from various sources into accounting information needed by various parties to reduce risk during the decision-making process (azhar susanto, 2013). top management support functions in higher education management accounting information systems hertati, et. al 3 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 accounting systems within the company can be classified into 2 (two) subsystems, namely financial accounting information system and management accounting system (bockholdt, 1999). the financial accounting system is intended for external corporate users (kieso, et.al, 20118: hertati, sumantri, 20016) while the management accounting system is for internal corporate users, such as managers, executives, and employees in decision making (hansen & mowen, 2007). hoq (2005) states that a management accounting system provides relevant high-quality information to managers to make effective decisions to achieve organizational goals or objectives. a quality management accounting system has characteristics, integrated, flexible, accessibility, normalization, richness media (heidmann, 2008). a quality management accounting system produces quality management accounting information processing (heidmann, 2008: syafarudin & herati, 2018). quality management accounting information has 4 (four) characteristics, relevance, timeliness, accuracy, completeness, summarization (hall 2011). the phenomenon states that many management accounting systems are not integrated. as stated by satria (2020), there are still many teaching staff who are categorized as weak economies because they are paid cheaply and are below the minimum necessities of life and social welfare security. this gap will be felt between lecturers who are civil servants and serve on state campuses compared to lecturers on private campuses, especially in the current large-scale social restrictions (psbb). the salary of a permanent lecturer at the indonesian institute of health, a private university in jakarta, is modest and receives a salary below the minimum wage standard. the nominal wages that have been set by the province of the special capital region of jakarta in 2020 are below the provincial minimum wage (ump) of idr 4,276,349.906 per month. in addition to receiving low salaries, payments are always late, sometimes past a month. entering 2020, the campus, in this case, the nusa bhakti husada foundation, has never paid all employees. then zakiyudin (2020) stated that the fate of pts lecturers, which was already difficult before the covid-19 incident, became increasingly difficult because of the impact of this pandemic. that is especially true in the payroll area. currently, according to zaki, many lecturers at private universities are only paid rp. 300 thousand per month, and some are only rp. 250 thousand. during a covid-19 situation like this, the condition is getting worse because many private universities are unable to pay their salaries. for this reason, the lecturer hopes that the government will have more role, especially the ministry of education and culture (kemendikbud) to pay more attention to the fate of the lecturers at pts. the government, especially the ministry of education and culture must participate to find the right solution so that the lecturers' income is not lost. the role of the ministry of education and culture in pts is still very minimal, especially its attention to the welfare of its lecturers. this can be seen from the absence of standardization of lecturers' salaries at pts. lecturer payroll system in state universities (ptn). the management accounting system in state-owned enterprises is not qualified because the management accounting system is not integrated, inflexible, inaccessible, unreliable so that it is feared that it is wrong in decision making and has an impact on the quality of management accounting information produced. the phenomenon of accounting information in indonesia has not fulfilled the characteristics of accounting information that function properly as suggested by the modification of production, financial control, and quality management accounting systems top management support functions in higher education management accounting information systems hertati, et. al 4 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 carried out in brazil. modification of production control, financial, and quality management accounting systems. jarvenpaa & ives (1991) and hertati & syafarudin (2019) in their research revealed that top management support can be in the form of participation and involvement of top management in the development of accounting information systems. with the participation and involvement of superiors in terms of project progress and providing the necessary resources, it will be able to determine the successful implementation of the functions of a system. if an organization implementing the system, the absence of top management support, this goal will not be achieved. agree with masrek et al. (2009) in their research that top management support can be in the form of providing the resources needed in developing information systems in the form of time, location, infrastructure, and human resources. it can be seen that top management supports the use of information systems as a means of alignment. the development of information systems in many literature studies is inseparable from top management support in the form of providing direction, authority, and provision of resources. in his research, it is concluded that the more optimal top management support is given, the higher the success of the information system will be (ifinedo, 2008). furthermore, daoud & triki (2013) and (hertati, et al, 2020) concluded that top management involvement and expertise affect the accounting information system (the result indicates that top management involvement and external expertise have an impact on the mais). hertati et al. (2019) in their research concluded that clarity of business vision and top management support has a significant effect on the quality of business intelligence systems (clarity of business vision and top management support have significant effects on the quality of business intelligence systems). the greater the support provided by top management, the higher the performance of the information system, the higher top management support has been identified as an important factor for the success of the main organizational activities. this paper establishes a framework for understanding the impact of top management support on the performance of management accounting information systems in tertiary institutions. the higher the level of top management support, the higher the level of management accounting information system performance. griffin & moorhead (2014) stated that top management support is very important for the successful implementation of a work team. among other things, top managers need to emphasize that there are sound business reasons for team use and be prepared for some setbacks during the transition to the team. these executives meet with their immediate reports to explain the process through which their company will move towards a team-based structure. top management support is essential for the successful implementation of teamwork. among other things, top managers need to encourage sound business activities for the use of teamwork and anticipate the setbacks that will occur during the transition. this executive receives the report in person to explain the process that the organization will undertake through a teamwork-based arrangement. young (2006) defines top management support as success in encouraging an activity (can be in the form of a budget) which is expected by all stakeholders (top management support is that only project management success (on-time on-budget) is emphasized by all stakeholders and top management support has been neglected). an opinion that does not differ much, was also conveyed by land et al. (2008) that top management support is needed for organizational change management. the top management has the responsibility of providing direction, resources, and supervision to manage organizational change. top management support functions in higher education management accounting information systems hertati, et. al 5 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 top management according to robbins & coulter (2016) is the party responsible for making decisions in an organization, setting goals and plans for organizational continuity. agree with williams (2006) that top management is an executive who is responsible for organizational activities. still according to williams (2006), parties including top management such as executives, vice presidents, presidents, directors, operational directors, or chief executive officers. furthermore, wheelen, et al. (2015) revealed that the top management function is in the form of coordination between the ceo (chief executive officer) and the coo (chief operating officer). mahring further (2002) states that top management support is needed in the use of information technology and continues to be supported so that the survival of the organization can be maintained. likewise, basu et al. (2002) and syafarudin & hertati (2020) argue that top management is the party responsible for providing general guidelines for information system activities. the level of support provided by top management for organizational information systems can be a very important factor in determining the success of all activities related to information systems. from some of the explanations above, it can be concluded that top management support is the highest management involvement and participation in organizational development through a process of evaluation, direction, and monitoring of the accounting information system used which can make individuals feel cared for and valued (mahring, 2002; jarvenpaa & ives, 1991; basu et al., 2002). top management support according to guinea et al. (2005) wheelen, et al. (2015) hertati (2015) can be measured through the following: 1. evaluate. top management can examine proposed proposals, decisions, and actions, agree or disagree with subordinates, provide advice. top management can describe the mission of the company and select strategic activities for management. 2. direct. top management must assign responsibility, and direct directly the plans and policies to be taken. as well as encouraging a culture of good governance of information technology by requiring managers to provide information on time in realizing the expected conditions. top management must also integrate the tasks that must be performed by each division. all sections require direction if they want to successfully achieve the ultimate goals of an organization. 3. monitor. top management must monitor, through the information technology work system and ensure that the resulting performance is under the plan and is not in line with external factors (regulations, legislation, laws) and internal factors (employee performance). continuous observation to ensure and control the alignment of program implementation with predetermined planning. 4. participation, choice of hardware & software, implementation of system, system maintenance, and problem-solving; 5. commitment: planning of further developments. the characteristics of high-quality information include accuracy, completeness, consistency, uniqueness, and timeliness. furthermore, stair & reynolds (2012) involves measuring the quality of information as seen from being accessible, accurate, complete, economic, flexible, relevant, reliable, secure, simple, timely, and verifiable so that it becomes more comprehensive and detailed. heidmann (2008) states that management accounting information systems (mais) are formal systems that provide information from the internal and external environment to top management support functions in higher education management accounting information systems hertati, et. al 6 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 managers. drury, colin (2012) stated that the management accounting system is to provide relevant financial information to managers to help them make better decisions. hoque, (2005) and hertati (2016) state that management accounting information system provides high-quality managers and relevant information to make effective decisions to achieve their organization's goals or objectives. the management accounting system is a formal system designed to provide information to managers bouwens & abernethy (2000). furthermore, hansen & mowen (2014) states that managerial accounting identifies, collects, measures, classifies and reports financial and non-financial information that is useful to internal users in planning, controlling, and decision making. hogue (2004) states that an effective management accounting system must be able to assess the progress of the company against strategic priorities. furthermore, horngren, et, al (1996) states that the management accounting system is a formal mechanism for collecting, organizing, and communicating information about organizational activities. the opinion of collier paul (2003) states that the management accounting system must provide timely and accurate information to facilitate efforts to control costs, measure and improve productivity, and to devise improved production processes. a statement expressed by anders rom (2005) states that a management accounting system is an enterprise system including an information system the terms' integrated information system. several meanings that are in line with the above meanings have been put forward by other experts who say that what is meant by a management accounting system is a formal system designed to provide information to managers and employees in the organization to provide relevant information, both financial and non-financial. financial, such as collecting, measuring, storing, analyzing, reporting, and managing timely, accurate information about activities to make effective decisions in achieving goals or objectives in the organization in an integrated manner to make decisions. based on the dimensions put forward by experts (heidmann, 2008, avison & fitzgerald, 2006), the dimensions of management accounting information systems in this study are integrated. (1) integrated: the system can cooperate; (2) follows: the system can adapt to environmental changes; (3) flexibility: the system is easily accessible when needed; (4) reliable: the system can minimize errors and function properly; (5) formalization: formalization measures the extent to which a system contains rules or procedures; and (6) media richness: measure the extent to which the system uses various alternative media to simplify and speed up communication. the effect of top management support on the quality of accounting information systems: mahring (2002) explains the importance of top management support in the success of information systems. mcleod & schell (2007) stated that top management support is one of the factors that have an impact on information systems. agree with schwalbe (2006) which states that top management support is the main support in the information system used. furthermore, laudon & laudon (2014) stated that information systems can be implemented if there is user involvement and are supported by top management because they have more opportunities to shape information systems according to business priorities and needs, and more opportunities to control the results. the same opinion was also conveyed by olson (2004) who revealed that top management support is one of the keys to the success of implementing information systems. research by sharma & yetton (2003) concluded that management support is considered an important factor in the success of a management accounting system. the form of top top management support functions in higher education management accounting information systems hertati, et. al 7 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 management support is in the form of establishing a new structure, a supervisory system, a coordinating mechanism, and motivating performance improvement. this is supported by the research of nathan et al. (2004) who stated that top management support has been identified as an important factor for the success of an organization. the results of this study indicate that a framework in understanding the impact of top management support on the performance of information systems in an organization. research conducted by dong et al. (2009) concluded that the position of top management support is very important in the implementation of a management accounting system, which understands the concept of work in an organization. research by dong et al. (2009) supported by hwang et al. (2012) stated that in addition to training, top management support can also affect the implementation of information systems. likewise, hussein et al. (2007) argued in the results of their study that top management support has a significant effect on the success of information systems. top management support is significantly and positively related to the dimensions of information system success: these findings further strengthen the argument that top management support has a considerable influence on the success of management accounting information systems (hertati, et al, 2020). top management support is significantly and positively related to the dimensions of si success. stare (2011) in his research suggests that the support provided by top management can be in the form of planning, monitoring, and evaluating the results achieved, overcoming problems, facilitating resources, and providing rewards to achievers. furthermore, top management plays a role in implementing information systems, in the form of observation and participation in implementing information systems (arnoldina, 2010). based on the description above, the quality of accounting information systems is indicated by the more optimal top management support is given, the higher the success of information systems is achieved, the performance of information systems and the success of information systems with the participation and involvement of top management, so it can be said that top management support affects quality. accounting information systems and offers advice and alternatives. figure 1: research framework h1: the top management support function affects the management accounting information system methods research methodology: the method used in this research is descriptive and explanatory. the population in this study were related sub-units at higher education institutions in south lecturer work management information system input teaching community service, research, guiding students information systems process management accounting salary and awards dosen ad art college top management support functions in higher education management accounting information systems hertati, et. al 8 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 sumatra, as many as 120 samples in 15 universities. the sample was obtained through a simple random sampling technique using the slovin formula (cooper & schindler, 2006), as follows: 𝐍 𝟏 + 𝐍(𝐞)𝟐) so that it is obtained a sample as follows 𝟒𝟗 𝒓𝒐𝒖𝒏𝒅𝒊𝒏𝒈 𝒕𝒐 𝟑𝟕 = 𝟏𝟏𝟗 𝟏 + 𝟏𝟏𝟗(𝟎. 𝟏)𝟐) of which: n: sample size n: population size e: inaccuracy leeway percent due to sampling which can still be tolerated or desirable for example 5%, 10%, and more. the observation unit in this study is the people who work in related units as administrators of management accounting information systems in tertiary institutions. this study uses primary data, while the data collection method used is a questionnaire assisted by google form. the validity test was conducted which was used to determine the feasibility of the items in the questionnaire to determine the variables and the reliability test to measure the reliability of the object being measured. data analysis was carried out by descriptive analysis and verification. descriptive analysis was carried out with a balanced categorization using inter-quartile ranges (cooper & schindler, 2006). the verification analysis used to test the hypothesis in this study is to use the structural equation modeling (sem) component or variance based on what is known as the partial least square (pls). results and discussion top management support: measured through three dimensions, namely evaluate, direct, and monitor. each of the variables and dimensions of top management support is measured through five indicators. the overall indicators are operationalized into ten statement items. the following is a descriptive analysis for each dimension and its interpretation. table 1. descriptive statistics of top management support variables variable dimension statistical measure relative frequency min max average sd 0-1 1-2 2-3 3-4 4-5 top manageme nt support functions evaluate 1,5 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 direct 1,5 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 monitor 1,3 5,0 3,8 0,7 0,0 11,7 31,1 32,3 32,5 5,1 participation 1,7 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 commitment 1,9 5,0 3,9 0,5 0,0 8,1 38,6 45,8 37,1 8,2 source: data processed statistical 2020 from table 1, the people who work in related units as administrators of management accounting information systems in tertiary institutions are shown top management support through the operation of the management accounting information system sampled in this study has an average value of 3.6 seen of the evaluate dimension which falls into the high category. it can be interpreted that the accounting information system used in related units as administrators of management accounting information systems in tertiary institutions has been assessed and evaluated by top management in helping smooth company activities periodically. top management support functions in higher education management accounting information systems hertati, et. al 9 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the direct dimension has an average of 5.0, which is in the high category which indicates that the use of management accounting information systems makes users motivated to complete tasks and responsibilities optimally through direction and communication built from management. the dimensions of the monitor have an average of 3.8 in the high category. this means that the use of management accounting information systems in colleges that are the research samples has been monitored both in terms of work completion and provision of resource allocation to support the smooth operation of the accounting information system used. if you pay attention to each dimension, the lowest dimension is the evaluate dimension with an average value of 3.6, while the highest in the monitor dimension, which means that top management support carried out in bumn is mostly applied through monitoring. the results of the calculation of the relative frequency (table 1) can explain as much as 5.2% of the unit of analysis which states that the evaluation is still low in the involvement of top management. 1.7% of the analysis unit stated that direct has not been entirely carried out to realize top management support. 6.9% of the analysis unit stated that the supervision of the management accounting information system implementation has not been fully achieved. the explanation of each dimension is as follows: management accounting information system functions: management accounting system quality variables are operationalized using 6 (six dimensions), namely integration, following, flexibility and reliability, formalization, media richness. each dimension of the management accounting system function is measured through twelve indicators. the overall indicators were operationalized into twelve statement items. table 2. descriptive statistics variable functions of management accounting information systems variable dimensi statistical measure relative frequency min max average sd 0-1 1-2 2-3 3-4 4-5 5 management accounting information system functions integrated 1,6 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 follow 1,7 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 flexibility 1,3 5,0 3,8 0,8 0,0 12,7 31,1 32,3 31,5 5,1 reliable 1,6 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 formalization 1,8 5,0 3,9 0,2 0,0 6,1 38,6 45,8 35,1 8,2 media richness 1,7 5,0 3,8 0,7 0,0 12,7 31,1 42,3 32,5 5,1 source: data processed statistical 2020 the integration dimension has an average score of .0 in the high category, meaning that in general, the analysis unit considers the management accounting information system used to have connected the components and the transaction processing system. the flexibility dimension has an average score of 1.3 in the low category (not qualified). this means that so far the management accounting information system used in the unit of analysis can adapt to user needs and can adapt to environmental changes. the reliable dimension has an average score of 1.6 in the low category. this means that the management accounting information system to produce financial reports used in the unit of analysis has been reliable and has many errors. among the six dimensions, integration and reliability have the greatest value which indicates that the management accounting information systems in the majority of tertiary institutions are not connected and are not reliable. however, there are still some units of analysis that do not feel that the management accounting information system used has unqualified attributes. based on the results of the calculation of the frequency of analysis (table 2), it shows that the management accounting information system application used is not integrating between top management support functions in higher education management accounting information systems hertati, et. al 10 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 components and the transaction processing system, namely 1.7%, less flexible by 3.4%, and less reliable at 3.4%. furthermore, to find out the quality of the management accounting information system in the high school, it will be explained from the distribution of respondents' responses in each statement item, namely integration, following, flexibility, formalization, and mediation. based on the phenomena, problem formulations, hypotheses, and research results, the following conclusions are obtained: top management support affects the quality of the management accounting system. not yet qualified because the management accounting system is due to the support provided by top management has not been fully provided. top management support affects the functions of the management accounting system so that to improve the function of the management accounting information system, several things need to be considered in top management support, namely: 1. review of the implementation of the accounting information system is carried out continuously, not only when there is a data mismatch, both at the central and regional levels. 2. motivating employees through regular meetings to solve problems that occur so that subordinates feel cared for in continuing to carry out their daily work activities. 3. increase support for the provision of resources, both infrastructure and human resources. this is of course done to increase adequate reward criteria and increase the capacity of human resources through training related to the design and implementation of accounting information systems. the results of this study also meet the characteristics of scientific research, namely replicability, and generalizability, so it is recommended for other researchers to conduct research again based on the results of this study with the same research method, on different units of analysis and samples to show the same results so that it will increase confidence in the research that has been done and the usefulness of the research can be widely accepted because the scope of validity of the research results is accepted by many organizations. based on the research results, it can be seen that the cause of the management accounting system is not qualified because several factors such as the management accounting system available in the company are not yet integrated, not flexible, difficult to access, not normalized properly, and often have errors/disturbances. based on the results of the research conducted, it can be seen that the organizational culture of state-owned enterprises in palembang is not optimal because there are still state-owned enterprises that place employees who are irrelevant to their expertise, employ employees with various types of work, there are several sections/departments that do not have a function. what is clear, some employees are not placed on the right side, some employees accept assignments that are not from their direct supervisors, there is still a lack of clarity of instructions from superiors, people who work in related units as administrators of management accounting information systems in colleges that do not have adrt standard operating procedures and for colleges that already have sops, there are employees who do not carry out work under their adrt. based on the results of the study, the influence of the top management function on the function of the management accounting information system was 5.56%, meaning that the increase in the function of higher education institutions would also improve the function of the management accounting information system. from the above results, it can be said that the results of hypothesis testing indicate that top management support affects the function of the management accounting system and is acceptable for lecturers' salaries and responsibilities. top management support functions in higher education management accounting information systems hertati, et. al 11 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 conclusion based on the results of research, top management support affects the function of the accounting system for higher education in south sumatra, does not meet the requirements because the accounting system is not integrated, inflexible, has not been reliable due to inaccurate, unreliable, and non-formal data. top management support at tertiary institutions in south sumatra is not optimal because there is still a division of tasks (a division of labor), departmentalization, and assignment of instructions (authority of command) which are so heavy that they are not balanced with a decent salary, as well as formalization. a job that is not good. the results of this study have discussed issues that have been raised previously in the background of the study, but several things need to be suggested in connection with the results of the study that show little effect such as hiring lecturers and the high educational status of lecturers is not balanced with the salary they receive is so low. with the quality of teaching that is heavily proxied, this is what causes lecturers to change jobs because of the heavy mental pressure they face. this research was conducted to provide input to the managers of higher education institutions in indonesia to pay more attention to the workload of lecturers in educating the nation's children. hopefully, this research can be investigated by subsequent research with different test tools and different variables to strengthen the findings that have been made. references anders rom. 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(2020). nasib dosen swasta di tengah covid-19: gaji minim dan terancam tak dibayar. https://www.kliksaja.co/read/klik-news/nasib-dosen-swasta-di-tengah-covid-19gaji-minim-dan-terancam-tak-dibayar https://www.kliksaja.co/read/klik-news/nasib-dosen-swasta-di-tengah-covid-19-gaji-minim-dan-terancam-tak-dibayar https://www.kliksaja.co/read/klik-news/nasib-dosen-swasta-di-tengah-covid-19-gaji-minim-dan-terancam-tak-dibayar the illomata international journal of management ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.256-263 https://www.ilomata.org/index.php/ijtc 256 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 corporate social responsibility and financial ratio on market value added diyah santi hariyani1, l. h. almira salatnaya2, d. dwi mardani3 13universitas pgri madiun university 2muhammadiyah high school of economics in tuban correspondent: diyah.santi@unipma.ac.id submitted : september 25, 2020 revised : october 10, 2020 published : october 31, 2020 abstract the purpose of this study is to empirically examine the effect of corporate social responsibility (csr) and financial ratio on market value added (mva), both simultaneously and partially. this research was conducted using a sample of 33 companies winning 2016 csr and top csr 2017 appreciation by determining their samples (purposive sampling) because there were certain considerations over a period of 2 years (2015-2016). the results of this study indicate that simultaneously the effect of csr and financial ratio together does not significantly influence market value added (mva). and partially iso9001, iso14001, iso26000, ohsas18001, current ratio (cr), debt to equity ratio (der), price earnings ratio (per), total asset turnover and return on sales do not significantly influence mva. while partially only esop has a significant effect on mva. keywords: corporate social responsibility, financial ratio, market value added introduction the performance of the company is not only focused on the disclosure of the company's financial information, but the company is expected to disclose information relating to nonfinancial matters such as; social and environmental problems. this measure of non-financial performance is a driving indicator to measure progress in financial performance because this measure can be used in the current economic conditions in indonesia. one of the non-financial elements expressed is social responsibility or corporate social responsibility (csr) (ioannou & serafeim, 2010). the increasing level of competition faced by companies in the present era raises various awards given to companies to appreciate the achievement of company performance. several awards are given certainly have international standards or commonly referred to as the international organization for standardization (iso) or other certificates relating to csr practices. the international organization for standardization (iso) has a variety of forms, one of which will be a measure in this study including iso 9001, iso 14001, iso26000, besides that there is another certificate, ohsas18001, employee stock option program (esop). in iso 9001, it addresses international standards on the issue of quality standards of a company. iso 14001 is an international standard in which there are environmental issues. at present, corporate social responsibility (csr) is characterized by international standard initiatives, namely iso26000. iso26000 states that corporate social responsibility (csr) is a form of corporate social care that is currently an important aspect to improve company performance in addition to quality and environmental issues (rachman et al., 2011: 37). https://www.ilomata.org/index.php/ijtc mailto:diyah.santi@unipma.ac.id1 corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 257 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 according to (kurnia, tandiontong, & maranatha, 2015), ohsas18001 is the standard of corporate social responsibility (csr) which contains safety and health standards, while the employee stock option program (esop) is to support the alignment of objectives between the company and its employees so that companies can create stock incentive programs for the employee. measurement of company performance is also measured using financial ratios. the ratio is designed to show the relationship between financial statement estimates. according to (zhang, 2016), financial statement analysis aims to determine the ability of companies to generate profits, prospects and the level of risk of investment in shares of a company. with this financial ratio analysis, companies can find out how much the percentage (%) the company is experiencing growth. besides, companies can find out how much they're strength in providing or generating funds with financial ratio analysis. market value added (mva) is a measurement of the performance of other companies. market value added is a performance measurement concept that is still related to economic value added (eva) which is more focused on the total value of a company at a certain point such as the value-added balance sheet (gs & rahmansyah, 2017). market value added (mva) is the size of the company to determine future performance where the main component in this measure is the price of the stock market, and the economic value added (eva) is the size of the company that measures past performance (song & peng, 2015). in measuring using mva this is an important factor to get the value of the company. giving awards to the company is expected to be a push for the company to be more advanced because the company's financial condition is considered not to have problems. market value added (mva) can be described as the performance of a company. good company performance will create a good corporate image. the relationship between corporate social responsibility (csr) and market value added (mva) according to (hsu-chien, 2010) has a close relationship, that is, when the company establishes social and environmental responsibility properly the company's image improves. financial ratios and company performance also have a close relationship. for investors, the use of ratios can be adjusted to the analysis that will be carried out because the ratio has its uses(putri, 2014). the ratio becomes the basis for analyzing the condition of a company. the healthy condition of the company will certainly add a good corporate image to the community. previous research conducted by (novita, 2013) in manufacturing and mining companies in the period 2007-2011 explained that social responsibility showed a positive relationship with market value added (mva). (kurnia et al., 2015) explained that esop, iso 9001, iso 14001, ohsas 18001, current ratio (cr), debt-to-equity ratio (der), total asset turnover (tat), return on sales (ros), price earnings ratio (per) have a significant effect on market value added (mva) while based on (abdurachman & gustyana, 2019) der did not have a significant impact on the market value added. starting from previous research, researchers were interested in adding ownership certificates to iso 26000 certificates that could be a guide to the implementation of organizational social responsibility for companies. iso26000 is represented by seven main issues including corporate governance, human rights, labour activities, the environment, fair operating activities, consumer issues and contributions to the community and society (rachman et al., 2011: 4). corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 258 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 the object of the research used in this study is the company that is the winner or who gets an award in the 2016 csr and top csr 2017 appreciation. one focus of the assessment is related to csr alignment with the company's strategy and competitiveness. it is this competitiveness that encourages companies to be responsible for the environment and society so that a good corporate image is formed in the community. figure 1. research framework methods this research is a quantitative descriptive and limits the problems that exist in the formulation of the problem. this study will only focus on companies that get csr 2016 and top csr 2017 appreciation awards. the 2016 csr appreciation is a mark for the company's acceptance of its social activities, and this award was followed by 22 companies. the 2017 top csr award was chosen as the object of research because one of the focuses of top csr 2017 assessment is the fulfilment of iso 26000 provisions related to csr alignment with the company's strategy and competitiveness. the event was attended by 117 companies from various industrial sectors. the method used in selecting the sample object of this research is purposive sampling, namely the method of selecting samples with various specific criteria. the criteria used in this study are as follows: (1) companies included in the list of 2017 csr appreciation and top csr 2017 award winners that are listed on the idx; (2) companies that have complete financial report data in 2015 and 2016. corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 259 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 based on the criteria above the total sample used in the study were 33 companies. data is obtained by downloading data that will be used by accessing from the official website of the award-winning company and the official website of the indonesia stock exchange (www.idx.co.id) results and discussion table 1. t-test dependent variable: mva the results of testing the hypothesis note that corporate social responsibility (csr) through is0 9001 does not affect market value adapt (mva). the negative t value indicates that iso9001 has an opposite relationship to market value added (mva). the increase or decrease in iso9001 will not affect market value added (mva). companies that get an iso 9001 certificate are companies which have guidelines for the quality of their companies. iso 9001 is the most comprehensive standard and is used to guarantee the quality so that if the company does not comply with these guidelines it will hurt the company's image. corporate social responsibility (csr) through is0 14001 does not affect market value adapt (mva). besides, a positive t value indicates that iso14001 has a relationship with market value added (mva), although it is not significant. the increase or decrease in iso9001 will not affect market value added (mva). the results of this study indicate that companies with iso 14001 certificates have guidelines for their environment that must be followed according to the rules. these rules must be following environmental quality standards because environmental quality can describe the company's performance. in its development, the company has aspects that must be adhered to in carrying out company activities. if the rules for this environment are not appropriate, it will harm the company, because the company is considered not to run the rules effectively. this causes if it is not following the guidelines, the measure of non-financial performance will be judged to be poor so it will decline the company's image. model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) iso9001 iso14001 iso26000 ohsas18001 esop cr der per tat ros 6,299 1,423 4,428 ,000 -1,072 1,349 -,148 -,794 ,436 1,437 2,715 ,211 ,529 ,602 -2,069 2,031 -,249 -1,019 ,319 2,450 2,569 ,359 ,954 ,351 2,967 1,264 ,401 2,348 ,028 -,008 ,005 -,315 -1,478 ,154 -,001 ,006 -,033 -,165 ,871 ,002 ,010 ,031 ,168 ,869 -,071 ,059 -,261 -1,204 ,242 ,098 ,094 ,226 1,038 ,310 http://www.idx.co.id/ corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 260 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 corporate social responsibility (csr) through is0 26000 does not affect market value adapt (mva). a negative t value indicates that iso26000 has an opposite relationship to market value added (mva). this shows that companies that implement iso 26000 have not worked effectively so that they have no influence. the iso guide to social responsibility emphasizes the importance of public reporting for the performance of social responsibility to stakeholders (gri-iso, 2010). corporate social responsibility (csr) through ohsas 18001 has no significant effect on market value adequacy (mva) in the direction of positive influence. this case happens because not all companies have implemented ohsas 18001 in their work environment. ohsas 18001 is intended to assist organizations in controlling occupational safety and health risks within the company. the implementation of this occupational safety & health management system cannot replicate or be imitated, because each company has its own needs. this shows that companies that implement ohsas 18001 well and efficiently have not been able to make high changes to the company performance of the winners of appreciation and top csr which impact the company's image. the results of hypothesis testing indicate that corporate social responsibility (csr) through esop has a significant effect on market value adapt (mva). this shows that the application of esop in the company gives positive things to employee performance. employees will be motivated so that it will have a good impact on the company. the purpose of this esop is to give rewards to all employees for their contribution to the improvement of the company performance (bapepam, 2002). increasing company performance from this measure of nonfinancial performance makes the company's image better. the application of esop is expected to be one way to attract the attention of employees, where all employees get the opportunity and have the right to own shares in the company where they work(hartono & wibowo, 2017). so that the expected results of employees will be motivated to advance the company. employees can maximize their performance, in other words, the application of esop can improve the company's financial performance which has an impact on the company's image well. the results of testing the hypothesis note that current ratio (cr) does not affect the market value adapt (mva), with a negative t value indicating that cr has an opposite relationship to market value added (mva). there is a negative relationship because of the company high current liabilities that affect the company's cr being too low. this means that the company's ability to meet its short-term obligations is less efficient because the current ratio which is the ratio that describes a company in paying its obligations has a time limit. besides, the trend analysis of this ratio needs to be done carefully because this ratio can change rapidly and can be easily influenced by management. debt to equity ratio (der) does not affect market value adapt (mva). based on the ttest there is a negative and no significant relationship to the dependent variable. thus the increase or decrease in der will not affect market value added (mva). besides, the negative t value indicates that der has an opposite relationship to market value added (mva). the negative relationship causes the der value to be relatively low, this case indicates that the company is lacking to guarantee funds from the back pay, so the company can be said that it is not solvable. besides, in this study, there are various types of companies engaged in various fields such as industry, minings, and services. these service companies include banks, insurances and investment companies which have a high der value because the funds managed are third-party funds risking the company performance. corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 261 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 price earnings ratio (per) does not affect market value adapt (mva). this result shows that per gives risk to the investors even though the risk is a small number in this study. this ratio also does not affect the profit growth expected by the investors. for investors, the higher the price earnings ratio, more expected profit growth will also increase (fahmi, 2014: 83). vice versa, the lower the price earnings ratio, the profit growth will decrease or has a low growth. per information indicates the amount of rupiah that investors must pay to get one rupiah in company earnings. this ratio can provide understanding for the company management to predict the company's ability to generate profits in the future. but in this study, the priceearnings ratio has not shown its influence on the size of the company's performance in the future which will have an impact on the company's reputation/image. the results of testing the hypothesis note that total asset turnover (tat) does not affect the market value adapt (mva). based on the t-test there is a negative and no significant relationship to the dependent variable. the increase or decrease in tat will not affect market value added (mva). besides, the negative t value indicates that tat has an opposite relationship to market value added (mva). the results of the study show that the overall assets of the company do not occur effectively so that the results of the business decline. this ratio is part of the activity ratio that describes the extent to which a company uses resources to support company activities (fahmi, 2014:77). however, this ineffective turnover shows that the low level of utilization of company resources is also a factor that affects the decrease in the ratio of total asset turnover. the lower the asset turnover value, the company is considered less efficient in allocating its assets. so that a low total asset turnover does not affect the performance of a company in improving the company's reputation. return on sales (ros) does not affect market value adapt (mva). thus the increase or decrease in ros will not affect market value added (mva). besides, a positive t value indicates that ros has a direct relationship to market value added (mva) but is not significant. the results show that the company's operating efficiency is low. a high return on sales shows that the company has a good financial performance. conversely, a low return on sales indicates that the company has less performance, this is because the sales contribution to the company's profits is low. if this ratio does not have a large influence on the size of the company's performance, this means that with the low corporate performance it does not improve the company's image to stakeholders. besides, sales contribution that reflects profit does not improve company performance. table 2. f-test predictors: (constant), ros, tat, per, iso9001, esop, cr, ohsas18001, der, iso26000, iso14001 dependent variable: mva model sum of squares df mean square f sig. 1 regression residual total 179,444 10 17,944 1,949 ,092 a 202,529 22 9,206 381,973 32 corporate social responsibility and financial ratio on market value added hariyani, salatnaya, mardani 262 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 based on the f test obtained a significant value of 0.092 > 0.05 and an f value of 1.949. the results of testing the hypothesis note that corporate social responsibility (csr) and all financial ratios together do not affect market value adapt (mva). the influence of whether or not a financial ratio can be described by the financial condition of a company at that time. besides, the company's poor performance will certainly have an impact on the company's responsibility. corporate responsibility is a measure of non-financial performance that is considered to have a large impact on the company's image in the social environment. as a result from companies that are less aware of the benefits of non-financial performance, causes managers to manipulate performance measures that enable managers to achieve their goals, especially to get bonuses (krismiaji&aryani, 2011: 359). financial ratios and company performance have a close relationship. for investors, they will see the ratio with the use that best fits the analysis that will be carried out (fahmi, 2014: 50). these results indicate that the company whose won the csr and top csr appreciation has a change in csr value and financial ratios both increase and decrease that does not affect market value added (mva). conclusion based on the results of research that has been done, it can be concluded that corporate social responsibility (csr) through iso 9001, iso 14001, iso 26000, ohsas 18001 has no significant effect on market value added (mva), while through esop, it has a significant effect. current ratio (cr), debt-to-equity ratio (der), price earnings ratio (per), total asset turnover (tat), and return on sales (ros) do not have a significant effect on market value added (mva) in companies that win csr appreciation and top csr. corporate social responsibility (csr) and all financial ratios together have no significant effect on market value added (mva). the focus of this study is only on companies that won csr and top csr appreciation awards for 2016 and 2017, where various fields that meet the research standards are selected. the population in this study is limited to the award winners so that the sample which is less than optimal chosen by the company's market value added (mva) disclosure. further research is recommended: (1) can add companies that win other csr awards and the latest winning years or researchers can focus on one of the objects of an industrial, service or mining company. (2) the researcher can add another measure of corporate social responsibility (csr) that supports the company in improving its corporate image. measuring instruments can be proof of ownership of certificates such as food safety management systems (iso 22000), and information security management systems (iso 27001). researchers can also add other financial ratios to measure company performance, such as return on equity (roe), dividend payout ratio. references abdurachman, a., & gustyana, t. t. (2019). analisis pengaruh corporate social responsibility (csr) terhadap economic value added (eva) dan market value added (mva). jim upb (jurnal ilmiah manajemen universitas putera batam), 7(1), 107. https://doi.org/10.33884/jimupb.v7i1.948 brigham, & houston. (2010). dasar-dasar manajemen keuangan (edisi 11). jakarta: salemba empat gs, a. d., & rahmansyah, m. r. 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(2014). analisis pengaruh economic value added dan faktor fundamental perusahaan lainnya terhadap return saham dengan corporate social resposibility sebagai variabel pemoderasi (studi empiris pada perusahaan yang terdaftar dalam indeks kompas-100 di bei tahun 201. iv(2), 227–248. rachman, nurdizal m., efendi, asep, & wicaksana, emir. (2011). panduan lengkap perencanaan corporate social responsibility. jakarta; penebar swadaya. salbiah. & asmara, andika jaka. (2012). pengaruh economic value added (eva) terhadap market value added (mva) pada perusahaan yang melakukan initial public offering (ipo) di bursa efek indonesia. jurnal ekonom, 15 (3), 135-147. song, t., & peng, h. (2015). study of the relationship between the sustainable growing social responsibility and eva performance evaluation system of chinese central enterprises. american journal of industrial and business management, 05(04), 219–225. https://doi.org/10.4236/ajibm.2015.54024 zhang, j. (2016). does corporate social responsibility affect the financial performance of listed manufacturing firms in germany? faculty of behavioural, management and social sciences, 01-70. bab i ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 17-36 https://www.ilomata.org/index.php/ijtc 17 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance vera wulandari1, lesi hertati2, rina antasari3, nazarudin4 1student of postgraduate program at tridinanti university palembang-indonesia 2lecturer, department of accounting, stie rahmaniyah sekayu-indonesia 3.4.lecturer faculty tarbiyah uin raden fatah, palembang-indonesia correspondent: vera_wulandari@gmail.com submitted : november 19, 2020 revised : november 15, 2020 published : january 31, 2021 abstract leadership is a leader's way of influencing subordinates with certain characteristics so that they can achieve the desired goals. one of the factors for the success of a leader depends on the leadership techniques used in creating situations that cause the people they lead to arise awareness to carry out what they want. in other words, whether a leader is effective or not depends on how his ability to manage and apply his leadership pattern under the situation and conditions of the organization. feelings related to job satisfaction and dissatisfaction tend to reflect the worker's assessment of current and past work experiences rather than expectations for the future. so it can be concluded that there are two important elements of job satisfaction, namely job values and basic needs. work values are the goals to be achieved in doing work tasks. what is wanted to be achieved are work values that are considered important by individuals. it goes on to say that work values must match or help fulfill basic needs. thus it can be concluded that job satisfaction is the result of labor which is related to work motivation with the degree of importance of job aspects for individuals. an individual will feel satisfied or dissatisfied with his work, which depends on how he perceives a match or contradiction between his desires and the results he gets. this research method is the method of exploration and verification, the analysis tool is structural equation modeling (sem, pls). the results showed that the influence of the covid-19 crisis leadership style on job satisfaction has implications for company performance. keyword: post-covid-19 transformative leadership style, job satisfaction, company performance introduction humans are the driving force of the resources that exist in an organization to carry out the functions of each of these organizations (avolio & bass, (2004). the driving wheel of leadership is a human being who can make breakthroughs, changes, transformations for problems that are very visible in the future. a form and style of leadership that has a high sense of urgency, as opposed to routine, monotonous, business as usual leadership, does not want to take risks and wants to be safe and always takes refuge in complicated bureaucratic procedures, takes time, and is also expensive (cartwright, & robertson, 2007) when facing a pandemic and economic recession, the indonesian nation needs a leadership style that is out of the box, outside of the usual routine, rich in breakthroughs, innovative in achieving measurable goals (correia & scholten, 2013). goal-directed leadership behavior and risk lover (datta & pandey 2010). the concrete manifestation of this form of transformative leadership is the level of policy and implementation, https://www.ilomata.org/index.php/ijtc mailto:vera_wulandari@gmail.com the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 18 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 which can be in the form of cutting out all bureaucratic procedures so that all programs can be implemented and budget realization can be on schedule. dare to take legal risks for bureaucratic breakthroughs carried out to accelerate the program, but free from corrupt behavior. as has been done by a leader to cut the wordy bureaucracy, hinder performance, and sacrifice public services (goulet & singh, 2002). herold & caldwell (2007) stated that in an organization, of course, there is a leader who brings his subordinates to achieve the desired organizational goals and can bring all members of the organization to a common goal and aspiration. furthermore, hertati (2015) states that in addition to a leader being able to convince all its members to achieve common goals, a leader is also able to encourage them to learn and progress in work in the organization. the encouragement can provide satisfaction in carrying out any existing work, which later on this satisfaction will be able to improve performance (hertati, 2016). the phenomenon states that the weakness of the supervisory system from the leadership can result in employees, acting not under established rules, decreasing employee performance, job satisfaction levels and the performance of each employee is still not optimal, there are disappointment and dissatisfaction from employees and satisfaction in the work environment. a transforming leadership style prioritizes according to the demands of its urgency, with measurable targets, pandemic response, and/or economic recovery. jokowi (2020) as president of the republic of indonesia stated that the coronavirus pandemic has placed enormous demands on leaders in the business sector and other sectors. the death toll from this virus caused fear among workers and various stakeholders. large-scale outbreaks and the uncertainty they face can make it difficult for leaders to cope. this outbreak is characterized by a “landscapescale” or large-scale crisis that can be interpreted as an unexpected or large event that occurs at an extraordinary speed, causing a high level of uncertainty that causes disorientation, feelings of loss of control, and strong emotional disturbances. kaplan & aksa (2012) stated that the most strategic factors in tackling a pandemic are tests, coverage, and speed of reporting, so budget provision is focused on this program. overall resources are focused here, if needed lgs take out loans for this purpose (as long as laws and regulations allow), and accountability is transparent. pressing the economic downturn is the low purchasing power of the people, the social safety net program is an important issue, so all bureaucratic breakthroughs to fix data and its follow-up must be the top priority. and there are many more determining strategic factors, which require a fast formulation and an action program that is no less rapid. kiessling & harvey (2006) stated that transformative leadership, leadership that brings change requires a leadership pattern that is reliable and then effective and reliable management skills. strong management skills, lobbying, team building, solidarity building, and smart and breakthrough social communication. transformative leadership requires good understanding and the realization is in the form of work ethic in the life of the community. value systems and even beliefs about life attitudes in living and interpreting life. give birth to ethical leadership guidance which has the basic characteristics: dedication, self-honesty, and then honesty to the public as the holder of the public mandate, an exemplary figure (. the leadership qualification is a very meaningful role model, in the life of a community that is being plagued by the covid-19 pandemic, the economy has declined sharply during a dry season, all sectors in indonesia have experienced a decline. of the many employees, of course, there is a leader who is appointed to bring employees to achieve the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 19 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 common goals. leadership is one of the abilities of someone very interesting to talk about, who often displays opinions and talks that discuss leadership. the role of leadership which is very strategic and important for the achievement of the vision, mission, and goals of an organization is one of the motives that encourages people to always investigate the ins and outs of leadership, apart from nurturing leadership, which is given either from the leader or from fellow members. can lead employees to human behavior to work actively and enthusiastically to achieve optimal results. a performance boost will certainly make members in the organization feel called to immediately complete their duties and responsibilities quickly and precisely. this is what is sometimes often overlooked in an organization. this becomes interesting to examine in more depth the problem of leadership associated with employee job satisfaction and performance. one of the factors that influence to achieve good work results from employees is the ability of leaders who are supportive and manifest sympathy for their subordinates so that they can achieve good performance so that organizational goals can be achieved. however, it is unfortunate that employee performance has not been optimal (rafferty & griffin, 2004: schweizer, & patzelt, 2012: smithikrai, & suwannadet, 2018). this sub-optimal performance is not only a problem of the employees themselves but also the role of a leader in it. how as a leader, be able to move his subordinates to work optimally. a leader should be able to encourage his subordinates to be able to carry out their duties properly, correctly, and quickly. the leader must also provide an example of how to carry out the job. the problem of decreased employee performance is not solely influenced by weak leadership or the attitude of leaders who are indifferent to their subordinates, but can also be seen from the motivation of employees in carrying out their work (kyei-poku, & miller, 2013: madsen, & john, 2005: maheshwari & vohra, 2015: meyer, et, al, 2007: muchiri & ayoko, 2013: neves & caetano, 2009: hertati, et, ell, 2019). performance can be said to encourage someone in carrying out their duties and responsibilities. kotter (1996) states that motivation is a condition that encourages a person to achieve maximum achievement. therefore, a leader needs to direct motivation so that employees feel motivated to work harder so that the performance achieved is also high. motivation must be well directed according to priorities and be well received by employees, to improve performance. employee performance is the result of work in quality and quantity achieved by an employee in carrying out his duties under the responsibilities assigned to him (lambert, & barton, 2001). performance in an organization is one element that cannot be separated in an organizational institution, either it is a government institution or a private institution. performance is the results of the work function or activity of a person or group in an organization which is influenced by various factors to achieve organizational goals within a certain time. besides, a lot of one's performance is associated with whether someone is satisfied with a job or not. if someone is satisfied with carrying out his job, then that person will be able to do his job well. creating employee job satisfaction is not easy because job satisfaction can be created if the variables that influence it, including leadership and work motivation, can be accommodated properly and accepted by all employees in an organization. job satisfaction is an individual thing, each individual has a different level of job satisfaction according to handoko's value system (2010: lee, & kim, 2020: hertati, et, al, 2020). performance management in the ministry of finance is a result of a job function or the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 20 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 activity during a certain period to achieve the goals of the organization. yukl, (1989). suggests that performance is a result of work achieved by a person in carrying out the tasks assigned to him based on skills, experience, and seriousness, and time. in other words, performance is the work achieved by a person in carrying out the tasks assigned to him under established criteria. yousef (2000) states that performance is a condition or behavior of a person that must be achieved with certain conditions. performance is the result of an employee's work in a certain period compared to various possibilities, for example, target/objective standards or predetermined criteria. in line with that wood, (2000). says "performance can be considered as a trait or characteristic of an individual in carrying out a task or job that cannot be observed or measured directly". it can only be observed in other circumstances or situations so that it can underlie the performance. yoon & thye (2002) performance is the work of a person based on perfecting these activities under the responsibilities and expected results. the word pimpin contains the meaning of directing, building or managing, guiding, and also showing or influencing. leaders have a responsibility both physically and spiritually for the success of the work activities of the people they lead so that being a leader is not easy and not everyone will have the same in carrying out their leadership. yousef, (2017) that leadership is translated into traits, personal behavior, influence on others, patterns, interactions, cooperative relationships between roles, the position of one administrative position, and persuasion, and perceptions of others about the legitimacy of influence. teece & leih (2016) leadership is an activity to influence the behavior of others, or the art of influencing human behavior, both individually and in groups. leadership is one of the most important factors in an organization because of most of the successes and williams, et, al (2017) state that leadership is a group process carried out by someone in managing and inspiring many jobs to achieve organizational goals through the application of techniques. management. yağar & dökme (2019) say that leadership is an activity to influence people to achieve organizational goals. leadership includes the influencing process in determining organizational goals, motivating follower behavior to achieve goals, influencing to improve the group and culture. schweizer (2005) states that leadership style is a social influence process in which managers seek voluntary participation from subordinates in achieving organizational goals. leadership by a leader also describes the direction and goals to be achieved from an organization. so it can be said that leadership is very influential for the big names of the organization. shield, & nelson, (2002). leadership is any action taken by an individual or group to coordinate and give direction to individuals or groups who are members of a particular container to achieve predetermined goals. shum & auh (2008) leadership is an influencing process carried out by a person in managing his group members to achieve organizational goals. leadership is a form of strategy or leadership theory that is certainly carried out by people who we usually refer to as leaders. a leader is someone with the authority to direct his subordinates to do part of his job in achieving goals. leaders are those who use formal authority to organize, direct, control subordinates who are responsible so that all parts of the work are coordinated to achieve company goals. the leader must first of all be someone who can grow and develop all the best in his subordinates. simply put, a good leader is someone who helps develop others, so that in the end they no longer need that leader. segars & grover (1993) argues that leadership is specific, distinctive, necessary for special situations. because in a group that carries out certain activities, and has the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 21 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 specific objectives and equipment, the group leader with its characteristic characteristics is a function of the special situation. the main characteristics of a leader and his leadership must be appropriate and acceptable to the group, as well as relevant, and fit the situation and era. in essence, leadership has a rather broad understanding compared to management. management is a special type of thinking of leadership to achieve organizational goals. whereas leadership can be because it tries to achieve organizational or group goals, and it can be the same or aligned or not in line with the organizational goals. top, & tarcan (2015) state that management is a process of achieving an organization through the efforts of other people. in management, there are certain rules and manners, so that management leadership will be regulated according to applicable regulations. someone who regulates management is usually called a manager. managers occupy structural positions through selection and term of office as regulated in the organization. tabachnick & fidell (2007) leadership is any action taken by an individual or group to coordinate and give direction to individuals or groups who are members of a particular container to achieve predetermined goals. leadership is not limited by the rules and manners in an organization. leadership can occur anywhere, provided that person can demonstrate his ability to influence other people or certain groups to achieve certain goals. someone who can influence other people to achieve certain goals can be called a leader. porter & lawler (1968) classifies situational leadership styles into four, where each leadership style looks at the readiness and willingness of subordinates, namely, telling, selling, participating, and delegating. 1. telling. this leadership style is appropriate when the level of readiness of an individual or group is low. this style is high attention to task, but low attention to relationships. this leadership style in telling aims to direct, guide, or control. 2. selling. this leadership style is used on followers with a moderate level of readiness. this style has high attention to both tasks and relationships. this selling leadership style aims to provide motivation, as well as ensure. 3. participating. this leadership style is used on followers with a high level of readiness. this style has high attention to relationships and low attention to tasks. participating leadership styles encourage followers as well as two-way communication, and facilitate followers in decision making. 4. delegating. this leadership style is best used for followers with a very high level of readiness, followers have very high abilities and willingness. this leadership style has low attention to relationships and tasks. delegating leadership style observes, and monitors followers closely, the leader sees progress and results, gives authority and responsibility to followers, and ensures followers achieve the desired results. everyone who works expects to get satisfaction from his place of work. job satisfaction is an individual thing because each individual will have a different level of satisfaction according to the values that apply to each individual. the more aspects of work that are under the wishes of the individual, the higher the level of perceived satisfaction. ulrich & brockbank 2008). job satisfaction is "an effectiveness or emotional response to various aspects of work". job satisfaction is an expression of a person's feelings or attitudes towards their work, on promotional opportunities, relationships with colleagues, supervisors, and feelings of satisfaction with the work itself (raukko, 2009). rao-nicholson & merchant (2016) job satisfaction is “a the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 22 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 general attitude toward one's job that shows the difference between the number of rewards employees receive and the amount they believe they should receive (pfeffer 1983). employees who do not get job satisfaction will never reach psychological maturity and in turn, will become frustrated. nunnally & bernstein. (1994) suggested that performance satisfaction is part of the motivation process. the satisfaction of work members can be linked to their performance and performance and the rewards and punishments they receive. therefore the level of job satisfaction can be shown by results such as the attitude of members of the work, change of work of members of work, change of work of members of work. absence or absence. delays and complaints. meyer & herscovitch (2001) suggest that a manager will care about the job satisfaction aspect. because it has a moral responsibility whether it can provide a satisfying environment for its employees and believe that the behavior of satisfied workers will make a positive contribution to performance. job satisfaction is an affective or emotional response to various aspects or aspects of a person's job so that job satisfaction is not a single concept. a person can be relatively satisfied with one aspect of a job and dissatisfied with one or more other aspects. job satisfaction is a worker's (positive) attitude towards his job, which arises based on an assessment of the work situation. the assessment can be carried out on one of the jobs, the assessment is carried out as a sense of appreciation in achieving one of the important values in the work. satisfied employees prefer their work situation rather than dislike them. overall job satisfaction for an individual is the number of job satisfaction (from each aspect of the job) multiplied. so it can be concluded that the notion of job satisfaction is a positive attitude of the workforce which includes feelings and behavior towards their work through the assessment of one job as a sense of appreciation in achieving. one important work values. job satisfaction is an expression of people being more satisfied with a job than some other people. satisfaction and dissatisfaction are part of a different group of variables, namely motivators and hygiene factors. dissatisfaction is related to conditions around work (such as working conditions, wages, security, quality of supervision, and relationships with other people) and not with the job itself. because the factors preventing negative reactions are known as hygiene or maintenance factors. conversely, satisfaction is drawn from factors related to the job itself or a direct result thereof such as the nature of the job, job performance, promotion opportunities, and opportunities for self-development and recognition. because these factors are associated with high job satisfaction levels, they are called motivators. job satisfaction occurs at the level where the work results are received by individuals as expected. the more people receive the results, the more satisfied and vice versa. the key to satisfaction in this theory is the difference between aspects of the job one has and what someone wants. the greater the difference, the lower the person's satisfaction. there are five factors that can affect job satisfaction (nielsen & munir 2009), which are as follows: 1. meeting needs. satisfaction is determined by the level of job characteristics providing opportunities for individuals to meet their needs. 2. meeting needs. satisfaction is determined by the level of job characteristics providing opportunities for individuals to meet their needs. 3. differences. satisfaction is a result of meeting expectations. fulfillment of expectations reflects the difference between what is expected and what individuals get from their work. if expectations are greater than what is received, people will be dissatisfied. conversely, the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 23 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 individuals will be satisfied if they receive benefits above expectations. 4. achievement of values. satisfaction is the result of the perception that the job provides an important fulfillment of individual work values. 5. justice. satisfaction is a function of how fairly individuals are treated in the workplace. 6. the work itself. every job requires certain skills in their respective fields. whether a job is difficult or not and a person's feeling that their skills are needed in doing the job, will increase or decrease satisfaction. 7. relationships with superiors. leadership that is consistent concerning job satisfaction is a consideration. functional relationships reflect the extent to which the employer helps the workforce to satisfy work values that are important to the workforce. the overall relationship is based on interpersonal attraction which reflects similar basic attitudes and values, for example, both have the same outlook on life. 8. workmates. co-workers are a factor related to the relationship between employees and their superiors and with other employees, both of the same or different types of work. 9. salary or wages. is a factor to fulfill the needs of employees who are deemed appropriate or not. the relationship between job satisfaction and other variables can be positive or negative. power -relationships have a range from weak to strong. cunningham (2006) and junzhi, et, al (2020) state that performance is the work result of leadership which results in employee performance as desired by the company. the employee's work environment is considered very good, as well as between subordinates and leadership who are in the employee's work environment and a harmonious work environment will create peaceful calm. research bruck, & spector, (2002). stated that performance is determined by work motivation and leadership style and a flexible and accurate work environment. highyielding jobs must be achieved by employees. nadler & tushman (1990). states that the measures that need to be considered in the performance appraisal include: 1. quality of work, that is. neatness, accuracy, and linkage of work results without neglecting the volume of work. with the existence of good quality work, it can avoid the error rate in completing a job and the resulting work productivity can be beneficial for the progress of the company. 2. work quantity, ie. the volume of work generated under normal conditions. work quantity shows the number of types of work done at one time so that efficiency and effectiveness can be carried out under company objectives. 3. responsibility, that is. shows how much employees can be accountable for their work, the facilities and infrastructure used, and their work behavior. 4. initiatives, namely. shows how much the employee's ability to analyze, assess, create, and make decisions on solving the problems it faces. 5. cooperation, that is. is the employee's willingness to participate and cooperate with other employees vertically or horizontally inside or outside the work so that the work results are getting better. 6. obedience, that is is the employee's willingness to comply with the regulations that carry out their work under the instructions given to employees. 7. mental skills. the level of ability and speed in receiving work instructions and adjusting to the way of working and the existing work situation. the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 24 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 lau, & woodman, (1995) that increasing job satisfaction can be done by changing the work structure, for example by doing job rotation, which is a system of changing jobs from one type of task to another (which is adjusted to the job. description). the second way to do this is by expanding (job enlargement) or expanding one job in addition to a variety of job tasks. practices for workers who accept additional and varied assignments to make them feel that they are more than just members of the organization. changes in the payment structure, changes in the payment system are carried out based on their expertise (skill-based pay), namely a payment in which workers are paid based on their knowledge and skills rather than their position in the company. the second payment is made based on merit pay, a payment system in which workers are paid based on their performance, the financial achievement of workers is based on the results achieved by the individual himself. the gainsharing leadership style is a playstyle based on the success of the group (profits are shared among all group members such as providing flexible work schedules, by giving workers control over their daily work, which is very important for those who work in congested areas, where workers can not work on time or for those who have responsibilities for children compressed work week, where the number of jobs per day is reduced while the number of hours of work per day is increased workers can compress the work that is only done from monday to friday, so they can have some free time for a vacation. the second way is with a scheduling system where a worker runs a specific number of hours per week (flextime) but still has flexibility when to start and end work. people argue that productivity can be increased by increasing job satisfaction. job satisfaction may be a result of productivity or vice versa. high productivity causes an increase in job satisfaction only if the workforce perceives that what the company has achieved is under what they have received (salary/wages), which is fair and reasonable and is associated with superior work performance. the transparent leadership style shows the level of job satisfaction of a worker because the company can find out the job aspects of the expected success rate. a transformative leadership style is a leadership style in which the level of absence is more spontaneous and does not reflect job dissatisfaction. there is no relationship between job satisfaction and absence (battilana, et, al, 2010). because there are two factors in present behavior, namely the urge to be present and the ability to be present. maccallum & sugawara (1996) stated that satisfaction and absence/absenteeism shows a negative correlation. for example, companies provide free sick leave or work leave without sanctions or fines, including very satisfied workers. the transparent leadership style of work has a large economic impact, so it is most likely related to job dissatisfaction. lord, & hansbrough, (2020). work dissatisfaction with workers can be expressed in various ways, for example apart from leaving work, complaining, disobeying, stealing company/organization property, avoiding some of their job responsibilities, and others. h1: how is the influence of post-covid-19 transformative leadership style on job satisfaction. the effect of satisfaction on company performance every agency or human organization is one of the determining factors for the achievement of organizational goals, one measure of the success of an agency or organization seen from the level of human productivity. bellou (2006) states that employee productivity is largely dependent on the willingness of employees to produce something, for this reason, leaders must strive for employees to have high motivation to the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 25 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 carry out their duties, and this is where the role of motivation is important to increase employee job satisfaction. employee job satisfaction is important for employees. if employees feel satisfied, both about their work and their rewards, it can be ensured that the resulting productivity is maximized and the results provided are also in line with the expectations of the agency or even more. but if employees have not felt the desired job satisfaction, their productivity will also decrease. carnall, (1986) states that job satisfaction is fulfilled is expected to spur morale and high work discipline. the role of a leader is also needed to create an environment that supports this. the relationship between employees and leaders affects the emotional state of employees. burns, (1978) states that the support that is fully obtained from superiors allows employees to work responsibly. employees will feel a harmonious relationship with the leader if the leader provides the influence or leadership style according to their expectations (cartwright, & cooper, 1993). in this case, the leader must be able to determine the leadership style under the conditions desired by the subordinates. there are also various types of leadership styles such as autocratic leadership styles. autocratic leadership is also called authoritarian leadership. herscovitch & meyer, 2002) and farahnak, et, al, (2020) define autocratic leadership as a style based on the power of position and the use of authority. so autocratic leadership is leadership carried out by a leader with a winning attitude, closed to suggestions from others, and has high idealism. there are also types of democratic leadership. sudarwan & roodt, (2008) and long, et, al (2014) democratic leadership stems from the assumption that only with group strength can quality goals be achieved. hertati, et, al (2020) and herold, et, al (008) said that the democratic leadership style is associated with personal strength and the participation of followers in problem-solving and decision-making processes. permissive leadership style according to lumley, et, al (2011) and lepine, et, al (2008) states that permissive leaders are leaders who do not have a strong stance, their attitude is permissive. leaders give freedom to their subordinates so that subordinates do not have a strong grip on a problem. permissive leaders tend to be inconsistent with what they do (parish, et, al, 2008: nemanich, et, al, 2007). from the leadership style and encouragement and job satisfaction can affect performance. from this, it can be seen that high performance is needed so that services can be provided as much as possible. hertati & safkaour, 2020: kabanoff, & cohen, 1995: hosseini & trang, 2017).). argued that several factors affect job satisfaction and the most important are commitment, salary, promotion, co-workers, superiors (leadership style), and the job itself. the application of the right leadership style will be able to affect employee job satisfaction. likewise, if there is an increase in an employee's work commitment, it will be able to increase employee job satisfaction (savović, 2017: rafferty & restubog, 2010: pate & mcgoldrick, 2003: meyer & allen, 1991). one of the supporters of the success and progress of an organization or company is the human resource factor. tepayakul & rinthaisong (2018) state that the level of success of human resources can be measured through an employee performance appraisal with predetermined and different rules, models, and systems. the level of the results of the work appraisal is proportional to the level of quality of the employee's performance itself which can be influenced by several factors. leadership is important in an organization and a company in achieving the desired goals of an organization or company, good leadership can produce good results for the company and bring comfort to employees while working (van & jacobs, 2012: taylor, et, al, 1993). the more the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 26 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 aspects of work that match the interests and expectations of the individual, the higher the level of satisfaction he feels, and vice versa. gunlu & perçin, (2010) stated that the satisfaction measure is very much based on the realities faced and received by individuals as business compensation and those given to the company. if a person is satisfied in carrying out his job, then that person can do his job well, but this needs to be proven empirically, whether this is one of the factors that cause a decrease in the performance of an employee (wang, & le, 2017: soukas, 2020: vasilaki, et, al, 2016). h2: how is the effect of job satisfaction on company performance. from various opinions and explanations, it can be seen that the framework of this research is as follows: source: research model image, 2020. methods the population of this study is related to units in supermarkets in indonesia. several steps must be done in research with data processing techniques using the sem method based on partial least square (pls), namely the evaluation of the measurement model is carried out to assess the validity and reliability of the model which is carried out by using convergent validity, discriminant validity, and composite reliability. outer loading is a table that contains loading factors to show the magnitude of the correlation between indicators and latent variables (hair, et, al, 2010). the weakest loading factor whose validity can be accepted is 0.5. outputouter loadings can be obtained from the pls algorithm report smartpls. to make it easier to see the outer loadings of the indicator blocks measuring constructs. in the loading factor, there are several indicators, some are valid and some are invalid. indicators are valid because they have a loading factor> 0.5 and invalid indicators <0.5, so these indicators must be removed from the model. the elimination of indicators will be followed by re-estimating or re-estimating. while the reliability test is seen from the composite reliability, if the value is more than 0.7 then it shows a satisfactory value, and it is further strengthened by looking at cronbach's alpha, it is recommended to have a value above 0.6. to determine the minimum sample required if the population is known, can use the slovin formula with the assumption that the tolerated sampling error rate is 5%. (chin & todd, 1995). to calculate this relationship, the following formula is used: ( ) ( ) ( ) ( )2222 . .     −− − = yynxxn yxxyn r information: r = correlation x = covid's crisp transformative leadership style 19 y = job satisfaction performance company job satisfaction transpormative leadership style post covid-19 the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 27 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 z = company performance n = number of respondents to determine the effect of covid19's transformative crisp leadership style, job satisfaction, company performance, the coefficient of determination (r²) is used. the results of instrument testing from research variables have a loading factor value of all instruments that is greater than 0.5. because the validity test with outer loadings has been fulfilled, the measurement model has the potential to be tested further. thus it can be concluded that all question instruments from the research variables used are valid. the next test of convergent validity is reliability. reliability is defined as the ability of the instrument indicators to produce the same value repeatedly (consistency) in each research activity. results and discussion perform validity data testing to determine whether the test equipment used is correct with verification and exploratory analysis. verification analysis was carried out to show the accuracy of the theory and test equipment (fox, 2016). to determine the feasibility test of indicators in the questionnaire to determine the variables tested and their suitability in measurement. the method of analysis i use is path analysis, the method used is the linear regression analysis and sobel test, while other studies use regression and correlation analysis. the similarity of this study with previous research is that it lies in the independent variables which both use the term leadership style and the dependent variable which also uses the term performance of bentler & chou, (1987). usefulness for descriptive analysis covid-19 transformative crisp leadership style, job satisfaction, company performance, statements submitted on the questionnaire. the purpose of the verification analysis is used so that an illustration such as the percentage of the answer scores of related sub-units to the leadership of supermarkets in indonesia is obtained. the reliability level is measured by the composite value and cronbach alpha which can be seen in the following table: table 1 output uji. output square roots of ave no dimension square roots of ave 1. 2. 3. 4. telling selling participating delegating 0.829 0.749 0.612 0.752 source: uji. output square roots of ave, 2020 table 2. output square roots of ave no. dimension composite reliability cronbach alpha 1. 2. 3. 4. 5. 6 7 8 fulfillment difference value achievement justice the work itself relationship with superiors work colleague salary or wages 0.846 0.820 0.860 0.821 0.711 0.821 0.821 0.711 0.852 0.836 0.841 0.852 0.732 0.841 0.841 0.732 source: uji. output composite reliability, 2020 the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 28 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 tabel 3 output uji composite reliability no. dimension composite reliability cronbach alpha 1. 2. 3. 4. 5. 6 7 work quality work quantity responsible initiative cooperation obedience mental skills 0.846 0.820 0.860 0.821 0.711 0.821 0.821 0.852 0.836 0.841 0.852 0.732 0.841 0.841 source: uji. output composite reliability, 2020 table 4 output goodness of fit (gof) on the final model no criteria value boundary output conclusion 1 2-chi square, significance probability p-value ≥ 0,050 atau = 0,000 0,000 fit 2 gfi > 0,70 0,734 fit 3 agfi > 0,80 0,647 fit 4 cfi > 0,72 0,953 fit 5 tli atau nfi > 0,71 0,771 fit 6 rmr ≤ 0,50 0,081 fit 7 rmsea ≤ 0,06 0,056 fit source: on the final model, 2020 table 5. output composite reliability dan cronbach alpha variable cronbach alpha composite reliability post-covid-19 transformative leadership style 0,965 0,970 job satisfaction 0.966 0.971 company performance 0,968 0,973 source: on the final model, 2020 table 6. output r-square variabel dependent variable r-square job satisfaction 0.989 company performance 0.977 source: on the final model, 2020 tabel 7. direct effects and indirect effects source: on the final model, 2020 direct/indirect effect original sample (o) sample mean (m) standard deviation (stdev) t –values (|o/stdev|) p values leadership style job satisfaction 0.665 0.635 0.152 4.367 0.000 job satisfaction-company performance 0.664 0.557 0.221 3.009 0.003 the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 29 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 table 8. hypothesis testing results hypothesis description decision test result path coefficient conclusion h1 leadership style job satisfaction be accepted total t-statistik 4.367 >1,96 take effect h2 job satisfactioncompany performance be accepted total t-statistik 3.009 > 1,96 take effect source: on the final model, 2020 the table above shows that the composite reliability value of all variables is above 0.7 and the cronbach's alpha value of all variables is above 0.5 so that all research variables have shown a fit measure, this means that all question items will be used to measure the variable. is reliable. the measurement of the structure / inner model is used to see the relationship between variables, through the bootstrapping process, the t-statistical test parameter is obtained to predict the relationship between variables, then the structural model is evaluated by looking at the percentage of variance described by the dependent variable r-square. dependent variable. table 4.10 above shows that the job satisfaction variable has an r-square value of 0.977, meaning that the job satisfaction variable can be explained by the leadership and motivation constructs of 97.70%, the performance variable has an r-square value of 0.989, meaning that the performance variable can be explained by the leadership construct and motivation is 98.90%, the higher the r-square value, the greater the ability of the independent variable to explain. research bass, & avolio (1997) and hertati & syafarudin. (2018). states that job satisfaction leadership and its impact on clinical employee performance. this research uses descriptive analysis method and verification using path analysis. the results of this study state that a good leadership style will spur company growth quickly and increase profits. research bass & avolio (1993) and hertati, & simanjuntak (2019) state that leadership and work culture on employee job satisfaction and its impact on company performance. this study draws a sample using the method of simple random sampling technique. the results stated that the good and bad of the organization will be reflected in the performance of superiors who can organize their subordinates. research muhammad chung, & choi (2014). states that the leadership style against job satisfaction. this research uses the linear regression analysis method and path analysis and sobel test with the help of spss 15.0. the results of the study conclude that an authoritarian leadership style is not well applied to women that will create tension, but if it is done in an equal manner, the subordinates will feel at ease judge, & welbourne (1999). results conducted by creswell, (2010) found that the influence of transactional leadership and job satisfaction shows that transactional leadership is statistically proven to affect employee job satisfaction where a leadership style is created that affects performance. next deschamps & privé, (2016). which states that performance affects the quality of work the better / higher the employee's performance, the higher the employee's performance. then eisenbach, & pillai (1999). namely the influence of leadership and employee job satisfaction on performance, it is proven that the higher the job satisfaction, the higher the level of performance achieved by the company and the achieved financial performance will increase employee performance. the influence of the covid-19 crisis transformative leadership style on job satisfaction implications on company performance wulandari, et. al 30 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 conclusion based on the results of data analysis and testing, leaders must pay attention to their employees, especially in completing their work. a manager can behave as a leader, as long as he can influence others to achieve certain goals. but a leader does not necessarily have to be a manager if he wants to influence others. a leader is not necessarily a manager, but a manager can behave as a leader. because of only a good leader and not taking sides in one of the employees in guiding, directing, influencing the mind of the employee so that it is the same as the perception of the leader in influencing the behavior of employees who will succeed in their leadership. leaders should pay attention to their actions and attitudes towards the employees they lead. leaders should not arbitrarily order and force employees to complete their assigned work. to increase employee job satisfaction with jobs and duties, it is necessary to pay attention to the division of labor under the employees' abilities based on the level of education the employee has. besides, it can also be done by providing opportunities for employees to take part in special education and skills. an attitude that does not impose the will must be instilled in every leader so that high job satisfaction can occur. if employees are satisfied, their performance will also be good. acknowledgments thank you to the respondents who have given time for the author to interview the data related to this paper, although they are less pleased because they are busy but have taken the time to fill out this questionnaire to complete this research. references avolio, b. j., & bass, b. m. 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(1989). leadership in organizations (2nd ed.). englewood cliffs, nj: prentice-hall. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 250-257 250| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices sri bulkia1, burhannudin2, kurniaty3, alpia rahmah4, mustaghfiri abdan5 12345islamic university of kalimantan mab banjarmasin, indonesia correspondent: burhanvirgo@gmail.com2 received : june 5, 2022 accepted : july 11, 2022 published : july 31, 2022 citation: bulkia, s., burhannudin., kurniaty., rahmah, r., abdan, m. (2022). empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices. ilomata international journal of tax and accounting, 3(3), 250-257. https://doi.org/10.52728/ijtc.v4i1.434 abstract: this paper aims to obtain empirical evidence about the influence of the debt to equity ratio (der) and return on equity (roe) on islamic stock prices, either partially or simultaneously. an exploratory investigation of 26 companies classified as sharia with the criteria of the jakarta islamic index on the indonesia stock exchange. the collection of complete financial data for the years 2014– 2018 is done through secondary data analysis. 130 secondary data checks were successful, followed by processing with spss 26 and regression analysis. the research's conclusions furnish empirical proof that the debt to equity ratio (der) and return on equity (roe) have a positive and significant influence on islamic stock prices, either partially or simultaneously. this paper contributes theoretically to the scant knowledge exploring the debt to equity ratio (der) and return on equity (roe) with islamic stock prices on the stock exchange in indonesia. in practice, this research gives a good insight that may be utilized to evaluate a company's performance health and determine its capacity to return shareholder investments for enterprises that are sharia-compliant. keywords: debt to equity ratio (der), return on equity (roe), islamic stock price. this is an open access article under the cc-by 4.0 license. introduction the equity market is a seen as crucial as a driver of the economic sustainability of any country, including indonesia (bathia et al., 2020; han & tang, 2020; lusiana, 2020a; usman et al., 2021). stock prices are a crucial reference before investing in the capital market (atems & yimga, 2021; huang & liu, 2021; tao et al., 2022). investors anticipate that the stock price will remain constant and will sometimes move upwards (chin & paphakin, 2021; hogenboom et al., 2021; ji et al., 2021; tang & yao, 2018). however, because the stock price is according to the principle of supply and demand, the more investors who buy the stock, the more expensive the stock will be, and vice versa (harper et al., 2020; robinson et al., 2018; xu et al., 2020). this means that stock prices will continue to fluctuate (up and down), which can be caused by internal or external factors. therefore, investors must have the right knowledge to make the right assessment (aznedra & putra, 2022; hao & wang, 2021). with the help of the capital market, shareholders mailto:burhanvirgo@gmail.com https://doi.org/10.52728/ijtc.v4i1.434 empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices bulkia, burhannudin, kurniaty, rahmah, and abdan 251 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can buy and sell shares, and business people can expand their network and make money (esteve et al., 2019). the uncertain character of stock values must be taken into account by (adikerta & abundanti, 2020; l. sari et al., 2022). companies must conduct financial analysis to obtain information because financial records will help investors (jia, 2018; tang & yao, 2018). before choosing an investment, consider the company's financial status and its strengths and limitations. a bad stock price indicates a low company value, while a high stock price indicates a high company value. according to supply and demand, stock prices continue to change every day, monthly, and yearly (adikerta & abundanti, 2020; cheng et al., 2020; yeung & lento, 2018). based on several previous studies, the element that influences the investment is debt to equity ratio (der) (bathia et al., 2020; rahmawati & hadian, 2022). the leverage ratio, often known as the extent to which debt is used as a source of corporate financing, is measured by the debt to equity ratio (davis, 2015). the lower the debt to equity ratio (der), which measures a firm's ability to pay long-term obligations, will affect rising stock prices and the company will be better at paying long-term liabilities. the market will interpret information about the rising debt to equity ratio (der) as an unfavorable signal, which will harm investors' decisions to purchase shares. as nothing more than a result, stock prices and demand decline. (utami & darmawan, 2019). this is supported by past academics' investigations such (adikerta & abundanti, 2020; meida dzulqodah, 2016; munira et al., 2018; nining, 2020; pandansari, 2012) which conclude that (der) effects on stock value. if the debt to equity ratio (der) increases, the stock price will also increase. however, the findings of this study conflict with those of earlier scholars, such as (amaliah & manda, 2021; hasanah & sulistiyo, 2021; hutomo et al., 2020; lusiana, 2020b; nurhayati & yudiantoro, 2022; rahmawati & hadian, 2022; rusdiyanto et al., 2020; d. i. sari & maryoso, 2021; l. sari et al., 2022; sudarman & diana, 2022; utami & darmawan, 2019) whose research results conclude that (der) does not effect on stock prices . if the debt to equity ratio (der) increases, the stock price will not increase as well. in addition to the debt to equity ratio (der) factor that has an empirical effect on stock prices, the return on equity (roe) factor also provides the same empirical evidence. market participants will see news of rising roe as a positive signal, which will help investors make informed judgments about whether to purchase shares. contrary to this, there is a greater demand for shares, which drives up their price (utami & darmawan, 2019). such as several research results (hapsari & chaniago, 2022; hasanah & sulistiyo, 2021; lusiana, 2020a; nurhayati & yudiantoro, 2022; rahmawati & hadian, 2022; l. sari et al., 2022) they state that an increase in return on equity (roe) has negative implications, then the stock price will also increase. however, the study's findings run counter to those of earlier researchers, including (hutomo et al., 2020; lusiana, 2020b; sepindo et al., 2020; sudarman & diana, 2022) concludes that (roe does not affect on stock prices. if return (roe) increases, then stock prices do not increase. the scalpel analysis uses signaling theory. according to conelly et al. (2011) in (utami & darmawan, 2019), according to the signaling theory, the information receiver can decide how to interpret the information they receive while the information provider can decide what and how the information will be conveyed. businesses can set themselves apart from subpar competitors by communicating their quality to the capital market in a trustworthy manner (spence, 1973) (utami & darmawan, 2019), signaling theory refers to information indications that investors must take into account when deciding whether to purchase shares of the target company. based on the gap research phenomenon mentioned above, there is a gap for researchers to re-proven the results of the study in a different context, namely, combining the (der) and (roe) variables, the effect is both partially and simultaneously on the share price of sharia shares with the criteria for the jakarta islamic index on the stock exchange of indonesia. the implications of the research report are expected empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices bulkia, burhannudin, kurniaty, rahmah, and abdan 252 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to provide a theoretical contribution to the limited research that explores the (der) and (roe) on islamic stock prices. likewise in practice, this research provides significant insights that can be used to measure the health of the company and assess the company's ability to generate returns from the investment of shareholders of companies classified as sharia. from a broader standpoint, this study is more significant because a nation's economic development is influenced by the financial performance of companies whose shares are classified as sharia. the following hypotheses were established concerning the primary issues and study goals: h1: there is a strong influence of the debt to equity ratio (der) on indexed islamic stock prices (jakarta islamic index) on the indonesia stock exchange; h2: there is a strong influence of return on equity (roe) on the indexed islamic stock price (jakarta islamic index) on the indonesia stock exchange. h3: there is a strong influence of the debt to equity ratio (der) and return on equity (roe) simultaneously on the indexed islamic stock price (jakarta islamic index) on the indonesia stock exchange. method this research is explanatory research, namely research that explains the effect of debt to equity ratio (der) and return on equity (roe) on islamic stock prices, either partially or simultaneously. an exploratory investigation of 26 companies classified as sharia with the criteria of the jakarta islamic index on the indonesia stock exchange. the collection of complete financial data for the years 2014–2018 is done through secondary data analysis. 130 secondary data were successfully analyzed using regression after being processed using spss 26. result and discussion based on table 1, demonstrates the specifics of the partial influence of the (der) variable on the islamic stock price variable. a procedure is employed to reach this conclusion, and it looks at the value of sig (significance with criteria 0.05). in table 1, the value of sig. listed is 0.008. to achieve this, adhere to the sig level. the cutoff point for the significance value is 0.05. this indicates that (der) has an influence on the stock if the (probability) significance is less than 0.05. furthermore, the regression coefficient value is 24,466 which describes the direction of a positive relationship, meaning that for every one percent increase in the (der) level, the stock price will also increase by 24,466 points. based on these statistical data, it can be concluded that (der) partially has a significant effect on the indexed islamic stock price (jakarta islamic index) on the indonesia stock exchange. thus, the first hypothesis (h1) can be proven (accepted). according to existing theory, if a company can maintain profits while taking on increasing debt, this shows that the benefits of using debt outweigh the costs, allowing investors to see the use of debt profitably (husnan, 2005: 331). his opinion is strengthened (adikerta & abundanti, 2020), companies with high der can create earning before interest and taxes (ebit), which is greater than the interest expense that must be paid by the company. this is possible with strong corporate management. high debt interest also has an impact on reducing the absorbed tax burden, which is another reason why businesses seek large debt. this may be advantageous for the business when using the loan. corporate earnings can benefit from a sound debt management strategy. investors choose to buy company shares because of this belief. stock prices rise as a result of increased demand for stocks. this research supports his claim that the (der) is a reliable indicator of whether a company's stock is worthwhile to purchase or not (hapsari & chaniago, 2022). the larger the debt or obligation that the firm is required to pay the (der) ratio should be. but on the other hand, as creditors or investors would feel comfortable in their assets even if the company is liquidated, the lower the trend in the debt-to-equity ratio, empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices bulkia, burhannudin, kurniaty, rahmah, and abdan 253 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the better. investors may feel more secure with a low der ratio, making it easier for businesses to draw in capital. the stock price of a company may be impacted when several investors want to purchase shares of that company. the results of the study strengthen or support the results of previous research conducted by (adikerta & abundanti, 2020; meida dzulqodah, 2016; munira et al., 2018; nining, 2020; pandansari, 2012) which stated debt to equity ratio (der) affects stock prices. based on table 2, shows information about the effect of the (roe) variable on the islamic stock price variable partially. to make this decision, a method is used, looking at the value of sig (significance with criteria <0.05). in table 1, the value of sig. listed as 0.000. this is by following the sig level. 0.05 as the cut-off value from the significance value. this means that if the probability value (significance) is below 0.05, the (roe) affects stock prices. furthermore, the regression coefficient value is 209,065 which describes the direction of a positive relationship, meaning that every one percent increase in the (roe) level, the stock price will also increase by 209,065 points. based on these statistical data, it can be concluded that (roe) partially has a significant effect on the indexed islamic stock price (jakarta islamic index) on the indonesia stock exchange. thus, the second hypothesis (h2) can be proven (accepted). this study supports his assertion. according to (hapsari & chaniago, 2022), return on equity (roe) is a measure that can demonstrate a company's capacity to generate a profit from its equity. as the return on equity (roe) increases, a company's investor appeal rises (bunea et al., 2019). this research strengthens his opinion (hasanah & sulistiyo, 2021), it will benefit the company if it can turn a profit with its resources because strong profits will boost interest in the company's shares and drive up the price of its stock. high profitability demonstrates that the company has a sizable internal fund, while high return on equity shows that the company earns high profits with its capital and does not require money from outside sources like creditors. the results of the study strengthen or support the results of previous research conducted by (hapsari & chaniago, 2022; hasanah & sulistiyo, 2021; lusiana, 2020a; nurhayati & yudiantoro, 2022; rahmawati & hadian, 2022; l. sari et al., 2022), which stated that return on equity (roe) affects stock value. based on table 3, displays information on the interaction between the islamic stock price variable and the (roe) and (der) variables. to make this decision, a method is used, looking at the value of sig (significance with criteria <0.05). in table 3, the value of sig. listed as 0.000. this is by following the sig level. 0.05 as the cut-off value from the significance value. this means that if the probability value (significance) is below 0.05, then debt to equity ratio (der) and return on equity (roe) affect stock prices. based on these statistical data, it can be concluded that debt to equity ratio (der) and return on equity (roe) simultaneously have a significant effect on the indexed islamic stock price on the stock exchange of indonesia. thus, the third hypothesis (h3) can be proven (accepted). the value of r2 in this regression model is obtained at 0,580. this means that 58% of the stock price variables can be influenced by the debt to equity ratio and return on equity variables, while the remaining 42% can be influenced by other variables not included in this research model. table 1 partial regression model coefficientsa model unstandardized coefficients standardized coefficients t sig. criteria conclusion b std. error beta 1 (constant) 4668.908 969.962 4.813 .000 debt to equity ratio 24.466 9.015 .233 2.714 .008 <0.05 h1: accepted a. dependent variable: sharia stock prices source: secondary data processed, 2022 empirical evidence from the indonesia stock exchange: the influence of debt to equity ratio (der) and return on equity (roe) on sharia stock prices bulkia, burhannudin, kurniaty, rahmah, and abdan 254 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 partial regression model coefficientsa model unstandardized coefficients standardized coefficients t sig. criteria conclusion b std. error beta 1 (constant) 2249.874 826.101 2.723 .007 return on equity 209.065 26.256 .576 7.962 .000 <0.05 h2: accepted a. dependent variable: sharia stock prices source: secondary data processed, 2022 table 3 simultan regression model anovaa model sum of squares df mean square f sig. criteria conclusion 1 regression 3630206935.857 2 1815103467.928 32.219 .000b <0.05 h3: accepted residual 7154686123.632 127 56336111.210 total 10784893059.488 129 a. dependent variable: sharia stock prices b. predictors: (constant), return on equity, debt to equity ratio c. r2=0,580 source: secondary data processed, 2022 conclusion the research findings provide the following conclusions: debt to equity ratio (der) and return on equity (roe) positively and significantly affect islamic stock prices, either partially or simultaneously. in this case the three hypotheses proposed can be proven. if the (der) and (roe) increase, the stock price will also increase. this study provides a theoretical contribution to limited research exploring (der) and (roe) with stock prices in the context of the indonesian stock market, especially indexed companies (jakarta islamic index). in practice, this research offers important insights that can be applied to gauge the company's health and determine its capacity to maximize returns on shareholders' investments for businesses that are classed as adhering to sharia law. in future research, it will be useful to explore the (der) and (roe) with stock prices by comparing stock exchanges of various countries. reference adikerta, i. m. a., & abundanti, n. 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(2018). ownership structure, audit quality, board structure, and stock price crash risk: evidence from china. global finance journal, 37, 1–24. https://doi.org/10.1016/j.gfj.2018.04.002 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 46-56 46 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta eka rofiyanti1, ika muji lestari2, istamkhuja olimovich davronov3, alian natision4, krishantoro5 1245 institut ilmu sosial dan manajemen stiami, indonesia 3bukhara state university, uzbekistan correspondent: rofiyanti.ekasumarno@gmail.com1 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: rofiyanti, e., lestari, i, m., davronov, i, o., natision, a., krishantoro (2022). strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta. ilomata international journal of tax & accounting.3(1), 46-56. https://doi.org/10.52728/ijtc.v4i1.421 abstract: the phenomenon of this research is that in the digital era, many people switch to promoting their products to social media, which is one of the causes of the decrease in billboard taxes. this study aims to find out the right strategy in the billboard tax collection in the digital era by the regional revenue agency of dki jakarta. the research method used is the descriptive qualitative method. data sources include primary data, namely data from interviews, and secondary data, namely target data and billboard tax realization from 2016-2020. the results of this study indicate that (1) the billboard tax collection strategy in the digitalization era in the future will lead to billboard data collection, optimization of billboard objects and tax applications such as e-tax (2) the power of billboard taxes in the digital era lies in the development of digital technology and cooperation between the government, the private sector and the community; and (3) obstacles and challenges from billboard taxes in the digitalization era are the number of taxpayers who have not mastered technology and are not obedient in paying their tax obligations. the suggestion in this study is that the regional revenue agency of dki jakarta forms a fieldwork team to conduct more thorough data collection, take advantage of technological developments, lead the comprehensive campaign to taxpayers, and provide strict sanctions to taxpayers who do not obey and install illegal billboards and (3) obstacles and challenges from billboard taxes in the digitalization era are the number of taxpayers who have not mastered technology and are not obedient in paying their tax obligations. the suggestion in this study is that the regional revenue agency of dki jakarta forms a fieldwork team to conduct more thorough data collection, take advantage of technological developments, lead the comprehensive campaign to taxpayers, and provide strict sanctions to taxpayers who do not obey and install illegal billboards and (3) obstacles and challenges from billboard taxes in the digitalization era are the number of taxpayers who have not mastered technology and are not obedient in paying their tax obligations. the suggestion in this study is that the regional revenue agency of dki jakarta form a fieldwork team to conduct more thorough data collection, take advantage of technological developments, work a comprehensive campaign to taxpayers, and provide strict sanctions to taxpayers who do not obey and install illegal billboards. keywords: tax collection, billboard tax, digital era. this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:rofiyanti.ekasumarno@gmail.com https://doi.org/10.52728/ijtc.v4i1.421 strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 47 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction dki jakarta is the capital city of indonesia which is the center of development. therefore, it creates many business opportunities and causes for many investors or entrepreneurs to open a business in jakarta (hadi, 2021). then indirectly increases tax revenues, especially advertisement taxes, because the more people who own companies or industries, the more consumers use billboard services (dewanti, 2021). the number of companies influences the advertisement tax revenue to develop to promote their products, both small, medium and large businesses in jakarta (safitri, 2021). advertising tax itself is a tool used as a bridge between producers and consumers to introduce products produced by companies or other functions with the same purpose (konfino et al., 2015). because the billboard tax is located at strategic points and is widely accessible by the public, billboards are one of the most appropriate media to promote products to the public (koumpias & martinez-vazquez, 2019). besides billboards, they can be in the form of boards, advertising advertisements, such as newspapers, magazines, etc., and electronic media such as television, radio, and social media (cyan et al., 2017). digitization is an era transformation from analog mechanical and electronic technology to digital technology that has occurred since 1980 and continues to this day (flach et al., 2021). along with the times, digital technology continues to change for the better (bellofatto & besfamille, 2021). many people have used digital technology in various fields of life, including in the field of taxation. in the current era of digitalization, the installation of billboards has been widely used and utilized by social media (seip, 2019). for example, on instagram, facebook, youtube, and other social media. this is one of the reasons why it is rare to find billboards installed on giant billboards. so often saw large billboards that are empty or not filled with advertisements (alsukait et al., 2020; song et al., 2020). to anticipate this, the dki jakarta regional revenue agency (bapenda) continues to look for solutions and strategies to increase advertisement tax revenues in the digitalization era (lidyawati, 2021). one of them is by supporting the installation of advertisements in the form of electronics or leds to attract more consumers (octaviany et al., 2021). however, this solution and strategy from the dki jakarta bapenda have not yet impacted the billboard tax revenue at the dki jakarta bapenda. we can see this from the advertising tax target data in 2020 derived from 2019 (dewanti, 2021). therefore, based on this phenomenon, the researchers are interested in further researching the advertisement tax, which the author puts into the thesis entitled "analysis of advertising tax collection strategies in the era digitization at the dki jakarta regional revenue agency 2021." method this study used the descriptive qualitative method (moleong, 2018). through this approach, researchers can introduce subjects and feel what they experience in their daily lives (bungin, 2017). and can perform an analysis of events, phenomena or social circumstances (creswell, 2017). the concept in this study is to analyze the advertising tax collection strategy in the digital era carried out by the dki jakarta regional tax revenue agency. data collection techniques were carried out through observation and continued with collecting relevant data (sugiyono, 2019). furthermore, the researcher conducted interviews with the dki jakarta regional tax revenue agency and academics to strengthen the information and data obtained (mardiasmo, 2016). https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 48 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion 1. advertising tax collection strategy in the digitalization era at the dki jakarta regional revenue agency. one of the local revenue sources (pad) is the advertisement tax (muhaimin et al., 2019). the advertisement tax itself is a tool that connects producers and consumers to introduce products produced by companies (hasibuan, 2020). because of the strategic location of the billboard and it can be seen by many people, the billboard becomes one of the right tools to introduce and promote a product to the public (bahmid & wahyudi, 2018). besides being in the form of billboards, it can also be in the form of boards, advertising advertisements such as newspapers, magazines and others, and electronic media such as television, radio, and social media (neni et al., 2021). based on sources from the regional revenue agency or bapenda dki jakarta with various types of billboards that can be used to introduce goods and services in the administration of billboards, there are multiple forms of irregularities in the administration of billboards (lidyawati, 2021). the number of advertisements installed is a great opportunity for local tax revenues (rolamdo & widiastuti, 2021). before entering the digital era at the dki jakarta bapenda, the income or realization of the advertisement tax did not reach the target because there were illegal advertisements such as unlicensed advertisements and did not extend the period of the advertisement administration (karo et al., 2019). but after entering the digital age, many companies prefer to promote their products using digital or social media because they are considered more effective and efficient (hanis & saputra, 2019). the digital footprint will never be lost or erased even though the times have changed. and this has become a phenomenon at this time (anggreni et al., 2020). currently, bapenda dki jakarta must have a good strategy so that the advertisement tax can continue to reach its target. because in the current digitalization era, people or entrepreneurs prefer to post their advertisements through social media because they can be seen by everyone anywhere and anytime and will not be erased even though the times have changed (mulatsih et al., 2021). bapenda dki jakarta continues to look for strategies to increase advertisement tax revenues by collecting advertisement data, both licensed advertisements and have extended the implementation of ads and advertisements that are not approved and have not developed the implementation of advertisements (ratnaningsih & waluyo, 2019). also, the dki jakarta bapenda is revising the old governor's regulation, namely the governor's regulation of the special capital region of jakarta number 148 of 2017 concerning instructions for implementing advertisements which replaces advertisement rent value (nsr) into contract value because it is considered more rational in setting the price of billboards. in addition to collecting data, the dki jakarta regional revenue agency is also optimizing the implementation of led billboards because they are considered an opportunity to increase billboard tax revenues in the digitalization era (wulandari et al., 2017). this optimization is carried out by expanding the installation of led billboards such as in boxcars in remote areas, at public transportation waiting for regions such as the mrt and in crowded areas such as the thamrin area central jakarta . then in terms of upppd, it is also improving the quality of service by utilizing the current progress and development of information and communication technology to provide the best service to billboard taxpayers (muspirawati et al., 2021). https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 49 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the following is a discussion regarding the six elements in formulating strategy according to the theory of stephen p. robbins & mary coulter, namely: a. external environmental analysis external environmental analysis is a step taken to identify things of interest to the community and affect life in the present and the future. to analyze the external environment can be done in several ways, including: 1) they optimize led billboards and other types of billboards and develop potential objects for advertising taxes such as led billboards, which still have considerable potential in increasing advertising tax revenue in the digitalization era. this is because led technological developments will assist in future billboards. 2) continue to race against the law on regional taxes and regional levies, namely law number 28 of 2009 wherein the law explains the definition of regional taxes and levies, types of regional taxes in which there is an advertisement tax and explains the object and subject of the advertisement tax itself, what which is not included in the advertisement tax, the basis for the imposition of the advertisement tax, the advertisement tax rate and the principal amount of the advertisement tax. 3) keeping up with technological advances to provide the best service to advertisement taxpayers 4) involvement of advertisement taxpayer participation. the participation of the billboard taxpayer can increase the awareness of taxpayers in paying their taxes through the participation of billboard taxpayers it is hoped that it will increase the awareness and compliance of taxpayers in paying their tax obligations. 5) socialization and counseling to billboard taxpayers to increase public awareness and collect data for non-taxpayers or unlicensed billboards and analyze taxpayers' perceptions of the billboard tax. 6) reviewing the strategies used to achieve an increase in revenue from advertising tax b. internal environmental analysis internal environmental analysis is a step that can be taken in formulating strategies by identifying the resources owned by both human and financial resources to support the strategy made. an internal environmental analysis can be done through: 1) conducting data collection starts from collecting data on empty and filled points to optimize billboard acceptance. and also attracts many graduates in the field of statistics to collect data. as well as conducting data collection to measure the potential for advertising taxes. 2) provide convenience in service to taxpayers. 3) strengthening internal consolidation, such as enhancing human resources, whether they can carry out the strategic system used or whether financial resources are sufficient to support the implemented strategy system. and also have to improve the existing bureaucracy. 4) building a good and accurate data system, providing rewards and punishments for obedient and disobedient taxpayers as a form of law enforcement. 5) must review the strategies used to achieve increased revenue from advertising tax. c. strategy formulation https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 50 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strategy formulation is a way to formulate a strategy that will be made by making an effective and efficient long-term plan. the formulation of formulating strategy tends to collect data and extensification advertisements. because if you look at the 2016-2020 billboard tax target and realization table, where the target and realization data are fluctuating, the trend of the percentage of tax revenue is positive. however, if we look at the target size, it can be seen that there is a reduction in the target so that the realization has increased. table 3.1 target and realization of dki jakarta advertisement tax 2016-2020 year target realization percentage 2016 1,150,000,000,000,000 894,271,331,591 78% 2017 850,000,000,000 955,578,757,485 112% 2018 1,150,000,000,000,000 1.020,000,000,000 89% 2019 1,050,000,000,000 1,079,492,802,701 103% 2020 775,000,000,000 827,484,401,205 106.77% source: dki jakarta regional revenue agency based on this, the dki jakarta bapenda must always carry out data collection, both data collection on billboard points so that it can collect data on advertisements that are licensed and not. to give strict sanctions to billboard taxpayers who do not have a permit and do not extend the implementation of billboards. formulating a strategy can also be done by forming an organization. so the organization is created and divided for those whose technical implementation is carried out by the upppd. at upppd they collect data, every time there is a new object, regional monitoring and supervision is carried out at upppd. the strategy is made in stages to not overlap with authority. the order in formulating the strategy itself is at the lowest technical level, supervision, and policy. formulating the strategy is carried out based on policy instruments in the form of governor's regulations, governor's instructions, decisions of the head of the agency & instructions of the head of the agency. the special strategy is carried out by each head of the regional tax collection service unit (upppd) at the regional and sub-district levels according to the characteristics of their respective regions. building a work team or organization can also formulate strategies and is useful for recording and monitoring billboard points following policy instruments. the work team here starts from technical, then supervision and then policy. each unit has its own obligations and does the work according to what is set with this work team. d. setting strategy setting a strategy is a step to choose a strategy that will be implemented to the public or the community adjusted to the goals set, both long-term and short-term goals. to determine the strategy can be done by preparing a budget, adequate facilities and infrastructure or accommodating to support the strategy to be selected so as not to hinder the strategy's performance from being implemented. with this budget, facilities and infrastructure, of course, it must be able to provide the best service to billboard taxpayers. https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 51 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc e. implementing strategy implementing the strategy is the next step after setting the strategy. after a strategy has been established, the strategy must be implemented so that the public can judge the good and the bad of the strategy. tax potential analysis can be done by optimizing led billboards because led billboards in the digitalization era have considerable potential in increasing the advertisement tax so that they must be increased again. in contrast, the weakness of led billboards is the difficulty of finding transaction price information because the bureau tends to cover it up. implementing the led advertising strategy in the future will be an effective means to promote its products because people use digital more, but led advertisements also have a weakness: the implementation of advertisements requires a large and crowded place. implementing a strategy using led billboards has the opportunity because it can display several advertising products, attract the attention of potential consumers and be more communicative within a certain period. implementing the dki jakarta bapenda strategy has challenges in the form of the ability of taxpayers to master information and communication technology (ict) and how to socialize it. and there are still many tax officers who have to do more training. however, bapenda dki jakarta also has a great opportunity to increase advertisement tax revenue in the digitalization era with the development of this technology. in implementing the dki jakarta bapenda strategy, it is necessary to socialize and give strict warnings or punishments to stubborn taxpayers. meanwhile, dki jakarta bapenda's opportunity to implement the strategy is to collaborate between the government, the private sector, and the community to increase billboard taxes in the digitalization era. implementing the bapenda strategy has challenges in the form of the ability of taxpayers to use technology, then the opportunity from bapenda dki jakarta in implementing the strategy is by utilizing technological developments to create strategies that can make it easier for taxpayers to pay their taxes. f. strategy evaluation strategy evaluation is after the strategy is implemented, the strategy must be evaluated to see the feasibility of the implemented strategy. and if there is a shortage, a solution can be found. evaluating the strategy, namely by expanding or intensifying the advertisement tax (such as led billboards using boxcars in the regions), revising the old governor's regulations by changing the advertisement rental value (nsr) into a contract value, because using the nsr is too large according to their transaction price and conducting a census namely to record existing points, which are empty or those that have not registered but also those that are obedient, meaning there are and pay. evaluating the strategy by collecting data in the field to control or see the potential that may still be withdrawn from the advertisement tax itself and collecting data on new objects and objects that have not been extended. then send a letter to remind billboard taxpayers who do not comply. evaluating the strategy can be done by improving the quality of service to advertisement taxpayers so that they get easier, cheaper, faster and more accurate services by utilizing information technology. evaluating the strategy can be done by following the development of information and communication technology (ict). because with the development of information and communication technology, it can be used to create an effective and efficient strategy in collecting advertisement taxes in the era of digitalization. and with the convenience of https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 52 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc technology, it can help billboard taxpayers pay their taxes because there is no need to come directly to the tax office and pay billboard taxes anywhere and anytime. evaluating the strategy can be done by making laws or regulations that stipulate non-taxpayers or unlicensed taxpayers so that they do not lose the potential of the advertisement tax and need to collaborate with the central government and make flexible strategies so that it can make it easier for taxpayers to report their taxes. 2. strengths and opportunities of the advertising tax collection strategy in the digitalization era at the dki jakarta regional revenue agency. a. the strengths and opportunities that the dki jakarta bapenda has in setting a strategy for collecting billboard taxes in the digitalization era are the existence of technological developments or ict developments that can help create software, for example, the reality of e-tax. then according to mr. wahyu as a taxpayer and build collaboration that provides mutual benefits between the government, the private sector and the community b. the strengths and opportunities of led billboards to increase advertisement tax revenues are that led advertisements have a great chance to increase advertisement tax revenues in the digitalization era, so they must be optimized. this is because led billboards can be the right means to promote a product in the future. after all, people use digital more and also led billboards are dynamic and can display several advertising products, thus attracting more public attention. c. strengths and opportunities in implementing advertising tax collection strategies in the era of digitalization. there is a great opportunity in the development and advancement of information and communication technology because it can be used as a means of making effective and efficient strategies in collecting billboard taxes, the strategy in question is like the existing tax application, namely e-spt with this tax application, of course, it can make it easier for mandatory advertisement tax in carrying out its tax obligations. strengths and opportunities in implementing the billboard tax collection strategy in the digitalization era can also be done through collaboration between the government, the private sector and the community to increase billboard taxes in the digitalization era and provide convenience for billboard taxpayers. d. strengths and opportunities in evaluating advertising tax collection strategies in the digitalization era, namely the development of information and communication technology that continues to experience renewal must be utilized to improve the billboard tax collection system or strategy. this technological advancement can be used to create a system or application that makes it easier for the public to pay billboard taxes. and an application can also be made that provides information to taxpayers such as information about which places can be used to place billboards. there is currently an e-tax application that can make it easier for taxpayers to pay or report their tax obligations. 3. weaknesses and challenges of the billboard tax collection strategy in the digitalization era at the dki jakarta regional revenue agency. a. weaknesses and challenges in setting advertising tax collection strategies in the digitalization era are the lack of openness, awareness and compliance of billboard taxpayers in reporting their tax obligations. weaknesses and challenges in setting a strategy for collecting billboard taxes in the digitalization era at bapenda dki jakarta, https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 53 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc namely the lack of socialization regarding the importance of paying billboard taxes and firm action against billboard taxpayers who disobey and there is no easy access to any platform or e-com. many people who have a lot of followers on social media can easily advertise their products on their social media. weaknesses and challenges in determining the billboard tax collection strategy in the digitalization era at bapenda dki jakarta, namely many people or even entrepreneurs who advertise their products on social media because they are considered cost-saving and will not be erased. b. the weakness and challenge of led billboards in increasing advertising tax revenue in the digitalization era is the difficulty of finding information related to transaction prices because many bureaus tend to cover transaction prices. so it is difficult for dki jakarta bapenda to get the actual transaction price. the weakness and challenge of led billboards in increasing billboard tax revenue in the era of digitalization are that the installation of billboards requires a large area and a crowded area and cannot be haphazardly placed because it requires electricity. to increase billboard tax revenue in the digitalization era, namely the lack of supervision and procedures in the development and extension of billboards so that illegal billboards are still rampant or without official permission from the dki jakarta bapenda. c. weaknesses and challenges in implementing the billboard tax collection strategy in the digitalization era, the lack of ability of billboard taxpayers in using information and communication technology and the lack of socialization from tax officials to billboard taxpayers. so that no matter how sophisticated the application that has been used in the field of taxation, there are still many taxpayers who have not been able to use technology, it will not work well. so it is necessary to carry out thorough socialization so that the system used can run well. then the weakness in implementing the strategy also lies in the weakness of rules or warnings for billboard taxpayers who do not obey reporting or paying their tax obligations. d. weaknesses and challenges in evaluating advertising tax collection strategies in the digitalization era are stubborn billboard taxpayers, meaning that many billboard taxpayers organize unlicensed billboards. however, the dki jakarta regional revenue agency has taken firm action against billboard taxpayers who do not comply with this kind of tax, namely, for billboard taxpayers who have registered, have paid and are licensed, they are given a letter later for taxpayers who the dki jakarta regional revenue agency does not authorize. collaborate with satpol pp to reduce the billboards. e. weaknesses and challenges in evaluating the billboard tax collection strategy in the digitalization era at the dki jakarta bapenda, namely with the existence of covid-19 that has existed in indonesia since 2020, the central government has issued restrictions on outside activities, therefore currently field officers are limited, this causes services to taxpayers are also slightly reduced. the weakness and challenge in evaluating the billboard tax collection strategy in the digitalization era at bapenda dki jakarta are that taxpayers often forget to pay their advertising tax obligations or divert the funds already available to pay taxes to be used to finance other needs that they think are more priority. a notification letter regarding the billing tax will be issued to overcome this. https://www.ilomata.org/index.php/ijtc strategy of advertising tax collection in the digitalization era on badan pendapatan daerah of dki jakarta rofiyanti, lestari, davronov, natision, krishantoro 54 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the strategy for collecting billboard taxes in the digitalization era in the future will focus more on collecting data on licensed and unlicensed billboards and collecting data on advertisements that have been extended or not. the dki jakarta bapenda also continues to expand the advertisement tax and revise the old pergub by changing the nsr to the contract value because it is considered more able to adjust the price of advertisements. in 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(2017). analisis pajak reklame di kabupaten purworejo periode 2012-2016. jurnal akuntansi dan pajak, 18(01), 1–18. https://doi.org/10.29040/jap.v18i01.94 https://www.ilomata.org/index.php/ijtc ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.179-184 https://www.ilomata.org/index.php/ijtc 179 | ilomata international journal of tax and accounting vol. 1 no. 4 october 2020 application in activity based costing (abc) calculation of home development cost (study on housing in sidoarjo) hendra dwi prasetyo1, kusuma adi rahardjo2, iman supriadi3 nindya kartika kusmayati4, moh wahib5 12345mahardhika surabaya high school of economics correspondent: hendra_prasetya@ymail.com submitted : august 3, 2020 revised : september 25, 2020 published : october 30, 2020 abstract activity based costing (abc) is an improved system of the traditional one. this system is calculating costs that provide accuracy and relevance in allocating overhead costs. this system has an overall cost tracking compared to traditional systems. this research uses a descriptive method of case study approach, which can describe the existence of a variable, symptom or condition. using this method adjusts the ability to answer the problem under study and hopes to be able to provide clear results and answers. the results of the calculation of housing construction cost using the abc system on housing in sidoarjo are able to describe results more accurately and do not cause distortion of costs. keywords : production cost, traditional systems and abc systems introduction every company always calculates profit in production. to achieve company goals in general need to pay attention to company policy. to be able to achieve the company's goals in increasing profits, companies must properly pay attention to the costs incurred for production and determining the selling price. mismatched selling prices can affect the company's finances. marketing is not optimal and the amount of inventory will have an effect on company revenue. the role of production cost is very important in determining the selling price of the product. calculating production cost is all production costs used to process raw materials into finished goods within a certain period. the cost of production is the basis for determining selling prices and profits and as a measurement tool. activity based costing is an improved system of the traditional one, this system is calculating costs that provide accuracy and relevance in allocating overhead costs. this system has an overall cost tracking compared to traditional systems. the growing business as it is today is not only limited to the benefits of abc for information on production costs but also as a concept that is broadly interpreted as information to motivate personal in improvising the process to produce products or services for customers. this system is useful for overcoming the weaknesses of traditional systems made specifically by industrial companies in martusa et al. (2010). research conducted by joseph et.al. (2019) had given result, that modern costing such as activity based costing systems can optimize the benefits of techniques that enable them to identify, accumulate and manage the costs of company activities to ensure accuracy in decision making and produce business excellence and customer satisfaction. al-saidi's research (2014) results are the need for multi item success steps because they capture individual perceptions more efficiently, unlike single item sizes that do not measure the complex nature of abc system https://www.ilomata.org/index.php/ijtc mailto:hendra_prasetya@ymail.com application in activity based costing (abc) calculation of home development cost (study on housing in sidoarjo) prasetyo, rahardjo, supriadi, kusmayati, & wahib 180 | ilomata international journal of tax and accounting vol. 1 no. 4 october 2020 success, multi items use composite scores to measure and analyze success by providing the biggest explanation of the factors determining the application of abc. there is also research by farzaneh et.al. (2010) show the results that cost of goods sold is not consistent with the rigidity of the cost model, but in general, administrative and sales costs are inherent in changes in the level of sales. furthermore, haneda and azizah's research (2018) shows the results that the room rent cost determined by management is determined by allocating operating costs to each room type based on the percentage of income. at present, in calculating goods manufactured cost, the company uses a traditional system, where all costs are not directly allocated to the product on an allocation basis. all allocations are costs that are triggered due to the relationship of production volume. based on the explanation above, it can be understood how important it is to use the abc system in calculating the cost of production. according to mulyadi (2012) cost accounting is an information system that produces company operating costs and information that is used as a basis for measuring, analyzing, reporting and making decisions. according to supriyono (2012) accounting cost is a cost information generated by company management as a basis for management decisions in achieving company goals (wiguna, 2017). costs are the basic price or part of which is used or consumed to obtain income (sunarto, 2004 & rahmadani et.al. 2016). costs represent the sacrifice of economic resources to obtain goods / services that are useful for the present or the future (siregar, 2013 & siby et.al. 2018). the grouping of costs over all existing cost elements into certain groups that are more concise and can provide more concise and important information is called cost classification. commonly used in the classification of costs related to products, production volumes, departments and cost centers, accounting periods, decision making (siby et.al. 2018). according to carter (2102) the cost classification is based on (palupi et.al. 2016): (1) costs with products that include manufacturing costs and commercial costs; (2) production volumes which include variable costs, fixed costs and semi-variable costs; (3) production department which includes the department of production, services, joint and joint costs; and (4) accounting period and a decision. the method of determining the production cost is how to calculate the cost element into the cost of production (mulyadi, 2012). the production cost includes all direct materials, direct labor and factory overhead incurred to produce goods / services (lasena, 2013). activity based costing system is an approach to determining product costs that impose costs on products / services based on resource consumption caused by activities (blocher et.al., 2011). the basis of this approach is that the company's products / services are carried out by the required activities and activities using resources that cause costs. resources are charged to cost objects based on their usefulness (haneda et al. 2018). methods this study is using a descriptive method of case study approach, which can describe the existence of a variable, symptoms or circumstances. using this method adjusts the ability to answer the problem under study and hopes to be able to provide clear results and answers. this study focuses on the housing construction cost according to management and calculation of the cost of housing construction using the abc system. application in activity based costing (abc) calculation of home development cost (study on housing in sidoarjo) prasetyo, rahardjo, supriadi, kusmayati, & wahib 181 | ilomata international journal of tax and accounting vol. 1 no. 4 october 2020 results and discussion calculation of the building cost a house by company determination of development cost carried out by the company that is using a traditional system, this system uses unit-level drivers. the calculations are as follows: table 1. land and construction costs (main costs) number house type land cost construction costs total 1 home office type-58/90 77.647.208 133.400.000 211.047.208 2 type-38/90 77.647.208 95.000.000 172.647.208 3 type-50/91 78.509.955 125.000.000 203.509.955 4 type-70/120 103.529.611 210.000.000 313.529.611 5 type-70/135 116.470.812 210.000.000 326.470.812 source: housing data in sidoarjo table 2. utility costs (overhead costs) number cost type total 1 land planning costs 17.557.029.500 2 infrastructure costs 11.000.000.000 3 electricity cost (pln) 1.228.000.000 4 environmental facility fee 2.640.000.000 5 building planning costs 100.000.000 6 licensing fees 983.200.000 7 project office administration costs 3.840.000.000 total cost 37.348.229.500 number of housing units and home office 564 unit total cost per unit 66.220.265 source: housing data in sidoarjo table 3. calculation of cost of building houses number cost type home office type58/90 type38/90 type50/91 type70/120 type70/135 1 land cost 77.647.208 77.647.208 78.509.955 103.529.611 116.470.812 2 construction costs 133.400.000 95.000.000 125.000.000 210.000.000 210.000.000 3 utility costs 66.220.265 66.220.265 66.220.265 66.220.265 66.220.265 total 277.267.473 238.867.473 269.730.220 379.749.876 392.691.077 source: housing data in sidoarjo calculation of the cost of house construction based on the abc system determination of housing construction basic cost with the traditional system as stated above does not provide accurate information because it causes distortion between types of houses. abc system is one method that can produce accurate information because there is a charge for each activity. the calculations are as follows: table 4. utility costs (overhead costs) number cost type total 1 land planning costs 17.557.029.500 2 infrastructure costs 11.000.000.000 3 electricity cost (pln) 1.228.000.000 4 environmental facility fee 2.640.000.000 5 building planning costs 100.000.000 application in activity based costing (abc) calculation of home development cost (study on housing in sidoarjo) prasetyo, rahardjo, supriadi, kusmayati, & wahib 182 | ilomata international journal of tax and accounting vol. 1 no. 4 october 2020 number cost type total 6 licensing fees 983.200.000 7 project office administration costs 3.840.000.000 total cost 37.348.229.500 source: housing data in sidoarjo table 5. activity identification number cost type activity 1 land planning costs batch level 2 infrastructure costs batch level 3 electricity cost (pln) batch level 4 environmental facility fee batch level 5 building planning costs product level 6 licensing fees product level 7 project office administration costs product level source: processed data table 6. grouping of costs to activities number cost type total 1 unit level activity costs electricity cost (pln) 1.228.000.000 total 1.228.000.000 2 batch level activity costs land planning costs 17.557.029.500 infrastructure costs 11.000.000.000 environmental facility fee 2.640.000.000 total 31.197.029.500 3 product level activity costs land planning costs 100.000.000 licensing fees 983.200.000 project office administration costs 3.840.000.000 total 4.923.200.000 source: processed data table 7. determination of drivers for activities number cost type activity 1 land planning costs land area 2 infrastructure costs land area 3 electricity cost (pln) number of units 4 environmental facility fee land area 5 land planning costs building area 6 licensing fees building area 7 project office administration costs building area source: processed data table 8. calculation of activity group rates number cost type cost driver pool rate 1 unit level activity costs electricity cost (pln) 1.228.000.000 564 unit 2.177.305 2 batch level activity costs application in activity based costing (abc) calculation of home development cost (study on housing in sidoarjo) prasetyo, rahardjo, supriadi, kusmayati, & wahib 183 | ilomata international journal of tax and accounting vol. 1 no. 4 october 2020 land planning costs 31.197.029.500 60.541 m2 effective land area 515.302 infrastructure costs environmental facility fee 3 product level activity costs land planning costs 4.923.200.000 28.040 m2 effective building area 175.578 licensing fees project office administration costs source: processed data table 9. calculation of the cost of building houses with the abc system number total cost home office type-58/90 type-38/90 type-50/91 type70/120 type70/135 1 land cost 77.647.208 77.647.208 78.509.955 103.529.611 116.470.812 2 construction costs 133.400.000 95.000.000 125.000.000 210.000.000 210.000.000 3 utility costs unit level 2.177.305 2.177.305 2.177.305 2.177.305 2.177.305 batch level 46.377.222 46.377.222 46.892.524 61.836.296 69.565.833 product level 10.183.509 6.671.954 8.778.887 12.290.442 12.290.442 total 269.785.244 227.873.689 261.358.671 389.833.654 410.504.392 source: housing data in sidoarjo table 10. comparison of company calculations with abc systems number house type traditional abc system gap percentage 1 home office type-58/90 277.267.473 269.785.244 -7.482.229 -3% 2 type-38/90 238.867.473 227.873.689 -10.993.784 -5% 3 type-50/91 269.730.220 261.358.671 -8.371.549 -3% 4 type-70/120 379.749.876 389.833.654 10.083.778 3% 5 type-70/135 392.691.077 410.504.392 17.813.315 4% source: housing data in sidoarjo conclusion the results of the calculation of housing construction cost using the abc system on housing in sidoarjo are able to describe the results more accurately and do not cause distortion of costs. this system can improve decision making planning so that it can help management in improving its financial planning. references al-saidi, shafeq hamoud., & h. nanje gowda. 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(2017). activity based costing system as an alternative to the determination of inpatient services rates and their implications for revenue of buleleng district hospital, scientific journal of accounting, vol.2, no.2, december, pp.148-172. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 268-285 268 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia kenny ardillah1, thenia2 1institut teknologi dan bisnis kalbis, 2universitas matana correspondent: l20617@lecturer.kalbis.ac.id1, thenia@matanauniversity.ac.id2 received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: ardillah, k., thenia. (2021). corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia. ilomata international journal of tax & accounting 2(4),268-285. https://doi.org/10.52728/ijtc.v2i4.341 abstract: this study aims to prove the influence of corporate social responsibility, investment decisions and managerial ownership on value of the company. theories used in this research are agency theory and signal theory. this research was done on all manufacturing companies listed on the indonesia stock exchange for the period of 2016-2018. the sampling method used is purposive sampling technique and the data analysis method used is multiple linear regression analysis. the results of this study show that corporate social responsibility and managerial ownership have no influence on value of the company, while investment decisions have a positive influence on value of the company. few suggestions for the further research are adjust research periods, use other criteria of sample, use other indicators such as funding decisions, company size, other corporate governance indicators, or use other methods to measure value of the company. keywords: corporate social responsibility, investment decisions, managerial ownership, value of the company this is an open access article under the cc-by 4.0 license. introduction corporate social responsibility is a form of private company contribution that is philanthropic or charitable with the aim of making social contributions ethically. although initially csr was an internal company policy, now various national and international laws have developed csr activities as an obligation for businesses and industries around the world. the company's csr activities at least have a positive social and economic impact on the people living around the company's operational areas, local communities in sub-districts, districts and provinces. multinational companies have csr programs that provide social impacts regionally, nationally, and even internationally. (pavez et al., 2020; rahdari et al., 2020) corporate social responsibility is an effort to improve the company's positive image. in addition to providing benefits to the community, csr is also important for companies. csr activities have many benefits for companies such as strengthening the relationship between employees and the company, increasing employee morale, and making the company more connected to the people who live around the company's offices. (elgebeily et al., 2021; jarjir et al., 2020) https://www.ilomata.org/index.php/ijtc mailto:l20617@lecturer.kalbis.ac.id mailto:thenia@matanauniversity.ac.id https://doi.org/10.52728/ijtc.v2i4.341 corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 269 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before companies implement csr, companies must have responsibilities to employees and shareholders. therefore, companies that implement csr programs usually have completed their responsibilities to employees and shareholders so that they can provide benefits to the community. in other words, csr strategy is a program implemented by large companies with work areas covering regional, national or international areas. the more successful a company is, the more responsibility it has to set standards of ethical behavior for its colleagues, competitors, and industry. (abdelfattah & aboud, 2020; tarczynski et al., 2020) the company will always strive to achieve its goals, both short-term and long-term goals. the short-term goal is that the company can get the maximum profit possible by utilizing the resources owned by the company, while related to the long-term goal, the company will always try to maximize the value of the company (meidiawati & mildawati, 2016). currently, business competition continues to increase. in its development, the company always strives to maintain its business excellence to increase the value of the company. with this guarantee, shareholders will not hesitate to invest their capital (puspaningrum, 2017) value of the company is the worth that forthcoming purchasers will pay if the company is sold (l. dewi & wirasedana, 2018). the value of the company is likewise reflected in the stock price which is steady and has expanded in the long haul. the higher the stock value, the higher the value of the company. high value of the company is the craving of company proprietors, on the grounds that a high value will demonstrate high investor flourishing. value of the company is an investor's view of the company's degree of achievement which is firmly identified with its offer value (rinnaya et al., 2016). in investing, investors and potential investors need to collect information as one of the basic considerations in making investment decisions in the capital market. the capital market is a means of channeling funds from investors to parties who need funds, namely companies through the sale of shares and bonds. with the capital market, investors can invest their funds by buying company shares in the hope of obtaining a return in the form of dividends or capital gains. meanwhile, issuers can use these funds for the benefit of the company without having to wait for the availability of funds from the company's operations (meidiawati & mildawati, 2016) the movement of the stock price index (cspi) on the indonesia stock exchange throughout 2018 was affected by various sentiments, both from within and globally. jci actually recorded a decline of 3.02 percent year to date (ytd). there was a decline in all sectors of the manufacturing industry. in the basic and chemical industry sectors, there was no significant decline between 2016 and 2017 of 3.90 percent, while the decline from 2017 to 2018 was 4.05 percent. in the various industrial sector, there was a very significant decline from 2016 to 2017 which was 28.87 percent and there was a slight increase between 2017 and 2018 of 0.19 percent. an increase also occurred in the consumer goods industry sector between 2016 and 2017 which was 10.55 percent, but there was a very significant decrease from 2017 to 2018 of -33.32 percent. to achieve the goals of a company, synergy and reciprocal relationships are needed between the company and the community, investors and employees of course. one way that can be done is by interacting between the company and the environment, because the environment contributes to the sustainability of the company and also social welfare. in the period of individuals who are beginning to think often about the climate, corporate social responsibility is something that should be done and not simply an intentional decision for companys. the company's commitment to https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 270 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc execute corporate social responsibility has been directed in law no. 40 of 2007 article 74 of the limited liability company law. numerous advantages acquired by the company in the execution of corporate social responsibility, among others, items are progressively preferred by buyers and companys are drawn in by investors. corporate social responsibility can be utilized as another showcasing device for companys on the off chance that it is carried out economically. by executing corporate social responsibility, the company's picture will be better so shopper faithfulness is higher. subsequently, corporate social responsibility assumes a significant part in expanding the worth of the company because of expanding company deals via completing different social exercises in the general climate (wulandari et al., 2016). but in reality, when an industry develops, many companies only focus on being an company that only seeks economic benefits and does not care about the impacts, resulting in social inequality and environmental damage. for example, the case of environmental problems due to the company's production process in indonesia that occurred in the bandung regency area, a number of textile industries around majalaya that dispose of waste into the citarum river which often disturbs the health of the surrounding community and pollution that occurs in the ciujung river, waste from the pt indah kiat pulp paper mill. & paper which is located in serang regency, air pollution by cigarette factories in kediri, the emergence of active radio due to metal processing waste in tegal regency and other pollution. every company should not only think about obtaining material benefits, at least the company is able to provide useful and beneficial things for external parties of the company, such as the community, social and environment in which the company operates (astuti & nugrahanti, 2015). the investment decision is a vital factor in the company's financial function, where the higher the investment decision has been decided by the company, the higher the company's chance to get an enormous pace of return. companys that have high investment decision will actually want to influence investors' comprehension of the company, so it can build the interest for the company's shares. along these lines, the higher the investor's interest in putting resources into the company, the speculation choice affects expanding the value of the company (pertiwi et al., 2016) the reason for settling on investment decisions is to get a huge benefit with least risk in order to enhance the value of the company. the right investment decision can affect the value of the company by focusing on various investments that get an excess. the excess acquired by the company will add to trade out for cash inflow, which is then aggregated as company benefit. the other way around, if the investment decision doesn't influence the value of the company, it very well may be deciphered that the company as of now has a shortage on various of investments which causes a a lessening in value, accordingly diminishing the value of the company (suryandani, 2018) managerial ownership is the participation of the management who actively participates in making company decisions (managers, directors or commissioners) and is also given the opportunity to participate in owning company shares (shareholders). managerial ownership is often associated as an effort to increase the value of the company because managers apart from being management, as well as company owners will feel directly the consequences of the decisions they make so that managers will not take actions that only benefit managers (suastini et al., 2016). in increasing the value of the company, agency conflicts often occur, namely conflicts of interest between shareholders and managers. corporate managers tend to pursue their own personal goals, https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 271 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc for example to get the highest possible bonus. managers will only focus on projects and investments that will provide large returns in the short term rather than maximizing shareholder wealth by investing in projects that are profitable in the long term. however, for shareholders, it will increase costs for the company which can cause a decrease in profits and affect the stock price so that it can reduce the value of the company. the proportion of managerial ownership can reduce the agency problem and indicate a common interest between management and shareholders. in addition, increasing share ownership by management will align its position with shareholders so that management will be motivated to take decisions that increase value of the company (puspaningrum, 2017). this research is a replication of (murnita & putra, 2018), (wiguna & yusuf, 2019) and (somantri & sukardi, 2019) research. the differences between this study and previous research include 1) the sample companies used in this study are manufacturing industry sector companies listed on the indonesia stock exchange in 2016-2018. the reason for choosing the manufacturing industry sector is because among the nine company sectors listed on the indonesia stock exchange, the manufacturing industry sector has tighter and stronger competitive competence, has a large number of registered companies and has a fairly close relationship with consumers because most of their products are almost always used by consumers. 2) the period used in this study is between 2016-2018. the reason for the research period is 3 (three) years in order to provide valid and coherent data so as to obtain relevant research results. the purpose of this study is to prove the influence of corporate social responsibility, investment decisions, and managerial ownership on value of the company. agency theory agency theory describes the relationship between management (agent) and shareholders (principal). where the manager as an agent must be able to run a company with the best decisions to increase the wealth of the principal, namely the shareholders. however, sometimes the shareholders cannot oversee all the decisions and activities carried out by managers, so it will be a threat if what is done by the managers is not for their own welfare. quality financial statement information can assist in making decisions for investors and potential investors (rahayu & sari, 2018). agency issues for the most part happen when company’s manager have a share ownership extent of under 100% with the goal that directors tend to act to seek after their own advantages in settling on organization monetary choices and not based on expanding value of the company (l. dewi & wirasedana, 2018). with managerial ownership, manager will attempt to work as per the desires of the shareholders so managers will likewise be roused to further improve performance which will affect expanding investor certainty and value of the company (wiguna & yusuf, 2019) signalling theory signaling theory clarifies that organizations are urged to have the option to give data on their financial reports to external parties (investors and creditors) to prevent information asymmetry that may occur, because companies know more data about the organization's possibilities than outside parties, both creditors and investors. the data given by the organization to external parties is relied upon to lessen the occurrence of information asymmetry between internal parties and outside parties just as to expand the value of the company. information distributed as a declaration will give a signal to investors. on the off chance that the declaration contains a positive value, the https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 272 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc market will react well to the information so that there will be changes in sales volume and changes in stock prices where this can influence the value of the company which is reflected in the increment in the organization's stock value (widiastari & yasa, 2018). signal theory shows how good quality companies can intentionally give signals to investors, so investors are able to distinguish good quality companies and poor quality companies. in addition, the information that companies must disclose is information about corporate social responsibility or what is often referred to as corporate social responsibility. information on corporate social responsibility is contained in the company's annual report or a separate report on corporate social responsibility. every company that carries out social responsibility activities is expected to improve the company's image and also the value of the company. the consideration of using this theory is because this theory is able to provide encouragement for companies to provide information to external parties that influence decision making which will later affect the value of the company and also affect changes in the company's stock price (murnita & putra, 2018). corporate social responsibility according to the international company of employers, corporate social responsibility is defined as voluntary activities that are positive for companies in various fields, both economic, social and environmental. it can be considered as an aspect of business strategy with the aim of making a profit and is a form of interaction between the company and the social environment. corporate social contributions can be implemented in several ways, including 1) financial donations, such as support for cultural performances. 2) donations for people with disabilities or religious groups and donations to universities. 3) social voluntary activities, such as building a house. 4) employ foreigners, disabled people, and women to ensure social justice. 5) protect the environment and so on (chung et al., 2018). if a company discloses social responsibility in a sustainable and consistent manner, investors will appreciate and give a positive appreciation which is displayed by the expansion in the organization's stock price and furthermore the expanding value of the company as an indication of the endurance of an organization later on (murnita & putra, 2018). corporate social responsibility is is unveiled in a report called sustainability report. corporate social responsibility can be practical if the program made by an organization is actually a joint responsibility from all components inside the actual organization (wulandari et al., 2016). corporate social responsibility reporting is usually used as a mechanism by which companies share information with shareholders about the company's approach to issues related to the environment, society, employees and consumers (singh et al., 2017). investment decision investment is the connecting of assets in the long haul to produce profits later on. investment decisions are vital in light of the fact that they are the center of all financial analysis which will eventually influence the accomplishment of organization objectives. the current investment opportunities influence the value of the company organization which is essentially shaped through the financial stock market value. furthermore, investment decision making is also very important for the survival of the organization concerned in light of the fact that it includes the assets utilized for investment, the sort of investment to be made and the different risk that can be created (l. dewi & wirasedana, 2018). investment can come from inside or outside the company. investments originating from within the company include cash, marketable securities, trade https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 273 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc receivables, inventories and others. meanwhile, investments originating from outside the company include equipment, land, buildings, machinery, vehicles and so on (tanto et al., 2019). investment decisions are decisions taken as an alternative for the company to issue funds outside of operational activities which can then provide benefits to the company in the future. investment decisions have a long term, so the decisions taken must be considered properly because they have long-term risks. if the organization can settle on the right investment choices, the organization will acquire benefits and the organization's resources will create ideal execution to give a positive sign to investors which will expand stock price and increment value of the company (suryandani, 2018). the investment made by the company certainly aims to prosper shareholders, both now and in the future (somantri & sukardi, 2019). investment decisions are also considered as a decision made by the company in spending its funds in the form of certain assets in the hope of getting profits in the future (suroto, 2015). managerial ownership managerial ownership is the level of share’s possession claimed by directors, managers and commissioners which can be found in the financial statements. managers act all the more cautiously with this share ownership in light of the fact that they likewise bear the outcomes of the choices that have been taken. companies with managerial ownership will positively adjust their inclinations as managers and also as shareholders. managerial ownership will help the unification of interests between managers and shareholders, straightforwardly feel the advantages of the choices taken and bear the losses as a result of settling on wrong choices. (widianingsih, 2018) in the company's financial statements, managerial ownership is demonstrated by the enormous level of organization share’s proprietorship by managers. information on share ownership by the manager unveiled in the notes to the financial statements by giving management the opportunity to be involved in the ownership of the company's shares, it is expected that management will act carefully because whatever decisions are made, they will also bear the consequences. management is also expected to be motivated to improve their professionalism which will have an impact on increasing company performance and value (hidayah, 2017). value of the company value of the company can be characterized as a specific condition that has been accomplished by an organization as an outline of public confidence in the organization subsequent to going through a cycle of activities for quite a while, since the organization was established as of recently. expanding the value of the company is an accomplishment, in light of the fact that expanding the value of the company is the thing that the proprietors need and with the increment in the value of the company. the welfare of the proprietors will likewise increment because a high share price will make the value of the company additionally high. the higher the value of the company, the higher the prosperity of shareholders (rinnaya et al., 2016). however, stock prices in the capital market are formed based on investor supply and demand, so the stock price is a fair price that can be used as value of the company (sudarma & darmayanti, 2021). value of the company is is a marker for the market in evaluating the organization as a whole. the thing that makes the value of the organization a significant idea for investors. the value of companies that have opened up to the public in the capital market is reflected in the stock price, if the share price increases, the value of the company additionally increments, while the value of https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 274 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc companies that have not opened up to the public is reflected in the value of company resources, business hazard level, organization possibilities, the executives, business climate and different variables. the stock price can can be supposed to be a marker of the organization's prosperity, where market strength in the stock trade is shown by the deal and acquisition of shares in the capital market (khoirunnisa, 2018). hypothesis development the influence of corporate social responsibility on value of the company corporate social responsibility is a type of duty to do the activities for environment and give impacts around the organization. organizations that do social responsibility are viewed as ready to disclose a decent commitment to the public and can be liable for their activities and impacts on the surrounding environment. the execution of corporate social responsibility will likewise persuade and give a signal to investors that the organization will actually want to guarantee its endurance later on while expanding the value of the company (murnita & putra, 2018). this statement is supported by research conducted by dewi & sanica (2017) and andreas & adiputra (2019) which found that corporate social responsibility has a positive influence on value of the company. ha1: corporate social responsibility has a positive influence on value of the company the influence of investment decisions on value of the company investment decisions are significant choices in the management function in finance because they involve how to distribute organization reserves, both from inside and outside the organization in regards to different types of venture choices with similar objective of acquiring more noteworthy benefits later on (suryandani, 2018). high investment is a sign of organization pay development which is viewed as uplifting news by investors in impacting impression of organization execution which will eventually influence value of the company (suroto, 2015). this statement is supported by research conducted by (suroto, 2015) and (tanto et al., 2019) which found that investment decisions have a positive influence on value of the company. the influence of managerial ownership on value of the company managerial ownership is one of the share proprietorship structures that can influence the motivating forces for the board to practice the wellbeing of investors. be that as it may, managers tend to utilize high obligation not based on amplifying the value of the company, however for their own advantages. conflict between management and company owners is called agency conflict. the managerial ownership mechanism can minimize conflicts of interest that arise from the agency relationship between shareholders and management. managerial ownership is able to control and reduce earnings manipulation behavior by managers, so that the quality of reported earnings can increase and also have an impact on increasing value of the company (sudarma & darmayanti, 2021). this statement is supported by research conducted by (gayatri et al., 2016) and (sudarma & darmayanti, 2021) which found that managerial ownership has a positive influence on value of the company ha3: managerial ownership has a positive influence on value of the company method https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 275 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the population used in this study were all manufacturing companies listed on the indonesia stock exchange for the 2016-2018 period, totaling 166 companies. the sample of this research is manufacturing companies listed on the indonesia stock exchange in 2016-2018 that meet the criteria for sampling. sampling in this study was conducted using non-probability sampling technique. one of the sampling techniques included in the nonprobability sampling technique is the purposive sampling method (sugiyono, 2016: 84-85). the criteria applied in the sampling of this research are as follows. 1. manufacturing organizations that have been recorded on the indonesia stock exchange and distributed a yearly report sequentially during the 2016-2018 period. 2. manufacturing organizations that distribute their yearly reports in rupiah. 3. manufacturing organizations that have total information identified with the factors utilized in the investigation such as corporate social responsibility and managerial ownership. 4. companies that have net income during the 2016-2018 period. the purposive testing strategy utilized in this investigation brought about 29 organizations that met the measures in this examination. the aftereffects of the example choice are introduced in table 2 underneath. table 2 sample selection process results number sample selection criteria amount 1 manufacturing companies listed on the indonesia stock exchange for the period 2016-2018. 166 2 manufacturing companies that that don't distribute yearly reports in rupiah currency (26) 3 manufacturing companies that don't have total information required in research : a. not disclosing corporate social responsibility activities (3) b. there is no managerial ownership (70) c. have no net profit (17) d. not publishing sustainability reports in a row during the 2016-2018 period (21) final data count 29 research year 3 number of samples during the study period 87 source: idx and edited by the author (2020) data collection technique data collection techniques are ways to get the data needed by researchers in conducting research (sugiyono, 2016: 137). information assortment method in this examination is documentation procedure. documentation strategies are completed by gathering, examining and breaking down auxiliary information that contains data required in research (sugiyono, 2016: 240). the information utilized in this investigation is optional information as yearly reports of manufacturing https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 276 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc organizations recorded on the indonesia stock exchange which are sourced from the indonesia stock exchange (idx) site and different information sources from diaries and other writing books. value of the company value of the company is an investor's view of an organization identified with share prices. an organization is said to have great worth on the off chance that it has great execution of performance, since investor will in general be keen on putting their offers in organizations that have great execution in expanding organization esteem. along these lines, the higher the stock value, the higher the value of the organization (dewi, 2017). in this examination, the value of the organization is estimated utilizing the proportion of price to book value (pbv) or the book value of the organization that can cause the market to have faith in the organization's possibilities. the price to book value (pbv) proportion broke down is a correlation between share price in a period with the book worth of value acquired from the organization's balance sheet in a specific period (khoirunnisa, 2018). this ratio explains that the market price of a stock in its book value can give an indication of the investor's view of a company. the reason for using the price to book value (pbv) ratio is because the book value has a relatively stable measure that can be compared with market price. another reason to use this ratio is because book value is able to provide consistent accounting standards for all companies. in addition, a high price to book value (pbv) will also make the market believe in the company's prospects in the future. price to book value (pbv) can be calculated using the following formula (sudana, 2013:23). price to book value = market value per share / book value per share book value per share can be obtained by the following formula (sudana, 2013:23). book value per share = total equity / total outstanding share corporate social responsibility corporate social responsibility is a type of corporate duty in fixing social imbalance and ecological harm that happens around the organization because of the organization's functional exercises. the more types of duty the organization embraces to the climate, the organization's picture will increment and furthermore affect expanding value of the company (sudarma & darmayanti, 2021). corporate social responsibility can be estimated utilizing the corporate social responsibility disclosure index (csrdi) intermediary dependent on the global reporting initiative (gri). corporate social responsibility disclosure indicators consisting of 91 items using 6 (six) performance indicators, namely (hadyarti, 2019): 1. economy (aec) which consists of 9 items 2. environment (aen) consisting of 34 items 3. manpower (ala) which consists of 16 items 4. human rights (ahr) which consists of 12 items 5. community social which consists of 11 items 6. product responsibility which consists of 9 items https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 277 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate social responsibility is estimated utilizing a rundown of social duty revelations, to be specific by giving a score of 0 (zero) for every thing that isn't unveiled in the organization's yearly report and giving a score of 1 (one) for everything revealed in the organization's yearly report (murnita & putra, 2018). the corporate social responsibility disclosure index (csrdi) is formulated with the following calculation (wulandari et al., 2016). information : xij = number of corporate social responsibility items uncovered by the organization nj = maximum number of items for corporate social responsibility exposure investment decision the investment decision is one of the decisions that must be taken by financial managers to allocate existing funds in order to bring profits in the future (tanto et al., 2019). organizations that have high speculation choices will actually want to impact investors' understanding of the company, so comprehension of the organization, in order to build the interest for the organization's offers. in this way, the higher the investor's interest in putting resources into an organization, the investment decision will affect expanding the value of the company (pertiwi et al., 2016). investment decisions in this study are proxied by price earning ratio (per). price earning ratio (per) is determined by contrasting the price per share and the income procured from each share. investors will see the organization's capacity to produce income from each one of the assets contributed by the company. if the price earning ratio (per) is high, then investors will assume that the company is able to allocate its funds properly and in the end it will increase the value of the company. price earning ratio (per) is formulated with the following calculation (somantri & sukardi, 2019). price earning ratio (per) = share price / earnings per share managerial ownership managerial ownership is the is the level of divide for share proprietorship between executives, officials, and all straightforwardly engaged with settling on organization choices (dewi, 2017). through managerial ownership, managers will be motivated to provide more optimal performance in operating the company, because managers have rights and obligations attached to both the shares they own and the company. when a manager is able to provide more optimal performance, then this will directly affect the increase in company performance and also increase the value of the company (gayatri et al., 2016). in this study, managerial ownership is measured by calculating the percentage (%) of shares owned by commissioners, boards of directors and managers to the number of outstanding shares. the formula for calculating managerial ownership is as follows (sudarma & darmayanti, 2021). mo = total share owned by manager, directors, and commissioners / total outstanding share data analysis method data analysis is a process of systematically searching and compiling from data that has been obtained through various data collection techniques, so that it is easy to understand and inform https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 278 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc other parties (sugiyono, 2016: 244). the data analysis method used in this research is quantitative analysis using statistical methods. the analysis in the study was carried out using spss version 25 software. the data analysis method used in this study was multiple linear regression analysis to determine whether there was an influence of several independent variables on the dependent variable (ghozali, 2018). result and discussion based on the results of descriptive statistical tests on corporate social responsibility, the lowest value was 0.1098901 and the highest value was 0.2857143, while the average value obtained was 0.171908547 with a standard deviation of 0.0435057871. the company that has the highest percentage of corporate social responsibility is fajar surya wisesa with a percentage amount of 29%. meanwhile, the companies that have the lowest percentage of corporate social responsibility are sekar laut tbk and siantar top tbk at 11%. from the results of the analysis, the average value is 0.171908547, this means that the company has disclosed its corporate social responsibility activities, which is 17%, meaning that the company has taken part in improving social inequality and environmental damage that occurred around the company due to the company's operational activities. this indicates that the mean value can be used as a representation of the entire data. the standard deviation is a reflection of the average deviation of the data from the mean. the investment decision obtained a minimum value of 3.0078076 and a maximum value of 42.8659747, while the mean value obtained was 16.836777767 with a standard deviation of 8.7760052162. the company that has the highest investment decision is lion metal works tbk with a percentage of 4287%. meanwhile, the company that has the lowest percentage of investment decisions is kedawung setia industrial tbk at 301%. from the results of the analysis, it can be seen that the mean value is 16.836777767, this means that the company has implemented an investment decision of 17%, meaning that the financial manager has made the decision to allocate existing funds to bring profits in the future. the average value is greater than the standard deviation value, this indicates that the mean value can be used as a representation of the entire data. the standard deviation is a reflection of the average deviation of the data from the mean. the results of descriptive statistical tests on managerial ownership obtained the lowest value of 0.0000933 and the highest value of 0.3451344, while the average value obtained was 0.080101115 with a standard deviation of 0.1032648575. the company that has the highest managerial ownership is indo acidatama tbk with a managerial ownership percentage of 35%. meanwhile, the company that has the lowest percentage of managerial ownership is kalbe farma tbk at 0.00933%. the average value is 0.080101115, this means that the company's shares have been owned by managers, boards of directors and commissioners by 8%. it can be concluded that managers, boards of directors and commissioners have taken part in supervising company performance to increase the value of the company although there are still many companies that have a low percentage of managerial ownership. the definition of the standard deviation is a reflection of the average deviation of the data from the mean which also describes the magnitude of the data variation. the average value of managerial ownership is smaller than the standard deviation value, this larger standard deviation value indicates that managerial ownership has a larger variation in the data, so the mean value is a poor representation of the overall data. https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 279 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the value of the company obtained a minimum value of 0.2281336 and a maximum value of 5.7016536, while the mean value obtained was 1.682218316 with a standard deviation of 1.3811070957. the company that has the highest value of the company is kalbe farma tbk with a value of the company percentage of 570%. meanwhile, the company that has the lowest percentage of value of the company is intanwijaya international tbk at 23%. from the results of the analysis, it can be seen that the mean value is 1.682218316 or 168%, this means that most companies have good corporate values. this indicates that the mean value can be used as a representation of the entire data. the standard deviation is a reflection of the average deviation of the data from the mean. classical assumption tests the results of the normality test show the asymp value. sig. (2-tailed) of 0.197 > alpha 0.05. it can be interpreted that the residual data on the proportion of corporate social responsibility, investment decisions and managerial ownership are declared normally distributed. the results of the multicollinearity test show that corporate social responsibility, investment decisions and managerial ownership do not have multicollinearity problems so that data on corporate social responsibility, investment decisions and managerial ownership are well used in the regression model. heteroscedasticity test results show that the significant value of corporate social responsibility, investment decisions and managerial ownership is greater than 5%, so it can be concluded that there is no heteroscedasticity in the regression model. the results of the autocorrelation test show that the durbin-watson value of 0.556 lies between -2 to 2 which can be concluded that this regression model does not have autocorrelation. coefficient of determination test the results of the coefficient of determination (r2) show the adjusted r2 value of 0.298. thus, it can be concluded that corporate social responsibility, investment decisions and managerial ownership can explain 29.8% of the variation in value of the company, while the remaining 70.2% is explained by the variable others that are not included in the regression equation model. hypothesis test the results of the hypothesis test in this study which aims to prove the influence of corporate social responsibility, investment decisions and managerial ownership on value of the company are presented in table 3 below. table 3 hypothesis test results https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 280 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc model unstandardized coefficients sig. value b 1 (constant) -1.577 corporate social responsibility 0.204 0.493 investment decision 0.742 0.000 managerial ownership -0.037 0.253 based on the results of multiple regression analysis in table 3, the regression equation used in this study is as follows. value = -1.577 + 0.204csr + 0.742io 0.037mo + e based on the results of the partial test (t test) in table 3, the results of the analysis of the influence of the independent variable partially on the dependent variable are explained as follows. 1. corporate social responsibility has a significance value of 0.493 which means a significance value of more than 0.05 which causes ha1 in this study to be rejected, namely corporate social responsibility has no influence on value of the company. 2. the investment decision has a significance value of 0.000 which means the significance value is less than 0.05 and the beta value is positive, namely 0.742 which causes ha2 in this study to be accepted and has a positive relationship, namely investment decisions have a positive influence on value of the company. 3. managerial ownership has a significance value of 0.253, which means a significance value of more than 0.05 which causes ha3 in this study to be rejected, namely managerial ownership has no influence on value of the company. the influence of corporate social responsibility on value of the company the results of the corporate social responsibility test prove that corporate social responsibility has no influence on value of the company. this is not in line with research conducted by dewi & sanica (2017) and andreas & adiputra (2019) which state that corporate social responsibility has a positive influence on value of the company, but the results of this study are in line with research conducted by puspaningrum (2017) and (sudarma & darmayanti, 2021) which states that corporate social responsibility has no influence on value of the company. the rejection of the hypothesis in this study occurs because the disclosure of corporate social responsibility by the company is relatively low, because this activity is still voluntary in indonesia so that companies do not consider corporate social responsibility as an aspect of business strategy to gain profits and increase value of the company. in addition, not all companies fully disclose corporate social responsibility in their annual reports or issue separate corporate social responsibility reports. another chance is that investors don't completely trust in the divulgence of corporate social responsibility did by the organization in light of the fact that up to this point there are as yet numerous cases identified with ecological, social and monetary issues, so investors consider that the exposure of corporate social responsibility is just a custom and can't guarantee that the organization has great corporate value. corporate social responsibility isn't identified with signalling theory in light of the fact that the aftereffects of this investigation show that executing social responsibility does not influence the value of the company. information on corporate social responsibility is a is likewise not generally https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 281 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc remembered for the organization's yearly report or a different report on corporate social responsibility. corporate social responsibility is is less ready to give consolation to organizations to give data to outside parties identified with dynamic that can influence the value of the company and changes in the organization's stock price. it it very well may be presumed that the divulgence of corporate social duty has no impact in expanding the value of the company. the influence of investment decisions on value of the company the results of testing investment decisions prove that investment decisions have a positive influence on value of the company. the results of this study are not in line with the research conducted by dewi & wirasedana (2018) and (suryandani, 2018), but are consistent and strengthen the research conducted by (suroto, 2015) and (tanto et al., 2019) which states that investment decisions have a positive influence on value of the company. the acceptance of the hypothesis in this study is due to high investment decisions indicating that the company's investment and company growth prospects are in good condition so as to increase the demand for shares in the company. the investment decisions taken by the company are also an alternative for companies to spend their funds outside of operational activities in order to gain profits for the company in the future. the higher the venture choice set by the organization, the higher the chance for the company to get opportunity for benefit. subsequently, directors should keep up with the improvement of ventures so they can accomplish organization objectives through the welfare of shareholders and can build value of the company. in light of the fact that the consequences of this examination, it can be shown that investment decisions influence value of the company. if that the organization can settle on the right investment decisions, the company will will acquire benefits and the organization's resources will create ideal execution in order to give a positive signal to investors, which will expand stock price and value of the company. so it tends to be presumed that investment decisions have have an impact in expanding value of the company. the influence of managerial ownership on value of the company the test results of managerial ownership prove that managerial ownership has no influence on value of the company. the results of this study are different from the research conducted by (gayatri et al., 2016) and (sudarma & darmayanti, 2021) which state that managerial ownership has a positive influence on value of the company. however, the results of this study are in line with and support previous research conducted by (suastini et al., 2016) and (rely & purwanti, 2018) which stated that managerial ownership had no influence on value of the company. the rejection of the hypothesis in this study occurs because the share ownership owned by managers, boards of directors and commissioners is relatively small or does not have many shares in the company. the low share ownership by managers, boards of directors and commissioners means that the performance of managers as a minority has not been able to actively participate in making decisions in the company, so it does not affect the value of the company. low share ownership by managers, boards of directors and commissioners causes managers to prioritize their goals as managers rather than as shareholders and makes managers' performances tend to have no influence on value of the company. https://www.ilomata.org/index.php/ijtc corporate social responsibility, investment decisions, and managerial ownership on value of the company : evidence from indonesia ardillah & thenia 282 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the discussion that has been stated, managerial ownership is not always related to agency theory because the results of this study indicate that the presence of stock ownership by managers, boards of directors and commissioners does not affect value of the company. share ownership by managers who act as agents as well as principals cannot in fact reduce agency conflicts that can occur, because relatively high managerial ownership is not a benchmark that managers will not be concerned with their own interests. so it can be concluded that the existence of managerial ownership in a company is not fully influential in increasing the value of the company. conclusion corporate social responsibility has no effect on value of the company. it tends to be reasoned that the revelation of corporate social responsibility by the organization can't ensure that the organization will keep away from cases identified with ecological, social and monetary issues and are less ready to give support to give data to external parties related to decision making that can influence the value of the company. investment decisions have a positive effect on value of the company. it tends to be reasoned that a high speculation choice demonstrates that the organization's investment and company growth possibilities are in acceptable condition to expand the demand for shares in the organization and furthermore affect expanding the value of the company. managerial ownership has no effect on value of the company. it can be concluded that managerial ownership cannot affect the value of the company because the shares owned by managers, boards of directors and commissioners are still relatively small, so it cannot guarantee that managers are more concerned with their goals as a manager than as shareholders and make managers' performance tend to have no effect on the value of the company. for management, this research is expected to be a reference in decision making by management, especially regarding the impact of every decision taken related to company value, increasing disclosure of corporate social responsibility, optimizing investment decision making and considering managerial share ownership so that managers, boards of directors and commissioners can participate fully active in making decisions in a company. for investors, the results of this study are expected to be used as consideration for making investment decisions by assessing what things or indicators can have an effect on increasing the value of the company. investors should also conduct a more in-depth analysis before investing their funds in a company such as studying the history of the company and the factors that affect the value of the company. for further researchers, it is expected to add other indicators such as funding decisions, company size, other corporate governance indicators, using companies with other sectors besides manufacturing such as the mining sector, property sector, financial sector or real estate sector, using other sample criteria for comparison results to make the sample data more visible and more varied, increasing the number of research periods so that they are longer for example 5 years or 6 years, using different measurement methods or adding measurement methods for company value, namely tobin's q or price earnings ratio (per) and can collect more references in order to provide better research results. reference abdelfattah, t., & aboud, a. 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(2016). dampak moderasi profitabilitas terhadap pengaruh corporate social responsibility pada nilai perusahaan manufaktur. ejurnal ekonomi dan bisnis universitas udayana, 5(7), 1889–1918. corporate social responsibility, profitability, firm value%0a https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 68-77 68 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung agus subagiyo1, siti nurbaity2, khikmatul islah3, rudianto hermawan4, ahmad junaidi5 12345institut ilmu sosial dan manajemen stiami correspondent: agussbagiyo@gmail.com1. received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: subagiyo, a., nubaity, s., islah, k., hermawan, r., junaidi, a. (2022). effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung. ilomata international journal of tax and accounting, 3(1), 68-77. https://doi.org/10.52728/ijtc.v4i1.380 abstract: the number of small and micro business taxpayers at the cibitung pratama tax office from year to year after the increase, but the high increase in the number of taxpayers is not directly proportional to the increase in taxpayer compliance in paying and notifying the tax. the purpose of this research is to recognize the influence of understanding, the description and knowledge of taxpayers on the compliance of small and medium-sized micro business taxpayers at kpp pratama cibitung. the population in this research is a small intermediate micro business taxpayer registered at kpp pratama cibitung. the procedure for taking illustrations in this research uses accidental sampling, on the contrary, the collection of information through the questionnaire method. the illustrations used in this research are 100 respondents. in this research, hypotheses are tested using multiple linear regression analysis. the results of this research display that understanding, descriptions, and knowledge of taxpayers regarding partial taxation influence the compliance of small and medium-sized micro business taxpayers in the cibitung pratama tax office. keywords: taxpayer awareness, understanding and knowledge on tax, taxpayer compliance this is an open access article under the cc-by 4.0 license. introduction currently, small and medium enterprises (msmes) are increasingly showing their existence and able to generate relatively high profits. last but not least also able to compete in the era of globalization as it is today, but not yet in line with the level of compliance in carrying out its tax obligations (machmudah, 2020; syuhada & gambetta, 2013; tambunan, 2019). the level of compliance of small and medium-sized micro enterprises (msmes) taxpayers is still fairly low, the target of tax receipts has not been achieved (rahmadhani et al., 2020; shafi et al., 2020; sinuhaji, 2019). low compliance of taxpayers of small and medium enterprises (msmes) is certainly a problem every year (rahayu, 2019; susanti & widajatun, 2021). in 2013 first applied https://www.ilomata.org/index.php/ijtc mailto:agussbagiyo@gmail.com https://doi.org/10.52728/ijtc.v4i1.380 effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 69 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the 1% rate, tax service office pratama cibitung recorded the lowest tax receipts in bekasi regency. until 2017, the problem of low tax compliance in bekasi regency is still experienced today (rahayu, 2019; widiastuti, 2017). the number of small and medium micro enterprises taxpayers recorded in tax service office pratama cibitung as of december 2017 reached 22,567 small and medium-sized micro enterprises taxpayers (ernita & sudjiman, 2021). the increase in the number of small and medium micro enterprises is not in line with taxpayer awareness in fulfilling its obligation to pay taxes (andreas & savitri, 2015). based on table 1, it appears that the realization of taxpayer tax receipts of private persons in the msme sector has never reached the overall target (barigozzi et al., 2019; cozmei & rusu, 2015; savitri & musfialdy, 2016). low level of taxpayer compliance (tax compliance) in paying taxes is one of the causes of not optimal tax receipts in indonesia (iyer & kaszak, 2021; melando & waluyo, 2013). low obedience levels can be caused by a number of elements of the lack of views and knowledge regarding tax rules by tax repellation, low taxpayer knowledge phase, type of fiskus service, tax sanction, and the use of online tax payment systems or called e-bill taxes that do not known size and understood by taxpayers (hajawiyah et al., 2021; saad, 2014; von brasch et al., 2021). the inhibiting factor that controls the compliance of the compliance with small and medium micro-enterprises (msmes) includes: (1) the level of taxation view (2) quality of fiscus services, (3) understanding of the general provisions and community taxation procedures are still low (batrancea et al., 2019; chaudhry, 2021; damayanti et al., 2015). . h1 h3 11 h2 11 https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 70 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis 1. the effects of taxpayer's consciousness regarding the compliance of taxpayer msmes, taxpayers, the higher the knowledge of the knowledge of the taxpayers in performing taxes, the higher the compliance of taxpayers in compliance with taxes . this was also supported by previous examinations that the knowledge of tax repayment had a positive and meaningful effect on the compliance of taxpayers . from review at the beginning of the researchers could be concluded the following similarities: h1: allegedly that the knowledge of taxpayers has a positive impact on the compliance of umkm taxpayers 2. the influence of tax knowledge views regarding the compliance of taxpayers. taxpayers knowledge of understanding regarding tax regulations affected compliance with tax msmes in bekasi regency (pratama, 2019). from the reviews at the beginning of the researchers received the following allegations: h2: allegedly that knowledge of understanding of taxation has a positive impact on compliance with small and medium micro-medium micro companies (msmes) 3. influence of taxpayer awareness, understanding’s knowledge of taxation on compliance of msme taxpayers the results of this study are in line with the theory of planned behavior revealed by ajzen (rahmadhani et al., 2020), where this theory is influenced by attitude factors towards behavior and behavior control (prawagis et al., 2016). from the description above the researchers concluded the hypothesis as follows: h3: alleged taxpayer awareness, understanding and knowledge of taxation positively affect the compliance of msmes taxpayers. method the type of analysis used in this study is quantitative. the quantitative analysis method can be interpreted such as the procedure for the analysis of the idea of positivism, used to examine certain populations or examples, the collection of information using objects to test the established suspicion (sugiyono, 2019). this type of analysis includes causal analysis. causal research is a study that examines the variable engaging into a target that is studied more diverse causal, so that the part in this analysis has an independent and dependent variable (bauer et al., 2021; djaali, 2020). the researchers tested the impact of taxpayer's awareness, knowledge of understanding about taxation, regarding the compliance of micro, small, and small businesses recorded at the pratama cibitung office tax office. this research uses accidental sampling procedures using 100 respondents. result and discussion a. validity test. validity test is used to measuring validity or not a list of questions (sari & wardani, 2016). the questionnaire is declared valid if the question or expression on the list of questions can express something that will be measured using a list of questions (ghozali, 2016). measurement of validity can be done using the relationship between the value of the item about https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 71 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc using the value of the construct or variable value (yani et al., 2020). from the impact of the research, it can be seen that the value of the part of the table in the design of r tables is found 0.1654 and the r value is calculated to all items the part of the part in the list of questions is worth more than r table, and the significance value to all questions is less than 0.1 meaningful it can be concluded that linear regression analysis is valid or appropriate. b. reliability test. reliability testing aims to measure questionnaires that are indicators of variables (ghozali, 2016; yani et al., 2020). this reliability test uses the spss.23 program with cronbach's alpha method (perdana & dwirandra, 2020). croanbach's alpha is when obtained croanbach's alpha value of less than 0.600 means bad, about 0.700 is accepted and more or equal to 0.800 is good. 1) if r alpha is positive and r alpha is >0,600, then the reliabel question is 2) if r alpha negative and r alpha <0.600, then the question is not reliable 3) r alpha can be seen on reliability coefficient. based on the results of reliability tests known cronbach's alpha value of 0.837, 0.852, 0.871 this value is greater than the provision of 0.60 then it can be concluded that all question items totaling 24 items have a reliable or consistent nature. c. normality test, normality research intends to understand whether each cause is usually distributed or not (ghozali, 2016; sari & wardani, 2016). the normality test is needed because of the testing of other variables using estimates that the residual value follows the normal distribution. to test evidence that is usually distributed or not, can be found using a normal graph plot. data : processed in spss v.23 kolmogorov-smirmov test results, have a significant asymp value of 0.200 where the result shows a significant level greater than 0.1. this means that the data is normally distributed. d. multikolinies test, multicolinies the test is to investigate whether there is a high relationship between the free variables in the multiple linear regression model (ghozali, 2016). multicolerity tests can be done by paying attention to the inflation component variance (vif) or tolerance value. tolerance value limit ≥ 0.10 and vif ≤ 10. the estimated results of the variance inflation factor (vif) also show the same matter, with the vif value for each taxpayer awareness variable of 1,975, the understanding and knowledge of taxation 1,975. so no independent variable has a vif value of more than 10. so this study did not occur multi-collocity between free variables. e. heteroscedasticity tests, scatterplot charts from this analysis can be seen, under heteroscedasticity testing are carried out to examine whether there are variance inequalities https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 72 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc originating in former monitoring to another (ghozali, 2016). the existence or absence of heteroscedasticity in this analysis can be seen from the plot chart.: scatterplot heteroscedasticity test results show that the facts spread above and below the score 0 (zero) on the y axis and there is no clear example near the spread of the fact. this means that there is no heterosaryity in the regression model. so it can be concluded that the inspection regression model is suitable to use to suspect the compliance of taxpayers belonging to the variables that affect it, namely taxpayer awareness and tax understanding and knowledge. f. autocorrelation test, autocoeration deviation in this study was tested with durbin-watson test (dw-test), the results of autokoleration can be seen in the following table: the above autocomeration test results show that the durbin-watson value of 1,823 corresponds to the durbin-watson table that in the lower limit range (dl) of 1.6337 and the upper limit (du) of 1.7152 and k=2, because the dw velue 1,823 is greater than the upper limit value (du) of 1.7152 and less than 4 – 1.6337 = 2.3662, it can be concluded that there is no autocoleration in the regression model of taxpayer awareness, understanding and knowledge of taxation to taxpayer compliance. g. t test, partial test or (t test) is used to test whether each independent variable namely taxpayer awareness (x1) and tax understanding and knowledge (x2) has a positive influence and significance to dependent variables namely partial taxpayer compliance (y). the rule of decision-making in the t test by formulating spss with a significant rate set at 10% is if the significant value is >0.1, then ho is accepted and ha is rejected, or the free variable cannot explain the bound variable or there is no influence between the variables tested and if the significance value <0.1, then ho is rejected and ha is accepted, or the free variable can explain the bound variable or there is an influence between the variables tested. https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 73 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source : spss data processing v.23 1) the significance value for taxpayer awareness variables is 0.000 or less than 0.1. t table of 1,660 and thitung 4,602. so thitung > ttabel, then ho rejected or h1 accepted. taxpayer-imposed variables significantly affect taxpayer compliance. 2) the significance value for variable understanding and knowledge of taxation is 0.014 or less than 0.1. 1,660 and thitung 2,495. so thitung > ttabel. then ho was rejected or h2 accepted. variable understanding and knowledge of taxation significantly affects taxpayer compliance. h. test f statistical test f aims to determine the influence of joint or simultaneous independent variables on dependent or bound variables. the criteria used are if a significant level of f > 0.1 or fcalculate < ftabel, then ho is accepted and if a significant level of f < 0.1 or fcalculate > ftabel, then ho is rejected. source : spss data processing v.23 it is known that a significant value of 0.000<0.1 fhitung value of 42,991 > ftabel 3.09 then the regression analysis model is significant therefore the regression model can be used to predict taxpayer awareness and understanding and knowledge of taxation. in this case it means that independent variables i.e. it can be concluded that there is no autocoleration in the regression model of taxpayer awareness. i. the determination coefficient test (r2), of the determination coefficient basically measures how far the model can go in applying variations of related variables. the r2 value is between 0 and 1. the small r2 value is meaningful to the ability of free variables to explain the related cause is very limited. the value close to 1 part in the free variable submits all the data needed to estimate the cause of related (ghozali, 2016). from the results of the table obtained r2 value of 0.470 means the percentage of contribution of variable influence x1 and x2 to y by 47%. while the remaining 53% is affected or explained by other countless variables in this model of analysis. j. multiple regression analysis, multiple regression analysis is the analysis of the internship between two or more independent variables with the dependent variable. this analysis is used to assign the intercourse between the independent variables and dependent variables. https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness, understanding’s knowledge of taxation on compliance of small and medium micro business taxpayers at pratama tax service office cibitung subagiyo, nubaity, islah, hermawan, junaidi 74 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the coefficient table above, it can be seen the value of unstandardized coefficients and can be concluded as follows: 1) constant of 7,603 means that if taxpayer awareness (x1), understanding and knowledge of taxation (x2) is 0, taxpayer compliance (y) is worth 7,603 2) the coefficient of taxpayer awareness variable regression (x1) is 0.444, meaning that if taxpayer awareness increases by 1 then taxpayer compliance (y) increases by 44.4% assuming other independent variables of fixed value. the positive value coefficient is meaningful that there is a positive poutage between taxpayer's awareness and taxpayer compliance, the higher the taxpayer's awareness, the more and more taxpayer compliance increases. 3) the coefficient of variable regression of understanding and knowledge of taxation (x2) amounted to 0.279, meaning that if the understanding and knowledge of taxation increased by 1 then taxpayer compliance (y) increased by 27.9% assuming other independent variables of fixed value. the coefficient of positive value is meaningful that there are positive internships between understanding and knowledge regarding taxation and taxpayers. conclusion based on the results of the study and discussion obtained conclusions: 1) in line with the hypothesis conducted by taxpayer awareness researchers have a positive and significant effect on the compliance of taxpayers of msmes personal persons in the tax service office pratama cibitung. the amount of taxpayer awareness of msmes' personal persons on taxpayer compliance at the pratama cibitung tax service office was 31.55%. 2) in line with the allegations carried out by tax researchers and tax knowledge have a positive and significant impact on the compliance of msme taxpayers at the cibitung pratama tax office. the number of impacts of understanding of taxes and knowledge of the compliance of umkm taxpayers in the tax service office pratama cibitung by 15.41%. 3) in line with the hypothesis conducted by taxpayer awareness researchers and tax understanding and knowledge has a significant impact on the compliance of msme taxpayers at the cibitung pratama tax office. the number of impacts of taxpayers and understanding and knowledge of taxpayers for compliance with msme taxpayers at the pratama cibitung tax service office numbered 47%. while the remaining 53% is influenced or explained by other countless variables in this research model reference andreas, & savitri, e. 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(2020). analisis data statistik: sebuah pendekatan praktis pengolahan statistik bermuatan karakter (1st ed.). graha ilmu. http://grahailmu.id/product/analisis-data-statistik-sebuah-pendekatan-praktis-pengolahanstatistik-bermuatan-karakter/ https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, number 3 july 2021 page no. 209-221 https://www.ilomata.org/index.php/ijtc 209 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo1* ,novianita rulandari2, aprilia alfani3, raveedhan syachlin4 1234administrasi publik, institut ilmu sosial dan manajemen stiami correspondent : novianitarulandari@gmail.com submitted : june 22, 2021 revised : july 15, 2021 published : july 31, 2021 abstract the phenomenon in this study is related to the self-assessment system for taxpayers in the context of the government regulation number 23 of 2018 implementation, where many micro, small, and medium enterprises (msmes) do not understand tax administration and consider taxation obligations to be complicated. the purpose of this study is to find out and analyze the selfassessment system for final tax income on msmes at the pratama tax office of west bekasi in 2018-2020 along with the obstacles and efforts made by the tax office regarding the self-assessment system. this research is descriptive research with a qualitative approach. data analysis was carried out using qualitative methods. the results of this study indicate that the implementation of government regulation number 23 of 2018 regarding the self-assessment system has not fully run as expected. in terms of registration and reporting, taxpayers have complied with these regulations, but in calculating and paying their taxes they have not fully complied with the rules. the obstacles include msmes who are still unfamiliar with taxes and do not understand it, regulators who are still having trouble supervising the taxation activities of taxpayers, and the lack of tax dissemination and counseling. as a result, the msme tax contribution has decreased during 3 years due to the decline in the msme tax rate. the average contribution of msme tax revenue at the primary tax office of west bekasi is 8.77% of final income tax receipts. keywords: final income tax, msme, self-assessment system introduction economic development becomes the most important thing in a country, one of them comes from taxes. in 2020 of apbn (state budget), state revenues amounted to 2,233.2 trillion, the biggest contribution of revenue from the taxation sector, which contributed 91.33% of the total 2020 apbn target based on presidential regulation number 72 of 2020 and the rest from pnbp (administration of non-tax state revenue) and grants. its contribution to state revenue becomes the main pillar because taxes are a source of state income to finance all state expenditures, including development expenditure, personnel expenditure, and other financings. tax revenue realization is the amount of net tax revenue on the tax revenue target. nowadays, umkm (micro small and medium enterprise/msme) can contribute to the indonesian economy in terms of contributing to gross domestic product. in 2018, the contribution https://www.ilomata.org/index.php/ijtc mailto:novianitarulandari@gmail.com digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 210 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 of umkm (micro small and medium enterprise/msme) to the national gross domestic product (gdp) reached around 60.34%. in total, small businesses in indonesia contributed more to gdp, reaching 93.4 percent, then medium business at 5.1 percent and large businesses were only at 1 percent. for comparison, in singapore, their tax revenues in the msme sector are at 72%. the difference in digital services provided gives different contributions in terms of msme taxes, in indonesia, digital tax services have only begun to be intensively implemented in 2018, while singapore has digitized taxation long before tax digitization in indonesia. in addition, the 0.5% tariff on umkm/msme in indonesia is still considered burdensome, compared to singapore, which has imposed a 0% tariff on its community of msme actors. (ministry of cooperatives and small and medium enterprises, 2019) to encourage the fulfillment of voluntary tax obligations and the contribution of state revenue from final income tax for umkm/msme actors (final income tax of umkm/msme), in 2013 the government issued a regulation, namely government regulation number 46 of 2013 which was updated with the issuance of government regulation number 23 of 2018 dated 1 july 2018 concerning final income tax on income from businesses received or obtained by taxpayers with certain gross turnover limits, namely those with gross turnover of less than rp. 4.8 billion a year where the implementation of compliance with this regulation is through the self-assessment system mechanism. besides that, the transformation of tax services to digital-based services has been intensively launched by the dgt (directorate general of taxes) since 2015 to improve the quality of services and the effectiveness of supervision of taxpayer compliance through the internet in real-time. this was realized through dgt online portals such as e-registration, e-commerce, e-billing, and efiling by implementing a single-sign-on system for taxpayers in fulfilling taxpayer obligations, including for micro, small, and medium enterprises. the phenomenon found in this study is that there are still many umkms/msmes who do not understand related to tax administration and the perception of msme doers about the complexity of carrying out tax obligations, so they are reluctant to calculate, pay and also report taxes. actually, the purpose of the issuance of government regulation number 23 of 2018 is to provide convenience for micro, small and medium business actors in fulfilling their tax obligations. besides that, the lack of taxation knowledge, the minimum information received by msme doers, and the lack of understanding of technology make msme doers are not aware of the administrative facilities that have been given to fulfill their tax obligations through the self-assessment system mechanism. therefore, this phenomenon will be investigated to see if this phenomenon always appears in the tax service office and what causes it, and how to overcome it. in order not to widen the discussion, the research only discussed the implementation of the selfassessment system for the final income tax (pph) of msme doers in pratama tax service office of west bekasi from 2018 to 2020 as well as the obstacles faced and solutions to those obstacles. several theories related to this research include tax administration, and according to rahman (2010: 183) tax administration is divided into two, namely tax administration in a broad sense can be seen as a function, system, institution, and public management. while tax administration in a narrow sense is the administration and service of the obligations and rights of taxpayers, both at the tax office and at the taxpayer's office. digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 211 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 included in clerical work are recording, classifying, and filling. meanwhile, the definition of tax according to rochmat soemitro in mardiasmo (2016: 3) is the people's contribution to the state treasury based on the law (which can be forced) without receiving reciprocal services (counter achievement) that can be directly shown and which are used to pay general expenses. the definition of a self-assessment system, according to mardiasmo (2016:7) it is a collection system that authorizes taxpayers to determine the amount of tax payable by themselves, with the following characteristics: the authority to determine the amount of tax payable to taxpayers, taxpayers are active starting from calculating, depositing, and self-reporting the tax payable, the tax authorities do not interfere and only supervise. meanwhile, final income tax, according to billy ivan tansuria (harjo 2019:198) is a type of income tax with its implementation where the tax imposition has been deemed completed when it is deducted from income or paid by the relevant taxpayer to the state treasury. darussalam (2020:476) argues that final income tax in indonesia is an income tax imposed when a taxpayer receives a certain object or source of income. then due to its final nature, the tax that has been imposed will not be recalculated in the annual income tax return of the relevant taxpayer. according to siti kurnia rahayu (2017:111) self-assessment system is a tax system that gives confidence to taxpayers to fulfill and carry out their tax obligations and rights, in this case, known as: 1. register with the tax office 2. calculate taxes by taxpayers 3. paying taxes done by the taxpayer himself a) paying tax b) implementation of tax payment c) tax deduction and collection d) type of deduction and collection 4. reporting is carried out by the taxpayer the subjects in the fulfillment of final taxation according to government regulation number 23 of 2018 are (harjo, 2019:228): 1) individual taxpayer 2) corporate taxpayers, namely: a) limited liability company b) cv c) firm d) cooperative based on law number 20 of 2008 concerning micro, small and medium enterprises, the criteria for each business actor are divided into (harjo, 2019:227): no description aset criteria (rp) turnover kriteria (rp.) 1 micro business maximal 50 million maximal 300 juta 2 small business >50 million – 500 million >300 million – 2,55 billion digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 212 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 3 medium business >500 million – 10 billion >2,5 billion – 50 billion it can be seen that law number 20 of 2008 specifically explains the criteria for micro, small, and medium enterprises. meanwhile, government regulation number 23 of 2018 only states that the criteria for business people who are included in micro, small, and medium enterprises are those whose gross turnover does not exceed rp. 4.8 billion a year. in government regulation number 23 of 2018, micro-business doers have been involved in raising tax revenues, while in previous government regulations, the role of micro-business doers was not taken into account. micro business itself is a stand-alone productive business unit carried out by individuals or business entities in all economic sectors (tambunan, 2012: 2). one way to support the achievement of optimal state services is the implementation of a selfassessment system supported by a digitalization program in fulfilling tax obligations for taxpayers in the hope that this system and program can accelerate and provide good service quality and support economic growth through tax revenues, especially from final income tax (pph) receipts for msmes. there are several e-system programs currently provided by the directorate general of taxes, including e-registration, e-billing, and e-filing/e-form (rahayu, 2017) where the digitization programs are important to support taxpayers' compliance in fulfilling their tax obligations, both in terms of registering themselves as taxpayers, calculating their tax obligations, making tax deposits and reporting taxes as a form of self-assessment system. in this study, several dimensions are related to one another in achieving the goals and objectives in the self-assessment system for final income tax on micro, small and medium enterprises to increase tax revenue (rahayu, 2017), these dimensions are activities that must be carried out by taxpayers, both individual taxpayers and corporate taxpayers, those activities are: a. self-register to the nearest tax office b. calculating taxes by the taxpayer himself, c. self-paying taxes done by tax payer d. reporting is carried out by the taxpayer the purpose of this study was to identify and analyze the final income text (pph) self-assessment system for msmes at kpp pratama of west bekasi in 2018-2020 along with the obstacles and efforts made by the kpp (tax office) regarding the self-assessment system. the relevance of the theoretical dimensions in the discussion of this research can be described in the conceptual model chart below: digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 213 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 picture 1 conceptual model source: processed by the author, 2021 methode in carrying out this research, a qualitative approach is used where qualitative research is a study that intends to understand what phenomena are experienced by research subjects such as behavior, perceptions, motivations, actions, etc., holistically and by way of description in the form of words and language, in a special natural context and by utilizing various natural methods (sugiyono, 2015). while the type of research used is descriptive analysis, which is to analyze the content of the object under study based on sources relevant to the title of the study. this type of research also describes an event whose operations carry out data collection and processing activities as well as interpreting data that is given a rational meaning while still holding to the principles of logic so as to form a holistic conclusion (neuma, 2011). calculating taxes by the taxpayer self-register to the nearest tax office paying taxes is done by the taxpayer himself obstacles effort tax revenue self assessment system for final income tax on micro small and medium enterprises in pratama tax office west bekasi (theory: siti kurnia 2013:103) reporting is done by the taxpayer digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 214 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 in the next step, the writer put forward the description and the facts description, the relationship between the dimensions, and the phenomenon under study through a clear and detailed explanation. the data collection carried out in this study is triangulation, which combines data collection techniques by direct observation at the research locus, namely at tax office of kpp pratama west bekasi, m. gold tower, ug floor, 9 and 10, jalan k.h. noer alie bekasi 17148, conducted interviews with several informants related to the theme of this research and collected documentation both in the field and through literature studies, namely by reading, analyzing and analyzing various literature, both in the form of documents, books, journals, publication data from various sources. official. at the implementation stage of data analysis, this study uses 3 (three) data analysis activities, namely data reduction, data display, and conclusion drawing/verification. in this study, it will be analyzed objectively about the number of msmes who do not understand tax administration and the perception of msme doers about the complexity of carrying out tax obligations, so that they are reluctant to calculate, pay, and also report their taxes by referring to the theories that have been stated above. to be juxtaposed with the implementation of this policy and then a conclusion is drawn, preceded by explanations, arguments, both in writing and in the form of table or chart displays. this activity is in line with the data analysis theory proposed by miles & huberman (sugiyono, 2017) result and discussion the data obtained show that the number of msme taxpayers at the tax office of kpp pratama west bekasi increased in 2019 and decreased again in 2020. the increase that occurred was also not too significant, which was only 3.83% while the decline in 2020 was 40.04%. in a normal atmosphere, there is an increase in the number of registered msme taxpayers, but the number is still far from what is expected. meanwhile, during the covid-19 pandemic, it had a huge impact on msme actors, namely the very high decline in taxpayers caused by the increase in applications for non-effective taxpayers because these msme taxpayers experienced a decrease in sales turnover and many went out of business. complete data on the number of msme taxpayers registered at the west bekasi pratama tax service office from 2018 to 2020 can be seen in the table below: table. 1 number of msme taxpayers registered at tax office of kpp pratama west bekasi in 2018-2020 year number of individual taxpayers number of registered msme taxpayers number of msme taxpayers who make payments number of msme taxpayers who report 2018 14.965 2.973 2.399 1.033 2019 19.748 3.087 2.419 1.109 2020 30.785 1.851 1.312 960 digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 215 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 source: tax office (kpp) pratama west bekasi, 2021 from the table, it appears that the success of the extensification section of the west bekasi pratama tax service office in carrying out its duties was proven by the increasing number of individual employee taxpayers from year to year. however, this increase was not suitable for an increase in non-employee individual taxpayers for micro, small, and medium enterprises. this is exacerbated by the emergence of the covid-19 pandemic outbreak in 2020 which caused a decrease in msme taxpayers, both registered, paying/depositing, and reporting their taxes. the existence of the government's policy to provide tax incentives for msme doers was not able to raise the level of reporting of msme taxpayers in 2020. based on the information from the west bekasi pratama tax service office, it was found that in 2020 there were 960 msme tax reporting consisting of: the annual tax return (spt) reports and incentive realization reports can be seen that there has been a very drastic decline in the implementation of the tax obligations of msme doers in the west bekasi pratama tax office area. income tax revenue from the micro, small, and medium enterprises sector from 2018 to 2020 has also decreased from year to year. this decline, especially in 2020, was due to the impact of the covid-19 pandemic, in which many msme players experienced a sharp decline in sales turnover that many could not even survive in maintaining their business continuity. this decline in revenue is also due to the tax incentives provided by the government for msme doers so that msme doers do not have to pay taxes owed to the state. the table below shows the income tax receipts received by the west bekasi pratama tax service office from the micro, small, and medium enterprises sectors from 2018 to 2020. table. 2 income tax revenue from the msme sector at kpp pratama west bekasi in 2018-2020 source: tax office (kpp) pratama west bekasi, 2021 as it has been explained that one of the data collection techniques in this study is to conduct interviews with several informants who are considered competent and knowledgeable about the year final income tax (pph) realization msme tax realization 2018 203.529.776.007 22.805.388.941 2019 236.202.884.587 19.455.838.706 2020 173.528.501.055 11.917.319.901 digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 216 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 theme of this research. there were 7 (seven) informants who were successfully asked and these informants came from many different characteristics to maintain the objectivity of this research. an informant comes from the regulator with the characteristics of the informant as account representative for supervision and consultation i at tax office (kpp) pratama west bekasi, 5 (five) informants from taxpayers with the characteristics of informants as msme doers from different types of businesses and an informant who is considered an expert in the taxation as the guardian of the objectivity of this research who came from academics with the characteristics of an informant as a tax lecturer at the stiami institute. the following describes the analysis of the results of interviews with informants juxtaposed with the dimensions contained in the self assessment system theory expressed by siti kurnia rahayu (2017) which includes the dimensions of registering with the tax office, calculating taxes by taxpayers, paying taxes by yourself. by the taxpayer and reporting is carried out by the taxpayer and an analysis of the obstacles both faced by the tax authorities of the west bekasi pratama tax office and by the taxpayer of micro, small and medium enterprises which is closed with an analysis of the solutions implemented to deal with the obstacles that occur. 1) self-register to the tax office based on the results of research through interviews with informants, especially informants with characteristics as tax authorities at the pratama tax service office of west bekasi, taxpayer registration number (npwp) registration activities and registration as participants for msme taxpayers based on the government regulation number 23 of 2018 for all people who have met the formal requirements and materials, both individuals and business entities, currently, besides being able to be done manually by coming in person to the nearest tax service office, it can also be done more easily, namely registering through e-registration. 2) calculating tax by taxpayer interviews were conducted with informants with the category of all characteristics of the informants. based on the results of research through interviews, it is known that msme taxpayers who have been registered as msme taxpayers participating in government regulation number 23 of 2018 are required to calculate their tax payable by the government regulation no. 23 of 2018 at a rate of 0.5%, except for taxpayers who do msmes that take advantage of the minister of finance regulation number 9 of 2021, the taxpayer does not need to pay the tax due but is still obliged to report their business activities every month on the website of the directorate general of taxes. 3) paying taxes done by taxpayer himself the results of the study based on interviews related to the parties regarding tax payments made by taxpayers themselves, a common thread are drawn that tax payments made by taxpayers can be done very easily by making e-billing to get a tax payment number and can pay the tax payable to the appointed perception bank or payment can be made from anywhere digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 217 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 via e-banking or e-mobil provided by the perception banks appointed by the directorate general of taxes. 4) reporting is done by the taxpayer the results of the study based on interviews related to informants regarding the tax obligation procedures about the obligation to report taxes show that the self-assessment system method of final income tax (pph) on micro, small, and medium enterprises can be done easily by doing it through electronic reporting on the directorate general's website taxes through efilling applications or e-forms that can be done from anywhere without having taxpayers to come and queue at the local tax service office. 5) obstacles faced by taxpayer and tax office of kpp pratama west bekasi tax authorities in the self-assessment system for final income tax (pph) on micro, small, and medium enterprises at the west bekasi pratama tax service office in 2018 -2020 the results of research based on interviews with informants can be seen that some of the obstacles faced by taxpayers and tax authorities are as follows: a. in the dimension of tax registration to obtain taxpayer identification number (npwp) and registration as msme doers, there are still many taxpayers who have not registered themselves. b. in the dimension regarding the calculation of the amount of tax payable, from the tax authorities side, it is difficult to supervise the taxpayer in carrying out the calculations correctly, while from the mandatory side there is no orderly recording of each transaction activity. c. in the dimension of tax payments, there are obstacles, namely in carrying out the flow of tax payments there are still taxpayers who do not know the process of making e-billing. this is because there are still many taxpayers, especially msme taxpayers who are still unfamiliar with taxes. d. in the dimension of tax reporting, the obstacle experienced is in carrying out this tax obligation procedure, there are still business doers who do not understand tax reporting using e-form. this is due to the lack of knowledge from msme business doers about the ease of technology that makes it easy to carry out their tax obligations, especially tax reporting is an important means for taxpayers to account for all their tax activities. 6) efforts made by the tax office of kpp pratama west bekasi to overcome obstacles that occur in the self-assessment system for final income tax (pph) on micro, small, and medium enterprises in the pratama tax service office in 2018-2020. the results of the study based on the results of interviews with informants showed that some of the efforts made to overcome the obstacles mentioned above were as follows: digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 218 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 a. in the dimension of tax registration to obtain taxpayer identification number (npwp) and registration, the directorate general of taxes has carried out more massive and focused activities in conducting socialization to taxpayers, especially msme taxpayers who have not been registered. b. in the dimension of calculating the amount of tax payable, the efforts made are to provide an understanding of the calculation of the amount of tax payable from the tax authorities side can be done by monitoring taxpayers through social media and also being able to monitor benchmarks with similar activities. c. in the dimension of tax payment, the efforts made are that the tax office of kpp pratama west bekasi has provided education to taxpayers in terms of billing code generation and the existence of an account representative at tax office of kpp pratama west bekasi as a consultant for taxpayers without paying. d. in the dimension of tax reporting, the efforts made are to simplify or facilitate taxpayers in carrying out their tax reporting obligation procedures and provide regular training to taxpayers on procedures for filling out tax forms and online tax reporting techniques. conclusions and managerial implications based on the results of the research that have been described with reference based on the theory used, the researcher can conclude the self-assessment system for final income tax on micro, small, and medium enterprises at the west bekasi pratama tax service office as follows: a. the self-assessment system for final income tax on micro, small, and medium enterprises at the west bekasi pratama tax service office, if it is measured with the selfassessment system indicator is still not appropriate, this is proved by the fact that there are not many msme doers who have not registered themselves and have not correctly calculated their taxes, not all of them have made payments based on the applicable regulations and there are still many msme doers who have not reported their taxation. b. the obstacles experienced by the tax office of kpp pratama west bekasi in the selfassessment system for final income tax (pph) on micro, small and medium enterprises at the pratama tax service office west bekasi, namely for msme entrepreneurs who are still unfamiliar with taxes and do not understand it, the tax authorities find it difficult to supervise to taxpayers for their transactions/activities, as well as the lack of regular socialization and counseling to taxpayers. c. efforts made by the tax office of kpp pratama west bekasi to overcome the obstacles that occur in the self-assessment system for final income tax (pph) on micro, small and medium enterprises in the pratama tax service office west bekasi, namely by providing education to taxpayers related to technology and taxes. conduct regular visits and supervision to taxpayers to monitor taxpayer activities/transactions, besides that to conduct periodic socialization and counseling or training to taxpayers, especially msme taxpayers. referensi digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 219 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 buku anggito, albi dan johan setiawan. 2018. metodologi penelitian kualitatif. sukabumi: cv jejak. anjarwati, ratna. 2014. pph final 1% untuk umkm. yogyakarta : pustaka baru press b. ilyas, wirawan dan burton, richard 2011. hukum pajak. jakarta: salemba empat edisi lima. darussalam, et. all. 2020. konsep dan aplikasi pajak penghasilan. jakarta : pt dimensi internasional tax. djamal, m. 2015. paradigma penelitian kualitatif. yogyakarta: pustaka pelajar. gibson, james. l. 2013. organisasi, perilaku, struktur dan proses. edisi ke-5. jakarta: penerbit erlangga. harjo, dwikora. 2019. perpajakan indonesia. jakarta : mitra wacana media. mardiasmo. 2016. perpajakan edisi terbaru 2016. yogyakarta: c. v andi offset. mahmudi. 2015. manajemen kinerja sektor publik. yogyakarta: upp amp ykpn. noor, juliansyah. 2014. metodologi penelitian. jakarta : kencana. pandiangan, liberty. 2014. administrasi perpajakan. jakarta: pt elex media komputindo. pasolong, harbani. 2010. teori administrasi publik. bandung: alfabeta. rahayu, siti kurnia. 2013. perpajakan indonesia : konsep & aspek formal. . yogyakarta: graha ilmu. rahman, abdul. 2010. panduan pelaksanaan administrasi pajak untuk karyawan, pelaku bisnis dan perusahaan. bandung: nuansa. resmi, siti. 2014. perpajakan teori dan kasus edisi 4. jakarta: salemba empat. rosdiana, haula dan edi slamet irinto. 2012. pengantar ilmu pajak: kebijakan dan implementasi di indonesia. jakarta: pt. rajagrafindo persada. sugiyono. 2017. metode penelitian kualitatif, kuantitatif dan r&d. bandung: alfabeta. suherman.2011. desain pembelajaran kewirausahaan. bandung:alfabeta sujarweni, v. wiratna. 2014. metode penelitian: lengkap, praktis, dan mudah dipahami. yogyakarta:: pustaka baru press. suryadi, didih. 2011. promosi efektif "menggugah minat & loyalitas pelanggan". jakarta: pt. suka buku. syafiie, inu kencana. 2010. ilmu administrasi publik. jakarta: rineka cipta sugi. tambunan, tulus t.h. 2012. usaha mikro kecil dan menengah di indonesia: isu-isu penting, jakarta: lp3es. waluyo. 2011. perpajakan indonesia. buku 1. edisi 10. jakarta: salemba empat. winarsih, ratminto dan atik septi. 2013. manajemen pelayanan. yogyakarta: pelajar pustaka. widyaningsih, aristanti. 2013. hukum pajak dan perpajakan. bandung: alfabeta. digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 220 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 jurnal arianty, fitri. 2017. tinjauan atas asas keadilan dan kemudahan administrasi pajak dalam pengenaan pajak final 1% terhadap wajib pajak umkm. jurnal vokasi indonesia, januari-juni 2017, vol 5. no. 1. diamastuti, erlina. 2016. ke (tidak) patuhan wajib pajak: potret self assessment system. jurnal ekonomi dan keuangan, universitas internasional semen indonesia 2016. vol. 20, no. 3, hal. 280-304 hakim, fadli, grace b. nangoi . 2015. analisis penerapan pp. no.46 tahun 2013 tentang pajak penghasilan umkm terhadap tingkat pertumbuhan wajib pajak dan penerimaan pph pasal 4 ayat (2) pada kpp pratama manado. jurnal fakultas ekonomi dan bisnis, jurusan akuntansi universitas sam ratulangi manado 2015. vol. 3, no. 1, hal 787-795 harun, irmasari, nur diana, m. cholid mawardipada. 2019. analisis penerapan peraturan pemerintah no. 23 tahun 2018 bagi umkm di kota malang. e-jra fakultas ekonomi dan bisnis universitas islam malang 2019. vol.08, no. 10, hal. 33-44 hendri. 2018. implementasi sosialisasi peraturan pemerintah no. 23 tahun 2018 bagi pelaku usaha mikro kecil menengah (umkm). jurnal vokasi indonesia jul-des 2018 vol. 6 no. 2. kintu, ismail, faisal buyinza, yusuf kiwala. 2019. tax administration and entrepreneurial performance: a study of smes in uganda. international business research and education, vol.12 no. 12, pages 1-39. issn 1913-9004, e-issn1913-9012 published by the canadian for science and education putri, trianita , david p. e. saerang, dan novi s. budiarso 2019. analisis perilaku wajib pajak umkm terhadap pelaksanaan pemungutan pajak dengan menggunakan self assessment system di kota tomohon. jurnal riset akuntansi going concern, fakultas ekonomi dan bisnis universitas sam ratulangi 2019. vol. 14, no. 1, hal. 130-136 twesige,daniel dan faustin gasheja. 2019. effect of tax incentives on the growth of small and medium-sized enterprises (smes) in rwanda: a case study of smes in nyarugenge district. journal of accounting and taxation vol. 11 (5), pp. 89-98, may 2019. issn : 2141-6664 wadesango, newman, mutema, a, mhaka, c, wadesango, v o. 2018. tax compliance of small and medium enterprises through the self-assessment system: issues and challenges. jurnal academy of accounting and financial, university of limpopo, midlands state university 2018. vol. 22, no. 3, hal. 1-15 yusuf, muhammad. 2016. analisis pengenaan pajak penghasilan final terhadap wajib pajak tertentu (studi kasus pada usaha mikro kecil dan menengah di kecamatan pancoran jakarta selatan). jurnal lentera akuntansi 2016. vol.2 no.1, issn 2339-2991 undang-undang dan peraturan undang-undang nomor 20 tahun 2008 tentang usaha mikro, kecil, dan menengah https://search.proquest.com/indexinglinkhandler/sng/au/wadesango,+newman/$n;jsessionid=47721efd00374d2d3df45af585086a26.i-06e6c18467f760a83 https://search.proquest.com/indexinglinkhandler/sng/au/mutema,+a/$n;jsessionid=47721efd00374d2d3df45af585086a26.i-06e6c18467f760a83 https://search.proquest.com/indexinglinkhandler/sng/au/mhaka,+c/$n;jsessionid=47721efd00374d2d3df45af585086a26.i-06e6c18467f760a83 https://search.proquest.com/indexinglinkhandler/sng/au/wadesango,+v+o/$n;jsessionid=47721efd00374d2d3df45af585086a26.i-06e6c18467f760a83 digital transformation of self assessment system on final income tax in small micro business and medium at pratama tax office of west bekasi dwikora harjo ,novianita rulandari, aprilia alfani, raveedhan syachlin 221 | ilomata international journal of tax & accounting volume 2 number 3, july 2021 peraturan pemerintah nomor 23 tahun 2018 tentang pajak penghasilan atas penghasilan dari usaha yang diterima atau diperoleh wajib pajak yang memiliki peredaran bruto tertentu. peraturan presiden nomor 72 tahun 2020 tentang perubahan atas peraturan presiden nomor 54 tahun 2020 tentang perubahan postur dan rincian anggaran pendapatan dan belanja negara tahun anggaran 2020. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 286-294 286 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics ahmadi aidi1, redjeki agoestyowati2, imam susanto3, supriyono4, dinda aulia rahman5 12345institut ilmu sosial dan manajemen stiami, jakarta, indonesia correspondent: gadisrasela@gmail.com1, redjeki.agoestyowati@gmail.com2, imamsusanto07@gmail.com3, supriyono.stiami@gmail.com4, dinda.auliarahman@gmail.com5 received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. (2021). challenges of policy reform on government accounting in indonesia : response to changing global dynamics. ilomata international journal of tax & accounting 2(4),286-294. https://doi.org/10.52728/ijtc.v2i4.362 abstract: the discussion in this article is about changes in government accounting, a significant change from government accounting in indonesia is from cash-based accounting to cash-based accounting towards accruals (cash toward accruals), to full accruals. the writing method used is a literature study with a qualitative approach . the research method used is a literature study with a qualitative approach. sources of data were obtained through searching articles related to accounting policies carried out by the government. the purpose of this study is to identify and analyze the challenges in reforming government accounting policies in indonesia. the finding of the study that state that the government needs to prepare financial statements in accordance with law no. 17 of 2003 which refers to government accounting standards (sap/standar akuntansi pemerintahan). as a derivative of this regulation, the government has issued government regulation number 24 of 2005 which was updated with government regulation number 71 of 2010 concerning government accounting standards (sap). practical implications there are , the basis of government accounting records changed from a cash basis to a cash basis to an accrual basis and to a full accrual basis. keywords: government accounting, changing global dynamics this is an open access article under the cc-by 4.0 license. introduction government accounting is the process of recording and reporting all financial transactions carried out by the government. both in terms of income and expenditure. each country uses a different government accounting system. negara-negara di afrika cenderung menggunakan sistem akuntansi eropa seperti inggris atau perancis tergantung koloninya. (jayasinghe et al., 2021; lassou et al., 2019) accounting reform is a change in accounting rules widely carried out by a government or country. reforms are needed when current accounting standards and practices are deemed no longer adequate in recording and reporting state financial activities, and are considered to cause failure in https://www.ilomata.org/index.php/ijtc mailto:gadisrasela@gmail.com1 mailto:redjeki.agoestyowati@gmail.com2 mailto:imamsusanto07@gmail.com3 mailto:supriyono.stiami@gmail.com4 mailto:dinda.auliarahman@gmail.com https://doi.org/10.52728/ijtc.v2i4.362 challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 287 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc maintaining the stability of the government's financial condition. (fuentes & borreguero, 2018; shinkle et al., 2021) problems that always arise in the process of government accounting reform usually involve the concept of reporting transactions, such as the cost of asset acquisition and the measurement of value currently in effect. accounting reform has two approaches, namely traditional, which is quite reliable, but less relevant in dealing with state financial problems. while the modern approach emphasizes the relevance factor to current conditions but is less reliable because it tends to be subjective. the international accounting standards board seeks to formulate the implementation of government accounting reforms so as to strike a balance between relevance and reliability. (padovani & iacuzzi, 2021; shinkle et al., 2021) indonesia's monetary emergency in 1997, trailed by the transformation period in 1998, the execution of provincial independence in 1999 was refered to as the trigger for the public authority's monetary and oversee ment's bookkeeping changes. government bookkeeping change in indonesia is brought about by outside and inner impacts. outer components are brought about by the solid impact of globalization. government bookkeeping change in the worldwide world happens in numerous nations. at first the public authority bookkeeping books clung to the money bookkeeping premise with single section records. government bookkeeping change to current bookkeeping changes from cash premise become gathering premise by recording twofold passage. here are a few nations that utilization gathering bookkeeping. (blöndal et al., 2009). acrrual accounting for individual agencies & departements consolidated whole of governmental accrual accounting accrual budgeting australia since 1995 since 1997 from fiscal year 1999-2000 canada fr fiscal year 2001-2002 fr fiscal year 2001-2002 no finland since 1998 since 1998 no germany permitted since 1998 no no iceland since 1992 since 1992 since 1998 ireland pilot launched in 1995 no no netherlands pilot launched in 1994 no no new zealand since fiscal year 1991-1992 since fiscal year 1991-1992 since fiscal year 1994-1995 sweden since 1994 since 1994 no united kingdom launched in 1993;all by fiscal year 1999 2000 planned fr fiscal year 2001-2002 united states since fiscal year 1997-1998 since fiscal year 1997-1998 no source: (moretti, 2021) gaining from the new zealand government, the accomplishment of the public authority's bookkeeping change brought about an improvement in the nation's economy, in this manner expanding the government assistance and personal satisfaction of its kin. the idea of the changes in a portion of these nations expresses that the objective of government bookkeeping change is the acknowledgment of responsibility. interest, straightforwardness and responsibility will improve whenever upheld by a bookkeeping framework that produces ideal and non-misdirecting data. then again, an obsolete, uninformative, off base and deluding bookkeeping framework will obliterate the establishments of public support, straightforwardness and responsibility. (barrett, 2004; cairns et al., 2011) at present the state of public area organization in indonesia actually should be improved, this is reflected in the bad quality of public administrations and widespread acts of defilement, agreement and nepotism identified with public administrations. the marvel that has turned into the principle focal point of public area associations in indonesia today is the fortifying of requests for responsibility and straightforwardness on open foundations both at the middle and in the districts. https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 288 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc with regards to government associations, public responsibility can be said as a type of giving data on government monetary exercises and execution to parties with an interest in the data. (lewis et al., 2020) with respect to requests for responsibility and straightforwardness of the public area, article 30 of law no. 17/2003 demonstrates that the public authority, particularly neighborhood governments, is needed to submit monetary reports as a type of responsibility for the execution of the provincial income and consumption spending plan (apbd) to the territorial individuals' delegate committee (dprd). as per the guideline of home undertaking pastor (permendagri) no.13/2006, the fiscal summaries alluded to essentially incorporate spending acknowledgment reports, monetary records, income proclamations and notes to fiscal reports. (darise, 2008) the indonesian government bookkeeping change has opened up promising circumstances for the production of good government administration which has the test of decreasing the degree of debasement, it very well may be framed by making a more adjusted government framework between the chief, legal executive, and assembly. in the public authority bookkeeping framework there are three parts, specifically transparency, cooperation and responsibility. receptiveness or straightforwardness is based on the opportunity to acquire data, interest or cooperation is worked from the local area partaking in dynamic either through the place of agents of the republic of indonesia (dpr ri), and responsibility is responsibility to the local area for any exercises completed by the public authority. in light of the above foundation, a huge issue in the test of government bookkeeping strategy change is the way the utilization of government bookkeeping frameworks and strategies can make great administration. method the composing technique utilized is a writing study with a subjective methodology. the writing concentrate on strategy with a subjective methodology is an approach to take care of issues by following the wellsprings of works that have been recently composed. as such, the term writing study is additionally intimately acquainted with the term writing study. the investigated sources that are normal and appropriate for use are books by scholastic writers, authorize logical diaries, and understudy research brings about different structures like papers, theories, papers, practicum reports, etc. the meaning of subjective exploration can be found in numerous sorts of writing. subjective strategies put more accentuation on noticing wonders and inspecting the substance of the importance of these marvels. the wellspring of the information was gotten through looking through articles identified with bookkeeping approaches did by the indonesian government. the justification for picking the writing audit strategy is to get a hypothetical premise that can uphold taking care of the issue being composed. the hypothesis acquired is the initial step so the writer can more readily comprehend the issue that is being composed accurately as per the logical structure of reasoning. gasb (legislative bookkeeping standard board) articulation 20, as corrected by proclamation 34, permits an administration the alternative of applying fasb (monetary bookkeeping standard board) explanations and understandings. the information investigation procedure was done by locating from different writing sources. triangulation is a work to check the reality of information or data acquired by specialists according to different alternate points of view by diminishing however much as could be expected the predisposition that happens during information assortment and examination. triangulation is basically a multi-strategy approach that the creator utilizes when gathering and breaking down information. the fundamental thought is that the wonder under study can be surely known so an https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 289 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc undeniable degree of truth can be acquired when drawn nearer according to different perspectives. capturing a solitary wonder according to various perspectives will permit a solid level of truth to be gotten.(mardiasmo, 2018) result and discussion different legitimate items have arisen as a type of government bookkeeping change, one of which is pp 24 of 2005 concerning government bookkeeping norms. the accomplishment of government bookkeeping changes to create responsible government monetary revealing will give many advantages, particularly according to acknowledging public administrations and destroying defilement. the year 2006 is a force for the indonesian individuals on the grounds that the public authority's fiscal reports will be distributed dependent on government bookkeeping norms. pp 24 expresses that the monetary reports of the focal and territorial governments should be arranged dependent on government bookkeeping norms. (herlina, 2013) government accounting rules (sap) are accounting norms applied in arranging and presenting government spending outlines. thusly, sap is an essential that has legal force with a ultimate objective to chip away at the idea of government money related reports in indonesia, with chipping away at the idea of government financial reports will additionally foster extraordinary organization so it influences achieving viable improvement goals. extraordinary organization is described as a sort of good organization via completing trustworthy headway the board and as per capable fame based principles, avoiding misallocation of adventure saves, thwarting corruption, and executing spending discipline. the three essential norms stowed away the execution of good organization are participation, straightforwardness, and obligation. to run well, extraordinary organization is maintained by three essential segments, explicitly the public power, the private region, and the neighborhood. these three sections have an astoundingly strong relationship with one another. the public power region has an influence as a regulator that oversees so current resources can be apportioned decently in a perfect world. the private region expects a section in exploring and offering added advantage to resources so they can be consumed/had a great time by the neighborhood. of course, society as the essential client of public items expects that current resources can be gained successfully and at moderate expenses. accounting is immovably related to the three crucial norms of good organization. accounting is essentially the course of productively recording money related trades that lead to offering an explanation to be utilized by accomplice's customers for various necessities. venture, straightforwardness, and obligation will work on the off chance that it is maintained by an accounting system that produces information that is great and not misdirecting. of course, the accounting system obsolete, uninformative, wrong, and beguiling, will wreck the foundations of neighborhood, straightforwardness, and obligation government accounting standards (sap) are a completely essential that ought to be used as an associate so the idea of financial reports in indonesia can be improved. also, in the arranging of monetary rundowns, an adequate accounting system is moreover required. a palatable accounting system will result in coordinated, precise, and mindful financial activities with the objective that the ensuing quality money related reports will be influenced. a quality government financial report is an organization money related report that can meet the best quality, to be explicit appropriate, reliable, essentially indistinguishable, and legitimate. https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 290 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the objectives of the public position's public money related organization changes are to (i) administer and manage utilizations through a medium articulation use design (mtef); (ii) invigorate analysis instruments for spending definition through redesigned monetary arrangement and execution noticing; (iii) further foster the display the chiefs environment by smoothing out arranging rules; (iv) present stimuli for better execution the board; and (v) increase the leaders versatility to ensure execution results. the progressions rely upon a benchmarking examination of the philippine utilize the board system inverse its connecting countries (australia, korea, malaysia, new zealand, singapore, and thailand) to the extent the three huge use results: staying aware of financial discipline, working with essential prioritization at the oversight level, and further developing the execution usefulness of line offices. the change program contains a couple of activities as follows: • sectoral spending rooftops. six-year sectoral spending rooftops were introduced for the monetary 2000 spending plan. these sectoral monetary plans were made with the multi-region orchestrating warning gatherings of the public financial and improvement authority (neda). these sheets of trustees join delegates from congress, neighborhood government, the academic local area, the private region and nongovernment affiliations. the cycle included diverse government executing associations in a participative and proactive manner. three-year spending baselines. the 6-year sectoral rooftops filled in as the justification for allotting resources for doing associations using a spending design approach. • building up evaluation instruments. in any case, secretly upheld exercises will be presented to a comparable underwriting measure that applies to those financed from new sources. second, the show assessment will be mainstreamed. a lot of execution pointers ought to go with each new procedure or adventures that are submitted to neda (public monetary and advancement authority, or dbm. (branch of financial plan and the executives). an authoritative objective is to develop an evaluation culture. • further creating government accounting and inside control. taking on private region accounting and declaring practices, for instance, full assembling accounting will overhaul the support of accounting information. it will similarly engage legitimate respects be absolutely cost. • disengaging accounting and assessing limits. coa ( graph of record), the philippines' superior audit association, accepts accounting, inside control and inspecting limits in government. these groupings are confused. government accounting standards (sap) are accounting principles applied in preparing and presenting government spending outlines. thusly, sap is a need that has legal force with a ultimate objective to chip away at the idea of government financial reports in indonesia, with chipping away at the idea of government money related reports will additionally foster extraordinary organization so it influences achieving affordable improvement targets. extraordinary organization is described as a kind of good organization via doing trustworthy progression the board and as per capable fame based guidelines, avoiding misallocation of hypothesis saves, hindering pollution, and executing spending discipline the three basic norms fundamental the execution of good organization are collaboration, straightforwardness, and obligation. to run well, extraordinary organization is maintained by three standard sections, specifically the public position, the private region, and the neighborhood. these three sections have an amazingly great correspondence with one another. the public power region has an impact as a regulator that oversees so current resources can be allotted decently preferably. the private region accepts a section in examining and offering added advantage to resources so they can be eaten up/had a great time by the neighborhood. on the other hand, society as the rule https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 291 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc client of public items expects that current resources can be procured adequately and at sensible expenses. accounting is immovably related to the three principal guidelines of good organization. accounting is essentially the course of productively recording financial trades that lead to offering an explanation to be utilized by accomplice's customers for various necessities. interest, straightforwardness, and obligation will work on in the event that it is maintained by an accounting structure that produces information that is helpful and not misleading. of course, the accounting structure old, uninformative, wrong, and misdirecting, will demolish the foundations of neighborhood, straightforwardness, and obligation government accounting standards (sap) are an out and out essential that ought to be used as an assistant so the idea of financial reports in indonesia can be improved. likewise, in the arranging of spending rundowns, an adequate accounting structure is also required. an adequate accounting system will result in coordinated, accurate, and capable financial activities with the objective that the ensuing quality money related reports will be influenced. a quality government money related report is an organization financial report that can meet the best quality, explicitly significant, strong, comparable, and reasonable. the public position accounting system limits as a progressive subsystem that works with control by giving a record of government execution. the degree of the public power accounting structure fuses accounting system draws near, accounting frameworks, hr, and information development. a critical change in the state finance region generally speaking and in the public power accounting system region, explicitly, is that three heaps of order have been organized, specifically law no. 17 of 2004 concerning state cash, law no. 1 of 2004 concerning the state vault, and law no. 15 of 2004 concerning survey of obligation and the leaders of state records. regardless the three laws, there is furthermore law no. 22 of 1999 concerning common government which was revised into law no. 32 of 2004, and law no. 25 concerning the money related balance of the central and neighborhood governments, which was changed into law no. 33 of 2004. close by changes in the field of state reserves, changes have been made in the field of government accounting structures. informal law number 24 of 2005 coordinates government accounting rules reliant upon a cash premise and considering a cash to social affair premise. informal law number 71 of 2010 coordinates government accounting standards on a gathering premise. meanwhile, the rule of home endeavor minister (permendagri) number 64 of 2013 concerning the use of social event based sap to local governments. the ideal change in the better approach to manage state finance, particularly government accounting as a part of reiterating the public power and new open organization, is a shift from cash-based accounting to social event based accounting to get supportive money related information. amassing based accounting basically adds to chipping away at the idea of dynamic for the capability and feasibility of public spending through precise and clear financial information, similarly as growing the assignment of resources by exhorting the degree in regards to the costs achieved from a game plan of a program. a couple of huge components that are driving the speedy advancement of government accounting improvement in indonesia include: (1), the approval of three heaps of laws supervising state reserves. article 32 (1) of law no. 17 of 2003 concerning state cash orders that the obligation report for the execution of the state spending plan (apbn)/regional government spending plan (apbd) is as financial reports that are prepared and presented according to government accounting standards. (2) the request for a law on common government and a law on the https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 292 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc amicability among central and regional government accounts. article 184 entry (1) of law no. 32 of 2004 concerning regional government communicates that spending reports are prepared and presented according to government accounting standards determined by informal laws government is a fundamental compiler and customer at the same time roused by the presence of a trustworthy government accounting. with the presentation of three state financial packages and related laws with adjacent governments to invigorate government associations, both central and regions to genuinely prepare resources for the development and arranging of government financial reports. the social class through ngos and people's representatives in the spot of specialists (dpr/dewan perwakilan rakyat), regional representative board (dpd/dewan perwakilan daerah), and common spot of specialists (dprd/dewan perwakilan rakyat daerah) additionally center around the demonstration of good organization in government in indonesia. the foundation of laws concerning three money related groups state and neighborhood government is an impression of the powerful responsibility of people's agents in the dpr. additionally, obligation regarding execution the state monetary arrangement (apbn)/commonplace government monetary arrangement (apbd) requires underwriting from the spot of specialists (dpr), and neighborhood spot of representatives (dprd) dpr/dprd. thought from the private region may not be astoundingly enormous in light of the fact that the accounting government doesn't directly influence the activities of region private. nevertheless, the usage of information advancement and systems improvement accounting based information will enable some business performers in the private region to take advantage of the benefits. law no. 17 of 2003 and law no. 15 of 2004 states that the obligation regarding the execution of the state monetary arrangement (apbn/anggaran pendapatan belanja nasional)/regional government spending plan (apbd) is investigated by the (transcendent survey office) bpk.. to give an appraisal, (transcendent survey association) bpk requires an accounting standard overall recognized organization. government internal regulatory mechanical get together (apip) which fuses typical inside audit office bawasda, inspector general, and proof of motorized vehicle ownership (bpkp/badan pengawasan keuangan dan pembangunan) is the public power's inside evaluator whose work is to help pioneers in understanding a good inward control system to help execution improvement of government associations while thwarting contamination and corruption practices. accounting government is immovably related and influences within control structure so inside auditors certainly should have the limit in the field of government accounting so they can expect a section in engaging the execution of government accounting that is being made. to help the compelling utilization of government accounting, it is a significant approach (1), staying aware of the power of progress with the declaration of three heaps of laws in the field of state finance and in the field of the neighborhood government, (2), working with the usage of government accounting, (3), engaging the commitment of schools and guidance and planning establishments ought to be encouraged to set up an instructive arrangement and outline according to enhancements in the field of government accounting, (4), cultivate full assembling based accounting as shown by the request for law no. 17 of 2003. https://www.ilomata.org/index.php/ijtc challenges of policy reform on government accounting in indonesia : response to changing global dynamics aidi, a., agoestyowati, r., susanto., i, supriyono., rahman, d.a. 293 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of the discussion above, the conclusions obtained are as follows: 1. the government has prepared financial statements in accordance with law number 17 of 2003 which refers to government accounting standards (sap). a significant change from government accounting in indonesia is from cash-based accounting to cash-based accounting towards accruals (cash toward accruals). 2. public sector accounting reform, which in this case is meant is government accounting reform in indonesia caused by external and internal influences. external factors are caused by the strong influence of globalization. 3. public sector accounting reforms in indonesia are changing single entry to double entry bookkeeping and changing the basis of cash-based accounting to accrual-based. 4. these changes do not contribute significantly to the transparency, efficiency, and effectiveness of the organization. 5. one of the principal features of accounting in the 21st century is harmonisation and standarisation. 6. accounting reform has to do with regional autonomy. this regional autonomy is one part of the changing global dynamics. reference barrett, p. 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(2021). government policy changes and organizational goal setting: extensions to the behavioral theory of the firm. journal of business research, 129, 406–417. https://doi.org/https://doi.org/10.1016/j.jbusres.2021.02.056 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 183-190 183| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc auditor skill, work experience and professional skepticism on performance of auditors sunarmin1, ahmad junaidi2 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: sunarmin3@gmail.com1 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: sunarmin., junaidi, a. (2022). auditor skill, work experience and professional skepticism on performance of auditors. ilomata international journal of tax and accounting, 3(2), 183-190. https://doi.org/10.52728/ijtc.v3i2.453 abstract: auditor is an accounting profession that is expected to be able to produce audit report products that can be accepted by both internal and external companies. the audit report must be existence and accuracy, completeness, rights and obligations, valuation or allocation, presentation and disclosure. to achieve this, several measuring tools are needed on how to determine the level of good auditor performance. the performance of professional auditors and having performance and broad insight will produce report products that can be accounted for and have reliable financial report functions and information. the research method used in this research is to use literature review, a systematic, explicit and reproducible method to identify, evaluate and synthesize research works and ideas that have been produced by researchers and practitioners. the results of this study can be concluded that good governance, audit structure, role conflict, role ambiguity, understanding of good governance, task complexity, have no effect on auditor performance. while organizational commitment, leadership style, professional training, competence, locus of control, and auditor integrity affect the performance of the auditor. for professional skepticism and audit knowledge, it turns out to have a positive and significant influence on the indications of regional loss findings. keywords: skill, work experience, professional skepticism, auditor performance. this is an open access article under the cc-by 4.0 license. introduction accountants are one of the professional fields that require special skills. the accounting profession has been around since the 15th century, although experts are still debating when this profession actually started (gammie & whiting, 2013; walker, 2017, 2021). in 15th century england, nonowners and non-managers who are now called auditors were asked to check whether there was fraud in the books or in the financial statements submitted by the owner's wealth manager (annisette, 2017; o’regan & killian, 2021; van der steen, 2022). the accounting profession is all fields of work that use expertise in the field of accounting, including the field of work of public accountants, internal accountants working in industrial, financial or trade companies, accountants https://www.ilomata.org/index.php/ijtc mailto:sunarmin3@gmail.com https://doi.org/10.52728/ijtc.v3i2.453 auditor skill, work experience and professional skepticism on performance of auditors sunarmin and junaidi 184 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc working in the government, and accountants as educators (antonelli et al., 2022; karlsson & noela, 2022; xue & zan, 2022). one of the keys to building the unified theory of acceptance and use of technology (utaut) is facilitating conditions (ronaghi & forouharfar, 2020; venkatesh et al., 2012). these factors influence behavioral intentions to use technology and/or use technology. the application of information technology, which is represented by three independent variables, skills and knowledge, system use and perceived usefulness, has a positive and significant effect on auditor performance (al aufa et al., 2020; dwivedi et al., 2020). the findings of this study recommend increasing the use of information technology so that the effectiveness and efficiency of the audit process can be increased (ayaz & yanartaş, 2020; rengganis & isgiyarta, 2015). accountants who have a career and work in offices or in private companies are responsible for processing transactions professionally based on the current statement of financial accounting standards (huang & yan, 2020). accountants who work in the government or in the government inspectorate will have the task of controlling and maintaining state assets (chychyla et al., 2019). accountants who work in external audits such as public accountants have the task of being a means of control over the company's financial transactions, the results of which can provide independent information on the company's performance for a certain financial year according to their assignment (pucci & skærbæk, 2020). accountants who work in public accounting firms must be independent in accordance with the auditing standards set by iapi (khumawala et al., 2020). the product of the internal accountant is a financial report that will be used as a measurement of the company's performance and used as a management benchmark for the achievements and success of the management in managing the company (flesher et al., 2018). the requirements that must be met by a public accountant as contained in article 6 of law no. 5 of 2011 concerning public accountants are: have a certificate of passing a valid public accounting professional exam, have a certificate of passing a legal public accounting professional exam, have experience in providing services as intended in article 3, domiciled in the territory of the unitary state of the republic of indonesia, has a taxpayer identification number, has never been subject to administrative sanctions in the form of revocation of a public accountant license, has never been sentenced to a permanent legal force for committing a criminal offense punishable by imprisonment 5 ( five) years or more, become a member of the association of professional public accountants as determined by the minister; and not in custody. an independent auditor is an auditor who is responsible for meeting auditing standards set by the indonesian institute of certified public accountants (agoes, 2017). there are differences in behavior and motivation between male auditors and female auditors, while the professional commitment dimension shows no difference (anggrainy et al., 2018). however, overall, the results of data processing show that there is a difference in performance between male auditors and female auditors. these differences prove that a person's performance will still be different, especially when compared to men and women, which are basically different in many ways because they are influenced by gender factors. in assessing performance in the field, some companies look at the ability side more than looking at gender differences. one of the considerations for employers is the experience and insight of a person in carrying out the work and the job https://www.ilomata.org/index.php/ijtc auditor skill, work experience and professional skepticism on performance of auditors sunarmin and junaidi 185 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc responsibilities that will later become the responsibility for the job. research related to the influence of competence and compensation on employee performance by adopting a contingency approach (brownell, 1982; jalaluddin, 2010; sutrisno, 2010). experienced auditors are auditors who have a better understanding, they are also better able to provide reasonable explanations for errors in financial statements and can classify errors based on audit objectives and the structure of the underlying accounting system (agoes, 2017; asif et al., 2022; yu et al., 2022). in carrying out audit assignments in the field, an auditor does not only follow audit procedures that are summarized in the audit program that has been created and becomes a guideline by the implementers in the field by the personnel of the public accounting firm. but it must also be accompanied by an attitude of professional skepticism (rodgers et al., 2017). professional skepticism in the professional standards of public accountants defines professional skepticism as an auditor's attitude that includes a questioning mind and critical evaluation of audit evidence (kang et al., 2015). auditors are said to be skeptical if in their attitude they will not take for granted explanations and oral information from clients. but with a critical nature will ask questions to obtain reasons, evidence and confirmation of the object in question (zarefar et al., 2016). without applying professional skepticism, an auditor will only find misstatements caused by errors and it is difficult to find misstatements caused by fraud, because fraud is usually hidden by the perpetrators. professional skepticism is an employee attitude that includes a mind that always questions and evaluates critically what its performance is (cohen et al., 2017). as previously explained, professional skepticism carefully and thoroughly requires performance to carry out professional skepticism for the better (noviyanti, 2008). evaluators do not affect the outcome effect in evaluating auditor performance. the outcome effect is the result of the professional auditor on the audited report product produced (sari et al., 2018). this product will be used as a handle for accurate information on the company that is the subject of his work. auditor performance is a public accountant who carries out objective examination assignments on the financial statements of a company or other organization with the aim of determining whether the financial statements present fairly in accordance with generally accepted accounting principles, in all material respects, the financial position and company results. internal auditor performance measurement uses the balanced scorecard which suggests aspects of internal audit performance measurement into perspective: innovation and learning to answer the question of whether internal audit is able to continuously improve and create value, internal audit process to answer questions in which areas of internal audit has expertise, management/ auditee adaptation of customer perspective is to answer the question of how the customer views internal audit, the board/audit committee adapts from a financial perspective to answer the question of how internal audit views stakeholders. method in this study, the authors use a literature review as a framework designed to classify sources of general data and information studied in the study. literature review is a systematic, explicit and reproducible method for identifying, evaluating and synthesizing research works and ideas that have been produced by researchers and practitioners. some sources of information used in this research as literature study materials include the following: research journal, in this journal several selected research results are published so that they can be used as a reference for the development of new science; books, books are a very important source of information because some fields of https://www.ilomata.org/index.php/ijtc auditor skill, work experience and professional skepticism on performance of auditors sunarmin and junaidi 186 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc science that are closely related to research are manifested in the form of books written by an author who is competent in his field of science. newspapers and magazines, this print media is a good source of literature and is easily available everywhere; internet, technological advances have a very significant impact in the field of information, researchers can directly access the internet and get the desired information from various countries very quickly. in order to collect valid and accurate data and information, to collect the main data (to obtain primary data) the researcher will conduct a literature review and supporting literature such as media information, internet and other supporting information which are studied in depth. a good literature review is one that evaluates the quality and new findings of a scientific paper. it should be understood that the so-called scientific literature can be in the form of: papers from scientific journals, papers from conferences (proceedings), thesis and dissertations, reports from trusted organizations, and textbooks. this source literature is useful as a cross-check material, if it turns out that there is data that is considered less valid. literature study is a data collection technique by using books or references as research support, and by completing or searching for data needed by researchers from journals, magazines, papers, print media and so on, which are relevant to the problems studied to get clarity of concepts in the preparation effort. theoretical basis that is useful in the discussion. internet searching is research conducted by collecting various additional references sourced from the internet in order to complete the author's references regarding the problem under study. result and discussion auditors are one of the accounting professions that focus on and work as examiners, both in external accounting firms and as internal audits. the performance of this auditor has an important and significant role in the auditie (client). parties with an interest in financial statements include investors, creditors, and stakeholders. the users of this audit report also expect that the financial statements that have been audited by the auditors produce an opinion that is free from material misstatement, so that they can be trusted to be used as a basis for decision making and are in accordance with accounting principles applicable in indonesia. therefore, an independent and objective public accounting firm is needed to assess the fairness of the financial statements presented by management. prajitno's research (2012) shows that understanding good governance, audit structure, role conflict, role ambiguity, understanding good governance, and task complexity have no significant effect on auditor performance and only organizational culture has a significant effect on auditor performance. problems in the field and the number of material transactions that require an auditor's professional opinion, so that an auditor must be ready for professional skills, insight and skepticism. the results of amandani and wirakusuma's research (2017) show that organizational commitment has a positive effect on auditor performance, which indicates that the higher the attitude of an auditor's commitment to a public accounting firm, the more it will affect its performance. leadership style has a positive effect on auditor performance which shows that the better the way to lead a leader in a public accounting firm, the more it will affect the performance of the auditor. professional training has a positive effect on auditor performance, which indicates that the more often training is given to auditors in a public accounting firm, the auditor's performance will tend to increase. competence has a positive and significant effect on auditor performance, compensation has a positive and significant effect on auditor performance. while the moderating effect of professional skepticism strengthens the effect of competence on auditor performance, the moderating effect of professional skepticism strengthens the effect of compensation on auditor performance (putra and sintaasih, 2018). the results of nurhayati's research (2018) that partially locus of control has a significant positive effect on auditor https://www.ilomata.org/index.php/ijtc auditor skill, work experience and professional skepticism on performance of auditors sunarmin and junaidi 187 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance, auditor integrity has a significant positive effect on auditor performance, leadership style has a significant positive effect on auditor performance. and locus of control, auditor integrity, leadership style can have a significant positive effect on auditor performance simultaneously. rahmat's research (2017) that professional skepticism and audit knowledge have a positive and significant effect on indications of regional loss findings. conclusion auditor performance is a benchmark for the results issued in the form of audit reports that will be used by various audiences. internal companies starting from the board of directors, managers and employees really need valid data and reports in order to determine future strategic policies and internal management rights if the company has good performance in the form of business profits. external parties such as shareholders, creditors and the government have an interest in valid, reliable and trustworthy audited report products. from the literature related to research that has an influence on auditor performance, among others, prajitno (2012) that good governance, audit structure, role conflict, role ambiguity, understanding of good governance, and task complexity have no effect on auditor performance. it is different from research by amandani and wirakusuma (2017) that organizational commitment, leadership style, professional training, competence have a positive and significant effect on auditor performance. putra and sintaasih (2018) research, highlighting the moderating effect of professional skepticism strengthens the effect of compensation on auditor performance. while nurhayati (2018) partially locus of control, auditor integrity, leadership style has a significant positive effect on auditor performance. rahmat (2017) in his research, that professional skepticism and audit knowledge have a positive and significant effect on indications of regional loss findings. this study focuses on literature research, where the source of this research is the results of analysis and research from sources of books, journals and literatures that are considered valid and have been published in official journals. this research still needs several more valid research sources or extensions of variables that have not been studied by previous researchers. or some of the journals and books on which the literature is based are 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(2016). the influence of ethics, experience and competency toward the quality of auditing with professional auditor scepticism as a moderating variable. procedia social and behavioral sciences, 219, 828–832. https://doi.org/10.1016/j.sbspro.2016.05.074 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 84-96 https://www.ilomata.org/index.php/ijtc 84 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati1, afriapollo syafarudin2 12mercu buana universitas jakarta-indonesia correspondent: rumiyati@gmail.com submitted : january 8, 2021 revised : january 18, 2021 published : january 31, 2021 abstract building loyalty is no longer an option in the banking world. in recent years a trend has emerged, namely the tendency for customers to have more than one savings account at different banks. one of the ways to do this is by marketing service quality and marketing mix to customer satisfaction. the bank's compliance with government policies to prevent the spread of covid19 is the work from home policy. banking measures to optimize employee efforts to maintain the health of their closest people at home while providing maximum protection from the potential for contracting covid-19 while interacting with the community while working or traveling to and from the office, namely adjustments to work systems. the role of marketing in banking is to build strong relationships sustainably by providing excellent service for the development of service quality such as servqual, with tangible, responsiveness, reliability, assurance, and empathy characteristics. new service quality that can be applied in the banking world in particular. the most important thing is banking service quality (bsq.) like conventional bank service products, the bank's low rating. testing using the pls (partial least square) analysis method. the results showed that customer satisfaction has a positive and significant effect on customer loyalty. customer satisfaction affects the reliability, effectiveness, and assurance of the service portfolio, price, and access. tangible must receive extra attention so that customer satisfaction can increase. keywords: service quality, marketing mix, customer satisfaction. introduction the bank is implementing work system adjustments aimed at suppressing the spread of the coronavirus or covid-19. this action is a step taken by the bank to provide maximum protection to employees, their families, and even customers from the possibility of being exposed to covid-19 which has now become a global pandemic. the bank has set three work system adjustments, namely split operation, shift operations and work from home. split and shift operations are applied to functions related to main operations and banking services. meanwhile, other positions apply for the work from home system or work from home. along with the times, the role of the banking world in the economic development of a country has become very large. hermansyah (2019) stated that banking institutions are the core of a country's financial system. almost all business entities related to financial activities require bank services. this is closely related to the main function of banking as a collector and channel of public funds. in indonesia, the banking industry has spread to remote villages. an increase in the number of banks has the potential to encourage the banking sector to become more competitive and improve banking efficiency and health (widyastuti & armanto, 2013). https://www.ilomata.org/index.php/ijtc mailto:rumiyati@gmail.com the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 85 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 one of the most important factors, to win the competition, is consumer trust. the current national economic growth encourages the enthusiasm of every organization or service provider to be able to improve and develop its business. gunadi (2012) states that to win the competition, every organization or service provider must pay attention to the needs and desires of consumers or customers, and try to meet their expectations, to provide satisfaction to consumers or customers. bari'ah et al. (2018) argued that this understanding is intended to provide maximum satisfaction to customers. customer satisfaction is a level where customer needs, wants and expectations can be fulfilled which will result in repeated purchases or continued loyalty (regan et al. 2019). the role of the bank in serving various needs of the covid-19 era community in financial needs from investing. to increase competitiveness, the bank must develop and improve its services to become superior or excellent service (service excellence). in the banking world, the customer in question is the customer. customer satisfaction is someone's expression in providing value or optimizing the value that someone feels and expects on a product or service (hadiati, 2014). in this theory, there is something to do with trust. the phenomenon states that banks are experiencing problems due to the covid-19 outbreak so that service to bank customers is not optimal and has implications for customer satisfaction as disclosed by who (2020) states that the spread of the corona covid-19 virus outbreak is increasingly worrying after the covid19 virus pandemic was announced so that its spread is getting faster until it enters countries around the world. it was recorded that the number of positive patients with the corona virus in indonesia increased to 369 people, 32 of whom died and 17 people were declared cured. several governments of other countries have closed in and out access for people who live in their territory. in indonesia itself, especially in big cities, preventive activities such as starting work or studying from home have been implemented. activities that invite the masses are also advised to postpone their holding. personally, people have also started to implement prevention for themselves and their families, such as imposing social distancing, to self-quarantine (selfquarantine) or self-isolation, which has become an initiative in almost every home. of course, this immediately drastically changes all aspects of life's activities. when shopping for goods, food, and necessities it can still be helped by the presence of an online shop and a 24-hour food delivery application. in banking activities in these conditions, the internet as the driving force for the rapid development of information technology is indeed present as a savior for community activities in various conditions. no exception for banking matters. when meetings must be limited, a bank customer need not be discouraged. there are already many bank applications that are ready to be accessed from a smartphone, and they can do it from home during work. bank syariah mandiri, for example. with the mandiri syariah mobile (msm) application, bank syariah mandiri customers can still access banking services while working from home and looking after their children. the bank's commitment to maintaining customer comfort during this pandemic can be seen at mandiri syariah mobile. where customers can carry out all important transaction needs without having to go outside the house, (reza, 2020). this trust is very important to build because the bank does not have enough cash to pay obligations to all its customers. to ensure long-term business continuity and retain customers, good service is needed in facing the increasingly competitive banking industry. high-quality banking services can determine customer satisfaction. rangkuti (2012) states that service quality the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 86 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 is one of the factors that can determine customer satisfaction. if the quality of service received or felt is as expected, then consumers will feel satisfied. conversely, if the quality of service received is lower than expected, the consumer will be dissatisfied. therefore, good service quality has an important role in shaping customer satisfaction. in the survey, the bank is in the fifth position in the best bank service excellence. the following in table 1 shows the results of the mri survey regarding the ranking of banks from the service side of other commercial banks. the best bank service excellence source: info bank magazine (2019) seeing this condition, of course, banks need to improve to get serious attention. because if you don't clean up quickly, you may be far behind the competitors. the results of a survey from marketing research indonesia (mri) for conventional bank service products, the recent low rating of the bank has not been maximal in service to customers due to the covid-19 outbreak. the survey, states that the bank is in the fifth position in the best bank service excellence. the following in table 2 shows the results of the mri survey regarding bank ratings from the service side. service quality lovelock & wright (2015) and hertati., safkaur., simanjuntak, (2019) suggest that service quality is the level of excellence expected and control over that level of excellence is to fulfill customer desires. zeithaml and bitner (2013) define service quality as service delivery. which is good or very good when compared to customer expectations. kotler and keller (2012) state that service quality is the totality of the features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs. measurement of service quality consists of 5 characteristics, namely: 1. tangibles, physical evidence, namely the ability of a company to address its existence to customers. the appearance and ability of the company's physical facilities and infrastructure and the condition of the surrounding environment are clear evidence of the services provided by service providers to their customers. 2. reliability, reliability, namely the ability of a company to provide services as promised accurately and reliably. 3. responsiveness, namely the company's ability to help and provide fast and precise service to customers, by delivering clear information. 4. assurance, assurance, and certainty, namely knowledge, the ability of company employees to foster customer trust in the company. 5. empathy, namely giving sincere and individual attention to customers by trying to understand the wishes of the customers; a marketing mix or marketing mix is a combination of four variables, namely product, price structure, promotional activities, and distribution system (dharmesta and handoko, 2017). 0 2 4 6 8 10 12 bank mandiri bii bank ocbc nisp permata bank bank negara indonesia (bni) bank cimb niaga bank rakyat indonesia (bri) bank central asia (bca) bank danamon bank bukopin the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 87 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 the four elements of the marketing mix are interrelated and influence one another, so efforts must be made to produce a marketing policy that leads to effective service and customer satisfaction. so in the marketing mix, there are variables that support one another, which the company then combines to obtain the desired responses in the target market. (hertati & sumantri 2016: syafarudin, 2016). kotler (2017) defines the marketing mix as follows: "a set of marketing tools that companies use to continuously achieve their marketing goals in target markets." tjiptono (2018) defines a marketing mix as a set of tools that marketers use to shape the characteristics of the services offered to customers. these tools can be used for long-term strategy as well as for designing short-term tactical programs. the concept of the marketing mix was first popularized several decades ago by jerome mc charty who formulated it into 4ps (product, price, promotion, and place). (tjiptono, 2018). most services are served by people, so that person needs to be selected, trained, motivated so that they can provide satisfaction to customers. every employee must complete doing good to consumers with attitude, attention, responsiveness, initiative, creativity, clever problem solving, patience, and sincerity. can influence buyers' perceptions. this marketing mix is increasingly developing, especially in the service sector, not only covering 4ps, but also reviewing from the point of view of a place, people, process, and physical evidence which is hereinafter known in the term service marketing mix as 7p. this concept will later be adjusted to the conditions of the service company that will implement it, but in general, the 7p concept is used to make decisions in making marketing communication strategies. 1. product, a combination of goods and services that the company offers to the target market includes variety, quality, design. features, brand names, and packaging. 2. price, is an amount of money that must be paid by the customer to obtain a product, including price list, discounted price, payment period, and credit terms 3. place, the company's activities that make products available to target customers include: location, distribution channels, supplies, transportation, and logistics. 4. promotion, means activities that convey the benefits of the product and persuade customers to buy it, including advertising and sales promotions. 5. people, means people who serve or plan services to consumers. 6. process, a process that occurs outside the consumer's perspective. consumers do not know how the process occurs; the important thing is that the service he receives must be satisfactory. the process occurs thanks to the support of employees and the management team who organize all processes to run smoothly. the service delivery process is very significant in supporting the success of service marketing and also providing satisfaction to consumers. 7. physical evidence is a physical means, the environment for the delivery of services, between producers and consumers interacting, and any other components that facilitate the appearance of the services offered. in an educational and training institution, of course, which is physical evidence. customer satisfaction understanding customer satisfaction (customer satisfaction) literally, satisfaction is a way to make customers not disappointed and can buy back the products we market. in this case, the company must be able to recognize, fulfill, and provide quality service and satisfy customer needs properly, which is a company strategy to increase sales. tjiptono, (2015) defines that customer satisfaction is a central concept in business and the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 88 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 management discourse. the consequences of customer satisfaction are very crucial for business, government, and consumers, of course. for business people, satisfaction is seen as a dimension of market performance. increased customer satisfaction has the potential to lead to long-term and short-term sales growth, as well as market share as a result of repeat purchases (hertati, 2015: syafarudin, 2016) kotler and keller (2013), state that customers are satisfied if their expectations are met or under what the customer wants are exceeded. there are 5 main dimensions of customer satisfaction, including: 1. price for sensitive customers, usually low prices are an important source of satisfaction because they will get high value for money. this price component is relatively insignificant for those who are not priced sensitive. 2. service quality depends on three things, namely systems, technology, and people. customer satisfaction with service quality is usually difficult to imitate because the formation of attitude and behavior that is in line with the company's wishes is not an easy job. improvement must be carried out starting from the recruitment process, training, and work culture. 3. product quality customers feel satisfied after buying and using the product if the product quality is good. 4. emotional factor (emotional factor) emotional factor is shown by consumers for the satisfaction they get in using a product/service that creates a sense of pride and selfconfidence. 5. efficiency (ease) ease of obtaining these products or services and ease of payment can make customers more satisfied if it is relatively easy, comfortable, and efficient to get a product or service. methods this type of research is a type of quantitative descriptive research. this study used a questionnaire with a numerical scale and an ordinal scale with a likert scale 1-5. the sample consists of many members selected from the population, namely 1000 (one thousand) people, wherein this research, 100 (one hundred) bank customers will be sampled as samples. this research uses the slovin formula so that the sample range that can be taken from the solvin technique is between 10% of the study population. the purpose of this research is to examine data to convey and limit findings to become organized, structured, and meaningful data. the data carried out is a quantitative analysis expressed by numbers and the calculation uses descriptive methods and partial least square (pls) which is assisted by using the smart-pls version 3.0 application program. image: research framework, 2020 ghozali (2013) "descriptive statistics are performed to provide an overview or description of data seen from the mean, standard deviation, variance, maximum, minimum, sum, range, service quality marketing mix, customer satisfaction the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 89 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 kurtosis and skewness value (distribution slope)". according to sugiyono (2012) "descriptive statistics are statistics that are used to analyze data that has been collected as is without intending to make general conclusions or generalizations. partial least square (pls) as a prediction model does not assume a certain distribution to estimate parameters and predict the causality relationship. therefore, parametric techniques for testing the significance of parameters are not required and the evaluation model for prediction is non-parametric. pls model evaluation is done by evaluating the outer model and inner model. the outer model is a measurement model to assess the validity and reliability of the model. through the algorithm iteration process, the measurement model parameters (convergent validity, discriminant validity, composite reliability, and cronbach's alpha) were obtained, including the r2 value as a parameter of the prediction model accuracy. meanwhile, the inner model is a structural model to predict the causality relationship between latent variables. through the bootstrapping process, the t-statistical test parameters were obtained to predict the quality relationship. results and discussion an indicator is said to have good validity if it has a loading factor value greater than 0.70. while the loading factor of 0.50 to 0.60 can still be maintained for models that are still in the development stage. table 1. the outer model evaluation loading factor values diagram indicator quality of service (x1) marketing mix (x2) customer satisfaction (y) x1 0,803 0,807 0,827 x2 0,803 0,807 0,827 x3 0,803 0,807 0,827 x4 0,803 0,807 0,827 x5 0,803 0,807 0,827 x6 0,803 0,807 0,827 x7 0,803 0,807 0,827 x8 0,803 0,807 0,827 x9 0,803 0,807 0,827 x10 0,803 0,807 0,827 x11 0,807 x12 0,807 source: data processed results based on the picture above, it appears that all loading factors are above 0.50. thus it can be concluded that the construct has good convergent validity. the value of cross-loadings presented in the table above also shows good discriminant validity, where the correlation value of the indicator with its construct is higher than the correlation value of the indicator with other constructs. the next stage assesses cronbach's alpha, composite reliability, and average variance extracted (ave) criteria. each construct is said to be reliable if it has cronbach's alpha and composite reliability that is greater than 0.70, while the ave value is expected to be greater than 0.50 the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 90 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 table 2. value cronbach’s alpha, composite reliability, dan average variance extracted (ave) variable cronbach’s alpha square root of (ave) composite reliability average voidance extracted (ave) quality of service (x1) 0,816 0,826 0,826 0,846 marketing mix (x2) 0,812 0,856 0,846 0,866 customer satisfaction (y) 0,817 0,876 0,876 0,876 source: results of data processing, 2020 based on the table above, it can be seen that all constructs have cronbach's alpha and composite reliability values that are greater than 0.70. the same thing is seen in the ave value, all constructs have ave values that are greater than 0.50. thus it can be concluded that all exogenous and endogenous measurement constructs are reliable. inner model evaluation is an analysis of the results of the relationship between constructs. the relationship between constructs can be said to be significant if it has a t-statistics value greater than 1.96. table 3. value path coefficients dan nilai r square parameter original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/sterr|) p values r square x1 -> y 0,234 0,223 0,085 2,746 0,006 0,804 x2 -> y -0,021 -0,013 0,069 0,303 0,762 source: results of data processing, 2020 based on the table above, it can be seen that in substructure 1, the variable service quality (x1) and marketing mix (x2) simultaneously contributed to influencing the emerald customer satisfaction variable (y) of 0.408 or 40.8% with the following details: hypothesis 1: the effect of service quality (x1) on customer satisfaction (y) has a path coefficient of 0.287 with a statistical value of t greater than the critical value (2.091> 1.96). thus h0 is rejected and h1 is accepted, meaning that service quality (x1) has a significant effect on customer satisfaction (y). hypothesis 2: the effect of marketing mix (x2) on customer satisfaction (y) has a path coefficient of 0.396 with a statistical value of t greater than the critical value (3.021> 1.96). thus h0 is rejected and h1 is accepted, meaning that the marketing mix (x2) has a significant effect on customer satisfaction (y). through this description, it can be seen that the variable service quality (x1) and marketing mix (x2) simultaneously affect the customer satisfaction variable (y) of 0.408 or 40.8%, while the remaining 59.2% is influenced by other variables that are not observed. in this study. as for the bank's strategy in business processes that can be carried out during a pandemic, banks must manage risk mitigation appropriately. banks must have new navigational maps to deal with the existing crisis. the debtor mapping process for the restructuring process must run immediately and clearly so that the bank's cash flow is visible after treatment. that way, the bank knows the position of strengths-weakness-opportunities-threats (swot) to be able to revise the bank's business plan (rbb) by taking into account the conditions due to corona (lestari & the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 91 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 hertati, 2020: syaparudin. & hertati, 2020). banks should focus on the industries that are prospects for financing. banks must be selective in the business sectors that exist and develop amid the outbreak of the coronavirus. meanwhile, according to research by dcode efc (2020), the business sector (potential winner) is a sector; agribusiness, telecommunications, e-commerce retail, pharmaceuticals, cleaning products & medical devices. and, for sectors that are at a loss or for sectors that have collapsed so that they have no prospect at all to rise, it is better not to become the choice of banks for their credit financing first. the hope is that banks will no longer work carrying the burden of bad credit for their new credit expansion. (hertati, 2015: syafarudin., 2016). digital banking. products and services must be converted into digital banking. the process must be gradual and the initiation carried out continuously. however, not all products and services must use digital banking, there are core businesses that still require functions by the human element. several functions involve the human element so that their existence cannot be replaced by digital banking. one of these roles is business advisory and consulting activities. for example, when a bank customer has a business disruption due to covid-19, he will receive business assistance and consultation from bank marketers. the bank has relationship managers (rm) spread across indonesia. the role of this rm will be to assist as well as consultants if customers experience problems in their business operations (syafarudin. & mulyana, 2019: hertati safkaour, 2020). bank innovation and creativity. korona demands that banks be more innovative. for example, banks today do not only demand installments and loan interest payments by their debtors. however, banks must also think about helping customers, by selling their products. as is known, the government's appeal to the public to carry out physical and social distancing affects the sales of micro, small, and medium enterprises (msmes). to get around this, banks can help their msme players to connect with the ecosystem so they can sell online. an example is to create msme go online. msme go online is a digital platform that aims to facilitate bank-assisted msmes in expanding the sales reach of its products. msme players who are interested in entering msme go online simply go through a simple step-by-step process. customers are required to complete data and register their business first by accessing the msme go online microsite on the bank's website via the bank portal link. furthermore, the seller will be asked to prepare product documentation, send samples of goods, to process the delivery of goods to inventory warehouses managed by the bank. these items will then be assisted by the bank to be sold through the umkm go online platform. superior products from bank-fostered msme partners can be purchased directly at e-commerce partners such as qoo10 singapore, tokopedia, shopee, bukalapak, blanja.com, and blibli.com. (hertati., syafarudin., safkaur. fery. 2020: hertati & safkaur, 2020). use the zoom tool for on the spot (ots). when the government requires social distancing or physical distancing, the hope is that the bank's response is to enforce verification of credit guarantees in the field or ots via video calls or zooms. business assistance and consulting. msme customers whose business is disrupted due to covid-19 receive business assistance and consultations by bank staff, namely relationship managers (rm) spread across indonesia. the role of this rm is to provide assistance as well as a consultant if the customer's loan is restructured until the restructuring process runs smoothly (syafarudin, saluy, masyhudzulhak. 2020: hertati & safkaur, 2019). corporate social responsibility (csr) program through online education and training for msme players. banks can organize an online education and training program 'bank virtual the influence of service quality, marketing mix, on bank customer satisfaction in the era covid-19 rumiyati, syafarudin 92 | ilomata international journal of tax & accounting volume 2 issue 1, january 2021 training and education' which is carried out through the umkm go online application. this is the bank's effort to continue to encourage msme players to increase their capacity and business amidst government calls for physical restrictions that are useful to suppress the spread of covid19. banks must immediately adapt to the conditions of the coronavirus pandemic by implementing new strategies and get back on the track of good performance. the hope is that the bank's intermediary function will run smoothly and be able to leverage indonesia's national economic growth in the new normal era (hertati & syafarudin, 2018: syafarudin, 2016). conclusion several business sectors were affected by the coronavirus pandemic (covid-19), including the banking sector. therefore, for the banking sector to continue to exist during the coronavirus pandemic, banks must carefully mitigate risks and use creative strategies to deal with the current uncertain conditions. the covid-19 pandemic outbreak forces individuals/groups/institutions/countries to change their lifestyle and behavior so far. if individuals/groups/institutions/countries do not make changes, then those changes will automatically crush them, without exception in the banking business sector. based on the overall presentation of statistical calculation analysis on structural model analysis and hypothesis testing, it can be concluded that partially: service quality is proven to have a positive and significant effect on customer satisfaction. the marketing mix is proven to have a positive and significant effect on customer satisfaction. syaran. banks to improve service quality with training 2 to be faster in serving customers by evaluating savings interest rates in the coming year to make it more competitive. the marketing unit further improves promotion through social media, advertisements, so that it is known to the public. increase cooperation with private companies and government agencies. for researchers who will research further in further research, it is hoped that they can add or develop other variables as a reference for research at the next research stage. references ali, hapzi & baruna hadibrata (2015). one-stop services: quality of service and accessibility to the investor loyalty: the investment coordinating board. international journal of bisnis and commerce arikunto, suharsimi, 2008. prosedur penelitian suatu pendekatan praktek. jakarta: rineka cipta. azwar, syaifuddin, 2007. validitas dan reliabilitas, yogyakarta: pustaka pelajar. bhatt, a.k, (2016). measuring customer satisfaction using servqual model – an empirical study. international journal of trend in research and development, volume 3(1), issn: 2394-9333. bhatt, a.k., divya sahil bhanawat (2016). measuring customer satisfaction using servqual model – an empirical study bni,2019. bni emerald.di akses pada 25 mei 2020.https://www.bni.co.id/emerald chamidah, s. 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(2013). service marketing: integrating customer focus across the firm (3rd ed.). new york: mcgraw-hill http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://scholar.google.com/scholar?cluster=15976113000262862936&hl=en&oi=scholarr http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 http://search.proquest.com/openview/a37efb7aea87201443a5c3277696c562/1?pq-origsite=gscholar&cbl=816339 https://www.liputan6.com/ the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 4 october 2021 page no. 246-254 246 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia dwikora harjo institut ilmu sosial dan manajemen stiami correspondent: dwikora.harjo@stiami.ac.id received : august 08, 2021 accepted : august 25, 2021 published : october 31, 2021 citation: harjo, dwikora (2021). tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia. ilomata international journal of tax & accounting 2(4),246-254 https://doi.org/10.52728/ijtc.v2i4.374 abstract: this research was conducted to determine the level of effectiveness of tracing implementation activities in order to verify the accuracy of data on motorized vehicles that did not re-register in an effort to support the regional tax stimulus policy provided by the regional revenue agency of west java province in the face of the covid-19 pandemic in bekasi city. this study uses a qualitative approach and descriptive research type by conducting library research and data collection using documentation on data obtained from related agencies. the results show that the west java provincial government through the regional revenue agency of west java province in an effort to relieve motor vehicle taxpayers affected by the covid-19 pandemic in 2020 has provided a motor vehicle tax stimulus, including exemption from motor vehicle tax fines and giving discounts in tax payments. motorized vehicles and motor vehicle title fee, provided that all data are validated. so that the public can enjoy the stimulus, the west java bapenda collaborates with various parties to conduct verification and validation of motor vehicle taxpayer data with the level of the effectiveness ratio of these activities in 2020 of 77.01%, a decrease compared to the achievement in 2019 of 89.09% and in 2018 amounted to 82.14%. keywords: data verification, motor vehicle tax, tracking activities this is an open access article under the cc-by 4.0 license. introduction vehicle taxes are made on a variety of factors including engine capacity, passenger capacity, weight and price of the vehicle. every country in the world has different regulations in determining vehicle tax. (cox & eger iii, 2006; david, 2013). several studies conducted in several countries show different vehicle taxation systems, based on several factors. in brazil, the larger the passenger capacity, the higher the tax (benvenutti et al., 2016). meanwhile, in ireland (petrov et al., 2019) and slovakia (gnap & konečný, 2015), the older the vehicle, the higher the vehicle tax. in contrast, in the united arab emirates, new vehicles are taxed more expensively (taleb, 2020). one consideration is that older vehicles cause more air pollution, while newer vehicles such as electric vehicles are subject to lower taxes because they do not cause air pollution.(barros & pádua, 2019; nel & nienaber, 2012) https://www.ilomata.org/index.php/ijtc mailto:dwikora.harjo@stiami.ac.id https://doi.org/10.52728/ijtc.v2i4.374 tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 247 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc many sectors have been affected by the covid-19 pandemic in this country, especially in the economic sector. the people's purchasing power has greatly decreased due to the number of employees who have lost their jobs due to layoffs carried out by their workplaces. (daparhita & gorda, 2020; kalalo et al., 2020). the head of the bekasi city manpower office, said that throughout 2020, 1,601 workers and workers were laid off due to several companies affected by the covid-19 pandemic. this figure does not include employees who live in the city of bekasi, work outside the city of bekasi and are affected by termination of employment which cannot be accurately recorded at the bekasi city manpower office (adam dan syamsah, 2018). in an effort to ease the burden on the community as a result of being affected by the covid19 pandemic, the bekasi city government has made several efforts to help its people in dealing with their difficulties, especially meeting their primary and secondary needs. one of the secondary needs of bekasi city residents is the availability of motorized vehicles as a means to carry out activities/mobility of daily life and it is the obligation of motorized vehicle owners to carry out their annual obligations, namely paying taxes and re-registering their motorized vehicles to the bekasi city samsat service office (single administration system under one roof), namely the joint office in serving the payment of motor vehicle tax which is part of the regional tax. thus, the regulation regarding the implementation of the motor vehicle tax is carried out by the level of the governor or the regional house of representatives of the province of west java with its derivative regulations carried out by the chairman of the regional revenue agency of west java province as the implementing regulator of the regional tax of west java province. in an effort to relieve motor vehicle owners in west java province, especially bekasi city, which has been affected by the covid-19 pandemic, in 2020 the west java provincial government has provided a lot of stimulus for motor vehicle taxes, including providing a transfer fee-free program, exemption from pkb fines, and exemption from the progressive rate of arrears. in addition, there are also pkb discounts, 5th year arrears exemption, and regional tax of transfer of motorized vehicle names (bbnkb) i discounts, where the program is free of administrative fees and the discount will last until july 31, 2020. seeing the high enthusiasm of the public to enjoy the tax stimulus, the bapenda of west java province extended the program by launching it under the name triple profit program which ends on december 23, 2020. there are three benefits that taxpayers can get in this latest program, namely the first is free of motor vehicle tax fines. for taxpayers who are late in processing payments but do not apply for exemption from payment for new motorbikes, change forms, auctions/ex-dumps that have not been registered and replace machines. the second advantage is free of principal and fines for bbnkb ii where this program can be used by residents who want to transfer the name of a second motorized vehicle and so on. the third advantage is the freeing of the changed name progressive principal rate which is specifically for west java residents who will apply for the second ownership bbnkb and so on. however, if the taxpayer still has pkb arrears, the pkb rate is only 1.75 percent. the existence of several regional tax stimuli, especially the motor vehicle tax and motor vehicle transfer fees provided by the west java provincial government, in this case the regional revenue agency, of course, must be closely followed by the validity and accuracy of data on motorized vehicle ownership registered at the bekasi city samsat office. the large number of data showing that the high number of motor vehicle taxpayers who do not reregister or pay taxes is not entirely correct, it could be that the taxpayer has made a sale and did not report it to the samsat office so that in its real condition the vehicle has changed ownership. it is also possible https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 248 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the owner of the motorized vehicle has changed domicile, so that the address recorded in the samsat administration is not the same as the actual address. this condition requires updating the data to properly map the implementation of the regional tax stimulus, especially the motor vehicle tax in a targeted and effective manner. right on target that this stimulus is beneficial for motor vehicle taxpayers, which is real and effective, is that this stimulus is useful for motor vehicle taxpayers, namely easing the burden of payment of motor vehicle tax obligations and is useful for increasing the income of motor vehicle taxes and motor vehicle transfers for the bekasi city samsat. in the midst of the ongoing covid-19 pandemic. to find out the number of motorized vehicle owners in bekasi city who have not verified or reregistered or have not paid their motor vehicle tax, it is necessary to have supporting data for this research. in table 1 below, it will be shown how many motor vehicle owners in the city of bekasi have not verified their data correctly. the indicator of the emergence of this data is the submission of a tax return for payment of motor vehicle taxes (spkp2kb) which has been carried out by the samsat office up to three times and has never been responded to by the motor vehicle taxpayer. tabel 1 motorized vehicle data unverified by the bekasi city samsat office vehicle type 2018 2019 2020 two wheels 387.723 363.570 354.984 four wheels : sedan, jeep, minibus 37.399 37.015 34.724 > four wheels : bus, microbus 887 731 769 > four wheels : truck, pick up 8.610 7.451 .7.139 heavy equipment 1 0 0 total 434.620 408.767 397.616 source : badan pendapatan daerah provinsi jawa barat, 2021 from the table above, it can be seen that from 2018 to 2020 the condition of motorized vehicles that have not been verified to re-register or pay motor vehicle taxes is still high. no significant decline was seen. the potential seen from this phenomenon also looks great. two-wheeled motorized vehicles hold the largest portion each year, in 2018 two-wheeled motorized vehicles that have not been verified were 89.21% of all motorized vehicles that have not been verified. in 2019 it was 88.94% and in 2020 it was 89.28%. the next table, namely table 2, shows the number of searchers who are tasked with verifying data on motor vehicle tax owners/taxpayers in the bekasi city area. tabel 2 data on number of tracers verification of motorized vehicle data for bekasi city samsat office source : badan pendapatan daerah (bapenda) provinsi jawa barat**, 2021 notes : * p3dw = pusat pengelolaan pendapatan daerah wilayah kota bekasi assignment 2018 2019 2020 p3dw kota bekasi *) 9 9 9 villages in bekasi city 112 0 0 tax center of stiami institute of bekasi campus 0 87 48 youth organization in bekasi city 0 0 0 others 0 0 0 total 121 96 57 https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 249 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (regional revenue management center of bekasi city) ** bapenda = west java provincial revenue agency in verifying the accuracy of motor vehicle data that has not re-registered/paid taxes, the west java provincial revenue agency through its work unit, the bekasi city regional revenue management center (p3dw) in collaboration with local government organizations, youth organizations, academics and organizations others since 2018 have deployed the data verification officer, which they call the search team. as shown in table 2, there are 121 searcher officers, all of whom are from p3dw bekasi city 9 people and from several villages in bekasi city area 112 searchers, in 2019 there were 96 searcher officers from bekasi city p3dw as many as 9 searchers and 87 searchers from the tax center of the stiami institute, bekasi campus and 57 searchers from p3dw bekasi city, as many as 9 searchers and 48 searchers from the tax center of the stiami institute, bekasi campus. west java province is the most populous province in indonesia with a population of 48,274,162 consisting of 24,508,885 male and 23,765,277 female population, of course, it has the potential to receive tax funds from its residents in the future. the framework of regional development of west java province. however, due to the covid-19 pandemic that has occurred since november 2019, the receipt of regional taxes, both provincial taxes and regency/city taxes in west java province, almost all types of taxes also experienced a contraction in 2020. of the 5 (five) types of provincial taxes, only cigarette taxes were used. experienced a surplus growth, while the other 4 (four) types of provincial taxes, namely motor vehicle tax, motor vehicle transfer fee tax, motor vehicle fuel tax and surface water tax decreased compared to the previous year's revenue. as described above, the decline in regional tax receipts, especially motor vehicle taxes, was due to a decrease in people's purchasing power due to the covid-19 pandemic and the west java provincial government in this case the west java provincial revenue agency has provided several regional tax stimuli for all vehicle taxpayers. motorized. it is hoped that with this stimulus, the taxpayers will be able to immediately return to carrying out their tax obligations, namely re-registering and paying their motor vehicle tax correctly and on time and of course lighter because of the payment relief provided by the west java provincial government through fiscal stimulus (darwin, 2010; harjo, 2019). the purpose of this study was to determine the level of effectiveness of data verification activities for motorized vehicles that did not re-register in bekasi city in an effort to support the bekasi city regional tax stimulus policy. the author uses the theory of effectiveness proposed by beni pekei in analyzing the data. this theory compares the realization with the target/budget in determining the effectiveness of an activity (asriati & sasmito, 2016). this research continues several relevant previous studies, including research conducted by nurfitriana & saputra (2020) where the results of this study indicate that the performance of the regional government in carrying out the collection of motor vehicle taxes and motor vehicle transfer fees at the regional revenue agency office of central sulawesi province has been very good in terms of the level of growth, effectiveness, and contribution of motor vehicle taxes and transfer of motor vehicle title fee on regional tax receipts. the results of this study indicate that the performance of the regional government in carrying out the collection of motor vehicle taxes and motor vehicle transfer. fees at the regional revenue agency office of central sulawesi province has been very good in terms of the level of growth, effectiveness, and contribution of motor vehicle taxes and motor vehicle transfer fees to local tax receipts. https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 250 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the second previous researcher by pratiwi et al., (2017) with the results showing that the onestop one-stop administration system (samsat) carries out several strategies in increasing motor vehicle tax revenues in talisayan district. , this is indicated by the program that has been run is able to increase motor vehicle tax revenues. samsat has optimally carried out its vision and mission, although in its implementation it faces several obstacles. method the research method used in this scientific work uses qualitative methods where qualitative research is a study that intends to understand what phenomena are experienced by research subjects such as behavior, perception, motivation, action, and others, holistically and by way of description in the form of words and language, in a special natural context and by utilizing various natural methods.. the type of research that i will use is descriptive analysis, which is to analyze the content of the object under study based on sources relevant to the research title. this type of research also describes an event whose operations carry out data collection and processing activities as well as interpreting data that is given a rational meaning while still holding to the principles of logic so as to form a holistic conclusion. furthermore, the author will provide a description, an overview of the facts, their relationship with the phenomena studied by explaining clearly and in detail. data collection was carried out through literature studies, namely by reading, reviewing and analyzing various literatures, both in the form of documents, books, journals, publication data from the west java provincial revenue agency, the bekasi city manpower office and from the official website. the implementation of data analysis in the study includes 3 (three) activities, namely carrying out data reduction (data reduction), presenting data (data display), and drawing conclusions/verification (conclusion drawing/verification). in this study the author will analyze the effectiveness of data verification activities for motor vehicle taxpayers who have not re-registered / taxpayers have not paid motor vehicle taxes in an effort to take advantage of the regional tax stimulus provided by the west java provincial government through the regional revenue agency office, where the stimulus is in the form of providing discounts and the abolition of motor vehicle tax fines and motor vehicle transfers as well as motor vehicle tax stimulus which aims to enable the motor vehicle taxpayers to carry out their obligations to pay motor vehicle tax more lightly without being burdened with late fees. this study refers to the effectiveness theory proposed by beni pekei, who argues that the effectiveness ratio is by comparing the realization with the budget, while the criteria for measuring effectiveness are based on the decree of the minister of home affairs number 690,900,327 of 1996 with the following criteria: 1. the comparison result of the achievement rate of more than 100% means it is very effective 2. the comparison results reach 90-100% means it is effective 3. comparison results reach 80-90% meaning quite effective 4. the comparison results reach 60-80% meaning less effective 5. the comparison result is less than 60% which means it is not effective https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 251 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion from the data that has been reduced, it is known that the number of motorized vehicles that have not re-registered in bekasi city from 2018 to 2020 is still high. two-wheeled motorized vehicles are the largest contributor of the number of motorized vehicles that have not reregistered for the past three years. in 2018, two-wheeled motorized vehicles that had not verified re-registration as many as 89.21% of all motorized vehicles that had not been verified. in 2019 it was 88.94% and in 2020 it was 89.28%. in order to make it easier to carry out this research, two types of classification of motorized vehicles were carried out, namely the twowheeled motorized vehicle group hereinafter referred to as (r2) and the other group which has more than two wheels. meanwhile, those with more than two wheels are divided into four categories, namely four-wheeled sedans, jeeps and minibuses (r4-sjm), categories of more than four-wheeled types of buses and small buses (microbus) (r>4-b), category of more than four wheels, types of trucks and pickups (r>4-t) as well as a special category, namely heavy equipment (ab). in 2018, a total of 434,620 motorized vehicles that had not been verified consisted of 387,723 (r2), 37,399 (r4-sjm), 887 (r>4-b), 8,610 (r>4-t) and 1 heavy equipment vehicle. in 2019, a total of 408,767 motorized vehicles that have not verified, consisting of 363,570 (r2), 37,015 (r4sjm), 731 (r>4-b) and 7,451 (r>4-t) and in 2020 as many as 397,616 consisting of 354,984 (r2), 34,724 (r4-sjm), 769 (r>4-b) and 7,139 (r>4-t). while the search officers tasked with verifying data in 2018 were 121 people, in 2019 there were 96 people and in 2020 there were 57 people. the number of searchers has decreased in line with the emergence of the covid-19 pandemic. if it is noticed that in 2018 the ratio of this search activity is 1: 3,592, it means that a searcher has the task of verifying 3,592 motorized vehicles. in 2019 the ratio rose to 1: 4,258 while in 2020 it increased to 1: 6,976. when viewed from this ratio, in 2018 each searcher will be charged an average of 10 verification data per day, in 2019 as many as 12 verification data and in 2020 as many as 19 data that must be verified. these data are only primary data in 2018, 2019 and 2020, respectively, meaning that motor vehicle data were completely unverified in those years without an overflow of unverified data remaining in previous years. table 3 shows data on tracking activities that must be carried out based on targets consisting of data on motorized vehicles that have not been verified in the relevant year plus overflow data from previous years. the abundance of data that has not been verified in previous years greatly affects the level of accuracy of the data received by the management of the west java provincial revenue agency and officials of the bekasi city regional revenue management center in making strategic policies. table 3 https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 252 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc number of targets and realization of vehicle data verification for bekasi city samsat office description 2018 2019 2020 target 1.262.892 1.200.674 1.217.349 realization 1.037.407 1.069.546 937.454 percentage 82,15% 89,08% 77,01% source : badan pendapatan daerah provinsi jawa barat, 2021 in 2018 there were data on all types of motorized vehicles that had not been verified as much as 1,262,892 verification data that had to be searched by a search team of 121 people, meaning that each searcher would get a target to verify data an average of 10,437 data a year or as many as 29 data every day. in that year, 1,037,407 or 82.15% of data were verified, or each searcher managed to verify an average of 8,574 data per year or 24 data per day. in 2019 the target data for verification fell to 1,200,674, with 96 searchers of which 87 people (91%) were students of the stiami institute, bekasi campus. in other words, every searcher in 2019 is given a target to verify an average of 12,507 data or 35 data per day. in the midst of limitations by dividing their time for lectures, the average searcher, most of these students succeeded in carrying out data verification tasks in 2019 as many as 1,069,546 data or 11,141 data or 31 data that were successfully verified every day. in 2020, 1,217,349 data are targeted for verification for 57 searchers (48 searchers are from stiami institute students, bekasi campus). from this data, in 2020 each searcher has a target of verifying 21,357 data or 59 data that must be verified every day. the realization achieved by the searchers in the midst of the outbreak of the covid 19 pandemic was 937,454 data that were successfully verified, or 46 data were successfully verified every day, equivalent to a 77% success rate of the target. based on the theory from beni pekei and the determination of the effectiveness criteria based on the decree of the minister of home affairs number 690,900,327 of 1996 which the author used as a reference in this study, it can be seen that the level of effectiveness of the implementation of this tracking activity in 2018 reached 82.14% which means it is in the quite effective category. , in 2019 this activity reached an effectiveness level of 89.08% which was included in the quite effective category and in 2020 it reached an effectiveness level of 77.01% and was included in the less effective category. the lack of success of this search activity in 2020 was caused by two things, firstly there was a decrease in the number of searchers, which was 57 searchers, compared to 2018 as many as 121 searchers and in 2019 as many as 96 searchers. the second cause is the covid19 pandemic, which limits the activities of searchers in order to maintain the safety of each searcher. conclusion from the above discussion about tracking activities for data verification of motorized vehicles not re-gisterin in bekasi city, west java, it can be concluded that : 1. the west java provincial government through the west java provincial revenue agency to relieve motor vehicle taxpayers affected by the covid-19 pandemic in 2020 has https://www.ilomata.org/index.php/ijtc tracking activities for data verification of motorized vehicles not registering in bekasi city, west java, indonesia harjo 253 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provided a motor vehicle tax stimulus in two stages, the first stage is the transfer of title tax exemption program, the exemption of motor vehicle tax fines. , exemption from progressive rates of principal arrears, granting of discounted motor vehicle taxes, exemption of 5th year arrears, and discounts on bbnkb i and the second stage is the basic exemption and fines of bbnkb ii (tax for transferring motor vehicles), exemption of progressive tariffs for principal arrears. 2. the effectiveness ratio of data verification activities for the bekasi city motor vehicle taxpayer in an effort to utilize the 2020 motor vehicle tax stimulus is at a level of 77.01% and is in the less effective category. a decrease compared to the achievement in 2019 of 89.09% and 2018 of 82.14%. 3. the low achievement level of effectiveness of data verification activities for bekasi city motor vehicle taxpayers in 2020 is due to the covid-19 pandemic which limits the movement of searchers and reduces the interest of volunteers to become searchers. reference adam, j. z., & syamsah, t. 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(2017). strategi sistem administrasi manunggal satu atap ( samsat ) dalam peningkatan pendapatan pajak kendaraan bermotor di kecamatan talisayan kabupaten berau. ilmu pemerintahan, 5(4), 1613–1626. taleb, h. m. (2020). the potential of implementing a toxicity tax for heavily polluting vehicles in the united arab emirates. transforming government: people, process and policy, 14(1), 101–123. https://doi.org/10.1108/tg-08-2019-0073 https://www.ilomata.org/index.php/ijtc ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp.210-224 https://www.ilomata.org/index.php/ijtc 210 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 top management support functions in higher education management accounting information systems lesi hertati1, nazarudin2, irlan fery3 13lecturer faculty economic of accounting stie rahmaniyah, sumsel-indonesia 2 lecturer faculty tarbiyah uin raden fatah, palembang-indonesia correspondent: hertatilesi@yahoo.co.id submitted : september 12, 2020 revised : october 10, 2020 published : october 31, 2020 abstract the function of the management accounting information system is very important in universities, as it provides input to leaders for accurate decision making. higher education leaders must listen more and provide good work management and require an accounting system in order to survive amid the heavy workload of lecturers that are not balanced with balanced wages. accounting information systems can help universities expand their reach to remote locations, acquire new forms and workflows, and possibly change teaching patterns virtually. the management accounting information system is a collection (integration) of sub-systems / components, both physical and non-physical, which are interconnected and harmoniously cooperate with each other to process transaction data related to financial matters into financial information. the purpose of this study was to determine the effect of top management support on the function of the accounting accounting system. the unit of analysis in this research is the related sub-unit within the management of higher education institutions in south sumatraindonesia. the results showed that top management support greatly influenced the function of the management accounting information system. the results of the study found that the life cycle of accounting information system development supports top management which includes planning, design and implementation (top management support is conceptualized as the involvement and participation of top-level management of the organization in information technology / accounting information system activities on lecturer work reports, lecturer salaries and managers. college. keywords: top management support, management accounting information system. introduction information is a business resource that an organization needs in an effort to maintain survival (hall, 2011). information, can find out how the development of operations that occur in the company and avoid the risk of doing something that should not be fatal to the organization (susanto, 2013). furthermore, hertati (2019) states that information is intended for a person, organization or anyone who needs it, so information must be managed effectively so that the organization gains strategic advantage, tactical advantage and operational excellence (mcleod & schell, 2007). effective information management is the process of processing data into highvalue information (wilkinson et al., 2000). according to kieso et al. (2012) accounting information is the result of an accounting process which includes the process of recording, grouping and summarizing certain entity's financial data presented in the form of financial statements. quality accounting information is accounting information that is in accordance with user needs (kieso et al., 2012), besides that quality information is needed in running the organization's business (o'brien & marakas, 2011), quality information is also useful for decision https://www.ilomata.org/index.php/ijtc mailto:hertatilesi@yahoo.co.id top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 211 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 making (gelinas et al., 2012) and used as a basis for overcoming problems and minimizing uncertainty (hall, 2011). accounting information for external parties is used to evaluate past performance, predict future performance, and obtain other input regarding the organization concerned (bodnar & hopwood, 2014). quality accounting information will influence capital providers and other stakeholders in making investment decisions, as well as credit (beest et al., 2009). kieso et al. (2012) added that quality information can create an efficient market. if the accounting information is not of high quality, the accounting information will be useless (kieso et al., 2012). kieso et al. (2012) say that the information function is measured by relevance, faithful representation and enhancing qualities. then the results of hertati's (2015) research found that information technology can process management accounting information systems well if users feel it is helped. this is said by mcleod & schell (2007) and susanto (2013) which states that quality information must have characteristics relevancy, accuracy, timeliness and completeness. then hall (2011) and hertati (2015) added that formalization can be well integrated if the measures of management accounting information that function consist of relevance, accuracy, timeliness, completeness and summarizing. not much different, according to mcmanus & harper (2003) and hertati (2026), which states that the basic key in determining functional information is seen from determining the characteristics of the information function, namely relevant, reliable, complete, timely, understandable, verifiable and accessible. in line with schermerhorn (2011) and hertati (2016), the criteria for quality information consist of timely, high quality, complete, relevant and understandable. laudon & laudon (2014) and hertati, et, all (2019) emphasize that accounting information systems are important for managers because most organizations need a management accounting system in order to survive and succeed. accounting information systems can help organizations expand their reach to remote locations, acquire new forms and workflows, and possibly change the way of doing business. hertati (2020) states that the management accounting information system is a collection (integration) of sub-systems / components, both physical and non-physical, which are interconnected and harmoniously work with each other to process transaction data related to financial issues into financial information. (susanto, 2013). a quality information system can mean a successful (successful) or effective information system (delone & mclean, 2003: hertati, et all, 2020). stair & reynolds (2010) and hertati & safkaur (2020) state that information systems can function in terms of being flexible, efficient, easily accessible and timely. the same thing was conveyed by horan & abhichandani (2006) and hertati, et, all (2020) that the characteristics of information system quality consist of utility, reliability, efficiency, customization and flexibility. then emphasized by heidmann (2008: 87-90) that the measure of the quality of information systems is integration, flexibility, accessibility, formalization and media richness. delone & mclean (1992) compile a model to describe the success of information systems, including system quality, information quality, use, user satisfaction, individual impact and organizational accounting information system is built with the main objective to manage accounting data coming from various sources into accounting information needed by various parties to reduce risk during decision making process (azhar susanto, 2013). accounting systems within the company can be classified in 2 (two) subsystems, namely financial accounting information system and management accounting system (bockholdt, 1999). the financial accounting system is intended for external corporate users (kieso, et.al, 20118: top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 212 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 hertati, sumantri, 20016) while the management accounting system is for internal corporate users, such as managers, executives and employees in decision making (hansen & mowen , 2007). hoq (2005) states that a management accounting system provides relevant high-quality information managers to make effective decisions to achieve organizational goals or objectives. a quality management accounting system has characteristics, integrated, flexible, accessibility, pormalization, richness media (heidmann, 2008). a quality management accounting system produces quality management accounting information processing (heidmann, 2008: syafarudin & herati, 2018). quality management accounting information has 4 (four) characteristics, relevance, timeliness, accuracy, completeness, summarization (hall 2011). the phenomenon states that in fact many management accounting systems are not integrated. as stated by satria (2020), there are still many teaching staff who are categorized as weak economies because they are paid cheaply and are below the minimum necessities of life and social welfare security. this gap will be felt between lecturers who are civil servants and serve on state campuses compared to lecturers on private campuses, especially in the midst of the current large-scale social restrictions (psbb). the salary of a permanent lecturer at the indonesian institute of health, a private university in jakarta, is modest and receives a salary below the minimum wage standard. the nominal wages that have been set by the province of the special capital region of jakarta in 2020 are below the provincial minimum wage (ump) of idr 4,276,349.906 per month. in addition to receiving low salaries, payments are always late, sometimes past a month. entering 2020, the campus, in this case the nusa bhakti husada foundation, has never paid all employees. then zakiyudin (2020) stated that the fate of pts lecturers, which was already difficult before the covid-19 incident, became increasingly difficult because of the impact of this pandemic. that is especially true in the payroll area. currently, according to zaki, many lecturers at private universities are only paid rp. 300 thousand per month, and some are only rp. 250 thousand. in the midst of a covid-19 situation like this, the condition is getting worse because many private universities are unable to pay their salaries. for this reason, the lecturer hopes that the government will have more role, especially the ministry of education and culture (kemendikbud) to pay more attention to the fate of the lecturers at pts. the government, especially the ministry of education and culture must participate to find the right solution so that the lecturers' income is not lost. the role of the ministry of education and culture in pts is still very minimal, especially its attention to the welfare of its lecturers. this can be seen from the absence of standardization of lecturers' salaries at pts. lecturer payroll system in state universities (ptn). the management accounting system in state-owned enterprises is not qualified because the management accounting system is not integrated, inflexible, inaccessible, unreliable, so that it is feared that it is wrong in decision making and has an impact on the quality of management accounting information produced. the phenomenon of accounting information in indonesia has not fulfilled the characteristics of accounting information that function properly as suggested by the modification of production, financial control and quality management accounting systems carried out in brazil. modification of production control, financial and quality management accounting systems. jarvenpaa & ives (1991) and hertati & syafarudin (2019) in their research revealed that top management support can be in the form of participation and involvement of top management in the development of accounting information systems. with the participation and top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 213 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 involvement of superiors in terms of project progress and providing the necessary resources, it will be able to determine the successful implementation of the functions of a system. if an organization in implementing the system, the absence of top management support, this goal will not be achieved. agree with masrek et al. (2009) in their research that top management support can be in the form of providing the resources needed in developing information systems in the form of time, location, infrastructure and human resources. it can be seen that top management supports the use of information systems as a means of alignment. the development of information systems in many literature studies is inseparable from top management support in the form of providing direction, authority and provision of resources. in his research, it is concluded that the more optimal top management support is given, the higher the success of the information system will be (ifinedo, 2008). furthermore, daoud & triki (2013) and (hertati, ett all, 2020) concluded that top management involvement and expertise have an effect on the accounting information system (the result indicates that top management involvement and external expertise have an impact on the mais). hertati et al. (2019) in their research concluded that clarity of business vision and top management support has a significant effect on the quality of business intelligence systems (clarity of business vision and top management support have significant effects on the quality of business intelligence systems). the greater the support provided by top management, the higher the performance of the information system, the higher top management support has been identified as an important factor for the success of the main organizational activities. this paper establishes a framework for understanding the impact of top management support on the performance of management accounting information systems in tertiary institutions. the higher the level of top management support, the higher the level of management accounting information system performance. griffin & moorhead (2014) stated that top management support is very important for the successful implementation of a work team. among other things, top managers need to emphasize that there are sound business reasons for team use and be prepared for some setbacks during the transition to the team. these executives meet with their immediate reports to explain the process through which their company will move towards a team-based structure. top management support is essential for the successful implementation of teamwork. among other things, top managers need to encourage sound business activities for the use of teamwork and anticipate the setbacks that will occur during the transition. this executive receives the report in person to explain the process that the organization will undertake through a teamwork based arrangement. young (2006) defines top management support as success in encouraging an activity (can be in the form of a budget) which is expected by all stakeholders (top management support is that only project management success (on-time on-budget) is emphasized by all stakeholders and top management support has been neglected). an opinion that does not differ much, was also conveyed by land et al. (2008) that top management support is needed for organizational change management. top management has the responsibility of providing direction, resources and supervision to manage organizational change. top management according to robbins & coulter (2016) is the party responsible for making decisions in an organization, setting goals and plans for organizational continuity. agree with williams (2006) that top management is an executive who is responsible for organizational activities. still according to williams (2006), parties including top management such as executives, vice presidents, presidents, directors, operational directors, or chief executive officers. furthermore wheelen, et al. (2015) revealed that the top management function is in the form of top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 214 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 coordination between the ceo (chief executive officer) and the coo (chief operating officer). mahring further (2002) states that top management support is needed in the use of information technology and continues to be supported so that the survival of the organization can be maintained. likewise basu et al. (2002) and syafarudin & hertati (2020) argue that top management is the party responsible for providing general guidelines for information system activities. the level of support provided by top management for organizational information systems can be a very important factor in determining the success of all activities related to information systems. from some of the explanations above, it can be concluded that top management support is the highest management involvement and participation in organizational development through a process of evaluation, direction and monitoring of the accounting information system used which can make individuals feel cared for and valued (mahring, 2002; jarvenpaa & ives , 1991; basu et al., 2002). top management support according to guinea et al. (2005) wheelen, et al. (2015) hertati (2015) can be measured through the following: 1. evaluate. top management can examine proposed proposals, decisions and actions, agree or disagree with subordinates, provide advice. top management can describe the mission of the company and select strategic activities for management; 2. direct. top management must assign responsibility, and direct directly the plans and policies to be taken. as well as encouraging a culture of good governance of information technology by requiring managers to provide information in a timely manner in realizing the expected conditions. top management must also integrate the tasks that must be performed by each division. all sections require direction if they want to successfully achieve the ultimate goals of an organization; 3. monitor. top management must monitor, through the information technology work system and ensure that the resulting performance is in accordance with the plan and is not in line with external factors (regulations, legislation, laws) and internal factors (employee performance). continuous observation to ensure and control the alignment of program implementation with predetermined planning; 4. participation, choice of hardware & software, implementation of system, system maintenance and problem solving; 5. commitment: planning of further developments. the characteristics of high quality information include accuracy, completeness, consistency, uniqueness and timeliness. furthermore, stair & reynolds (2012) involves measuring the quality of information as seen from being accessible, accurate, complete, economic, flexible, relevant, reliable, secure, simple, timely and verifiable so that it becomes more comprehensive and detailed. heidmann (2008) states that management accounting information systems (mais) are formal systems that provide information from the internal and external environment to managers. drury, colin (2012) stated that the management accounting system is to provide relevant financial information to managers to help them make better decisions. hoque, (2005) and hertati (2016) state that management accounting information system provides high quality managers and relevant information to make effective decisions to achieve their organization's goals or objectives. management accounting system is a formal system designed to provide information to managers bouwens & abernethy (2000). furthermore, hansen & mowen (2014) states that managerial accounting identifies, collects, measures, classifies, and reports financial top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 215 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 and non-financial information that is useful to internal users in planning, controlling, and decision making. hogue (2004) states that an effective management accounting system must be able to assess the progress of the company against strategic priorities. furthermore, horngren, et, al (1996) states that the management accounting system is a formal mechanism for collecting, organizing and communicating information about organizational activities. the opinion of collier paul (2003) states that management accounting system must provide timely and accurate information to facilitate efforts to control costs, measure and improve productivity, and to devise improved production processes. a statement expressed by anders rom (2005) states that management accounting system is an enterprise system including information system the terms' integrated information system. several meanings that are in line with the above meanings have been put forward by other experts who basically say that what is meant by a management accounting system is a formal system designed to provide information to managers and employees in the organization to provide relevant information, both financial and non-financial. financial, such as collecting, measuring, storing, analyzing, reporting and managing timely, accurate information about activities in order to make effective decisions in achieving goals or objectives in the organization in an integrated manner to make decisions. based on the dimensions put forward by experts (heidmann, 2008, avison & fitzgerald, 2006), the dimensions of management accounting information systems in this study are integrated: (1) integrated. the system is able to cooperate with one another; (2) follows. the system is able to adapt to environmental changes; (3) flexibility: the system is easily accessible when needed; (4) reliable. the system can minimize errors and function properly; (5) formalization. formalization measures the extent to which a system contains rules or procedures; dan (6) media richness. measure the extent to which the system uses various alternative media to simplify and speed up communication. the effect of top management support on the quality of accounting information systems. mahring (2002) explains the importance of top management support in the success of information systems. mcleod & schell (2007) stated that top management support is one of the factors that have an impact on information systems. agree with schwalbe (2006) which states that top management support is the main support in the information system used. furthermore, laudon & laudon (2014) stated that information systems can be implemented if there is user involvement and are supported by top management because they have more opportunities to shape information systems according to business priorities and needs, and more opportunities to control the results. the same opinion was also conveyed by olson (2004) who revealed that top management support is one of the keys to the success of implementing information systems. research by sharma & yetton (2003) concluded that management support is considered an important factor in the success of a management accounting system. the form of top management support is in the form of establishing a new structure, a supervisory system, a coordinating mechanism and motivating performance improvement. this is supported by the research of nathan et al. (2004) who stated that top management support has been identified as an important factor for the success of an organization. the results of this study indicate that a framework in understanding the impact of top management support on the performance of information systems in an organization. research conducted by dong et al. (2009) concluded that the position of top management support is very important in the implementation of a management accounting system, which understands the concept of work in an organization. top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 216 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 research by dong et al. (2009) supported by hwang et al. (2012) who stated that in addition to training, top management support can also affect the implementation of information systems. likewise hussein et al. (2007) argued in the results of their study that top management support has a significant effect on the success of information systems. top management support is significantly and positively related to the dimensions of information system success: these findings further strengthen the argument that top management support has a considerable influence on the success of management accounting information systems (hertati, et al, 2020). top management support is significantly and positively related with the dimensions of si success. stare (2011) in his research suggests that the support provided by top management can be in the form of planning, monitoring and evaluating the results achieved, overcoming problems, facilitating resources and providing rewards to achievers. furthermore, top management plays a role in implementing information systems, in the form of observation and participation in implementing information systems (arnoldina, 2010). based on the description above, the quality of accounting information systems is indicated by the more optimal top management support is given, the higher the success of information systems is achieved, the performance of information systems and the success of information systems with the participation and involvement of top management, so it can be said that top management support has an effect on quality. accounting information systems and offers advice and alternatives. figure 1: research framework h1: the top management support function affects the management accounting information system methods research methodology: the method used in this research is descriptive and explanatory. the population in this study were related sub-units at higher education institutions in south sumatra, as many as 120 samples in 15 universities. the sample was obtained through simple random sampling technique using the slovin formula (cooper & schindler, 2006), as follows: n 1 + n(e)2) so that it is obtained a sample as follows 𝟒9 𝑟𝑜𝑢𝑛𝑑𝑖𝑛𝑔 𝑡𝑜 37 = 119 1 + 119(0.1)2) of which: lecturer work management information system input teaching community service, research, guiding students information systems process management accounting salary and awards dosen ad art college top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 217 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 n: sample size n: population size e: inaccuracy leeway percent due to sampling which can still be tolerated or desirable for example 5%, 10% and more. the observation unit in this study is the people who work in related units as administrators of management accounting information systems in tertiary institutions. this study uses primary data, while the data collection method used is a questionnaire assisted by google form. the validity test was conducted which was used to determine the feasibility of the items in the questionnaire to determine the variables and the reliability test to measure the reliability of the object being measured. data analysis was carried out by descriptive analysis and verification. descriptive analysis was carried out with a balanced categorization using inter-quartile ranges (cooper & schindler, 2006). the verification analysis used to test the hypothesis in this study is to use the structural equation modeling (sem) component or variance based on what is known as the partial least square (pls). results and discussion top management support: measured through three dimensions, namely evaluate, direct and monitor. each of the variables and dimensions of top management support is measured through five indicators. the overall indicators are operationalized into ten statement items. the following is a descriptive analysis for each dimension and its interpretation. table 1. descriptive statistics of top management support variables variable dimention statistical measure relative frequency min max average sd 0-1 1-2 2-3 3-4 4-5 top management support functions evaluate 1,5 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 direct 1,5 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 monitor 1,3 5,0 3,8 0,7 0,0 11,7 31,1 32,3 32,5 5,1 participation 1,7 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 commitment 1,9 5,0 3,9 0,5 0,0 8,1 38,6 45,8 37,1 8,2 source: data processed statistical 2020 from table 1, the people who work in related units as administrators of management accounting information systems in tertiary institutions are shown top management support through the operation of the management accounting information system sampled in this study has an average value of 3.6 seen of the evaluate dimension which falls into the high category. it can be interpreted that the accounting information system used in related units as administrators of management accounting information systems in tertiary institutions has been assessed and evaluated by top management in helping smooth company activities periodically. the direct dimension has an average of 5.0, which is in the high category which indicates that the use of management accounting information systems makes users motivated / motivated to complete tasks and responsibilities optimally through direction and communication built from management. the dimensions of the monitor have an average of 3.8 in the high category. this means that the use of management accounting information systems in colleges that are the research samples has been monitored both in terms of work completion and provision of resource allocation to support the smooth operation of the accounting information system used. if you pay attention to each dimension, the lowest dimension is the evaluate dimension with an top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 218 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 average value of 3.6, while the highest is the monitor dimension, which means that top management support carried out in bumn is mostly applied through monitoring. the results of the calculation of the relative frequency (table 1) can explain as much as 5.2% of the unit of analysis which states that the evaluate is still low in the involvement of top management. 1.7% of the analysis unit stated that direct has not been entirely carried out to realize top management support. 6.9% of the analysis unit stated that the supervision of the management accounting information system implementation has not been fully achieved. the explanation of each dimension is as follows: management accounting information system functions: management accounting system quality variables are operationalized using 6 (six dimensions), namely integration, following, flexibility and reliability, formalization, media richness. each dimension of the management accounting system function is measured by means of twelve indicators. the overall indicators were operationalized into twelve statement items. table 2. descriptive statistics variable functions of management accounting information systems variabel dimensi statistical measure relative frequency min max average sd 0-1 1-2 2-3 3-4 4-5 5 management accounting information system functions integrated 1,6 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 follow 1,7 5,0 3,5 0,8 0,0 20,3 35,2 34,1 44,2 3,2 flexibility 1,3 5,0 3,8 0,8 0,0 12,7 31,1 32,3 31,5 5,1 reliable 1,6 5,0 3,6 0,9 0,0 6,9 35,7 33,8 43,6 8,2 formalization 1,8 5,0 3,9 0,2 0,0 6,1 38,6 45,8 35,1 8,2 media richness 1,7 5,0 3,8 0,7 0,0 12,7 31,1 42,3 32,5 5,1 source: data processed statistical 2020 the integration dimension has an average score of .0 in the high category, meaning that in general the analysis unit considers the management accounting information system used to have connected the components and the transaction processing system. flexibility dimension has an average score of 1.3 in the low category (not qualified). this means that so far the management accounting information system used in the unit of analysis is able to adapt to user needs and is able to adapt to environmental changes. the reliable dimension has an average score of 1.6 in the low category. this means that the management accounting information system to produce financial reports used in the unit of analysis has been reliable and has many errors. among the six dimensions, integration and reliability have the greatest value which indicates that the management accounting information systems in the majority of tertiary institutions are not connected to one another and are not reliable. however, there are still some units of analysis that do not feel that the management accounting information system used has unqualified attributes. based on the results of the calculation of the frequency of analysis (table 2), it shows that the management accounting information system application used is not integrating between components and the transaction processing system, namely 1.7%, less flexible by 3.4% and less reliable at 3.4%. furthermore, to find out the quality of the management accounting information system in the high school, it will be explained from the distribution of respondents' responses in each statement item, namely integration, following, flexibility, formalization and mediation. based on the phenomena, problem formulations, hypotheses and research results, the following conclusions are obtained: top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 219 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 1. top management support affects the quality of the management accounting system. not yet qualified because the management accounting system is due to the support provided by top management has not been fully provided. top management support affects the functions of the management accounting system so that to improve the function of the management accounting information system, several things need to be considered in top management support, namely: 2. review of the implementation of the accounting information system is carried out continuously, not only when there is a data mismatch, both at the central and regional levels. 3. motivating employees through regular meetings to solve problems that occur so that subordinates feel cared for in continuing to carry out their daily work activities. 4. increase support for the provision of resources, both infrastructure and human resources. this is of course done in an effort to increase adequate reward criteria and increase the capacity of human resources through training related to the design and implementation of accounting information systems. the results of this study also meet the characteristics of scientific research, namely replicability and generalizability, so it is recommended for other researchers to conduct research again based on the results of this study with the same research method, on different units of analysis and samples to show the same results so that it will increase confidence in the research that has been done and the usefulness of the research can be widely accepted because the scope of validity of the research results is accepted by many organizations. based on the research results, it can be seen that the cause of the management accounting system is not qualified because several factors such as the management accounting system available in the company are not yet integrated, not flexible, difficult to access, not normalized properly, and often have errors / disturbances. based on the results of the research conducted, it can be seen that the organizational culture of state-owned enterprises in palembang is not optimal because there are still state-owned enterprises that place employees who are irrelevant to their expertise, employ employees with various types of work, there are several sections / departments that do not have a function. what is clear, there are employees who are not placed on the right side, there are employees who accept assignments that are not from their direct supervisors, there is still a lack of clarity of instructions from superiors, people who work in related units as administrators of management accounting information systems in colleges that do not have adrt standard operating procedures and for colleges that already have sops, there are employees who do not carry out work in accordance with their adrt. based on the results of the study, the influence of the top management function on the function of the management accounting information system was 5.56%, meaning that the increase in the function of higher education institutions would also improve the function of the management accounting information system. from the above results it can be said that the results of hypothesis testing indicate that top management support affects the function of the management accounting system and is acceptable for lecturers' salaries and responsibilities. conclusion based on the results of research, top management support affects the function of the accounting system for higher education in south sumatra, does not meet the requirements top management support functions in higher education management accounting information systems hertati, nazarudin, & fery 220 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 because the accounting system is not integrated, inflexible, has not been reliable due to inaccurate, unreliable, and non-formal data. top management support at tertiary institutions in south sumatra is not optimal because there is still a division of tasks (division of labor), departmentalization, and assignment of instructions (authority of command) which are so heavy that they are not balanced with a decent salary, as well as formalization. job that is not good. the results of this study have discussed issues that have been raised previously in the background of the study, but there are several things that need to be suggested in connection with the results of the study that show little effect such as hiring lecturers and the high educational status of lecturers is not balanced with the salary they receive is so low. with the quality of teaching that is heavily proxied, this is what causes lecturers to change jobs because of the heavy mental pressure they face. this research was conducted to provide input to the managers of higher education institutions in indonesia to pay more attention to the workload of lecturers in educating the nation's children. hopefully this research can be investigated by subsequent research with different test tools and different variables to strengthen the findings that have been made. references anders rom. 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(2020). nasib dosen swasta di tengah covid-19: gaji minim dan terancam tak dibayar. https://www.kliksaja.co/read/klik-news/nasib-dosen-swasta-di-tengah-covid-19gaji-minim-dan-terancam-tak-dibayar the illomata international journal of management ilomata international journal of tax & accounting (ijtc) p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 2 april 2021 page no. 146-158 https://www.ilomata.org/index.php/ijtc 146 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance iman supriadi1, wulandari harjanti2, rahma ulfa maghfiroh3 12faculty of economics, stie mahardhika surabaya 3faculty of economics, sunan ampel university of surabaya correspondent: iman@stiemahardhika.ac.id submitted : march 3, 2021 revised : march 30, 2021 published : april 30, 2021 abstract the bookkeeping occupation has an essential function in offering dependable monetary info for the federal authorities, financiers, creditors, investors, workers, debtors, in addition to for the general public as well as various other curious celebrations. this study intends to analyze the effect of locus of control, auditor expertise, and organizational commitment on auditor performance, towards analyze as well as evaluate whether auditor proficiency mediates the impact of locus of command as well as business dedication on auditor efficiency. this type of research is a quantitative study with a causal approach. data collection was carried out by dispersing questionnaires straight towards auditors that operate at the tax obligation bookkeeping solid in surabaya. the results showed that locus of control had a positive effect on auditor expertise and auditor performance. the same thing happened to the organizational commitment variable. auditor expertise has a significant effect on auditor performance and the auditor expertise variable can moderate the impact of locus of command as well as business dedication on auditor efficiency. this examination shows the impact of locus of command as well as business dedication on auditor efficiency. the outcomes revealed that if the auditors have a higher dedication towards the company, it will result in increased performance. these findings have implications for the inculcation of organizational and professional values in auditors. keywords: behavioral accounting, locus of control, auditor expertise, auditor performance. introduction the auditor profession has been in the public spotlight in recent years. there are several phenomena of cases that occur related to violations of the auditor's code of ethics that occur in the company of the kilien. the bookkeeping occupation has an essential function in offering dependable monetary info for the federal authorities, financiers, creditors, investors, workers, debtors, in addition to for the general public as well as various other curious celebrations. to sustain the excellence in performing its responsibilities as well as features correctly, it is required towards having a certified as well as dependable auditor's efficiency. as professionals, auditors must avoid carelessness and dishonesty. to satisfy their specialist obligations, an auditor is needed towards carrying out jobs along with a sensible degree of accuracy, proficiency, as well as vigilance in every situation (otley and pierce 1995). deviations against this standard will result in undesirable underperformance. research on behavioral accounting that examines the variables that affect auditor performance has been carried out, but still shows inconsistent results. the following will describe the inconsistencies in the results of research that have been conducted by previous researchers. https://www.ilomata.org/index.php/ijtc mailto:iman@stiemahardhika.ac.id mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 147 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 among the elements that affect auditors, efficiency is a locus of command. locus of command is an idea industrialized through rotter (1966). rotter (1996) in donnelly et., al. (2003) specified that people establish assumptions around their excellence in specific circumstances which will certainly depend upon their habits or even be managed through celebrations outdoors on their own. some scientists have discovered that locus of command has a favorable impact on auditor efficiency (donnelly et., al. 2003). another factor that influences the performance of auditors is auditor expertise. expertise is superior performance in a specific task using ability as an operational measure in auditing (bonner and lewis 1990). ashton (1990) defines expertise as the ability that is required to perform a certain task as well as possible. researchers have found that the expertise or competence of auditors has a positive effect on auditor performance (buchanan 2006; usman et al. 2014). business dedication is one more element that impacts auditor efficiency. parker as well as kohlmeyer (2005) specify business dedication as the family member's stamina of an individual's recognition of a company as well as their participation in a specific company. 3 elements are associated with the company, specifically a certain idea as well as approval of the worths as well as objectives of the company, the wish to perform whatever in your energy for the company as well as lastly a solid wish towards staying a participant of the company. several research study outcomes discovered that business dedication has a favorable impact on auditor efficiency, specifically ali, bo (2018), anugerah, r., anita, r., nelly sari, r., & zenita, r. (2016), srimindarti, c., sunarto, & widati, lw (2015), sunyoto, y., lely, n., & agus, a. (2019) as well as winarja, w., sodikin, a., & widodo, d. (2018). referring to previous research, research on the effect of individual characteristics on auditor performance in community bookkeeping companies is still performed in a restricted range. research on auditor performance is often conducted on internal auditors. this examination tries to carry out a research study on auditors that operate in the general public bookkeeping solid in surabaya. this examination intends to analyze as well as evaluate the impact of locus of command, auditor proficiency, as well as business dedication on auditor efficiency, towards analyzing as well as evaluate whether auditor proficiency mediates the impact of locus of command as well as business dedication on auditor efficiency. this research is expected to be useful for the development of behavioral accounting theory, particularly in the area of bookkeeping. the results of this study are also expected to be a reference for partners in public accounting firms in encouraging auditors to always maintain performance. another benefit is that this research is expected to serve as a reference for further research interested in examining the performance of auditors. based on the inconsistency of research results that have been conducted by previous researchers, as described in the previous paragraph, it is wished that this research study will certainly add to partners of public accounting firms to consider the locus of control when accepting new auditors so that they can show performance under company expectations. the attribution concept was initially industrialized through heider (1958). this concept argues that a person's habits are identified through a mix of interior requirements, specifically, elements coming from outward an individual, as well as outside requires, specifically elements coming from outdoors. luthans (1987) additional industrialized as well as specified that these concept conditions are exactly just how an individual discusses the reasons for various other people's habits or even themself. the trigger for an individual to select a habit can easily mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 148 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 originate from the interior (dispositional associates) as well as outside (situational associates). interior triggers tend to describe elements of private habits, one thing that currently exists in an individual, like individual characteristics, self-perception, inspiration, and capacities. on the other hand, outside triggers are much a lot extra administered in the atmosphere that impacts a person's habits, like social problems, social worths, as well as people's sights. based upon this concept, whether the efficiency of an auditor readies or otherwise could be affected through interior elements as well as outside (ecological) elements of the auditor. this theory is closely related to locus of control, organizational commitment, and auditor expertise because all of these variables are internal factors that are owned by each auditor and can affect auditor behavior in the workplace. blumberg and pringle (1982) recommend that private efficiency is a work of 3 measurements, specifically wish, opportunity, and capability. wish is an incentive that motivates workers to carry out a business job. capability is the capacity, ability, as well as power had through a private towards performing the function designated towards him. on the other hand, it is most probably a job atmosphere element that promotes efficiency. within the range of auditors that operate in the general public bookkeeping solid, research study has been performed that analyzes the efficiency of auditors along with their habits in the work environment. the outcomes of the research study through donnelly et., al. (2003) discovered that auditor efficiency is affected through the locus of business dedication and command. auditors along with locus of command tend to become deceitful to accomplish their objectives. auditors can easily control the investigation procedure to obtain a great efficient evaluation. the business dedication adjustable has a favorable impact on auditor efficiency. an auditor that is dedicated to the company will certainly attempt to perform his responsibilities inning accordance with his obligations to ensure that it will certainly lead to enhanced efficiency. srimindarti (2015) evaluated the locus of command as well as auditor proficiency on efficiency. the outcomes of this particular examination discovered that locus of command has a considerable impact on efficiency, in addition to the adjustability of auditor's proficiency has a considerable impact on auditor efficiency. rotter (1966) states that individuals have beliefs and perspectives on an event whether they can control events that can affect their success or are managed through celebrations outdoors on their own. people that tend to characteristic lead to their very personal initiatives or even people that think that occasions are actually under their command go through the interior locus of command. on the other hand, people along with outside locus of command think that they cannot command the occasions or even the outcomes they accomplish. since they think that exactly just what they perform will certainly identify the outcomes they have a collection, based upon the summary over, it could be discussed that people along with interior locus of command tend to perform much a lot extra function. this idea will certainly produce higher inspiration outward all of them to ensure that they are certainly not quickly affected through an unsupportive atmosphere. people along with outside locus of command have extremely genuine distinctions along with people that have an interior locus of command. people along with outside locus of command have the idea that the outcomes they acquire are identified much a lot extra through elements past their command like destiny, good fortune, as well as changes over which they have no command (rotter 1966). this belief will influence their behavior so that they tend to be easily influenced by the environment, have less fighting power, and are easy to give up. mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 149 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 research that examines the effect of auditors' locus of control on their work behavior in public accounting firms has been conducted, including frucot and shearon (1991) that discovered that locus of command possessed no impact on efficiency. hyatt as well as prawitt (2001), donnelly et., al. (2003), anugerah, r., anita, r., nelly sari, r., & zenita, r. (2016), as well as damico, js, & sphere, mj (2019) discovered that locus of command possessed a considerable impact on efficiency. auditors. on the other hand, malone as well as roberts (1996) evaluated the impact of locus of command on the habits of decreasing investigate high top premium. the outcomes of these research researches suggest that locus of command has no considerable impact on the habits of decreasing audit quality. business dedication has been determined as a crucial consider comprehending as well as discussing the connection between function habits of workers in the company. parker as well as kohlmeyer (2005) specify business dedication as the family member's stamina of an individual's recognition of a company as well as their participation in a specific company. 3 elements are associated with the company, specifically a specific idea as well as approval of the worths as well as objectives of the company, the wish to perform whatever in your energy for the company as well as a solid wish towards staying a participant of the company. there have been several researchers who tested auditors' organizational commitment to their behavior at work in public accounting firms, such as donnelly et al. (2003), who investigated the impact of business dedication on auditor efficiency. the outcomes discovered that the adjustable business dedication has a favorable impact on auditor efficiency. anugerah, r., anita, r., nelly sari, r., & zenita, r. (2016) discovered that business dedication is likewise revealed to have a considerable impact on the individual efficiency of auditors. when it comes to mathieu, j. e. as well as decoration. m. zajac. (1990) likewise discovered that auditors' business dedication has a considerable impact on the action of approving inefficient bookkeeping habits of auditors. expertise is superior performance in a specific task using ability as an operational measure in auditing (bonner and lewis 1990). meanwhile, ashton (1990) defines expertise as the ability that is required to do a certain task as well as possible. research in the field of auditing has implicitly or explicitly adopted conclusions from the psychology literature as a fundamental assumption in an attempt to examine the effect of expertise in the field of auditing. the psychology literature provides two general conclusions about expertise. first, a deep understanding of specialized knowledge is an essential factor influencing expertise. second, qualified skills increase through years of work experience. according to cognitive psychology theory, a skilled professional can do a job better. an expert also can better organize information in memory (koonce and mercer 2005). auditors who have a variety of expertise and skills to perform audit work will experience relatively little conflict with their work (donnelly et al. 2003). an auditor's expertise is reflected in the certification of his various skills to perform audit work in various fields. this is because, to audit certain areas of audit, appropriate expertise is required. therefore, an auditor is required to perform tasks with a sufficient level of expertise in every case at hand (otley and pierce 1995). auditors are also required to always follow education continuously to keep up with the times. locus of control or even command facility describes the degree towards which the private thinks that he can easily command the elements that impact him. people that have a higher interior command facility think that their habits as well as activities, although certainly not mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 150 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 completely, impact different occasions in their lifestyle. people along with a higher outside command facility think that possibility, destiny, or even other individuals are the primary identifying elements for points that occur towards all of them. the efficiency is a determinant utilized towards evaluating the outcomes of the application of jobs as well as obligations provided due to the company (gibson et., al. 2012). scientists have determined that locus of command is carefully associated with private efficiency. people along with interior locus of command tend to be placed in such a lot of extra initiative when they think that their initiatives have a particular function (plares 1968). additionally, people along with interior locus of command have actual problem-solving skills and can use information better so that they tend to have better performance. the opposite condition will be obtained if the auditors have an internal locus of control, they lack fighting power, lack problem-solving skills, and are less able to use information properly so that it will result in less than optimal performance. srimindarti, c., sunarto, & widati, l. w. (2015) and damico, j. s., & ball, m. j. (2019) discovered that locus of command has a considerable impact on efficiency. based upon the description over, the complying with hypothesis is developed: business dedication is specified as private stamina as well as private participation in a specific company. business dedication is stated to become a condition or even level towards which a worker edges along with a specific company as well as its objectives, as well as means towards preserve subscription because of company. worker dedication towards the company is among the mindsets that show the sensations of such as or even do not like of a worker in the direction of the company they help (robbins as well as court 2013). the excellence, as well as efficiency of an individual in an area of function, is mostly identified due to the individual's dedication towards the company. the auditor's dedication towards the company could be utilized as a motivation towards function much a lot better or even the other way around, triggering somebody towards leave behind their task because of a need for various other dedications. the straight dedication will certainly offer higher inspiration as well as have a favorable impact on the effectiveness of an auditor. the outcomes of the research study carried out through anugerah, r., anita, r., nelly sari, r., & zenita, r. (2016) suggest that business dedication has a considerable impact on auditor efficiency. based upon the description over, the complying with hypothesis is developed: expertise is the main asset for a professional to carry out work. expertise is seen based on how broad and how well an individual is in performing the tasks that are the responsibility of the individual. an individual will not be able to do work under the goals of the organization they work for without having the ability to achieve these goals. when individuals are burdened with certain tasks, the individual will try to do the task according to their skills. the skill variable is the variable most likely to affect performance. under research in cognitive psychology, a person with expertise will be better at organizing information in memory, better-explaining data archetypes, and better at adjusting stimuli to relevant categories (koonce and mercer 2005). because of their abilities, experts can perform tasks better so that they can perform better and more efficiently. setiawan et al., (2020) found that expertise has a considerable impact on efficiency. these results are supported by effect et al., (2019). based upon this description, the complying with hypothesis is developed: locus of control is one of the factors related to individual expertise. people along with the interior locus of command cannot learn something (spector 1988). this condition is very mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 151 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 encouraging when individuals are required to improve their skills. therefore, locus of control has a relationship with auditor expertise. auditors with an interior locus of command think that the factors within themselves determine what they achieve. this will not prevent auditors from increasing their expertise because auditors have inner motivation to improve their skills to support the work they do. auditors have a desire to improve their expertise without any demands from external parties. business dedication is a problem through which a worker edges along with a specific company as well as its objectives as well as wishes towards preserving its subscription in the company. auditor performance is a quality work result accomplished through an auditor in performing his responsibilities according to the responsibilities designated towards him. so it can be concluded that the greater the desire of an auditor to achieve maximum audit objectives, the better the performance that will be given by an auditor, especially the responsibility and the auditor's loyalty to the organization. the higher the desire of an auditor to achieve maximum audit objectives, the better the performance an auditor will provide, especially the responsibility and the auditor's loyalty to the organization. likewise with the competence of auditors, the better the competence of the auditor, the better the performance provided by an auditor, especially on the results of the audit. based upon the description over, the complying with hypothesis is developed: mehods this kind of research study is a quantitative examination along with an original method. the populace of this particular examination is auditors that operate in community bookkeeping companies throughout indonesia. info concerning the variety of community bookkeeping companies in indonesia is acquired coming from the variety of community bookkeeping companies signed up in the directory site of the indonesian accounting professionals solid, the community accounting professionals area. the example of this particular research study is the auditors that operate at the general public bookkeeping solid in surabaya. sampling was determined using the purposive sampling method, with the criteria used based on judgment, namely the auditors who work in the office. the kind of information utilized within this particular research study is the main information. main information is information acquired straight coming from information resources that are particularly acquired as well as straight associated with the issues examined (hair et., al., 1998). the information within this particular examination was acquired through providing questionnaires to participants. the data sources in this study were auditors who were selected as respondents according to predetermined criteria. data collection was carried out through dispersing questionnaires straight towards auditors that operate at the tax obligation bookkeeping solid in surabaya. auditor performance variables are determined utilizing concerns industrialized through mahoney et., al. (1965). the tool of the auditor's efficiency adjustable is determined by using 5 questionnaires. each respondent is asked to evaluate the performance which is divided into five performance dimensions, namely planning, investigation, coordination, supervision, and representation. the locus of control variable was measured using questions from kreitner and kinichi (2014). where this instrument is measured by five questions. each respondent is asked to identify indicators which include motivation, achievement, rewards at work, ability to carry mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 152 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 out work, and job satisfaction. organizational commitment variable is determined utilizing concerns industrialized through mowday et., al. (1979). this tool includes 5 concerns. the dimension method utilizes a likert factor 1-5 range. greater ratings stand for higher business dedication, whereas reduced ratings stand for reduced business dedication. the adjustability of auditor proficiency is determined utilizing concerns industrialized coming from chao et., al. (1994). this tool includes 5 concerns. the dimension method utilizes a likert factor 1-5 range. greater ratings stand for higher abilities, while reduced ratings explain reduced abilities. in architectural formula modeling, screening the credibility of the research study tool such as a questionnaire is carried out using the confirmatory factor analysis approach, which measures the validity of the manifest variable against the latent variable, while the reliability test of the research instrument is carried out using cronbach alpha. the pattern of influence between variables to be studied is the causal impact of several private variables on several reliant variables. the form of causal effect in this study uses a model that is not simple, namely the existence of a variable that has multiple roles, as an independent variable in one case but becomes the dependent variable in another case. this form of influence requires an analytical tool capable of simultaneously explaining these effects, namely structural equation modeling (sem). sem processing uses the analysis of moment structure version 22.0 program. result and discussion the variety of examples within this particular examination were 105 participants. based on descriptive statistics, the average organizational commitment variable is 3.46. this shows that the respondents' answers tend to agree. the auditors agree that the public accounting firm is the right organization so that the auditors are ready to accept any given assignment. besides, auditors also feel proud and comfortable to join the public accounting firm as the best place to work because it can inspire them to work well. likewise for other variables, the average performance variable is 3.48, locus of control is 3.60 and auditor expertise is 3.44, which shows that the respondents' answers tend to agree. measurement model is a measurement that shows how the manifest variable (indicator) represents the latent variable to be measured by testing the validity and reliability of latent variables through confirmatory factor analysis. this study will test the validity of the construct by looking at convergent validity. tabel 1. measurement of construct reliability and ave construct cr ave ave square conclusion loc 0.946 0.777 0.882 valid and reliable oc 0.961 0.833 0.912 valid and reliable ae 0.950 0.793 0.891 valid and reliable ap 0.937 0.749 0.866 valid and reliable source: amos 22.0 output the results of the calculations shown in table 1 show that all latent variables have a construct reliability value higher than the removed worth, specifically 0.7, it could be wrapped up that adjustable signs have great interior uniformity. the variance drawn-out worth will certainly be smaller sized compared to the build dependability worth. since the 4 variables acquire a worth drawn-out variance value> 0.50, the variance drawn out coming from the signs is higher for the mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 153 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 development of latent variables. a discriminant validity test is conducted to test two or more constructs whether they are different and each is an independent construct. based upon dining table 2, it could be viewed that each adjustable has a greater ave square value when compared to the correlation between constructs, this shows that each is an independent construct. tabel 2. discriminant validity loc oc ae ap loc 0.882 0.406 0.579 0.216 oc 0.406 0.912 0.221 0.374 ae 0.579 0.221 0.891 0.290 ap 0.216 0.374 0.290 0.866 source: amos 22.0 output noted : loc: locus of control oc: organizational commitment ae: auditor expertise ap: auditor performance the next stage is the model suitability test where this test is carried out using the parameters presented in table 3. if all of these tests meet the required criteria, it means that the model can be accepted through structural model testing. table 3 shows that more than half of the criteria used have a good value even though there are still two sub-standard model test requirements, but the value is the value that is closest to the predetermined standard. tabel 3. goodness of fit test goodness of fit index cut-off value estimation conclusion chi-square (χ2) expected small 172,882 good significance probability ≥ 0,05 0,230 good rmsea ≤ 0,08 0,028 good gfi ≥ 0,90 0,866 marjinal agfi ≥ 0,90 0,824 marjinal cmin/df ≤ 3,00 1,081 good tli ≥ 0,95 0,994 good cfi ≥ 0,95 0,995 good source: amos 22.0 output after testing the measurement model and structural suitability of the model, the next step is testing the hypothesis proposed in the examination. the outcomes of hypothesis screening are displayed in table 4. 0.316 0.354 0.192 0.204 0.500 locus of control organiz. auditor expertise auditor perform mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 154 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 figure 1. research model framework based upon dining table 4, it is understood that locus of command has a considerable favorable impact on auditor proficiency. these outcomes are constant along with the forecast that locus of command has a considerable impact on auditor efficiency. people along with interior locus of command have the tendency to get techniques as well as don't quit quickly as well as are inspired towards enhancing abilities. the outcomes of this particular examination sustain the research study carried out through srimindarti, c., sunarto, & widati, l. w. (2015). the results of hypothesis testing indicate that auditor expertise has a considerable impact on auditor efficiency. this schedules to several possibilities, such as based on the respondent's description, it can be seen that most respondents tend to agree with the auditor's expertise question, meaning that the respondent has sufficient expertise so that it influences performance; as well as auditors, both expert and less skilled, always work under audit standards so that their performance is maintained. the outcomes of this particular examination are actually according to the research study of setiawan et al., (2020) and effect et al., (2019) based upon dining table 4, it could be viewed that locus of command has a favorable impact on auditor efficiency. the outcomes of this particular examination indicate that auditors who believe that the outcomes acquired are much a lot extra identified through internal and external factors will do their best and will not give up easily, resulting in high efficiency. the outcomes of this particular examination support the research of srimindarti, c., sunarto, & widati, l. w. (2015) and damico, j. s., & ball, m. j. (2019). table 4 shows that business dedication is shown towards having a considerable favorable impact on efficiency. auditors that have a higher dedication towards the company will certainly be inspired towards function efficiently to preserve subscription in the company leading to enhanced efficiency. the outcomes of this particular examination sustain the research study of anugerah, r., anita, r., nelly sari, r., & zenita, r. (2016) that discovered that business dedication has a considerable impact on auditor efficiency. table 4. significance test of the effect between constructs construct estimate s.e. c.r. p-value conclusion auditor expertise <--locus of control 0.500 0.090 5.574 0.000 significant auditor expertise <--org. commitment 0.192 0.081 2.357 0.018 significant auditor perform <--org. commitment 0.354 0.090 3.928 0.000 significant auditor perform <--locus of control 0.204 0.102 1.995 0.046 significant auditor perform <--auditor expertise 0.316 0.120 2.625 0.009 significant source: amos 22.0 output mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 155 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 based on the results of the direct and indirect relationships in table 5, it can be concluded that the variable of auditor expertise can moderate the impact of locus of command as well as business dedication on auditor efficiency. this outcome is since the relationship between expertise and performance has a significant effect so that the direct relationship is eliminated. the results of the calculation of the guide, as well as indirect impacts, are displayed in the complying with dining table. table 5. direct and indirect effects construct direct effect indirect effect total effect decision ap<---loc 0.204 0.158 0.362 mediate ap<---oc 0.354 0.061 0.415 mediate source: amos 22.0 output conclusion and recommendation this examination analyzes the impact of locus of command, business dedication, as well as auditor proficiency on auditor efficiency. the outcomes revealed that the locus of command possessed a considerable impact on auditor proficiency. that's if the auditors have a locus of command, the auditors tend to have the maximum expertise. this is because auditors with a locus of control have problem-solving skills and can use information well so that they will not experience much difficulty to improve their skills. locus of command has a considerable impact on auditor efficiency. these findings indicate that if auditors have a locus of control, then auditors are less likely to be influenced by the environment, resulting in maximum performance. meanwhile, business dedication has a considerable impact on auditor efficiency, which implies that when auditors have greater business dedication, the auditors will try to do work under company demands to maintain membership in the company. this auditor's motivation will result in higher performance. the searchings for this particular examination offer empirical sustain for attribution concept which conditions that the trigger of an auditor's behavior can come from within the auditor or come from outside the auditor. auditors that have a locus of command think that the outside atmosphere plays a greater role in supporting the achievements they get so that their performance will be more determined by the surrounding environment. the next results show that if the auditors have a higher dedication towards the company, it will result in increased performance. these findings also prove that the behavior of an auditor can be influenced by internal factors of the auditor. apart from theoretical implications, this research also has implications for policy, where the management of the public accounting firm should provide training to auditors with an interior as well as an outside locus of command. the form of training that is more suitable for individuals with an internal locus of control is training that places more emphasis on implementing highquality audit programs. repeated training that focuses on audit quality is expected to improve auditor performance. this study proves the impact of business dedication on auditor efficiency. this finding has implications for the inclusion of organizational and professional values in auditors. implanting organizational values in the auditor can convince the auditor to accept the organization's goals. increasing the auditor's confidence in the objectives as well as the worths of the company will increase auditor performance. mediating effects of auditor expertise on the effect of locus of control and organizational commitment on auditor performance supriadi, harjanti, & maghfiroh 156 | ilomata international journal of tax & accounting volume 2 issue 2, april 2021 reference ali, b. o. 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(2014). effect of competence factor, independence, and attitude against professional auditor audit quality improve performance in inspectorate (inspectorate empirical study in south sulawesi province). iosr journal of business and management, 16 (1), 1-13. winarja, w., sodikin, a., & widodo, d. (2018). the effect of organizational commitment and job pressure to job performance through the job satisfaction in employees directorate transformation technology communication and information indonesia. international journal of business and applied social science, 4(2), 51-70. the illomata international journal of management international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 55-69 55| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fourteen years of sustainability reporting research in accounting: bibliographic studies rizky yuniar sururi1, y.anni aryani2, evi gantyowati3 universitas sebelas maret123 correspondent : rizky.yuniar.sururi@student.uns.ac.id1 diterima : november 10, 2022 diterima : january 25, 2023 diterbitkan :january 31, 2023 citation: sururi, r, y., aryani, y,a., gantyowati, e.(2023). fourteen years of sustainability reporting research in accounting: bibliographic studies. ilomata international journal of tax and accounting, 4(1), 55-69. https://doi.org/10.52728/ijtc.v4i1.603 abstract: some companies that still apply the singleprofit paradigm cause environmental damage, so there is a need for accountability to stakeholder through media sustainability reports. this study aimed to provide an overview of the development of sustainability reporting research for 14 years in indonesia. charting the field and analyzing community approach were used in this research. a research sample consisting of 50 articles obtained from 21 journals accredited sinta 2 from 2009 to january 2022. the results indicated that the most widely used research method is the analytical method and the articles that received the most citations were published in 2015. in addition, this study also found that there are still research variables that are inconsistent with sustainability reporting, namely antecedent variables in the form of audit committees and consequence variables in the form of financial performance. therefore, it is necessary to conduct an in-depth study to determine the cause of the inconsistency of these variables. keywords: literature review, sustainability reporting, analytical method this is an open access article under the cc-by 4.0 license introduction intense competition leads to competition in various sectors of the company, hence companies must be able to have good performance in order to survive and generate large profits. to earn a profit, the company carries out high natural exploration in the production process without considering the sustainability of the nature and community environment being explored. this is proven by some cases of environmental pollution such as the case of pt karya cipa nusantara kcn) which polluted the air in the form of flying ash bottom ash (pencemaran abu batu bara yang buat warga marunda jakut menderita, 2022)(janji pt kcn jalankan sanksi atas pencemaran akibat abu batu bara di marunda halaman all kompas.com, 2022) and pipe leak by pt lapindo brantas which causing contamination of resident's water (15 tahun lumpur lapindo: darat, air dan udara sekitar tercemar mongabay.co.id : mongabay.co.id, 2022). the company's environmental pollution becomes the reason for the conflict of interest between the company mailto:rizky.yuniar.sururi@student.uns.ac.id1 https://doi.org/10.52728/ijtc.v4i1.603 fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 56| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and its stakeholders. a conflict of interest occurs when a company has different interests from its stakeholders. the company has an interest in maximizing profit but ignores the social and environmental aspects. this is different from the interests of stakeholders who continue to prioritize environmental and social aspects according to the triple bottom line concept (aksan & gantyowati, 2020). the triple bottom line concept introduced by (elkington, 1998) urges companies to pay more attention to the balance of environmental, economic and social aspects with the result that companies can sustain and compete with other companies competitively. companies that have implemented the triple bottom line concept can account for their activities to stakeholders through sustainability reporting. the stakeholders can encourage companies to make quality sustainability reports. when the pressure is inside companies regarding high quality report, companies will produce high quality reports (rudyanto & siregar, 2018) . sustainability reporting is used by stakeholders to evaluate all forms of corporate responsibility activitites to the society as well as presented separately from the annual report (juwita & honggowati, 2021). the practice of sustainability reporting in indonesia has been started since the government passed law no. 40 of 2007 concerning limited liability companies and government regulation no. 47 of 2012. the implementation of laws and government regulations is an obligation for indonesian or foreign companies operating in indonesia to carry out social and environmental responsibility activities. if the corporation breaks the laws and government regulations, it will be subject to sanctions following the applicable laws and regulations. in 2017, the financial services authority (ojk) also issued ojk regulation no. 51/pojk.03/2017. the regulation requires financial services institutions, issuers and public companies to submit the sustainability report separately from the annual report. the issuance of laws and government regulations in indonesia is quite effective in urging companies to present sustainability reports consequently the trend of sustainability reporting increased from 2006 to 2019 (gunawan et al., 2022) . the increasing trend of sustainability reporting has become an attraction for researchers to conduct research on this topic both in indonesia and abroad. some research in indonesia conducted by (ardiana, 2022), (juwita & honggowati, 2021), (masum et al., 2020), (khafid & mulyaningsih, 2017) while abroad, such as (önder & baimurzin, 2020), (onyali & okafor, 2019), (khan et al., 2021), (rahman et al., 2020) . the variety of research results shows the uniqueness in terms of antecedent factors and consequence factors. the number of accounting and financial journals that evaluate and document various research results has attracted researchers to carry out further research related to the development of sustainability reporting practices in indonesia in the form of a bibliography. this study examines fifty articles on sustainability reporting published by accredited journals of the ministry of education, culture, research and technology in the classification of sinta 2. the journal selection in the category of sinta 2 was based on two things, namely, first, the article has been carefully selected in consequence they have good quality and is free from plagiarism. second, based on the regulation of the ministry of research and technology of the republic of indonesia number 9 of 2018 concerning accreditation of scientific journals, the category of fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 57| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sinta 2 has an accreditation rating with a value of (n), 70 n < 85. this rating indicates that the journal with the category of sinta 2 has a higher score compared to sinta 3 with a value of 60 n < 70, sinta 4 with a value of 50 n < 60 and sinta 5 with a value of 30 n < 40. the researcher did not include articles from journals in the sinta 1 category because of the limited sustainability reporting research articles published by journals with the category of sinta 1. this study adopted the method of charting the field and analyzing the community created by (hesford et al., 2006) to map and analyze the results of research on sustainability reporting in indonesia. the contribution of this study consists of three items, namely, first, classifying articles based on research topics, research methods, and discussing the comparison of articles in terms of topics and research methods. second, this article provides information related to citation analysis and centrality networks in sustainability reporting research in indonesia. third, this article provides information to future researchers that there are interesting variables and research methods for further investigation in the form of empirical research. method bibliographic research is the research developed by (hesford et al., 2006) in the field of management accounting by analyzing 916 articles using two approaches consists of charting the field and analyzing community. bibliographic research has also been applied in indonesia, for example on the topic of disclosure development, ifrs implementation and financial distress (aksan & gantyowati, 2020; amri & aryani, 2021; a. c. dewi et al., 2018). the approach taken by hesford et al (2006) was used in this study, namely charting the field and analyzing community. the charting the field approach is carried out by selecting articles and classifying articles based on research topics and methods. analyzing community approach is done by citation analysis and centrality network. citation analysis is carried out by analyzing citations taken from google scholar while the centrality network is carried out by analyzing the relationship between individual influences in several studies. google scholar was chosen because it provides information about the number of citations in published articles (herawati & bandi, 2017) . this study uses fifty articles on sustainability reporting obtained from accredited journals in the sinta 2 category. the criteria used in selecting journals are: 1. journals that have been accredited by the ministry of education, culture, research and technology in the sinta 2 category using the keyword "akuntansi" or "accounting" or "keuangan" in 2022, 2. journals can be accessed online, 3. the journal publishes articles related to sustainability reporting in indonesia. after going through the journal selection process, researchers find journals which match the criteria that have been set. the journals that published the most articles on sustainability reporting are the indonesian journal of sustainability management and accounting (ijsma) and the accounting analysis journal (aaj). the focus of the ijsma journal specifically covers the environment and sustainability, while the focus of aaj covers research that discusses the fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 58| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc relationship between sustainability reporting and financial aspects such as leverage, liquidity and profitability. we can see the list of selected journals in table 1. tabel 1. list of journals journals journals nickname the number of articles indonesian jurnal of sustainability management and accounting ijsma 10 jurnal dinamika akuntansi jda 3 jurnal keuangan dan perbankan jkp 3 indonesian journal of accounting research ijar 3 jurnal akuntansi paradigma jap 2 jurnal dinamika akuntansi bisnis jdab 2 jurnal ilmiah akuntansi bisnis jiab 2 riset akuntansi dan keuangan rak 2 indonesian accounting review iar 2 ekuitas jurnal ekonomi dan keuangan ekuitas 1 international business and accounting research journal ibarj 1 journal of accounting & investment jai 1 journal of islamic economics & banking jieb 1 journal akuntansi ja 1 jurnal akuntansi akrual jaa 1 jurnal akuntansi & bisnis jab 1 jurnal akuntansi & keuangan jak 1 jurnal of accounting & strategic finance jasf 1 jurnal riset akuntansi kontemporer jrak 1 kajian ekonomi dan keuangan kek 1 accounting analysis journal aaj 10 this study uses a research period that has lasted for fourteen years, namely from 2009 to january 2022 as shown in figure 1. the selection of 2009 as the initial observation was due to research articles on sustainability reporting in indonesia published by journals with the keyword "akuntansi" or "accounting" or "keuangan". the journal that published articles in 2009 is the journal of financial economics which is managed by the fiscal policy agency of the ministry of finance. as for the end of the observation, 2022 was chosen because the latest article on sustainability reporting published by the journal with the keywords "akuntansi" "accounting" or "keuangan" was published in january 2022. the journal that published articles in january 2022 is scientific journal accounting and business. based on figure 1, the development trend of sustainability reporting research shows fluctuations every year. figure 1 shows a significant increase in sustainability reporting research from 2018 to 2020. this is in accordance with the issuance from ojk regulation no. 51/pojk.03/2017. the rules of the regulation demand companies in indonesia to publish sustainability reporting hence more complete sustainability reporting data is available, especially disclosure of the economic, fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 59| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc social and financial aspects of companies within a period of one year after the issuance of the regulation. the existence of complete data related to sustainability reporting affects the interest of researchers in indonesia which is increasing the interest to conduct research on the topic of sustainability reporting. however, on the other hand, there is a decrease in the graph in 2022 in figure 1 due to articles on sustainability reporting published in 2022 which are included in the new research sample until january. therefore, articles on sustainability reporting published from february to december are likely to increase the trend of sustainability reporting research during 2022. figure 1. sustainability reporting research trends furthermore, the classification of the research period was adopted from (a. c. dewi et al., 2018). to classify the data, the research period is split into two periods to determine whether there has been an increase or reduction in the number of articles on sustainability reporting over time. the first period is the period between 2009 and 2015 and the second period is the period between 2016 and 2022 in january. based on this classification, we are aware of a rise in the quantitiy articles, which initially only published 14 articles (period 1), increasing to 36 articles (period 2). we can see the division of the research period on sustainability reporting in table 2. table 2. the division of the research period on sustainability reporting name of journals 2009-2022 2009-2015 2016-2022 sum % sum % sum % ekuitas 1 2% 1 7% 0% jab 1 2% 0% 1 3% jak 1 2% 1 7% 0% jai 1 2% 0% 1 3% jieb 1 2% 0% 1 3% ja 1 2% 0% 1 3% jdab 2 4% 0% 2 6% jaa 1 2% 0% 1 3% jasf 1 2% 0% 1 3% jrak 1 2% 0% 1 3% 0 2 4 6 8 10 12 14 16 2009 2011 2012 2014 2013 2015 2017 2018 2019 2020 2021 2022 sustainability reporting research trends fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 60| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc rak 2 4% 0% 2 6% ijsma 10 20% 0% 10 28% ibajr 1 2% 0% 1 3% jap 2 4% 1 7% 1 3% jda 3 6% 2 14% 1 3% jiab 2 4% 1 7% 1 3% jkp 3 6% 1 7% 2 6% kek 1 2% 1 7% 0% iar 2 4% 1 7% 1 3% ijar 3 6% 0% 3 8% aaj 10 20% 5 36% 5 14% total 50 14 36 results and discussion 1. classification of article a. classification of articles based on research topics we discuss the classification of articles by research topics in this part. the research topics are divided into four, namely antecedents, consequences, combinations of antecedents with consequences and the last other topics. an antecedent topic is a topic that discusses the factors that motivate companies to disclose sustainability reporting. the topic of consequences is a topic that discusses the influence of sustainability reporting on other research variables. the combination of antecedents and consequences is a topic that discusses antecedents and consequences in the same article. another topic is a topic that discusses the criteria for variables that are not included in the antecedent group and consequences, such as the topic of comparison between voluntary reporting and sustainability reporting. to be able to see more the research topic, we can see in table 3 as follows : table 3. classification of articles based on research topic topics 2009 2022 2009 2015 2016 2022 sum % sum % sum % antecedents 16 32% 4 29% 12 33% consequences 10 20% 5 36% 5 14% antecedents and consequences 1 2% 0% 1 3% others 23 46% 5 36% 18 50% in table 3, it can be seen that there are 16 articles discussing the topic of antecedents from 2009 to 2022 in january, after that there are 10 articles discussing the topic of consequences from 2009 to 2022 in january, the next article discussing the combination of antecedents and consequences only amount to 1 article and the last there are 23 articles that discuss other topics from 2009 to 2022. therefore, it is proven that articles which examine other topics, such as moderation, comparison, testing and implementation of sustainability reporting are the most researched topics from 2009 to fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 61| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2022 in january. furthermore, based on antecedent research topics, we can see the classification of variables more detail in table 4. table 4. the classification of antecedent variables antecedent variables sum % effects + no effect board member nationality 1 1% 1 multiple director 5 7% 3 2 foreign director 1 1% 1 independent manager 1 1% 1 social responsibility manager 4 6% 1 1 2 the community influential member 1 1% 1 board size 7 10% 2 2 3 board of independence 5 7% 1 4 role duality 1 1% 1 publishing sustainability report 1 1% 1 gender 4 6% 3 1 education 2 3% 1 1 board of directors meeting 3 4% 3 audit committee 10 14% 5 5 slack resources 1 1% 1 profitability 7 10% 2 1 4 leverage 6 8% 1 4 1 liquidity 5 7% 1 2 2 capability dimension 1 1% 1 company size 5 7% 2 2 1 based on table 4, the most dominant factor influencing sustainability reporting is the auditee committee factor which gets 14%. the establishment of an audit committee serves to help management publish sustainability reports requested by stakeholders and the public (wulandari et al., 2021) . through strict supervision from the audit committee, the company is getting better able to obey with the principles of good corporate governance (gcg) such as the transparency principle. the transparency principle explains that companies must be open in providing information on their company's activities so that supervision can run well. in table 5, the researcher discusses the classification of variables based on the topic of consequence. table 5. the classification of consequence variables consequence variables sum % effects + no effect financial performance 9 56% 4 2 3 company risk 1 7% 1 tax aggresiviness 1 7% 1 fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 62| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc market performance 1 7% 1 investment decisions 1 7% 1 company performance 3 20% 1 2 in table 5, we can see that sustainability report still has a positive, negative, and no effect on financial performance by 56%. the positive effect on financial performance occurs because if the company can disclose sustainability reporting then stakeholder confidence will increase and the financial performance, especially profitability and company value will advance too. the support from stakeholders will increase the company's working capital hence, it can facilitate the company's operations. mapping cause and effect relationship we present a causal relationship chart based on the factors that affect sustainability reporting in indonesia, based on 50 articles. (luft & shields, 2006) classify causal relationships into six models that apply an additive model consisting of additive, intervention, independent variable interaction, cyclical recursive, moderator variable interaction, and nonrecursive reciprocal. based on the grouping using the research model from (luft & shields, 2006), the researchers found 26 articles that used the additive model. next, we created a mapping of sustainability reporting research which can be seen in figure 2. figure 2. mapping cause and effect relationship fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 63| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc description bmn : board member nationality ed : education md : multiple director bdm : board of directors meeting fd : foreign director ac : audit committee cz : company size sr : slack resources im : independent manager pr : profitability srm : sosial responsibility manager le : leverage cim : the community influental member lq : liquidity bs : board size cd : capability dimension boi : board of independence fp : financial performance rd : role duality cr : company risk psr : publishing sustainability report ta : tax aggresiviness ge : gender mp : market performance id : investment decision cp : company performance classification of articles based on research methods this section discusses the classification of articles on sustainability reporting by research methods. the research methods commonly used are analytical, literature reviews and surveys. the analytical method is the method used by researchers in indonesia by applying various data analysis techniques in the form of simple regression, multiple regression, panel data regression and content analysis with the help of tools such as spss version 13, spss version 23, stata 16.0 and eviews version 10. the literature review method is the method used by researchers to conduct a systematic literature review that leads to the conceptualization of sustainability reporting. the survey method is a method used by distributing questionnaires to foreign students who take environmental and social accounting courses to determine the extent of student's knowledge of the implementation of sustainability reporting. based on table 6, the most dominant research method is the analytical method by 92% or 46 articles, followed by the literature review method 4% or 2 articles and the remaining survey methods around 4% or 2 articles. when viewed in period 1 (2009 to 2015), it still dominated by analytical methods by around 86% 12 articles) and the remaining survey methods by around 14% (2 articles). meanwhile, in period 2 (2016 to 2022), the analytical method was still dominated by 94% (34 articles), and the remaining literature review method was around 6% (2 articles). therefore, it proves that the analytical method is the fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 64| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc most dominant method used from 2009 to 2022 because it can test more accurate and objective data than other research methods. table 6. articles classification based on research methods research methods 2009 2022 2009 2015 2016 2022 sum % sum % sum % analytical 46 92% 12 86% 34 94% review 2 4% 0% 2 6% survey 2 4% 2 14% 0% total 50 100% 14 100% 36 100% comparison of research articles based on research topics and methods table 7 shows the characteristics of articles based on cross-tabulations between topics and research methods as follows. table 7. classification of articles based on comparison of topics and research methods research methods topik penelitian anteceden t consequenc e antecedents and consequences other s analytical 16 10 1 19 review 2 survey 2 based on table 7, we can see that the analytical research method is used widely to examine four research topics. first, the topic of antecedent research, which discuss the factors that motivate the publication of sustainability reporting as many as 16 articles. second, the topic of consequential research that discusses the effect of sustainability reporting on other variables gets 10 articles. third, the topic about the combination of antecedents and consequences gets 1 article. fourth, other topics that discuss matters other than antecedents and consequence as many as 19 articles. table 7 also reveals that the review research method is used only to examine other research topics like a comparison topics which get two articles. one example of a comparative topic is a research topic that compare voluntary reporting with sustainability reporting. furthermore, the survey research method is used only to examine other research topics as many as two articles such as the topic of application. the application topic means a topic that discusses how to implement sustainability reporting at pt pembangkit jawa bali. therefore, the characteristics of cross-tabulation indicate there are no studies use literature review and survey methods to examine the antecedent topics and consequences related to sustainability reporting. fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 65| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. community analysis a. citation analysis citation analysis used to determine the frequency of articles cited by other studies. the higher the frequency of the cited article, the greater the benefits of the article because it used to enrich other research reference sources (herawati & bandi, 2017) . the article by (tarigan & semuel, 2015) has the most citations which have been cited by 149 other articles. the factors that influence the citations number in the article include a long publishing period and the use of an interesting variable to study, namely the financial performance variable. on the other hand, there are still articles that do not have citations, such as by (ardiana, 2022; breliastiti, 2020; elafify, 2021; juwita & honggowati, 2021; nilasakti & falikhatun, 2020; supriyati & anggraini, 2021). . articles that do not have citations caused by several factors. for such, the average period of publishing the article is not long enough, variable that are rarely studied such as environmental performance and the entities studied are also non-public such as islamic banks. b. centrality network centrality can be defined as how much an individual has a dominant influence in a particular network. centrality can be measured by using the number of direct links a researcher has with other researchers in the network. in this study, the article that has the most citations has the greatest influence among the others. as shown in figure 3, the article that has the most citations is the sustainability reporting article studied by (tarigan & semuel, 2015) . the article has been cited by 4 recent articles researched by (ariantika & geraldina, 2019; k. e. c. dewi & sudana, 2015; ihsani et al., 2021; marwa et al., 2017). information : 1. (tarigan & semuel, 2015) 2. (ihsani et al., 2021) 3. (ariantika & geraldina, 2019) 4. (marwa et al., 2017) 5. (k. e. c. dewi & sudana, 2015) fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 66| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion this study analyzes 50 articles from the journal of the ministry of education, culture, research and technology in the classification of sinta 2. the journals that publish the most articles about sustainability reporting are the indonesian journal of sustainability management and accounting ijsma) and the accounting analysis journal aaj). this research method uses charting the field approach and analyzing community. based on the charting the field approach, this study finds that there are still antecedent variables that are inconsistent with sustainability reporting, namely the audit committee variable and the consequence variable that shows inconsistency, specifically financial performance. consequently, it needs to be studied further. furthermore, based on analyzing the community, the researcher found that the article by (tarigan & semuel, 2015) is the most cited article and had been cited by four other articles on the topic of sustainability reporting. this research has several implications. first, it provides an overview of fourteen years of sustainability reporting research. second, it shows the possibility of increasing sustainability reporting research from february to december 2022. third, it shows that review and survey research methods are research methods that are still rarely applied by sustainability reporting research in indonesia. on the other line, this study has several limitations. first, it does not fully describe the 2022 research because the data available in the 2022 research period only lasts until january. second, this study only analyzes articles based on the article classification and citation analysis. third, this study only examines the articles from accredited journals of the ministry of education, culture, research and technology in the sinta 2 classification. in addition, this study has several suggestions for further research. first, for future research, it is expected to use research data for the whole period of one year so as not to show a graph decline. second, future research can analyze sustainability reporting research based on the theory that underlies sustainability reporting. it is because the theory used can causes the inconsistency of the research results that have been researched. third, future research can explore articles in accredited journals of the ministry of education, culture, research and technology in the sinta 1 or scopus classification. reference 15 tahun lumpur lapindo: darat, air dan udara sekitar tercemar mongabay.co.id : mongabay.co.id. 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(2020). moderating effect of earnings management in the relationship between sustainability reporting initiatives and value relevance. indonesian journal of sustainability accounting and management, 4(2), 266. https://doi.org/10.28992/ijsam.v4i2.309 rudyanto, a., & siregar, s. v. (2018). the effect of stakeholder pressure and corporate governance on the sustainability report quality. international journal of ethics and systems, 34(2), 233–249. https://doi.org/10.1108/ijoes-05-2017-0071 supriyati, s., & anggraini, d. d. (2021). sustainability reporting and tax aggressiveness: evidence from a public company in indonesia. indonesian journal of sustainability …. https://doi.org/10.28992/ijsam.v5i1.249 tarigan, j., & semuel, h. (2015). pengungkapan sustainability report dan kinerja keuangan. jurnal akuntansi dan keuangan, 16(2), 88–101. https://doi.org/10.9744/jak.16.2.88-101 fourteen years of sustainability reporting research in accounting: bibliographic studies sururi, aryani and gantyowati 69| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc wulandari, r., fauziyah, s., & mubarok, a. (2021). “(studi empiris pada perusahaan yang mengikuti asia sustainability reporting rating periode 2015-2020).” accounthink : journal of accounting and finance, 6(02), 181–193. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4 october 2022 page no. 371-385 371| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid-19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city wuwuh andayani1, septa prayoga2, mainita hidayati3, 123institut ilmu sosial dan manajemen stiami correspondent: wuhanku1112@gmail.com1 received : july 30, 2022 accepted : october 12, 2022 published : october 31, 2022 citation: andyani, w., prayoga, s., hidayati, m. (2022). an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid-19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city. ilomata international journal of tax and accounting, 3(4), 371-385 https://doi.org/10.52728/ijtc.v3i4.570 abstract: taxes, both central and local taxes, are the main source of income for the state. one of the regional taxes is the motorized vehicle tax (pkb) which is one source of income expected to help local governments in increasing locally-generated revenue (pad). this has prompted local governments to innovate tax payment services for motorized vehicles by utilizing increasingly advanced information technology which serves as an effort to break the chain of the spread of covid-19. this study was conducted to analyze the effectiveness of the j’bret (west java ngabret) samsat service system to improve taxpayer compliance in paying the motorized vehicle tax during the covid-19 pandemic in bekasi city, the obstacles that emerged, and the efforts made by the samsat and taxpayers in realizing the effectiveness of the service system. the research method was a qualitative approach by employing a descriptive approach. the results of this study indicated that the j’bret samsat service system has been effective and fully following the theory of effectiveness aspects according to muasaroh (2013). last, what needs to be improved was more campaigns held for taxpayers about the existence of a motorized vehicle tax payment service system through the samsat j’bret. keywords: local tax; motorized vehicle tax; the effectiveness of j’bret samsat services. this is an open access article under the cc-by 4.0 license. introduction the source of state revenue in indonesia comes from several sectors. one of them is an income generated from the tax sector. taxes are a major issue, both for the government and indonesian taxpayers (beny & loviana dewi, 2021; fitriana & sudrajat, 2017; supriyadi, 2019; wantasen et al., 2021). revenues from the tax sector are expected to help the government in increasing the need for development to reach the goal of indonesia that which has been mandated by the opening of the law of association of 1945, which are listed in paragraph 4 stated that to protect the people and the country of indonesia and to promote the general welfare (dewanti, 2021; lhoka & sukartha, 2020; lim & indrawati, 2016; purwanto & safira, 2020). tax payments are a manifestation of the obligation of the state and the participation of the community in mailto:wuhanku1112@gmail.com https://doi.org/10.52728/ijtc.v3i4.570 an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 372 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc collecting funds to finance the state and national development. the tax aims to improve the wellbeing of all people through improved and additional public services. this is allocated not only to the people paying the tax, but it is also for the benefit of people who are not obliged to pay taxes (paramitha & supadmi, 2021; rahayu, 2019; ratnaningsih & waluyo, 2019; supriyadi, 2019). the tax itself is divided into two types, namely central taxes and local taxes. the division of tax differentiation of both types can be seen from the agency or government where they handle. if the agency or central government is authorized to handle it, then it is a central tax; while the agency or regional government that is authorized to handle it, then the tax is included in the type of regional tax (bahmid & wahyudi, 2018; dewanti, 2021; lesmana & rumaiza, 2019; octaviany et al., 2021; pohan, 2021; wulandari et al., 2017). this paper will discuss the tax for motorized vehicles in the last three years. there has been occurred an increase in the number of vehicles on the 1,609,441 in 2018 to 1,614,965 in 2019, but in 2020 there was a decrease in the number of vehicles this was due to the effects of the covid-19 pandemic that hit indonesia (defrian et al., 2021; megayani & noviari, 2021; ramadani & syafari, 2020; utina & gobel, 2020). in this situation, the local government was asked to think about how the taxpayers can fulfill their obligation as usual. by having samsat j'bret which is one of the innovations created by the west java samsat team. it consists of the government of west java represented by the board of region revenue of west java province, police of west java, and pt. jasa raharja (persero) branch of west java. this was held under an agreement cooperation between the west java samsat team and the pt. bank pembangunan daerah of west java and banten tbk. on november 29th, 2018, with a tagline samsat j’bret (west java samsat ngabret). it was expected to be a way to break the chain of coronavirus spread as it could avoid the crowds of people. in line with this, the obligation of taxpayers could be also fulfilled. thus, the regional original income (pad) in bekasi city could be maintained (atmaja, 2019; kumala & junaidi, 2019; latofah & harjo, 2020). in this study, there were several previous studies used as reference materials. some problems regarding the lack of taxpayers who know about the j’bret samsat service system (nurfadiyah, 2020). the effect of this system on motorized vehicle taxpayers’ compliance. here, the similarity between her research and what the author just did was to analyze the j’bret samsat service system which is an innovation in paying motorized vehicle tax. then, the difference between them was her research discussed the implementation of the j’bret samsat service system, while this research discussed how the effectiveness of the j’bret samsat service system, especially during the covid-19 pandemic (nurfadiyah, 2020). in motorized vehicle tax payment service through mini samsat services (samin) at the samsat joint office; there were some shortcomings and obstacles occurred (mustofa, 2017). in the innovation attribute, it can be seen that the service and socialization trials carried out by the samsat joint office were less optimal. this can be shown by the small number of taxpayer reports in the samsat mini (samin) service. this paper has similarities to the research conducted by the author, which lay in an easy service system to keep the motorized vehicle an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 373 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxpayers obedient in carrying out their obligations as taxpayers. in addition, there was also a difference between their paper and this study. the difference was the payment method. in the samin (samsat mini), the payment was held only when there were important events such as cfd, bazaars, or carnival, while the j’bret samsat payment could be done every time through minimarkets or online shopping applications (mustofa, 2017). next, another previous research obtained that the program has been running through it was not satisfying yet. it was because some people still did not know about e-samsat (setyawan et al., 2019). based on the relative advantages of e-samsat compared to previous innovations, it can be seen in terms of the flexibility of time and can be done at any atm. the similarities of this research can be seen in terms of payments that can be made at atms. there is no need to come to the samsat office, make manual payments, queue, and avoid the brokers. in addition to the similarities, the differences of both pieces of research can be seen from the main discussion of this research which is still in the form of service innovation and the unavailability of payment of the motorized vehicle tax through atms, minimarkets, or online shopping applications (setyawan et al., 2019). finally, based on the above elaboration, it is important to conduct this study as it was to determine the extent of the tax compliance of taxpayers in fulfilling their obligation to pay the motorized vehicle tax. moreover, this was also to find out the effectiveness of the use of the samsat j’bret (west java samsat ngabret) system. concerning the previous background, there were some limitations in this study to make the study to be more effective and be in line with the purpose of the study, as follows: 1. the researchers only discussed the effectiveness of innovation in the form of samsat j'bret in efforts to improve the taxpayers’ compliance with motorized vehicles on the covid19 pandemic in bekasi city. 2. the researchers only discussed the obstacles that appeared caused by the innovation samsat j'bret in efforts to improve the taxpayers’ compliance with motorized vehicles on the covid19 pandemic in bekasi city. 3. the researchers only discussed the efforts that could be done by the samsat office of bekasi city to fix the obstacles of the implementation of samsat j'bret in efforts to improve the taxpayers’ compliance with motorized vehicles on the covid-19 pandemic in bekasi city. in this literature review, it is explained about matters related to the research discussion, the general understanding of taxes and the theory needed in this research. administration can be defined as the whole process of cooperation between two or more people based on certain rationality to achieve the goals that have been set earlier (siagian, 2012). the definition of administration in the narrow sense is usually only associated with the administrative activities that include correspondence, secretarial, report preparation and archives (keen & slemrod, 2017; paramitha & supadmi, 2021; saptono & khozen, 2021; siagian, 2012; surjono, 2016). public administration is the art and science (art and science) which is intended to regulate public affairs and carry out the various tasks are specified. public administration as a discipline an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 374 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc aims to solve the problem of the public through improvements mainly in the field of organization, resources, human, and financial (antonakas et al., 2014; pasolong, 2019; scupola & mergel, 2022; weimer & vining, 2017). tax administration in a narrow sense is services and administrative activities including notetaking and light bookkeeping (recording), correspondence, secretariat, preparation of reports, and filing of the obligations of the rights of taxpayers (barnay et al., 2018; pohan, 2021; saptono & khozen, 2021). public policy is one of the key dimensions in the science and practice of administration public. public policy has analogous function which is similar to the function of the brain to the human body. as by using this instrument, all activities of the state life and society began to be carried out by the bureaucracy, plus the government system (anggara et al., 2020; mulyadi et al., 2016; suharno, 2013). policy taxation is a fiscal policy. fiscal policy in the broadest sense is a policy to influence public production, employment opportunities and inflation, using the instruments of tax collection and state expenditures. meanwhile, the notion of fiscal policy in a narrow sense is a policy related to determining what will be used as a tax base, who is taxed, who is excluded, what will be the object of taxation, anything that is subject to taxation excluded, and what is the procedure for implementing the tax obligations owed (fendrich et al., 2022; janoušková & sobotovičová, 2019; sudrajat, 2020). taxes are people's contributions to the state treasury based on the law (which can be enforced) without receiving reciprocal services (contra performance) which can be directly shown and which are used to pay general expenses (harjo, 2019). local tax is an obligatory contribution to the area that is owed by the private or entities who are forced by law, with no gain in return, is directly and used for the purposes of the area for the greatest prosperity of the people (samudra, 2016). the motorized vehicle tax is one type of provincial regional tax. in other words, the motorized vehicle tax is a tax that is objective, depending on the object that is subject to tax and is in possession and/ or control of compulsory taxes (mardiasmo, 2016). corona viruses are a large family of viruses that cause disease in humans and animals. in humans, it usually causes respiratory tract infections, ranging from the common cold to serious diseases such as middle east respiratory syndrome (mers) and severe acute respiratory syndrome (sars). a new type of coronavirus found in humans since an extraordinary event appeared in wuhan, china, in december 2019, was later named severe acute respiratory syndrome coronavirus 2 (sars-cov2), and caused coronavirus disease-2019 (covid19) (andrew et al., 2022; kumar & aribowo, 2021; nguyen & darsono, 2022; rohman & larasati, 2020) . samsat j'bret is one of the innovations created by west java samsat team. it consists of the government of west java represented by board of region revenue of west java province, police of west java, and pt. jasa raharja (persero) branch of west java. this was an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 375 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc held under an agreement cooperation between the west java samsat team and the pt. bank pembangunan daerah of west java and banten tbk. on november 29th, 2018, completed with a tagline samsat j'bret (west java samsat ngabret). as the form of the program is a payment of motorized vehicle tax in modern outlets (minimarket) such as alfamart, alfamidi, and indomaret as has been widely used by the public/ taxpayers and the payment is through online shopping applications i.e. bukalapak, tokopedia, and kaspro as well as through bjb bank and ppob (payment point online bank) tellers. an activity to look for a pattern in addition to the analysis of a way of thinking that is associated with a systematic examination of something to decide, the relationship between the part and its relationship to the whole (sugiyono, 2019). effectiveness is a key element to achieve the goal or goals that have been set in each organization, activity or program. it is called effective if it achieves the objectives or goals that have been determined (kasper & alm, 2022; patton, 1990). in this study, the researchers use the service theory in which to assess whether service is already effectively running, there are four aspects of effectiveness (muasaroh, 2013), as follows: 1. aspects of plan or program here is a programmed learning plan. in other words, if all plans can be implemented then the plan or program is said to be effective. 2. aspects of tasks or functions, namely an institution is said to be effective if it carries out its duties or functions, as well as a learning program, will be effective if its duties and functions can be carried out properly and the students learn well. 3. aspects of provisions and regulations. the effectiveness of a program can also be seen from the functioning or not of the rules that have been made to maintain the ongoing process of its activities. this aspect includes both the rules relating to teachers and related to the learners. if these rules are implemented well, it means that the rules have been run effectively. 4. aspects of objectives and ideal conditions of an activity program are said to be effective from the point of view of the results. it is when the objectives or ideal conditions of the program can be achieved. an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 376 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conceptual model source: (muasaroh, 2013) method the method of this research was a qualitative approach. this is where researchers interact against the fact that is researched (constructivist) and the type of research used in this research is descriptive research (creswell, 2017; creswell & creswell, 2018). data collection technique is a scientific way to obtain data with a specific purpose. the scientific method means that the research activities are based on scientific characteristics, namely rational, empirical, and systematic (sugiyono, 2019). in this study, the researcher used three data collection techniques. the data collection techniques used were a. observation; b. interview; c. documentation (miles & huberman, 1994). informants are people who are chosen to provide information about the situation and condition of the research background (moleong, 2018). on this occasion, the informants were the representatives of the samsat officers, lecturers of institute of social science and management stiami, and taxpayers who use samsat j’bret service. the technique of the data analysis used in this study was a qualitative descriptive method. data analysis in qualitative research is carried out during data collection and after completing data collection within a certain period (miles & huberman, 1994). efforts obstacles pkb revenue plan or program terms and regulation task or function effectiveness of samsat j’bret purpose and ideal condition an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 377 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the location of the research was at the bekasi city samsat joint office (p3dw bekasi) located in jln. ir. h. juanda no. 302 (bulak kapal), bekasi 17113. result and discussion this research employed descriptive qualitative method held by conducting interviews, observation, and documentation. table 1. number of potential motorized vehicles based on its type registered at the regional revenue management head office for the bekasi city region in 2018-2020 source: regional revenue management head office bekasi of bekasi city from table 1, it can be seen that the potential of motorized vehicles from year to year is dynamic. it increased in 2018 and 2019, but it decreased in 2020. in 2020, the decline was 1,523,880 vehicles. it was because of the effect of covid-19 pandemic. table 2. number of manual taxpayers of motorized vehicles and taxpayers who used samsat j’bret service in 2018-2020 year tax payers manual taxpayers of motorized vehicles (%) taxpayers of manual motorized vehicles taxpayers via samsat j’bret (%) taxpayers via samsat jbret 1 2 3 4 = 3:2 5 6 = 5:2 2018 1.558.190 1.558.178 100% 12 0,00% 2019 1.562.329 1.549.562 99,18% 12.767 0,82% 2020 1.482.136 1.451.634 97,94% 30.502 2,06% source: regional revenue management head office bekasi of bekasi city types of vehicle year 2018 2019 2020 cars (car, jeep, minibus) 307.235 310.635 295.283 bus, microbus 2.870 2.765 2.611 truck 48.377 49.867 39.129 heavy equipment vehicle 4 4 4 motorbikes (2 and 3 wheels) 1.250.95 5 1.251.69 4 1.186.85 3 total 1.609.44 1 1.614.96 5 1.523.88 0 an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 378 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the above table, it is clear that the number of taxpayers of motorized vehicle who used samsat j’bret experienced a rising every year compared to those who paid manually. table 3. formula of effectiveness value based on mahmudi (2010: 143-166) based on the table 3. it can be seen that the supporting theory stated by mahmudi (2010) shows a formula to measure an effectivity value with the notes: >100% is very effective, 100% is effectice, 90% 99% is quite effective, 75% 89% is less effective, and <75% is not effective. table 4. result of the calculation of motorized vehicle tax via manual samsat and samsat j’bret service in 2018-2020 no year manual samsat samsat j’bret 1 2018 x 100% = 104,9% x 100% = 0% 2 2019 x 100% = 103,7% x 100% = 1,35% 3 2020 x 100% = 78,1% x 100% = 2,49% from table 4 and referred to the formula on the value of effectiveness written on table 3, the calculation of the realization of motorized vehicle tax through samsat j’bret service system was getting increased. in 2020, it was 2.49%. this number has increased comparing to those in 2019 which was only 1.35% and in 2018 when firstly applied it was 0%. table 5. target and realization of motorized vehicle tax via manual samsat and samsat j’bret service in 2018-2020 year target realiz ation realizati on of pkb % manual samsat % samsat j’bret % 1 2 3 4 = 3:2 5 6 = 5:2 7 8 = 7: 2 2018 1,005,563, 000,000 1,054,523,65 4,375 105 % 1,054,502,291, 475 104 .9% 21,362,900 0 % 2019 1,088,917, 000,000 1,144,007,24 3,500 105 % 1,129,312,381, 500 103 .7% 14,694,862, 000 1. 35 effectiveness = realization of revenue x 100% target of revenue an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 379 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc % 2020 1,340,842 ,274,750 1,080,049,87 8,850 81 % 1,046,676,391 ,950 78.1 % 33,373,486, 900 2. 49 % source: regional revenue management head office bekasi of bekasi city based on the table 5, in general, the realization of the motorized vehicle tax in 2018-2020 using samsat j’bret system has been declining. however, the realization of the motorized vehicle tax through samsat j’bret system has experienced an increase, especially happened on 2020. in contrast, the manual payment of samsat was declining in 2020. this research employed a theory stated by muasaroh (2010: 13) in which to measure whether a service has been effectively running were by using four aspects of effectiveness, as follows: plan or program the results of the indicators of the plan/program was already effective, as the plan created was an innovation of motorized vehicle tax payment which can be applied through android-based smartphone. it was sambara application which made of cooperation among bapenda of west java province, police office and jasa raharja which have a goal to ease the society in paying their vehicle tax. task or function the results of the indicators of a task or function has been effective because the task of the samsat team which was doing the education and socialization of the application sambara to the taxpayers has gone well. it was proved by the taxpayers’ data (pkb) which were using sambara application to pay the annual motorized vehicle tax was getting higher from year to year. rules and regulation the results of the indicators of rules and regulations have been effective because there are some rules and regulations when making payment of motorized vehicle tax using samsat j’bret system. moreover, they did not immediately approve their vehicle registration at the samsat office or outlet with a period of maximum 30 days then the vehicle will be automatically blocked by the samsat. objectives or ideal condition the results from the indicators of the ideal goals or conditions were said to be effective because samsat has felt positive things from the purpose of modernizing motor vehicle tax payment services using an online-based payment system. in addition, the conditions in the field were not too many taxpayers who came to the samsat office to make tax payments of motorized vehicles. based on the results of the vertbatim analysis, the author has interviewed the informant, collected the data documentation, and did observation. as a result, based on the data of samsat team and academics, the obstacles encountered in using the samsat j’bret service were an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 380 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the changing patterns of thinking or mindset and inviting the public to follow the technology which was increasingly sophisticated. in addition, from the taxpayers’ point of view, first, the obstacle for the taxpayers was the lack of socialization and counselling from the government and the samsat team in several areas related to online-based service innovations and also how to use the j’bret samsat service to pay their motor vehicle taxes. second, as the covid-19 pandemic occurred, there was less information provided related to the j’bret samsat service. thus, there were so many taxpayers who were not aware of the j’bret samsat service and did not understand how to pay the tax by using this application. based on the results of the vertbatim analysis, the author has interviewed the informant, collected the data documentation, and did observation. here, the efforts that needed to be done to solve those obstacles were as follows: first, the academics suggested that there should be socialization and routine education to help the taxpayers change their mindset and understand better the j’bret samsat service. second, such governmental program was developed to ease the payment system and now we are also in an era where everything is in a modern way. third, the government and samsat were to improve the j’bret samsat service into fully online system, so the taxpayers do not need to go to samsat office only for validating their stnk (vehicle registration certificate). conclusion based on the results and discussion and referred to the theories on the previous research, some conclusions were drawn as follows: the effectiveness of j'bret (west java) samsat services during the covid -19 pandemic in an effort to improve the taxpayers’ compliance of the motorized vehicle at the bekasi city samsat joint office has been effective and completely matched with the aspects of effectiveness in accordance with muasaroh's theory (2010: 13). the obstacles encountered by bekasi city samsat were changing patterns of thinking or mindset of the taxpayers to employ the technology which was increasingly sophisticated. then, there was also a lack of socialization directly to the taxpayers related to the j’bret samsat service. next, the obstacle for the taxpayers was the lack of socialization and counselling from the government and the samsat team in several areas related to online-based service innovations and also how to use the j’bret samsat service to pay their motorized vehicle taxes. some efforts done by samsat to solve the obstacles were by holding socialization and invites the society to change their mindset that now we are also in an era where everything is in a modern technology. next, they also can add more media of publication i.e. banners, pamflets, tutorial videos about how to pay their motorized vehicle taxes by using the j’bret samsat service. in addition, an effort could be done by the taxpayers to solve the obstacle was not too lazy to find out some information provided by the government and samsat related to the j’bret samsat service. an analysis of the effectiveness of samsat j'bret service (west java ngabret) during the covid19 pandemic to improve the tax compliance of motorized vehicles at the office of samsat bekasi city andayani, prayoga, and hidayati 381 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc after doing the research, for further development, the researchers provide some suggestions on the j’bret samsat service in this covid-19 pandemic as follows: increasing the program of the government of the java west province and samsat in onlinebased service of vehicle tax payments which is the j’bret samsat service. it is aimed at improving more taxpayers of motorized vehicles in bekasi who choose online tax payment services. 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(2017). analisis pajak reklame di kabupaten purworejo periode 2012-2016. jurnal akuntansi dan pajak, 18(01), 1–18. https://doi.org/10.29040/jap.v18i01.94 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 103-116 103| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach ahmadi aidi1, sayuthi2, imam susanto3, ahmad junaidi4, abdurohim5 1345institut ilmu sosial dan manajemen stiami, indonesia 2university syiah kuala banda aceh, indonesia correspondent: gadisrasela@gmail.com1, sayuthi_siem@unsyiah.ac.id2, imamsusanto07@gmail.com3, ahmadjunaidi76588@gmail.com4, rohimlaz23@gmail.com5 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: aidi, a., sayuthi, susanto, i., junaidi, a, abdurohim. (2022). the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach. ilomata international journal of tax and accounting, 3(1), 103-116. https://doi.org/10.52728/ijtc.v4i1.434 abstract: this research was conducted at the indonesian financial and development supervisory agency (bpkp) at jalan pemuda no 33 jakarta. the time of the study starts in january 2018 until september 2018. this study aims to determine the influence of the competence and independence of the auditor internal on the quality of internal audit and its impact on the effectiveness of internal control. the study sample consisted of 63 people from auditors at the indonesian bpkp. primary data is obtained through observation, interviews, and questionnaires whose validity and reliability have been tested first. the object in this study is the influence of competence and independence of internal auditors, as well as the quality of internal audit, while those who are the subject of this research are bpkp ri auditors. the conclusions obtained are there is a significant influence of the competence and independence of internal auditors on the quality of internal audit together. keywords: competencies, independence, and quality of internal audit. this is an open access article under the cc-by 4.0 license. introduction the quality of internal audits carried out by government agencies including bpk ri auditors is still low and from the five levels in the iacm (internal audit capability model) approach, 93.96 percent of supervisors are at level one and only 5.74 percent at level ii while only one apip at level iii. based on the results of the assessment of the level of capability of ri bpkp auditors in 474 apip ministries, institutions, and regional governments as of december 31, 2014, a total of 404 apips or 85.23% were at level-1, 69 apip or 14.56% level-2, and new 1 apip or 0.21% which is at level-3. https://www.ilomata.org/index.php/ijtc mailto:gadisrasela@gmail.com mailto:sayuthi_siem@unsyiah.ac.id mailto:imamsusanto07@gmail.com mailto:ahmadjunaidi76588@gmail.com mailto:rohimlaz23@gmail.com https://doi.org/10.52728/ijtc.v4i1.434 the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 104 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no level of apip capability percentage 1 supervisor is at level one (404 apip) 85,23% 2 supervisors are at level two (69 apip) 14.56% 3 supervisors are at level three (1 apip) 0.21% 4 supervisors are at level four (none) 0% 5 supervisors are at level five (none) 0% (bpkp ri, 2016). the institute of internal auditors (iia) has developed a model capability model (ia-cm) internal audit capability, namely a framework that identifies fundamental aspects needed for effective internal supervision in the public sector (christ et al., 2015). in the ia-cm model, apip is divided into five levels of capability, namely level 1 (initial), level 2 (infrastructure), level 3 (integrated), level 4 (managed), and level 5 (optimizing). the bpkp's oversight role is not yet optimal due to constraints such as the lack of optimal development of auditor competency and independence, inadequate composition and distribution of human resources, unplanned planning with a central monitoring program, lack of coordination among local / central unit deputies, and lack of socialization of guidelines clear supervision. external constraints are the lack of optimal coordination with apip ( government internal supervisory apparatus), ministry / institution / regional government (setyawati & bernawati, 2020). in addition to these constraints, the number of assignments at the request of the institution / other apip affects the resources that can be used to carry out the bpkp's mandate and obscures the focus of supervision. internal audit quality. the absence of these competencies can make the internal auditors as a whole unable to carry out their role in carrying out supervision effectively so that their contributions are not optimal in ensuring that comprehensive and fundamental internal audit quality practices cannot be realized (yurniwati & rizaldi, 2015). to be able to function properly and be able to maintain its independence, the internal auditor must focus its activities on strategic activities and avoid execution of daily activities. internal auditor independence is manifested in the form of not having personal interests or interrelationships which can cause conflicts of interest with the institution, not people in the public accountant office, legal consultant offices, or other parties that provide audit services, non-audit services or other consulting services, not people who have the authority and responsibility to plan, lead or control institutions and most importantly have independent behavior and thinking. inspection activities must include planning checks, testing and evaluating information, notifying results and following up (munteanu & zaharia, 2014). internal audit planning must be documented and include matters such as setting the purpose of inspection and scope of work, obtaining basic information about the activities to be examined, determining the various forces needed to carry out the inspection, notifying the parties deemed necessary, carrying out the survey appropriately, writing an inspection program and determining how, when and to whom the results of the examination will be submitted and obtaining approval for the inspection work plan (dalkin et al., 2021). https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 105 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc proxy of quality and effective internal audit quality, according to the provisions of the decision of the secretary of the bumn minister sk-16 / s.mbu / 2012 number has at least three parameters, namely the first company has an internal oversight charter set by the board of directors, both internal audits are equipped with supporting factors for success in carrying out their duties. and the third internal audit carries out internal supervision to provide added value and improve company operations (sudharmono & tunjungsari, 2021). it is expected that the internal auditors in carrying out their functions and duties have competence so that they will produce good and reliable audit quality. the synthesis of competencies is an ability that must be possessed regarding an adequate understanding of accounting, auditing and systems that apply in the company. competence indicates the achievement and maintenance of a level of understanding and knowledge that allows an audit committee member to carry out the task properly (seckler et al., 2017). the synthesis of the dimensions or characteristics of competencies includes knowledge, skills, behaviors and personal characteristics that comprise traits and motives. personal characteristics are difficult to develop and more cost effective for choosing people who have the desired personality traits. knowledge and skills are easy to develop so training is cost effective. it is expected that the internal auditors in carrying out their functions and duties in addition to having competencies must also have independence so that they will produce good and reliable audit quality (salterio et al., 2021). the synthesis of the independence of internal auditors is a freedom from conditions that threaten objectivity both individually and the ability of internal audit activities in carrying out their responsibilities in unusual ways, as well as in formulating and expressing opinions. the synthesis of the dimensions or characteristics of the independence of internal auditors includes independence in the audit program, independence in verification / investigation, independence in reporting (rapley et al., 2021). based on the description above, it appears that the scope of the internal audit work is very broad and comprehensive in order to guarantee the achievement of organizational goals. if the internal audit institution in indonesia which is incorporated in the apip container is given clear and broad authority, roles and functions as mentioned above, the results of apip's work will be very beneficial not only for the government, but also beneficial for the legislature, external auditor, and other interested parties (iswara, 2014). however, to ensure the quality of the results of the apip work involving a large number of human resources with various types of educational and experience backgrounds, a professional and sustainable education and training program is needed. in addition, to improve coordination in planning, implementing and evaluating activities among the apip ranks, the development of synergy for apip supervision is needed (setyawati & bernawati, 2020). the definition of competency is the knowledge and skills necessary to accomplish tasks that define an individual's job. competence is the knowledge and skills needed to complete tasks that define individual work (arens & loebbecke, 2015). the other definition states competence means the ability and ability to carry out a job or profession. competent people means people who can carry out their work with good quality results. on the other words, competence means employees have the knowledge and expertise to carry out their duties (susanto, 2017). https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 106 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a competency represents the knowledge, skills, and abilities needed to perform a desirable behavior, which can be said that human resource competencies are related to the knowledge, skills and abilities needed to recruit, hire, train and compensate employees (sanjuan & froese, 2013). competence is a characteristic of people who have the skill, knowledge and ability to perform tasks which can be said that competence is a characteristic that includes skills, knowledge and ability to perform tasks (dinapoli, 2017). competency is an underlying skill, potential characteristics, or demonstrating various observable behaviors that contribute to outstanding performance in a job. competence is an underlying skill, potential characteristic, or motive showing a variety of observable behaviors that contribute to outstanding performance in the work (grau, 2013). there are two terms that emerge from two different schools of thought about the concept of conformity in work, the term is competency, namely a description of behavior and competence (skill) which is a job description or work result (ingason, 2015). competence is a person or group of people who perform the function functions as follows: (1) having integrity, means having an honest, objective spirit; (2) understanding the ins and outs of business and company finance; (3) able to read financial statements; (4) having sensitivity to environmental development that can affect the company's business; and (5) commitment means having a consistent nature with applicable regulations (gibson et al., 2014). integrity, meaning having the spirit of honesty, and objective, internal auditors must have words, and actions in their work can be trusted both for themselves and others and the internal auditor must have an unbiased attitude, and avoid conflicts of interest with full confidence. with individual objectivity it is intended that internal auditors carry out assignments with honest beliefs and do not make compromises in terms of significant quality. internal auditors should not be placed in situations that can interfere with their ability to make judgments in an objective professional manner (bellamkonda et al., 2020). the objectivity of internal auditors is not negatively affected when the auditor recommends control standards for a particular system or reviews certain procedures before they are implemented. the auditor's objectivity is considered to be disturbed if the auditor designs, implements, draws procedures, or operates the system. occasional assignments outside the audit by internal auditors, if full disclosures are made in reporting the tasks, do not necessarily interfere with objectivity. however, this requires careful consideration, both by management and internal auditors to avoid negative impacts on the objectivity of internal auditors (felício et al., 2021). based on the description above, it can be concluded that competency is a capability that must be possessed regarding an adequate understanding of accounting, auditing and systems that apply in the company. competence indicates the achievement and maintenance of a level of understanding and knowledge that allows an audit committee member to carry out the task properly. internal auditor must be able and understand and analyze financial statements (tugiman, 2016). based on understanding competencies of internal auditors is a competency is the capability of an individual which is related to superior performance in a role or job. it may be knowledge, skill, intellectual, strategy or a cluster of all that may or may not work units. competence is the https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 107 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ability of an individual to be associated with superior performance in a role or job (ruizbarbadillo & martínez-ferrero, 2020). based on how many meanings have been explained above, it can be concluded that competence is a person's ability that can be observed including the knowledge, skills, and abilities in completing a job or task in accordance with established performance standards characteristics of internal auditor competencies models characteristics of level 1 (initial) include (1) ad hoc or unstructured; (2) only conduct audits, or review documents and transactions for accuracy and compliance; (3) results depend on the skills of certain people; (4) there is no professional practice carried out; (5) approval of the budget by management as needed; (6) absence of infrastructure; (7) the existence of an internal audit unit is not taken into account; and (8) institutional capabilities are not developed . characteristics of level 2 (infrastructure) include: (1) the basic question or challenge is how to build and maintain processes repeatedly; (2) there are written rules regarding reporting of internal audit activities, infrastructure management and administration and professional practices and processes that are being built; (3) audit planning is determined based on management priorities; (4) still depends on the skills and competencies of certain people; (5) compliance with the implementation of internal audit standards is still partial. characteristics of level 3 (integrated) include: (1) internal audit policies, processes and procedures have been established documented and integrated with each other and are organizational infrastructure; (2) management and professional practice of the internal audit unit has been established and uniformly applied in all internal audit activities; (3) the internal audit unit begins to align with the governance and risks faced by the organization; (4) the internal audit unit evolved from only conducting activities traditionally to integrating itself as a unitary organization and providing advice on performance and risk management; (5) focus on building teams and internal audit capacity, independence and objectivity; and (6) implementation of activities in general is in accordance with audit standards. level 4 (managed) characteristics include: (1) the alignment of expectations of the internal audit unit with the main stakeholders; (2) there is a performance matrix to measure and monitor internal audit processes and results; (3) the internal audit unit is recognized as making a significant contribution to the organization; (4) the internal audit function is part of the integration of governance and organizational risk management; (5) the internal audit unit is a well-managed unit; (6) risk is measured and managed quantitatively; and (7) there are skills and competency requirements with the capacity to update and share knowledge in the internal audit unit and throughout the organization. level 5 characteristics (optimizing) include: (1) internal audit unit is a learning organization with a continuous process of improvement and innovation; (2) internal audit units use information from inside and outside the organization to contribute to achieving organizational goals; (3) world-class performance recommended, best practice; (4) the internal audit unit is an important part of the organizational governance structure; (5) top level that is professional and has specialized skills; (6) measures of individual, unit and organizational performance are fully integrated to encourage improved performance. https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 108 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc competencies exist at different levels of personality. the various levels are: (1) knowledge: information that an individual has in a particular area; (2) skills: an individual's ability to do something well; (3) behavior: an action in a given situation; (4) personal characteristics, consist of: (a) traits: a typical way of behaving such as taking initiatives; (b) motives: a fundamental and often unconscious driver of thoughts and behavior for example concern for excellence. personal characteristics are hard to develop and it is more cost effective to select people having the desired personality traits. knowledge and skills are easy to develop so training is cost effective (iswara, 2014). competency characteristics consist of: knowledge, skills, behaviors and personal characteristics that comprise traits and motives. personal characteristics are difficult to develop and more cost effective for choosing people who have the desired personality traits. knowledge and skills are easy to develop so training is cost effective (weisner & sutton, 2015). the dimensions of competency are: knowledge, skill, capability, work management, character and commitment . whereas according to mcleod (2007), the dimensions of competence can be seen from education criteria, education criteria are knowledge and skills needed for career in information service. knowledge criteria consist of: computer literacy, information literacy, business fundamentals, system theory, system development, system modeling and skill requirements consist of: communication, analytical ability, creativity, and leadership (paananen et al., 2021). competence can also be seen from individual effectiveness, individual effectiveness emphasizes the task of performance of specific employees or members of the organization. manager routinely assesses individual effectiveness through performance evaluation processes. individual effectiveness causes six factors are: ability, skill, knowledge, attitude, motivations and stress (gibson et al., 2014). from several competency characteristics mentioned above, it can be concluded that the competency characteristics consist of knowledge and skills. both of these characteristics are easy to recognize. these two competencies are also relatively easier to form and develop through learning and training processes (singh et al., 2021). the definition of internal auditor independence is independence is the freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner. threats to independence must be managed at the individual auditor, engagement, functional and organizational levels (elsayed & elshandidy, 2021) . the definition of internal auditor independence as independence is the freedom from conditions that threaten the ability of the internal audit activity or the chief audit executive to carry out internal audit responsibilities in an unbiased manner (mironeasa & codină, 2013). furthermore, according to hiro tugiman (2006: 13), the definition of internal auditor independence is "independence of internal auditors is a condition free from situations that threaten their objectivity both individually and in carrying out their duties. internal auditors must https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 109 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc have an impartial mental attitude, and believe honestly without compromise in quality and to maintain their objectivity, it is forbidden to delegate their decisions to others ". in the government sector, in government auditing standards (gao), paragraph 3.02, defining independence is independence is all matters related to the audit work, the audit organization and the individual auditor, whether government or public, must be independent (dalkin et al., 2021). internal auditors must carry out tasks freely and objectively. internal auditors must be personally independent in attitude toward reality and appearance, then according to spai, 2004 internal auditors are not justified in carrying out checks or evaluations of activities where internal auditors play a role as executors of these activities (dinapoli, 2017). the independence of internal auditors in carrying out their activities includes: (1) independence programming, here the auditor is free to define the selected areas that will be applied; (2) reporting independence, the right to report the full fact is seen as important aspect of independence; and (3) examining independence, external auditors should have freedom to examine all the areas that affect the financial accounts (dalkin et al., 2021). furthermore, the independence of internal auditors includes: (1) organizational independence, the chief audit executive must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. the executive chief audit must confirm at least annually, the organizational independence of the internal audit activity; and (2) individual objectivity, internal auditors must be impartial, unbiased attitude and avoid any conflict of interest. the dimensions and indicators of internal auditor independence, including: (1) independence in the audit program, consisting of indicators: (a) free of managerial intervention over the audit program; (b) free from any intervention on audit procedures; (c) free of all requirements for audit assignments other than those required for an audit process; (2) independence in verification / investigation, consisting of indicators: (a) free in accessing all records, checking assets, and employees that are relevant to the audit conducted; (b) can cooperate actively with employees / client management during audit verification; (c)) free of all managerial efforts that attempt to limit the activities that are examined or limit in obtaining audit evidence; (d) free from personal interests which hinder audit verification; (3) independence in reporting, consisting of indicators: (a) free from personal desires or the influence of other parties to modify evidence material during audit activities; (b) free from the pressure of any party in reporting material findings; (c) avoid using misleading words both intentionally and unintentionally in reporting facts, opinions and recommendations in the auditor's interpretation; (d) free in using judgment regarding facts in audit reports (tong et al., 2021). in the international standards for the professional practice of internal auditing, internal auditor independence consists of: 1) organizational independence (1.1) the chief audit executive must be at a level within the organization that allows the internal audit activity to fulfill its responsibilities. https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 110 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (1.2) the chief audit executive must confirm the annual audit, the organizational independence of the internal audit activity. (1.3) the internal audit activity must be free from interference in determining the scope of internal auditing, performing work, and communicating results. (1.4) the chief audit executive must communicate and interact directly with the board. 2) individual objectivity (2.1) internal auditors must be impartial, unbiased attitude and avoid any conflict of interest. (2.2) shall not participate in any activity or relationship that is not the impact of their unbiased assessment. this activity includes activities that can conflict with the interests of the organization. (2.3) do not accept anything that may be impaired to their professional judgment. (2.4) shall discloses all material facts known to them, if not disclosed, they will be the reporting of activities under review. that the independence of internal auditors can provide impartial and unbiased judgments, this can be obtained through: 1) organizational status the status of the internal audit unit organization must provide flexibility to fulfill or complete the responsibilities of the audits given (1.1) internal audit must obtain support from senior management and the board, so that they will get cooperation from the parties examined and can complete the work independently of various other parties' interference. (1.2) the head of the internal audit must provide an annual report on various activities to senior management and the board. reports on these various activities must present important findings in examinations and recommendations, and must also provide information on a variety of significant deviations or deviations from the schedule of audits, staffing, and approved financial budgets and reasons. (1.3) the head of the internal audit must communicate and have a direct relationship with the board. (1.4) the purpose, authority and responsibility of the internal audit section must be defined in written documents, preferably in the articles of association approved by senior management and the board (tugiman, 2016). 2) objectives of internal auditors (2.) internal auditors show the highest level of professional objectivity in collecting, evaluating and communicating information about activities or processes being examined. (2.2) internal auditors carry out a balanced assessment of all relevant conditions and are not too influenced by their own interests or by others in forming judgments. (2.3) will not participate in activities or relationships that can interfere with or be considered disturbing to contain their judgment. this participation includes activities or relationships that might conflict with the interests of the organization. (2.4) will not accept anything that can interfere with or be considered to interfere with their professional judgment. (2.5) must disclose all material facts that they know that, if not disclosed, can distort the reporting of activities under review. https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 111 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the apip audit standard states that the assessment of the independence and objectivity of government internal auditors (yurniwati & rizaldi, 2015), includes the following two components: 1) apip independence (1.1) the leadership of the apip is responsible to the highest leadership of the organization so that the responsibility for conducting the audit can be fulfilled. (1.2) the apip position is placed appropriately so that it is free from intervention and obtains adequate support from the highest leadership of the organization so that it can cooperate with the auditor and carry out work freely. (1.3) apip must establish good working relationships with the auditee. 2) auditor objectivity (2.1) the auditor must be objective in carrying out the audit. the principle of objectivity requires that auditors carry out audits honestly and do not compromise quality. (2.2) auditors must have a neutral and unbiased attitude and avoid conflicts of interest in planning, implementing and reporting on the work they do. (2.3) the leadership of apip is not permitted to place the auditor in situations that make the auditor unable to make decisions based on his professional judgment. according to the government auditing standards (dalkin et al., 2021). independence consists of: 1) independence of mind the state of mind that permits the performance of audits without allowing them to act with integrity and exercise objectivity and professional skepticism. 2) independence in appearance having knowledge of the relevant information, to be reasonably conclude that the integrity, objectivity, or professional skepticism of an audit organization or member of the audit team has been compromised. while independence is an impartial viewpoint in the implementation of testing, evaluation of the results of examination and preparation of audit reports (arens & loebbecke, 2015). the independence of auditors must be at least 1 member from 3 members, whereas according to the indonesian audit committee association (ikai), the number of audit committee members is limited to 5 members, 2 of whom are parties independent (khairunnisa et al., 2016). the 2001 public accountants professional standards book section 220 psa no.44 paragraph two, explained that independence means that it is not easily influenced, because it carries out its work for the public interest (distinguished in terms of practicing as an internal auditor). thus, he is not justified in favoring anyone's interests, because if it is not the case, however perfect the technical expertise he has, he will lose his impartiality which is most important to maintain his freedom of opinion. independence is a condition free from influence which not controlled by other parties and not dependent to other people (deviarti et al., 2014). in spap the auditor is required to be independent, meaning that it is not easily influenced, because he carries out his work in the public interest (distinguished in the case he practices as an https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 112 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc internal auditor). furthermore, according to the spkn in the second general standard statement, it is stated that in all matters relating to audit work, the examining and examining organization must be free from mental attitude and appearance from personal, external, and organizational disturbances that can affect its independence (daryani & amini, 2016). there are three aspects of the independence of an auditor, namely as follows, (1) independence in fact. this means that auditors must have high honesty, a close relationship with objectivity; (2) independence in appearance (independence in appearance). this means that the views of other parties towards the auditor are related to the conduct of the audit; and (3) independence in competence (independence from the point of expertise). independence from the expertise point of view is closely related to professional auditor skills (weisner & sutton, 2015). the independence of internal auditors describe as to balance two considerations in deciding on any proposed move away from accountancy: (1) the need for secure functions that are commensurate with the increasingly high profile of the internal audit function; and (2) the need for secure full commitment from the director of finance to support the continuing presence of internal auditing functions. from some definitions of independence above it can be concluded that the independence of internal auditors is freedom from conditions that threaten objectivity both individually and the ability of internal audit activities in carrying out their responsibilities in unusual ways, as well as in formulating and expressing opinions. the internal auditor is someone who works as an employee in a company, they generally provide direct reports to the interests of top management in order to remain able to maintain independence of operational units (arens & loebbecke, 2015). internal auditors are auditors who work in companies whose main task is to determine whether the policies and procedures set by top management have been obeyed, determine whether or not safeguards against organizational wealth, determine the efficiency and effectiveness of organizational activities procedures and determine the reliability of information produced by various parts of the organization (eik-andresen et al., 2016). indicators of internal auditor independence are stated by mautz and sharaf in sawyer (2003: 39), these indicators are intended for public accountants, but the same concept can be applied to internal auditors who want to be objective, these indicators are (1) independence programming, consist of freedom from management of any portion of the audit program, freedom from interference with or uncooperative attitude respecting the application of selected procedures, and freedom from any requirement for the review of audit works other than that which normally accompanies an audit process; (2) examining independence, consist of direct and free are all relevant to the audit, active cooperation from management's personnel during the audit examination, freedom from managerial attempts to specify activities to be examined or establish the acceptability of evidential matter, and freedom from personal interest on auditing; (3) reporting independence, consist of freedom from any feeling of obligation to modify to impact or significance of reported facts, freedom from press to exclude significant matters from internal https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 113 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit reports, avoidance of intentional or unintentional uses of ambiguous language in the statements of facts, opinions, and recommendations in their interpretation, and freedom from any attempt to overrule the auditor's judgment either to facts or opinions in the internal audit report (ingason, 2015). the concept of internal audit quality is basically not much different from external audit . internal audit, designed to accommodate the development of professional roles and responsibilities of internal auditors and how they serve at all levels of management. internal auditing is an independent appraisal of an established within an organization to examine and evaluate its activities as a service to the organization (eik-andresen et al., 2016). robert moeller (2009) explains that internal audits must be able to cover audits of almost all business operations, so they must have a thorough knowledge and understanding. to be able to implement this, the internal auditor's qualifications must have the ability, consist of interview skills, analytical skills, testing and analysis skills, documentation skills, recommending results and corrective actions, communication skills, negotiating skills, and commitments to learning . method this study uses a qualitative approach and the type of research is descriptive research (creswell, 2017). researchers want to know how much influence the competencies and independence of the quality of internal audit: theoretical review approach result and discussion the competencies is a person's ability that can be observed including the knowledge, skills, and abilities in completing a job or task in accordance with established performance standards the independence of internal auditors is freedom from conditions that threaten objectivity both individually and the ability of internal audit activities in carrying out their responsibilities in unusual ways, as well as in formulating and expressing opinions. the internal auditor's qualifications must have the ability (a) interview skills; (b) analytical skills; (c) testing and analysis skills; (d) documentation skills; (e) recommending results and corrective actions; (f) communication skills; (g) negotiating skills; and (h) commitments to learning. as a complex concept, internal audit quality is difficult to measure accurately, and several approaches can be used to measure it or indicators. one such approach can be found in the past, which states the determinants of audit quality: "company culture, skills and personal qualities of mission partners and employees audit, the effectiveness of audit processes, reliability and usefulness of audit reports, and other factors located outside auditors , affect the audit quality ". conclusion based on the description above, it appears that the audit room of internal audit work is very broad and can be accessed by the credibility of the organization. every internal audit institution in indonesia incorporated in the apip container is given clear and broad authority, roles and https://www.ilomata.org/index.php/ijtc the effect of competencies and independence internal auditors on internal audit quality: the theoretical review approach aidi, sayuthi, susanto, junaidi, abdurohim 114 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc functions as mentioned above, the results of apip's work will be very beneficial not only for the government, but also beneficial for the legislature, external auditor, and other interested parties. however, to ensure the quality of the results of the apip work that involves human resources with various types of educational and experience backgrounds, a professional and managed education and training program is needed. in addition, to improve coordination in planning, implementing and evaluating activities among the apip ranks, participation in the development of synergy for apip supervision is needed. reference arens, a. a., & loebbecke, j. k. 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(2015). control environment analysis at government internal control system: indonesia case. procedia social and behavioral sciences, 211, 844–850. https://doi.org/10.1016/j.sbspro.2015.11.111 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 162-170 162| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta dwi agustina 1, yosua richard angky2, johansyah zaini3 123institut ilmu sosial dan manajemen stiami, indonesia correspondent: dwiagustina1808@gmail.com1 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: agustina, d., angky, y.r., zaini j. (2022). analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta. ilomata international journal of tax and accounting, 3(2), 162-170. https://doi.org/10.52728/ijtc.v3i2.461 abstract: the government issued government regulation number 9 of 2021 to improve the investment climate and accelerate economic recovery in indonesia. one of the policies passed was a dividend tax. this study aims to analyze the policy strategy carried out by the primary tax office of menteng dua, jakarta to increase the number of investors by utilizing the dividend tax that has been made by the government. data collection in this study was conducted through literature study, interviews, observation, and documentation. the results of the analysis show that the dividend tax policy strategy carried out by the primary tax office of menteng dua, jakarta to increase the number of investors was to develop a culture that supports the strategy, create an effective organizational structure, direct marketing efforts policies, plan budgets, develop and empower information systems, and connect the employee and organizational performance. although several strategies had been implemented, the implementation had not been optimal because due to the large number of taxpayers the tax office did not conduct a special campaign regarding dividend tax. the campaigns were carried out only through representative accounts without a special budget. keywords: tax strategy, dividend tax. this is an open access article under the cc-by 4.0 license. introduction countries around the world have been battling a pandemic for more than a year due to a virus called corona which causes the covid-19 disease. the pandemic caused a decline and slowdown in the global economy as each country's government had to implement special policies to break the chain of the virus spread, and indonesia was no exception (anugerah et al., 2021; dai et al., 2021; górska et al., 2021; gupta et al., 2022; malahayati et al., 2021; stephens et al., 2021; yao & ngai, 2021). in 2020 indonesian economy experienced a contraction of 2.07% compared to 2019 (amalia & saputra, 2021). this economic decline and slowdown was caused by the implementation of large-scale social restrictions or lockdowns by all countries in the world, causing trade flows such as exports and imports as well as the productivity of company employees to decrease (abdelrahman & ismail, 2022; de la rosa et al., 2022; giannopoulou et al., 2022; martín-rodríguez et al., 2022; matysiak et al., 2022; scivicco et al., 2022). these restrictions hampered companies' https://www.ilomata.org/index.php/ijtc mailto:dwiagustina1808@gmail.com https://doi.org/10.52728/ijtc.v3i2.461 analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 163 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operations and decreased their incomes, leading to cuts in employee salaries and termination of employment (jedwab et al., 2021; kusumastuti, 2020; sekiraqa et al., 2021; shafi et al., 2020). this was done so that the companies can survive. the economic downturn and slowdown in indonesia required the government to make various efforts so that the economy could gradually recover, one of which was by issuing various stimuli or incentives in the form of fiscal policies such as the job creation act or law number 11 of 2020 (nurhayati, 2021; suntoro, 2021). the purpose of the act is to improve the investment climate, create jobs and provide convenience for large businesses and msmes (hukunala, 2022; sudarmanto et al., 2021; tan, 2022). one of the regulations passed by the government as a followup to the job creation act was government regulation number 9 of 2021 concerning the application of taxation to support the ease of doing business. this regulation contains several changes to general provisions and tax procedures, one of which is regarding the exception of dividend tax as a tax object. the regulation was later revealed to be minister of finance regulation no. 18/pmk.03/2021 which discusses in detail the terms and conditions for the changes that occurred (wijaya & melati, 2021). the terms and conditions so that dividends are not subject to tax are contained in the regulation of the minister of finance number 18 of 2021, article 17 paragraph (2) and article 35 which state that dividends obtained must be reinvested in predetermined financial products. indonesia's trade balance began to recover. this can be seen in the trade balance in the first quarter of 2021 which recorded a surplus of 17.11% year on year compared to the surplus in the first quarter of 2020 which was around us$ 2.59 billion. the surplus occurred because export performance increased by 17.11% and imports grew by 10.76% (wafikhoh, 2022). this recovery continued until the 3rd quarter of 2021, where the indonesian economy grew by 3.51% compared to 2020; this growth was supported by export performance (asshidiqi & irawan, 2021). the increase in exports and imports indicates that indonesia's economic recovery has begun massively, in line with the programs that have been implemented by the government to encourage the wheels of the economy (wardana, 2021). in 2021, the indonesian government ratified government regulation number 9 of 2021 concerning tax treatment to support ease of doing business as a follow-up to law number 11 of 2020 concerning job creation. government regulation number 9 of 2021 contains several changes to general provisions and tax procedures, one of which is regarding dividends contained in chapter iii article 2a. dividends were originally subject to income tax of 10% of the gross income received by shareholders as stated in the final income tax article 4 paragraph (2), but in government regulation number 9 of 2021 paragraph (2a) income on dividends is excluded from the tax object. the government regulation was later revealed by the minister of finance to become regulation of the minister of finance of the republic of indonesia number 18 of 2021, in which there are terms and conditions for exemption from income tax received from dividends. indonesia is a developing country with the fourth largest population in the world, i.e. 270,200,000 people in 2020 which was dominated by productive age (70.72%) totaling 191,085,440 (tambunan, 2020). however, the number of local investors until february 2021 was only 4,513,103 people (herninta & rahayu, 2021). the data shows that investors in indonesia were only 2.3% of the total population. therefore, the government provided a stimulus in the form of dividend tax exemptions listed in government regulation number 9 of 2021 and its derivative, namely minister https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 164 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of finance regulation number 18 of 2021 to increase the number of investors . the government's efforts to increase the number of investors in indonesia were not easy. the government needed the right strategy so that these goals could be achieved. strategy is a process of determining the plan of top leaders that focuses on the long-term goals of the organization, accompanied by the preparation of a method or effort so that these goals can be achieved (ledro et al., 2022; thaher & jaaron, 2022). a good strategy is prepared based on the company's internal capabilities and weaknesses (laguir et al., 2022; velasco-muñoz et al., 2021). opportunities will be meaningless if the company is not able to utilize the resources it has (pashutan et al., 2022; samson & bhanugopan, 2022). indicators in strategy implementation are: a. develop a culture that supports strategy b. create an effective organizational structure c. direct marketing efforts d. plan a budget e. develop and empower information systems f. connect employee performance and organizational performance (de mendonça et al., 2022) based on the background that has been described previously, in order this research to obtain maximum results, the authors limit the scope of this research as follows: 1. the study only discusses the implementation of the dividend tax strategy by the primary tax office of menteng dua, jakarta. 2. the study only discusses the constraints of the primary tax office of menteng dua, jakarta in implementing the dividend tax strategy. 3. the research only discusses the efforts of the primary tax office of menteng dua, jakarta in overcoming obstacles in the implementation of the dividend tax strategy. 4. the research period is 2021 because the government regulation regarding dividend tax was passed in that year. research purposes based on the main issues raised, the writing of this thesis aims to: 1. to analyze the implementation of tax policy strategies related to dividend tax in an effort to increase the number of investors in the primary tax office of menteng dua, jakarta using swot analysis. 2. to analyze the obstacles that arise in the implementation of policies related to dividend tax in an effort to increase the number of investors in the primary tax office of menteng dua, jakarta. 3. to analyze the efforts or solutions made in dealing with the obstacles to the implementation of the policies related to dividend tax in an effort to increase the number of investors in the primary tax office of menteng dua, jakarta. method the following is an explanation of the approach and types of research used by the researchers: scientific method is a method used to obtain data scientifically with certain goals and uses (sugiyono, 2019). qualitative research is research that can produce new findings, which cannot be https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 165 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc produced using methods of quantification (measurement) and other statistical procedures (creswell, 2017). in qualitative research, researchers must have a "perspective emic" nature, meaning that the data is obtained not "as it should be", nor based on what the researcher thinks, but based on the reality that has been thought, experienced, happened, felt. in the field by data sources (moleong, 2018). the theoretical basis put forward by researchers is not fixed, but is temporary. researchers are also required to conduct grounded research, which is to find new theories based on data obtained in the field or in certain social situations (bungin, 2017). result and discussion 1. how is the implementation of the tax policy strategy related to dividend tax in an effort to increase investors in indonesia? covid-19, which hit the global economy in 2020, required every country to make various efforts to recover the economy quickly, including indonesia. the indonesian government issued various stimulus in fiscal policy, one of which was reforms in the taxation sector as stated in government regulation no. 9 of 2021 as a follow-up to law no. 11 of 2020 (law on job creation). government regulation number 9 of 2021 contains changes to general provisions and tax procedures, one of which is the policy for exemption from dividend tax as a tax object. this regulation was later revealed by the ministry of finance to become a policy product, namely minister of finance regulation no. 18/pmk.03/2021 which discusses in detail the terms and conditions for the amendment. the data that the authors got from the indonesian central securities depository (ksei) showed that the number of capital market investors from 2018 to february 2021 was only 4,515,103 (ksei.co.id). meanwhile, the productive age population is 15-64 years old, which was 191,085,440 people (bps.go.id). the data shows that investors in indonesia were only 2.3% of the total productive age population. in comparison, the number of investors in malaysia reached 9% and singapore reached 26% (fong, 2020). so it can be concluded that investors in indonesia were still classified as very low. 2. what are the obstacles experienced in implementing tax policies related to dividend tax in an effort to increase investors in indonesia? the obstacles experienced by the primary tax office of menteng dua, jakarta in implementing the dividend tax policy according to mr. muhammad were time, number of human resources, and the fact that the public preferred to conduct one-on-one consultations for privacy reasons, and according to ms. megah the obstacle was restrictions that occurred during the pandemic and that some people did not understand how to use zoom meetings as a means of campaigns. constraints were also experienced by the ten investors who said that the campaign regarding the dividend tax was still not appropriate, giving rise to some misunderstanding of the policy and campaigns during the pandemic because some people did not understand how to use technology. teh tax office could take advantage of the dividend tax policy to attract investors such as students or millennials in accordance with the purpose of the job creation act, namely improving the investment climate. 3. what are the efforts or solutions to overcome the obstacles experienced in implementing tax policies related to dividend tax in an effort to increase investors in indonesia? https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 166 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to mr. muhammad and ms. megah, the efforts made to overcome these obstacles were adding a picket schedule to conduct consultations so that more people were met, and using social media as a tool to promote policies because even though people do not understand technology, they still use social media every day. investors also provide input or solutions so that the tax office can handle future or existing obstacles; the campaign carried out by the tax office to the community needs to be improved so that there are no misunderstandings in interpreting the policy. the tax office can also conduct campaigns on videos uploaded to social media and create discussion forums in the work area. the tax office can also make online chat-based consultations such as whatsapp and telegram as an alternative for people who do not understand using zoom meetings. the tax office can conduct outreach to campuses within the tax office's scope of work so that students can be educated. it is hoped that with this campaign, curiosity about investments that can use the tax-free dividend facility will arise. conclusion based on the discussions described in chapter iv, the authors draw conclusions from this study regarding the analysis of tax policy strategies related to dividend tax in efforts to increase investors in the primary tax office of menteng dua, jakarta as follows: 1. the dividend tax policy strategy carried out by the primary tax office of menteng dua, jakarta to increase the number of investors was to develop a culture that supports the strategy, create an effective organizational structure, direct marketing efforts policies, plan budgets, develop and empower information systems, and connect the employee and organizational performance. although several strategies had been implemented, the implementation had not been optimal because due to the large number of taxpayers the tax office did not conduct a special campaign regarding dividend tax. the campaigns were carried out only through account representative without a special budget. 2. the obstacles experienced by the primary tax office of menteng dua, jakarta in implementing the dividend tax policy were the campaign during the pandemic was not easy to do because some people did not understand how to use zoom meetings. investors also said that the campaign was still not appropriate, giving rise to some misunderstanding of the policy. 3. efforts that can be made to overcome obstacles when implementing tax policies are to disseminate policies using social media such as youtube and instagram through short videos about these policies and provide online chat-based consultations such as whatsapp or telegram as an alternative for people who do not understand how to use zoom meetings. based on the results of the research that has been done and the conclusions described above, the authors provide several suggestions that are expected to be useful for taxation, especially in increasing the number of investors in the primary tax office of menteng dua, jakarta: 1. considering the objective of government regulation number 9 of 2021, which is to improve the investment climate in indonesia, the primary tax office of menteng dua, jakarta should maximize the dividend tax policy to increase the number of investors by conducting a special campaign regarding dividend tax with a special budget so that resources can be used optimally so that there is no misunderstanding of the dividend tax policy. https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 167 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. the primary tax office of menteng dua, jakarta needs to disseminate the dividend tax policy to campuses to foster student curiosity about dividend tax and investment instruments that can use the facility. 3. the primary tax office of menteng dua, jakarta needs to maximize social media-based information systems and online chat-based services such as whatsapp and telegram to carry out campaigns considering that during the pandemic it is very difficult to meet face-to-face, as well as promote the website that has been created, namely https://www. onlinepajak.com/kantor-pajak/kpp-pratamajakartamenteng-dua so that more people can feel the ease of carrying out their rights and obligations in taxation. reference abdelrahman, r., & ismail, m. e. 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(2022). the impact of sustainability strategic planning and management on the organizational sustainable performance: a developing-country perspective. journal of environmental management, 305, 114381. https://doi.org/10.1016/j.jenvman.2021.114381 velasco-muñoz, j. f., mendoza, j. m. f., aznar-sánchez, j. a., & gallego-schmid, a. (2021). circular economy implementation in the agricultural sector: definition, strategies and https://www.ilomata.org/index.php/ijtc analysis of tax policy strategies related to dividend tax in an effort to increase investors at the primary tax office of menteng dua, jakarta agustina, angky, and zaini 170 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indicators. resources, conservation and recycling, 170, 105618. https://doi.org/10.1016/j.resconrec.2021.105618 wafikhoh, i. s. 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(2021). engaging social media users with attitudinal messages during health crisis communication. lingua, 103199. https://doi.org/10.1016/j.lingua.2021.103199 https://www.ilomata.org/index.php/ijtc ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 vol. 1 no. 4 october 2020 pp. 193-209 https://www.ilomata.org/index.php/ijtc decrease in labor levels in the covid-19 government budget lesi hertati1 , wahyudin zarkasy2, mohammad adam3 , haryono umar4, harry suharman5 1lecturer, faculty of economics of accounting, stie rahmaniyah – indonesia 2, lecturer faculty economics and business of accounting, padjadjaran university, indonesia 3lecturer faculty economics of management sriwijaya university, indonesia 4lecturer faculty of economics and business of accounting, perbanas university correspondent: hertatilesi@yahoo.co.id submitted : september 12, 2020 revised : october 10, 2020 published : october 31, 2020 abstract the overall budget of the government affected by covid-19 plays an important role in contributing to the welfare of the people who are being hit by a corona outbreak and more importantly is how the government's focus in determining the composition of the government budget itself. determination of the composition of the government budget is a strategic plan to achieve the population safety targets of the covid-19 outbreak and at the same time to emphasize the human resource sectors because all residents are required to lockdown. the government budget component is related to the provision of basic food and health assistance in the regions and the provision of basic community needs such as free food and free health. government budget allocations to the food and health sectors for free encourage an increase in the corona outbreak so that the population death rate decreases more broadly. a small enemy that is not visible to the naked eye but enough to stifle the economy and employment so that development is stalled in all directions, poverty rates increase, economic growth is paralyzed. the government is responsible for the allocated financial allocations for health and food for the residents of their respective countries. the availability of food is influenced by the availability of local government budget in providing government policies. regions that have better regional income budgets compared to other regions will tend to have high levels of regional income budgets. government expenditure is closely related to community life processes due to the co-19 pademic as a result of the government's success in handling co-19 nationally or regionally. this research method is descriptive and verification method, the analysis tool is structural equation modeling (sem, lisrel). the results showed that the decline in labor affected government budget period of the covid-19. keyword: decrease in labor rates, covid-19, government budget introduction the attention of the world is stirred by the plague of co-¬ 19 which quite shocks the people wherever they are so that it is merely the economic boom and the work of humankind in the equator. the wheels of the economy are totally paralyzed by governments made helpless all over the world. the role of the government is very important in social assistance such as distribution of basic food and free health care. iron road limited. (2015) states that the government sector can influence directly or indirectly on economic growth which is still chaotic in lanta corona. while luke, & emmanouil, (2019) stated that government policies can affect long-term growth through three fiscal instruments, namely: tax free, clean water in tackling government spending and budget balance from the economic crisis caused by corona https://www.ilomata.org/index.php/ijtc mailto:hertatilesi@yahoo.co.id decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 194 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 (mackinnon, 2002) . these three components affect the level of efficient use of resources, accumulation of production factors and technological development (martin, 2010). the success of development in indonesia during the 1980s could not be separated from the substantial development funding support that originated from state revenue due to high oil prices and capital inflow flows that flowed in from outside (mills, 2010). but in the next period the government faced various difficulties in mobilizing funds to finance food and public health affected by corona (parker, 2020). the decline in government savings and reduced capital inflow have an effect on the government's ability to finance corona, including a decrease in central government assistance to local governments to finance basic food and free medical treatment at regional levels. the government has an important and very strategic role (plummer, et, all, 2018). the tendency of openness of the global economy that leads to economic integration will have an impact on the national economy which will ultimately also affect the economy at the regional level. factors of production stop moving between countries and regions which cannot follow market mechanisms and the stagnation of economic sectors does not grow. this model will open up opportunities for areas with sufficient resources to grow leaving areas that have limited resources. therefore, in the context of regional development, the government must pay attention to the inter-sector linkages and the inter-regional linkages based on the principle of interrelation and dependence (hertati, et, all, 2020: argent, 2013: boschma, 2015: fielke, 2017: gunton , 2003). government policies relating to lockdown focus of basic food needs to replace spending on households who cannot work because of financial limitations and government involvement in providing good services (hertati & syafarudin, 2018: mackinnon, et, all, 2009). free social financial and basic food assistance to reduce the burden on the community with government support. in connection with this in an effort to spur the stopping of economic growth the government is a private sector partner in growing basic food aid activities. government policies in the context of encouraging the provision of groceries due to the weakness of the regional economy are expected to create efficiency and increase regional economic activity. each region requires free food services that support the burden of people who cannot work due to covid-19. regional free basic food funding from central and regional government funds (government investment) is intended to stimulate other sources of funds to ease the burden on society, but in reality most regions are still very dependent on funds from the central government. this can be seen from the large share of central government funds reaching around 70% 80% in the regional income and expenditure budget (hertati & syafarudin, 2018: m., marshall, et, all, 2007). one government policy that is closely related to efforts to mobilize factors of production is through fiscal policy. in modern economic management fiscal policy contains three main objectives namely; the first is to influence the allocation of economic resources (resource allocation). the purpose of fiscal policy in this context is to find the right balance both in real and nominal terms between the allocation of economic resources to the public sector and the opportunity cost of transferring economic resources from private entrepreneurs. second, is to carry out the process of redistribution of wealth and income among economic groups in society. in this case fiscal policy aims to obtain an interpersonal balance in net income or welfare. third, is to determine the direction of growth and stability of the national economy. therefore fiscal policy must be able to engineer actions that will facilitate the optimal use of resources such as decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 195 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 natural resources, human resources and financial resources (hertati, et, all, 2020: mackinnon, et, all, 2009). with regard to financing development in the regions, basically development in the regions can be financed by the regional government itself from the results of the mobilization of tax and retribution funds and other levies reflected in the amount of local revenue. development funding in the regions is also funded by the central government through the state budget income in the form of providing assistance to regions outside the autonomous region subsidy (before the enactment of the regional autonomy law). sources of funds for social assistance in the region both from the regional government itself and from the central government are government investment (government sector). it is expected that from this government investment it can reduce the economy in the regions and cities that increase the capacity to provide large-scale social assistance services to the community which in turn can help the people's economy and do not have income due to corona income between individuals and between sectors in the region. another factor affecting regional economic growth is the influence of sectoral and regional policies in the distribution of priority social assistance funds to regions through channeling aid funds between levels of government. socio-economic assistance in a region is very dependent and influenced by internal factors, namely the economic carrying capacity of the region and external factors, namely the carrying capacity of external support, in this case the assistance of the central government. development of central government expenditure based on dik / dip allocation by province. central government expenditures in the form of donors of basic food assistance and free health services during the corona period are realized by the regional and provincial heads of the regions which are the central government funds used in the corona period assistance whose financing is borne by the state budget (apbn). the allocation of central government funds to the regions is provided through assistance, namely the autonomous regional subsidy (sdo) and free basic food and health assistance from the corona through inpres funds. autonomous regional subsidies (sdo) are given to the regions in order to finance the administration of the government in the regions while the inpres funds are intended to assist the regions in financing the activities stipulated in the free basic food assistance budget. the consequence of the high co-19 development is the limited economic capacity to create jobs. economic growth has fallen sharply which tends to be driven by an increase in consumption not proportional to the growth of the labor force will have implications for increasing the number of unemployed. efforts to reduce the number of open unemployment through increasing basic food assistance and free health so that the economy continues to recover are pursued, among others, through government budget policies at both the central and regional levels. government policies to increase the state budget even with the consequence of increasing the fiscal deficit and focusing its spending on sectors where free food and health assistance are expected to reduce the burden on the population in a country so that the rate of unemployment can be overcome (martin, 2012: measham ,, et, all, 2019: mee, et, all, 2004: nelson & inter, 2002). economic growth greatly affects job creation, especially in economic sectors that have a high employment elasticity. increased economic growth will increase employment when there is an increase in investment. economic growth in recent years has tended to be driven by increased consumption so that despite economic growth it has been very slow in job creation. national economic growth experienced a sharp decline in 2020. the decline in national economic growth decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 196 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 in 2020 was caused by world oil prices which dropped dramatically, the epidemic covid-19 which also affected regional economic growth. the decline in world oil prices was followed by the worldwide co-19 pademic outbreak and the reduced flow of capital inflows into the country. this condition affects the diminishing state finances and has an impact on the ability of the government to finance food consumption due to lockdowns by the central government to stay at home not doing work outside the home. the economic growth model is expressed as a form of production function that describes the relationship of input and output in which the input variable consists of capital, labor and technology. the variable of labor becomes important because labor plays a dual role, in addition to being a subject that will be a source of other resources, it is also an object of development. sector due to corona outbreaks struck. the decline in labor in various economic sectors is closely related to the economy. the economic decline in the long run, following the decline in national income growth, will bring a fundamental change in the structure of the economy, from the traditional economy (agriculture as the main sector) to the modern economy (manufacturing) (poruschi, et, all, 2020). decline is defined as a series of changes that are interrelated to one another in the composition of aggregate demand, foreign trade (exports and imports), aggregate supply (production and use of factors of production such as the decline in labor and capital (ryser, et, all, 2019 : scearce, et, all, 2019) environmental uncertainties in the economic sector into two sectors, namely: (1) the traditional sector (agriculture), is a subsistence and overpopulated rural sector, which is characterized by a marginal productivity decline in labor, almost equal to zero, (2) the modern sector (industry) with high productivity is a decrease in labor from all sectors, production in the modern sector will decrease and the benefits derived will decrease as well.the process of decreasing growth and decreasing employment opportunities in the modern sector continues until all decline labor in all traditional sectors which are not absorbed by the sector industry. this process will stop when marginal productivity in all sectors has a corona impact with wage levels falling above the average even zero income line (scearce, & fulton, 2004). the characteristics of the decline in labor occur due to factors such as the following: that is: 1. open unemployment. it is unemployment based on the characteristics of the first is open unemployment the situation of someone who does not work at all and is trying to find work. open unemployment is caused by employment that is not available or is not suitable between job openings and educational background. 2. seasonal unemployment is when the corona season, rainy season rubber tappers and fishermen all affected cannot work appeal the government has to lockdown because the covid-19 outbreak cannot do their work and is forced to be unemployed. in addition, in the dry season the farmers cannot do the work of the government period, the rubber civil servants, rubber tappers, fishermen and farmers and so on do not do other work so they are forced to be unemployed. unemployment like this is classified as seasonal unemployment. government spending reflects government steps to influence the economy through fiscal policy. in a broad sense, fiscal policy is not only related to the allocation and regulation of the composition of expenditure, but also relates to how the government finances the expenditure. financing of government expenditure can come from: (i). tax, (ii). loans or bond sales, (iii). printing money (seignorage), and (iv). sale of government assets (privatization). tonts (2013, decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 197 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 stated that tax is the main source of funding for government spending to improve the welfare of society. the imposition of certain types of tax will have a different effect on economic growth. if the government imposes a lump-sum tax on the community, the effect on investment and growth is positive but if the tax what is imposed is income tax that can reduce investment and economic growth (rda limestone coast, 2019: scearce, & fulton, 2004). financing government expenditure through loans or the sale of government bonds will add to the wealth and income of the community in the future but the community has a future responsibility in the form of a bond tax. funding through debt is in principle the same as financing expenses through tax collection because debt is equivalent to tax in the future. while financing government spending through printing money (seignorage) will drive inflation rates (tonts, et, all, 2012). government expenditure consists of two, namely routine expenditure (current expenditure) and capital expenditure / expenditure (capital expenditure). routine expenditure is intended to finance the operational activities of government in providing services to the public. routine government spending is to meet the internal needs of government activities so that it has a negative effect on growth (barro; 1990). whereas capital expenditure is to finance the construction of physical infrastructure and facilities. government spending on social and economic overhead will open up employment opportunities, increase national income and in turn increase economic capacity (van staden, 2019). tonts, (2014) measured the role of government through the approach to the volume of government spending in the form of: i) purchases of goods and services, ii) transfers of income to residents, companies and governments, iii) interest payments. this approach illustrates that the role of government spending is very important to the economy, especially for the supply of public goods. van staden (2019) and van't klooster, et, all, (2006) provide arguments about the importance of government spending on helping the people's economy when environmental insecurity is affected by corona outbreaks in the allocation of economic resources for social assistance such as free food supplies. this approach explains that the efficiency of government spending can be achieved if the marginal benefit is the same as the marginal cost. the characteristics of the government budget affected by the corona outbreak are: as follows: 1. rearranging expenditure priorities. the government must determine the priority scale by sorting the budget according to the level of urgency. the government can refocus on the budget, especially in the health and social sectors. refocusing on this expenditure budget is also needed because of declining income budget assumptions. 2. reallocation of shopping. the first priority is now heading towards dealing with covid-19 and its various domino effects. this activity can be done by reducing / temporarily halting infrastructure development activities, as well as other investment activities allocated for the handling of covid-19 countermeasures. the government can also cut down certain expenses such as expenses for official travel, meeting expenses, technical guidance, counseling, and the like to be diverted to the handling of covid-19. 3. utilization of the excess budget balance (sal), endowment funds, funds controlled by the government with certain criteria, and funds managed by blu / blud. central and local government agencies can utilize the funding sources in accordance with their intended use to handle the impact of covid-19 and prepare for the recovery period. decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 198 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 4. establishing a policy of relaxation of central and regional taxation. providing stimulus to the business sector and the community, it is necessary to reduce expenses, reduce tax rates, and extend the time for exercising rights and fulfilling tax obligations. 5. aligning the implementation of the legal umbrella and intensive communication with various parties. intensive communication must also be built properly, especially between the executive as the implementer of the policy with the legislative body, the examining / supervisory agency, law enforcement, including the community. 6. encourage the involvement of the examining, supervisory and law enforcement agencies, namely bpk, bpkp, inspectorate, and kpk in overseeing covid-19 handling funds, especially in the procurement of goods and services (pbj), so that they always adhere to the pbj principles in emergency situations. 7. accelerating the transfer of the central government to regional governments. the smooth transfer of funds from the center to the regions is one of the keys to solving the funding problem to overcome covid-19 in the regions, because the regional government will be very dependent on the smoothness of the transfer of funds from the center. 8. adjustment to the use of state capital participation in soes. plans for allocating pmn to certain soes can be altered according to the needs of handling covid-19. 9. massive fundraising from businesses and the public can be a source of income that is used effectively and accounted for in accordance with the provisions. hertati, et, all (2019) stated about the relationship of decreasing labor and income through free social assistance to ease the burden on the people affected by corona. then hertati (2020) states that high unemployment because people cannot work can be attributed to lack of capital relative to meeting the necessities of life. when economic growth plummets and is sustainable so as to decrease production capacity, there will be a reduction in employment opportunities with a high level (watkins, 1963). increased unemployment and underemployment in economic activities that have low levels of productivity are therefore seen to reduce the level of labor affected by corona (markey, et, all, 2019). fiscal policy instruments include government budget and revenue, government expenditure consisting of routine expenditure and social assistance expenditure. routine expenditures are intended to finance social assistance activities at the national and regional level. government expenditure is a form of government investment (government investment) which is allocated for free food staples, is an investment in human resources in the health sector and investment in research and development (r&d). government investment expenditure will increase the quantity of production inputs and can reduce the quality of private sector production inputs which in turn will reduce productivity and long-term economic growth due to corona outbreaks sweeping around the world (manalo, et, all, 2015: mackinnon, et, all, 2009). fleming (2015) states that government intervention in the economy is likely to increase, measured based on the comparison of government spending on national products. the relationship between government spending states that in the initial stages of economic growth the ratio of government investment is greater than the ratio of total investment or in other words the ratio of government expenditure to national income is relatively large. this is because in the initial stages the government must provide various infrastructure. in the next stage, government investment is still needed to spur growth followed by an increase in private investment. decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 199 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 empirical studies that examine the relationship of government spending to economic growth conclude that an increase in government spending will encourage economic growth. increasing government spending is a necessity but the problem is how the government finances the expenditure. in a theoretical arrangement, financing government spending can be done through several sources, namely: (i). tax revenue, (ii). printing money (seignorage), (iii) loans and (iv) asset sales (privatization). the government can optimize tax revenues or through loans to finance its expenditure. financing of local government expenditure in the financial relationship between the central and regional governments can be done through decentralization, deconcentration and co-administration mechanisms. financing of government expenditure through the decentralization mechanism comes from the region's original revenue and the balance funds that are charged in the apbd of each region. while financing through the mechanism of deconcentration and assistance tasks is the responsibility of the central government and is charged to the state budget. decentralized and deconcentrated systems have an impact on government spending patterns which in turn results in resource transfers, incidence and output effects. government expenditures that are directly related to a reduction in capital for decreasing production are classified as government spending which is government investment in society due to the corona outbreak. the source of basic food needs in the region can come from the local revenue collected by the regional government through taxation and regional levies. in addition, funding for the distribution of basic food and regional health facilities can also come from transfers and assistance from the central government to the regions. all of this is local government revenue and subsequently allocated to funding semabako in the region based on strategic plans that have been prepared by each local government. the allocation of central government funds through sectoral projects and social assistance will increase the corona outbreak of the region's capacity to provide services to the community through increased provision of economic infrastructure will strengthen regional competitiveness to distribute free spells. a region that is relatively advanced and has better infrastructure will potentially become a private investment destination. the results of research conducted by the center for international private enterprise (cipe) mention the factors that influence the flow of bansosoi sorted according to the importance of their respective roles including: characteristics of the akibar corona community so that access to markets, labor, exchange risk, capital repatriation, protection copyright, trade policy, government policy, tax rates and intensive, political stability, macroeconomic policy and total stop (rq, shi, x., cronshaw; 2018). hayter, (2008) examined a study of the effects of government spending on free food assistance and at the same time improving the distribution of income. the development of the study was triggered by the hypothesis that there was a divergence between the distribution of free food staples and improvements in the standard of living of the people caused by the allocation of government spending. hyndman, et, all (2008) stated that some previous studies used national aggregate data in measuring research variables so that the estimation process was carried out using time series data. in this study variable levels of government spending are broken down according to the level of government (level of government). this is expected to provide more information and scope of analysis on the effects of government spending on free social assistance on the growth of people's lives that are required to be in the house. the study of the effect of government spending based on the level of government (level of government) was conducted by halseth, et, all (2014). the study only looked at the effect of decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 200 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 government spending at three levels of government (federal, state and local) on co-19 government spending on decreasing labor rates (hyndman, et, all, 2008). the researcher not only analyzed the effect of government spending at various levels of government on social assistance but also analyzed its effects on the decline in labor, humanitarian impact of the corona outbreak affecting populations worldwide. research hypothesis: h1: the effect of a decrease in labor figures on co-19 government spending. figure 1: research conceptual framework methods the target population of this study is small and medium enterprises in indonesia. keep in mind the conceptual model shown in figure 1, the review instrument established by utilizing previous studies. the characteristics of the variable hypothesis were designed using sem-lisrel five answers from 1 to 5. the measurement items of the current study consisted of two variables which included emergency scientific discoveries during the co-19 period government expenditure, a decrease in labor rates. the data of this study were collected using a questionnaire through the google box directly and sent a letter and then collected from 600 small and medium businesses in indonesia that are related to which collected 215 samples. after sending the google box to small and medium-sized businesses in indonesia that are directly related by distributing questionnaires to them for their responses. the selection process and related small and medium businesses in indonesia are very important for data collection for researchers, when investigating creativity, emphasizing sales centralization both online and at the counters giving meaningful responses (sugiyono, 2013). therefore, a total of 600 questionnaires were sent and distributed to all small and medium enterprises in indonesia 215 samples responded. overall, the data collection process was taken for 1 month and this research was not funded by any association. investigation has also followed the rules of gujarati, (2003) in considering moral and ethical actions. ghosh, et, all (2013) to measure reliability in sem variance) can use composite reliability (internal consistency reliability) and variance exctract measure (variant extract size) as follows:  ghcklay .= where : y: gross domestic product a: technological level l: labor k: private capital mass unemployment decreasing labor rate open unemployment covid-19 epidemic prevention process future government expenditure s covid19 preparation of priority scale belanja reallocation of shopping utilization of the budget balance participation of state capital accelerate government transfers involvement of the examining aligning legal umbrella establish a relaxation policy fundraising for donations decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 201 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 hc: human capital g: government expenditure β, δ, γ, φ, are the parameters to be tested results and discussion validity test is done which is used to determine the eligibility of items in the questionnaire to determine the variables and reliability test to measure the reliability of the object being measured. data analysis was performed by descriptive analysis and verification. descriptive analysis is carried out with balanced categorization using quartile range (sugiyono, 2013). verification analysis used to test the hypotheses in this study is to use a structural component of the modeling equation (sem, lisrel) or variance-based known as sem lisrel. the decrease in labor figures towards the government budget for the co-19 period will be revealed through the crafter's response to the statements submitted on the questionnaire. based on the calculation of the percentage of score crafters answer obtained results as shown in the following table: table 1 recapitulation of research variable response results no variable average percent category 1 decreasing labor rate 7,49 69,84 high 2 the government budget period covid19 9,01 95,1 high source: recapitulation of research variable response results based on table 1 above, it is known that the variable decrease in labor rates obtained a score presentation of 69.84% which was categorized high, and became the highest score compared to the scores of the other variables studied. this score is obtained by comparing the actual with the ideal score. based on the results of these calculations where the reduction in labor numbers is very high, which means it is in accordance with the initial phenomenon that the authors found in the field, where the results of the decreasing labor rate on the government budget period co-19 have been said to be good but not optimal. the results of data processing describe a decrease in the number of workers in general are in the high category. these results explain the level of good government capability in interpreting each of the handicraft business activities he carries out which is affected by the corona he believes in giving rise to a wise and open attitude, and the government budget during the co-19 period rises high due to a corona outbreak in business. the variable decrease in labor rates on a practical level, decreases sharply shows a decrease in labor numbers due to corona engulfing the population of the entire world in analyzing problems, being able to be flexible when dealing with various problem situations, and having a clear vision in facing and solving every business problem. small scale business owners are often deemed not to have a good ability to understand a problem holistically, because in general it has a low level of education. the small business scale also causes them to be often seen as having no business vision that goes beyond profit making and survival. the results of the study show the opposite, where based on responses to each item the statement shows that the artisans generally have a high co-19 government expenditure. this condition is caused by crafters who are business owners who are almost always faced with the risk of uncertainty in the business environment such as changes in government policies decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 202 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 for lockdowns, limited supply of raw materials, economic situation due to unstable corona, or changes in market trends that demand they can minimize any potential business risks quickly and accurately. the business environment causes them to become unemployed to face difficult business situations. experience in overcoming each of these business problems encourages a broad and holistic mindset in understanding each problem and forming wiser personality traits. this causes the craftsmen to have the ability to understand each problem and relate it to social and spiritual values that have a broader range. table 2. recapitulation of results of dimensions and indicators of the co-19 government budget dimensions and indicators loading factor the loading factor squared error information patk 1 0.714 0.510 0.890 valid cr = 0.891 ave = 0.577 ca = 0.856 reliabel patk 2 0.714 0.510 0.790 valid patk 3 0.714 0.510 0.660 valid patk 4 0.714 0.510 0.790 valid patk 5 0.714 0.510 0.890 valid patk 6 0.714 0.510 0.730 valid patk 7 0.714 0.510 0.890 valid patk 8 0.714 0.510 0.670 valid patk 9 0.714 0.510 0.890 valid patk 1.1 0.844 0.713 0.287 valid cr = 0.824 ave = 0.611 ca = 0.678 reliabel patk 1.2 0.844 0.933 0.287 valid patk 2.1 0.844 0.713 0.287 valid cr = 0.824 ave = 0.611 ca = 0.678 reliabel patk 2.2 0.844 0.813 0.287 valid patk 3.1 0.844 0.713 0.287 valid cr = 0.814 ave = 0.711 ca = 0.678 reliabel patk 3.2 0.844 0.913 0.287 valid patk 4.1 0.844 0.713 0.287 valid cr = 0.924 ave = 0.711 ca = 0.978 reliabel patk 4.2 0.844 0.813 0.287 valid patk 5.1 0.844 0.913 0.287 valid cr = 0.924 ave = 0.611 ca = 0.678 reliabel patk 5.2 0.844 0.713 0.287 valid patk 6.1 0.844 0.773 0.287 valid cr = 0.724 ave = 0.711 ca = 0.678 reliabel patk 6.2 0.844 0.713 0.287 valid patk 7.1 0.844 0.753 0.287 valid cr = 0.824 ave = 0.811 ca = 0.678 reliabel patk 7.2 0.844 0.913 0.287 valid patk 8.1 0.844 0.713 0.287 valid cr = 0.824 ave = 0.811 patk 8.2 0.844 0.813 0.287 valid decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 203 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 ca = 0.678 reliabel patk 9.1 0.844 0.743 0.287 valid cr = 0.824 ave = 0.911 ca = 0.878 reliabel patk 9.2 0.844 0.813 0.287 valid source: data processed in 2020 based on table 2 the government budget model co-19 period with 9 dimensions can be declared already valid, because it has a loading factor value (λ) of more than 0.5. judging from the composite reliability value greater than 0.7 (cr = 0.891), the average variance extract value is more than 0.5 (ave = 0.577), and the cronbach alpha value is greater than 0.7 (ca = 0.856). this means that the dimensions and indicators formulated in the government budget variable measurement model in the co-19 period are valid and reliable. following is the goodness of fit (gof) results table in the final model: table 3. goodness of fit (gof) results in the final model no criteria limit value results conclusion 1 2-chi square, significance probability p-value ≥ 0,050 atau = 0,000 0,000 fit 2 gfi > 0,90 0,934 fit 3 agfi > 0,90 0,947 fit 4 cfi > 0,95 0,983 fit 5 tli atau nfi > 0,95 0,971 fit 6 rmr ≤ 0,10 0,081 fit 7 rmsea ≤ 0,08 0,066 fit source: data processed in 2020 table 3 describes that the final cfa model of spiritual intelligence formed has fulfilled several goodness of fit (gof) statistical criteria such as 2, gfi, agfi, cfi, tli or nfi, rmr, and rmsea, so that the measurement model of government expenditure covid-19 meets the criteria of a good measurement model (fit) and can be used as a manifestation for the formation of a full model. goodness of fit test results in the final model of the 19th government budget period obtained as shown in table. next table 1 recapitulation of dimension results and indicators for reduction in labor figures dimensions and indicators. table 4. recapitulation of dimension results and indicators for decreasing labor figures dimensions and indicators dimensions and indicators loading factor the loading factor squared error information patk 1 0.714 0.510 0.890 valid cr = 0.824 ave = 0.611 ca = 0.678 reliabel cr = 0.824 ave = 0.611 ca = 0.678 reliabel patk 2 0.714 0.510 0.890 valid patk 1.1 0.844 0.743 0.287 valid patk 1.2 0.844 0.743 0.287 valid patk 1.3 0.844 0.743 0.287 valid patk 2.1 0.844 0.743 0.287 valid patk 2.2 0.844 0.743 0.287 valid patk 2.3 0.844 0.743 0.287 valid source: data processed in 2020 decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 204 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 table 4 describes that the final cfa model for the reduction in the number of workers formed has fulfilled several goodness of fit (gof) statistical criteria such as 2, gfi, agfi, cfi, tli or nfi, rmr, and rmsea, so that the measurement model for declining labor rates meets the criteria of a good measurement model (fit) and can be used as a manifestation for the formation of a full model. in sem analysis an indicator is said to have good validity if it has a factor loading value greater than 0.70. while loading factors 0.50 to 0.60 can still be maintained for models that are still in the development stage (ghosh, et, all 2013). evaluation of the value of construct reliability is measured by composite reliability. each construct is said to be reliable if it has a composite reliability greater than 0.70 and ave greater than 0.50 (gujarati, 2003). table 5. goodness of fit (gof) results in the final model no criteria limit value results conclusion 1 2-chi square, significance probability p-value ≥ 0,050 atau = 0,000 0,000 fit 2 gfi > 0,90 0,934 fit 3 agfi > 0,90 0,947 fit 4 cfi > 0,95 0,983 fit 5 tli atau nfi > 0,95 0,971 fit 6 rmr ≤ 0,10 0,081 fit 7 rmsea ≤ 0,08 0,066 fit source: data processed in 2020 table 5 describes that the final cfa model for the reduction in the number of workers formed has fulfilled several goodness of fit (gof) statistical criteria such as 2, gfi, agfi, cfi, tli or nfi, rmr, and rmsea, so that the measurement model for the reduction in labor numbers meets the criteria of a good measurement model (fit) and can be used as a manifestation for the formation of a full model. goodness of fit test results on the final model of the reduction in labor figures obtained results as shown in table. next table 1 recapitulation of dimension results and indicators for reduction in labor figures dimensions and indicators. declining output growth rates and employment opportunities are focused on policies to increase national output through capital accumulation (hertati & safkaur.2020). this model connects the rate of decline in employment with the growth rate of gnp, then the model suggests that with a decrease in gnp growth to maximize the decline in labor. the decline in economic growth rates occurred as a result of a combination of the reduction in the level of savings and the accumulation of physical capital which became its first impact on one side and the capital-output ratio on the other. based on a certain capital-output ratio, the rate of decline in output growth and a decrease in employment can be maximized through the maximization of the level of savings and investment. the basic principle of this model is that producers are assumed to face two relative prices of the bansoso factor, which is the distribution of basic necessities due to the minus capital and labor. producers must use a combination of capital because the level of labor is not available properly to minimize production costs to achieve maximum profit. the people are all unemployed and only staying at home are not able to produce output with a variety of production processes both capital intensive and labor intensive. if the capital price is higher, there is no community income, the producers will choose to have a house at home to avoid the corona outbreak so that it does not spread widely. decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 205 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 a two-sector model of labor reduction was developed by boschma, (2006). describing the economy consists of two sectors, namely: 1) the traditional sector; rural economic sector which is subsistence with labor which decreases due to the orona impact, resulting in mass disbursement. 2) urban industrial sector; is a modern sector with a high level of labor productivity and has become unemployed in both rural and urban subsistence banks & sharpe (2006). the decline in labor due to growth rates and decreased employment opportunities in the modern sector is due to an increase in corona outbreaks as a result of increased government social assistance and capital accumulation in the modern sector. accumulation of government expenditure occurs because of environmental uncertainty that occurs throughout the world corona. retrieved from (2011) explains that the decline in labor is related to the allocation of factors of production and factor flows between regions affected by orona. current flows of unemployment between regions occur because people are encouraged to stay at home due to corona outbreaks resulting in mass unemployment between regions. increasing demand for output in the regions will change consumer tastes or increase demand for food. watkins (1977) developed a geographical economic approach to explain the decline in labor through a coronaweakening process. the allocation of economic expenditure in a region will form a geographical concentration of locations and give birth to an economic agglomeration of government social assistance (poruschi, 2020). with the formation of geographic concentration and economic agglomeration will have an impact on the efficiency of alleviating the burden of suffering people. to support the manufacturing sector or better known as the core-periphery model. the agricultural sector has a constant return due to global unemployment that does not produce homogeneous products in perfect competition conditions while the manufacturing sector with increasing returns does not produce diverse outputs in a corona-striking condition (tonts, 2013). conclusion government budget due to covid-19 outbreaks both the central government in the region financed from state budget revenue due to declining economic growth has a negative effect on people's income locked up in a country means that government spending due to the covid-19 outbreak both central and regional rose sharply and the decline in economic growth has a role in raising the level of numbers poverty in a country. whereas government expenditure due to regional covid-19 outbreaks financed from state cost income, investment and quality of human capital have a positive effect on regional community income, meaning that the aggravation of covid-19 outbreaks between regions will result in higher unemployment rates. traditional free market model; neither producers nor consumers have the influence or power to influence the prices of inputs or outputs of production. the level of decline in labor rates (level of employment) and the level of wages (wages) is determined simultaneously by all prices of output and factors of production in an economy through the balance of the forces of demand and supply. producers will reduce the labor rate as long as the marginal product value that will be produced by reducing one unit of labor exceeds the wage level. on the supply side, every individual will try to survive but work is not available, this is where government savings are spent to fund the community-affected groceries. workers cannot work in time to work and free time based on marginal utility. regional resources have only geographical advantages with low manufacturing potential and high agricultural conditions. the occurrence of the geographic concentration of the covid-19 outbreak by forming monopolistic competition so as to create a price index effect and home market effect, the nominal wage of labor declined and as a result a decrease in labor levels in the covid-19 government budget hertati, zarkasy, adam, umar, & suharman 206 | ilomata international journal of tax & accounting vol. 1 no. 4 october 2020 decline in the number of workers became unemployed in the city or region. the relationship of the decline in labor rates and the decline in mass unemployment spread through the approach of the level of decline in labor productivity. acknowledgments this research was conducted in the context of co-19 which attacks the entire population. we thank 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(2022). influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes). ilomata international journal of tax and accounting, 3(4), 408-420. https://doi.org/10.52728/ijtc.v3i4.572 abstract: micro, small and medium enterprises (msmes) grow and compete in a constantly changing business environment such as the current digital era, this change makes micro, small and medium enterprises (msmes) need follow-up for more advanced business development. many found that micro, small and medium enterprises (msmes) that have been established have finally had to stop operating due to improper management. of course, this is a joint concern considering that micro, small and medium enterprises (msmes) are the heart of economic development. micro, small and medium enterprises (msmes) are businesses with high gdp contributors and also new job seekers. the study was conducted by conducting preliminary observations by looking at the data on the number of micro, small and medium enterprises (msmes) in lubuklinggau city totaling 5,303 registered in lubuklinggau city. with data analysis technique use linear regression . as a result, there are significant influence between the variable. keywords: intellectual capital; financial literacy; financial inclusion; msme. this is an open access article under the cc-by 4.0 license. introduction micro, small and medium enterprises (msmes) are the drivers of the country's socio-economic development as productive businesses that are just developing and the forerunners of future large businesses owned by individuals and business entities (anjaningrum, 2020; chatterjee et al., 2022; haron et al., 2013; putra, 2018). the economic crisis of the 1990s showed that micro, small and medium enterprises (msmes) continued to grow and became supporters in increasing gross domestic product (gdp) and employment. the development of micro, small and medium enterprises (msmes) is consistently a top priority for the government because it is considered capable of providing benefits to the welfare of the community (anas et al., 2017; shafi et al., 2020; srijani, 2020; trinh et al., 2020) the advantage of micro, small and medium enterprises (msmes) in indonesia is that they provide a large contribution to gdp for the country and can absorb labor (janita & chong, 2013; kumala & junaidi, 2020; rahayu & day, 2015; sisilia et al., 2015). however, the fact is that mailto:dheo_rimbano@univbinainsan.ac.id https://doi.org/10.52728/ijtc.v3i4.572 influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 409 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc micro, small and medium enterprises (msmes) in indonesia are still lacking in building financial stability such as access to capital, competent human resources (hr) to use advanced technology, and not many have evaluated management performance in facing challenges (muhammad et al., 2009) the growth of micro, small and medium enterprises (msmes) can be measured from a qualitative perspective through the company's subjective attributes such as increasing the quality of output and depicting a positive product image. quantitative perspective is also considered in measurable indicators such as increase in number of employees, sales revenue and profitability (nkwabi & mboya, 2019) . qualitative and quantitative perspectives on micro, small and medium enterprises (msmes) can be optimized so that the business runs smoothly and maintains sustainability. micro, small and medium enterprises (msmes) are optimistic about their growing business, thus achieving competitive advantage. this achievement cannot be directly achieved without actors who have an understanding of financial literacy and utilize technology along with the times and utilize intellectual capital (leitner, 2011) . the 2019 national financial literacy and inclusion survey (snlik) showed a financial literacy index of 38.03% and a financial inclusion index of 76.19%. this shows that the indonesian people in general do not understand well the characteristics of various financial products and services offered by formal financial services institutions, even though financial literacy is an important skill in the context of community empowerment, individual welfare, consumer protection, and increasing financial inclusion (otoritas jasa keuangan, 2020) minimal financial literacy has resulted in low financial inclusion and vice versa (martini et al., 2021) . the need for a good understanding of literacy certainly reduces the risk of using fintech and increases public financial inclusion (sulistiyarini, 2012) . financial technology and financial inclusion are external factors in viewing the understanding of financial literacy. understanding of financial technology on financial literacy and financial inclusion has a positive effect as evidenced by financial technology-based financial services that are needed by the public to broaden their horizons regarding financial literacy and financial inclusion (mulasiwi & julialevi, 2020) . this research has been carried out previously which states a significant positive relationship between these variables (martini et al., 2021) ; (marginingsih, 2021) ; (marini et al., 2020) ; (dewi, 2020) ; (sulistiyarini, 2012) . there are other factors that are thought to have an effect on intellectual capital in micro, small and medium enterprises (msmes), namely financial inclusion. intellectual capital is a company resource that is categorized as intangible assets that can be developed from human resources (leitner, 2011) . intellectual capital is one of the main sources of financial inclusion in islamic banking in pakistan (nawaz, 2017) . previous research related to intellectual capital in relation to financial inclusion in micro, small and medium enterprises (msmes) has not been carried out. the research focuses only on the financial performance of each micro, small and medium enterprises (msmes), has not discussed further about intellectual capital on financial inclusion. this study analyzes the influence of intellectual capital, financial technology and financial literacy on financial inclusion in micro, small and medium enterprises (umkm) lubuklinggau city. influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 410 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial inclusion inclusion is providing financial services such as savings, credit, insurance, and payments at prices that all economic actors can afford, especially low-income economic actors (anwar et al., 2017) . financial inclusion is the proportion of individuals and companies that use financial products and services (pulungan & ndruru, 2019) financial inclusion is the process of promoting affordable, timely and adequate access to a wide range of regulated financial products and services and expanding their use by all segments of society through the adoption of existing and innovative tailored approaches including financial awareness and education with a view to promoting financial well-being and inclusion. economic and social (holle, 2019) financial inclusion is a banking instrument that plays an important role in the stability of financial services and access to finance (rusdianasari, 2018) . the following indicators for financial inclusion are: 1. availability/access 2. use 3. quality 4. well-being financial technology financial technology is an innovation that provides convenience and comfort for the public in the financial sector, because people can make transactions only with smartphones and the internet (ansori, 2019). financial technology is an innovation in financial services by utilizing the development of information technology (bfi finance, 2022). financial technology (fintech) is a 'revolution' of combining financial services with information technology that has improved the quality of financial services, and created financial stability (international trade administration, 2016) financial technology refers to the use of technology to provide financial solutions (arner et al., 2015) . specifically, financial technology defined as the application of digital technology to financial intermediation problems (aaron et al., 2017) . financial technology is the use of financial system technology that produces new products, services, technology, and/or business models and can have an impact on monetary stability, financial system stability, efficiency, fluency, security, and reliability of the payment system (bank indonesia, 2017) . financial technology is divided into several indicators based on their use (martini et al., 2021) , namely: 1. perception of ease of use of financial technology 2. effective use of financial technology 3. risk of using financial technology 4. interest in using financial technology financial literacy financial literacy is the level of knowledge, skills, beliefs that influence attitudes and behavior to improve the quality of decision making and financial management in order to achieve prosperity (ojk, 2013) . in addition, financial financial literacy is knowledge to manage finances ( financial literacy is money management knowledge ), indicators in financial literacy are (ulfatun et al., 2016): influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 411 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. basic knowledge of financial management . this basic knowledge is usually related to making decisions in investing or financing that can affect a person's behavior in managing the money they have 2. credit management . is a facility to borrow money and repay it within a certain period of time with interest. 3. savings management . is the amount of money saved for future needs. 4. investment management . is a form of investment activity of funds or assets with the aim of obtaining profits in the future. intellectual capital intellectual capital refers to knowledge resources that can provide a competitive advantage for companies (stewart & ruckdeschel, 1998). intellectual capital is defined as a new, intangible source of wealth; as information, knowledge that is applied to work to create value (nawaz, 2017) . intellectual capital refers to the possession of knowledge and experience, professional knowledge and skills, good relations, and technological capacity, which when applied will provide a competitive advantage for the organization (starovic & marr, 2005) . intellectual capital is divided into human intellectual capital and structural, where the former refers to human intellectual capital, which generates new ideas. second, structural refers to supporting mechanisms, which help human capital to turn these ideas into real products. previous research has shown that intellectual capital is the main driver of value creation in the banking industry (nawaz, 2017) . indicators in intellectual capital are measured by developing the competence of micro, small and medium enterprises (msmes) in honing competent employees, innovating, and maintaining good relations which will result in a successful business in the future and sustainability and can excel in business competition between entrepreneurs in similar fields. (absah et al., 2018) . framework of thinking figure 1 thinking frame hypothesis based on the framework of thinking, the following hypotheses can be presented: h1 : financial technology effect on financial inclusion in micro, small and medium enterprises (msmes) h2 : financial literacy affects financial inclusion in micro, small and medium enterprises (msmes) influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 412 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3 : intellectual capital affects financial inclusion in micro, small and medium enterprises (msmes) method this study uses a population of all micro, small and medium enterprises (msmes) in lubuklinggau city as many as 5,303 businesses registered with the office of cooperatives and small and medium enterprises (umkm) lubuklinggau city. this population cannot be used as a sample because only 2,150 micro, small and medium enterprises (msmes) in lubuklinggau city have business permits . the sample of this study was 337 micro, small and medium enterprises (msmes) which were determined by the slovin formula. the slovin formula is used to reduce the number of populations that are too large but still represent the total population of 100% (sujarweni, 2015). the following slovin formula is used with an error rate of 5% . the data collection technique used was the distribution of questionnaires to the people of lubuklinggau city as many as 337 micro, small and medium enterprises (msmes) in lubuklinggau city. collecting data by distributing online questionnaires with smartphones for 3 months. in addition, other methods are also carried out by visiting the owner directly to be invited to actively participate in providing information related to the problem under study. table 1. definition of operational variables source: primary data processed (2020) the analysis technique uses quantitative analysis. the quantitative analysis technique uses a likert scale with 4 scales to measure each element of the indicator. data analysis using ibm spss 25 . includes descriptive statistics, multiple regression analysis and hypothesis testing (ghozali, 2016). influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 413 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 175 162 337 0 50 100 150 200 250 300 350 400 perempuan laki laki jumlah gender 845 838 707 773 486 675 497 482 5303 0 1000 2000 3000 4000 5000 6000 lubuklinggau barat i lubuklinggau barat ii lubuklinggau selatan i lubuklinggau selatan ii lubuklinggau timur i lubuklinggau timur ii lubuklinggau utara i lubuklinggau utara ii total jumlah umkm (unit) result and discussion data distribution the research data was taken from msmes registered in lubuklinggau city, as many as 5,303 msmes registered at the cooperatives and micro, small and medium enterprises office where the msmes are spread across eight sub-districts, as shown in the following table: source: primary data processing, 2022 figure 2 . research population table 2 . msme research samples in lubuklinggau city complete with business license 2.150 research sample (slovin formula) 337 source: sujarweni, 2015 the sample of this study was 337 micro, small and medium enterprises (msmes) which were determined by the slovin formula. the slovin formula is used to reduce the number of populations that are too large but still represent the total population of 100% (sujarweni, 2015). source: primary data processing, 2022 influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 414 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1 38 298 337 0 50 100 150 200 250 300 350 400 magister sarjana sma jumlah educational stage figure 3 . respondent's gender respondents consisted of 175 women and 162 men, with an average age of 20 to 59 years. source: primary data processing, 2022 figure 4 . respondent's education level there are 298 respondents in sma and equivalent education, 38 respondents for bachelors and 1 respondent for masters. linear regression analysis financial technology data analysis x1 on financial inclusion y for simple linear regression shows the regression equation, namely y = 24,868 + 0,347 x1. then, the table of results of financial technology data analysis on financial inclusion for the t-test of the financial technology (x1) variable on financial inclusion (y) obtained the value of tcount = 9,670 which is greater than the value of ttable (337-1=336) = 1,652 with a significant value of 0.000 < 0.05. this means that the financial technology (x1) variable has a partially significant effect on financial inclusion (y). the results of x2 financial literacy data analysis on financial inclusion y for simple linear regression shows the regression equation, namely y = 28.095 + 0.263 x2. then, the table of results of data analysis of financial literacy on financial inclusion for the t-test of the financial literacy variable (x2) on financial inclusion (y) obtained the value of tcount = 7,123 greater than the value of ttable (337-1=336) = 1,652 with a significant value of 0.000 < 0.05. this means that the financial literacy variable (x2) has a partially significant effect on financial inclusion (y). results of data analysis of intellectual capital x3 on financial inclusion y for simple linear regression shows the regression equation, namely y = 25.399 + 0.332 x3. then, the table of results of data analysis of intellectual capital on financial inclusion for the t-test of the intellectual capital (x3) variable on financial inclusion (y) obtained the value of tcount = 9.487 which is greater than the value of ttable (337-1=336) = 1.652 with a significant value of 0.000 < 0.05. influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 415 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that is, the variable intellectual capital (x3) has a partially significant effect on financial inclusion (y). results of data analysis of intellectual capital x3 on financial inclusion y in for simple linear regression shows the regression equation, namely y = 25.399 + 0.332 x3. then, the table of results of data analysis of intellectual capital on financial inclusion for the t-test of the intellectual capital (x3) variable on financial inclusion (y) obtained the value of tcount = 9.487 which is greater than the value of ttable (337-1=336) = 1.652 with a significant value of 0.000 < 0.05. that is, the variable intellectual capital (x3) has a partially significant effect on financial inclusion (y). effect of financial technology (x1) on financial inclusion (y) based on the results of the regression test, it is known that the financial technology (x1) variable has a coefficient value of 0.347, a positive coefficient value indicates that the higher the financial technology , the higher the level of financial inclusion. the significance value for the financial technology variable is 0.00 less than 0.05, while the t-count value is positive at 9,670. based on the results of the regression test, it shows that h0 is rejected and h1 is accepted, which means that the financial technology variable has an effect on the financial inclusion variable. so it can be concluded that financial technology has a positive and significant effect on financial inclusion. the results of this study are supported by previous research, namely "the role of fintech on financial inclusion in south tangerang msmes". the results of the analysis show that the t count of the fintech variable is 6.925 > t table with a value of 1.965, then ha₁ is accepted. thus, fintech has a significant and positive control effect on the financial inclusion variable. this research describes that if there are more msme actors who use technology-based financial assistance, this will further encourage the achievement of the implementation of financial inclusion that is echoed by the government and the increase in the financial inclusion index will also increase with the growing use of fintech assistance. support for financial technology companies should also be increased. the use of technology-based financial services is expected to provide support for increasing levels of financial inclusion. the precise way and ease of access in the use of aid and financial products can ease the efforts of msme actors in obtaining capital and managing their business finances. the effect of financial literacy (x2) on financial inclusion (y) based on the results of the regression test in this study, it is known that the financial literacy variable (x2) has a coefficient value of 0.263, a positive coefficient value means that the higher the level of financial literacy, the higher the level of financial inclusion. the significance value for the financial literacy variable is 0.00, smaller than 0.05, while the t-count value is positive at 7.123. the results of the regression test indicate that h0 is rejected and h2 is accepted, which means that there is an effect of the financial literacy variable on the financial inclusion variable. so it can be concluded that financial literacy has a positive and significant effect on financial inclusion. influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 416 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research is supported by a previous study entitled the effect of financial literacy on financial inclusion through financial technology on msmes in bandar lampung, the result of which is that financial literacy has a significant effect on financial inclusion. this shows that the higher the financial knowledge, the better the financial behavior and financial attitude of a person will increase the use, utilization and understanding of financial products and services. this is reinforced by the answers of respondents who have the highest scores related to financial literacy where msmes in bandar lampung city already believe and also understand about investment in the form of returns and investment risks, so that msme business actors by investing as early as possible are expected to provide benefits. for them in the future (kusuma, 2020). the influence of intellectual capital (x3) on financial inclusion (y) based on the results of the regression test in this study, it is known that the intellectual capital (x3) variable has a coefficient value of 0.332, a positive coefficient value means that the higher the level of intellectual capital, the higher the level of financial inclusion. the significance value for the financial literacy variable is 0.00 less than 0.05, while the t-count value is positive at 9.487. the results of the regression test indicate that h0 is rejected and h3 is accepted, which means that the intellectual capital variable has an effect on the financial inclusion variable. so it can be concluded that intellectual capital has a positive and significant effect on financial inclusion. this research is supported by a previous study entitled the impact of intellectual capital and public financial services education on financial inclusion succession in indonesia with the test results showing that the intellectual capital variable has a t-value value of 2.21 or > 0.196. these results indicate that the intellectual capital variable has a significant positive impact on the succession of financial inclusion in indonesia. this conclusion means that h1 is accepted. this proves that intellectual capital can help for the succession of financial inclusion, so that the development of the concept of intellectual capital is not always only to detect the financial performance of a company, however, we are oriented more broadly that intellectual capital also supports the economy, one of which is the succession of financial inclusion. based on the results of the coefficient of determination test also found that the magnitude of the influence of the variable intellectual capital on the succession of financial inclusion is 0.299 or 29.9%. these results prove that the role of intellectual capital towards the succession of financial inclusion in indonesia is quite large. these results should be able to provide advice to the government and policy makers (regulators) to start intensifying cooperation with any educational institution to help provide good and correct knowledge (finance) to the unbanked community so that they immediately have access to financial institutions and independently manage their finances. conclusion 1. based on the results of the regression test, it shows that h0 is rejected and h1 is accepted, which means that the financial technology variable has an effect on the financial inclusion variable. so it can be concluded that financial technology has a positive and significant effect on financial inclusion. influence financial technology, financial literacy, and intellectual capital on financial inclusion in micro, small and medium enterprises (msmes) martini, triharyati, and rimbano 417 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. based on the results of the regression test in this study, it is known that the financial literacy variable (x2) has a coefficient value of 0.263, a positive coefficient value means that the higher the level of financial literacy, the higher the level of financial inclusion. the significance value for the financial literacy variable is 0.00, smaller than 0.05, while the t-count value is positive at 7.123. 3. the results of the regression test indicate that h0 is rejected and h3 is accepted, which means that the intellectual capital variable has an effect on the financial inclusion variable. so it can be concluded that intellectual capital has a positive and significant effect on financial inclusion. this research is supported by a previous study entitled the impact of intellectual capital and public financial services education on financial inclusion succession in indonesia with the test results showing that the intellectual capital variable has a t-value value of 2.21 or > 0.196. reference aaron, m., rivadeneyra, f., & sohal, s. 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(2016). analisis tingkat literasi keuangan mahasiswa fakultas ekonomi universitas negeri yogyakarta tahun angkatan 2012-2014. pelita, xi(2), 1–13. https://journal.uny.ac.id/index.php/pelita/article/view/10924 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 1 january 2022 page no. 57-67 57 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach aramia fahriyah1, wuwuh andayani2, rochland yoseph3, s. penta nurwibowo4, wendy irawan5 12345 institut ilmu sosial dan manajemen stiami correspondent: aramia.stiamli@gmail.com1 received : august 26, 2021 accepted : january 15, 2022 published : january 31, 2022 citation: fahriyah, a., andayani, w., yoseph r., nurwibowo, s, p., irawan, w. (2022). strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach. ilomata international journal of tax & accounting.3(1), 57-67. https://doi.org/10.52728/ijtc.v4i1.409 abstract: the new normal life of covid-19 pandemic has brought a new life pattern which is more strict health protocols in the interaction among each other. in the normal time, although the level of tax revenue shows a rising trend, the tax ratio hasn’t shown any significant increase. also, it is still left behind other developing countries. related to the pandemic effect, the world economy is decreasing and resulting to the decline of the indonesian tax revenue. the concerns of this study are on how to optimize the compliance level of tax payment from small-medium sized enterprises (smes) and the efforts of optimization needed to be done including in helping smes for being able to survive and or to be improved in terms of its business performance. thus, they can contribute to maintaining their tax compliance at the same time from getting worse. this study employed a descriptive research method using a qualitative approach. the data sources were primary and secondary data. in this study, an operational management tool which is the approach of supply chain management (scm) integration will be implemented as the solution. it is found that the gradual application of the concept of scm integration will give several significant impacts on the smes’ performance including their compliance with the existed tax regulations. also, this will encourage the optimal taxation authority in managing the tax participation of the smes sector. keywords: tax compliance, smes, new normal, supply chain management (scm) integration this is an open access article under the cc-by 4.0 license. introduction in the current pandemic era, people were directed to live the new normal life. this is a new life pattern completed with more strict health protocols in the interaction among each other. related to the business situation, the effect of pandemic needs to be anticipated and dealt with as it can prevent the decline of a business or it can even strive for improvement. one of the business areas is small-medium sized enterprises (smes) (bai et al., 2021). smes are businesses that maintain revenues, assets, or some employees below a certain threshold (perdana et al., 2021). although it is small in size, smes play an important role in a country’s economy, particularly in developing countries. then, smes also consider the majority of businesses worldwide and are crucial https://www.ilomata.org/index.php/ijtc mailto:aramia.stiamli@gmail.com https://doi.org/10.52728/ijtc.v4i1.409 strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 58 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc contributors to job vacancies and global economic development (r. dai et al., 2021). they represent about 90% of businesses and more than 50% of employment worldwide. formal smes contribute national income (gdp) in emerging economies up to 40%. these numbers are significantly higher when informal smes are included (shafi et al., 2020). about 57 million msmes (micro-small-medium sized enterprises) were operating in indonesia in 2017 (tambunan, 2019). about 97 percent of the total workforce is currently employed in msmes, while 99.9 percent of all businesses in indonesia are msmes. msmes account for approximately 60 percent of the overall gdp of indonesia. for the details, overall gdp of indonesia (in %): micro 30%, small 13%, medium 15%, and cooperative 23%. here, it can be concluded that small-medium sized enterprises provide about 28% of the total indonesian gdp (susanti & widajatun, 2021). as one of the fundamental country’s incomes, smes contribute to the country’s economy in terms of its tax. based on the data from the tax office; for smes, the pph final is 0.5%. it is written in uu no 36 of the year 2008. it is addressed for smes which get profits fewer than 4.8 billion. therefore, normally, the smes only need to pay 0.5% of their income. many smes did not pay regularly for their tax, so it seems that the tax revenue from smes had not reached the target (malahayati et al., 2021; shafi et al., 2020). nowadays, since the pandemic of covid-19 has happened, indonesian tax revenue, especially from smes was more and more not optimal. it is found that there were some challenges appeared. first, most smes lacked education and understanding of tax policies. psychologically, they were afraid of going to the tax office for any business or even joining any tax meeting held by the tax authority. it showed that there was a problem of misunderstanding by smes towards tax authority. they mostly thought that all business related to the tax authority will be related to the payment they must pay. second, smes’ income is currently decreasing. as the new normal life made citizens take a distance from each other, they rarely go outside and buy something directly. as the result, it made the cash flow of smes also decreases. last, there are still many opportunities for improvements in our indonesian tax authority, like having more education and socialization agenda for smes in more different and interesting ways (trinh et al., 2020). based on the previous research, tax compliance was influenced by taxpayer’s knowledge, transparency of state spending, and tax justice. while supply chain management builds upon the flow of products and information through an operation and seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline. the focus of supply chain management is on co-operation and trust and the recognition that, properly managed, the ‘whole can be greater than the sum of its parts. thus, the supply chain management approach will improve any related factors above which improve tax compliance (allen et al., 2021; beske et al., 2014). to deal with the matters explained before, this study tried to solve it by using an operational management tool which is the approach of supply chain management (scm) integration. the scm integration will connect all parties involved with the fulfillment of the goal into a single system. the parties involved may include smes, tax authorities (government), citizens, educational institutions, etc. it is hoped that all of them will work together effectively to pursue the same goal. therefore, when the gradual application of scm integration is used, it will give several significant impacts on the smes’ performance including their compliance with the existed tax regulations. moreover, this will encourage the optimal taxation authority in managing the tax participation of the smes sector (centobelli et al., 2021; zhang et al., 2021). https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 59 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method a descriptive approach was applied in this study. it was implemented by drawing a conclusion from some collected research and using a method of qualitative normative analysis. normative means using secondary data as the resources, including theories and opinions from scholars and well-known experts. next, qualitative means that it is a process of data analysis without using any formulas and numbers coming from the information of literature studies (data collected either from the related institutions or from research observation which was done) (sugiyono, 2019). the research methodology could cover the following points: (1) a concise explanation of the research methodology is prevalent; (2) reasons to choose particular methods are well described; (3) research design is accurate; (4) the sample design is appropriate; (5) data collection processes are proper; and (6) data analysis methods are relevant and state-of-the-art. (hashimov, 2015) result and discussion a. the business situation of smes during the covid19 outbreak and its implications the increase in countries affected by the covid-19 virus around the world has made the world economic situation worse. some institutions even predicted the weakening of the world economy, including the international monetary fund (imf) which projects a global economy to grow minus at 3%. minister of finance (minister of finance of the republic of indonesia) explained that state revenue in march 2020 grew positively although then the government was wary of the impact of the pandemic in the coming months (stephens et al., 2021). along with the policy of work from home (wfh) for both the government and the private sector, a slowdown in business activity began at the end of march 2020 which has the potential to reduce domestic delivery reducing the receipt of domestic value added tax (ppn dn) in april 2020. this condition is likely to continue and become increasingly contracted in may. then, in april some regions have implemented large scale social restrictions (psbb) in several affected areas. in line with the implementation of the wfh and psbb, the government provides tax facilities in the form of relaxation of article 29 pph op payments and reporting of the pph pp spt, which results in the non-optimal realization of the article 29 pph op revenue (abubakar, 2021). the central statistics agency reported that the economic growth in the first quarter of 2020 reached 2.97% as the impact of the covid-19 pandemic. this number was decreased compared to the first quarter of 2019 which was 5.07% year on year. the decline in economic growth has also impacted the micro, small and medium business (msme) business in indonesia. here, according to the ministry of cooperatives and smes, the msme opened 99.7% of employment in indonesia in 2019 (hanoatubun, 2020). if it was calculated, the total number of smes in indonesia currently reaches 59.2 million businesses. with the 40 percent figure, the umkm that will stop operating reaches 23.68 million businesses. https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 60 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc "in april 2020, the survey resulted that 43 percent of msmes would stop operating. then, there was a survey from the faculty of economics and business at padjadjaran university stating that the data was almost the same as 47 percent of msmes in west java had stopped. if it is averaged with another survey, 40 percent of msmes will stop (syaidah, 2020; yusmar et al., 2021). b. tax compliance progress the economic downturn affected households, msmes, corporations, and the financial sector. thus, the smes were also being impacted with difficulties to run their business, then it has the probability of being disturbed to pay their credit obligation. non-performed loan of banking credit can be increased significantly, so it will also worsen the economic condition (susan, 2020). according to the ministry of finance of the indonesian government, they have been acting some actions to manage this pandemic crisis such us: a. design a program of budget refocusing and reallocation, by president law no 9/2020 (source of funding) and president instruction no 4/2020 (implementation mechanism) b. release monetary stimulus c. release some state financial policies tax revenue is a major contributor to the state budget. since 2009, the contribution of tax revenue is above 70% with an increasing trend. however, the tax ratio tends to be stagnant (between 1112%). it is relatively low compared to asean, oecd, and latin-caribbean countries. the realization of state revenues is derived from taxation revenue and non-tax state revenues (pnbp) which has nominal amounted to rp279.89 trillion and rp95.99 trillion. meanwhile, the realization of the grant in the same period only reached idr0.08 trillion. the tax revenue and pnbp grew by 0.43% and 37% respectively. meanwhile, the overall growth of the tax revenue component up to the end of march 2020 is still sourced from taxes on household consumption, although tax revenue is also still overshadowed by pressure due to the weakening trend in the manufacturing industry and international trade activities, as well as the weakening of economic activity due to the spread of covid-19. there was a slowdown in business activity at the end of march 2020 which has the potential to reduce domestic value added tax revenues. the government provides taxation facilities in the form of relaxation of pph no op 29 payments and op pph spt reporting, which impact the non-optimal realization of income tax. scm integration looking at what the directorate general of taxation (dgt) has done so far and the dynamics and performance of taxation in indonesia from the data shared by dgt, here are some information stated: dgt steps & strategies are good enough optimization aspects of the strategies that have been implemented can be further refined, i.e. with the principle approach of supply chain management integration. the sme sector is also experiencing problems, while there are increasingly pressured, on the other hand, is the level of compliance with tax payments that are still low. this aspect also https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 61 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc needs to be deepened to get improvement on all of the related parties or in terms of the indonesian taxation scm environment. as has been proven starting from the history of warfare, and companies that can get through a crisis well, use the principles of the supply chain management approach in maximizing strategy and implementation. from the implementation and dynamics of the tax so far as well as the data that has been submitted by dgt & ministry of ri, several scm principles need to be implemented. also, the implementation details can be adjusted in each of the points & concerns as follows: indonesian tax share holders must be in line with the greatest business environment challenge today, which is the integration (to achieve linkage & co-ordination collaboratively) of supply chains between the processes of other entities in the pipeline and the organization itself to satisfy ultimate customers and obtain value for those companies (group chain) the supply chain and competitive performance indonesia tax authority (dgt) stated that all indonesian tax share holder is integrated as the supply chain is the network, through upstream and downstream linkages. it is in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer. value is one of the important keys to perform the best performance of the indonesia tax system. here, it is an urgency to avoid traditional-style-organization who viewed itself as entities that exists independently from others. indeed, they need to compete with other country’s organization to survive. the real competition is not one entity against one other entity but rather supply chain against supply chain. thus, internal integration itself is not sufficient (hu et al., 2019; turker & altuntas, 2014). supply chain management is a comprehensive system that can be approached by taking advantage of some leverage tools (madhani, 2019). the dgt can take some of the leverage tools to optimize implementation of scm such as: collaboration with scm experts to ensure the proper scm managements benchmarking into business environment who has an excellent performance by scm improvement & integration make sure to do proper scm standardization at all related aspects 1. the changing competitive environment as the competitive context of business continues to change, bringing with its new complexities and concerns for management generally. it also has to be recognized that the impact on the indonesian taxation system of these changes must be considerable. the challenges are perhaps the most pressing currently are: the new rules of competition globalization of industry downward pressure on price or economic consideration customers taking control https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 62 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in terms of the indonesian tax system, there were many changes and challenges such as: new economic era and globalization, while indonesia on the warm economical competition with other country automatically bring out many challenges that tax authority must have update style to push this as a benefit for the country. in terms of sme people, dgt has some new and interesting policies to attract them. while dgt can’t act as a single player, it must be collaborative work of socialization, especially to set some interesting value for citizen tax obligation and to make sure that the value is properly delivered. give the citizen greater access to be involved in various ways of collaboration and work. 2. the delivering customer value in this hard situation, the dgt must determine the level of customer value that is delivered in its chosen segment. the indonesian tax system is almost unique in its ability to impact both the numerator and the denominator of the customer value ratio. the ratio is as follows: customer value = quality x service ---------------------- cost × time each of the four constituent elements can briefly be defined as follows: quality: the functionality, performance, and technical performance of tax authority service: the availability, support, and commitment provided to the customer. cost: the customer’s transaction costs or effort to comply with tax regulation time: the time is taken to respond to customer requirements, e.g. delivery lead times. many indonesian citizens didn’t have a standard value perception of their tax obligation and compliance. many of them have serious questions: “why do we pay the tax? what for?”. this is interesting homework and must be solved by an integrated and better approach to the taxpayer. 3. creating the responsive supply chain as being explained in some dgt release, there are some rooms for improvement. these positive findings need to be responded to ever increase the levels of volatility in demand. to meet this challenge, the dgt needs to focus on its efforts upon achieving much greater agility. it can be responded to in shorter time-frames in terms of both volume change and variety change. agility has many dimensions and the concept applies as much to networks as it does to individual companies. indeed, a key to agile response is the presence of agile partners upstream and downstream of the focal firm such as academic entities. 4. the era of network competition the indonesian tax stakeholders can optimize the performance by implementing principles of logistics and supply chain management, to significantly in developing responsive logistics https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 63 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc capability. the success in the operations is due to many things there that can be no doubting the role that logistics and supply chain management have played in achieving that success. based on an analysis of the leading companies in the survey, they have identified six consistent characteristics exhibited by those companies as follows: a. outside-in focus dgt must consider from the customer backward and are demand-driven. b. embedded innovation this implies a close integration between tax environment supply chain begins on the drawing board. c. extended supply chain a recognition that today the close management of relationships from end-to-end is essential. d. balanced metrics to achieve high levels of agility and responsiveness, there has to be a realization that there will be trade-offs across the business. to achieve the best overall outcomes requires a set of key performance indicators (kpis) that reflect the need for balance. e. attitude a culture that extends across the organization based on the recognition that internal silos must be removed and that external relationships need to be managed in a spirit of partnership f. supply chain talent as supply chains are as much about people as anything, the tax authority needs to ensure to develop the skills and capabilities that will enable success on the previous five elements. while there is a short key to perform this human resource challenge, through optimizing the benefit of certification to ensure the skill update. 5. integration as the integration of scm is now the greatest challenge, the indonesian tax system must ensure the effectiveness of chains devolves from how they are set up, incorporating the following ideas: a. pulling the chain together. b. chain performance measures (using the balanced scorecard and the scor model). c. trade-offs. as there are complex interactions, in the process also should be designed and operated with suitable tradeoffs between processes, movements, and stocks along the chain. 6. overcoming the barriers to supply chain integration on the operation management aspects, the conventional organization poses an immediate problem. tax entities should avoid a functional basis. 7. creating a sustainable supply chain the definition of sustainability is most widely used originally from the united nations brundtland commission, which reported in 1987. sustainability, the commission suggested, was about meeting the needs of the present without compromising the ability of future generations to meet their own needs (kouhizadeh et al., 2021; vural et al., 2021). https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 64 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the triple bottom lines. the triple bottom line concept emphasizes the importance of examining the impact of business decisions on three key areas: a. environment (e.g. pollution; climate change; the depletion of scarce resources, etc.) b. economy (e.g. effect on people’s livelihoods and financial security; profitability of the business, etc.) c. society (e.g. poverty reduction; improvement of working and living conditions, etc.). these three elements – the 3ps of people, profit, and planet – are inevitably intertwined and they serve to remind us that for a business to be truly sustainable, and these basic principles also need to be implemented on the background of the indonesia tax system. in the context of scm, based on the united nations brundtland commission, a triple bottom line philosophy can be built to encompass the broader idea that sustainability is concerned with ensuring the long-term viability and viability of the business as well as contributing to the future well-being of society (j. dai et al., 2021; jabbour et al., 2020). indeed, it can be argued that these two objectives are mutually reinforcing, i.e. supply chain strategies that benefit the wider environment are likely to also involve businesses at lower costs in the long run as a result of better use of resources (christopher & peck, 2012; soltanmohammadi et al., 2021). as supply chains underpin the efficiency and effectiveness of businesses, they can provide a useful framework for exploring opportunities to improve sustainability. we need to understand the sustainability impact of everything we do start from product design to end-of-life disposal. here, related to the tax compliance, as the emphasis of scm is on co-operation and trust, automatically it will influence the taxpayers’ awareness on the punctuality and regularity on paying the tax (rahayu, 2019). https://www.ilomata.org/index.php/ijtc strategies for maintaining tax compliance of smes during covid-19 pandemic by using supply chain management integration approach fahriyah, andayani, yoseph, nurwibowo, irawan 65 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the conclusions of this research were as follows: 1. nowadays, the indonesia tax system faces a difficult situation, as well as in the business environment they also experience several times facing the hard situation. the logistic or supply chain management integration principle has been proven many times as a problem solver in those challenges. 2. supply chain management doesn’t provide the fixed recipe, yet it provides wide and flexible tools to manage any circumstances and also better performance through their competitive advantage. 3. the indonesian taxation system in scm views still has a lot of room for improvement, so the dgt and government have an opportunity to get scm advantage who has a complete and flexible approach to performing operational excellent within the chain: a. to maintain the degree of indonesian citizen tax compliance, especially by the better tax matters understanding & proper tax environment. b. to build sme endurance to fight the pandemic c. dgt has flexibility & operational excellent to perform the best indonesia tax system environment 4. the impact of the environment that properly and continuously perform scm integration is the ability to provide excellent result and good endurance to fight difficult situation. then, it is recommended that; first; tax agencies should assign specialized bodies for the comprehensive implementation of scm approach and follow-up the taxpayers who paid lately. second, some simple systems of payment and facilitators should be provided to facilitate the taxpayers who are lack of knowledge. last, voluntary compliance of taxpayers should be facilitated. reference abubakar, r. w. a. 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(2021). perbandingan provinsi jawa barat dan provinsi dki jakarta dalam pemanfaatan sistem informasi penanganan covid-19. jurnal dialektika informatika (detika) universitas muria kudus, 1(2), 38–43. https://doi.org/10.24176/detika.v1i2.5853 zhang, j., yalcin, m. g., & hales, d. n. (2021). elements of paradoxes in supply chain management literature: a systematic literature review. international journal of production economics, 232, 107928. https://doi.org/10.1016/j.ijpe.2020.107928 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 117-127 117 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable ayunita ajengtiyas saputri mashuri universitas pembangunan nasional veteran jakarta, indonesia correspondent: ayunita.ajeng@upnvj.ac.id received : november 28, 2022 accepted : january 28, 2023 published : january 31, 2023 citation: mashuri, a, a, s. (2023). determinants of tax avoidance and audit quality as a moderating variable. ilomata international journal of tax and accounting, 4(1), 117-127. https://doi.org/10.52728/ijtc.v4i1.661 abstract: taxes is the largest contribution for every country financial forecast. the government maximizes their effort to be able increasing taxes, in order to accomplish the needs of their people. companies are one of the biggest expenses of country need to be able to be financed. as a result, the government's efforts can create conflicts and it is not in line with the company's goals it self. the company will try to do a tax avoidance scheme in order to reduce the amount of the tax burden, however it will trigger various problems. agency theory that can solve those problems that arise, from company as an agent. there are factors impact on tax avoidance, it consists of institutional ownership and corporate social responsibility. audit quality is taken as a moderating variable, in analyzing the effect between the two independent variables, either strengthens or weakness. this type of research is quantitative research that uses the company's annual report as sources data. the sample in this study amounted to 43 mining companies listed on the indonesia stock exchange in 2017-2019 and were selected based on purposive sampling technique. the results of data testing show that institutional ownership has no significant positive effect on tax avoidance, while corporate social responsibility has a significant positive effect on tax avoidance. audit quality is showed to be able to weaken the influence of institutional ownership on tax avoidance and strengthen the influence of corporate social responsibility on tax avoidance. keywords: corporate governance, csr disclosure, audit quality, tax avoidance this is an open access article under the cc-by 4.0 license. introduction one of the effective sources of revenue to improve the country's economy is from taxes. it is known that taxes are the main component and the largest contributor in the apbn. state revenue has contributed to reach more than 79% every year. the online article on the website explains that in 2019, the tax contribution was able to reach almost above 85%, which is around rp. 1,577.6 trillion of the apbn. thus, the role of such a large amount of state revenue comes from the tax sector, the government seeks to maximize tax potential by establishing various kinds of regulations that are able to regulate the tax system in indonesia. however, the government's expectation to increase tax revenue is contrary to the goal of companies that want https://www.ilomata.org/index.php/ijtc mailto:ayunita.ajeng@upnvj.ac.id https://doi.org/10.52728/ijtc.v4i1.661 determinants of tax avoidance and audit quality as a moderating variable mashuri 118 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to have large profits, because companies interpret taxes as a burden that can reduce earnings before tax. explicitly, the implementation of the self-assessment system in indonesia has opened up considerable access for taxpayers to fight taxes. companies that act as corporate taxpayers have a motive so that the taxes paid are as low as possible (rahmi et al., 2022). if the company generates a tax burden that is too high, the tendency to fight taxes will increase. tax resistance often arises as an obstacle to tax increases. tax avoidance according to (abdelfattaha & aboud, 2020; apriliyana & suryarini, 2018; dewanti & sujana, 2019) is considered an active tax fight that is legal and always takes advantage of the deficiencies found in the applicable tax regulations. according to (apriliyana & suryarini, 2018; jamei, 2017; mulyani et al., 2018), tax avoidance reflects a form of tax planning that is able to reduce the amount of tax paid by the company, but still observe and comply with existing regulations. although tax avoidance does not violate the rules, this action is considered unethical for the government and morally unjustified. the reason is, this practice can become a serious problem and have an impact on state losses. it has been proven that the existence of tax avoidance causes a decrease in state cash receipts (mangoting et al., 2019; solihah et al., 2020; sunarto et al., 2021; widuri et al., 2019). the occurrence of tax avoidance practices cannot be separated from the existence of several supporting factors. one of the reasons is from the emergence of agency theory. agency theory is a contract between the manager who acts as an agent and the owner as the principal which occurs because of the separation of functions and supervision of the company. this of course can trigger problems because each party certainly has different interests and goals. the party that gives full resources to the agent to manage the company is called the principal. it is expected that the agent can manage the company's activities in accordance with the interests of the principal. there are several factors, that impact tax avoidance, the first factor is corporate governance (fionasari et al., 2020). in general, corporate governance shows the relationship between parties bound by the company in influencing decisions that are useful for determining the direction of company performance, including decisions on the implementation of tax avoidance. in addition to playing a role in decision-making procedures, corporate governance also has a function to monitor performance and be a supervisor for tax avoidance (mulyani et al., 2018). an effective supervisory mechanism on good corporate governance, one of which is the existence of institutions in the company. the role of the institutional owner is to help ensure that management acts in the best interests of the company. therefore, institutional ownership becomes the main focus in research on the implementation of corporate governance. based on (sandy & lukviarman, 2015) explaining the advantages of the existence of institutional ownership, namely institutional ownership can have a strict supervisory function on the activities carried out by the company. in addition, institutional owners are also able to intervene in management performance which is assumed to be able to behave opportunistically at any time to fulfill personal interests (krisna, 2019). this can help companies to minimize tax avoidance practices. research that has been done on institutional ownership, namely research conducted (charisma & dwimulyani, 2019) shows that institutional ownership has a negative effect on tax avoidance. this is in contrast to research (apriliyana & suryarini, 2018) and (rombebunga & pesudo, https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 119 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2019) which prove that institutional ownership does not have a significant effect on tax avoidance. another factor that can affect the existence of tax avoidance is corporate social responsibility (csr). (fitri et al., 2019; hossain et al., 2107; jitmaneeroj, 2018; mashuri & ermaya, 2019; said et al., 2017) defines csr as a sustainable corporate commitment with a view to improving the quality of life for the community and the surrounding environment. on the other hand, csr is also interpreted as a form of corporate responsibility that incurs a number of costs for the implementation of its activities. since the issuance of regulations concerning the obligation for each entity to carry out csr activities, companies not only have an obligation to pay taxes and work for the benefit of shareholders, but also have a responsibility to implement the program. when csr disclosure is high increasingly, it means that the company has implemented more social programs for the community and the environment with higher expenditures. the costs of these activities are then used as a deduction for pre-tax profit. thus, the tax payable that will be obtained by the company will be less. empirical evidence regarding the effect of corporate social responsibility on tax avoidance shows mixed results. the results of the study (wiguna & jati, 2017) explain that there is a significant positive influence between corporate social responsibility and tax avoidance. however, (salsabila et al., 2021) and (yulistiani et al., 2019) state that corporate social responsibility has no effect on tax avoidance. the existence of research on audit quality with a view to supporting supervision of managers' behavior and increasing the principle of transparency in company reports presented by management. a quality audit occurs when the auditor carries out audit duties on the entity's financial statements, detects significant and material misstatements, then expresses them in the form of an opinion on the audited financial statements (diantari & ulupui, 2016; gaaya et al., 2017). high audit quality is created when the auditing process is carried out by a professional and reliable independent auditor, namely the big 4 kap auditor. thus, audit quality is able to become a strong controller to prevent fraud in company reports. the objectives to be achieved in this study are to prove empirically and determine the significant influence between institutional ownership and corporate social responsibility on tax avoidance and identify the role of audit quality in moderating the effect of institutional ownership and corporate social responsibility on tax avoidance. in contrast to the previous one, this study develops the concept of previous research by adding audit quality variables as moderating variables, measuring tax avoidance variables using abtd, and the sector used is the mining sector which indirectly has an impact on the economic, social, and environmental fields. researchers try to find out this sector for further analysis related to tax avoidance practices. the mining sector is known to have a very high income because the industry in this sector does not sell goods or services but rather natural resources. supposedly, the mining sector is able to contribute more in state revenues. conceptual framework the research model that can be formulated by researchers where corporate governance is expressed by institutional ownership and corporate social responsibility as independent variables. https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 120 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc meanwhile, audit quality is a moderating variable to test whether audit quality can moderate the relationship between the two variables on tax avoidance. the practice of tax avoidance in various sectors in indonesia is the main concern of various parties. it is undeniable, tax avoidance can occur because of differences in interests between management and the government, giving rise to agency theory that can solve agency problems that arise. for this reason, a system is needed that can regulate relations with interested parties in policy making, especially related to taxation. the system is corporate governance. the function of corporate governance is to monitor the decisions chosen by the company so as not to damage the image (fitri et al., 2019). there are several components included in corporate governance, one of which is institutional ownership which is considered to be able to influence company policy with effective supervision of management performance and optimal monitoring. in addition to agency theory, stakeholder theory is also needed so that companies are able to consider the needs of stakeholders and the environment affected by the company's activities. one way that must be done by the company is to carry out social responsibility (csr) activities. several studies say that companies that implement csr activities tend not to do tax avoidance. however, due to the unclear guidelines for implementing csr activities, it is likely that a lot of information is hidden by the company (apriliyana & suryarini, 2018). this will affect decision making for stakeholders. to ensure that there are no assumptions from management behavior that lead to tax avoidance practices, it is necessary to support audit quality. a qualified auditor is able to reduce information asymmetry that occurs within the company and is able to convey any irregularities or irregularities found in the audited financial statements so that tax avoidance actions can be minimized by the company (krisna, 2019). in addition, with good audit quality, it is hoped that the company will be able to disclose csr activities transparently so that stakeholders can obtain real information from the company. thus, researchers suspect that audit quality is considered capable of providing direct interaction with institutional ownership and csr disclosure on tax avoidance practices. based on the explanation above, the research model that can be formulated by researchers is where corporate governance is expressed by institutional ownership and corporate social responsibility as independent variables. meanwhile, audit quality is a moderating variable to test whether audit quality can moderate the relationship between institutional ownership and corporate social responsibility on tax avoidance. method the types of data used are quantitative data and secondary data(sugiyono, 2020, 2017). research sources come from annual reports, independent audit reports, and company sustainability reports by browsing the indonesia stock exchange website and the company's official websites. researchers determine companies engaged in the mining industry and listed on the indonesia stock exchange from 2017 to 2019 as the population in this study. the sampling technique was carried out by selecting based on the criteria (purposive sampling method) and resulted in 41 mining companies for 3 periods. the dependent variable in accordance with the research issue is https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 121 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax avoidance and makes audit quality a moderating variable. meanwhile, institutional ownership and corporate social responsibility are the selected independent variables. data analysis used multiple linear regression analysis with moderated regression analysis (mra) supported by excel 2013 and stata version 16.0. hypothesis h1: institutional ownership has a negative effect on tax avoidance. h2: corporate social responsibility has a positive effect on tax avoidance. h3: audit quality strengthens the effect of institutional ownership on tax avoidance. h4: audit quality weakens the influence of corporate social responsibility on tax avoidance result and discussion descriptive statistical analysis the representation of a data in the form of a table that displays the minimum, maximum, mean, and standard deviation values is called descriptive statistics. the following is the result of processing descriptive statistical data: tabel 2. descriptive statistics n minimum maximum mean std. dev. abtd (y) 123 -0.1487358 0.1524333 0.0079838 0.0486565 inst (x1) 123 0 0.7816 0.2081256 0.2550169 csr (x2) 123 0.043956 0.5934066 0.2565042 0.1151015 aq (z) 123 0 1 0.4188034 0.4954851 inst_aq 123 0 0.7816 0.0678256 0.2018988 csr_aq 121 0 0.5934066 0.1251057 0.165716 source: process data with stata v.16.0. (2021). based on the results of the descriptive statistical data presented in table 2, the residual value generated from the btd regression has the lowest value of -0.1487 and the highest value of 0.1524. furthermore, the mean obtained by tax avoidance is 0.0079, it means that the tax profit reported in the financial statements of mining companies is on average smaller than the accounting profit. the closer the abtd is to 0, the less likely the company is to do tax avoidance. the results that refer to institutional ownership present a minimum value of 0 in companies that, it shows, there are 3 companies in this sample do not have a share ownership proportion of financial services institutions and it reach a maximum value of 0.7816 within a mean value shows 20.81% most mining companies in indonesia have institutional share ownership solely. meanwhile, the average for corporate social responsibility is 25,65% of mining companies in this sample have average csr disclosure items the lowest value generated from this variable is 4,395% meanwhile, the highest value of csr disclosure is around 59,34% from total item achievements. audit quality resulted in a mean value of 41,88%, it means that big 4 kap audited https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 122 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the financial statements of the sample and the rest by kaps not categories of the big 4. the mean for institutional ownership and csr disclosure moderated by audit quality were 0.0678256 and 0.1251057, respectively. most of the mining companies that use the services of non-big 4 kaps have institutional share ownership of 6.78% with csr disclosures carried out as much as 12.51%. classic assumption test before testing the classical assumptions, it is necessary to test the selection of the regression model first with the aim of knowing the best regression estimation model to be used. it is known that model 1 has a value of 0.1335 > 0.05. a probability value greater than 0.05 means that h0 is accepted and the best model is the common effect model (cem). meanwhile, the value for model 2 is 0.0000 < 0.05, it means that h1 is accepted, where the probability value is below 0.05. therefore, the appropriate regression model for model 2 is the fixed effect model (fem). furthermore, the classical assumption test can be run to ensure that the regression model equation has precise and consistent accuracy. a number of basic assumptions contained in the study must be met. the results of testing the data that have been processed are summed up in the following table: tabel 3. classic assumption classic assumption test testing tools model 1 model 2 normalitas skewness kurtosis fulfill fulfill multikolinearitas vif tolerance fulfill unfulfilled heteroskedastisitas breusch pagan unfulfilled fulfill autokorelasi wooldrigde test autocorelation fulfill fulfill the normality test for model 1 and model 2 according to table 3 has met the criteria where the skewness value is below 3 and the kurtosis value is less than 10, meaning that the variables of institutional ownership, corporate social responsibility, audit quality, and tax avoidance do not experience normality disturbances. in this case, the data for each variable has been normally distributed. in addition, there is no strong relationship between the independent variables in model 1, because the tolerance and vif values of the two variables are above 0.10 and less than 10, namely 0.679130 and 1.47. however, in model 2, there is a multicollinearity problem. to overcome the existence of multicollinearity, centering is recommended to help reduce interactions that are too strong between variables and are considered to often produce more precise coefficient estimates with lower standard errors. this treatment is carried out on problematic variables to meet the criteria. it is known that model 2 has a probability value of 0.0594 which is greater than 0.05, meaning that the model equation does not experience heteroscedasticity disorders. however, in model 1, https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 123 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc there has been a heteroscedasticity problem because the probability value is less than 0.05, which is 0.0272. one way to overcome the presence of heteroscedasticity disorders is the robust method approach. when viewed in the column of autocorrelation test results, model 1 and model 2 have met the test requirements where both models have probability values above 0.05, namely 0.7780 and 0.4550. for this reason, there is no autocorrelation problem in the regression model equation. uji hipotesis tabel 4. uji t (parsial) model 1 model 2 coef. t p > |t| coef. t p > |t| (constant) -0.0121985 -1.09 0.276 0.0847222 3.18 0.002 inst -0.0067405 -0.33 0.867 -0.1110556 -1.26 0.211 csr 0.0841511 2.79 0.017** -0.1151083 -1.25 0.214 aq -0.0517023 -1.13 0.262 inst_aq -0.355311 -4.63 0.000* csr_aq 0.287621 2.42 0.018** notes: *significance 1%; ** significance 5% source: data processed by stata v.16.0. (2021) table 4 presents the institutional ownership variable (inst) which has a significant value of 0.867 > 0.05 and a tcount of 0.30 < 1.98099. thus, institutional ownership has no significant effect on tax avoidance, so h1 is rejected. the existence of institutional ownership does not affect the high or low tax avoidance practices in a company. basically, institutional ownership has a supervisory function on management performance. however, they cannot influence and control the policies made by management, one of which is related to tax avoidance. this is because institutional ownership as an external party to the company cannot be directly involved at any time in the process of company activities. (diantari & ulupui, 2016) emphasizes that institutional shareholders are not necessarily fully capable of controlling management's opportunistic activities in tax avoidance. they will rely more on the audit committee and the board of commissioners which are internal parties of the company to oversee management actions. in other words, the existence of institutional ownership does not significantly influence management decisions, thus allowing tax avoidance to still occur. research that is in line with these results are (apriliyana & suryarini, 2018; maharani & baroroh, 2020; rombebunga & pesudo, 2019), which state that institutional ownership has no effect on tax avoidance. the corporate social responsibility (csr) variable has a significant value of 0.017 < 0.05 and tcount of 2.79 > 1.98099. that is, h2 is accepted where there is a significant positive effect on csr disclosure on tax avoidance. in addition to csr disclosure as an obligation for companies and part of community development, some companies still think that items in csr can be used for tax avoidance practices. (hege et al., 2021; hidayati & fidiana, 2017; rahmawati et al., 2016) explained that csr is a form of expenditure that can be a deductible expense, so that it has an impact on decreasing taxable income. in this regard, it can be interpreted that many companies https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 124 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc do csr disclosures, but in fact they are still involved with tax avoidance problems. similar results are shown in research (fitri et al., 2019; rahmawati et al., 2016; wiguna & jati, 2017) which states that there is a positive and significant influence between corporate social responsibility and tax avoidance. . audit quality moderated institutional ownership (inst_aq) has a significant value of 0.000 < 0.01 and tcount of 4.63 > 1.65857. this shows that audit quality is able to weaken the influence of institutional ownership on tax avoidance, so h3 is rejected. although the two variables do not have a significant linear relationship, with audit quality, institutional stock ownership is able to negatively affect tax avoidance. the supervisory function of institutional ownership can run effectively, if it is supported by an external auditor who is able to properly detect all forms of fraud. the role of the auditor will help improve oversight of institutional ownership. this is useful to prevent opportunistic behavior of management in carrying out tax avoidance practices. in accordance with research (charisma & dwimulyani, 2019; krisna, 2019) which say that high institutional ownership supported by quality external auditors is believed to be able to find errors in financial statements better and encourage management to always pay attention to decisions made, so that the level of fraud within the company becomes lower. csr disclosure moderated by audit quality (csr_aq) has a significant value of 0.018 < 0.05 and tcount of 2.42 > 1.98137. that is, audit quality is able to strengthen the influence of corporate social responsibility on tax avoidance, so h4 is rejected. when csr disclosure is made higher, it will trigger companies to do tax avoidance. kap is not able to detect tax avoidance in the company's financial statements, especially related to the use of csr costs which are used as tax deduction burdens. meanwhile, according to research data, there are 68 samples who choose non-big 4 kaps for audit services from a total of 117 samples. the existence of non-big 4 kaps that dominate mining companies has the potential to increase tax avoidance practices through high csr disclosures. they are not necessarily able to provide the best audit quality. it is very likely that these non-big 4 kaps do not have sufficient understanding to detect tax avoidance actions. thus, companies can easily take advantage of opportunities from the costs incurred for carrying out activities n csr in order to carry out tax avoidance actions. conclusion the results of data analysis and discussion that have been described can be concluded that institutional ownership does not have a significant effect and corporate social responsibility has a positive effect on tax avoidance. the role of audit quality according to the test is able to weaken the influence of institutional ownership on tax avoidance. on the other hand, the influence of corporate social responsibility on tax avoidance can be strengthened by the existence of audit quality as a moderator. there is limitation in this study with high subjectivity to the value of csr disclosure. the possibility of a perception bias or perception that is not in accordance with the actual conditions because the assessment is based on the assumptions of the researcher by analyzing the csr disclosure items in the annual report. the implication is that mining companies are able to consider the long-term risks arising from tax avoidance practices and the government and the directorate general of taxes can give more attention to companies in the mining sector to prevent tax avoidance. in the future, further researchers can expand and deepen https://www.ilomata.org/index.php/ijtc determinants of tax avoidance and audit quality as a moderating variable mashuri 125 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research on the determination of tax avoidance by adding other independent variables, such as transfer pricing, corporate governance in different alternatives, compensation for fiscal losses, and as well as adding a range of observation periods or all company sectors listed to obtain more comprehensive research results. reference abdelfattaha, t., & aboud, a. 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(2021). the effect of corporate governance on tax avoidance: the role of profitability as a mediating variable. journal of asian finance, economics, and business, 8(3), 217–227. widuri, r., wijaya, w., effendi, j., & cikita, e. (2019). the effect of good corporate governance on tax avoidance of listed companies in indonesia stock exchange in 20152017. journal of economics and business, 2(1), 120–126. wiguna, i. p., & jati, i. k. (2017). pengaruh corporate social responsibility, preferensi risiko eksekutif, dan capital intensity pada penghindaran pajak. e-jurnal akuntansi universitas udayana, 21(1), 418–446. yulistiani, n., widiastuti, n. p., & masripah. (2019). determinan tax avoidance pada perusahaan manufaktur di bursa efek indonesia periode 2016-2018. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 283-295 283 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress eddy suranta1, muhammad alif bimo satrio2, pratana puspa midiastuty3 123bengkulu university, indonesia correspondent : eddy.suranta@unib.ac.id1 received : january 25, 2023 accepted :april 13, 2023 published : april 30, 2023 citation: suranta, e. , satrio, m. a. b., & midiastuty, p. p., (2023). effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress. ilomata international journal of tax and accounting, 4(2),283-295. https://doi.org/10.52728/ijtc.v4i2.714 abstract: the purpose of this examination is to empirically evidence the impact of investments, free cash flow, earnings management, interest coverage, liquidity, and leverage on financial distress. the dependent variable is financial distress. independent variables are investments, free cash flow, earnings management, interest coverage, leverage, and liquidity. i tested this examination using logistic regression. the sample used in this research was manufacturing companies listed on the indonesian stock exchange from 2016 to 2020. samples for this research were selected using purposive sampling with a total of 392 observations. the results of this research show that free cash flow, interest coverage, and liquidity have a significant influence on financial distress. investments, earnings management, and leverage have no significant effect on financial distress. the implication of this study is to confirm the signaling theory and the agency theory. a limitation of this research is that there are still type i and type ii errors in classifying companies in financial distress and those in nonfinancial distress. keywords: financial distress, investment, free cash flow, earnings management, interest coverage, liquidity, leverage this is an open access article under the cc-by 4.0 license. introduction a firm can be in financial distress when it is having financial difficulties. there are numerous circumstances in which the business could be in financial distress. financial distress, according to (ghazali et al., 2015), occurs when an agreement or contract between a business and a creditor does not go as planned or is in a challenging state. a situation where a business is unable to pay off its short-term debt with the money it makes. according to (piatt & piatt, 2002), financial distress is a period of poor financial condition before a company enters bankruptcy or liquidation. finally, as described by (almilia & kristijadi, 2003; hofer, 1980; whitaker, 1999), financial distress refers to a situation in which a firm has negative net income. financial difficulties result from a series of poor choices and connected flaws that can affect management directly or indirectly, as well as from a lack of efforts to monitor the company's financial situation so that its use is not as required. as such, many researchers have created alternate https://www.ilomata.org/index.php/ijtc mailto:eddy.suranta@unib.ac.id https://doi.org/10.52728/ijtc.v4i2.714 effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 284 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc models of financial distress. z-scores, zetas, o-scores, zmijewski, and camel ratios are just a few of the models that can be used to determine financial distress. according to (gamayuni, 2011), the z-score is the greatest indicator of bankruptcy, particularly for businesses engaged in manufacturing. because it is known that indonesia's stock market has delisted manufacturers with z-scores below 1.81. the altman z-score is also very effective at predicting financial difficulties, according to tanjung (2020), so it is still very pertinent to use as a proxy for determining financial difficulties. several research findings have explored the relationship between financial distress and various factors such as leverage, liquidity, interest coverage ratio, free cash flow, earnings management, and investment decisions (desai & dharmapala, 2009; suk et al., 2021; xue et al., 2021). however, the results have been inconsistent. this study seeks to replicate the findings of two previous investigations conducted by (a. dewanti et al., 2018; setiany, 2021) combined. (a. dewanti et al., 2018) conducted a study on the influence of liquidity and leverage on financial distress, whereas (setiany, 2021) investigated the impact of investment, free cash flow, earnings management, and interest coverage ratio on financial distress. setiany's findings suggest that only free cash flow and interest coverage ratio have a significant effect on financial distress for healthy companies, while dewanti et al.'s research reveals that leverage has a positive effect on financial distress, whereas liquidity has a negative effect. the difference between this study and (setiany, 2021) is that adding liquidity and leverage variables based on previous research suggestions requires finding new additional variables to detect financial distress and according to (a. dewanti et al., 2018) liquidity and leverage can explain the condition of companies in financial distress. the next difference is using the altman z-score as a measure of the financial hardship of the manufacturing company. in fact, according to wild (2005), altman's z-score is a powerful tool for determining whether firms are in financial distress and is well suited for this study and comparison of firms. as in setiany's 2021 survey, not only are healthy businesses dependent on his z-score results, but so are those in financial distress (dudley et al., 2022; febriml dwijayanti universitas katolik widya mandala surabaya, 2010; a. kartika et al., 2020; lópez-gutiérrez et al., 2015). signalling theory signaling theory describes how companies work to provide investors with guidance on how management views the company's prospects. signal theory helps companies (agents) and owners (principals) and outsiders reduce information asymmetries by producing high-quality or consolidated financial reporting information. healthy companies are more likely to disclose than financially distressed companies. financial difficulties refer to situations in which a company's business performance deteriorated due to poor management and faced a financial crisis. ross (1977) states that when a firm is in financial trouble, it has bad news, a negative signal to investors that affects disclosure. companies that have good news, which means that the company is financially healthy, influence management by providing company information, but management does not want information that can enhance the company's success. this information is not required. signal theory in financial distress research explains that if the financial condition and prospects of an entity are good, managers will give a signal by carrying out liberal accounting. conversely, if the entity is in a state of financial distress and has poor prospects, the manager will give a signal by doing conservative accounting. signal theory can therefore be used to provide managers with signals about good and bad news for the company. this allows the authority to take action or take immediate action to resolve the issue. https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 285 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc signals about the condition of companies that are experiencing financial distress can be obtained by agents and principals through financial reports which are illustrated through financial ratios. the financial ratios used are the ratio of liquidity and leverage. liquidity can indicate a company's ability to meet its short-term obligations. leverage, on the other hand, shows how much of a company's money comes from debt and company stock. when a company obtains more debt financing, when the debt exceeds the equity, the dangerous problem of future payment difficulties arises. the interest coverage ratio can also be used as a signal of whether a company is in financial distress. if a company has a negative interest coverage ratio, it means that the company cannot cover its interest costs, which is a bad sign (i. g. dewanti & sujana, 2019; maharani & baroroh, 2020; yarba & güner, 2020). in addition, investment decisions can also be a signal that can be used in assessing the condition of a company. the investment decision described by the investment opportunity set can use a total asset growth (tag) proxy where the growth in the total asset value of a company indicates that the company is in a condition to add asset value through investment decisions made by the company. investment financing is also closely related to available free cash flow. if a company's free cash flow is positive, that's a promising sign, indicating that it's operating well. on the flip side, a negative free cash flow reflects the same thing: negative operating cash flow. without proper vigilance, the company may end up facing financial problems (abu et al., 2022; ramli & yekini, 2022; vatamanyuk-zelinska & melnychenko, 2020). the effect of investment decisions on financial distress the decision to invest is linked to the proxy of investment opportunity set, which employs a total assets growth approach in its calculation. as per (eliu, 2014), the growth of total assets can lead to increased company size and activity in the long term. a higher growth rate in a company's total assets indicates better management of fixed assets and greater potential for future growth. consequently, the chances of the company facing financial difficulties are reduced. (epato, 2020) shows that financial difficulties have a negative impact on investment decisions. (almilia & kristijadi, 2003), on the other hand, found that wealth growth has a significant negative impact on financial hardship. because healthy companies tend to invest effectively in real and financial assets to streamline their business operations. based on this evidence, the proposed hypothesis: h1: financial distress is negatively impacted by investment choices effect of free cash flow on financial distress free cash flow is the free cash flow that a company has. a company in secure financial standing indicates that its free cash flow can support the investor's cost of capital. of course, this is a positive signal for the company. if the company has good free cash flow, the company is not in financial problems and the company can run smoothly. according to (diana & hutasoit, 2017), a high level of free cash signifies that a company has significant internal cash reserves, which improves its capacity to meet both short-term and longterm obligations. this indicates strong performance, particularly during times of financial difficulty. a favorable free cash flow indicates a positive operating cash flow and negative investing cash flow. however, if a company's operating cash flow is negative and its investing cash flow is also negative, it suggests that the company is making additional investments that are funded by debt. this could result in financial difficulties for the company in the future. https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 286 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (setiany, 2021) proves that free cash flow has significant positive influence facing healthy companies. conversely, firms that have free cash flow in firms experiencing financial distress will focus more on solving financial problems such as paying debts that are due and not using this free cash flow to pay dividends or make investments. even if the operating cash flow is negative, this allows the company to borrow additional capital from outside. if this situation continues, the debt will continue to grow, interest payments will increase, and the company will continue to face financial difficulties in the future. based on this explanation, the proposed hypothesis: h2: financial distress is negatively impacted by free cash flow effect of earnings management on financial distress earnings management is management's pursuit to manipulate earnings by making financial reports attractive to investors and other users of financial reports. cause this case, of course, this is a sign or signal that the company is in financial trouble, so management should ensure that the earnings reported in the financial statements are consistent with the wishes of stakeholders. is required. take steps to control another thing is agency competition due to information asymmetry. in this case, the manager has more information than the principal, and the company confuses earnings management. the motive for revenue management when the company is in financial problems is the motive for the debt agreement. (nikolaiev et al., 2021) explains that debt agreements greatly affect the state of a company. losing companies do revenue management in their financial statements so as not to violate contractual financial metrics. the motivation comes from companies struggling financially to not cancel debt agreements with creditors. therefore, financially challenged companies tend to manage earnings through an accrual basis in the accounting policies used to avoid covenant violations. (bisogno & luca, 2015) found that boards must enhance financial statements as agents, so companies in severe financial distress must take out loans to finance the company operations. indicates what it means. this allows creditors to confidently extend credit to the company and revenue management positively impacts financial emergencies. based on this explanation, the proposed hypothesis: h3: financial distress is positively impacted by earnings management effect of interest coverage ratio on financial distress the interest coverage ratio (icr) is a metric that assesses a company's capacity to pay short-term and long-term interest-bearing debt through the pre-tax income it generates. (setiany, 2021) has demonstrated that the icr has a noteworthy and favorable influence on financial distress, which implies that a low icr ratio is an indication of negative impact. a higher icr ratio suggests that the company can more effectively pay off the interest on its debt. in contrast, a low or negative icr ratio implies that the company is experiencing financial distress. based on this explanation, the proposed hypothesis: h4: financial distress is negatively impacted by interest coverage ratio effect of liquidity on financial distress liquidity is a measure of a firm's ability to source its operations and pay its current liabilities. this signals when the company can cash out and raise funds from working capital, the company is in a healthy financial position, and conversely, when the company is unable to fund its operations and https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 287 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc has short-term obligations. if unable to meet, the company will show signs of financial difficulty. therefore, this ratio minimizes information asymmetry between agents and principals. because the liquidity ratio can assess the manager's performance according to the goals desired by the shareholders to generate profits. (a. dewanti et al., 2018) research proves that liquidity has a negative impact on firms' financial distress and that a firm's likelihood of experiencing financial distress decreases as current interest rises. as a result, a business with a high cash ratio is one that can use capital and short-term debt to finance its operations. in light of this justification, the suggested theory is: h5: financial distress is negatively impacted by liquidity effect of leverage on financial distress the leverage ratio can be used to determine a business's debt ratio and to evaluate the financial risk that the company has assumed. this leverage ratio may indicate the health of the company. this is because the higher the leverage ratio, the more difficult it is for a company to manage its capital structure, leading to financial difficulties. leverage in agency theory is used as the shareholder's control over the manager. this is because managers tend to be more cautious when making decisions when a company's level of debt is high. a larger debt-to-equity ratio indicates that a company is more dependent on debt financing, which is risky for the company. every liability has a maturity date, with the exception of interest expense. (a. dewanti et al., 2018; r. kartika & hasanudin, 2019) show that leverage has a large positive impact on financial hardship. this shows that the effect of a high leverage ratio can be used as a negative signal to outside parties that the company is in financial trouble. based on this description, the proposed hypotheses are: h6: financial distress is positively impacted by leverage method sample selection method purposive sampling is the type of non-random sampling that is used in this study. it is a strategy that relies on judgemental sampling, where information is gathered using specific considerations. (sekaran, 2006). this study utilized a population of manufacturing companies that were listed on the idx (indonesia stock exchange) during the period of 2016-2020, with 2015 serving as the base year. data collection methods secondary data from manufacturing companies listed on the idx are used in this study. the financial report data for manufacturing companies from 2016 to 2020 was received from the idx through the websites (www.idx.co.id, 2019 and www.sahamok.com, 2019) and used in this study. operational definition and variable measurement https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 288 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. variable and measurement item variabels measurement sources dependent variable “financial distress” “z-score = 1,2x1+1,4x2+3,3x3+0,06x4+ 1,0x5” (altman, 1968) independent variable “investation decision” “ag= (total asett-total asett-1)/(total asett-1)” (epato, 2020) “free cash flow” fcf=(ako-pm)/total aset (diana & hutasoit, 2017) earning management tacit = niit – cfoit. (1) tac/(tat-1) = α11/(tat-1)+α2 δsales/(tat1)+α3ppe/(tat-1).. (2) ndac = ά11/(tat-1)+ά2((δsales δrec)/(tat-1)+ά3ppe/(tat-1) .. (3) dac = tac/(tat-1) – ndac .. (4) dechow et al, (1995) interest coverage ratio icr = ebit / biaya bunga (dewanti et al., 2018) liquidity cr=(current asets)/(current liabilities) (dewanti et al., 2018) leverage der =(total debt)/(total equity) (dewanti et al., 2018) result and discussion overall fit model model testing was performed using the chi-square test shown in table 2 below. a test was performed on the data for the entire model by comparing the initial log-likelihood value of -2 (result from block number 0) with the log-likelihood value of -2 (result from block number 1). if there is a reduction, the model shows a good regression. table 2 overall fit model regression models model -2 log likelihood “chi-square (omnibus test coefficient & variables)” “df” “sig” logistics “intercept only” “503.521” “final” “264.404” “239.117” “6” “0.000” based on table 2, the logistic regression results show only a -2ll (-2 log-likelihood) intercept of 503.521 with a final -2ll (log-2 likelihood) of 264,404, indicating a significance level. the decrease in the value is α < 5%, so it can be concluded that the logistic regression model used is the adjusted model. test for determination coefficient https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 289 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the findings of calculating the nagelkerke r square to test the coefficient of determination are shown in table 3 below: “table 3 test of the coefficient of determination” “equation models” “nagelkerke r square” prob zsc=α+β1tag+β2fcf+β3dac+β4icr+β5cr+β6lev+ ϵ 0.631 the nagelkerke r-squared value is 0.631. this means the independent variables explained 63.1% of his financial difficulties and the other variables explained 37.9% not included in this study variable. table 4 classification table prediction models non financial distress financial distress percentage “altman zscore” “non financial distress” “94” “40” “70.1”% financial distress “12” “246” “95.3”% “overall” “86.7”% table 4 shows a classification of bankruptcy prediction models using the altman z-score model showing a value of 86.7%. the classification table for companies that are not in trouble shows a value of 70.1%. table 4 shows that of the 134 observations classified as not in financial distress, only 94 observations are financially distressed and all 40 observations are not financially distressed. this indicates that there is still a type i error in altman's model for predicting financial distress. similarly, financial distress firms rankings show a value of 95.3%. the table shows that while 258 observations are identified as being in financial distress, 12 firms are also found to not be in financial distress, demonstrating that the prediction model used in this research still includes type ii errors. hypothesis test the results of logistic regression analysis are shown in table 5 below: prob zsc=α+β1tag+β2fcf+β3dac+β4icr+β5cr+β6lev+ ϵ variable coefficient wald sig constant “2.748” “87.143” “0.000” total aset growth (tag) “0.034” “0.055” “0.814” free cash flow (fcf) “-9.960” “23.122” “0.000” earnings management (dac) 0.286” “0.063” “0.802” interest coverage ratio (icr) -0.061” “17.727” “0.000” liquidity (cr) “-0.383” “15.021” “0.000” leverage (der) “0.008” “0.109” “0.741” first hypothesis testing and discussion https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 290 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the coefficient value of the total assets growth (tag) variable is 2,748 with a significance level of 0.841 (α > 5%), which means hypothesis 1, which posits that investment decisions have a negative impact on financial distress, is rejected, indicating that the total asset growth (tag) variable has no significant effect on financial distress. signal theory states that an increase in asset value reflects the firm's growth phase, indicating that the company has sufficient funds and significant profits, which sends a positive signal to investors. nonetheless, total asset growth does not have a significant impact on financial distress, indicating that asset value growth is not a reliable indicator of a company's financial difficulties. according to agency theory, managers have greater information and control over the company than investors, leading investors to hope that managers will act as stewards and make profitable investment decisions with a positive net present value. the investment opportunity set is a representation of the most profitable investment that a company will choose using total asset growth as a proxy. however, issues arise if firms continually fund investments with debt. as a result, companies that are in financial distress often experience an increase in assets since they finance their investment decisions using debt. (almilia & kristijadi, 2003; epato, 2020) found different results where financial distress has a negative effect on investment decisions. meanwhile (almilia & kristijadi, 2003) stated that asset growth has a negative and significant effect on financial distress. because a healthy firm tends to invest in real and financial assets effectively to expedite the firm's operating activities. however, these results are consistent with the research by (audina, 2018; fadhilah, 2020) which state that total assets growth does not affect the financial distress of a company because adding asset value is a longterm investment for the company which is expected to increase company activity in the future. come so that companies experiencing financial distress also try to increase their firm's activities to get out of this financial distress condition second hypothesis testing and discussion the coefficient value for the free cash flow variable is -9,960 with a significance level of α < 5%. hence, hypothesis 2 which posits that free cash flow has a negative effect on financial distress is accepted. the logistic regression findings reveal that the fcf variable has a significant adverse effect on financial distress, meaning that a higher free cash flow leads to lower levels of financial distress for the company. signal theory suggests that having a high free cash flow is a positive indicator for investors as it indicates that the company has excess cash that can be utilized for external business expansion or paying dividends to investors. the agency theory relates to free cash flow in the sense that managers, attempting to increase their personal wealth, may prioritize free cash flow. as a result, companies with high free cash flow are less likely to experience financial distress. however, under the free cash flow hypothesis, the firm may encounter an agency problem when investors anticipate dividends from the free cash flow available, but the company tends to choose business expansion instead. this research supports the findings of (setiany, 2021) which suggest that free cash flow is an indicator of a company's financial situation. a company with good financial health will typically have a high free cash flow, while a company with poor financial health will have a low free cash flow. this further affirms that free cash flow can serve as a signal to assess the financial condition of a company, determining whether or not the company is experiencing financial distress. https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 291 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results of testing the third hypothesis and discussion the earnings management variable has a coefficient value of 0.286 with the significance level α > 5%, so hypothesis 3 is rejected, that is, the earnings management variable has no significant impact on financial distress. earnings management if it is connected with agency theory, of course there is motivation that is owned by the manager (agent) so that he does earnings management. one of the motivations is to enter into a debt agreement. by carrying out earnings management, firm managers try to increase firm earnings so that the debt terms agreed upon by creditors are not violated. however, the practice of earnings manipulation does not affect the condition of a company that is in a state of financial difficulty or not so that earnings management does not significantly affect financial distress. in relation to the signaling theory, this earnings management practice is a signal that the company is experiencing financial difficulties, so that the firm tries to make reported earnings consistent with previous years, which is an inaccurate theory. because this earnings management practice is not only carried out in companies experiencing financial distress. these results are inconsistent with the results of (bisogno & luca, 2015) which in their research shows that earnings management has a significant effect on financial distress. these results are consistent with research conducted by (sayidah et al., 2020; setiany, 2021) that earnings management is not one of the motivations for companies to manipulate financial reports for firms that are experiencing financial distress. fourth hypothesis testing and discussion the icr variable has a coefficient value of -0.061 and a significance level of 0.000 (α < 5%), which confirms hypothesis 4. the logistic regression analysis reveals that the icr variable has a significant negative impact on financial distress. a higher icr indicates a lower financial distress condition for the company. signal theory posits that a company will provide a signal to investors through its financial statements about its condition. the interest coverage ratio is one of the ratios that can be used to evaluate a company's health or financial difficulties. if a company is unable to pay interest charges on its debt, it is in a state of financial distress, which can be seen from its icr ratio being below 1. agency theory suggests that managers' interests play a role in determining a company's funding policies, and one way to finance firm activities is through debt. however, if managers do not handle the company's debt wisely, it can lead to financial burdens and obligations that may cause financial difficulties in the future. investors hope that managers will make sensible decisions in this regard. these results are consistent with (setiany, 2021), which explains that the interest coverage ratio has a significant effect on financial distress, because companies that have difficulty meeting debt obligations will be affected by debt interest. if the company's management can manage debt obligations well, then the debt interest that must be paid also does not have a major impact on the company's cash flow so that the company avoids financial problems. fifth hypothesis testing results and discussion the coefficient value for the liquidity variable (cr) is -0.383, with a significance level of 0.000 (α < 5%). therefore, hypothesis 5 is accepted, and the logistic regression results indicate that the cr variable has a significant negative impact on financial distress. the higher the liquidity, the lower the likelihood of a company experiencing financial distress. financial statements serve as a means for external parties to evaluate a company's financial condition. one way to evaluate this condition is through the use of financial ratios. the current ratio is a financial ratio that measures a company's https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 292 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ability to meet its short-term obligations using its current assets. investors can use this ratio as a signal to assess a company's liquidity. a high current ratio indicates that a company has good liquidity, and is therefore less likely to experience financial difficulties. this study is in consistency with (a. dewanti et al., 2018) explains that a company with a high liquidity ratio means that it is more liquid, that is, it is able to pay short-term obligations and is able to finance futures. company activities. with enough costs to finance the operation of the business, the enterprise will be able to produce goods and carry out its business activities, while at the same time, the business will face financial difficulties (financial distress). main) will be lower. sixth hypothesis testing results and discussion the coefficient value for the leverage variables is 0.008, with a significance level of 0.741 (α > 5%), so hypothesis 6 is rejected, which means that the leverage variable (does not affect financial distress). the debt-to-equity ratio is a measure of how well a company is financed with debt. a high level of debt in signal theory gives a negative signal to investors. a high level of debt will cause problems in the future, namely paying off debts that have matured and facing financial burdens. however, the research results show that leverage does not have an impact on financial distress because companies experiencing financial difficulties will be faced with settling short-term obligations first to avoid financial distress so that if short-term liabilities have problems, it will cause long-term problems in the form of bankruptcy faced by the company in the future. the agency theory also explains that the company's activities will certainly be influenced by the capital owned by the company itself. if the company receives more capital or equity from investors, of course, this will become a separate burden for management where there is an obligation to manage company resources and the obligation to pay dividends. therefore, companies will tend to borrow debt to avoid this responsibility. however, the agency theory in this study does not explain the relationship between leverage and financial distress. the results of this study are consistent with those of (budiarso, 2014), who found that leverage has no effect on the occurrence of financial distress in firms, since large firms tend to rely heavily on bank loans or creditors. consequently, it can be said that big businesses usually have a high leverage ratio. however, although large companies have high debt levels, it can also be said that large companies are better able to avoid financial difficulties by diversifying their operations. however, the results of this study contradict the results of (a. dewanti et al., 2018). the risk of financial distress can be assessed using leverage. since the number of shares owned does not guarantee the debt the business owns, a company with a large amount of debt may breach its debt agreements with creditors. the high-interest rates will apply to businesses that have a significant amount of debt. meanwhile, the company's book value for its shares is negative because its total debt is higher than its total equity. conclusion leverage, earnings management, and investment decisions have no effect on financial distress. liquidity, free cash flow, and the interest coverage ratio all have a negative effect on financial distress. interest coverage ratio and free cash flow are used in relation to the theory of signaling variables of liquidity to determine whether the company is in financial distress or not. the free cash flow hypothesis is supported by this study and is related to agency theory, although agency theory is not supported by earnings management or investing. according to the free cash flow https://www.ilomata.org/index.php/ijtc effect of investment, free cash flow, earnings management, interest coverage ratio, liquidity, and leverage on financial distress suranta, satrio, and midiastuty 293 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis, managers will generally prioritize business growth over paying dividends to investors in agency theory. reference abu, m., ibrahim, u. a., & muritala, t. a. 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(2020). leverage dynamics: do financial development and government leverage matter? evidence from a major developing economy. empirical economics, 59(5), 2473–2507. https://doi.org/10.1007/s00181-019-01705-5 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4 october 2022 page no. 397-407 397| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc biological asset disclosure in indonesia aminah1, djoko suhardjanto2, rahmawati3, jaka winarna4, dea oktaviana5 15 university of bandar lampung, indonesia 234 sebelas maret university surakarta, central java indonesia correspondent: aminah@ubl.ac.id1 received : july 30, 2022 accepted : october 10, 2022 published : october 31, 2022 citation: aminah., suhardjanto, d., rahmawati, winarna, j., oktaviana, d.(2022). biological asset disclosure in indonesia. ilomata international journal of tax and accounting, 3(4), 397-407 https://doi.org/10.52728/ijtc.v4i1.434 abstract: the development of companies in the agricultural sector is supported by the availability of information, which is also a consideration for decisionmaking by company owners or company management. as a result, the company's annual report must include as much information as possible. agricultural companies are required to disclose their biological assets under psak 69. however, many agricultural companies have not fully disclosed their biological assets. the focus of the research is to observe how biological assets, company growth, auditor type, and public ownership influence biological assets disclosure. plantation & crops companies listed on the indonesia stock exchange (idx) are the population for this study, with a total of 25 entities. 13 out of 25 companies became the research sample taken using a purposive sampling method. the research technique uses panel data regression in eviews 10. the findings of this study are biological assets intensity and auditor type have a significant positive impact on biological assets disclosure. company growth has an insignificant positive effect on the disclosure of biological assets, public ownership has an insignificant negative effect on the disclosure of biological assets. keywords: biological assets; auditor type; growth; public ownership; psak 69. this is an open access article under the cc-by 4.0 license. introduction the agricultural sector is one of the foundations of national economic growth. it is increasingly important and strategic, marked by an increasing contribution to gdp (khairiyakh et al., 2016; nasrun et al., 2020; widada et al., 2020). based on data from agricultural indicators 2020, the agricultural sector contributed 13.70% to the total gross domestic product (gdp), an increase of 0.99% from the previous year. agricultural companies (plantation) are a combination of labor, land, and animals, which play a role in increasing agricultural productivity as a source of income, comply food and industry demand, encouraging exports, and providing wide employment opportunities (arham et al., 2020; bashir et al., 2019; bohušová & svoboda, 2016). the availability of information must be fully contained in the company's annual report to support the company's growth in the agricultural sector (arvidsson, 2011; d. kurniawati & yuliando, 2015; velasco-muñoz et al., 2021). financial reports that provide relevant and extensive information mailto:aminah@ubl.ac.id https://doi.org/10.52728/ijtc.v4i1.434 biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 398 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc about financial status, investment prospects, company value, and risks can help companies become more transparent (mansoor, 2021; martini, 2012; prekazi, 2022). psak 69 was approved by dsak iai on 16 december 2015 and adopted from international accounting standard (ias) 41 for agriculture, which was implemented on 1 january 2018. psak 69 requires companies to disclose their biological assets. biological assets consist of a group of biological assets, agricultural activities, as well as gains and losses from biological assets during the period (bozzolan et al., 2016; herbohn & herbohn, 2006; h. kurniawati, 2013). the entity also discloses the difference between the fair value and cost of selling agricultural products in the current period, the location and amount of recorded biological assets, also biological asset adjustments. the transformation accounting treatment of biological assets using the fair value method has become a controversy where according to psak 69, the historical cost method does not reveal the true value in the financial statements because biological assets are recorded at the costs incurred. fair value transformation will result in various valuation methods, and reduce the quality of comparability of financial statements (elad & herbohn, 2011; gonçalves & lopes, 2014; octisari, 2020). several countries that have implemented ias 41 agriculture have difficulty in measuring the fair value of some biological assets, so it isn’t worth the benefits received (dewi et al., 2018). after examining the annual reports of several agricultural companies listed on the indonesia stock exchange in 2018-2020, many agricultural companies haven’t fully disclosed their biological assets . companies only disclose 38.68% of their biological assets (hayati & serly, 2020). in other study the disclosure index of biological assets in bangladesh is still very low with an average of 29.30% (mirović et al., 2019) literature review agency theory is an arrangement of one or more people (principals) to involve other people (agents) in doing some work on their behalf and empowering agents to make some decisions (jensen & meckling, 1976). business owners need the information to evaluate their business as a fundamental for decision making, while company management provides good information to principals that can add value to the company later (buchanan et al., 2018). this problem creates a condition of information imbalance or often called information asymmetry, thus requiring control over the company. one of them is agents must disclose information so that business owners can analyze and evaluate management's performance in managing the investments allocated to them as effectively as possible (healy & palepu, 2001). agency theory claims that disclosure can be considered as a procedure to control the performance of managers, meaning that disclosure is the right method to monitor the performance of agents and the credibility of the company can be increased in the eyes of shareholders (mirović et al., 2019). the intensity of biological assets is defined as the proportion of investment which can show the amount of money the entity invests in its biological assets (alfiani & rahmawati, 2019; carolina et al., 2020) total assets that have changed, either increasing or decreasing also reflect the company's growth (brigham & houston, 2014; cindy & madya, 2018). auditing can bridge the presentation of the company's financial statements where conflicts of concern often occur. to avoid information asymmetry and biased financial statements, the report must be checked by an independent auditor so the financial statements can be used by shareholders (lubis & dewi, biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 399 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2020). the percentage of total share ownership of the general public which is not a large institution and has no special relationship with the company is called public ownership. method the object of this research is plantation & crops companies listed on the indonesia stock exchange from 2018 to 2020 with a population of 25 companies. the purposive sampling method was used in the selection of samples and obtained a sample of 13 companies. the type of data in this study is quantitative data with the panel data type. documentation techniques are used for data collection by collecting annual reports of plantation & crops sub-industry companies listed on the indonesia stock exchange (idx) from 2018 to 2020 which are accessed through www.idx.co.id or the company's official website. the total data to be observed in this study is 13x3=39 observation data. to facilitate the variable comprehension used in the research, descriptive statistical tests were conducted to define the data by knowing the mean, median, standard deviation, minimum and maximum value of the observed data for each variable (ghozali, 2013). the research uses panel data regression analysis techniques with 3 approaches, namely the estimates of the common effect model (ols), the fixed effect model (lsdv), and the random effect model (gls). the panel data regression model was selected using three tests, namely the chow test (f-test), the housman test, and the lagrange multiplier (lm) test. then, the hypothesis test consists of the coefficient of determination test (r-squared), the f statistic test, and the t statistic test (partial). below are the variables used in the research provided in table 1. table 1. operational definition and measurement variables research variable operational definition object measurement biological asset disclosure (y) measured using a dummy variable. if the entity discloses each item in the financial statements, it is assigned 1, while if it does not disclose items, it is assigned 0. biological asset intensity (x1) determined by comparing the company's biological assets with the company's total assets (carolina et al., 2020). company growth (x2) dividing the total assets of the current period minus the total assets of the previous period by the number of assets of the previous period (alfiani & rahmawati, 2019) ( ) ( ) ( ) auditor type (x3) measurement of the auditor the following is the big-four kap biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 400 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc type uses a dummy variable. if the entity is examined by kap big-four, it is given a score of 1. then, if the entity is examined by kap not big-four, it is given a score of 0. proposed by the directorate of iapi in 2010: 1. ernst & young, in alliance with kap purwantono, suherman & surja; 2. delloite touche tohmatsu, in alliance with kap satrio bing eny & partners; 3. kpmg (klynveld peat marwick goerdeler), in alliance with kap siddharta widjaja & partners; and 4. pwc (pricewaterhousecoopers), in alliance with kap tanudiredja, wibisana, rintis & partners. public ownership (x4) public ownership is the sum of all public shareholdings divided by the number of company shares (azzahra et al., 2020). result and discussion descriptive statistic analysis table 2. descriptive statistic analysis result bad bai cg at po mean 0.541234 0.013777 0.034423 0.564103 0.244526 median 0.540541 0.013679 0.023844 1.000000 0.237312 maximum 0.702703 0.030819 0.735217 1.000000 0.457119 minimum 0.378378 0.001828 -0.371432 0.000000 0.016072 std. dev. 0.081669 0.007295 0.181611 0.502356 0.128091 source: eviews 10 processed data, 2022 table 2 reveals the mean value of disclosure of biological assets (bad) of 0.54. the standard deviation of the biological asset disclosure (bad) is 0.081. the minimum value of bad is 0.38 while the maximum value of bad is 0.70. the mean value of biological asset intensity (bai) is 0.014. the standard deviation score of the biological asset intensity (bai) is 0.007. the minimum value of bai is 0.002 and the maximum value of bai is 0.031. the mean value of company growth (cg) is 0.034. the standard deviation value of company growth (cg) is 0.182. the minimum value for company growth (cg) is -0.371 and the maximum value for company growth (cg) is 0.735. the mean value of auditor type (at) is 0.564. the value of the auditor type standard deviation (at) is 0.502. the minimum value for auditor type (at) is 0.000 and the maximum value for auditor type (at) is 1,000. panel data regression model selection for the selection of this research model, the authors conducted the chow test and housman test. the chow test was run to find out which of the common effect model (cem) and fixed biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 401 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect model (fem) models were more optimally used. while the housman test is used to ensure a suitable model between the fixed effect model (fem) and the random effect model (rem). table 3. recapitulation of model selection test results uji chow nilai probabilitas f 0,0020 uji hausman nilai probabilitas chi squares 0.5704 source: processed data, 2022 from the results of the above recapitulation, in the chow test, it is known that if the prob-f value of 0.0020 is declared less than the significant level (0,002 < 0,05) then the more appropriate model between the two is the fixed effect model (fem). furthermore, based on the results of the hausman test above, it shows that the probability value chi-squaresres is greater than the significant level (0,5704 > 0,05). it can be concluded that the random effect (rem) model is more suitable than the fixed effect (fem) model. the lagrange multiplier test was not carried out in this study because this test was used to compare cem and rem, while in the chow test, fem was more precise than cem, and rem was better used than fem. therefore, the random effect (rem) model was chosen to analyze the variables in this research. the following is the equation of the random effect (rem) model. badit = 0 + 1 + 1bai1it + 2cg2it + 3at3it + 4po4it + eit bad : biological asset disclosure 0 : unknown parameter indicating the average of the population intercept bai : biological asset intensity cg : company growth at : auditor type po : public ownership µ : it is random which explains the differences in the behavior of individual companies classic assumption test gujarati & porter (2009) stated that the equation using the generalized least squares (gls) approach has passed the classical assumption. the panel data regression model which is the gls is a random effect (rem) model, while the common effects (cem) and fixed effect (fem) models use ordinary least squares (ols), so they must pass the classical assumption test and reach blue (best linear unbiased estimator). because the regression equation in this study uses a random effect model where the generalized least squares (gls) estimation method is said to be able to overcome heteroscedasticity and autocorrelation, it is not necessary to test the classical assumptions. in this study, the authors only tested the normality of the distributed data, namely the normality test and found out whether there was a correlation between the independent variables, namely the multicorniality test. normality test the jarque-berra method was used in testing the normality of this study. the results obtained are as follows. biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 402 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc picture 1. normality test diagram it can be seen that the jarque-berra probability value is 0.866061 greater than the significance level (0.87 > 0.05), so the research data in this research model has a normal distribution. multicollinearity test paired-correlation method was used to test the multicollinearity of the independent variables in this study. the results of the multicollinearity test are as follows. table 4. multicollinearity test results bai cg at po bai 1.000000 -0.216952 0.221788 0.075464 cg -0.216952 1.000000 0.184942 0.049618 at 0.221788 0.184942 1.000000 0.584951 po 0.075464 0.049618 0.584951 1.000000 source: processed data, 2022 because the table above shows that the correlation value for all independent variables is less than 0.85, it can be concluded that there are no signs of multicollinearity in each of the independent variables of this study. coefficient of determination test (r-squared) the coefficient of determination test (r-squared) is used to find out how well the model can explain the dependent variable. it is known that the adjusted r-squared value of 0,200402 which shows the percentage of the variable intensity of biological assets, company growth, type of auditor, and public ownership in explaining the disclosure of biological assets is 20.04%, with the remaining 79.96% being the proportion of other factors that influence the dependent variable. f-statistic test the f statistical test was carried out to determine whether the model used in the research was feasible by seeing whether the dependent variable was usually explained by all the independent variables together. table 4. recapitulation of f-statistic test results description value f-statistic 3.380977 prob(f-stat) 0.019673 source: processed data, 2022 biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 403 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5 shows the f-statistic value of 3.380977 where the f-calculate is greater than the f-table (3.38 > 2.65) and the prob f-statistic value of 0.019673 is smaller than the significance level (0.01< 0.05) which means that the variables of biological asset intensity, company growth, auditor type, and public ownership together can explain the variable of biological asset disclosure, so it can be concluded that the random effect model is feasible for this research. t-statistic test (partial) table 5. t-test results following are the conclusions from the table above. 1. hypothesis testing 1 the t-statistic test obtained a coefficient value of bai 3.414 and the prob-value was lower than the significant level (0.03 <0.05), so it was concluded that the intensity of biological assets had a positive and significant effect on the disclosure of biological assets. 2. hypothesis testing 2 the coefficient value of the cg variable is 0.006382 and the probability score is higher than the significant level (0.82 > 0.05), which means that the company's growth has a positive and insignificant effect on the disclosure of biological assets. 3. hypothesis testing 3 the at coefficient value is 0.083176 and the prob-value lower than the significant level (0.02 < 0.05), so it can be stated that the type of auditor has a positive and significant effect on the disclosure of biological assets. 4. hypothesis testing 4 the coefficient value of the po is -0.162294 and the probability value is higher than the significant level (0.26 <0.05), which means that public ownership has a negative and insignificant effect on the disclosure of biological assets. effect of biological asset intensity on biological asset disclosure the results showed that biological asset intensity had a positive and significant effect on the disclosure of biological assets. this result is in line with agency theory. agricultural companies place biological assets as the main assets so the size of biological assets in financial statements has an impact on company owners in making decisions according to agency theory (carolina et al., 2020). with the increasing value of biological assets, there is a tendency for companies to disclose more information about biological assets to convey more transparent information, so company owners know the condition of their biological assets, so that owners can evaluate the company's potential and determine business strategies that must be improved in the future. it concurs with the research of hayati & serly (2020), gonçalves & lopes (2014), azzahra et al. (2020), carolina et al. (2020), zulaecha et al. (2021) which concludes that the intensity of variabel koefisien t-statistik prob. c 0.486751 12.05483 0.0000 bai 3.413585 1.928609 0.0322 cg 0.006382 0.138026 0.8910 at 0.083176 2.445722 0.0198 po -0.162294 -1.140625 0.2620 source: processed data, 2022 biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 404 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc biological assets has a positive and significant effect on the disclosure of biological assets. however, this study contradicts the research of (alfiani & rahmawati, 2019; mirović et al., 2019) which state that the intensity of biological assets has a negative effect on the disclosure of biological assets. the effect of company growth on disclosure of biological assets the company growth shown by the research results has a positive effect on the disclosure of biological assets but does not significantly increase the disclosure of biological assets. the value of the company's growth coefficient is 0.006 which can be concluded that the company's growth increases by 1, which affects the increase in the disclosure of biological assets by 0.006. this effect is very small, and also has a significant level of 0.8910 > 0.05 which means that the increase in the growth of the company cannot affect the amount of disclosure of the company's biological assets in the financial report. therefore, the growth of the company will increase the disclosure of biological assets if it is supported by other factors such as the number of biological assets and the accounting records policies that apply to the company. company growth does not significantly affect the disclosure of biological assets, in line with the research of (hayati & serly, 2020) which has a positive influence on the disclosure of biological assets, but it is contrary to the research of (carolina et al., 2020). effect of auditor type on biological asset disclosure based on the results of the study, the type of auditor has a positive and significant effect on the disclosure of biological assets. based on agency theory, company owners trust data audited by auditors of public accounting firms who are known and have a high degree of independence. it can be seen in the research sample that the majority of plantation & crops companies have used the services of big-four kap in examining financial statements, which means that the level of auditing of financial statements is higher, including disclosure of biological assets. the financial information examined by the big four auditors also resulted in a reduced information gap between the owner of the company and the management of the company. in addition, the complete disclosure of information can increase the credibility of the annual report owned. these results agree with research conducted by (alfiani & rahmawati, 2019) which concludes that the type of auditor has a significant influence on the disclosure of biological assets. however, in contrast to the research of (carolina et al., 2020; gonçalves & lopes, 2014) that the type of auditor does not influence the disclosure of biological assets. effect of public ownership on disclosure of biological assets the research shows that the results of public ownership have a negative and insignificant effect on the disclosure of biological assets. the coefficient value for public ownership is -0.162 which can be concluded that if every increase in the number of public ownership is one, there is a decrease in the disclosure of biological assets in the financial statements by 0.162. however, the public ownership variable has a prob-value greater than the level of significance (0,891 > 0,050). this indicates that public ownership has no significant effect on the disclosure of biological assets. the public who invest in companies are generally investors who tend to be small, for example, the community. public owners cannot change or provide input to the management of the company as a whole so that there is no significant difference in the amount of demands for disclosure of financial information including disclosure of biological assets. based on agency biological asset disclosure in indonesia aminah, suhardjanto, rahmawati, winarna, and oktaviana 405 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc theory, company owners who have a larger percentage get greater authority to regulate management to disclose financial information for their benefit. conclusion the purpose of this study was to determine the effect of the intensity of biological assets, company growth, type of auditor, and public ownership on the disclosure of biological assets. the following are the results of this study. 1. the intensity of biological assets has a positive and significant effect on the disclosure of biological assets. 2. the growth of the company has a positive and insignificant effect on the disclosure of biological assets. 3. the type of auditor has a positive and significant effect on the disclosure of biological assets. 4. public ownership has a negative and insignificant effect on the disclosure of biological assets. for further research, it is hoped that more samples can be taken, thus strengthening the research. then researchers can also add to the determinants of companies related to the disclosure of biological assets, such as company size, and concentration of ownership. then, companies are expected to increase the completeness of disclosure of their company's biological assets by psak 69 by disclosing more detailed information related to agricultural activities, so that they can provide clearer information and become an added value for those in need. reference alfiani, l. k., & rahmawati, e. 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(2021). pengungkapan aset biologis pada perusahaan algikultur di indonesia serta faktor yang mempengaruhinya. competitive jurnal akuntansi dan keuangan, 5(1), 122. https://doi.org/10.31000/competitive.v5i1.4062 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 297-307 297 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance rutmada silalahi1, panubut simorangkir2, taufiq akbar3 123perbanas institute, indonesia correspondent: panubut@perbanas.id2 received : june 1, 2022 accepted : july 20, 2022 published : july 31, 2022 citation: silalahi, r., simorangkir, p., akbar t. (2022). the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance. ilomata international journal of tax and accounting, 3(3), 297-307. https://doi.org/10.52728/ijtc.v3i3.514 abstract: this study was conducted with the aim of analyzing the effect of the application of computer-assisted audit technique systems and professional ethics on auditor performance. the data used in this study are the results of processing questionnaire data given to auditors who work in public accounting firms in the jakarta area. the method used in this research is a purposive sampling method with a total of 92 respondents. testing the analysis using spss 25 by testing the validity, reliability, multiple linear regression, classical assumption test, and hypothesis testing. the results of this study indicate that the application of a computerassisted audit technique system has a positive and significant effect on employee performance with a significance level of 0.000 <0.05 and professional ethics has a positive and significant effect on employee performance with a significance level of 0.000 <0.05. the results also show that the application of a computer-assisted audit technique system and professional ethics have a joint or simultaneous effect on auditor performance with a significance level of 0.000 < 0.05. keywords: computer assisted audit technique (caat), professional ethics, auditor performance this is an open access article under the cc-by 4.0 license. introduction along with the rapid development of the technological era, it encourages companies including public accountants to be required to be able to compete in preparing good and appropriate information systems and professional human resources (deng et al., 2018; godowski et al., 2020; salleh & aziz, 2014). within the scope of audit work, tools that help auditors to achieve audit objectives are referred to as computer assisted auditing tools and techniques (caatts). more specifically caatts refers to data and program checking procedures (belfo & trigo, 2013; krieger et al., 2021; siew et al., 2020). in testing the caatts data used are grouped in software such as file interrogation software and system control audit review files (scarf) while in testing the caatts program the ones used include program review, code comparison, and parallel simulation (praktiyasa & widhiyani, 2016; shihab et al., 2017). in addition to technical competence, the use of a code of ethics is also required in the realization of good performance. the professional ethics are the values and moral norms that become the guideline for a person or group of people in regulating their behavior (ardillah & chandra, 2022; https://www.ilomata.org/index.php/ijtc mailto:panubut@perbanas.id https://doi.org/10.52728/ijtc.v3i3.514 the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 298 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc halim, 2008; nurfauziah et al., 2022). according to (muchtar, 2016), professional ethics are rules of behavior that have binding power for every profession holder. efforts are being made to support the professionalism of an accountant in implementing and increasing public trust, namely by compiling and ratifying the code of ethics of the indonesian institute of certified public accountants (iapi), public interest, integrity, objectivity, competence and due care, confidentiality, professional conduct and technical standards (kuntari et al., 2017; latercia et al., 2020; mulyani, 2020). auditor performance is a form of work carried out in achieving better work results and achieving organizational goals (arianti, 2015; meidawati & assidiqi, 2019). but in fact there are many cases of public accountants, such as clients bribing auditors or auditors auditing their relatives' companies, and so on (alissa et al., 2014; causholli et al., 2021; ricci, 2022). the case involving the public accountant of the multi-business company bakrie & brothers lost rp. 15.86 trillion in 2008, the multi-business company published an error in the bookkeeping of a very large net loss in 2009 of rp. 15.86 trillion in financial statements that have been audited by public accounting firm (paf) of doli, bambang, sudarmaji and dadang. previously, the published financial statements recorded a net loss of rp. 16.6 trillion, but a few days later the financial statements were corrected and the net loss was changed to rp. 15.86 trillion (detik finance, 2009). this phenomenon shows that the quality of the auditor's performance is still not good, so that good auditor performance is needed in terms of quality and quantity as well as responsibility for professional ethics in order to produce good performance and apply the principles of professional ethics in carrying out his profession. previous research related to the application of computer assisted audit techniques and professional ethics on auditor performance was conducted by (praktiyasa & widhiyani, 2016) and (kristian, 2020) stating that the computer assisted audit technique variable and professional ethics variable had a significant influence on the auditor's performance. meanwhile, based on (triyatno, 2017) research, it states that the use of information technology does not significantly affect the performance of auditors. furthermore, (praktiyasa & widhiyani, 2016) examined the relationship between ethics and audit performance. in their research, (praktiyasa & widhiyani, 2016) concluded that the more the auditor upholds the code of ethics, the higher the auditor's performance. however, (darwanis & putri, 2020) failed to prove that the ethics of the auditor did not have a significant effect on the auditor's performance. the phenomenon of poor audit quality as previously mentioned and the inconsistency of previous research results related to factors that can affect audit performance make researchers interested in reviewing similar studies in order to obtain more comprehensive results and show the latest phenomena related to audit performance. therefore, the researchers conducted a review of the application of information systems computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance at public accounting firms in the dki jakarta region. auditor performance according to (mulyadi, 2002) auditor performance is the success of public accountants in carrying out objective examination assignments on the financial statements of a company with the aim of determining whether the financial statements have been presented fairly in accordance with generally accepted accounting principles. auditor performance can be measured through certain measurements of quality, quantity and timeliness, where quality is related to the quality of https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 299 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the work produced, while quantity is the amount of work produced within a certain time, and timeliness is the conformity of the planned time. in measuring performance, there are four dimensions of personality, namely; ability, professional commitment, motivation, and job satisfaction. an auditor who has expertise in the audit process will be thorough and careful in completing his work. auditors who are committed to their profession will be loyal to their profession as perceived by the auditor (trisnaningsih, 2007). computer assisted auditing tools and techniques (caatts) according to (praktiyasa & widhiyani, 2016) caatts is any use of computers in audit activities. the results of using caatts make the resulting information better because the calculations are carried out using audit software so that the decisions taken by the auditor become more precise and accurate. (surya & widhiyani, 2016) stated that using caatts will be able to provide benefits for auditors. caatts is the use of computers in audit activities to collect and evaluate data in electronic form to become audit evidence, to be able to do this an auditor must have a good understanding of techniques for accessing and analyzing electronic data called caatts. professional ethics professional ethics is social ethics in which special ethics have duties and responsibilities towards their knowledge and profession (prakoso, 2015). professional ethics include standards of behavior for a professional that are made with practical and idealistic goals and motivate ideal behavior, so they must be realistic and enforceable (kartika, 2015). the ethical principles of the auditor's profession in the code of ethics (iai) include; professional responsibility, public interest, integrity, objectivity, competence and professional prudence, confidentiality, professional behavior, and technical standards (mulyadi, 2002). effect of computer assisted auditing tools and techniques (caatts) information system on auditor performance an accounting information system is a system that aims to collect and store data about business processes carried out by the company, making the data into quality information that is useful for management in the planning stages of decision making and providing security for company assets (kabuhung, 2014). the use of technology plays a role in business processes in creating new processes to solve problems, carrying out adequate tasks in managing information to support business operational activities of a company. without the application of technologybased information systems that can monitor business process activities, companies will find it difficult to analyze employee performance, problems being faced by the company and difficulties in supervising the resources owned by the company (kabuhung, 2014). moreover, the use of caatts is very much needed by an auditor in every process of audit activities. the results of previous research conducted by (surya & widhiyani, 2016), (praktiyasa & widhiyani, 2016), (kristian, 2020), (wicaksono et al., 2018), states that computer assisted auditing tools and techniques have positive inffuence on auditor performance. based on the above thoughts, the following hypothesis is formulated: h1: computer assisted auditing tools and techniques (caatts) information system has an effect on auditor performance. effect of professional ethics on auditor performance https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 300 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc professional ethics (professional ethics) is an attitude of life in the form of justice to be able to provide a professional service to the community with full order and expertise, namely as a service in carrying out tasks that are obligations to the community. with the principles of professional ethics, members can fulfill their professional responsibilities and demand the commitment of an auditor who fulfills the principles of professional ethics. a sense of responsibility can make an auditor strive to complete his work properly and with quality. an auditor is required to always maintain standards of ethical behavior in order to improve auditor performance. unfair and deviant competition between auditors can be avoided if an auditor can adhere to the principles of professional ethics. professional ethics are guidelines or basic ethical principles that have been formulated by the indonesian institute of certified public accountants (institut akuntan publik indonesia, 2016). auditor performance can be said to be good if the auditor can comply with professional ethics because if the level of auditor compliance with professional ethics is higher, the performance results of the auditor will be better and can reflect his attitude to become an individual with integrity, objective and responsibility, so that the auditor carries out his professional duties. gain trust. previous research conducted by (zaleha & novita, 2020) stated that professional ethics had an effect on auditor performance. another study conducted by (praktiyasa & widhiyani, 2016) stated that professional ethics had an effect on auditor performance. this shows that the higher the level of compliance of an auditor with professional ethics, the better the performance of the auditor. based on the thoughts above, the following hypothesis is formulated: h2: professional ethics affect the auditor performance method research design the type of research that will be used in this study is quantitative research, according to (sugiyono, 2014), namely research that seeks to uncover, describe and describe a social phenomenon by taking samples, processing data using instruments, statistical data analysis to determine the relationship between two variables. namely the implementation of computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance. population and sampling techniques according to (sugiyono, 2014) states that the area of generalization consists of objects or subjects that have certain qualities or characteristics set by researchers to be studied and then drawn conclusions. the population in this study are auditors who work in a public accounting firm located in dki jakarta. the sample is part of the number and characteristics of the population (sugiyono, 2014). the sampling technique used in this study was purposive sampling, because it was in accordance with the characteristics of the sample in this study. the samples used in this study were junior auditors and senior auditors who worked in public accounting firms located in the dki jakarta region. data types and sources https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 301 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the source of data used in this research is primary data. primary data is data that can be obtained directly from the field or research place (moleong, 2018), to obtain direct information about the influence of computer assisted auditing tools and techniques and professional ethics on auditor performance, the data collection in this study was carried out using division online questionnaire in the form of google form to auditors working at paf located in dki jakarta. the questionnaire contains a number of statements related to computer assisted auditing tools and techniques, professional ethics and auditor performance. measurement of variables using instruments in the form of statements and measured using a likert scale. result and discussion data respondents in this study are auditors who work at the public accounting firm (paf). the process of distributing questionnaires is carried out by sending a permit letter and a questionnaire link in the form of a google form via email to the paf due to constraints during the covid-19 pandemic. the questionnaires in this study were also distributed through intermediaries. questionnaires were distributed to several pafs located in the dki jakarta area. following are the results of the response of paf who agreed to fill out the questionnaire and have filled out the questionnaire. table 1 distribution of questionnaires based on public accounting firm no . name of public accounting firm (paf) respondent 1. paf. drs. teguh pribadi & rekan 4 2. paf. kksp & rekan jakarta 9 3. paf. rsm indonesia 4 4. paf. husni, wibawa & rekan 4 5. paf. s.mannan ardiansyah & rekan 6 6. paf. johannes juara & rekan 3 7. paf. crowe indonesia 4 8. paf. bharata, arifin, mumajad & sayuti 58 total 92 auditor source: processed by researchers validity test based on the results of the validity test for the observed variable items, it was found that all items had met the validity test requirements where the results showed that all instruments, both caatts, professional ethics and audit performance, had rcount values greater than rtable. so it can be concluded that all instrument items from the observed variables contained in the questionnaire are valid. reliability test reliability testing in this study used the cronbach alpha method, namely by determining the reliable value (consistent) or not each item of the instrument in this study. the results of data processing indicate that the variables studied in this study meet the requirements of the reliability test where the value of cronbach's alpha variables x1, x2 and y where the results are higher than the significance level of 0.6 (arikunto, 2013). https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 302 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc classic assumption test this study conducted several tests before testing the hypothesis from the observed data. normality testing was carried out using the one-sample kolmogorov-smirnov test which resulted in the conclusion that the research data were normally distributed as indicated by a significance value of 0.200 > 0.05. the next test is the multicollinearity test using an assessment between collinearity tolerance and vif statistics with the result that the collinearity tolerance value is greater than 0.10 and the vif statistical value for all variables is less than 10 which indicates that the observed model is free from multicollinearity errors. the last test is the heteroscedasticity test using the scatterplot test with the results that the scattered points do not form a certain clear pattern. so it can be concluded that there is no heteroscedasticity problem in this study. hypothesis test hypothesis testing is done by using multiple linear regression testing and to assess whether the independent variable has a significant effect on the dependent variable, it is done by comparing the values of tcount and ttable and comparing the significance value with a predetermined degree. the results of hypothesis testing are shown in the following table: table 2 multiple linear regression test results model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 18.405 4.342 4.239 .000 caatts .534 .112 .527 4.776 .000 professional ethics .070 .062 .124 1.128 .263 a. dependent variable: auditor performance source: results of data processing with spss based on the multiple linear regression test in the table above, the following regression equation can be obtained: the regression coefficient for the computer assisted auditing tools and techniques (x1) variable is 0.534, indicating that the computer assisted auditing tools and techniques variable has a positive influence on auditor performance. this means that for every 1 time increase in the computer assisted auditing tools and techniques variable, the auditor's performance will increase by 0.534 with the assumption that other variables are not examined in this study. the results of the t-test test on the independent variable computer assisted auditing tools and techniques (x1) showed a t-count of 6.444, while for t-table with a significance level (α) = 5%, namely 0.05 and degrees of freedom (dk) = 92-2 ≈ 90 then the ttable value is 1.986675 1.987. the results of the t-test calculation can be concluded that the acceptance of ha, because the results of the calculation of t-count 6,444 > 1,987 t-tabels, it can be said that the independent variable computer assisted auditing tools and techniques (x1) has a significant influence on auditor performance (y). a significant influence on the dependent variable means the acceptance of ha by testing the results of a significance value of 0.000 < 0.05 indicating a strong auditor performance = 18.405 + 0.534 caatts + 0.070 proffessional ethics https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 303 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc significant effect. thus, this hypothesis test answers the formulation of the problem in this study, namely whether computer assisted auditing tools and techniques have an effect on auditor performance, and the results of the calculation of the hypothesis test can be stated that the application of computer assisted auditing tools and techniques has a positive and significant effect on auditor performance. the regression coefficient of the professional ethics variable (x2) of 0.070 indicates that the professional ethics variable has a positive influence on auditor performance. this means that for every 1 time increase in the professional ethics variable, the auditor's performance will increase by 0.070 with the assumption that other variables are not examined in this study. the results of the t-test test on the independent variable professional ethics (x2) showed the results of t-count of 5.031, while for t-table with a significance level (α) = 5%, namely 0.05 and degrees of freedom (dk) = 92-2 ≈ 90 then the obtained value ttable is 1.986675 ≈ 1.987. the results of the t-test calculation can be concluded that the acceptance of ha, because the results of the calculation of t count 5.031 > 1.987 treble, it can be said that the independent variable professional ethics (x2) has a significant effect on auditor performance (y). a significant influence on the dependent variable means the acceptance of ha by testing the results of a significance value of 0.000 < 0.05 indicating a strong significant effect. thus, this hypothesis test answers the formulation of the problem in this study, namely whether professional ethics have an effect on auditor performance, and the results of the calculation of the hypothesis test can be stated that professional ethics has a positive and significant effect on auditor performance. multiple r coefficient of determination test table 3 multiple r coefficient of determination test results model r r square adjusted r square std. error of the estimate 1 ,615a ,379 ,365 4,070 a. predictors: (constant), professional ethics, computer assisted auditing tools and techniques source: results of data processing with spss based on the calculation results in table 4.9, it can be seen that the adjusted r square for the dependent variable (auditor performance) is 0.365. this means that the auditor's performance can be explained by the variable computer assisted auditing tools and techniques and professional ethics by 36.5%, while the remaining 63.5% is explained by other factors not included in this study. f test table 4 f test results (simultaneous) anovaa model sum of squares df mean square f sig. 1 regression 898,836 2 449,418 27,125 ,000b https://www.ilomata.org/index.php/ijtc the influence computer assisted auditing tools and techniques (caatts) and professional ethics on auditor performance silalahi, simorangkir, and akbar 304 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc residual 1474,599 89 16,569 total 2373,435 91 a. dependent variable: auditor performance b. predictors: (constant), professional ethics, computer assisted auditing tools and techniques source: results of data processing with spss the results of the f test calculation can be seen that the value of f test is 27.125 with a significance level of = 5% and the f table value is in accordance with the statistical f table n (922 = 90) which is 3.10. this means that in the structural equation, the two independent variables have a simultaneous effect on the dependent variable, seen from testing the value of sig 0.00 < 0.05 and testing the f value, which shows f count 27.125 > 3.10. independent computer assisted auditing tools and techniques and professional ethics have a significant effect on auditor performance which is the dependent variable. conclusion this study was conducted to examine the effect of the application of the computer assisted auditing tools and techniques system and professional ethics on auditor performance. based on the results of processing and analyzing the data collected, it can be concluded that computer assisted auditing tools and techniques have a significant influence on auditor performance. this proves that the computer assisted auditing tools and techniques system facilitates the work of the auditor and improves the performance of the auditor. thus, it can be stated that the application of the computer assisted auditing tools 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(2020). dampak teknologi informasi, etika profesi terhadap kinerja auditor. jurnal akuntansi dan auditing, 17(1), 90–114. https://doi.org/https://doi.org/10.14710/jaa.17.1.90-114 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 164-180 164 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc profit or planet? : impact of production and environmental costs on sales ivada zanetha darmaputri1, valentine siagian2 12universitas advent indonesia, indonesia correspondent: 1932107@unai.edu 1 received : janaury 13,, 2023 accepted : april 3, 2023 published : april 30, 2023 citation: darmaputri, i., siagian, v. (2023). profit or planet? : impact of production and environmental costs on sales. ilomata international journal of tax and accounting, 4(2), 164-180. https://doi.org/10.52728/ijtc.v4i1.695 abstract: lately, environmental problems such as pollution, poorly managed waste, and even depleting green land, have become issues that require companies to take action. but on the other hand, companies need well-allocated production costs, which of course have the aim of increasing company profits. that’s why, the purpose of this research is to analyze the effects of production costs and environmental costs on sales for primary and chemical industry firms with iso 14001 certification that are traded on the indonesia stock exchange. specifically, spss version 27 is utilized for conducting multiple regression analyses as part of a quantitatively descriptive methodology. annual and sustainability reports for 5 years from 2017 to 2021 out of 8 companies that have gone through a purposive sampling process are used as research samples. based on the multiple regression analysis that has been carried out, the results show that partially, production costs have a significant effect on sales, and environmental costs have no significant effect on sales. meanwhile, simultaneously both production costs and environmental costs have a significant effect on sales. meaning that production costs and environmental costs are interconnected with each other, so when sales continue to increase, production costs and environmental costs will also increase. keywords: environmental cost, production cost, sales this is an open access article under the cc-by 4.0 license. introduction to achieve the expected goals, companies today are facing new focus. initially, a company was only focused on a single bottom line or the value of a company from its financial condition, nowadays the focus became a triple bottom line or according to elkington, 1944 in (nababan, l., & hasyir, 2019) the 3p concept which includes financial (profit), environmental (planet), and social (people) dimensions. the profit dimension is how the company aims to make a profit from activities such as sales carried out by the company. then the planet dimension shows that the company should be responsible for managing the environment and its resources. also, the well-being of the company's employees and other stakeholders is a key aspect of the human dimension. this demonstrates that https://www.ilomata.org/index.php/ijtc mailto:1932107@unai.edu https://doi.org/10.52728/ijtc.v4i1.695 the effects of production cost and environmental cost on sales darmaputri, and siagian 165 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporations' objectives in conducting operations should include not only financial gain but also care for the local environment and the well-being of the surrounding community. in the manufacturing industry, there are various activities carried out by the company, one of which is production activities. this activity certainly requires an allocation of costs called production costs. according to (myrelid & olhager, 2019) it is important for manufacturing firms to allocate costs correctly as a decision to the products that they made. (harnanto, 2017) defines production costs as costs that are considered related to products which include direct and indirect costs for processing raw materials into finished products. mulyadi's definition of manufacturing costs, on the other hand, are those that arise while taking raw materials and turning them into finished goods, (mulyadi., 2015). this production cost can be broken down into the following categories: raw materials, labor, direct costs, and overhead. (xi chen & bertrand m. koebel, 2017) found that in production cost there are fixed costs and variable costs, and fixed costs represent 20% of the total cost which highlights its importance. according to (raiborn & kinney, 2013) there are 3 components in production costs, which are as follows: 1. direct material which is any part of the product that is available and easy to identify. 2. direct labor is the effort of individuals who produce products and provide services. 3. overhead is a cost that is indirectly included in the production of a product or service provided. with the existence of production costs, it is hoped that companies can calculate the cost of making finished products and selling them to consumers to make a profit. however, over time, companies need to think about how the products that have been produced could have sustainable properties. (soytas et al., 2019) define sustainability as processes that are created and modified to improve a company's social and environmental impact. according to (hong et al., 2019) sustainability is not just for long-term survival of a company, but also preserve social ecosystems at large. (loorbach et al., 2016) found out that ecological degradation is one of the factors that a company needs to be concerned about. in other words, companies need to think about the impact of their production activities and the effects on the environment and community welfare so that both natural and human resources can be used sustainably and passed on to the next generations. reported from (surjaya, 2022) in september 2022, pt. saranagriya lestari keramik, which produces floor ceramics and roof tiles, was proven to have polluted the environment so the bekasi regency government together with the west java environment agency sanctioned the company. it is known that pt. saranagriya lestari keramik has been proven to have committed 13 violations in waste management, especially liquid and air waste. the company was found not fulfilling waste treatment procedures because there were hazardous and toxic materials (b3) in the disposal of waste. https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 166 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the neighborhood first noticed this issue three months ago, and after an investigation by the bekasi district environmental agency, they confirmed that pollution had occurred, classifying it as moderate to severe. article 100 of law 32 of 2009, concerning environmental protection and management, was therefore broken. the increasing of various environmental problems such as pollution and environmental damage made companies have to find solutions to prevent this problem. (bai et al., 2019) found out that if companies invest in green technologies and made carbon regulation, it will able to reduce carbon emission. in other words, one of many solutions that can be done is to allocate environmental costs. businesses invest environmental costs into projects with the goal of bettering their environmental impact. environmental costs according to (ikhsan, 2009) are cost that include internal costs and external costs that relate to all costs associated with environmental damage and protection. (hansen d.r. & mowen m.m., 2018) classify environmental costs into 4 categories: internal costs associated with preventing environmental damage, external costs associated with repairing environmental damage, and internal costs associated with detecting environmental damage. investment in preventive and detection operations, or the costs of preventing and detecting environmental damage, is one way for businesses to achieve effective environmental cost allocation. such as the costs of waste treatment, reclamation, measuring waste levels, and others. according to (waltho et al., 2019) research, it’s found that to make substantial reductions in emissions companies have to increase their cost. conversely, if the company is unable to allocate its environmental costs properly, it can lead to additional costs that will affect the company’s financial performance. therefore, it is expected that the allocation of environmental costs will make people put more of their trust to create a good and sustainable relationship with the company. not only that, if the company can allocate production costs and environmental costs properly, it is expected that the company’s sales volume and profits will also increase. (kwon & lee, 2019) research backs this up, finding that a company can boost its returns by improving both its sustainability practices and the quality of its operations. over time, companies are competing to fulfill the 3p concept as evidenced by the existence of csr (corporate social responsibility), which according to (sultoni, 2020) represent a pledge on the part of businesses to act in an ethical manner and contribute to long-term economic growth. research by (jo et al., 2015) indicated that environmental cost was a factor in corporate social responsibility (csr). companies have implemented a wide range of programs aimed at achieving environmental management and community welfare. in order to gauge how well a company is doing in terms of environmental management, iso 14001 certification is often employed. iso 14001 is an ems standard created by the international organization for standardization, as stated by (deepak et al., https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 167 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2015). according to studies conducted by (feng & wang, 2014), a corporation can increase customer happiness and loyalty by creating an ems. (iso central secretariat, 2015) describes iso 14001 as an internationally recognized standard that indicates the criteria in the environmental management system. to obtain an edge in the market and the confidence of their stockholders, businesses can use this certification to improve their environmental performance by conserving resources and cutting down on waste. (de jong et al., 2014) in their research found that if companies have iso 14001certification, it can help them to develop their capabilities and give impact to the profitability. beyond the corporate legitimacy gains, (treacy et al., 2019) discovered that the iso 14001 standard has benefited the organization in other ways as well. to obtain this certification, (sadiq, n., & khan, 2019) in their book write that companies must pay attention to clause 6.12 of iso 14001 where companies and organizations are required to define and implement a procedure that describes how the company identifies and applies matters such as identifying all environmental laws; permits; and licenses that apply to products, processes, waste management whether solid, liquid, or gas; and periodic evaluation of environmental policies, along with the company’s compliance with environmental laws and other requirements. based on the problems described, this research was conducted to examine the effect of production costs and environmental costs on sales. sales are affected by production costs manufacturing expenses may have an effect on a company's sales. (albdullah, 2017) in his book defines sales as complementary activities to purchases made so that a transaction occurs. so it can be said that sales are a transaction made by consumers when they buy a product. while according to (panjaitan, 2018) sales is a concept that focuses on existing products, using promotion as an attraction with the ultimate goal of making a profit. the factors that influence sales according to (hidalyah , al., & sulakson, 2021) include the price set, the company’s strategy for promotion, and the quality of the products produced. (mcguian et al., 2016) argue if production costs increase, then companies must increase selling prices to maintain margin standards. this can affect market demand and reduce sales. however, on the other hand, if the company can reduce production costs, its market demand, and sales will increase. however, studies conducted by (rupaida & bernardin, 2016) reveal a positive and statistically significant relationship between production costs and revenue. this shows that when production cost increase, sales will also increase. the first hypothesis may be derived from the above description, and it is as follows: h1 = production costs have a positive effect on sales partially. sales affected by environmental costs https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 168 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in some cases, environmental costs can have a significant impact on a company’s sales volume. according to (callan, s. j., & thomas, 2013), every resource used for economic activities ends up as a residue that has the potential to cause environmental damage. although this process can be delayed through environmental restoration, it cannot be stopped. therefore, companies need to make policies regarding environmental management. taking active steps to meet environmental regulations and demonstrating a commitment to environmental sustainability, can have a positive effect on sales volume. in a study conducted by (suki, 2016), it was found that consumer attitudes towards environmentally friendly products. so it can be concluded that if consumers have a strong preference for environmentally friendly products, then the allocation of higher environmental costs can positively affect sales volume. naturally deriving from the first, the second hypothesis is as follows: h2 = environmental costs have a positive effect on sales volume partially based on the two hypotheses above, the researcher also formulates a third hypothesis, namely: h3 = production costs and environmental costs have a positive influence on sales simultaneously. according to the theoretical basis and previous research that has been discussed, the renewal in this study is how the existence of production costs and environmental costs put together can influence sales. whether the company pays attention to the allocation of production costs and environmental costs can make the company's product sales increase or vice versa. this study also hopes to answer whether companies are better off relying on profits or taking responsibility by managing environmental policies. figure 1. framework theory method thei obje icts that will bei e ixamineid are i production costs, einvironme intal costs, and sale is. the i re iseiarch useis nume irical me ithods to analyzei information culle id from primary source is (idx-listeid firms' annual reiports and sustainability re iports) and che imical industry seictors that havei iso 14001 ceirtification. population and sample companieis from thei primary and cheimical industrieis listeid on thei indoneisia stock eixchangei and holding iso 14001 ce irtification that providei sustainability reiports and annual reiports for 20172021 constitutei thei study's population. for samplei de iteirmination, this study will usei thei purposivei sampling meithod. this me ithod was chosein be icause i of the i re iseiarch limitations that reiquire i thei environmental cost sales production cost h2 h3 h1 https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 169 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc seile icteid samplei to be i following the i e ixisting objeictive is. thei following factors we ire i consideire id whein se ileicting thei samplei for this study: table 1. purposive i sampling no. criteria total 1. primary and che imical industry seictor companieis that arei iso 14001 ceirtifie id 73 2. companieis that did not publish sustainability reiport and annual reiport in 2017-2021 (65) numbeir of sample i companieis: 8 thei amount of data use id during 2017-2021 40 tablei 1 shows that 73 firms in the i basic and che imical industry arei accreidite id to iso 14001 standards. approximateily 65 busineisseis do not qualify. this proce iss of e ilimination yieilds 8 busineisseis and 40 sampleis worth of data that may be i analyzeid in furthe ir deipth. thei 8 busineisseis that meie it the i criteiria arei as follows: indoceime int tunggal prakasa tbk.; waskita beiton preicast tbk, surya toto indone isia tbk.; krakatau ste ieil (pe irse iro) tbk.; impack pratama industri tbk.; japfa comfe ieid indone isia tbk.; and toba pulp le istari tbk. variable measurement independent variable (x1,2) variableis outsidei of the i de ipeinde int variablei can be i consideire id indeipe inde int. production and e icological eixpeinseis are i thei study's indeipeinde int variableis. dependent variable (y) an indeipe indeint variablei acts as a driving forcei on a de ipeinde int variablei. this re iseiarch is ceinteire id on saleis as thei de ipeinde int variablei. table 2. summary of re iseiarch variable is variables dimensions disclosure indicator measurement production cost (x1) total production cost of thei company production cost = direict raw mate irial cost + direict labor cost + variablei factory ove irhe iad cost + fixeid factory ove irheiad cost nominal e invironmeintal costs (x2) total e invironmeintal cost of the i company total einvironmeintal costs in the i company's sustainability re iport for the i pe iriod 2017-2021 nominal https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 170 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc saleis (y) total reive inuei geine irate id from saleis total reive inuei ge ine irateid from saleis in the i company's annual re iport for the i pe iriod 2017-2021. nominal research model thei following meithods weire i e imployeid to analyzei thei data for this study: (1) quantitative i de iscriptions; (2) thei teist of classical assumptions; (3) corre ilation teist; (4) hypothe isis teist; (5) coeifficie int of de ite irmination using multiple i re igre ission te ichnique is. data analysis and proce issing will bei carrie id out with the i ibm spss statistics 27 application. result and discussion descriptive statistics table 3. deiscriptive i statistics n minimum maximum me ian std. de iviation production costs 40 163512400 6153867715706 802373990044.42 1556507837236.47 6 e invironmeintal costs 40 744000000 391000000000 18671215416.98 60777650183.773 saleis 40 183195700 0 8000149423527 1276575993475.75 2000485709143.09 3 valid n (listwisei) 40 source i: spss veirsion 27 proce isseid data baseid on tablei 3 abovei, it is found that production costs as one i of the i indeipe indeint variableis in this study havei a minimum valuei of idr 163,512,400. from the i calculation of production costs, thei maximum valuei obtaine id idr 6,153,867,715,706. whilei thei aveirage i value i obtaineid is idr 802,373,990,044.42 and a standard deiviation of idr 1,556,507,837,236.476. anotheir indeipe inde int variablei that useis deiscriptivei statistical calculations is e invironmeintal costs which havei a minimum re isult of idr 744,000,000. through the i re isults of the i calculation of e invironmeintal costs, the i maximum valuei obtaine id is idr 391,000,000,000. whilei thei ave iragei obtaineid is idr 18,671,215,416.98 and a standard de iviation of idr 60,777,650,183.773. if we i usei reive inuei as thei de ipeindant variablei, thein we i geit a minimum valuei of idr 1,831,957,000. as a reisult, the i higheist possiblei amount re iache id through total sale is is idr 8,000,149,423,527. with an aveirage i of 1,276,575,993,475.75 and a standard de iviation of 2,000,485,709,143.093 indone isian rupiah (idr). classical assumption test se iveiral assumptions must be i me it be ifore i a re ise iarcheir can draw valid re isults from a multiple i re igre ission analysis, theire ifore i theiy should be i che ickeid off be ifore i conducting any hypothe isis teisting. https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 171 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc thei normality teist, the i he iteirosce idasticity teist, thei autocorre ilation teist, and the i multicollineiarity te ist arei among thosei pe irforme id. normality test table 4. classical assumption te isting re isults one-sample kolmogorov-smirnov test unstandardizeid re isidual n 39 normal parame ite irsa,b me ian -.0000814 std. de iviation 606559599776.14980000 most e ixtreimei diffe ire ince is absolutei .307 positivei .307 ne igativei -.235 teist statistic .307 asymp. sig. (2-taileid)c .000 montei carlo sig. (2taileid)d sig. .000 99% confideince i inteirval lowe ir bound .000 uppe ir bound .000 a. teist distribution is normal. b. calculateid from data. c. lillieifors significancei corre iction. d. lillieifors' me ithod baseid on 10000 monte i carlo sampleis with starting seie id 2000000. source i: spss veirsion 27 proce isseid data thei proce isseid data has a normal distribution if the i significancei valuei of thei re isultant teist statistic is largeir than 0.05, as reiquireid by thei kolmogorov-smirnov te ist (seie i tablei 4 above i). heteroscedasticity test figure 2. he ite irosceidasticity scatteirplot graph source i: spss veirsion 27 proce isseid data https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 172 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc baseid on figure i 2 above i, it is known that thei points are i scatteire id irre igularly or randomly, so it is concludeid that thei data doe is not occur heite irosceidastic probleims. autocorrelation test thei re ise iarcheir doe is an autocorre ilation te ist on the i time i seirieis data to seie i if theire i is any association be itweie in thei diffe ire int me iasureime ints. thei durbin-watson (dw) valuei is useid in this analysis. table 5. autocorre ilation assumption te ist re isults model summaryb mode il r r squarei adjusteid r squarei std. e irror of thei e istimate i durbin-watson 1 .977a .954 .951 339594003084.29640 1.707 a. pre idictors: (constant), e invironmeintal costs, production costs b. de ipeinde int variablei: sale is source i: spss veirsion 27 proce isseid data baseid on tablei 5 abovei, thei durbin-watson valuei that has beie in obtaineid is beitweie in thei valueis of du and 4du (1.600<1.707<2.400). theire ifore i, it may be i infeirre id that the i conditions for the i proposeid re igre ission modeil havei be ie in satisfieid thei re igre ission be itweie in thei inde ipe indeint variableis production costs (x1) and einvironme intal costs (x2), against saleis (y) has beie in fre ie i from autocorre ilation probleims. multicollinearity test table 6. multicolline iarity te isting reisults coefficientsa modeil collineiarity statistics toleirancei vif 1 (constant) production cost 1.000 1.000 einvironmeintal costs 1.000 1.000 a. deipeindeint variablei: saleis sourcei: spss veirsion 27 proceisseid data as may bei seie in in tablei 6, thei final toleirancei valuei is 1.000. as this value i is largeir than 0.10 and thei vif valuei discoveire id was 1,000, which is le iss than 10, wei can safeily infe ir that theire i is no multicollineiarity issuei. results multiple linear regression analysis in this study, thei re iseiarche ir will form a re igre ission eiquation as follows: se = α + β1 prc + β2 enc https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 173 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc wheire i: se i (y) = saleis α = constant βi = coeifficie int of reigre ission prc (x1) = production costs e inc (x2) = einvironme intal costs thei re isults of the i calculation of multiple i line iar re igre ission analysis using the i spss ve irsion 27 program will bei preiseinteid in the i following tablei: table 7. multiplei lineiar re igreission re isults coefficientsa mode il unstandardizeid coe ifficieints standardizeid coeifficie ints t sig. b std. e irror beita 1 (constant) 296901749098.924 116237650328.533 2.554 .015 production costs 1.224 .064 .954 19.060 .000 e invironmeintal costs -.479 1.642 -.015 -.292 .772 a. deipe inde int variablei: sale is source i: spss veirsion 27 proce isseid data thei re igre ission eiquation useid to e ixplain thei eiffe ict of production costs and e invironmeintal costs on saleis is as follows: sales = 296,901,749,098.924 + 1.224 prc 0.479 enc baseid on the i re igre ission eiquation abovei, it is known that production costs have i a positive i re igre ission coeifficieint, indicating that thei higheir thei production costs, thei more i saleis will increiasei. conveirse ily, einvironme intal costs arei known to havei a neigativei re igre ission coeifficie int, indicating that thei higheir the i e invironmeintal costs, thei saleis will deicre iasei. t test thei re ise iarcheir conducte id partial hypothe isis teisting as a teichniquei for ide intifying the i factors that influe incei a targeit variablei. thei t valuei in this te ist with α = 5% is as follows: ttable = t (α/2; n-c-1) = t (0.025; 37) = 2.021 first, the i re iseiarcheir will te ist h1 https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 174 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 8. t teist re isults of the i e iffeict of production costs partially against sale is coefficientsa mode il unstandardizeid coe ifficieints standardizeid coeifficie ints t sig. b std. e irror beita 1 (constant) 287710529387.269 110489515424.607 2.604 .013 production cost 1.224 .063 .954 19.304 .000 a. deipe inde int variablei: sale is source i: spss veirsion 27 proce isseid data calculateid t-valuei is, as shown in tablei 8: 19.304, which is largeir than thei minimum valuei of ttablei 2.021. thus, wei can acceipt h1 with a 95% leiveil of confideincei, which stateis that production costs significantly affeict saleis. ne ixt, thei re ise iarcheir will te ist h2 table 9. t teist re isults of the i e iffeict of einvironme intal costs partially against sale is coefficientsa mode il unstandardizeid coe ifficieints standardizeid coeifficie ints t sig. b std. e irror beita 1 (constant) 1292182465611.010 335481523362.868 3.852 .000 e invironmeintal costs -.836 5.338 -.025 -.157 .876 a. deipe inde int variablei: sale is source i: spss veirsion 27 proce isseid data tablei 9 shows that thei calculateid t valuei is -0.157, which is leiss than thei thre ishold valuei of 2.021 in table i 8. sincei h2 cannot be i acceipteid with a 95% de igre ie i of confide incei, it follows that e invironmeintal eixpe inditure is havei no appreiciablei impact on re iveinue i. f test he ire i, thei re ise iarcheir also put the i third hypothe isis to the i te ist, and thei outcome is weire i as follows: f table = f (c ; n-c) = f (2 ; 40) = 3.23 https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 175 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 10. f teist re isults of thei e iffeict of production costs and e invironme intal costs to sale is simultane iously anovaa mode il sum of squareis df me ian squarei f sig. 1 reigreission 141167843470823650000 000000.000 2 7058392173541183000000 0000.000 181.751 .000b reisiduals 139807528270628440000 00000.000 36 3883542451961901300000 00.000 total 155148596297886500000 000000.000 38 a. deipe inde int variablei: sale is b. pre idictors: (constant), e invironmeintal costs, production costs source i: spss veirsion 27 proce isseid data baseid on table i 10, it is known that the i valuei obtaine id from thei comparison of f and ftablei is e iqual to (181.75>3.23). so it is concludeid that h3 can be i acceipteid, which me ians that production costs and einvironmeintal costs havei a significant eiffe ict on saleis simultaneiously. coefficient of determination thei coe ifficie int of de ite irmination was eixamineid by scieintists to deimonstratei thei eixte int to which thei inde ipeinde int variablei influe inceid the i re isult of the i study's deipe indeint variable i. thei tablei be ilow de itails thei outcomeis of our e ixpe irime ints: table 11. coeifficieint of deiteirmination model summary mode il r r squarei adjusteid r squarei std. e irror of the i e istimate i 1 .954a .910 .905 623180748415.891 a. pre idictors: (constant), (x2 ) e invironme intal costs, (x1 ) production costs source i: spss veirsion 27 proce isseid data in table i 11 abovei, it can be i seiein that the i r squarei valuei obtaineid is 0.910. baseid on the isei re isults, it is found that production costs, and e invironme intal costs contributei 91% of the i influe ince i on saleis, whilei thei re imaining 9% is a largei contribution of influe ince i deirive id from othe ir factors not e ixamineid. thei re iseiarche ir also teisteid thei coeifficie int of de ite irmination partially by using the i eiffe ictive i contribution valuei which can bei found through multiplying thei standardize id coeifficieints beita by thei correilation coeifficie int. the i re isults of thei calculation will bei preiseinte id in the i following tablei: table 12. partial deiteirmination coe ifficieint mode il standardizeid coeifficie ints corre ilations partial coeifficie int of de ite irmination beita https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 176 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc production costs (x )1 0.954 0.954 0.910116 e invironmeintal costs (x )2 -0.015 -0.025 0.000375 total eiffe ict 0.910491 source i: spss veirsion 27 proce isseid data tablei 12 provide is information about the i amount of influe ince i contribution give in by e iach variablei partially. sincei production costs is known to have i an e iffe ict of 0.910116 on sale is and e invironmeintal costs is known to have i an impact of 0.000375 on sale is, it is eivideint that production costs is thei variablei that de iliveirs the i most ove irall contribution of influe ince i. the i re isults of thei curreint t te ist corroborate i thosei of the i prior one i, proving the i validity of thei the iory. discussion effect of production costs on sales de ipeinding on the i findings of thei te ists of hypotheiseis, thei conclusion that can bei drawn is that production costs havei a significant eiffe ict on saleis. wheire i thei highe ir the i production cost, the i impact on increiasing saleis. this stateime int can bei prove in by thei partial t te ist re isults wheire i thei t valuei obtaine id is 19.304 which is greiateir than ttable i 2.021. this hypotheisis is of coursei also supporteid by thei re isults of thei coe ifficieint of de ite irmination te ist, wheire i production costs contribute i 91.05% of the i influe ince i on sale is. all e iight companieis listeid on the i indone isia stock e ixchangei have i high production costs duei to high production volumeis as a contributing factor. with a high production volume i, this meians that consumeir de imand is high. in othe ir words, the i company's saleis will bei high as weill. theisei findings corroborate i thosei of (dzakiyyah et al., 2022), who found that raising manufacturing costs had a favorablei and significant impact on saleis. the effect of environmental costs on sales using a partial t teist, wei find that e invironme intal e ixpeinseis do not significantly affe ict reive inue i, sincei thei t valuei of -0.157 is leiss than thei ttablei valuei of 2.021 at a significance i thre ishold of 0.876> 0.050. this reimark shows how an increiasei in thei company's einvironme intal e ixpe inditure is may not automatically translatei into higheir saleis for the i busine iss. thei re iason for this to happe in is that the i e iight companieis listeid on the i indone isia stock eixchangei allocatei more i of the iir e invironmeintal costs to csr programs, which are i aimeid more i at incre iasing company valuei and peirformancei. that is why this study has not be ie in ablei to prove i a significant influe incei be itweie in e invironme intal costs and saleis partially. the effect of production costs and environmental costs on sales simultaneously hypothe isis teisting was peirforme id using the i f teist and the i coeifficie int of de ite irmination, thei e iffe ict of production costs and einvironmeintal costs on saleis from ftablei is (181.75> 3.23). thei significancei le iveil of 0.000 < 0.050 and the i coeifficieint of de iteirmination of 0.9105 show that production costs and einvironmeintal costs consideirably affeict saleis. thei re imaining 8.9% is attributable i to a factor not inve istigateid in this study. https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 177 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this happeins beicausei production costs and einvironmeintal costs arei inte irconne icteid with onei anotheir, so that saleis will increiasei, and if saleis continuei to incre iasei, production costs and e invironmeintal costs will also increiasei. anotheir factor that causeis this to happein is that thei e iight companieis listeid on thei indone isia stock e ixchangei combine i thei allocation of production costs and e invironme intal costs to beine ifit from theiir saleis. it can be i se ie in in how the i companieis produce i theiir products. if production costs incre iasei, the i production volume i increiaseis which can cause i thei numbe ir of sale is to incre iasei. howe iveir, whe in production volumei increiaseis, companieis arei re isponsiblei for carrying out einvironme intal manageime int in ordeir to avoid einvironme intal proble ims. this can be i achie iveid by allocating e invironmeintal costs. conclusion this reiseiarch shows that companie is should pay atte intion to the i allocation of the iir production costs and einvironme intal costs. although in this study the ire i was no significant re ilationship found be itweie in e invironmeintal costs and sale is partially, the i simultaneious eiffe ict of production costs and e invironmeintal costs shows that production costs and e invironmeintal costs arei two matte irs that are i important in thei company's saleis. production costs do havei a direict reilationship with saleis beicausei whein production costs increiasei, thei volumei of production will increiasei along with incre iaseid consumeir de imand. but einvironme intal costs arei no le iss important to pay atteintion to. if companieis do not consideir the i propeir allocation of e invironmeintal costs, einvironmeintal proble ims reisulting from thei lack of company manage imeint of e invironmeintal policieis may occur, and this not only hampe irs the i company's products but also re iduceis public trust. suggestions : a. for the i company companieis can increiasei eifforts to pre iveint e invironmeintal probleims by seitting policieis and allocating einvironme intal costs. although this adds to production costs, if it is allocate id in a planneid and eifficieint manne ir, thei sustainability of thei company will bei guarante ieid and thei valuei of the i company with consumeir confide incei will increiasei. b. for inve istors inve istors can consideir inve isting in companieis that pay atte intion to e invironme intal issueis by allocating einvironme intal costs and having ce irtifications that arei einvironmeintally frieindly. thus, inveistors can avoid the i risk of busine iss continuity disruption. in othe ir words, inve istors can bei freie i from companie is that are i e ixposeid to le igal proble ims duei to the i impact of e invironme intal probleims, pe ioplei who do not trust the i company and proteist, or othe ir things that can harm thei company as weill as inveistors. https://www.ilomata.org/index.php/ijtc the effects of production cost and environmental cost on sales darmaputri, and siagian 178 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. for the i gove irnme int (ministry of e invironmeint and fore istry) thei goveirnme int is eixpe icte id to urgei all companieis to pay atteintion to einvironme intal issueis and obtain iso 14001 ceirtification or othe ir einvironmeintally frieindly ceirtifications. d. for future i re iseiarche irs: it is hope id that future i re ise iarcheirs can makei de ive ilopme ints such as increiasing the i numbe ir of sampleis or can usei otheir e invironme intally frie indly company speicifications so that manageime int accounting knowleidge i can also increiase i and deive ilop in thei future i. reference bai, q., gong, y. 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(2019). green supply chain network design: a review focused on policy adoption and emission quantification. international journal of production economics, 208, 305–318. https://doi.org/10.1016/j.ijpe.2018.12.003 xi chen, & bertrand m. koebel. (2017). fixed cost, variable cost, markups and returns to scale. annals of economics and statistics, 127(127), 61. https://doi.org/10.15609/annaeconstat2009.127.0061 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4 october 2022 page no. 421-434 421 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc factors affecting student financial literacy leni triana1, ibrohim2 12bina bangsa university, indonesia correspondent: lenitriana.binabangsaa@gmail.com1 received : august 21, 2022 accepted : october 18, 2022 published : october 31, 2022 citation: triana, l., ibrohim.(2022). factors affecting student financial literacy. ilomata international journal of tax and accounting, 3(4), 408-420. https://doi.org/10.52728/ijtc.v3i4.591 abstract: students, on the whole, have more leeway to exercise their own discretion regarding matters of personal finance. on the other hand, the current phenomenon does not indicate that students have a good grasp of financial concepts. in order for students to be able to make the most of the money they have, they need to be provided with an education that teaches them financial information and skills and teaches them how to properly handle funds. the goal of this study is to determine which factors, if any, have an effect on the financial literacy level possessed by university students in the city of serang, indonesia. the method used in this research is to go directly to the respondents who are the samples in the study to get primary data. the sampling technique in this study ses a proportionate random sampling with data collection techniques using a questionnaire distribution technique. factor analysis of 17 indicator variables resulted in 5 forming factors, namely: 1) management factors, 2) income factors, 3) budgeting factors, 4) education factors, and 5) planning factors. keywords: factor analysis, financial literacy, multivariate analysis this is an open access article under the cc-by 4.0 license introduction talking about financial literacy, it can be defined as financial knowledge aimed at achieving prosperity (lusardi & mitchell, 2014). communities in indonesia have serious problems and significant challenges due to the lack of information on financial literacy (otoritas jasa keuangan, 2019; shandy, 2021; wahyuni et al., 2019). individual financial education is becoming increasingly important to avoid adverse mistakes in future financial decision making (li et al., 2020; margaretha & pambudhi, 2015). based on the results of the national survey of islamic financial literacy, the islamic financial literacy index of the indonesian people in 2019 was 8.93 percent, indicating that the majority of indonesian people fall into the category of people who are not yet literate. various financial literacy education programs are organized by the financial services authority to improve public financial literacy. students and students in general are the main focus of financial education efforts aimed at educating the general public. students are considered to have a very important role because one of the advantages of being a student is being relatively close to the community (otoritas jasa keuangan, 2017) mailto:lenitriana.binabangsaa@gmail.com https://doi.org/10.52728/ijtc.v3i4.591 factors affecting student financial literacy triana and ibrohim 422 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to a poll performed by the financial services authority in 2015, indonesia has the lowest degree of financial literacy among neighboring nations. (otoritas jasa keuangan, 2017). for a bright future, students must have a better understanding of personal finance as well as reallife skills such as budgeting, saving, paying interest, and even taking out insurance (kumar et al., 2022; sohn et al., 2012; zhou et al., 2022). on the other hand, the current phenomenon does not reflect a high level of financial literacy among students. this can be seen from the fact that there has not been any attempt made to establish a priority scale for different types of economic activities (budiarti & setyaningsih, 2021). even though the majority of them do not have income because they are still financially dependent on their parents, they are becoming increasingly wasteful in the sense that they make purchases without giving any thought to the future. additionally, their monthly reserves are restricted (amagir et al., 2020; gilenko & chernova, 2021; margaretha & pambudhi, 2015; moreno-herrero et al., 2018). in furthermore, delays in remittances from family members or premature exhaustion of monthly payments are both problems in terms of the management of their finances. sometimes the condition of a friendly atmosphere is also endorsed by many lucrative entertainment and culinary facilities, which have an impact on the financial structures and consumption patterns of students in general. these facilities can be found on campus. if the student does not acquire knowledge and experience in the field of finance, then the likelihood of making mistakes in the financial resource management will be even higher, and it will be more difficult to achieve prosperity. consequently, students need to be instructed in the proper management of finances in order for them to maximize the value of the money that is available to them (douissa, 2020; jang et al., 2014; maulida, 2018; popovich et al., 2020). literacy in financial matters is an absolute necessity for a person to have in order to keep themselves from getting into financial trouble. the emergence of financial issues is not only the result of a low level of income; rather, it can also be the result of a person's lack of knowledge in the management of their own personal finances. individuals who demonstrate financial literacy are able to make effective use of the assets at their disposal to achieve and improve their standard of living (cameron et al., 2014; cavdar & aydin, 2015). financial literacy is financial knowledge and the ability to apply it in everyday life with the aim of achieving prosperity. the definition of financial literacy, according to (dhandayuthapani, 2020) is the ability to make informed judgments and to take effective decisions regarding the use and management of money” which means financial literacy is the ability to make informed judgments and make effective decisions about the use and management of money. financial knowledge is an inseparable dimension of financial literacy, but it has not been able to describe financial literacy (huston, 2010). a person is considered to have a high level of financial literacy if they possess the knowledge, skills, and abilities that allow them to make effective use of the financial resources at their disposal to accomplish their objectives. wrong financial planning as a result of low financial knowledge will cause the expected welfare not to be achieved. attitude is an essential element in financial literacy (byrne, 2007). a person's psychosocial factors in relation to their own personal financial issues are what are referred to as their "financial attitude." factors affecting student financial literacy triana and ibrohim 423 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc attitudes regarding money include things like being open to new information, recognizing how important it is to properly manage one's finances, avoiding being impulsive with one's spending, looking to the future, and taking responsibility. according to the program for international student assessment (badan standar kurikulum dan asesmen pendidikan, 2018) in the research and development of the ministry of education and culture, the aspects contained in financial literacy are: 1. financial and exchanges 2. organization and management of financial resources 3. risks and advantages 4. financial landscape. the ability of the four aspects of financial literacy is certainly influenced by many things (lusardi et al., 2009) that there are "three things that have an influence on financial literacy ability, namely: 1. socio-demography; men and women have different levels of understanding. men are thought to be more financially literate than women. the same is true of cognitive abilities. 2. family background; in particular, mothers who have completed college have a significant impact on financial literacy due to their education. they perform 19% better academically than those who have completed high school. 3. friendship circles; a person's circle or community will impact their financial literacy by influencing their spending habits and how they handle their money. the socio-economic status of parents is a person's class position or a combination of economic positions which includes education level, type of parent's occupation, income level, and student pocket money (laily, 2016). through a well-planned combination of teaching, media, and educational resources in conformity with professionalism, is anticipated to be able to equip students with financial literacy so that they are prepared and capable of navigating an increasingly complex world both now and in the future (widyawati, 2012). the indicators are: 1. understanding of material in finance courses 2. methods and media used 3. learning process and assessment. financial education in the family is an ability a person or family in budgeting, saving money, managing expenses, making investments, and saving for future family needs. there are 5 aspects in financial literacy (nababan & sadalia, 2013), including: 1. general knowledge of finance 2. savings and loans 3. insurance 4. investment 5. risk management. the financial habits of college students tend to continue in their adult lives. according to grable and joo in (jorgensen, 2007) the better financial literacy when you are a student, the less likely you are to experience financial difficulties in your life. research conducted by (gade & sarma, 2018) states that someone who has high financial literacy tends to have an influence on one's factors affecting student financial literacy triana and ibrohim 424 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial behavior. this study shows that the level of literacy will affect how a student behaves towards the decisions that someone makes. various studies have been conducted to identify the factors that influence the level of financial literacy among students, including: education level, type of work, education level, student monthly allowance (nidar & bestari, 2012). understanding of material in finance courses, methods and media used, learning processes and assessments. in contrast to (luksander et al., 2014) who stated that the factors that affect student literacy are budgeting, saving money, managing expenses, making investments, and saving. furthermore, (nababan & sadalia, 2013) in his research stated that the factors that influence student literacy are general knowledge of finance, savings and loans, insurance, investment, risk management. through family education, in simple ways children are brought to a desired value system or life attitude and accompanied by parental examples which have indirectly led children to certain views and habits (gutter, 2008). students who reported they learned either some or a lot about managing their money from parents had higher financial knowledge, attitude, and behavior scores than students who reported learning none or not much about managing their money from their parents (jorgensen, 2007). students live in a diverse and complex economic environment, so an increased need for financial education is necessary. several countries have recognized the need for financial literacy to be taught in the classroom (international network on financial education, 2011). financial education has a significant positive effect on financial knowledge, attitudes and behavior. it is strengthened by research by (siregar, 2018) which states that financial management education has a significant effect on financial literacy. method this study uses a non-probability sampling method. non-probability sampling is a type of sampling that is not done randomly. this technique was used because the researcher did not know the research population in detail. this sampling method uses convenience sampling technique. the use of convenience sampling is to select several populations from the factors that influence the level of financial literacy of private university students in serang city with the availability of respondents to be used as samples by providing the information needed in the study (sugiarto, 2017). the sample number used is 150 respondents. the sampling technique in this study was by distributing questionnaires and interviews to 150 students at private universities in serang city. the determination of the number of respondents is divided based on the division of universities by looking at the number of students of each university in table 2. table 2 number of samples by university university jumlah mahasiswa bina bangsa university 8864 serang raya university 8856 banten jaya university 3224 primagraha university 4292 faletehan university 2971 total 28207 source: data processed (2022). factors affecting student financial literacy triana and ibrohim 425 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the calculation of the number of samples that will be used as respondents for each university is as follows. for example, for bina bangsa university: bina bangsa university = x 100% = 31,42% x 150 = 47 orang the calculation of the number of respondents for the next university is carried out in the same way as above. respondents from each university were then taken according to predetermined criteria to meet the number of respondents. this is so that students from each university can be represented by a number of respondents. the data collection method used is by going directly to the respondents who are the samples in the study. data collection techniques using questionnaires. the questionnaire itself is a list of questions given to other people who are willing to respond according to user requests. the goal is to find complete information about a problem from the respondent without feeling worried if the respondent gives an answer that is not in accordance with the reality in filling out the list of questions. the unit of analysis is the individual because each respondent's answer represents his or her own opinion. measurement of data using the rating scale, namely the raw data obtained in the form of numbers and then interpreted in a qualitative sense. the questionnaire in this study was in a closed form, namely a questionnaire whose answers had been provided so that respondents only had to choose. the number of questions in the questionnaire is 34 questions. respondents can choose the available alternative answers, namely: strongly agree, agree, neutral, disagree, strongly disagree. the scoring in the item instrument answer category uses a likert scale as follows: description score strongly agree 5 agree 4 neutral 3 disagree 2 strongly disagree 1 before starting the preparation and writing of this research, we prepared a number of designs or procedures for compiling this research. the design is divided into several stages, namely: a. problem identification stage at this stage we look for the core of the problem to be discussed, namely the determination of the variables used in the study. the variables used in this study include the variables used to determine the factors that affect student financial literacy. there are 17 variables, namely: 1. level of education 2. type of work 3. income level 4. student monthly pocket money 5. budgeting 6. saving money 7. manage expenses 8. make investment 9. save 10. understanding of material in finance courses factors affecting student financial literacy triana and ibrohim 426 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 11. learning process and assessment 12. methods and media used 13. general knowledge of finance 14. savings and loans 15. insurance 16. investment 17. risk management b. information gathering stage at this stage we collect materials and sources of information from websites, newspapers, journals and books. c. compiling questionnaire at this stage, we compiled a questionnaire to determine the factors that influence financial literacy according to the procedure and distributed it to the respondents. d. looking for alternative troubleshooting at this stage, we analyze the data obtained and then test the validity and reliability of the questionnaire used and then discuss the factors that affect student financial literacy. the data analysis method that will be used is factor analysis with ms.excel and spss 22.0 program analysis which is a software program for statistics. result and discussion test the assumption of factor analysis to assess the eligible variables. factor analysis has assumptions that must be met beforehand, including the kmo statistical value for the adequacy of the sample or data and the significance of the barlett test to test that there is a correlation between variables. table 4.1 output kmo dan bartlett’s test 2. identification of data sufficiency adequacy of data or samples can be identified through the value of measure of sampling adequacy (msa) and kaiser-meyer-olkin (kmo). the testing procedure is as follows: a. hypothesis formulation h0: the sample (variable) is sufficient for further analysis. h1: the sample (variable) is not sufficient for further analysis. b. quantity required significant level referring to the theoretical basis that a group of data is said to meet the assumption of data adequacy if the msa and kmo values are > 0.5. c. test statistics: factors affecting student financial literacy triana and ibrohim 427 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc d. testing criteria: accept h0 if the kmo value is greater than 0.5. the criteria for suitability in the use of factor analysis include: 1) 0.9 < kmo  1.00 ≤ unit of observation is very good for factor analysis. 2) 0.8 < kmo  0.9 ≤ unit of observation is good for factor analysis. 3) 0.7 < kmo  0.8 ≤ unit of observation is rather good for factor analysis. 4) 0.6 < kmo  0.7 ≤ unit of observation is more than adequate for factor analysis. 5) 0.5 < kmo  0.6 ≤ unit of observation is sufficient for factor analysis. 6) kmo  0.5 ≤ unit of observation is not feasible for factor analysis. e. conclusion: based on table 4.1 above, it can be seen that the assumption of data adequacy has been met, namely by looking at the kmo value of spss output (0.740> 0.5). where it implies that the data is satisfactory for factor analysis so that the data or sample adequacy test has been met. 3. identification of correlation between variables between variables must meet the assumption of correlation. to help identify correlations between variables, spss software is used. the testing procedure is as follows: a. hypothesis formulation h0: the correlation matrix is an identity matrix. h1: the correlation matrix is not an identity matrix. b. test statistics = [( ) ( ) ]ln | | c. acceptance criteria reject h0 if > ( ) d. conclusion: information that can be obtained from table 4.1 is known that between variables have met the assumption of mutual correlation, namely by looking at the barlett test value of 457 at 136 degrees of freedom, far below 0.05, which means h0 is rejected. thus, both assumptions for factor analysis have been met. in addition, the feasibility of the variables to be analyzed is also seen from the anti-image matrix which is used to find out which variables must be excluded because they cannot be predicted and factors affecting student financial literacy triana and ibrohim 428 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cannot be analyzed further. the msa (measure of sampling adequacy) number ranges from 0 to 1, with the following criteria: a. msa = 1, the variable can be predicted without error by the other variables. b. msa > 0.5, the variable is still predictable and can be c. further analyzed. d. msa < 0.5, the variable is unpredictable and cannot be analyzed further or excluded from other variables. e. the msa value for each variable can be seen in the following table: table 4.2 msa values on anti-image matrices variable msa variable msa level of education 0.593 understanding of material in finance courses 0.688 type of work 0.762 methods and media used 0.532 income level 0.661 learning process and assessment 0.743 student monthly pocket money 0.548 general knowledge of finance 0.829 budgeting 0.696 savings and loans 0.624 saving money 0.806 insurance 0.701 manage expenses 0.808 investment 0.699 make investment 0.754 risk management 0.772 save 0.909 from the output of the anti-image matrix, it turns out that the msa value of all variables is above 0.5, meaning that the unit of observation is sufficient for further analysis on each variable. 4. extracting factor next, the core process of factor analysis is carried out, namely extracting a set of existing variables, so that one or more factors are formed. there are many methods for carrying out the extraction process, but the method used is principal component analysis. table 4.3 communalities communalities initial extraction level of education 1.000 0.597 type of work 1.000 0.629 income level 1.000 0.550 student monthly pocket money 1.000 0.754 budgeting 1.000 0.587 saving money 1.000 0.750 manage expenses 1.000 0.753 make investment 1.000 0.669 save 1.000 0.676 understanding of material in finance courses 1.000 0.587 methods and media used 1.000 0.545 learning process and assessment 1.000 0.675 factors affecting student financial literacy triana and ibrohim 429 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc general knowledge of finance 1.000 0.678 savings and loans 1.000 0.795 insurance 1.000 0.513 investment 1.000 0.516 risk management 1.000 0.519 extraction method: pricipal component analysis communalities are basically the amount of variance (can be in percentage) of an initial variable that can be explained by existing factors. the greater the communalities of a variable, the closer the relationship with the factors formed. the largest origin variable that can be explained by factors is the savings and loans variable with a communality value of 0.795. this means that 79.5% of the variance of these variables can be explained by the formed factors. while the smallest communality value is 0.513 for the method and media variables used, which means that only about 51.3% of the variance of this variable can be explained by the formed factors. there are 17 variables (components) that are included in the factor analysis, with each variable having a variance of 1, so the total variance is 17 x 1 = 17. the number of eigenvalues for the seventeen variables is the same as the total variance of the seventeen variables (5.112+1,587+1,482+1264+0.156+0.997+0.913+0.798+0.678+0.620+0.488+0.470+0.389+0.35 7+0.333+0.187+0.169 = 17.) table 4.4 total variance explained total variance explained initial eigenvalues extraction sums of squared loadings rotation sums of squared loadings component total % of variance cumulate % total % of variance cumulate % total % of variance cumulate % 1 5.112 30.068 30.068 5.112 30.068 30.068 4.059 23.876 23.876 2 1.587 9.338 39.406 1.587 9.338 39.406 2.096 12.328 36.204 3 1.482 8.717 48.123 1.482 8.717 48.123 1.832 10.782 46.986 4 1.264 7.437 55.56 1.264 7.437 55.56 1.322 7.773 54.759 5 1.156 6.801 62.361 1.156 6.801 62.361 1.292 7.602 62.361 6 .997 5.867 68.228 7 .913 5.370 73.598 8 .798 4.695 78.293 9 .678 3.961 82.254 10 .620 3.564 85.818 11 .488 2.874 88.692 12 .470 2.776 91.468 13 .389 2.265 93.733 14 .357 2.211 95.944 15 .333 1.959 97.903 16 .187 1.101 99.004 17 .169 .996 100.000 extraction method: pricipal component analysis the arrangement of eigenvalues is always sorted from the largest to the smallest, with the criteria that the eigenvalues below one are not used in calculating the number of factors formed. from the table above, it can be seen that only five factors are formed. because with one factor, the eigenvalues are above 1 (5.112), with two factors the eigenvalues are still above 1 (1.587), with factors affecting student financial literacy triana and ibrohim 430 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc three factors the eigenvalues are still above 1 (1.482). with four factors, the eigenvalues are still above 1 (1,264) . with five factors, the eigenvalues are still above 1 (1,156). however, for six factors, the eigenvalues are already below 1 (0.997), so the factoring process should stop at only 5 factors. if the total variance table explains the basic number of factors obtained by calculating numbers, then the scree plot shows this with a graph. it can be seen that from one to two factors (the line from the component number axis = 1 to 2), the direction of the line decreases quite sharply. then from number 2 to number 3, the line is still decreasing. figure 4.1 screen plot likewise with number 3 to number 4, but now with a smaller slope. also notice the factor 6 is already below the number 1 on the y axis (eigenvalues). this shows that five factors are the best for summarizing the seventeen variables. furthermore, the grouping of variables based on the loading factor. see the table below: table 4.5 output loading factor values (rotation factor matrix) rotated component matrix* component 1 2 3 4 5 manage expenses .837 0.16 .175 -.055 .140 saving money .836 .079 -.012 .154 -.145 save .784 .051 .179 .128 .104 make investment .697 .259 -.050 -.321 .098 general knowledge of finance .691 .166 .350 .180 .217 type of work .580 .437 .320 -.010 .000 risk management .472 .276 -.194 .041 -.282 income level .179 .697 .180 -.005 -.013 insurance .170 .664 -.115 -.016 -.167 investment -.069 .583 .322 .118 .230 student monthly pocket money .115 .179 .828 .118 -.084 budgeting .303 -.063 .592 -.298 -.227 level of education .145 .390 .039 .645 .067 understanding of material in finance courses .271 .292 .161 .626 .105 methods and media used .148 .392 -.244 .466 -.069 savings and loans .111 -.079 -.248 -.004 .845 factors affecting student financial literacy triana and ibrohim 431 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc learning process and assessment .472 .142 .448 -.038 .478 extraction method: principal component analysis. rotation method: varimax with kaiser normalization after knowing that the five factors are the most optimal number, the component matrix table shows the distribution of the sixteen variables in the five formed factors. while the numbers in the table are factor loadings, which show the magnitude of the correlation between a variable and factor 1, factor 2, factor 3, factor 4, or factor 5. the process of determining which variable will enter which factor is carried out by perform a large comparison of correlations on each row. the results of grouping the variables into each factor after being rotated using the varimax method, so that it can clearly be seen that the members of the variables in factor 1, factor 2, to factor 5. in detail, the factors formed are described as follows: table 4.6 factors formed factor 1 factor 2 factor 3 factor 4 factor 5 manage expenses income level student monthly pocket money level of education savings and loans saving money insurance budgeting understanding of material in finance courses learning process and assessment save investment methods and media used make investment general knowledge of finance type of work risk management the next step is factor interpretation. from the above analysis, it can be concluded: 1. factor one: consists of variables managing expenses, saving money, saving, investing, general knowledge of finance, type of work, and risk management. based on these variables, the first factor is called the management factor. 2. factor two: consists of variables of income level, insurance, and investment. based on these variables, the second factor is called the income factor. 3. the third factor consists of the variables of student monthly pocket money and budgeting. based on these variables, the third factor is called the budgeting factor. 4. the fourth factor consists of variables of education level, understanding of materials in finance courses, and methods and media used. based on these variables, the fourth factor is called the education factor. 5. the fifth factor consists of the variables of savings and loans, learning process and assessment. based on these variables, the fifth factor is called the planning factor. conclusion based on the results of the analysis and discussion of the factors that affect the financial literacy of university students, it can be concluded that of the seventeen variables studied by the factoring process, it can be reduced to five factors that affect student financial literacy, namely factors affecting student financial literacy triana and ibrohim 432 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc first, the management factor which consists of managing 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(2022). education and financial literacy: evidence from compulsory schooling law in china. the quarterly review of economics and finance. https://doi.org/10.1016/j.qref.2022.09.006 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 320-327 320| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021 alief ramdan, tuaraja simon sinaga 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: arya.nabila0828@gmail.com1 received : june 5, 2022 accepted : july 15, 2022 published : july 31, 2022 citation: ramdan, a., sinaga, t, s.(2022). restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021. ilomata international journal of tax and accounting, 3(3), 320-327. https://doi.org/10.52728/ijtc.v3i3.532 abstract: based on temporary research, there are still many taxpayers who are not obedient in fulfilling their taxes, such as paying taxes not on time and not by the amount of tax owed. this study aims to find out and analyze the restaurant tax audit analysis in the framework of testing taxpayer compliance at the south jakarta city administration regional revenue tribe in 2021. the research method used in this study is a qualitative descriptive method. the criteria for the sources that the author uses as informants (parties/interviewees) in this study are those who control and understand the conditions of the research object, who are involved or occupy positions related to the topic under study, and have sufficient time to be interviewed. restaurant tax audit in the context of testing taxpayer compliance at the regional revenue subdistrict of the city of south jakarta administration has been carried out well, especially from the audit procedures and audit results, but the ability of the tax authorities still needs to be improved. keywords: restaurant tax audit. this is an open access article under the cc-by 4.0 license. introduction badan pendapatan daerah (bapenda) of dki jakarta province collects restaurant taxes and uses a self-assessment system where restaurant taxpayers are given the authority or trust to collaborate with local governments to register collect calculate, calculate and self-report tax payable payments (dantes & lasminiasih, 2021; lovianna & rahmi, 2022; patriandari & amalia, 2022). however, many taxpayers still do not yet know how important it is to fulfill tax obligations both for the government and for themselves as good citizens (eulaiwi et al., 2021; klaser & mittone, 2022; popa, 2014). under these conditions, the existence of a self-assessment system allows taxpayers to commit tax fraud, such as the occurrence of tax evasion, based on several reasons, such as the lack of government socialization to the reluctance of taxpayers who feel that they do not receive any compensation from the government (kasper et al., 2015; masrullah et al., 2021; zaimah, 2016). giving great trust to taxpayers is naturally balanced with a supervisory instrument. for this purpose, the regional revenue sub-department (suban) of the south jakarta city administration is authorized to carry out law enforcement through local tax https://www.ilomata.org/index.php/ijtc mailto:arya.nabila0828@gmail.com https://doi.org/10.52728/ijtc.v3i3.532 restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021 ramdan and sinaga 321 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audits, one of which is the restaurant tax (farhah et al., 2021; noviyanti, 2021; wulandari et al., 2014). suppose the results of the examination show that there is a difference or discrepancy between the tax paid and the amount collected (gnap & konečný, 2015; hasanah & indriani, 2013; reck et al., 2022). here it is clear that in the self-assessment system, the taxpayer is seen as a subject, not a tax object. in that case, the tax authorities are authorized to issue an underpaid regional tax assessment (skpd-kb) which functions as a collection letter. due to this change, badan pendapatan daerah (bapenda) must carry out, service, supervise, foster, and implement tax sanctions (anugrahi et al., 2018; rusli, 2019; walasik, 2015). without any research and tax audits as well as the absence of firmness from the tax agency, the taxpayer's non-compliance can develop so that it can reach a level where the tax system will be paralyzed (herawati et al., 2018; kadir et al., 2019). it is anticipated to keep taxpayers within the corridor of taxation regulations by examining taxpayers who meet the criteria for examination. as regulated in peraturan gubernur (pergub) no.115 of 2019, article 2 and article 3. the regional revenue agency (bapenda) is authorized to conduct audits to test taxpayer compliance and for other purposes to implement the provisions of the tax law by referring to the annual audit work plan (rkpt) and non-annual audit work plan (non-rkpt). there is a delegation of collection authority to the regional revenue sub-dept. of the south jakarta city administration to carry out some of the tasks in the field of services and collection of regional taxes as referred to in the decree of the head of the regional revenue service no. 129 of 2002 will make the regional revenue service more flexible to carry out extensification and intensification to fulfill the function of the budgeter. thus, the number of taxpayers at the subdepartmental level can increase, which in turn can increase local tax revenues, especially from restaurant tax. based on data from the 2020 assessment and examination sub-sector, the 2020 annual examination work plan (rkpt) was due to the covid 19 pandemic in early march 2020. however, from the 2020 rkpt, the south jakarta regional government was able to contribute rp. 7,306,600,055,of 38 tax objects. meanwhile, the 2020 non-rkpt examination has not been achieved due to the covid 19 pandemic since early march 2020. however, from the 2020 rkpt, the south jakarta regional government was able to contribute rp. 910,072.179,of 12 tax objects. tax audits can affect taxpayer compliance in paying taxes because this factor is one of the factors that can reduce tax evasion and increase taxpayer compliance. arifin (2019:42) the tax audit consists of tax audit procedures, the tax authorities' ability, and the audit results. based on an audit standard to test compliance with the fulfillment of tax obligations and implement the provisions of tax laws and regulations for other purposes. method this type of research regarding analyzing restaurant tax audits to test taxpayer compliance with the regional revenue agency for the south jakarta city administration is observational/interview research, using a qualitative approach (creswell, 2017; moleong, 2018; sugiyono, 2019). meanwhile, the data used in this study is primary data. primary data is research data obtained directly from the source not through intermediaries (arikunto, 2013; yin, 2012). this study, to get preliminary data, can be done by conducting interviews in the restaurant tax audit analysis to test taxpayers' compliance with the regional income agency of the city of south jakarta administration. data collection techniques were carried out through interviews, observation, and documentation. informants in this study consisted of the head of sub-division of assessment and examination of the regional revenue agency for the city of south jakarta administration, the assessment and examination of the regional revenue agency of the city of south jakarta administration, https://www.ilomata.org/index.php/ijtc restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021 ramdan and sinaga 322 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc who knew and had various basic information needed in research, expert staff for the assessment and examination of the regional revenue agency. south jakarta administrative city region knows and has the basic information required in research, academics, and taxpayers. technical data analysis is carried out by data reduction, presentation of data, and concluding. result and discussion to analyze the tax audit, the author uses arifin's theory: the tax audit consists of tax audit procedures, the tax authorities' ability, and the examination results. a. tax audit procedures analysis of audit procedures can be seen from several descriptions of sub-themes, including the realization of tax revenue procedures. to know the tax audit procedures to assess taxpayer compliance, it is necessary to know in advance who the policy makers and interested parties are in the tax audit process (goldman et al., 2022; kasper & alm, 2022). policymakers in the audit process are carried out by high-ranking officials within their respective institutions, both in the government and the private sector. all essential parties participate in the process because they will also decide the tax revenue procedures in their activities (benkraiem et al., 2021; garcía-meca et al., 2021; ma et al., 2021). completion of field inspections or office inspections to test compliance with tax obligations fulfillment can be completed by making the examination results regarding the termination of the audit without a proposal for the issuance of a tax assessment letter. a report containing the implementation and results of the audit compiled by the tax auditor concisely and clearly, and following the scope and objectives of the audit. the restaurant tax audit to test taxpayer compliance has been effective. this is done when making restaurant tax audit procedures, and discussions are made on taxes payable and underpaid, which involve each section to accommodate all the aspirations and needs so that they can be stated in the minutes of the inspection. tax payable is a tax that must be paid within the tax period, tax year, or part of the tax year following the provisions of the applicable tax laws. the tax period equals one calendar month, and the tax year is similar to one calendar year. the tax year can last from january to december. however, it can be excluded through permission so that it can be used for another period. in paying the tax payable, the taxpayer has not fully implemented the counting function, so the tax collection system that gives responsibility to the taxpayer has not been able to be implemented properly, so the purpose of the self-assessment system has not been appropriately achieved because many taxpayers do not calculate the tax payable themselves. to be able to see the tax owed, the tax audit team conducts an evaluation which includes assessing the correctness of the sptpd concerning general information in the sptd, assessing the completeness of the sptpd concerning the attachment of the sptpd, and assessing the internal control system. tax officials should intensify training and counseling on taxation, for example, training on filling out the sptpd so that taxpayers can calculate their tax payables and counseling on the importance of paying taxes so that taxpayers are more concerned about their rights as taxpayers. for underpaid status, there is a shortage of tax that should be owed and must be paid by the taxpayer concerned. this occurs when the tax payable for a tax year is greater than the tax credit. so the taxpayer must pay the tax shortfall so that the status can be nil. the taxpayer must pay off the underpayment before the notification letter is delivered. in the tax audit procedure, there are still obstacles in the process, including rules that are not followed the time. still, no changes are made immediately; many obedient taxpayers feel disadvantaged compared to non-compliant taxpayers, https://www.ilomata.org/index.php/ijtc restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021 ramdan and sinaga 323 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc overlapping rules that confuse taxpayers, and many once a taxpayer who does not understand or tends not to know the tax rules. they are handling obstacles that occur in tax audit procedures with policy implementing parties by coordinating with each other, making good decisions, and socializing or counseling the public about local tax regulations. officers go to the field to collect data. control with a letter of reprimand. field supervision by the agency and satpol pp b. central apparatus capabilities the implementation of tax audits has a significant effect on the ability of the tax authorities. aspects of the performance of this tax audit cover two things: the mechanism and the structure itself (campa et al., 2022; chen et al., 2022). the collection system at the restaurant uses a self-assessment system, namely tax collection, that authorizes taxpayers to calculate, calculate, pay themselves, and report taxes owed based on tax laws and regulations. however, in terms of compliance with tax obligations, periodic supervision and inspection must still be carried out, so taxpayers comply with their tax obligations since they are registered as taxpayers (huang et al., 2022; kolias & koumanakos, 2022). registration and data collection activities for restaurant taxpayers are the first steps that must be carried out by officers optimally and objectively in the field and at the office so that all potential taxpayers can be explored so that they can increase the amount of tax that will be collected, of course, through setting the restaurant tax target. in the activity of collecting data on the results of the examination, it must always be on time and according to established procedures (lewis et al., 2020). there is an increase in human resources for officials in the tribal environment to oversee the regional regulations that have been set. this effort has consistently made it possible to increase revenues in the restaurant tax sector. barriers in the provision of resources that are often encountered in the capacity of the tax authorities require updating of qualifications for human resources to increase material resources. solutions that can be used to overcome existing obstacles include making the implementation of audits clear and measurable (schneider et al., 2021). c. check up result in the examination results, there must be a good standard of inspection results reports with a system for achieving goals and reasonable procedures. to accomplish an activity's objectives, the organization must have a strategy for achieving that goal and collecting and receiving restaurant taxes from the regional revenue agency of the south jakarta city administration. audit activities to test compliance with the fulfillment of tax obligations must be reported as an audit result report prepared following reporting standards. audit result report is a report containing the implementation and audit results compiled by the tax auditor concisely, clearly, and in accordance with the scope and purpose of the audit. the audit result report is prepared concisely and contains the content or items that are audited following the purpose of the audit, contains the tax auditor's conclusions supported by robust findings regarding the presence or absence of deviations from tax laws and regulations, and also includes information disclosure. others are related to the examination. determination of the purpose of the assessment, determination of the basis of value, identification of the object of the assessment, date of assessment, assumptions and limiting conditions must be included in the report on the results of the examination (lhp). in the results of the examination, an evaluation of the results of the examination is also carried out. evaluation can be explained as identifying problems, https://www.ilomata.org/index.php/ijtc restaurant tax audit analysis in the order to test taxpayer compliance at suku badan pendapatan daerah kota administrasi jakarta selatan in 2021 ramdan and sinaga 324 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc collecting data and analyzing data, concluding the results that have been achieved, interpreting the results into policy formulations, and presenting information for decision making based on the aspects of truth in the evaluation. the first step in evaluating the results of the examination in accordance with the applicable provisions is to identify problems in the form of determining the purpose of the examination, determining the basis of value, identifying the object of the examination, the date of assessment, assumptions and limiting conditions. based on the data contained in the valuation report, the identification of the problem has been carried out by the tax assessor function. conclusion based on the explanation above, it can be concluded that: the results of the examination of restaurant taxes cannot be measured by the nominal amount of the underpayment of the object being examined but must be seen from the overall restaurant tax receipts periodically following the purpose of the audit is to test the compliance of taxpayers in carrying out tax obligations. so that the target charged to the audit officer is not the nominal amount of the audit result in the form of an underpaid regional tax assessment (skpd-kb) but the number of tax objects being audited. especially from the examination procedure and the results of the examination. however, the human resources capacity of the fiscus apparatus still needs to be improved. the restaurant tax audit analysis in the context of testing taxpayer compliance at the south jakarta administration city regional revenue subdivision has been carried out well, especially from the audit procedure and the audit results. however, the human resources capacity of the fiscus apparatus still needs to be improved. inhibiting factors in restaurant tax audit to test taxpayer compliance with the rules and provision of human resources and the presence of internal obstacles such as lack of supervision and sanctions as well as external barriers such as lack of awareness of taxpayers causing restaurant tax revenues not as expected. efforts to overcome obstacles to restaurant tax audit in the context of testing taxpayer compliance through changes in regulations/regulations, provision of competent human resources, and provision of restaurant tax audit sops in 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(2016). efektivitas sistem self assessment dalam pajak penghasilan di kantor pelayanan pajak pratama batu. jurnal jurisdictie, 7(1), 44. https://doi.org/10.18860/j.v7i1.3678 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 301-321 301 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the application of government accounting standards and quality of financial reports on the accountability financial performance indra1, mutiara adinda febrian2, septia amelia putri3 123stie pembangunan tanjungpinang, indonesia correspondent: indratan56@gmail.com1 introduction financial reports must accurately depict the state and performance of the firm, in this case the regional apparatus organization (opd), and information must be helpful for evaluating both the present and the future. the clearer the image painted by financial data, the more successful the business will be, the closer truth according to ernawati, 2019 in (ismunawan & septyani, 2020) . (ridzal, 2020) indicates that the quality of a financial report will indicate how well or poorly an entity is held accountable for its financial performance. a government agency with sound financial standing will constantly create and submit quality financial reports in compliance with government accounting standards (sap). government accounting standards (sap) are guidelines for compiling and presenting financial reports in government environments, both central and regional governments (simanjuntak et al., 2023). received : november 20, 2023 accepted : january 29, 2024 published : january 31, 2024 citation: indra., febrian, m, a., putri, s, a. (2024). the application of government accounting standards and quality of financial reports on the accountability financial performance. ilomata international journal of tax anad accounting, 5(1), 301-321. https://doi.org/10.61194/ijtc.v5i1.842 abstract: this research aims to see the effect of implementing government accounting standards and the quality of financial reports on the accountability of financial peformance of the tanjungpinang city government. the population in the study was 99 respondents and a research sample of 50 respondents was obtained using the slovin formula with a tolerance level of 10%.the research method used is a quantitative research method. the type of data used is primary data, the data collection technique uses a questionnaire with a likert scale, and the data is processed using the jasp statistical application version 0.17.2.1. the results of the analysis show that all variables have partial or simultaneous influence, seen from all variables, the calculated t is greater than the t table, and the calculated f is greater than the f table, with an overall influence of 74,5% and the remaining 25,5% is influenced bye other variables outside this research. keywords: government accounting standards, quality of financial statements, financial performance accountability this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:indratan56@gmail.com https://doi.org/10.61194/ijtc.v5i1.842 the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 302 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indonesia is slow in introducing accrual basis accounting and has a grace period in accrual basis accounting. in the management of financial reports, one of them is related to financial recording for each regional and central government agency on an accrual basis (rosana & bharata, 2023). tanjungpinang city regional government financial statements received a unqualified opinion (wtp) or unqualified opinion based on the findings of the riau archipelago supreme audit agency (bpk) examination in the most recent five years, from 2016 to 2020. the information in the table below can be used to form an opinion regarding the audit of the tanjungpinang city regional government's financial reports by the audit board of the republic of indonesia (bpk) up until 2020: table 1 bpk examination opinion giving data against the financial report of the regional government of tanjungpinang city from 2016 to 2020 lhp title bpk opinion results 2016 2017 2018 2019 2020 lhp bpk on the financial report of the tanjungpinang municipal government wtp wtp wtp wtp wtp source: bpk. kepri, 2021 according to the results above, the tanjungpinang city regional government's financial report has been given a wtp (unqualified) opinion for five years running. the quality of the financial data is based on the qualitative traits of financial reports that adhere to the government accounting standards (sap) used by the regional apparatus organization. since 2010, tanjungpinag city has used accrual-based government accounting standards, and eight times since 2014, it has received the highest unqualified opinion (wtp). this demonstrates how proficiently the tanjungpinang city government has applied accrual-based government accounting standards. a village government that is accountable in its financial management means it is capable presenting information on government administration openly, quickly and precisely to the public, being able to explain and being accountable for every public policy in a proportional manner, being able to provide space for the public to be involved in the development process, and government as well as having a means for the public to assess government performance, so that management accountability village finance is very important in achieving good governance at the village government level (amin & baehaqi, 2019). understanding the concept of financial performance of public organizations can be done by looking at the financial performance of public organizations from the perspective of the bureaucracy itself by paying attention to the performance of public organizations from the perspective of target groups or service users of public organizations (darma, 2019). https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 303 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc having a wtp opinion for eight years in a row shows that the financial reports produced by the tanjungpinag city government agencies are of good quality and can explain the responsibility of their financial performance. accountability of financial performance can also be impacted by a number of additional elements, including adherence to legislation, clarity of budget targets, internal control systems, and human resource competency. this research leads to previous research. in research (wiguna et al., 2021) according to government financial performance accountability, the amount of financial performance accountability is influenced by the caliber of a financial report. in addition, the study's findings (ridzal, 2020) demonstrate that financial performance responsibility is positively and significantly impacted by the caliber of a financial report. government entities that create financial reports in accordance with government accounting standards (sap) will exhibit improved financial performance. agency theory in government agency theory is a relationship between two or more parties, where one party (agent) agrees to act with the consent of the other party (principal). agency problems occur in all organizations. in agency companies, problems occur between holders shares as principal and management as agent. in the government sector agency problems occur between officials elected by the people as agents and voters as principal. officials in government as parties who provide public service, have more information so that they can carry out actions that are not in accordance of the people as principal is like using personal interst, including corruption (andiyanto, 2011). when government officials are involved in manufacturing decisions regarding the allocation of expendicture in the budget, it is hoped that represent common interest. at this stage the government must be able to become an agency with integrity and accountability (abdullah & a, 2016). in (ridzal, 2020) research, it was said that the government is the agent and the people are the principal, where the government must be able to be responsible for the authority that has been given by trying its best, especially in regional financial governance, both in terms of the recording system implemented and the quality of the financial reports represented must be is accountable so that the people, as the principal, feel that the goverments financial performance is accountable. bureaucratic reform theory the basic concept of reform is to make changes, improvements and comprehencive and systematic regulation of many things, especially relating to state, organizational and governmental systems (hendrayadi, 2011). (sujatmiko, 2019), bureaucratic reform is closely related to an improvement, change or refinement of a system of organization to realize good governance that is free from there is an act of fraud. an improvement in system refinement where the cash-based recording system switches to accrualhttps://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 304 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based recording and obtaining quality financial report results is a form of accountability for regional government financial performance in managing regional finances. government financial performance accountability government financial performance is a way of illustrating how well-capitalized, liquid, and profitable an agency's finances were over a specific accounting period. these factors are typically quantified by measures of capital adequacy, liquidity, and profitability. jumingan claimed in the journal (herawati, 2019) . accountability is not just about making financial reports, but as a way of eradicating corruption, and efforts to increase accountability are the main steps taken to improve community welfare. according to dwi afriyanti, harpanto guno sabanu, 2015 in the journal (ridzal, 2020). stewart, 1984 (ridzal, 2020) states that there are five basics of accountability as standards for assessing accountability, namely: legal accountability and honesty, process accountability, performance accountability, and policy accountability. regional government financial performance is the output or result of activities or programs that will or have been achieved in connection with the use of the regional budget with measureable quantity and quality, regional capacity can be measured by assessing the efficiency of services provided to the community (polii et al., 2020). financial performance measurement also has a close relationship with accountability. to strengthen the accountability mechanism, financial performance management is needed which includes performance indicators and performance targets (riyani & widajantie, 2022). good financial performance measurement indicators have the characteristics of being relevant, unambiguous, cost-effective and simple, as well as functioning as a signal indicating that there is a problem that requires management action and further investigation, according to sumarsono 2010 in (darma, 2019). public financial performance is a formal effort carried out in the context of empowerment which aims and relies on the public interest (supraja, 2019). accounting controls influence performance accountability government agency finances. this shows that control good accounting can create good financial performance also, this can increase accountability for agency performance government according to kartika and sukamto 2019 in the journal (fadila & budiwitjaksono, 2022). government accounting standards every government organization is required to create the 7 components of financial reports specified in the draft government accounting standards, which are presented by an independent standards committee in their field and ratified in government regulation no. 24 of 2005 and law no. 1 of 2004 concerning the state treasury (fauzi & hasanah, 2017) . accounting and https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 305 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial reporting guidelines that apply to indonesian government agencies include: realization principles, accounting principles, and ethical presentation (mardiasmo et al., 2019). below are eight principles used in local government accounting and financial reporting: a) accounting basis, b) earned value principle, c) realization principle, d) substance principle trumps formality, e) periodicity principle, f) consistency principle, g) the principle of full disclosure, h) the principle of fair recitation (simanjuntak et al., 2023). an accounting system with an accrual basis is accounting that recognizes and record all transactions when they occur or at the time of acquisition. can it is said that this accounting system focuses on calculating economic resources in an entity according to nasution 2019 in (wahyuni, 2022). government accounting standards is useful for preparing financial reports in determining the information that must be presented to parties outside the agency (yanti et al., 2020). the advantage of accrual basis accounting is every piece of information the accounting obtained will be more complete oa also this system presents much more complete and detailed information regarding assets and liabilities. an accrual basis accounting system can fulfill or complement the objectives of reports that cannot be used by government accounting systems on a basis cash, according to lamonis 2016 in (wahyuni, 2022). (wahyuni, 2022) states that there are several benefits from implementation government accounting standards on an accrual basis include: a. can show a complete background for the position on government finances. b. reports are presented clearly and truthfully regarding obligations and very useful for evaluating financial performance regarding goal achievement. several indicators in the accrual based accounting system are: 1) recording, 2) summarizatio, 3) reporting. principles that apply in accounting and financial reporting that applies to government organizations in indonesia: accounting principles, realization principles, fair presentation (mardiasmo et al., 2019). based on research (firiyani & herawati, 2019) it was found that accrual-based government accounting standards, internal control system, and quality of financial report influence the accountability of government financial performance. quality of financial statements according to puspitawati and anggadini (2011) in the magazine, the caliber of local government financial reports (bramasto et al., 2021) is the management of entity financial data that begins with transaction documents such as invoices, documents, notes, receipts, and other proof of financial transactions before being later recorded in an organization's books. the process of recording and identifying transaction documents will ultimately produce information, namely financial reports. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 306 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the quality of government financial reporting is closely related to government accounting standards (sap), because quality financial reporting must be prepared in accordance with the guidelines and rules contained in applicable accounting standards (parinding et al., 2023). according to bastian 2006 in the journal (suhardjo, 2019) states that the quality of financial reports can be measured based on qualitative characteristics including: understandability, relevance, materiality, reliability, honest presentation, substance over from, neutrality, sound judgment, completeness and comparability. the quality of financial reports reflects the orderly management of regional government finances and show that financial reports are heading in the right direction to realize budgets that are on target. the quality of financial reports is the presentation of financial reports that have criteria including; conformity with sap, adequacy of disclosure, compliance with laws and regulations, and effectiveness of the internal control system (setyowati et al., 2020). government financial report information must meet requirements several qualitative characteristics as required in the regulations government no. 71 of 2010 concerning government accounting standards, (ridzal, 2020) namely: 1. relevant financial reports are said to be relevant if the information contained it can influence users decisions by helping them evaluate past or present events and make predictions future and confirm or correct the results of their evaluation in the past. 2. reliable information from financial reports is free from misleading meanings and material errors, presenting each fact honestly and competently verified. 3. comparable the information presented in financial reports will be more useful if can be compared with the prevous period’s financial statements or financial statements of other reporting entities generally. based on (ridzal, 2020) research, it was found that the quality of financial reposrts has a positive and significant effect on the accountability of bpkad financial performance in buton regency. method this research is a type of quantitative research. quantitative method where the presentation of reseach data is in the form of an interpretation of the figures obtained based on the results of data processing (hadi, 2018). the type of data used is primary data, in the form of a questionnaire using a likert scale. the data was analyzed using the application “jefferey’s amazing statistics program” or what is known as jasp version 0.17.2.1, a statistical data processing application which is quite capable of solving problems related to meta analysis, as well as sem (structural equation modelling) (daniar paramita et al., 2021)(santosa djoko & sihono raharjo, 2022). the population in this research is regional apparatus organizations in tanjungpinang city. which consists of several parts https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 307 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that form the population in this study: 18 offices, 1 regional secretariat, 1 dprd secretariat, 1 inspectorate, 1 civil service police unit, 1 regional hospital, and 4 districts. the number of regional organizations in this study was 33 regional organizations, represented by 3 respondents in each regional organization, so the total population in this study was 99 respondent. the sample in this study was determined using the slovin formula. the calculations are as follows: n = n 1+(n.(e)2 ) where: n = sample n = population e = standard error with the following calculations: = 99 1+99.(10%)2 ) = 99/1,99 = 49,75 respondents = 50 respondents furthermore, the sampling criteria in this reseach used purposive sampling, namely a method of determining samples with certain considerations (sugiyono, 2019). this research uses techniques purposive sampling with the following criteria: 1. sampling was carried out at the offices and agencies within the government of tanjungpinang city 2. financial administration officer in charge of the related opd 3. the treasurer in charge of the related opd. based on the sample calculation using the slovin formula above and with the criteria of the purposive sampling technique used, the sample in this study was 50 respondents from 25 regional organizations consisting of departments and agencies. where each regional organization is represented by 2 repondents. result and discussion 1. questionnaire test a. validity test table 2 results of the validity test of government accounting standard variables question items r count r table information question 1 0.556 0.2353 valid https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 308 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc question 2 0.728 0.2353 valid question 3 0.713 0.2353 valid question 4 0.730 0.2353 valid question 5 0.658 0.2353 valid question 6 0.593 0.2353 valid source: processed data (2023) using the n-2 formula to calculate the degrees of freedom in the aforementioned table, it yields a df of 50-2 = 48 with a standard significance level of alpha 0.05 and a r table value of 0.2353. all government accounting standard variables are valid and suitable for use as a research measurement tool, according to the test results, which allow them to move on to further analysis. the results of this test show that all questionnaire question items for government accounting standard variables are greater than r table 0.2353. table 3 variables results of the validity test of the quality of financial report question items r count r table information question 1 0.607 0.2353 valid question 2 0.498 0.2353 valid question 3 0.801 0.2353 valid question 4 0.410 0.2353 valid question 5 0.854 0.2353 valid question 6 0.647 0.2353 valid source: processed data (2023) each question item's correlation coefficient (r) value is higher than the r table's 0.2353 threshold. as a consequence of the test's findings, it can be concluded that all of the questionnaire questions about the quality of financial statements variable are reliable and suitable for use as a tool for measuring research effectiveness. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 309 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4 validity test results of financial performance accountability variables question items r count r table information question 1 0.670 0.2353 valid question 2 0.746 0.2353 valid question 3 0.765 0.2353 valid question 4 0.786 0.2353 valid question 5 0.708 0.2353 valid question 6 0.595 0.2353 valid question 7 0.819 0.2353 valid question 8 0.711 0.2353 valid source: processed data (2023) each question item's correlation coefficient (r) value is higher than the r table's 0.2353 threshold. the test's findings show that every item on the financial performance accountability variable questionnaire is reliable and suitable for use as a tool for measuring study outcomes (budiastuti & bandur, 2018). b. reliability test table 5 government accounting standard variable reliability test results frequentist scale reliability statistics estimates cronbach's α point estimate 0.750 95% ci lower bound 0.611 95% ci upper bound 0.846 source: jasp output results (2023) with a lower limit value of 0.611 and an upper limit value of 0.846, the dependability value of the government accounting standards questionnaire is 0.750 (cronbach's count), which is greater than cronbach's alpha 0.60 or > 0.60. as a result of the test's findings, it can be said with confidence that the questionnaire employed to measure the government accounting standards variable produced accurate results. following are the findings of the reliability test for the variable "quality of financial statements." https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 310 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6 results of reliability test of variable quality of financial statements frequentist scale reliability statistics estimates cronbach's α point estimate 0.731 95% ci lower bound 0.582 95% ci upper bound 0.834 source: jasp output results (2023) with a lower limit value of 0.582 and an upper limit value of 0.834, the reliability value of the financial report quality questionnaire is 0.731 (cronbach's count), which is greater than cronbach's alpha 0.60 or > 0.60. as a result of the test's findings, it can be said with confidence that the questionnaire employed to assess the variable quality of financial statements produced accurate results. following are the findings of the financial performance accountability variable's reliability test. table 7 financial performance accountability variable reliability test results frequentist scale reliability statistics estimates cronbach's α point estimate 0.868 95% ci lower bound 0.799 95% ci upper bound 0.917 source: jasp output results (2023) the financial performance accountability questionnaire has a reliability value of 0.868 (cronbach's count), which is greater than cronbach's alpha 0.60 or > 0.60, with a lower limit value of 0.799 and an upper limit value of 0.917, as can be seen in the table above. as a result of the test's findings, it can be said with confidence that the questionnaire employed to measure the financial performance accountability variable produced accurate results. 2. accountability.classical assumption test a. normality test this study's normality test was used to examine if the research variables were distributed normally or not. a histogram was used in this study to perform a normality test; data is considered to be normally distributed if the histogram is in the shape of a bell and rests on the peak point 0. by examining the distribution of data that is close to the diagonal line and does not follow a specific pattern in the standard qq plot graph, it is further enhanced. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 311 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1 normality test histogram standardized residuals histogram source: jasp output results (2023) based on the aforementioned histogram, it is known that the residual data is concentrated on the central tendency, forming a bell-shaped curve with the peak point exactly at point 0. and neither a left nor a right skew, in which case the graph is considered to be in a balanced state. the residual data are therefore presumed to be regularly distributed. figure 2 normal qq plot chart qq plot standardized residuals source: jasp output results (2023) https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 312 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the distribution of data (plots) is close to a linear line and does not form any patterns, indicating that neither the assumption of linearity nor any of the variables under study have been violated, according to the graph above, which also shows that the regression model obtained is normally distributed. it is usually distributed and has a linear or unidirectional relationship. b. heteroscedasticity test the goal of heteroscedasticity testing is to determine whether the variance between each residual observation in the regression model is unequal. a decent regression model has no violations of heteroscedasticity, and a scatterplot graph can be used to determine whether there are any violations. figure 3 scatterplot graph of heteroscedasticity test residuals vs. predicted source: jasp output results (2023) on the basis of the aforementioned graph, it is apparent that the data points are dispersed evenly and randomly (with no discernible pattern). therefore, it may be said that the regression model has no heteroscedasticity. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 313 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. multicollinearity test table 8 multicollinearity test results coefficients collinearity statistics model unstandardized standard error standardized t p.s tolerance vif h₀ (intercepts) 4,196 0.069 61,035 < .001 h₁ (intercepts) 0.719 0.300 2,394 0.024 government accounting standards 0.397 0.114 0.388 3,482 0.001 0.439 2,275 quality of financial statements 0.517 0.107 0.535 4,818 < .001 0.439 2,275 source: jasp output results (2023) according to the above table, the vif value indicates that there is no violation of multicollinearity between the independent variables, where the vif value of the two independent variables is less than 10 (10) and the tolerance value is greater than 0.1 (> 0.1). as a result, it can be said that there are no signs of multicollinearity between the two independent variables examined.. 3. multiple linear regression analysis based on the results of data processing using jasp software v. 0.17.2.1 for windows, regression results are obtained as follows: table 9 multiple linear regression analysis test results coefficients model unstandardized standard error standardized t p h₀ (intercept) 4.196 0.069 61.035 < .001 h₁ (intercept) 0.719 0.300 2.394 0.021 government accounting standards 0.397 0.114 0.387 3.482 0.001 quality of financial statements 0.517 0.107 0.535 4.818 < .001 source: jasp output results (2023) https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 314 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the values in the tableunstandardized above, the regression equation can be formed as follows: y = 0.719 + 0.397x1+0,517x2 the equation's constant, 0.719, may be seen in the equation above. these constants show that if x1, x2, and x3 are all equal to 0, the value of y equals 0.719. the value of y grows by 0.397 assuming x2 remains constant if the value of x1 increases by 1% or one unit. the value of y rises by 0.517 assuming x1 remains constant if the x value2 increases by 1% or one unit. the regression equation is explained as follows: 1) the value is 0.719, which indicates that the value of financial performance accountability (y) is 0.719 points if the government accounting standards variable (x1) and the quality of financial statements variable (x2) have no impact.. 2) because the government accounting standard variable (x1) has a positive regression coefficient value of 0.397 and the quality of financial statements variable (x2) has a fixed value, every one point increase in government accounting standards (x1) will result in a 0.397 point increase in financial performance accountability (y). 3) with the requirement of government accounting standards (x1) being a fixed value, the regression coefficient value of the variable quality of financial statements (x2) has a positive value of 0.517, which means that for every one point increase in financial report quality (x2), it will increase accountability of financial performance (y) by 0.517. a. partial test (t test) by using a significant level of 5% and degrees of freedom (df) n-k-1, namely 50-2-1 = 47, a t table value of 2.011 is obtained. the results of testing each variable partially are as follows: table 10 partial test results (t test) coefficients model unstandardized standard error standardized t p h₀ (intercept) 4.196 0.069 61.035 < .001 h₁ (intercept) 0.719 0.300 2.394 0.021 government accounting standards 0.397 0.114 0.387 3.482 0.001 quality of financial statements 0.517 0.107 0.535 4.818 < .001 source: jasp output results (2023) https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 315 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc government accounting standards (x1) t-test findings showed t value 3.482 > t table 2.011 and profitability value 0.001 < 0.05. ha is then accepted. if ho is rejected, it can be said that financial performance accountability is partially significantly positively impacted by government accounting standards. if the government accounting standards rise, financial performance accountability will as well, as a positive t count number indicates. a conclusion that the quality of financial statements partially has a significant positive effect on financial performance accountability can be drawn from the results of the t test on the quality of financial statements (x2) variable, which showed t values of 4.818> t table 2.011 and profitability value <.001 0.05. if the quality of financial statements improves, financial performance accountability will also improve, which is indicated by a positive t count value. b. simultaneous test (test f) the results of simultaneous hypothesis testing can be seen in the following table: table 11 simultaneous test results (test f) anova model sum of squares df mean square f p h₁ regression 8.630 2 4.315 68.774 < .001 residual 2.949 47 0.063 total 11.579 49 source: jasp output results (2023) with df = n-k-1 = 50-2-1 = 47 and a significance level of 0.05, the f table is searched, yielding a value for the table of 3.20. table 11 demonstrates that the independent factors collectively (simultaneously) have a considerable impact on the dependent variable. it can be concluded that the variables of government accounting standards and the quality of financial statements jointly (simultaneously) have a significant effect on financial performance accountability as evidenced by the calculated f value of 68.774> f table 3.20 with a profitability value (p) of <.001 < 0.05. this means that all the independent variables studied have a significant effect (<.001 < 0.005). an rise in the quality of financial statements and the application of government accounting standards will increase the accountability of financial performance, which is shown by a positive computed f value. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 316 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. determination coefficient test the value of the coefficient of determination is obtained through the results of processing usingsoftware statistic jasp v. 0.17.2.1 for windows, as presented below: table 12 determination coefficient test results model summary financial performance accountability model r r² adjusted r² rmse h₀ 0.000 0.000 0.000 0.486 h₁ 0.863 0.745 0.734 0.250 source: jasp output results (2023) according to table 12, the value of r2 is 0.745, which indicates that the variables government accounting standards (x1) and quality of financial statements (x2) have an impact on 74.5% of accountability of financial performance. compliance with legal requirements, the clarity of budget targets, internal control systems, the competence of human resources, and other variables not included in this study all have an impact on the remaining 25.5%. the influence of application of government accounting standards on financial performance accountability of tanjungpinang city government the government accounting standard variable has a strong impact on financial performance accountability and a positive coefficient value. thus, the first supposition—that the application of government accounting standards significantly improves financial performance accountability—is accepted. financial performance accountability will rise to a greater extent in an opd the more effectively government accounting standards are implemented. the development and implementation of clear, accurate, orderly, and effective accountability are also impacted by the growing public demand for government performance that must be accountable in all areas, particularly money. the government can achieve accountable financial performance by fulfilling accountability commitments. in practice, accountability can improve engagement, trust, and even inspire continued improvement in government performance. the findings of this study are consistent with research (firiyani & herawati, 2019) that claims that financial performance accountability is positively and significantly impacted by government accounting standards. as a method of public accountability, public sector accounting is a system of accounting that will be utilized by institutions in government. the public asks the government to run as transparently, responsibly, and effectively as possible. organizations in the public sector are obligated to manage economic costs for public usage and the effects of the actions undertaken more effectively. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 317 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research is in line with research conducted by (firiyani & herawati, 2019) wich found that accrual-based governemnt accounting standards, internal control system, and quality of financial reports infl;uence the accountability of government financial performance. the influence of the quality of financial statements on the financial performance accountability of the tanjungpinang city government with a profitability value of less than 0.05, or 0.001, the financial report quality variable exhibits a positive coefficient value and significantly influences financial performance accountability. as a result, the second hypothesis—that the reliability of financial statements influences financial performance accountability in a positive and significant way—is accepted. financial reports for the public sector are crucial for establishing a responsible government. financial reports given by the public sector accounting must be of a high standard because this is a way of accountable financial execution. the findings of this study are consistent with research (ridzal, 2020), which asserts that financial performance responsibility is positively and significantly impacted by the caliber of financial reports. the accountability for the financial performance of government agencies that submit financial reports in compliance with government accounting standards will result in quality financial reports, regardless of how well the resulting financial reports are produced. as a form of accountability, the financial reports used to measure accountability for an agency's performance should be able to give accurate and understandable information. correct application of government accounting standards will have an impact on raising the caliber of financial reports produced by the government (aprilianti et al., 2020). this research is in line with research conducted by based on (ridzal, 2020) research, it was found that the quality of financial reports has a positive and significant effect on the accountability of bpkad financial performance in buton regency. the influence of application of government accounting standards and quality of financial reports on financial performance accountability of the tanjungpinang city government the study's findings demonstrate that financial performance accountability is positively and significantly impacted by government accounting standards and the quality of financial reports. the test for the coefficient of determination of the r value 2 results, which show a result of 0.745, confirm this conclusion. this indicates that all x variables simultaneously influence y variable by 74.5%, while the remaining 25.5% are influenced by additional variables not analyzed in this study. so that the third hypothesis in this study, that financial performance accountability has a favorable and significant impact on government accounting standards and the quality of financial statements, is accepted.the findings of this study are consistent with research by (agung, 2020), which claims that the reliability of financial reporting has a positive and significant impact on the financial performance of local governments. additionally in line with study presented by riyani & widajantie (2022), which claims that financial performance accountability is positively and significantly impacted by government accounting standards. https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 318 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this reaearch is in line with research conducted, it was found that accpounting controls influence performance accountability government agency finances. this shows that control good accounting can create good financial performance also, this can increase accountability for agency government performance according to katika and sukamto 2019 in the hournal (fadila & budiwitjaksono, 2022). conclusion through the use of multiple regression analysis, the researcher in this study aimed to determine whether the government accounting standards and quality of financial statements are a factor in financial performance accountability. based on the outcomes of the hypothesis testing covered in chapter 4. the following conclusions can be made: 1. in part, financial performance accountability is positively and significantly impacted by government accounting standards. 2. financial performance responsibility is, in part, positively and significantly impacted by the accuracy of financial accounts. 3. the financial performance accountability of the tanjungpinang city government is simultaneously positively and significantly impacted by government accounting standards and the quality of financial statements. based on the research results and conclusions, the suggestions that can be submitted are as follows: 1. in order to manage state finances more effectively, the regional apparatus organizations that are the focus of this study should keep learning about them and developing their knowledge and expertise in them. 2. the tanjungpinang city government should pay close attention to regional income and spending in order to improve the efficacy and efficiency of regional financial management and win the trust of the public. 3. future researchers should have the option to include additional variables that were not examined in this study in order to broaden the research's scope. 4. future researchers should be able to use every opd in tanjungpinang city as a research object to provide even better results. reference abdullah, s., & a, h. 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(2022). analisis pengaruh implementasi standar akuntansi pemerintahan berbasis akrual dan kinerja sdm terhadap kualitas laporan keuangan (studi kasus dinas lingkungan hidup provinsi sumatera utara). jurnal akuntansi dan keuangan universitas jambi, 7(2), 59–66. wiguna, k. y., syafitri, a., & putri, r. m. (2021). pengaruh kualitas laporan keuangan terhadap akuntabilitas kinerja pada kantor pengadilan agama lubuklinggau. jurnal ilmu sosial, https://www.ilomata.org/index.php/ijtc the influence of application of government accounting standards and the quality of financial reports on the accountability of tanjungpinang government’s financial performance indra, febrian, putri 321 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc manajemen, akuntansi dan bisnis, 2(4), 106–125. https://doi.org/10.47747/jismab.v2i4.509 yanti, n. s., made, a., & setiyowati, s. w. (2020). pengaruh penerapan standar akuntansi pemerintah, pemanfaatan sistem informasi akuntansi dan pengawasan keuangan terhadap kualitas laporan keuangan pemerintah daerah. jurnal riset mahasiswa akuntansi, 8(1), 1–8. https://doi.org/10.21067/jrma.v8i1.4455 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 104-116 104 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial performance of banking companies on idx before as well as during the covid-19 pandemic martinus budiantara1, ratri paramitalaksmi2, fiki rihadani3 123universitas mercu buana yogyakarta, indonesia correspondent: budiantara@mercubuana-yogya.ac.id1 received : december 2, 2022 accepted : january 27, 2023 published : january 31, 2023 citation: budiantara, m., paramitalaksmi, r. & rihadani, f. (2023). analysis of financial performance of banking companies on idx before as well as during the covid-19 pandemic. ilomata international journal of tax and accounting, 4(1), 104-116. https://doi.org/10.52728/ijtc.v4i1.659 abstract: this study aims to determine the financial performance on 44 bank company listed by idx (indonesian stock exchange) before as well as after the covid-19 pandemic’s period using operating expenses and operating income (bopo), return on asset (roa), non performing loan (npl), also capital adequacy ratio (car) variables and comparative quantitative methods, with difference test analysis tools paired simple t-test and sign-wixolcon. the ratio of car and npl was categorized as safe before as well as after the covid-19 pandemic’s period, and its contrast to the ratio of roa and bopo. on the other hand, during the period of covid-19 pandemic, roa, car and npl experienced an increase in performance while bopo experienced a decrease in performance. the results are the ratio of car, roa and npl showed a sig difference, while the bopo ratio did not show any sig differences in 44 banking company that listed on the idx before as well as during the covid-19 pandemic’s period. according to this, it is recommended that bank management in indonesia can better control the company's operations more efficiently in future and subsequent research adds a wider sample and increases the duration of the study. keywords: car; npl; roa; bopo; the covid-19 pandemic this is an open access article under the cc-by 4.0 license. introduction the covid-19 pandemic is a global phenomenon and no country is immune to the disease (könig & winkler, 2020) . it was first identified in china in november 2019 and world health organization (who) classified it as a pandemic tin the first months of 2020 (sukardi, 2020). nearuniversal lockdowns in response to the pandemic have brought exceptional disruption to the economy (ashraf, 2020). the indonesian government introduce pembatasan social berskala besar (psbb) as a first step in to overcome the pandemic (paramitalaksmi et al., 2022). the presence of the pandemic can disrupt bank sector in such a way that it has an effect on reducing banking results (wu & olson, 2020). a bank is an institution that sells trust to its customers, so maintaining its efficiency is an obligation (hansen & meyer, 2022). the bank performance is a consequential https://www.ilomata.org/index.php/ijtc mailto:budiantara@mercubuana-yogya.ac.id https://doi.org/10.52728/ijtc.v4i1.659 financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 105 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc aspect in the assessment of the management which is the benchmark for the it’s performance (junghanns & körnert, 2022). if the bank goes well, the prospect will be more interested and give the money to the bank and get a loan or financing from the bank (du, 2020). banks are institutions that sell trust to their customers, so they have an obligation to maintain their efficiency. bank performance is a consequential aspect in evaluating the management of a bank company, which is the benchmark for bank performance (yu & xiao, 2022). if a bank performs well, stakeholders will be more interested, give money to the bank, and receive loans or loans from the bank (hanna et al., 2019). banks are financial institutions that have the authority solicit donations from citizens and return it to the public in the form of working capital loans in order to enhance people's residing standards (hilliard & hilliard, 2018). the term "bank" comes from the italian word "banca" which means money changer (rumini et al., 2019). the result of a bank company’s operation are the financial performance of it , which relates to income, expenses, capital structure, and asset position over a certain period (demirgüç-kunt et al., 2020). excellent banking financial performance can increase public confidence, but deteriorating banking financial performance can also weaken public confidence (nguyen & wald, 2022). the indicator used to valuate a bank's financial performance according to kasmir (2018) is to use the analysis of capital, assets, management, earnings and liquidity (camel). camel analysis are an analysis used to assess financial performance using several aspects such as capital, assets, management, earnings and liquidity. based on this explanation,the indicators used in this study to measure bank performance are presented as follows: a. capital adequacy ratio (car) indicates the bank's ability to cover possible losses from loans and securities transactions with its current capital (thian, 2021). h1: there is a sig difference in the solvency ratio proxied by car at banking company that listed on the idx before as well as after the covid-19 pandemic’s period. b. return on asset (roa) are a ratio to measurize the ability of bility of bankers to achieve overall profit. the higher the roa of a bank, the higher it's profit and the better it's position in the use of assets (thian, 2022). h2: there is a sig difference in the asset quality ratio proxied by roa at banking company that listed on the idx before as well as after the covid-19 pandemic’s period. c. non performing loan (npl) is a measurement of the importance of credit given. the higher the npl, the worse and the lower the bank performance the better, the best npl is of course 0% which means there are no non-performing loans. for banks, this npl is a critical concern because it has side effects in the form of decreased revenues and increased npl costs, which means lower profits and effects roa, roe, bopo and car (ristanto, 2021). h3: there is a sig difference in the asset quality ratio proxied by npl at banking company that listed on the idx before as well as after the covid-19 pandemic’s period. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 106 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc d. operating expenses and operating income (bopo) is an indication of the bank's ability to manage wealth and manage risk (putera, 2020). the covid-19 pandemic causing many parties think that the bopo ratio will increase. on the other hand, a research by sutrisno et al. (2020) found that islamic banks can generally control their efficiency, where bopo is a measure of bank efficiency, the higher the bopo, the lower the income. h4: there is a sig difference in the asset quality ratio proxied by bopo at banking company that listed on the idx before as well as after the covid-19 pandemic’s period. past research • result of the research by (hartadinata & farihah, 2021), there was no sig difference in roa value between before the covid-19 pandemic as well as during the pandemic. • the research by putera (2020) presents evidence of a relationship between executive compensation and bank performance in indonesia. through the application of factor analysis, it was shown that board remuneration and board size are positively related to accounting aspects, especially income, costs and profits. finally, decisions should be monitored beyond the reward system as a bonus to mitigate risk from internal and external factors. • the results of study by diana et al. (2021) demonstrates fluctuating performance levels during the covid-19 pandemic. profitability indicators of performance of the bank, shows some shariah banks are rated as efficient and some are underperforming. in terms of liquidity ratios, liquidity ratios have fallen among average banks, the lowest was bri syariah, down 50.9%, bank solvency ratios are generally good. • the results of the data processor of the article by thamrin (2021), it hows the overall impact of covid-19 on the financial performance of islamic banks in indonesia, as can be seen by the results of the paired sample t-test table, the ratio of car, roa, npf and fdr is not sig, demonstrate a difference in financial performance of it. • the main conclusions of the paper by zihui et al. (2020), shows that the covid-19 caused a sig negative effect onvarious departments in china also united states, brazil, and canada, financial risks in european markets have also impacted most markets, and although there has been widespread convergence within asia-pacific markets, they have become a source of risk in global markets. besides the intensity of integration and cooperation in european financial markets has increased significantly. • the study by he et al. (2020) found that transportation, mining, electricity & heating, and environment industries have been adversely effected by the pandemic. however, manufacturing, information technology, education and health-care industries have been resilient to the pandemic. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 107 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the conceptual framework used in this study: source: data processed by researchers (2022) the variance test above is to see the difference in bank performance before as well as after the covid-19 pandemic’s period (shahabi et al., 2021). if there's a difference, it's the impact of the covid-19 pandemic on the indonesian stock exchange (idx) listed bank performance in 20192021. the purpose of this study was to test banks company on the indonesia stock exchange (idx) using car, roa, npl, serta bopo variables to find out whether there are differences in performance between before as well as after the covid-19 pandemic in the periode 2019 – 2021 or not. method this study uses a comparative quantification method. comparative quantitation methods are studies that compare and contrast two or more different objects to see if there are variable differences between the objects under study (allen & gu, 2021). comparative quantitative methods can be used to determine the cause, effect, or effect that exists between two different groups (nuryadi et al., 2017). the choice of comparative quantitative methods for this study is made because the study aims to determine the impact of the covid-19 pandemic phenomenon (caferra et al., 2022). this study will use data from before the existence of covid-19 (2019) and during the existence of covid-19 (2021). additionally, the study examines the impact of the pandemic on the financial performance of indonesian banks. the population under study is banking sector company in the listed on the idx before as well as after the covid-19 pandemic’s period. the samples are selected in this study were based on a pro-positive sampling method that selects samples based on certain criteria. suggestive sampling criteria were: 1. banking company listed on the idx in 2019 – 2021. 2. banking company that publish annual reports during 2019-2021. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 108 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. banking company that have complete data during 2019 – 2021 are related to the variables used in this study. 4. financial statements of banking company listed on the idx in 2019 – 2021 that use rupiah currency. the type of data used in this study is secondary data. secondary data are data that are not directly available from the research subject. research receives prepackaged data collected by other parties in a variety of commercial and non-commercial ways or methods (nuryadi et al., 2017). the data of this study were obtained from: 1) indonesian stock exchange (idx) through www.idx.co.id. 2) journals, books and research related to the research topic. this study collects process data using documentation research techniques. a documentation study is a method of collecting data from documents produced by the subject himself or another party (maghfiroh, 2021). the documents used in this study are financial reports issued by the indonesian stock exchange (idx) and the internet of each company, issued between 2019 and 2021 annual report that meet the criteria for each variable of the study. the study compares four variables of financial performance of banks listed on the indonesian stock exchange (idx). the variables used in this study are capital adequacy ratio (car), return on assets (roa), non-performing loans (npl) and biaya operasional dan pendapatan operasional (bopo). the stages carried out to analyze the data in this study are as follows: a. descriptive statistics in this study, descriptive analysis will use the average level of financial performance indicators of indonesian banks to determine the average financial performance of banks before and during the covid-19 pandemic. b. basic assumption test 1) normality test this study used a statistical test used, namely kolmogrov-smirnov, and the following decisionmaking basis : a. if the data of the object under study the signification value > 0.05, then the data is normally distributed. b. if the data of the object under study the signification value < 0.05, then the data is abnormally distributed. if the normality test results show normal distribution data, a different test will be carried out with a paired sample t-test, while if the data is distributed abnormally, it will use signwilxocon which is more suitable for use. https://www.ilomata.org/index.php/ijtc file:///d:/umby/penelitian/pak%20budi/www.idx.co.id financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 109 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) differential test the analytical tools used are paired simple t-test and sign-wixolcon to test the differences in the performance of banking company before and during the covid-19 pandemic in 2019 – 2021. the basis for decision making in this test is as follows: a) if the signification value > 0.05 then there is no difference in the average between the bank's financial performance in indonesia. b) if the signification value < 0.05, there is a difference in the bank's financial performance in indonesia. result and discussion the data used in this study are the financial reports published by the indonesian stock exchange (idx) on the period 2019 – 2021. there are 44 banking company in indonesia that meet the criteria for each variable from the survey as shown in table 1 below: table 1 research data 1 agro 10 bbmd 19 bina 28 bnli 37 maya 2 agrs 11 bbni 20 bjbr 29 bris 38 mcor 3 amar 12 bbri 21 bjtm 30 bsim 39 mega 4 arto 13 bbtn 22 bksw 31 bswd 40 nisp 5 babp 14 bbyb 23 bmas 32 btpn 41 nobu 6 baca 15 bcic 24 bmri 33 btps 42 pnbn 7 bbca 16 bdmn 25 bnba 34 bvic 43 pnbs 8 bbhi 17 beks 26 bnga 35 dnar 44 sdra 9 bbkp 18 bgtg 27 bnii 36 inpc source: processed data from www.idx.co.id a. descriptive statistics table 2 descriptive statistics indicators year mean car 2019 27,80 2021 37,02 roa 2019 0.81 https://www.ilomata.org/index.php/ijtc file:///d:/umby/penelitian/pak%20budi/www.idx.co.id financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 110 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2021 -0,01 npl 2019 1,96 2021 1,31 bopo 2019 94,54 2021 103,33 source: data processed with spss (2022) according to the data in table 2, it is showed that: 1. the car of banks in indonesia is averaged 27.80% pre-covid-19 pandemic (2019) and averaged 37.02% during the pandemic (2021). based on surat edaran bank indonesia no. 6/23/dpnp 2004, car above 12% is considered very healthy and below 12% is considered unhealthy. 6%. on this basis, the 2021 car ratio is assessed as very healthy. car ratios during the pandemic have improved compared to pre-covid-19. 2. the roa of banks in indonesia showed an average value of 0.81% pre-covid-19 (2019), but an average value of -0.01% during the pandemic (2021). according to surat edaran bank indonesia no. 13/24/dpnp 2011, roa determination is considered very sound when > 1.5% and unsound when < 1.5%. 0% on this basis, indonesian banks' roa ratios were in an unsanitary state before and during covid-19. however, during covid-19, roa of the bank in indonesia fell. this means that it has been able to generate good profitability from its operations compared to pre-covid-19. 3. the bank’s npl in indonesia before covid-19 (2019) show us an average value of 1.96%, while during the pandemic (2021) it demonstrate an average value of 1.31%. according to surat edaran bank indonesia no.6/23/dpnp 2004, npls are considered very healthy if < 2% and are said to be unhealthy if > 12%. based on this, the bank's npl ratio in indonesia before as well as during the pandemic was in good health. even during covid-19, the bank's npl in indonesia has decreased, which means that there is an increase in performance at banks in indonesia when compared to before covid-19. 4. the bopo of banks in indonesia averaged 94.54% before the covid-19 pandemic, but averaged 103.33% during the pandemic. according to surat edaran bank indonesia no. 6/23/dpnp 2004, bopo is safe if it has 97% share. based on this, the bopo ratio of indonesian banks was in an unsanitary state before and during covid-19. even during covid-19, indonesian bank bopo increased. this means that indonesian banks have performed poorly compared to pre-covid-19. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 111 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. the classical assumptions test 1) normality test table 3 normality test results indicators year ks test asymp sig. (2-tailed) descriptio n distribution car 2019 1,93 0,001 p < 0,05 abnormal 2021 1,45 0,030 p < 0,05 abnormal roa 2019 2,14 0,000 p < 0,05 abnormal 2021 1.83 0,003 p < 0,05 abnormal npl 2019 0,84 0,487 p > 0,05 normal 2021 1.30 0,067 p > 0,05 normal bopo 2019 1,72 0,005 p < 0,05 abnormal 2021 1,99 0,001 p < 0,05 abnormal source: data processed with spss (2022) according to the results of the normality test (table 3), it can be known, that: 1. car ratio pre-covid-19 (2019) got a sig. value of 0.001 which means that the value of sig. < 0.05, it can be concluded that the ratio of car pre-covid-19 is abnormally distributed. meanwhile, the car ratio during covid-19, namely in 2021, received a sig value. of 0.030 which means the value of sig. < 0.05, it can be concluded that the car ratio during the pandemic is abnormally distributed. 2. roa ratio pre-covid-19 (2019) got a sig. value of 0.000 which means the value of sig. < 0.05 then it can be concluded that the roa ratio pre-covid-19 is abnormally distributed. meanwhile, the roa ratio during covid-19, namely in 2021, received a sig value. of 0.003 which means the value of sig. < 0.05, it can be concluded that the roa ratio during the pandemic is abnormally distributed. 3. npl ratio pre-covid-19 (2019), earned a sig value. of 0.487 which means the value of sig. > 0.05, it can be concluded that the npl ratio pre-covid-19 was normally distributed. meanwhile, the npl ratio during covid-19, namely in 2021, received a sig value. of 0.067 which means the value of sig. > 0.05, it can be concluded that the npl ratio during the pandemic is normally distributed. 4. bopo ratio pre-covid-19 (2019) received a sig value. of 0.005 which means the value of sig. < 0.05, it can be concluded that the bopo ratio pre-covid-19 is abnormal. meanwhile, the bopo ratio during covid-19, namely in 2021, received a sig value. of 0.001 which means the value of sig. < 0.05, it can be concluded that the bopo ratio during the pandemic is abnormally distributed. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 112 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) differential test table 4 paired sample t-test results year t sig (2tailed) description decision npl 2019 – 2021 2,487 0,017 p < 0,05 there are differences source: data processed with spss (2022) the spss 27 output in table 4 shows the test results different from the paired sample ttest. the npl ratio shows the value of sig. of 0.017 then the value of sig. < 0.05, it can be concluded that there is a difference in the npl ratio before and during covid-19. table 5 sign-wilcoxon test results year z sig (2-tailed) description decision car 2019 – 2021 -4,68 0,000 p < 0,05 there are differences roa 2019 – 2021 -2,33 0,020 p < 0,05 there are differences bopo 2019 – 2021 -0,64 0,521 p > 0,05 no difference source: data processed with spss (2022) the spss output in table 5 shows various sign-wilcoxon test results. the car ratio is 0.000 sig. 0.05 suggests a sig difference in car ratios before and during covid-19. since the sig. value of the roa ratio is 0.020, the sig. value <0.020. at 0.05, we can conclude that there is a sig difference in roa ratios before and during covid-19. whilw the bopo ratio shows signs with a value of 0.521, we can conclude that values of sig. > 0.05 are not sigly different in the proportion of bopo before and during covid-19. https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 113 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of the paired simple t-test and sign-wilcoxon performed in spss, it become clear that: a. the car variable had a differences before and during covid-19, so h1 was accepted. before covid-19, in 2019, the car ratio received a sig value. means a sig value of 0.001 < 0.05. we can conclude that pre-covid-19 car ratios are abnormally distributed. on the other hand, the car ratio received a sig value during covid-19, in 2021, means a sig value of 0.030. < 0.05. we can conclude that the car ratio is abnormally distributed after covid-19. car ratio was classified as very healthy during covid-19, performing better compared to pre-covid-19. b. the roa variable shows a difference before and during covid-19, so h2 is accepted. the roa of banking company in indonesia averaged 0.81% before covid-19 and averaged 0.01% during covid-19 (2021). according to surat edaran bank indonesia no. 13/24/dpnp 2011, roa determination is considered very sound when it more than 1.5% and unsound when it less than 0%. on this basis, indonesian banks' roa ratios were in an unsanitary state before and during covid-19. however, during covid-19 (2021), banks' roa in indonesia decreased. this means that we were able to generate good profitability from our operations compared to before covid-19. c. the npl variable had a differences before and during covid-19, so h3 was accepted. the bank's npl in indonesia before covid-19 (2019) showed an average value of 1.96%, while during covid-19 (2021) it showed an average value of 1.31%. according to surat edaran bank indonesia nomor 6/23/dpnp tahun 2004, npls are considered very healthy if more than 2% and are said to be unhealthy if less than 12%. based on this, the bank's npl ratio in indonesia before covid-19 and during covid-19 was in good health. even during covid-19 (2021), bank npl in indonesia has decreased, which means that there is an increase in performance at banks in indonesia when compared to before covid-19. d. the bopo variable did not have a difference before and during covid-19, so h5 was rejected. the bopo of banks in indonesia is averaged 94.54% before the covid-19 pandemic, but averaged 103.33% during the covid-19 pandemic. according to surat edaran bank indonesia nomor 6/23/dpnp tahun 2004, bopo is safe provided it has more than of 94.54% and does not less than 97% share. based on this, the bopo ratio of indonesian banks was in an unsanitary state before and during covid-19. even during covid-19, indonesian bank bopo has increased, which means that indonesian banks are performing worse than before covid19. based on the results of this study, the suggestions that can be conveyed are: https://www.ilomata.org/index.php/ijtc financial performance of banking companies listed on idx before as well as during the covid-19 pandemic budiantara, paramitalaksmi, and rihadani 114 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a. for banks in indonesia although the bopo ratio is in an unhealthy state, the performance of banks in indonesia before and during the 2019-2021 covid-19 pandemic can generally be considered healthy. based on this, it is suggested that the indonesian bank's management can manage the company's operations more efficiently in the future. b. for further research in order to provide outbound results on the effect of the covid-19 pandemic on all banks in indonesia, we suggest adding a broader sample including bpr, shariah bpr and digital banks in the following survey. also, if possible, extend the period after the covid 19 pandemic. reference allen, f., & gu, x. 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(2020). macroeconomic shock, financial risk transmission and governance response to major public emergencies. management world, 5, 13-35+7. https://caod.oriprobe.com/articles/58685934/macroeconomic_shock__financial_risk _transmission_a.htm https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 14-25 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc utilization of information and communication technology in the tax administration system to increase taxpayer compliance intan arsitia djafri1, intan damawati2, suharto3, i gusti agung raka putra satwika4, rahmatullah5 123stie widya persada 45universitas jakarta correspondent: damaintan@yahoo.co.id2 received : november 30, 2022 accepted : january 24, 2023 published :january 31, 2023 citation: djafri, i, a., damawati, i., suharto., satwika, a, g,a, r, k., rahmatullah.(2023). utilization of information and communication technology in the tax administration system to increase taxpayer compliance. ilomata international journal of tax and accounting, 4(1),14-25. https://doi.org/10.52728/ijtc.v4i1.670 abstract: adaptation to changes based on information and communication technology (ict) causes obstacles and community preparedness for the 5.0 age, also known as society 5.0. this necessitates the digital revolution of all disciplines, including taxation. government efforts to promote taxpayer compliance include creating a contemporary tax administration system encompassing organizational structure, business processes, information and communication technology, human resource management, and applying good governance. in addition to the tax administration system, taxpayer knowledge also influences the level of taxpayer compliance. this study's objective is to investigate the use of ict in a modern tax administration system to enhance taxpayer compliance. the main theory in this research is positive accounting theory which was developed by watt & zimmerman in 1986. this study employs a qualitative approach and descriptive methodologies. this study demonstrates that the incorporation of ict is a component of the modernization of the tax administration system. application of the e-tax system, which comprises e-registration, e-spt, e-filing, e-payment, blockchain, artificial intelligence (ai), chatbots, and biometric identification, can constitute the use of ict in the tax administration system. ease of service, particularly in filling out spt electronically, or e-spt, is the method for boosting taxpayer compliance with the modernization of the tax administration system utilizing ict. keywords: information and communication technology (ict), tax administration system, taxpayers, e-spt. this is an open access article under the cc-by 4.0 license. introduction in understanding the accounting administration system in the modern era, the most relevant theory is the positive accounting theory developed by two people, namely watt and zimmerman who first coined this theory in 1986. this theory seeks to explain and be the answer to the mailto:damaintan@yahoo.co.id https://doi.org/10.52728/ijtc.v4i1.670 utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reasons why practice in accounting is carried out and provide a prediction of messages from accounting and information in making economic decisions from an individual, company, or other party (nemade et al., 2019). this theory also has the advantage of being able to find out the motivation of a company in revaluing its assets. furthermore, this theory also puts forward at least three basic hypotheses related to management's opportunistic behavior, namely: 1) bonus plan hypothesis, which states that a manager will choose an accounting model that aims to increase the competence that will be obtained by the company; 2) debt covenant hypothesis, which is the selection of an accounting model that aims to reduce the possibility of violating the terms of the debt or bond agreement; and 3) political cost hypothesis, this hypothesis shows that companies with a large size will prefer an accounting model that can reduce company profits in a financial report (mithas & rust, 2016). modernization will continue to develop in various companies in the world and will never stop. one of the results of modernization is marked by the emergence of sophisticated technology which is one of the supporting tools for achieving the company's vision and mission. even in the last 20 years, this is predicted to go even further, as the results of a study conducted by the economist are as follows: figure 1. the economist's research predictions about computerization in various professions source: the economist in general, many parties justify the publication because part of the accountant's role has been replaced by the role of (information) technology. for some others, it doesn't necessarily justify the publication. for example, barclays mentions jobs are changing, not disappearing (drnevich utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc & croson, 2013). this statement can have a double meaning. the first is the change that has taken place in the profession from a lot of clerical work to jobs that are more discretionary in nature and are more strategic/discretion-based within the accounting profession itself. the second is the changes that occur and result in a decrease in the role and need for accountants in the world of work and so they have to move to other fields of work or industries. the rate of technological advancement in the current global period is extremely quick. several aspects of organizational operations aided by technology demonstrate this (gadenne, 2017). technology is a tool designed to assist individual humans in accomplishing their responsibilities. information and communication technology represent improvements in technology that are equally crucial to the operations of a business (pea, 2018). information and communication technology is crucial in the business world due to the significance of information technology as a competitive advantage for private businesses (drnevich & croson, 2013). the contribution of information and communication technology (ict) in creating added value for companies is a controversial issue in the economy of information technology. technology investments made by companies have strategic goals to advance company performance (mithas & rust, 2016). research that reveals a relationship between it and organizational performance states various results, ranging from a negative relationship between ict investment and various organizational performance criteria (sarunan, 2016). the potential profit from ict investment is more difficult than seeing the potential profit from tangible assets; this is because the benefits of it cannot be felt directly. financial performance is most often used as a benefit assessment compared to ict because of its ease of viewing performance (coltman et al., 2015). ict is not only used by profit-based companies or organizations. government organizations also use ict; as written by (pang et al., 2014), several governments and public sector organizations invest in information technology to make government management more effective. in recent years, the indonesian government has launched a program to use information technology, one of which is the directorate general of taxes (dgt), which has launched a tax modernization program (saragih et al., 2022). taxes are a source of government revenue used to fund government expenditures and development (gadenne, 2017). taxes are the state's primary source of revenue. article 1 of tax law no. 28 of 2007 defines taxes as an obligatory contribution to the state payable by persons or entities that are coercive under the law by not receiving direct remuneration and used for the state's purposes for the maximum prosperity of the people (ismawati, 2022). tax administration is necessary for the imposition and collection of taxes. according to (daba & mishra, 2014), the assessment of tax revenue performance must consider the achievement of tax administration goals, such as enhancing taxpayer compliance and implementing tax legislation uniformly to acquire maximum revenue at optimal costs. following this objective, the directorate general of taxes has implemented administrative reform since 2001 to achieve: (1) a high level of voluntary compliance, (2) a high level of trust in tax administration, and (3) a high level of productivity among tax officers. utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (alm, 2019) defines taxpayer compliance as the circumstance in which taxpayers perform all tax duties and exercise all tax entitlements in line with the tax legislation. compliance by taxpayers has always been a concern with taxation. the percentage of taxpayers who comply with their tax duties has mostly stayed the same yearly (hajawiyah et al., 2021). this conclusion compares the number of taxpayers in indonesia who meet compliance standards and the total number of taxpayers registered. most existing taxpayers need to comprehend their rights and responsibilities (magribi & yulianti, 2022). presidential instruction no. 3 of 2003 regarding national policies and strategies for egovernment development, so dgt also developed e-government. the manifestation of egovernment development in dgt can be seen in the reforms carried out by dgt (nautami & wahid, 2019). technological changes at dgt began to align with the reforms carried out by dgt. dgt's strategic map illustrates that information technology is one of dgt's strategies for increasing tax compliance (sarunan, 2016). the administrative system in modern tax offices is supported by information technology to increase efficiency in tax services (bhuasiri et al., 2016). the directorate general of taxes has prepared an sop (standard operating procedure) for each job with the hope that in this modernization system, the accumulation of work and power can be avoided (madewing, 2013). one of the objectives of the mid-term reforms carried out by dgt is to increase tax compliance by taxpayers. previous research has demonstrated that tax knowledge and the implementation of the tax administration system influence compliance (astana & merkusiwati, 2017) (sari & jati, 2019). a high level of compliance is anticipated to improve tax revenues, making taxpayer compliance an important factor. the use of technology can facilitate human labor. it is anticipated that tax technology will make it easier for taxpayers to conduct tax transactions to be more tax compliant in compliance with current tax legislation (rakhmawati & rusydi, 2020). compliance with the dgt's information technology can be measured against a business's income or receipts. the dgt developed tax information technology to aid corporate taxpayers in executing tax transactions. dgt's convenience and usage will raise taxpayers' knowledge of tax reporting and payment. it is anticipated that the benefits afforded by using information technology will also diminish tax fraud committed by irresponsible parties (dowling, 2014). based on the described phenomena and challenges in the research background, the problem of this study is how the use of ict in the tax administration system might promote compliance with the mandatory pack. following the existing description of the problem, this study aims to determine the contribution of ict to the tax administration system in enhancing taxpayer compliance. method the qualitative technique was applied in this investigation. a qualitative approach can be produced or constructed as a research method that stresses words over numbers in data utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 18 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc collecting and analysis, as well as an inductive approach in the relationship between theory and research that can produce a theory. according to (moleong, 2014), one of the features of a qualitative approach is focusing on the processes that occur or the consequences. qualitative researchers are curious about how something came to be. according to this viewpoint, the qualitative technique utilized by researchers will focus on the reality that is occurring by watching the research subject, determining the elements that cause it to occur, and then seeking solutions to the problems. apart from reporting social events or realities, this study adopted a qualitative approach to seek and discover the forms and behaviors of applying information and communication technology (ict) in the tax administration system to promote taxpayer compliance. result and discussion 1. modernization of the tax administration system the department of government and taxation (dgt) is modernizing its tax administration system to serve the public better and promote accountable leadership. implementing a trustworthy and cutting-edge it infrastructure to manage taxes openly and responsibly is a key component of good governance. the approach is to give the taxpayers high-quality service and strict oversight. furthermore, it seeks to maximize tax compliance, public confidence in the tax system, and the efficiency of tax authorities. many advancements have been made toward modernizing tax administration. because of this, optimizing tax income should be done right, efficiently, and effectively (gao & ma, 2015). of course, the goal of the government's modern tax administration is not limited to the maximization of tax revenue. provisions, procedures, and tax activities also enhance services to make them business-friendly for the community, especially for business people. this additional aspect must be carried out jointly to lead to a shift in the paradigm of taxes (fjeldstad, 2013). according to (sentanu & budiartha, 2019), "modernization of tax administration" is "a process of renewal reform in the field of tax administration that is carried out comprehensively, covering aspects of information technology, namely software, hardware, and human resources, with the aim of achieving a level of tax compliance and achieving high-performance productivity of the tax apparatus, so that it is expected to reshape the tax system and make it more efficient and effective." according to (pandiangan, 2013), the purpose of tax modernization is to answer the background of tax modernization, namely: a) achieving a high level of tax compliance. b) achieving a high level of trust in tax administration. c) achieving a high level of productivity for tax officials. enhancing the current system through the modernization of tax administration to boost taxpayer compliance, build taxpayer trust, and increase tax officials' efficiency. the directorate general of taxes appoints personnel as account representatives (ar) who have received special education utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 19 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and training to give full and excellent service to taxpayers concerning the fulfillment of taxpayer rights and obligations (maria, 2015). following the minister of finance decree no. 98/kmk.01/2006 on account representatives at tax service offices that have implemented modern organizations, an account representative has been designated to carry out the responsibility of enhancing taxation by way of advising/appealing, consulting, analyzing, and supervising taxpayers. every tax service office using the new modern organization structure has a designated account representative who works in the supervision and consultation branch. they are required to refer to the decree of the minister of administrative reform no. 63/kep/m.pan/7/2003 concerning general rules for the administration of public services while they are carrying out the implementation of the supply of services to account representative taxpayers. in the decision made by the minister for administrative reform, it is regulated that service consists of all activities related to service that public service providers carry out to fulfill the needs of service recipients and the implementation of statutory provisions. this definition of service can be found in the decision. the principles of service, including simplicity, clarity, legal certainty, accuracy, security, responsibility, completeness of facilities and infrastructure, ease of access, discipline, politeness, friendliness, and comfort, must be adhered to by public services. the simplification of complicated bureaucracy is an improvement to corporate processes. these processes consist of work methods, systems, and procedures. the department of general services (dgt) modernization program aims to implement full automation through information and communication technology, particularly for administrative and clerical work. one important pillar of the modernization program is the improvement of business processes. implementing full automation is anticipated to result in the creation of a business process that is both efficient and effective. this is because the administrative process will become paperless, quicker, simpler, and more accurate. this will improve the level of service provided to taxpayers, both in terms of time and quality. business processes are designed in such a way as to reduce direct contact between dgt employees and taxpayers to minimize the possibility of kkn. in addition, the internal oversight function will be more effective with a built-in control system because anyone can oversee the running of administrative processes through the existing system. several tax service facilities available at each kpp and ready to be used by the public or taxpayers in tune with modernization are as follows: integrated service center (tpt); account representatives; helpdesk; complaint center; call centers; tax information media; website; an e-taxation system which includes: e registration; e-spt; e-filling and e-payment. 2. taxpayer compliance compliance is one of the primary goals of the directorate general of taxes' reform initiatives. tax compliance is the readiness of taxpayers to meet responsibilities following existing legislation utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 20 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc without the need for inspections, investigations, warnings, or threats, as well as the application of legal and administrative punishments (james et al., 2019). therefore, assuming all taxpayers obey and comply with the applicable tax rules, there will be no difference between potential and actual tax revenue. consequently, a rise in the degree of tax compliance will reduce the tax gap, which is the difference between prospective tax income and actual tax revenue (wahab & holland, 2015). taxpayer compliance relates to the taxpayer's perspective while assessing the tax itself. a person's internal and external factors significantly impact his or her perspective of making judgments about other individuals. learning and motivation are internal variables that shape a taxpayer's viewpoint, influencing the taxpayer's compliance with tax duties. (helhel & ahmed, 2014) found that internal factors had a greater impact on tax compliance. regardless of how hard the dgt tries, its efforts will never be successful if the problem lies within the taxpayer. the environment and circumstances influence perceptions through external causes. from an external perspective or outside the taxpayer, the directorate general of taxes (dgt) has undertaken numerous measures to boost taxpayers' motivation, including updating the tax administration system and modifying the tax system (self-assessment system). in addition to dgt's efforts, the public is troubled by corruption instances that continue to be unearthed. the surfacing of corruption cases involving tax officers and government officials produces unfavorable opinions and alters the taxpayer's perspective on the benefits of paying taxes (nurkhin et al., 2018). tax compliance consists of 2 forms, namely formal and non-formal. formal compliance is a situation where the taxpayer formally fulfills his tax obligations following the tax law's provisions. for example: submitting it to the kpp before the set deadline. at the same time, material compliance is a situation where the taxpayer substantively/essentially fulfills all material provisions on taxation according to the tax law's content and soul. for example, taxpayers who fill out the spt honestly, properly, and correctly follow the provisions of the law. then according to (gobena & van dijke, 2017), tax compliance is indicated by: (a) the level of understanding of the taxpayer and efforts to understand all provisions of tax laws and regulations; (b) the taxpayer fills out the tax form completely and, (c) the taxpayer calculates the amount of tax payable correctly, and (d) pays the tax payable on time. 3. use of information technology in the tax administration system the implementation of information technology in the government is accomplished through electronic government, often known as e-government. the implementation of e-government in numerous nations, including indonesia, is already widespread. numerous public requests for the establishment of good governance by the government apparatus have prompted the development of a technical solution that may integrate the governance system via an online information network that strives to deliver excellent service to the community (guha & chakrabarti, 2014). the utilization of information technology consists of two interdependent activities: a) data processing, information processing, management systems, and work processes electronically. utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 21 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b) the utilization of information technology advances so that people in all regions can access public services easily and cheaply. the directorate general of taxes, as a government organization related to all sectors of people's lives, is fully aware that with improvisation in the field of information technology, business dynamics will be able to be anticipated. the directorate general of taxes develops information technology-based tax services as a demand for convenience in the tax administration process through services. information technology is one of the visible improvements in the modernization of the tax administration system. dgt develops reliable information technology to make dgt a more effective and efficient organization. 1. complaint center, the purpose of establishing a complaint center is to accommodate complaints from taxpayers. 2. call center, the function of the call center is to make it easier for wp to interact directly without being anywhere and anytime. 3. tax information media taxpayers can access everything related to taxes free of charge. 4. the information website, which is growing rapidly, requires dgt to join the flow of this development. one of the things that dgt has done is create a website. the community can use this website to see what information has been issued by the dgt www.pajak.go.id. 5. tax e-system the e-system was created by dgt to facilitate services for internet-based taxpayers. taxpayers can utilize the e-system in carrying out tax transactions through the various facilities offered by the e-system. some of the things that exist in the e-system, namely: a. e-regristation. e-regristation is an online taxpayer registration system with an application system as part of the use of information technology systems at dgt, which is linked to hardware and software-based data communication devices. b. e-filling. e-feling is a way of submitting spt or notification of spt extension, which is done online in real time through an application service or application service provider c. e-spt e-spt is the taxpayer's spt data in a form made by the taxpayer using the e-spt application provided by the taxpayer. d. online payment online payment is an online payment that can be paid through national banks and several places that the dgt. has designated as part of the use of information technology systems at dgt that are linked to hardware and softwarebased data communication devices. an efficient tax administration system can change the fundamentals of the taxpayer compliance process. however, there are still obstacles in optimizing the system if we rely heavily on human resources. with the development of the increasing number of taxpayers adopting the use of sustainable innovative technology that can help simplify administrative complexity, the tax authority can reduce the need for human resources needed to manage the implemented system. the types of technology currently developing and used as survey aspects of innovative technological developments in the application of digital tax administration. http://www.pajak.go.id/ utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 22 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc blockchain is a digital data storage system consisting of transaction records or data spread across the internet using multiple servers (multiserver). the data structure of the blockchain is not managed or controlled by one party but can be shared publicly and managed globally even at the same time. using a cryptographic system that forms a network and guarantees the security of the information regarding users who send or receive information so that the security aspects of making transactions can be maintained with each other. the use of blockchain technology is widely used by companies in the financial sector (banking), logistics, e-commerce, and including in the world of taxation (nemade et al., 2019). in facilitating taxpayers to pay taxes and supporting the transparency of tax transactions in indonesia. artificial intelligence, the application of artificial intelligence technology, can examine large amounts of data to create a database that allows regulators to carry out supervision in identifying suspicious transactions more practically. chatbots, this technology is a conversation products using artificial intelligence (ai) technology. the existence of this technology can connect one party to another, even though a robot assists it; the resulting discussion is designed in an informal style that is easy for users to learn and understand. biometric identification this technique can realize transparency and accountability in the financial transaction process with biometric information such as fingerprint recording, iris scanning, and voice and facial recognition. in the field of taxation, in the future, by implementing this technology, the government, through the tax authority, can make the basis a requirement for accessing benefits provided by the government and filing income taxes. currently, the state of india has implemented this technology in the field of taxation; this technique is important in the process of the investigation mechanism. 4. utilization of ict in the tax administration system in improving taxpayer compliance the author intended the information technology created by dgt to assist taxpayers in conducting tax transactions, especially in making espt. the purpose of using e-spt by wp is because it is required by kpp to use this technology. companies feel enormous benefits in using information technology, so using this technology is not a loss, but on the contrary, it is a good thing. users of this technology feel the work that feels easier. users experience enormous benefits with the existence of this information technology. when viewed from the point of view of taxpayer compliance, it is increasingly self-compliant with the existence of this information technology. as stated in the theoretical basis, dgt has 3 strategies in order to increase tax compliance, namely: 1. increasing voluntary compliance. 2. maintaining (maintaining) compliance of compliant taxpayers, 3. counteract non-compliance of obedient taxpayers. applications in the form of e-spt are often the main figures in the use of information technology. not all technologies made by dgt are used optimally by wp; only technologies utilization of information and communication technology in the tax administration system to increase taxpayer compliance djafri, damawati, suharto, satwika, and rahmatullah 23 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc considered important, such as e-spt, are because other information technologies are not directly related to reporting or tax transactions. e-spt is a free application provided by the dgt to help taxpayers make annual reports or tax returns. following what has been stated in the dgt strategy map, technology is one of dgt's strategies to increase compliance. this research also shows the same results, which can be seen in the relationship between information technology and compliance. the use of information technology by taxpayers can improve performance in tax reporting. information technology makes it easy to make tax reports or tax returns. users feel that this information technology can make the user's jobs easier. the tendency to use information technology in e-spt is quite high because e-spt is one of the technologies directly related to tax transactions, and e-spt spoils its users. e-spt users feel the benefits of using the e-spt. reporting taxpayers with varying amounts of tax charged by the dgt does not affect their utilization, so both taxpayers with high tax values and taxpayers with low tax values feel the same workload. even though one form still has to be typed manually using a tape typewriter, this is fine with the satisfaction of a technology user who has started to develop among taxpayers. tax information technology plays a role in increasing taxpayer compliance with taxes. various benefits and conveniences in information technology enable companies to complete their tasks more quickly and precisely. tax calculations that are likely to be correct are certainly presented in the report. this is because this application already has the percentage of tax deductions imposed by the state on companies. this application does not provide loopholes for users to commit fraud. information technology created by dgt can be said to force its users to comply. that coercion makes them have to follow the existing rules, whether they want to or not. information technology is one of dgt's strategies in order to increase taxation. conclusion of course, the purpose of the government's modern tax administration, which the government carries out, is not merely to seek and achieve the optimization of tax collection alone. another aspect is important to be carried out together towards a change in the taxation paradigm; regulations, procedures, and tax activities are also continuously directed at improving services so that they become business-friendly for the community, particularly for people who are in business for themselves. the use of information technology by taxpayers as a tool that can help them undertake tax transactions is a possibility. the application of an electronic tax system, which may include e-registration, e-spt, e-filing, and e-payment, as well as the utilization of blockchain technology, artificial intelligence (ai), chatbots, and biometric identification, is one way that information and communications technology can be used in the tax administration system. reference alm, j. 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(2015). the persistence of book-tax differences. the british accounting review, 47(4), 339–350. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4, october 2022 page no. 435-447 435 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of price earning ratio, return o equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 ayu kartika1, lies handrijaningsih2, septi mariani tr3, anisah4 gunadarma university, indonesia correspondent: haniayu1@gmail.com1 received : august 18, 2022 accepted : october 21, 2022 published :october 31, 2022 citation: kartika, a., handrijaningsih, l., t.r, s, m., anisah (2022). the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020. ilomata international journal of tax and accounting, 3(4), 435-447. https://doi.org/10.52728/ijtc.v3i4.592 abstract: the capital market in indonesia is currently experiencing very rapid development from year to year, as evidenced by the increasing number of public companies every year. banking is one of the sub-sectors included in the lq45 index with its average share having the highest market capitalization among other sub-sectors. the development of the capital market in indonesia, including the banking subsector is inseparable from the supporting factors are internal factors as seen from the company's financial ratios. this study aims to determine the influence of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio on stock returns in banks listed on the lq45 index for the period 2015-2020. the data collection method used in this study is the documentation method. the data used is secondary data, the determination of the sample in this study was carried out by purposive sampling method. the data in this study was processed using spss application.. the analysis tools used are, descriptive statistical analysis, classic assumption test, multiple linear regression, t test, f test, and determination coefficient. the results of this study show that the price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio affect stock returns simultaneously. partially, the price earning ratio, return on equity, and debt to equity ratio affect stock returns, meanwhile firm size and dividend payout ratio have no effect on stock returns. keywords: debt to equity ratio, dividend payout ratio, firm size, lq45, banking, price earning ratio, return on equity, stock returns. this is an open access article under the cc-by 4.0 license. introduction the capital market is a place for various parties, especially companies, to add funds to strengthen the company's capital by selling stocks and bonds (dima et al., 2018; engler & wulff, 2014; fahmi, 2015). the capital market is a place for buying and selling various long-term financial instruments in the form of debt or equity, whether issued by the government, public authorities, or private companies (bathia et al., 2020; hao & wang, 2021; tarczynski et al., 2020). currently, mailto:haniayu1@gmail.com https://doi.org/10.52728/ijtc.v3i4.592 the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 436 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the capital market is developing very rapidly and has become one of the supporting factors that have an important role in increasing the economic growth of a country (han & tang, 2020; jia, 2018; paddock et al., 1980). the development of the capital market in indonesia, namely the indonesia stock exchange, is growing rapidly from year to year as evidenced by the number of public companies that is increasing every year (mukti & rokhyadi, 2016; pandansari, 2012; putri & shabri, 2022; rahmawati & hadian, 2022). source: bps, processed 2021 graph 1. number of public companies listed on the idx (2008 – 2020) graph 1 shows an increase in the number of companies listed on the indonesia stock exchange (idx) from year to year. based on data from the central bureau of statistics, the number of companies listed on the indonesia stock exchange increased from 396 companies in 2008 to 713 companies in 2020. quoted from cnbc indonesia, according to the president director of the indonesia stock exchange, inarno djajadi, there were 51 new issuers listed. listed its shares on the indonesian stock exchange in 2020 during the corona virus pandemic. currently, indonesia is still the stock exchange with the highest number of initial public offerings (ipo) in asean. there are various kinds of indices on the indonesia stock exchange, one of which is the lq45 index. the lq45 index is one of the indexes on the indonesia stock exchange which consists of 45 stocks that have high liquidity and large market capitalization as well as good company fundamentals. banking is one of the sub-sectors that are included in the lq45 index with the average share having the highest market capitalization among other sub-sectors. the banking sub-sector companies also dominate the list of top constituents in the lq45 index (mauko et al., 2018; rahayu & sari, 2018; sambelay et al., 2017; sudarman & diana, 2022). investment itself is one way that can be done to get a number of advantages by investing or buying valuable assets offered in the capital market (sari & hermuningsih, 2020). one type of investment in the capital market that has developed is stocks. shares are defined as proof of ownership of funds in a company which includes the nominal, company name, and rights and obligations for its users (fahmi, 2015). investors have the main objective in investing in stocks, namely to obtain returns in the form of dividend income (profits distributed by the company to shareholders) and capital gains (income from the positive difference between the selling price of the stock and its purchase price) (draženović & kusanović, 2016). stock returns are the result of expectations expected by investors (hartono, 2017). to get the maximum stock return, investors need to pay attention to various factors such as the company's financial performance as reflected in financial ratios. price earning ratio is one of the financial ratios that affect stock returns. defines the price earning ratio as a ratio that shows the results of the comparison between the price per share and earnings per share (hery, 2018). the price earning ratio (per) has a positive effect on stock returns (pandaya et al., 2020). another financial ratio that investors need to pay attention to in estimating stock returns is return on equity. return on equity is a ratio used to measure net profit after tax and own capital (kasmir, 2017). roe can describe the extent to which the company is the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 437 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc able to manage and optimize existing equity or capital to obtain profits or profits. the results of previous researches show that return on equity has a positive and significant effect on stock returns (dewi et al., 2020; sinaga et al., 2020). the debt to equity ratio is another financial ratio that can affect stock returns, this is based on the results of their research which shows that the debt to equity ratio (der) has a positive influence on stock returns (silalahi & silalahi, 2020). der is a ratio that shows the extent to which own capital guarantees all debt (hantono, 2017). companies that have a low debt to equity ratio in their capital structure policies generally have the opportunity to grow bigger (fatahillah et al., 2022). however, if the company's high der is balanced with productive use of debt, it will affect the company's performance and be able to increase profits so that it will have an impact on increasing stock returns (widiani et al., 2022). another factor that affects stock returns is the size of a company (firm size). large companies (size) have more stable sales and established assets so that the ability to earn greater profits (gaffar et al., 2022). firm size is the size of the company that can be measured by total assets / company assets by using the calculation of the logarithmic value of total assets (hartono, 2017). previous research shows that firm size has a positive and significant effect on stock returns (sustrianah, 2020). the company's dividend policy is a factor that is generally considered by investors in addition to financial performance through the company's financial ratios and company size (tiwari & pal, 2020). the company's dividend policy is reflected in the dividend payout ratio, namely the percentage of profits distributed in the form of cash dividends, meaning that the size of the dividend payout ratio will affect the investment decisions of shareholders (fitri & purnamasari, 2018; yan & zhu, 2020). the dividend payout ratio has a significant positive effect on stock returns (sinaga et al., 2020). according to previous research, there are still differences in research results regarding the effect of price earning ratio, return on equity, debt to equity ratio, dividend payout ratio, and firm size on stock returns. method this study uses an associative research method with a quantitative approach to identify the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio on stock returns. the variables to be measured in this study are price earning ratio, return on equity, debt to equity ratio, firm size, dividend payout ratio, and stock returns. price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio as independent variables that will affect stock returns as the dependent variable. besides that, the object of this research is a banking company listed on the lq45 index on the indonesia stock exchange. the data used in this study is data for the period from 2015 to 2020. the types of data used in this study are secondary data and data collection methods. in this study, it was conducted by means of a documentation study, which was obtained from internet media by downloading it through the website www.idx.co.id and related company websites to obtain company financial statement data and download via site www.finance.yahoo.com to obtain stock price data for the 2015-2020 period. the population used in this study were all companies listed on the lq45 index on the indonesia stock exchange, totaling 45 shares. determination of the sample in this study was done by purposive sampling method. the sample taken by the researcher is the banking sub-sector companies that are included in the lq45 index on the indonesia stock exchange for the 20152020 period with predetermined criteria. the criteria used in this study are: the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 438 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. the research was conducted on companies that consistently entered the lq45 index list on the indonesia stock exchange during the 2015 2020 period. 2. banking sub-sector companies listed on the lq45 index. 3. companies that have positive earning after tax (eat) in the 2015-2020 period. 4. companies that consistently distribute dividends in the 2015-2020 period. based on the above criteria, of the 45 companies included in the lq45 index listed on the indonesia stock exchange that can be used as research samples are as many as 4 banking subsector companies. this study uses multiple linear regression analysis and hypothesis testing using f test and t test. all of these data analysis methods are processed using the spss application. this research was conducted with a series of testing stages, namely descriptive analysis, classical assumption test (normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test), multiple linear regression, hypothesis testing (f test and t test), and coefficient of determination (r2) . result and discussion descriptive statistical test descriptive statistical testing in this study was used to describe the variables used. descriptive analysis describes a data that is seen from the value of the average (mean), minimum, maximum, and standard deviation (standard deviation) with n being the number of respondents or data in the study. the amount of data observed was 24 data from 4 research samples and 6 years of observation, namely from 2015 to 2020. the description of each research variable is shown in table 1 below. table 1. descriptive statistics test descriptive statistics n minimum maximum mean std. deviation stock returns 24 -27.13 44.19 4.8792 19.10985 per 24 3.64 35.10 13.5421 8.16263 roe 24 2.91 22.45 14.3842 4.25682 der 24 4.25 6.76 5.5208 .65863 firm size 24 33.86 34.95 34.4754 .29760 dpr 24 21.89 65.00 39.4396 13.35967 valid n (listwise) 24 source: data processed by researchers with spss (2021) the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 439 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc classical assumption test results 1. data normality source: data processed by researchers with spss (2021) graph 2. result of normality classical assumption test – probability plot graph 2 shows the points spread around the diagonal line on the normality probability plot graph. this means that the data meets the assumption of normality and deserves to be accepted. 2. multicollinearity test table 2. multicollinearity test results coefficientsa model collinearity statistics tolerance vif 1 (constant) per .168 5.960 roe .403 2,482 der .367 2,722 firm size .195 5.133 dpr .215 4.646 a. dependent variable: stock return source: data processed by researchers with spss (2021) table 2 above shows the results of the calculation of the tolerance value on the regression modal. the results show that all independent variables, namely price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio have a tolerance value > 0.1 and the vif value obtained for each variable < 10. these results conclude that the model regression in this study is free from multicollinearity. the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 440 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. heteroscedasticity test source: data processed by researchers with spss (2021) graph 3. heteroscedasticity test results–scatterplot graph 3 above shows the points scattered randomly, both below and above the number 0 on the y axis, so it can be concluded that the data used in this study is free from symptoms of heteroscedasticity. 4. autocorrelation test table 3. autocorrelation test results – run test runs test unstandardized residual test value -4.77612 cases < test value 12 cases >= test value 12 total cases 24 number of runs 14 z .209 asymp. sig. (2-tailed) .835 a. median source: data processed by researchers with spss (2021) table 3 above shows the results of data processing using run tests. the results show the value of asymp. sig (2-tailed) of 0.835 > 0.55 which means that the residual is random or there is no autocorrelation problem in this study. multiple linear regression analysis multiple linear regression analysis was carried out after the classical assumption test to determine the relationship between the independent variables (x) which included price earning ratio (x1), return on equity (x2), debt to equity ratio (x3), firm size (x4), and dividends. payout ratio (x5) to the dependent variable (y), namely stock returns. the results of the regression test of the research variables using spss obtained the following results as presented in table 4 below. the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 441 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. multiple linear regression test results coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 1212.813 848,032 1,430 .170 per 2.169 .995 .927 2.180 .043 roe 3.506 1,231 .781 2.847 .011 der -22.484 8.335 -.775 -2,698 .015 firm size -34.284 25,333 -.534 -1.353 .193 dpr .465 .537 .325 .866 .398 a. dependent variable: stock return source: data processed by researchers with spss (2021) based on table 4 above, the regression equation for this study can be made as follows: y = 1212.813 + 2.169 x1 + 3.506 x2 22.4848 x3 34.284 x4 + 0.465 x5 +e information: y = stock returns x1 = price earning ratio x2 = return on equity x3 = debt to equity ratio x4 = firm size x5 = dividend payout ratio a = constant b = regression coefficient e = error term hypothesis test hypothesis testing was conducted to determine the effect of the independent variables, namely price earning ratio (x1), return on equity (x2), debt to equity ratio (x3), firm size (x4), and dividend payout ratio (x4) on the dependent variable, namely stock returns. testing this hypothesis using the simultaneous significance test (f test) and partial significance test (t test). 1. effect of price earning ratio (x1), return on equity (x2), debt to equity ratio (x3), firm size (x4), and dividend payout ratio (x5) on stock return simultaneously the following are the results of the f test (simultaneous test) which are presented in table 5. the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 442 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. f test results (simultaneous test) anovaa model sum of squares df mean square f sig. 1 regression 3815.309 5 763.062 2.996 .039b residual 4583.981 18 254.666 total 8399.291 23 a. dependent variable: stock return b. predictors: (constant), dpr, der, roe, firm size, per source: data processed by researchers with spss (2021) based on table 5 above, the result of fcount is 2.996, while ftable is 2.77. the results of ftable 2.77 can be seen in the distribution ftable, in column 5 (total all 6 variables minus the number of dependent variables 1) in row 18 (total data 24 minus the number of variables 6). because the value of fcount > ftable (2.996 > 2.77) and a significant value of 0.039 < 0.05 then h0 is rejected and h1 is accepted, this shows that the variables price earning ratio (x1), return on equity (x2), debt to equity ratio (x3), firm size (x4), and dividend payout ratio (x5) simultaneously (together) have a significant effect on stock returns in banking sub-sector companies listed on the lq45 index for the 2015-2020 period. 2. effect of price earning ratio (x1), return on equity (x2), debt to equity ratio (x3), firm size (x4), and dividend payout ratio (x5) on stock returns partially the following are the results of the t-test (partial test) which are presented in table 6. table 6. t-test results (partial test) coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 1212.813 848.032 1,430 .170 per 2.169 .995 .927 2.180 .043 roe 3.506 1,231 .781 2.847 .011 der -22.484 8.335 -.775 -2.698 .015 firm size -34.284 25.333 -.534 -1.353 .193 dpr .465 .537 .325 .866 .398 a. dependent variable: stock return source: data processed by researchers with spss (2021) in the price earning ratio (x1) variable, the t-count value is 2.180 and the sig value is 0.043, by describing the t-table, the value is 2.093, then t-count > t-table (2.180 > 2.093) and significant value (0.043 <0.05) thenh0 is rejected and h1 is accepted, meaning that the price earning ratio (x1) has an effect on stock returns in banks listed on the lq45 index in 20152020. this shows that the greater the price earning ratio (per), the greater the stock returns. a high per indicates that the company has the opportunity for a higher growth rate. this growth opportunity is a positive signal for investors so that there will be many investors who will buy the stock and cause the stock price to continue to increase. this indicates that per has an influence on stock returns. this is in line with the results of research by silalahi the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 443 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and evelin (2020) which show the results of the price earning ratio (per) have a significant effect on stock returns in banking in the capital market. in the return on equity (x2) variable the value oft count of 2.847 and a sig value of 0.011, by describing t-table obtained a value of 2.093 then t-count>t-table(2.847 > 2.093) and significant value (0.011 < 0.05) then h0 is rejected and h1 is accepted, meaning that return on equity (x2) has an effect on stock returns in banks listed on the 2015-2020 lq45 index. this shows that it is getting bigger return on equity a company, the greater the stock returns that will be obtained by shareholders (investors). the higher the roe means that the company's profit growth is higher and causes investors to be interested in the stock, this has an impact on increasing the selling price of the stock. high stock prices will also affect the increase in stock returns. the stock returns that will be received by investors will be even greater. this indicates that roe has an effect on stock returns, which can be considered by investors in making investment decisions. this is in line with the research results of sinaga, et al (2020) which show that there is a significant positive effect of roe on stock returns on trade, service & investment listed on the idx. the results of this study are also in line with the research of dewi, et al (2020) with the results of return on equity having a positive effect and significant to stock returns in banking companies on the indonesia stock exchange. in the variable debt to equity ratio (x3) the value oft count of -2.698 and sig value of 0.015. the negative t-count value is ignored on its nature and only uses the number, namely 2.698 which is applied to the one-tailed test (one-tailed), by outlining t-table obtained a value of 2.093 then t-count>t-table (2.698 > 2.093) and significant value (0.015 < 0.05) then h0 is rejected and h1 is accepted, meaning that the debt to equity ratio (x3) has an effect on stock returns in banks listed on the 2015-2020 lq45 index. this shows that the greater the der of a company, the greater the debt and the smaller the stock returns or returns that investors will get. der has an effect on stock returns because this ratio describes the level of company risk so that it is an important thing that investors need to pay attention to. the higher the risk, the less interested investors are in the stock. this will cause stock prices to fall and result in a low level of return that will be received by investors. this is in line with previous researches result that the debt to equity ratio (der) has an effect on stock returns (anam et al., 2021; estiasih et al., 2020; reztrianti & suparningsih, 2021). in the firm size (x4) variable the value of t-count of -1.353 and sig value of 0.193. the negative t-count value is ignored on its nature and only uses the number, namely 1.353 which is applied to the one-tailed test (one-tailed), by outlining t-table obtained a value of 2.093 then t-count<t-table(1.353 < 2.093) and significant value (0.193 > 0.05) then h0 is accepted and h1 is rejected, meaning firm size (x4) has no effect on stock returns. this shows that the size of a company seen from its total assets will not have an impact on the amount of stock returns that will be received by shareholders or investors. firm size has no effect on stock returns because the size of the company's total assets does not indicate that the company is better at generating profits which will have an impact on investor decisions. this is in line with previous research result that size has no significant effect on stock returns (mayuni & suarjaya, 2018). on variable dividend payout ratio (x5) scoret count of 0.866 and a sig value of 0.398, by describing t-table obtained a value of 2.093 then t-count<t-table (0.866 < 2.093) and significant value (0.398 > 0.05) then h0 is accepted and h1 is rejected, it means dividend payout ratio (x5) no affect on stock returns. this shows that the size of the dividends distributed by the company to shareholders (investors) will not affect the increase or decrease in stock returns in the form of capital gains that will be obtained by these investors. the amount of dividends distributed by investors has no effect on stock returns because the the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 444 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc company's decision in terms of dividend distribution is not only caused by the size of the company's profits, but also because of the company's management policies. this is in line with the previous research results, the dividend policy calculated by dividend payout ratio has no effect on stock returns (dewi et al., 2020). coefficient of determination (r2) the coefficient of determination is intended to measure how far the model's ability to explain bound variation is (ghozali, 2016). the following are the results of the coefficient of determination test which can be seen in table 7. table 7. coefficient of determination test results model summaryb model r r square adjusted r square std. error of the estimate 1 .674a .454 .303 15.95825 a. predictors: (constant), dpr, der, roe, firm size, per b. dependent variable: stock return source: data processed by researchers with spss (2021) table 7 shows the relationship that occurs between the independent variables (price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio) and the dependent variable (stock returns) is a fairly low or limited relationship. this is indicated by the adjusted r square value of 0.303 or around 30.3%, which means that the independent variable can only explain 30.3% of the dependent variable (stock returns). the remaining 60.7% is the influence of independent variables or other independent variables not examined in this study, namely current ratio, earnings per share, price to book value, return on assets, and other financial ratios. conclusion based on the results of the tests and discussions described in the previous chapter, the following conclusions can be drawn: 1. price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio simultaneously have an effect on stock returns in banks listed on the lq45 index for the 2015-2020 period. 2. price earning ratio effect on stock returns in banks listed on the lq45 index for the 20152020 period. 3. return on equity effect on stock returns in banks listed on the lq45 index for the 20152020 period. 4. debt to equity ratio effect on stock returns in banks listed on the lq45 index for the 20152020 period. 5. firm size has no effect on stock returns in banks listed on the lq45 index for the 2015-2020 period. 6. dividend payout ratio has no effect on stock returns in banks listed on the lq45 index for the 2015-2020 period. the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 445 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results of the research in the final project in the form of this thesis can be used as information for investors in investing, especially those who want to invest in banking sector companies. investors who want stock returns in the form of high capital gains can consider and understand various kinds of company financial ratios such as price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio in making investment decisions to get maximum stock returns and minimize unwanted losses due to the wrong choice of investment products. the conclusions of this study can be used as information for the management of banking companies that are included in the lq45 index regarding the effect of price earning ratio, return on equity, debt to 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(2020). peer influence on dividend policy: evidence from the chinese stock market. economics letters, 192, 1–3. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 70-91 70 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic wiwik andriani1, rangga putra ananto2, wina nofrima fitri3, dandi aprila4 1234politeknik negeri padang, indonesia correspondent: wiwikandriani@pnp.ac.id1 received : desember 1, 2022 accepted : january 26, 2023 published : january 31, 2023 citation: andriani, w., ananto, r, p., fitri, w n., & aprila, d. (2023). corporate policy strategy based on comparison of financial performance due to the impact of the covid19 pandemic. ilomata international journal of tax and accounting, 4(1), 70-91. https://doi.org/10.52728/ijtc.v4i1.662 abstract: the analysis carried out to see how far a company has carried out by using the rules of financial implementation correctly and adequately is called financial performance. there are 5 (five) ratios used in assessing a company's financial performance, including liquidity ratios, leverage ratios, activity ratios, profitability ratios, and market value ratios. this study aims to determine policy strategies based on the results of comparative tests of the financial performance of companies in the technology and infrastructure sector before and during the 2018-2021 covid-19 pandemic. this study uses secondary data. the sampling technique used was the purposive sampling method. this study used the normality test and paired difference test. the results of this study indicate that the financial performance of technology companies during the covid-19 pandemic obtained significant results for all variables. in contrast, for the variables in the infrastructure sector companies, only one variable was significant. based on the comparative test results, a policy strategy is needed to overcome problems related to financial performance experienced by infrastructure and technology companies listed on the indonesia stock exchange. through the eight determined policy strategies, it is expected to be able to make the company survive and choose the proper steps in developing its business. keywords: corporate policy strategy, financial performance, covid-19, financial ratios this is an open access article under the cc-by 4.0 license. introduction in 2019 the world was shocked by the occurrence of the covid-19 pandemic, which caused many countries to be affected. the covid-19 pandemic has had a severe impact on the business sector. the company's activities which began to decline, made many companies lay off their employees. this causes an increase in the unemployment rate, which may increase in the future. several potentials and economies have an impact as a threat to decrease production or income, but it is also assumed that businesses are growing during the pandemic (2022). mailto:wiwikandriani@pnp.ac.id https://doi.org/10.52728/ijtc.v4i1.662 corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 71 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on the indonesia stock exchange, twelve sectors and industries have been listed, two of which are the technology sector (idx techno) and the infrastructure sector (idx infra). the technology sector listed on the indonesia stock exchange comprises six sub-sectors: online applications & services, it services & consulting, software, networking equipment, computer hardware and electronic equipment, and instruments & components. the infrastructure sector listed on the indonesia stock exchange consists of seven sub-sectors, namely, transport infrastructure operators, heavy constructions & civil engineering, telecommunication services, wireless telecommunication services, electric utilities, gas utilities, and water utilities. the infrastructure sector is closely related to the construction sector, such as the construction of roads, bridges, irrigation, ports, airports, factories, to housing. massive infrastructure development must be accompanied by the fulfillment of reliability, health, and safety aspects, starting from the planning stage to the completion stage of development (zarei & honarmandi, 2022). in companies listed on the indonesia stock exchange, the infrastructure sector consists of several sub-sectors that are also related to technology, such as telecommunication services and wireless telecommunication services, about utilities such as electric utilities, gas utilities, and water utilities, related to infrastructure such as infrastructure operators, heavy constructions & civil engineering, and related to transportation. during the pandemic, the infrastructure sector experienced a significant impact because many projects had to be stopped due to the covid-19 pandemic, which caused enormous losses for companies in the infrastructure sector (2022). this is inversely proportional to the telecommunications sub-sector. during the pandemic, the use of services provided by telecommunication companies is increasing because most activities are carried out online. this is supported by the research conducted by fajriyanti & wiyarni (2022), who found that covid-19 hurt traditional industries in china but created opportunities for emerging technology industries, including the telecommunications industry. the covid-19 pandemic demands that most of the community's activities be carried out online, which has led to an increase in the use of the internet and other services provided by telecommunication companies. based on the above phenomenon, the main objective of this research is to formulate a policy strategy based on a comparative analysis of the financial performance of technology and infrastructure sector companies listed on the indonesia stock exchange before and during the covid-19 pandemic. this study uses financial ratio variables, including the current ratio, debtto-equity ratio, debt-to-asset ratio, receivable turnover, and net profit margin. this research is necessary because, during the covid-19 pandemic, many companies experienced a decline in financial performance. some experienced an increase in economic performance but could not formulate appropriate policies so they could survive during the covid-19 pandemic. this research takes the range of 2018-2021 because, in 2018, there were no cases of covid-19 in indonesia, then in 2020, when the covid-19 pandemic began, and the economy weakened. in 2021, when the situation gradually improved. signaling theory signal theory explains what must be done in the event of failure or success of management or agents and conveyed to the principal. apart from that, this theory also explains that signaling by corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 72 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management can reduce asymmetric information. financial reports can be used as a signal that describes the excellent performance of a company during the current year. of course, the existence of a sound signal will positively impact a good market response because the information conveyed by the company will significantly influence the market response. information is a crucial benchmark for an investor and its users because, through this information, the information needed will be obtained in the form of notes and descriptions related to conditions that occurred in the past and the future. investors need quality and complete information in the capital market to determine their decisions (ross, 1977) the signal theory will provide an overview regarding why a company must have the motivation to publish information about financial reports to external parties. the information provided will significantly affect the company's value that external parties will provide because good details will have a positive impact so that it can also give an excellent image to stakeholders. moreover, companies' profits will be huge if the information they provide gives the market a positive value. that is why a company needs to avoid information asymmetry, which can cause a decrease in company value because external parties are not interested in the company (ross, 1977). this signal theory has a very close relationship with the information provided. the financial statements will be the basis for stakeholders to analyze future investing decisions. covid-19 the covid-19 pandemic is a condition caused by the spread of the coronavirus. coronavirus is a positive single-celled rna virus (gupta et al., 2022). this virus was originally only in the city of wuhan, but because it has easily contagious characteristics, the whole world is affected by the dangers of the covid-19 virus. the first positive case of covid-19 in indonesia was detected on march 2, 2020, when two residents were infected by a japanese citizen (shimizu & negita, 2020). financial performance financial performance describes the company's operational activities, which will later be presented as numbers printed on the financial statements. the company's operating activities will later be compared with the previous period's financial performance, the company's balance sheet and profit and loss budget, and various other financial performance averages (de lima et al., 2022). the financial performance is part of the analysis that the company must carry out to see how far the company has achieved to achieve the predetermined targets (hamzah et al., 2022). the financial performance itself is generally measured in the form of ratios as follows: (1) profitability ratios, (2) activity ratios, (3) liquidity ratios, (4) solvency ratios, and (5) market value ratios. financial performance measurement according to kapalu & kodongo (2022), measuring financial performance means comparing the standards set with the company's economic performance. measurement of the company's financial performance can be measured using financial ratios. financial performance can be measured using financial ratio analysis. financial ratio analysis can reveal relationships and become the basis for comparisons that indicate conditions or trends that cannot be detected when only looking at the components of the ratio itself. corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 73 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc liquidity ratio the liquidity ratio is a ratio that is the basis for determining how far a company can meet its short-term debt obligations. the liquidity ratio itself consists of (1) the current ratio, which serves to see how far the company can pay its short-term debt as a whole at maturity, (2) the quick ratio, which is the basis for determining the comparison between current assets and current liabilities and see if the comparison can cover its current liabilities, (3) cash ratio, is a calculation that functions to see the company's ability to pay off short-term debt with the accumulated results of a comparison of the amount of cash with current debt, (4) working capital to total assets ratio to see the value company liquidity (kasmir, 2008). 1. current ratio 2. quick ratio 3. cash ratio 4. working capital to total assets ratio solvency ratio the solvency ratio is a ratio that shows a company's ability to fulfill all of its short-term and long-term debt obligations. leverage is said to be high if the company uses much debt to finance its operational activities. the solvency ratio consists of (1) the total debt to equity ratio serves to calculate how capable the equity owned by the company is to bear the liabilities owned by the company, (2) the debt to asset ratio is used to see how capable the assets owned by the company are in bearing the debt owned by the company itself; generally, this ratio uses accumulated comparisons, (3) the long term debt to equity ratio serves to see the comparison between long term debt (non-current liabilities/long term debt) and total equity, (4) fixed charge coverage is a ratio that is almost similar to the time's interest earned ratio but is calculated if the company has a lease contract in its operational activities. (5) times interest earned ratio measures the number of times an operation/business can pay interest expense obligations (amelia et al., 2019). corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 74 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. total debt to equity ratio (der) 2. debt to asset ratio (dar) 3. long-term debt to equity ratio 4. fixed charge coverage 5. times interest earned ratio activity ratio the activity ratio is a ratio that shows the effectiveness of using assets financed with debt. the ratio includes (1) total assets turnover to calculate the turnover of funds invested in assets in one period, (2) receivable turnover serves to see the turnover of funds embedded in receivables, (3) account payable turnover is used to see the frequency of payment of company debts to creditors, (4) inventory turnover looks at the effectiveness of the turnover of funds invested in inventory, (5) working capital turnover is a picture of the ability of a company's net working capital to rotate in an accounting period (herispon, 2016). 1. total assets turnover 2. receivable turnover corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 75 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. inventory turnover 4. working capital turnover 5. accounts payable turnover profitability ratio the profitability ratio is a ratio that is generally used to see a comparison of the level of return earned by a company with the sales or assets it owns. this ratio is divided into several parts, namely: (1) gross profit margin functions to see the percentage of profit earned from product sales activities carried out by the company, (2) net profit margin is used to see the level of net profit obtained from the business being carried out, (3) return on total assets is a ratio that assesses the percentage of net profit generated for each rupiah of total assets, (4) return on equity ratio is a ratio that aims to measure the percentage of net profit generated for each rupiah of equity capital, (5) earnings per share is used to see the percentage of the company's success in achieving the targets expected by shareholders (herispon, 2016). 1. gross profit margin 2. net profit margin 3. return on total asset 4. return on equity ratio corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 76 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5. earning per share research framework this research framework uses eight independent variables, which are proxies for the current ratio (x1), total debt to equity ratio (x2), debt to asset ratio (x3), receivable turnover (x4), net profit margin (x5), for the dependent variable or variable (y) in this study is the financial performance of technology and infrastructure sector companies listed on the indonesia stock exchange in 2018-2021 later based on this comparative analysis a policy strategy will be formulated for technology and infrastructure companies. based on previous research and the relationship between variables, the research framework can be arranged as follows: picture 1 research framework method research design the research design will briefly describe the research methods used, such as an overview of the relationships between variables, the population and sample size, the selected sample technique, how to collect data, and the analytical tools used. this type of research is comparative with a quantitative approach. later, based on the results of a comparison of financial performance, a suitable policy strategy will be determined for companies in the infrastructure and technology sectors. according to juliandi et al (2014), comparative research is conducted not to explain corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 77 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc causal relationships directly but to make various comparisons between several situations. on that basis, an assumption is made about what causes the differences in situations. meanwhile, sekaran (2017) explains that the quantitative approach focuses more on proving the hypothesis. population and sample a) population the population in this study are all technology and infrastructure sector companies listed on the indonesia stock exchange in 2018-2021. in general, researchers limit the population with the aim that the research population is homogeneous so that the level of difficulty in research can be minimized. b) sample the criteria used as samples in this study are: 1. technology and infrastructure sector companies listed on the indonesia stock exchange in 2018-2021 2. provide complete annual financial reports for the 2018-2021 period 3. entire data regarding the variables studied are available. table 1 sample selection procedure no. criteria total 1. technology and infrastructure sector companies listed on the indonesia stock exchange in 20182021 86 2. does not provide annual financial reports for the 2018-2021 period (15) 3. complete data regarding the variables studied are not available. (0) number of selected research samples 71 research year 4 the total number of examples in the study 284 variable operations a variable is the object of research observation, commonly referred to as a factor that has a role in research or the phenomenon to be studied. data sources and data collection techniques a) sample the data used in this study is secondary data that can be directly used and obtained from an agency or outside the agency concerned. in this study, the secondary data used is the annual financial report data of technology and infrastructure sector companies listed on the indonesia stock exchange in 2018-2021 and obtained through the website www.idx.co.id. the reason for choosing the data period to be used is because the results of this study will corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 78 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc compare the company's financial performance before and during the covid-19 pandemic in 2018-2021, thus requiring four years of financial statements as the basis for conducting comparative analysis to determine the company's policy strategy. b) data collection techniques research also uses library research by reading and studying literature and publications related to research. the data used in this study was carried out using: 1) documentation 2) literature review 3) evaluation of data collection data analysis methods 1) quantitative descriptive analysis 2) normality test 3) hypothesis test. result and discussion descriptive statistical analysis descriptive statistics are statistics used to analyze data by describing or describing the data that has been collected as it is without intending to make conclusions that apply to the public or generalizations (hardani et al., 2020). descriptive analysis can provide an overview and description of the frequency distribution of the variables in this study. descriptive analysis data includes the number of samples, minimum value, maximum value, average value, and standard deviation of each variable. this study uses research variables in the form of company financial performance, which are analyzed through 8 (eight) financial ratios, namely the liquidity ratio proxied by the current ratio (cr), the solvency ratio proxied by the total debt to equity ratio (der) and the debt to asset ratio (dar), activity ratio proxied by receivable turnover (rto), and profitability ratio proxied by net profit margin (npm). to carry out descriptive analysis in this study assisted by spss software version 25. the following is the result of a descriptive analysis of each financial ratio which forms the basis for comparative tests in determining company policy strategies: table 2 technology sector companies descriptive statistical analysis results variable period n min max mean std. devices cr before 22 1.08 7.02 3.1286 1.84127 during 22 0.87 4.75 2.7523 1.21330 der before 22 0.17 0.59 0.3414 0.10787 during 22 0.10 0.69 0.3659 0.16582 corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 79 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dar before 22 0.02 0.76 0.3574 0.18597 during 22 0.10 0.74 0.3201 0.16260 rto before 22 2.53 7.73 5.4123 1.62270 during 22 1.23 8.01 5.0427 1.88508 npm before 22 0.27 5.10 2.4082 1.43762 during 22 -8.54 8.71 1.6268 3.83335 source: processed data, 2022 based on the results of the descriptive analysis in the table above, it can be explained as follows: 1. current ratio (cr) the current ratio is included in one of the liquidity ratios. where based on the data in the table above, it can be seen that before the covid-19 pandemic had a standard deviation value of 1.84127, while the mean value was 3.1286 with a maximum value of 7.02 in nfc indonesia companies (nfcx) and a minimum of 1.08 at the sat nusapersada (ptsn) company. the average cr value of 3.1286 indicates that the company can pay off its short-term debt by utilizing its current assets at an average of 313%. based on the data in the table above, it can be seen that during the covid-19 pandemic, the standard deviation value was 1.21330, while the mean value was 2.7523 with a maximum value of 4.75 at the kioson komersial indonesia (kios) company and a minimum value of 0.87 at the anabatic company. technologies (atic). the average value of 2.7523 shows the company can pay off its short-term debt with an average of 275% through the use of current assets owned by the company. 2. debt to equity ratio (der) as measured by the debt-to-equity ratio (der) before the covid-19 pandemic, the solvency ratio had a standard deviation of 0.10787. at the same time, the mean value was 0.3414, with a maximum value of 0.59 at anabatic technologies (atic) and a minimum value of 0.17. at the distribusi voucher nusantara (diva). the average der value of 0.3414 indicates that the average level of the company's debt is below number one, where it is said that the company can pay its long-term debt well with an average of 34% of its equity. the solvency ratio measured by the debt to equity ratio (der) during the covid-19 pandemic has a standard deviation of 0.16582. at the same time, the mean value is 0.3659, with a maximum value of 0.69 for anabatic technologies (atic) and a minimum value of 0.10 for companies. distribusi voucher nusantara (diva). the average der value of 0.3659 indicates that the average level of the company's debt is above number one, where the company has more significant debt than equity, where the company can be said to be not good at paying its longterm debt with an average of 37%. corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 80 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. debt to asset ratio (dar) the debt to asset ratio is a solvency ratio. based on the table above, it can be seen that before the covid-19 pandemic, the company had a standard deviation of 0.18597. at the same time, the mean value was 0.3574, with a maximum value of 0.76 at anabatic technologies (atic) and a minimum value of 0.02 in the company kresna graha investama (kren). the average dar value of 0.3574 indicates that the average level of the company's debt is below one, which means that the assets owned by the company are still able to bear the long-term debt owned by the company with an average of 36% of the company's assets. based on the test results, it can be seen that during the covid-19 pandemic, the company had a standard deviation of 0.16260, while the mean value was 0.3201 with a maximum value of 0.74 at the anabatic technologies (atic) company and a minimum value of 0.10 at the distribusi voucher nusantara ( diva). the average dar value of 0.3201 indicates that the average level of the company's debt is below one, which means that the assets owned by the company are still able to bear the long-term debt owned by the company with an average of 32% of the company's assets. 4. receivable turnover (rto) accounts receivable turnover or receivable turnover includes the activity ratio, where based on test data, it can be seen that before the covid-19 pandemic, the company had a standard deviation value of 1.62270, while the mean value was 5.4123 with a maximum value of 7.73 in m-cash integrasi (mcas) company and a minimum value of 2.53 at the sentra mitra informatika (luck) company. the average rto value is 5.4123, indicating that the funds owned by the company are embedded in all receivables with a reasonable rotation period of 5.41 times. based on the test results at the time of the covid-19 pandemic, the company had a standard deviation value of 1.88508, while the mean value was 5.0427 with a maximum value of 8.01 for the company m-cash integrasi tbk (mcas) and a minimum value of 1.23 for the company sentral mitra informatika (luck). the average rto value is 5.0427, indicating that the funds owned by the company are embedded in all receivables with an average rotating period of 5.04 times. 5. net profit margin (npm) net profit margin is one of the profitability ratios. based on the test results in the table, it can be seen that before the covid-19 technology company had a standard deviation value of 1.43762, the mean value was 2.4082, where the maximum value of the sample was 5.10 at the kresna graha investama (kren) and a minimum value of 0.27 at the company elang mahkota teknologi (emtk). the average value of the npm itself is 2.4082, indicating that the company's profit level is classified as a period average of 24%. based on the test results in the table, it can be seen that when covid-19 occurred, technology companies had a standard deviation value of 3.83335, the mean value was 1.6268, where the maximum value of the sample was 8.71 at the elang mahkota teknologi (emtk) company. the minimum value is -8.54 at the company anabatic technologies (atic). the average value of the corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 81 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc npm itself is 1.6268, indicating that the company's profit level is classified as a period average of 162%. table 3 results of descriptive statistical analysis of the infrastructure sector variable period n min. max. mean std. devices cr before 62 0.06 6.68 1.5934 1.32421 during 62 0.08 9.28 1.4484 1.52447 der before 62 -1.75 35.47 2.0984 4.54455 during 62 -3.43 8.43 1.7469 1.99630 dar before 62 0.16 2.62 0.6385 0.38037 during 62 0.19 2.91 0.6832 0.46450 rto before 62 0.01 93.08 11.1073 16.64526 during 62 1.17 84.07 11.0894 17.57093 npm before 62 -0.65 0.28 0.0232 0.16574 during 62 -1.30 0.30 -0.0565 0.28928 source: processed data, 2022 the following is an explanation regarding the results of the descriptive statistical analysis in table 3 above: 1. current ratio (cr) the liquidity ratio, as measured by the current ratio (cr) before the covid-19 pandemic, had a standard deviation of 1.32421, with a mean value of 1.5934, a maximum value of 6.68 at the cikarang listrindo company (powr) and a minimum value of 0.06 at the ictsi jasa prima (karw) company. the average cr value of 1.5934 shows that the company has an excellent ability to pay off its short-term debt by utilizing the company's current assets. the liquidity ratio, as measured by the current ratio (cr) during the covid-19 pandemic, has a standard deviation of 1.52447, with a mean value of 1.4484, a maximum value of 9.28 at the cikarang listrindo company (powr) and a minimum value of 0.08 at the ictsi jasa prima (karw). the average cr value of 1.4484 shows that the company has an excellent ability to pay off its short-term debt by utilizing the company's current assets. the average cr value, which decreased during the covid-19 pandemic compared to the average cr before the covid-19 pandemic, shows that infrastructure sector companies have reduced their ability to meet their short-term obligations (han & an, 2022). 2. debt to equity ratio (der) the solvency ratio as measured by the debt to equity ratio (der) before the covid-19 pandemic had a standard deviation of 4,54455, with a mean value of 2,0984, a maximum value of 35.47 at asset indonusa (acst) and a minimum score of -1.75 at ictsi jasa prima (karw). the corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 82 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc average der value of 2.0984 indicates that the average level of the company's debt is above number one, which indicates that the company has more significant debt than its equity. the company can be said to need to improve at paying its debts. the solvency ratio, as measured by the debt to equity ratio (der) during the covid-19 pandemic, has a standard deviation of 1.99630, with a mean value of 1.7469, a maximum value of 8.43 at asset indonusa (acst) and a minimum value of -3.43 at the garuda maintenance facility ae (gmfi). the average der value of 1.7469 indicates that the average level of the company's debt is above one, which suggests that the company has debt more significant than its equity. the company can be said to need to improve at paying its debts. the average der value decreased during the covid-19 pandemic compared to the average der before the covid-19 pandemic, showing that infrastructure sector companies have increased their ability to pay their obligations. 3. debt to asset ratio (dar) the solvency ratio, as measured by the debt to asset ratio (dar) before the covid-19 pandemic, had a standard deviation of 0.38037, with a mean value of 0.6385, a maximum value of 2.62 at the ictsi jasa prima (karw) and a minimum value of 0.16 at a jasa armada indonusa (ipcm). the average value of dar is 0.6385, below number 1, indicating that the company's financial condition towards its debts is still good and the smaller the capital that comes from loans used by the company. the solvency ratio, as measured by the debt to asset ratio (dar) during the covid-19 pandemic, has a standard deviation of 0.46450, with a mean value of 0.6832, a maximum value of 2.91 for ictsi jasa prima (karw) and a minimum value of 0.19 for companies jasa armada indonusa (ipcm). the average value of dar is 0.6832, below number 1, indicating that the company's financial condition towards its debts is still considered good and the smaller the capital that comes from the loans used by the company. the average dar value, which has increased during the covid-19 pandemic when compared to the average dar before the covid19 pandemic, shows that the company experienced an increase in capital obtained from loans, but because the average dar value before and during the covid pandemic -19 is still below the number one, indicating that the company's financial condition is still considered good (2022). 4. receivable turnover (rto) the activity ratio as measured by receivable turnover (rto) before the covid-19 pandemic had a standard deviation of 16.64526, with a mean value of 11.1073, a maximum value of 93.08 for smartfren telecom (fren) companies and a minimum value of 0.01 for cardig aero services (cass). the average rto value of 11.1073 indicates that companies can collect their receivables on average 11.1073 times a year. the activity ratio as measured by receivable turnover (rto) during the covid-19 pandemic has a standard deviation of 17.57093, with a mean value of 11.0894, a maximum value of 84.07 for the xl axiata (excl) and a minimum value of 1.17 for the company paramita bangun sarana (pbsa). the average rto value of 11.0894 indicates that companies can collect their receivables on average 11.0894 times a year. the average rto value, which experienced a decrease during the covid-19 pandemic compared to the average rto before the covid-19 pandemic, shows corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 83 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the company experienced a decrease in its ability to collect its average receivables (rahmah & novianty, 2021). 5. net profit margin (npm) the profitability ratio as measured by the net profit margin (npm) before the covid-19 pandemic had a standard deviation of 0.16574, with a mean value of 0.0232, a maximum value of 0.28 for the nusantara infrastructure (meta) company and a minimum value of -0.65 for the smartfren telecom (fren). the average npm value of 0.0232 indicates that the company generates an annual net profit of 2.32%. the profitability ratio as measured by net profit margin (npm) during the covid-19 pandemic has a standard deviation of 0.28928, with a mean value of -0.0565, a maximum value of 0.30 for the company paramita bangun sarana (pbsa) and a minimum value of -1.30 at the garuda maintenance facility ae (gmfi) company. the average npm value is -0.0565, indicating that the average company generates a yearly net profit of -5.65%. the average npm value, which decreased during the covid-19 pandemic compared to the average rto before the covid-19 pandemic, shows that the company's ability to generate net profit has decreased (reyhan et al., 2022). classical assumption test using normality test (kolmogorov-smirnov) before testing the hypothesis, the data normality test was conducted on the company under study. the normality test was carried out to determine whether the data obtained had a normal distribution. this study uses the normality test with the kolmogorov-smirnov test. the level of significance used in this study is 5% or 0.05. data can be declared generally distributed if the significance level is more significant than 0.05 or 5%. decision-making in the normality test using the kolmogorov-smirnov test, which was tested with the spss 25 program using the following guidelines: a) if the p-value > 0.05, then the data is usually distributed b) if the p-value < 0.05, then the data is not normally distributed table 4 kolmogorov-smirnov normality test of technology sector companies variable period n asymp. sig. (2-tailed) significance level conclusion cr before 22 0.083 0.05 normal during 22 0.137 0.05 normal der before 22 0.095 0.05 normal during 22 0.200 0.05 normal dar before 22 0.122 0.05 normal during 22 0.102 0.05 normal rto before 22 0.051 0.05 normal during 22 0.200 0.05 normal corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 84 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc npm before 22 0.200 0.05 normal during 22 0.200 0.05 normal sources: processed data, 2022 based on the normality test results in the table above, all research variables were usually distributed before and during the covid-19 pandemic. overall the data distribution is normal. then the hypothesis test is performed using the paired t-test. table 5 kolmogorov-smirnov normality test of technology sector companies variable period n asymp. sig. (2-tailed) significance level conclusion cr before 62 0.000 0.05 abnormal during 62 0.000 0.05 abnormal der before 62 0.000 0.05 abnormal during 62 0.000 0.05 abnormal dar before 62 0.000 0.05 abnormal during 62 0.000 0.05 abnormal rto before 62 0.000 0.05 abnormal during 62 0.000 0.05 abnormal npm before 62 0.000 0.05 abnormal during 62 0.000 0.05 abnormal source: processed data, 2022 based on the normality test results in table 5 above, the research variables used for infrastructure sector companies do not have a normal distribution. overall, the data distribution was not expected, so the next hypothesis test was carried out using the wilcoxon signed rank test. hypothesis test data normality test using the kolmogorov smirnov test based on financial report data from 11 samples of technology companies and 31 samples of infrastructure companies with residual criteria is expected if the significant value is above 0.05 or 5%. the results of the data normality test with the kolmogorov-smirnov test show that the value of a technology company meets the normality criteria. namely, the details show that the significant value of the current ratio is 0.203 > 0.05 (5%), the total debt to equity ratio shows an important value of 0.594 > 0.05 ( 5%), the debt to asset ratio shows a value of 0.287 > 0.05 (5%), receivable turnover shows a significant deal of 0.433 > 0.05 (5%), net profit margin shows an effective value of 0.295 > 0.05 (5%), this normality test data from technology sector companies is inversely proportional to infrastructure sector companies. based on the kolmogorov smirnov test results show that the value of infrastructure companies does not meet the normality criteria because 30 samples from the infrastructure sector have a value of <0.05 (5%). based on the test results for different infrastructure sector tests, the wilcoxon signed rank test would be used. table 6 paired sample t-test for technology corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 85 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variable sig. (2-tailed) conclusion current ratio 0.006 significant total debt to equity ratio 0.012 significant debt to asset ratio 0.003 significant receivable turnover 0.009 significant net profit margin 0.032 significant source: processed data, 2022 the comparison test using the sample-paired t-test aims to describe the number of differences between the two samples to be tested with the data before and after. the characteristics in making decisions on the paired t-test are <0.05 (5%). from the table above, the results obtained are a current ratio of 0.006 <0.05 (5%). the total debt-to-equity ratio is 0.012 < 0.05 (5%). debt to asset ratio of 0.003 < 0.05 (5%). receivable turnover of 0.032 <0.05 (5%). a net profit margin of 0.032 < 0.05 (5%). based on the paired t-test that has been carried out, it can be seen which financial ratios need to be formulated as a policy strategy based on the results of a comparative analysis of financial performance in technology sector companies: 1. liquidity ratio the results of the paired t-test can explain that the value of the liquidity ratio as measured by the current ratio is significant, namely 0.006, which means that the current ratio is greatly affected by covid-19. this is because the average technology company during the pandemic focused on developing infrastructure in the form of big data that could increase its users' performance productivity (2022). of course, infrastructure development will lead to an increase in corporate debt, so a strategic policy is needed to improve the impact of the increase in debt. the right policy strategy to overcome this problem is to increase sales of products and services provided through online marketing strategies, especially during the covid-19 pandemic (outra & fernandes, 2023). for example, what was done by pt telkom indonesia tbk, where the company accelerated digital business channels by selling sim cards online so that they could increase sales effectively. the higher the level of sales of products and services the company provides, the more potential payments the company can make to pay off its debts (park et al., 2022). 2. solvency ratio the results of the paired t-test can explain that the total debt measures the value of the solvency ratio to equity ratio and debt to asset ratio. the significance value is 0.012 for the total debt-toequity ratio and 0.003 for the debt-to-asset ratio, which shows the impact of covid-19 on the company's receivables. this is due to the inability of debtors to pay their obligations to creditors (technology sector companies), which causes low revenues (2022). of course, the low acceptance of receivables obtained by the company will result in delays in the company's operations due to a lack of funds. the right policy strategy to overcome this problem is to provide debt restructuring to debtors and a reduction in loan interest rates so that debtors can still pay their obligations (desai, 2021). corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 86 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. activity ratio the results of the paired t-test can explain that the value of the activity ratio proxied by receivable turnover has a significant value of 0.009, which indicates that covid-19 causes an impact on company receivables. this is due to the customer's inability to pay the company's receivables. of course, the low payment of receivables made by the customer will result in many receivables that the company needs to realize (chinnapong et al., 2021). the right policy strategy to overcome this problem is to follow up with customers who have passed the payment deadline. second aggressive billing is carried out if the first strategy needs to be revised. third, imposing fines for late payments is a form of company firmness for actions taken by the customer to increase customer compliance in making debt payments (tudose et al., 2022). 4. profitability ratio the results of the paired t-test can explain that the value of the profitability ratio proxied by the net profit margin has a significant value of 0.032, which indicates that covid-19 affects company profits and causes an impact. this is due to a decline in sales during the large-scale social restrictions (psbb). of course, low sales will cause a decrease in the value of profits owned by the company. the right policy strategy to overcome this problem is to strengthen the digital business sector by selling online both in terms of ordering and payment. online services will provide customers convenience in transactions and can positively impact company sales (narkunienė & ulbinaitė, 2018). table 7 wilcoxon signed ranks test variable sig. (2-tailed) conclusion current ratio 0.015 significant total debt to equity ratio 0.075 not significant debt to asset ratio 0.092 not significant receivable turnover 0.073 not significant net profit margin 0.064 not significant source: processed data, 2022 the wilcoxon signed ranks test was used to measure the significance of the difference between 2 groups of data that were not normally distributed. the wilcoxon signed rank test is an alternative test to the pairing t-test if it does not meet the normality assumption with the decision-making criteria of <0.05 (5%). based on the wilcoxon signed ranks test, a significant value of the current ratio was 0.015 < 0.05 (5%). the total debt-to-equity ratio is 0.075 > 0.05 (5%). the debt-to-asset ratio is 0.092 > 0.05 (5%). receivable turnover is 0.073 > 0.05 (5%). net profit margin is 0.064 > 0.05 (5%). based on the wilcoxon signed ranks test that has been carried out, it can be seen which financial ratios are affected by the covid-19 pandemic; only the infrastructure sector companies are companies whose policies are strongly influenced by the government and are bound. moreover, infrastructure companies that are classified as state-owned enterprises (bumn) are very dependent on policies issued by the government. for this reason, the formulation of policy strategies for infrastructure companies based on the results of comparative corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 87 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis can only be formulated in general terms related to policies. the following is a policy strategy resulting from a comparative analysis of the financial performance of infrastructure companies: liquidity ratio the comparative test results show that the value of the liquidity ratio proxied by the current ratio is greatly affected by the covid-19 pandemic, namely with a value of 0.015, which means a policy strategy is needed for the company from the results of the comparative analysis. the right policy strategy is to make a stand-by facility loan. the loan serves as a catalyst for infrastructure sector companies in carrying out ongoing infrastructure developments. with the funds from the loan, the company can continue to carry out its operational activities because it is better for construction to continue than to let a planned project stall (2022). of course, the development carried out using loan funds will cause the company's debt to increase, but this is an effort that must be made and can be used as a long-term investment by the company. because later, through the development that has been carried out, funds will be obtained from the users of the development that has been carried out so that they can benefit even if it takes a long time (cavusgil et al., 2021). quoted from an article published by kompas.com, it was stated that pt indonesia infrastructure investment (iif) is ready to provide loans to infrastructure companies affected by the covid-19 pandemic through the extraordinary event relief facility product. so the policy proposed above is in line with the opinion put forward by iff, which states that it is better for the company to continue to strive for infrastructure development than to let it become a stalled project (garcia et al., 2021). conclusion the study results show significant differences between the financial performance of technology and infrastructure sector companies before and during the pandemic. these significant differences include the current ratio, total debt-to-equity ratio, debt-to-asset ratio, receivable turnover, and net profit margin. this significant difference in financial performance requires the formulation of a policy strategy that can be implemented to address issues related to performance in the future. the following policy strategies can be applied to overcome problems related to the company's economic performance: 1. increase sales of products and services provided through online marketing strategies, especially during the covid-19 pandemic. 2. provide debt restructuring to debtors. 3. provide a reduction in loan interest rates so that debtors can still pay their obligations. 4. follow up with customers who have passed the payment deadline. corporate policy strategy based on comparison of financial performance due to the impact of the covid-19 pandemic andriani, ananto, fitri, and aprila 88 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5. perform aggressive billing, which is carried out if the first strategy fails to produce results. 6. giving fines for late payments, this action is taken as a form of firmness by the company for the actions taken by the customer so that it can improve customer compliance in making debt payments. 7. strengthen the digital business sector by selling online in terms of ordering and payment. 8. make a stand-by facility loan. the loan serves as a catalyst for infrastructure sector companies in carrying out ongoing infrastructure developments. limitation the limitation of this research is that the formulation of new policies is carried out for technology and infrastructure companies, even though on the indonesia stock exchange itself, many corporate sectors are also significantly affected by the covid-19 pandemic, so policies are needed to overcome this. suggestion for this reason, the researcher hopes that through this research, several objectives will be achieved, namely: 1) for the company it can be used as a reference in determining policies to address problems that arise in technology sector companies during the covid-19 pandemic. 2) for the next researcher hopefully, this research can develop by providing policy recommendations for companies in other sectors that are also heavily affected and need studies related to the policies they must 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(2022). covid-19 outbreak and sectoral-level stock returns in the tehran stock exchange: an event study. iranian journal of management studies (ijms), 2022(4), 835–849. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 311-323 311 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) jufri yandes1, sapto setyo nugroho2 12universitas terbuka, indonesia correspondent: jufriyandes@ecampus.ut.ac.id1 received : february 3, 2023 accepted : april 16, 2023 published : april 30, 2023 citation: yandes, j. & nugroho, s. s. (2023). reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022). ilomata international journal of tax and accounting, 4(2), 311-323. https://doi.org/10.52728/ijtc.v4i2.734 abstract: this research study was held to examine internal variables that can determine the effect of stock underpricing levels when conducting an ipo (initial public offering) on the idx (indonesia stock exchange) 20212022. internal factors include roe and roa. research is quantitative and uses secondary data, explanatory research study type, using methods by purposive sampling when determining samples. the novelty of the study can be seen from the overall data and the latest samples used by 64 issuers and the periods used, namely 2022 and 2021. the study used hypothesis testing methods, including multiple linear regression analysis through the help of eviews (econometric views). the source of data used in this study is prospectus data issued by companies or issuers that go public with underwriters. the calculation results obtained partially produce roe and roa variables have a significant influence on the level of underpricing in ipo shares, and simultaneous results show that roe and roa variables together have a significant effect on the level of underpricing of ipo shares. the result of a positive value coefficient is obtained at the ipo stock underpricing level, then the roe variable has a negative coefficient and the roa coefficient is positive, this is interpreted by the increase in the roe value, the stock underpricing level will decrease and apply to vice versa, and for the roa variable that has a positive coefficient means that the more the roa value increases, the stock underpricing level will also increase and vice versa. keywords: initial public offering, roa, roe, stock, underpricing this is an open access article under the cc-by 4.0 license. introduction capital utilization is very important in the survival of a company. the company will carry out various activities to meet capital requirements, including one of the quantities of share ownership. increasing share control of a company can be done through offering to existing shareholders of stock securities, as well as through stock offering activities to the public. the process of offering several amounts of the company's shares to the public or the public through idx intermediaries is known as going public. a company that conducts a share offering is known as an issuer, while stock bookers are known as investors. https://www.ilomata.org/index.php/ijtc mailto:jufriyandes@ecampus.ut.ac.id https://doi.org/10.52728/ijtc.v4i2.734 reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 312 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the process of this activity is known as a public offering in the initial or initial share sale which we commonly refer to as an ipo, and the forum to accommodate ipo activities is called the capital market. the capital market is divided into two activities in it, the first activity is carried out in the primary market, and then the second activity is that shares can be bought and sold through idx intermediaries or in the second or secondary market (secondary market). the price value formed in shares when in the primary market is based on the time of a joint agreement with the underwriter (underwriter) and the issuer itself, the underwriter itself is chosen at the discretion of the issuer, while the formation of share prices in the secondary market is determined when the market mechanism process occurs (based on demand & supply). in its realization during price formation, there is a state of price comparison in stocks, when in the first or primary market or in the second or secondary market. if the price of shares during the ipo process is below and then compared with the price value of shares when in the secondary market until the closing of exchange trading on the first day, so that it can be ascertained that underpricing conditions have been created, and when conditions occur otherwise it is called overpricing. it can be observed from the table below that in 2022 and 2021 it is known that there are 112 companies that carry out ipos, of which a total of only 45 companies are underpricing in 2021 and 47 companies in 2022 so that a total of 92 companies are underpricing. if ratio, the underpricing company amounted to 82.14% of the total companies that carried out ipos from 2021 to 2022. table 1. number of ipo companies for the 2021-2022 period source: (bursa efek indonesia, 2023) there are a number of variables that can affect the underpricing value of stocks, which have previously been studied from several previous researchers from the company's own internal including roe and roa. (sembiring et al., 2018) in their study found that roe has a significant negative effect on underpricing. in the study, (nurazizah & majidah, 2019) found that roa results have a positive effect on underpricing. furthermore, the study of (rahmawati et al., 2022) said that the roa factor negatively affects underpricing. a study in (thoriq et al., 2018) resulted in the observation that roa has a significant influence on underpricing. a study conducted by (permatasari & kusumah, 2017) found that the results of the roa study partially had no influence on the level of underpricing. the study conducted by (gunawan et al., 2019) found that roe results did not have a significant effect on underpricing. it was also found that a study conducted by (lestari, 2018) found that roe and roa variables did not have a significant influence on underpricing. and finally, the (mayasari & yulianto, 2018) study found that the roe variable has https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 313 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an influence on underpricing. (kusminto, 2018) in his study produced roa has no effect on the percentage of underpricing. the (novitasari & cahyati, 2018) study is the same as kusminto, profitability seen from roa has no influence on underpricing. furthermore, (ayuwardani & isroah, 2018) explained that roe affects underpricing. the results of the (aulia & tandika, 2019) study stated that roa and roe have an influence on underpricing. (haska & rokhmawati, 2017) said the roe variable has an influence on underpricing. unlike thoriq's research, research conducted by (devi & istikhoroh, 2019) resulted that roa has no influence on underpricing. furthermore, study conducted by (kuncoro & suryaputri, 2019) stated that roe affects underpricing. (jayanarendra & wiagustini, 2019), in their research resulted that roe has an influence on underpricing. (dewi et al., 2018) found that roe has an influence on underpricing. furthermore, research conducted by (abbas et al., 2022) resulted that roa has no influence on underpricing. similar to abbas, (vivianti, 2021) research results in roa has no influence on underprcing. (kasmad et al., 2021) also have results in their research that roa has no effect on underprcing. furthermore, (mahardika & ismiyanti, 2021) found in their research that roa affects undepricing. (mulyani & maulidya, 2021) found that roe in their research had no influence on underpricing. finally, research conducted by (hayati et al., 2021) resulted in roe and roa has no influence on underpricing. looking at the description and results of studies conducted from several previous researchers which there are differences and similarities in research results, it makes researchers want to conduct a review in order to obtain empirical evidence with the novelty of research in the form of data and the year of sampling with the theme "reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022)”. and researchers try to identify problems or problems as follows: a) does the company's roe have a significant influence on the level of underpricing? b) does the company's roa have a significant influence on the level of underpricing? c) does the company's roe and roa together have a significant influence on the level of underpricing? literature review stock (samsul, 2006) argues that shares are proof of owning a company where the owners of these shares are known as shareholders or stockholders. so, it can be said that if an investor has bought shares of a company both in the primary market and the secondary market, it can be interpreted that the investor has rights to the company's assets, where the amount of the right is assessed based on how many shares are owned or purchased. https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 314 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ipo (initial public offering) (tandelilin, 2010) states that ipo is the first sale of securities by the company. judging from this understanding, ipo is an alternative choice for a company to increase the company's funding by selling securities or in this case shares with the public. underpricing (elan, 2022) said, if the stock price at the time of ipo is lower than the closing stock price on the first day of trading, it is called underpricing. judging from this understanding, it can be said that underpricing will occur if the price of shares that have gone public closes higher in the secondary market than in the primary market on the first day. roe (return on equity) according to (mokhamad anwar, 2015) roe shows the company's ability to generate net profit on its own capital. it can be interpreted that the more the roe value increases, the company increases the profit ratio or profitable, and the opposite is the decreasing roe number, the company decreases in profitability. roe is one of the profitability ratios used by investors in looking at the fundamental state of companies that conduct ipos. roa (return on asset) (sartika et al., 2022) argues that roa is the ability of a company to generate net profit based on a certain level of assets. the roa ratio is one of the preferred ratios to see information on the fundamental state of a company conducting an ipo, both for investors and issuers themselves. based on this study, a theoretical framework was made in the following scheme model: figure 1. frame of mind source: research results, 2023 from the frame of mind that we can see above, the researcher drew three hypotheses in this observation, including: ha1: the company's roe has a significant influence on the level of underpricing. https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 315 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ho1: the company's roe has no significant effect on the level of underpricing. ha2: the company's roa has a significant influence on the level of underpricing. ho2: the company's roa has no significant effect on the level of underpricing. ha3: the company's roe and roa together have a significant influence on the level of underpricing. ho3: the company's roe and roa together have no significant influence on the level of underpricing. method research using quantitative data, using the type of explanatory research which has the purpose of a study that explains the relationship between existing variables (usman &; akbar, n.d.). the variables in this study include underpricing variables as dependent variables and internal information variables, including roe and roa as independent variables through hypothesis testing and assisted by the use of eviews (econometric views). the data used in this research is secondary data that can be accessed through the idx. the population in this research is the company when conducting ipo activities and has followed all the requirements on the idx for the period from 2021 to 2022, which is 112 companies. the sample was drawn using purposive sampling techniques with certain criteria, where of the 92 companies that underpriced, only 64 companies or issuers had criteria to be used as samples for this research. in this study it is known that the dependent variable is underpricing, in this research the underpricing or dependent variable is synonymized with the alphabet y. furthermore, the independent variable is synonymized with the alphabet x. where for the first independent variable is roe (x1.) and the second is roa (x2). table 2. variable measurement source: research results, 2023 https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 316 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before obtaining the results of hypothesis testing, it is preceded by the use of data analysis techniques, where the data analysis techniques used in this research include, descriptive statistical analysis which is intended to provide a description of the data obtained. the data obtained are sourced from the results of descriptive analysis whose results show the mean, maximum, minimum, and standard deviation values of each variable studied, both x, and variable y. then the classical assumption test is used before heading to multiple regression analysis, where this classical assumption test consists of normality, autocorrelation, heteroscedasticity and multicolonicity tests. furthermore, multiple linear regression analysis is intended as a direction to provide information about the influence of two or more of variable x on variable y. finally, hypothesis testing aims to obtain information about the influence of variable x (internal factors, namely roe and roa) on variable y (i.e., underpricing) which is seen partially or simultaneously by looking at information on the value of the coefficient of determination (r2), t-test, and f-test. this analysis was carried out using eviews (econometric views) with the following basic model: result and discussion table 3. descriptive statistical analysis (common sample) source: research results, 2023 digest the information above using 64 samples based on the determination of the issuer sample. it is known that the sample underpricing that occurred in 2021-2022 at the time of the ipo had a mean value of 24.41563%, with std. dev showing that there was a variation between underpricing in issuer stocks, namely with a value of 10.04916%. has a maximum underpricing level with a value of 35% and a minimum of 0.67%. first, the roe variable has a mean of 13.68438%, and std. dev which shows that there is a variation between roe in issuer stocks, which is 28.65943%, and has a maximum roe level with a value of 130.73% and a minimum of -114%. both roa variables have a mean of 6.22%, and std. dev which shows there is a variation between roa in issuer stocks, which is 14.78031%, and has a maximum roa level with a value of 57.39% and a minimum of -73%. https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 317 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. normality test source: research results, 2023 normality test is carried out with the aim of assessing the distribution of data in a group of data or variables, whether the distribution of data is normally distributed or not (hidayat, 2022). if the significance value (in this case the jarque-bera probability value) > 0.05, the residual value is normally distributed, and it turns out that from the results of the research test the jarque-bera probability table value is 0.050513 > 0.05, meaning that the data in this research is normally distributed. so that the data used can be continued in the next test. table 5. multicollinearities test source: research results, 2023 if the value of the correlation matrix between two independent variables (x) is smaller than (<) 0.90, then there is no multicollinearity, and vice versa (ghozali & ratmono, 2017). based on the correlation value above that there is no symptom of multicollinearity because the roe correlation value to roa and vice versa is 0.878139, this indicates a correlation value of 0.878139 < 0.90. so, it is certain that there is no indication of multicollinearity between these two x variables. table 6. autocorrelation test source: research results, 2023 https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 318 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc autocorrelation tests are used to test whether in a linear regression model there is a correlation between confounding errors (residuals) in period t with errors in period t-1 (previously) (ghozali &; ratmono, 2017). the results of the lm value test that we can see above, show the value of prob. chi-square (from obs*r-squared value) is 0.2239, this indicates 0.2239 > 0.05 which means there are no autocorrelation symptoms. table 7. heteroscedasticity test (glejser) source: research results, 2023 the heteroscedasticity test is used to see if in the regression model there an inequality of variance from residual observations to one observation to another is (ghozali &; ratmono, 2017). if the value produced by the probability of the independent variable is greater than (>) 0.05, heteroscedasticity does not occur. so, the interpretation based on the table above, the value of prob. chi-square (from obs*r-squared value) is 0.5752 > 0.05, and it means that from these results there is no heteroscedasticity problem. table 8. multiple linear regression analysis source: research results, 2023 https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 319 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taking into account the results of the multiple linear regression output values above seconded by the eviews program, it can be narrated that the value of the constant (c) shows 24.82519, roe has a variable coefficient value of -0.271953, and roa shows a variable coefficient value of 0.532466. from the results and narrative of the multiple linear regression analysis value figures, the following research model was formed: underpricing = 24,82519 + (-0,271953 roe) + 0,532466 roa + e…… the constant value obtained is 24.82519, meaning that if the independent variables (roe and roa variables) are considered constant (0 values), it can be interpreted that the dependent variable (underpricing) will be valued at 24.82519. furthermore, the roe repression coefficient has a value of -0.271953. it can be interpreted that if roe experiences an increase of 1%, the dependent variable (underpricing) experiences a decrease in value of 0.271953, even vice versa, assuming the regression coefficient of other variables is zero (0). finally, the roa regression coefficient has a regression coefficient of 0.532466. it is interpreted that if roa experiences an increase of 1%, the dependent variable (underpricing) experiences an increase of 0.532466, even vice versa, assuming the regression coefficient of other variables is zero (0). the table above also contains the coefficient of determination showing an adjusted r-square value of 0.120164, the results of this calculation mean that 12.0164% of underpricing variations can be explained by roe and roa, while the remaining 87.836% can be explained by variables outside the model. then the table also shows the results of the t test (partial), where according to (imam, 2011), if the value of sig. < 0.05 then it means that variable x partially affects variable y, in this case the value of sig is equal to the value of prob., and vice versa. looking at the results of the table above, we get the value of prob. roe (0.0026) and prob value. roa (0.0024), this means that roe and roa factors partially affect underpricing. and the last thing that can be seen from the table is test f (simultaneous), according to (imam, 2011) if the value of sig. < 0.05 then it means that variable x simultaneously affects variable y, in this case the value of sig is equal to the value of prob. the results of the table above show that the f test (simultaneous) gets an f value with a number of 5.302124 and a number of prob. test of 0.007532. this indicates that roe and roa factors simultaneously or together have an influence on the level of underpricing. at the beginning it was written that the submission of hypothesis testing in this research was divided into three hypotheses. where based on the results of the above tests, namely the t test (partial) and f test (simultaneous) so that the results of hypothesis testing are obtained among them, ha1 is accepted, namely the company's roe has a significant influence on the level of underpricing. this condition is similar to the results of studies by (sembiring et al., 2018) and (mayasari & yulianto, 2018) which stated that roe has an influence on the level of underpricing, this indicates that investors still have confidence that the roe value of an issuer can affect the level of investor confidence to want or not invest in companies that carry out ipos so that it can affect the level of underpricing of selected shares. furthermore, the second hypothesis, namely ha2, is accepted, namely that the company's roa has a significant influence on the level of underpricing, where this second hypothesis is similar to https://www.ilomata.org/index.php/ijtc reviewing internal variables on the level of underpricing of ipo shares (observation of the company go public on idx 2021-2022) yandes and nugroho 320 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the research studied by (nurazizah & majidah, 2019) and (rahmawati et al., 2022) said roa has an influence on the level of underpricing, it could be possible for investors to have confidence in the value of roa can determine the good or bad prospects of an issuer that carries out an ipo which has an impact on the level of stock underpricing selected. finally, the ha3 hypothesis is accepted, namely the company's roe and roa together have a significant influence on the level of underpricing, where the results of this hypothesis indicate that investors can trust the value of roe and roa issued by issuers representing the good financial condition of companies that carry out ipo activities, this condition may be the basis for investors in choosing to invest or not in issuers that conduct ipos so that they have an impact at the level of underpricing of the issuer's shares. conclusion based on the results of the overall analysis, it can be concluded that: the results show that the company's roe partially has an influence on the underpricing level of ipo shares for the 20212022 period, then the research results also show that the company's roa partially has an influence on the underpricing level of ipo shares for the 2021-2022 period, and the research results show that the company's roe and roa have a joint influence on the underpricing level of ipo shares for the period 2021-2022. in other words, we can digest that from the results of the discussion, both partially and simultaneously, it turns out that the variables roe and roa have an influence on the level of underpricing of stocks that carry out ipo activities in the period 2021 to 2022, and are supported by several previous studies that have been conducted by researchers before, although there are several studies that contradict this study. it is hoped that this study can show an illustration that roe and roa variables have an influence on the level of underpricing in the period 2021 to 2022. looking at these conclusions, researchers have several suggestions that can be presented in this research, including, for companies planning an ipo, efforts are made to show the quality of roe information and the company's roa that is truly accurate and credible, then for researchers then they can add a period of observation years or the latest year so that the sample data studied is more adequate; for those who will conduct further research, they can use an additional mixture of other variables both from within the company and from outside the company, due to the limitations of researchers in using the number of variables used. reference abbas, d. s., rauf, a., hidayat, i., & sasmita, d. 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(2018). faktor internal dan eksternal yang memengaruhi underpricing pada saat ipo di bursa efek indonesia. jurnal aplikasi bisnis dan manajemen (jabm), 4(1), 19. vivianti, j. (2021). faktor keuangan dan non keuangan yang mempengaruhi underpricing pada perusahaan yang melakukan penawaran umum perdana di bursa efek indonesia, bursa malaysia, dan bursa singapura. e-jurnal akuntansi tsm, 1(4), 375–390. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 117-138 117| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion chairil anwar pohan1, notika rahmi2, pebriana arimbhi3, ahmad junaidi4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: anwar.phn@gmail.com1, notika.rahmi@gmail.com2, pebrianasusanto@yahoo.co.id3, ahmadjunaidi76588@gmail.com4 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: pohan, c.a., rahmi, n., arimbhi, p., junaidi, a.(2022). automatic exchange of information review from the perspective of its effectives in minimizing tax evasion. ilomata international journal of tax and accounting, 3(2), 117-138. https://doi.org/10.52728/ijtc.v3i2.462 abstract: this research aims to review the implementation of automatic exchange of information (aeoi) from the perspective of its effectiveness in minimizing tax evasion and to analyze the inhibiting entities and encouraging entities in aeoi in minimizing tax evasion. the research approach used in this study is a qualitative approach with data collection techniques using in-depth interviews, observation, literature/ documentation studies and source triangulation. the results of the study conclude that the implementation of aeoi in minimizing tax evasion so far has been quite effective according to international standards, although there are still many complete data sets that have not been fulfilled by partner countries, resulting in data provided by partner countries cannot be used by the indonesian tax authorities. however, the performance of aeoi has not yet provided optimal results in increasing tax revenue, especially in 2020, its progress has been hampered by the covid 19 pandemic. on the other hand, directorate general of taxation (dgt) still has obstacles. there are four obstacles and challenges in aeoi, namely: first, the reciprocity of information exchange (reciprocity). second, banking tends to be resistant to data access. third, the lack of technology that supports aeoi. fourth, the complexity of conversion of tax revenue data. the entity that drives this information exchange in minimizing tax avoidance is the existence of an information exchange system called the "common transmission system (cts). keywords: effectiveness, automatic information exchange, and tax evasion. this is an open access article under the cc-by 4.0 license. introduction the largest source of indonesian state revenue comes from the tax sector that is paid by the public to the state (alexeev & zakharov, 2022; gokhale, 2021; lahiri & yang, 2021; majoral et al., 2021; ndoricimpa, 2021). this tax revenue plays an important role in the interests of indonesia's development. automatic exchange of information (aeoi) is an opportunity for indonesia to prevent and reduce tax avoidance and evasion practices because aeoi is big data in the taxation https://www.ilomata.org/index.php/ijtc mailto:anwar.phn@gmail.com1 mailto:notika.rahmi@gmail.com mailto:pebrianasusanto@yahoo.co.id mailto:ahmadjunaidi76588@gmail.com https://doi.org/10.52728/ijtc.v3i2.462 automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 118 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sector which offers detailed and legal financial information from several contracting countries (febyani & widodo, 2020; selvi, 2018; yang et al., 2017). another important role of the aeoi is expected to be able to increase taxpayer compliance from more transparent tax reporting (ispriyarso, 2020; supriyadi, 2019). however, the priority is if the aeoi is able to increase the potential for state revenue from the tax sector, which has often been overlooked, especially if the income or assets are outside the jurisdiction of indonesia (adegboye et al., 2022; jacobsson et al., 2020; knobel & meinzer, 2014; nan et al., 2022). the implementation of aeoi by the indonesian government cannot be separated from efforts to obtain information and withdraw (repatriate) funds belonging to indonesian citizens abroad considering that most of the assets of indonesian citizens abroad are located in singapore, which reached 60% of the approximately usd 75 billion. even (chang & sargsyan, 2022; matti et al., 2022; zucman, 2015), in the book the hidden wealth of nation: the scourge of tax havens, said that about 8% of global wealth is placed in tax haven countries, and unfortunately, 80% of these funds are not known by tax authorities. this amount is quite significant, so it is natural for indonesia to seek to have aeoi agreements with many countries, including singapore (amendolagine et al., 2021). the following is a table 1 of the development of aeoi cooperation: source: oecd, global forum on transparency and exchange of information for tax purposes (as of june 2020) based on the table 1 above, there is a significant increasing trend in terms of the number of countries, bilateral exchanges, financial accounts, and assets traced through aeoi cooperation in the 2017-2019 period. the existence of aeoi between countries facilitates transparency of taxpayer financial information. the ministry of finance said there are assets of indonesian citizens (wni) with a value of more than rp. 1,300 trillion abroad that have not been reported through the spt and tax amnesty (pablo, 2019). several companies in indonesia are involved in cases of tax evasion or transfer pricing as shown in table-2 below: tabel 2. cases of transfer pricing practices in indonesia n o company number of tax disputes (in rp) link/source of court decision 1 . toyota motor manufacturing indonesia 1,2 tril lion tempo prahara pajak raja otomotif (tempo, 2014) https://majalah.tempo.co/read/in vestigasi/145213/ prahara-pajak-raja-otomotif 2 . pt. asian agri group 2,5 tril lion putusan mahkamah agung no. 2239k/pid.sus/ 2012. (sarwoko, 2012) file:///c:/users/hp/downloads /putusan_puthttps://www.ilomata.org/index.php/ijtc https://majalah.tempo.co/read/investigasi/145213/ https://majalah.tempo.co/read/investigasi/145213/ file:///c:/users/hp/downloads/putusan_put-67452ppm.va15201520220413.pdf file:///c:/users/hp/downloads/putusan_put-67452ppm.va15201520220413.pdf automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 119 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 67452ppm.va15201520220413.pdf 3 . multinational company practices (mostly transfer pricing according to yustinius prastowo, the executive director of the center for indonesian taxation) 150 tril lion (neraca, 2015) https://economy.okezone.com/re ad/2015/09/16/20/1215476/pra ktik-transfer-pricing-sebabkanindonesia-rugi-rp100-t tanggal 16 september 2015 the phenomenon that the authors raise from the research above and from the table 2 above is that quite a number of taxpayers in indonesia and abroad are practicing tax evasion/evasion which has an impact on reducing tax revenues. to minimize such practices, indonesia as a member of the g20 implements aeoi. precisely during the covid-19 pandemic, this should be a good momentum for indonesia to stimulate investment optimism and suppress tax avoidance/evasion practices, in order to increase tax revenue (aditya, 2021; indahsari & fitriandi, 2021; padyanoor, 2020; tibulca, 2021; wantasen et al., 2021; zarghami, 2021). the research objective, firstly, is to review the implementation of aeoi from the perspective of its effectiveness in minimizing tax evasion at the directorate general of taxes. second, to analyze what factors are still hindering the smooth running of the aeoi policy to be input in solutions or formulating a plan of action by the government to overcome bottlenecks in its implementation. • literature review 1. effectiveness parameter: the parameter "effective interpretation value" can be used to measure effectiveness, according to minister of home affairs decree no. 690.900-327 of 1996 are as follows: very effective criteria if the interpretation value is: e>100%; effective criteria if the interpretation value: 90% < e <100%; criteria sufficiently effective if the interpretation value: 80% < e < 90%; less effective criteria if the interpretation value: 60% < e_> 80%; ineffective criteria if the interpretation value: e_< 60%. (pohan, 2021). meanwhile, according to devas (pohan, 2021) effectiveness is a measure of the success of an organization in achieving organizational goals that have been set. if an organization succeeds in achieving its goals, the organization is said to have been running effectively. effectiveness measures how much success in achieving the revenue target that should be achieved in a certain period. by using this theory, it is expected to measure the effectiveness of aeoi in minimizing tax evasion at dgt 2. effectiveness indicators: according to berger sikora (pohan, 2021) the effectiveness indicators are as follows: i. commitment, ii. competence and iii. coordination. 3. automatic exchange of information: according to (pohan, 2019) "exchange of information is the exchange of information related to taxation based on an international agreement or exchange of information (aeoi) as the implementation of an international agreement" the objectives of aeoi, according to (pohan, 2019) are: i. preventing tax avoidance ii. preventing tax abuse iii. preventing the misuse of tax treaty by unauthorized parties; and/or iv. obtain information related to the fulfillment of taxpayer's tax obligations. https://www.ilomata.org/index.php/ijtc file:///c:/users/hp/downloads/putusan_put-67452ppm.va15201520220413.pdf https://economy.okezone.com/read/2015/09/16/20/1215476/praktik-transfer-pricing-sebabkan-indonesia-rugi-rp100-t https://economy.okezone.com/read/2015/09/16/20/1215476/praktik-transfer-pricing-sebabkan-indonesia-rugi-rp100-t https://economy.okezone.com/read/2015/09/16/20/1215476/praktik-transfer-pricing-sebabkan-indonesia-rugi-rp100-t https://economy.okezone.com/read/2015/09/16/20/1215476/praktik-transfer-pricing-sebabkan-indonesia-rugi-rp100-t automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 120 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as to information exchange procedure, according to (pohan, 2019), the exchange of information can be reciprocal. the exchange of information can be reciprocal and carried out in the form of information exchange between the authorized official in indonesia and the authorized official in the partner country or partner jurisdiction, which includes: i. exchange of information on request, ii. spontaneous exchange of information and iii. automatic exchange of information (aeoi). in this study, the authors only focus on the discussion of aeoi. (1). aeoi is carried out at a certain time, periodically, systematically, and continuously on information regarding matters relating to taxation from the authorized official in indonesia to the authorized official in the partner country or partner jurisdiction or vice versa. (2). information exchange is automatically carried out on a) information regarding withholding tax on income paid to indonesian tax subjects or withholding tax on income paid to tax subjects in partner country or partner jurisdiction. b) financial information of foreign customers c) report information per country, and/or d) other tax information based on mutual agreement between indonesia and partner countries or partner jurisdictions. e) information submitted by the authorized official in indonesia to the authorized official in the partner country and partner jurisdiction is as contained in the attachment f) the implementation of aeoi is carried out in accordance with the international agreement. according to (pohan, 2019) in the context of implementing the exchange of information, the authorized official may: i. competent authority meetings ii. tax examinations abroad; and/or iii. simultaneous tax examinations. information exchanged between authorized officials is used as a tax database for the directorate general of taxes. 4. tax avoidance & evasion one definition of tax avoidance is "arrangement of a transaction in order to obtain a tax advantage, benefit, or reduction in a manner unintended by the tax law" (brown, 2012). to clarify, tax evasion can generally be distinguished from tax evasion, where tax evasion is related to the use of unlawful means to reduce or eliminate the tax burden whereas tax evasion is carried out “legally” by exploiting loopholes that contained in existing tax regulations to avoid paying taxes, or conducting transactions that have no purpose other than to avoid taxes (ibnu wijaya, 2014). not different from the above definition, according to the blacks law dictionary (pohan, 2019). tax avoidance is an effort to minimize the tax burden by taking advantage of tax avoidance opportunities (loopholes) by not violating tax law, even though this effort may not violate the law (the letter of the law), it actually contradicts the purpose of making tax laws (the spirit of the law) (butarbutar, 2017). according to (pohan, 2019), resistance to taxes (tax resistance) carried out by taxpayers are obstacles in collecting taxes, both caused by the condition of the state and its people and caused by the efforts of taxpayers who are aware of it or not that complicate income tax as a source of state revenue. tax resistance by minimizing the tax payable includes all businesses and actions or not that complicates tax revenue as a source of state revenue. tax resistance by minimizing the tax payable includes all efforts and actions that directly aim to avoid taxes, both legally (tax avoidance) or illegally (tax evasion) in making tax savings occur a lot in crossborder transactions. according to (pohan, 2019), tax evasion is an effort by taxpayers to avoid illegal taxes owed by hiding the actual situation, but this method is not safe for taxpayers, where the methods https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 121 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and techniques used are actually not in the corridor of laws and regulations. taxation itself is a high risk method and has the potential to be subject to sanctions for violating the law or fiscal or criminal offenses (white collar crime) therefore as a good tax planner this method of tax evasion is not recommended to be applied. the same thing is also stated by rohatgi (pohan, 2019) that tax evasion is an intention to avoid paying taxes owed taxes by intentionally hiding data and facts from the tax authorities, and is an illegal act. thus, according to (pohan, 2019), tax evasion has an indication of the actions of taxpayers doing illegal tax evasion and the imposition of tax criminal sanctions. some examples of tax evasion (pohan, 2019): i. doing double disclosure, manipulating disclosure documents such as inflating costs with fictitious expenses, and manipulating sales prices far below the prevailing market price are illegal ways; ii. taxpayers do not report part or all of their income in the annual tax return (spt) or charge fees that should not be deducted from income to minimize the tax burden. this illegal act causes state losses. iii. conducting pejorative/negative transfer pricing (hemling et al., 2022; kumar et al., 2021; steens et al., 2022; stefano et al., 2022). example: tax evasion carried out by “aag”, which ended with supreme court decision no. 2239k/pid.sus/2012 dated december 18, 2012, by punishing “aag” who has to pay taxes and a tax penalty of rp. 2.5 trillion. method in this study the author uses a qualitative research approach which according to creswell (sugiyono, 2019) is a process of exploring or understanding individual and group behavior, describing social problems or humanitarian problems. the research process starts from making research questions and procedures, collecting data from participants, analyzing data inductively, constructing data and providing interpretations of the meaning of data. according to denzin and lincoln (moleong, 2018) qualitative methods explain phenomena that occur and are carried out by involving various existing methods. while the type of research used is descriptive research according to (neuman, 2011). descriptive research according to neuman: "descriptive research present a picture of the specific details of the situation, social setting, or relationship. the outcome of a descriptive study is a detailed picture of the subject.” while the data collection techniques were carried out by triangulation of sources, in-depth interviews, observations, literature studies and documentation (moleong, 2018; sugiyono, 2019). in-depth interviews to strengthen the results of the analysis were carried out with mr. aldo as officer/head of section at the directorate of international taxes dgt (informant 1), mr. fajry akbar center for indonesia taxation analysis or cita (informant 2), mr. bawono kristiaji (partner of ddtc fiscal research – as informant 3), mr. alif ramadhan as tax practitioner and lecturer of the stiami institute (informant 4), mr. swarum as lecturer of taxation as academic, consultant and tax lawyer (informant 5). mr. otto as tax director of price waterhouse cooper indonesia (informant 6). result and discussion 1. implementation of the automatic exchange of tax information from the perspective of its effectiveness in minimizing tax evasion at the directorate general of taxes to prevent tax avoidance, the leaders of the g20 countries agreed to end the era of bank secrecy for the sake of taxation. this consensus is realized through the global forum on transparency https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 122 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and exchange of information for tax purposes (global forum), which currently has 161 countries/jurisdictions, including indonesia. in 2013, the g20 leaders summit in st. petersburg, russia, gave a mandate to the organization (oecd) to set global standards for the automatic exchange of financial account information (aeoi). this standard became known as the common reporting standard (crs). furthermore, in 2014 at the g20 meeting in brisbane, australia, it was agreed to implement aeoi reciprocally based on the crs. finally, the global consensus states that jurisdictions can exchange financial information automatically and periodically (https://majalahpajak.net/ikut-melawan-pengelakan-pajak/). the more multinational companies that develop in indonesia, of course, it is followed by the increasing number of intra-group transactions of multinational companies (affiliate transactions). this has resulted in a risk for tax administration in each country through tax avoidance efforts in cross-border transactions, or better known as base erosion and profit shifting (beps). indonesia's readiness in implementing the has been realized by the issuance of minister of finance regulation number 60/pmk.03/2014 which has been amended by regulation of the minister of finance number 125/pmk.010/2015 as an internal procedural provision in implementing aeoi as approved by the government of indonesia in iga model 1b and mcaa (wibowo, 2017). then it was followed up with the regulation of the minister of finance number 39/pmk.03/2017 concerning procedures for exchanging information based on international agreements. to strengthen the implementation of the aeoi, the government of indonesia has finally issued government regulation in lieu of law (perpu) number 9 of 2017 concerning access to financial information for tax purposes. this information is very important for dgt to uncover the modes of tax avoidance/tax evasion. together with 159 other countries/jurisdictions, indonesia has signed the multilateral competent authority agreement (mcaa) which is an international agreement instrument in order to carry out aeoi. indonesia is one of the first few countries to successfully implement the aeoi along with malaysia and singapore. after that, there are other countries in southeast asia that have committed to the aeoi, namely thailand, vietnam, the philippines and cambodia. however, thailand stated that in 2023 they will be ready to carry out aeoi. meanwhile, vietnam, the philippines and cambodia have not specifically stated when the aeoi will be implemented in their respective countries (suwiknyo, 2020a). • information exchange scheme (exchange of information) in implementing the aeoi, indonesia is part of one of the countries that participate in implementing the aeoi program. in essence, there are three schemes of information exchange, namely the exchange of request information, spontaneous, and automatic. in exchanging tax information, the goal is still to open access to data and information on transactions that are only intended for tax matters. in the spontaneous exchange of information (spontaneous), up to now, dgt has received more information spontaneously from the competent authority of the partner country (inbound) than sending out information (outbound). this spontaneous exchange of information can be done without any prior request. https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 123 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3 the amount and type of information exchange that has been carried out by dgt during 2016-2018 source : directorate general of taxation(dgt) inbound: information from partner country to indonesia outbound: information from indonesia to partner country from table 3 above, it can be seen that the implementation of information exchange in the last 3 years that has been carried out by the dgt mostly originates from the exchange of information on request (on request). overall, dgt also makes more requests for information exchange with partner countries (outbound) than receiving requests for information exchange (inbound). indonesia's preparations to participate in the aeoi program have been ongoing since 2018. there is an assessment process held by the aeoi organizing committee. the difficulty lies in the readiness of each country which is different and the capacity of each country is different and can affect the quality of the information and data exchanged and the dgt tries hard to solve problems when they encounter difficulties. during 2020, indonesia has received financial information from 78 partner countries/jurisdictions for indonesian/required financial account holders indonesian tax. indonesia has also sent financial information to 71 countries/partner jurisdictions for foreign financial account holders/foreign tax subjects. there were 3 aeoi categories in implementation during the past year. first, aeoi on withholding tax data. information containing income transactions originating from indonesia in one tax year related to/received by the taxpayer (tax resident) who declares as a resident/entity of the partner country/jurisdiction or vice versa. in 2020, indonesia has received aeoi information on withholding tax data from 5 partner countries/jurisdictions. indonesia. second, the aeoi on country-by-country report (cbcr) data or the exchange of reports per country. this exchange is one of the minimum requirements for countries committed to implementing recommendations to address base erosion and profit shifting (beps) risks. in 2020, indonesia has received country-bycountry information from 48 partner countries/jurisdictions. indonesia has also sent country-bycountry information to 26 partner countries/jurisdictions. third, aeoi on financial information data (aeoi common reporting standard/crs). financial information reported by financial service institutions, other financial service institutions, and other entities to the dgt, will be sent to the competent authority of the partner country/jurisdiction through the common transmission system (cts) application. financial information data based on the standard, namely crs, received by dgt from partner countries/partner jurisdictions will be followed up. dgt will follow up by https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 124 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc doing a comparison (data matching) with internal data. the results of the matching data are then used by units in the dgt to explore potential state revenues from the taxation sector. (ddtcnews, 2021) dgt carried out the financial information data exchange (aeoi) agenda in november 2020. director of international taxation, mr. john hutagaol, said that indonesia carried out a data exchange agenda as a form of contribution in carrying out financial data transparency efforts to achieve the 2020 edition of taxation goals globally. the aeoi data validation and consolidation process can only be carried out by the dgt in early november 2020. the covid-19 pandemic has caused the authority to relax the reporting schedule to be postponed until october 2020. john hutagaol said that dgt only has less than a month to carry out the relaxation process before sending it. to partner countries with the global forum via a common transmission system (cts). aldo as the head of section at the directorate of international taxation-dgt explained that for the exchange of request information (by request) is information that we can get if we make a request to the country concerned, of course according to the criteria that have been set. the second scheme is the spontaneous exchange of information, according to aldo, its use is received and sent spontaneously, and is not set on a regular basis, it can be anytime as long as there is potential tax in it. we can send and we can receive it at any time as long as there is potential tax in it. from partner countries send data to us. likewise, we send data spontaneously to them as long as there is information. and in terms of receiving the information we received, we will directly forward it to the registered tax office. prior to the existence of the aeoi, the first thing that was carried out was the exchange of information on demand and spontaneously and is still being implemented today. the third scheme is aeoi, namely information exchange that is carried out at a certain time, periodically, systematically, and continuously on financial information obtained from financial institutions. for aeoi via electronic transmission, namely the common transmission system (cts) aldo said that we do not need to ask for data from partner countries, the maximum data reception limit is until september 30, 2020 and for reports that were previously entered by the system automatically. as long as there are indications of tax evasion during the inspection, on this basis the tax office can directly submit a request to our party, dgt international, one door system, and we will process it to be forwarded to the partner country. in the case of preliminary evidence examination and investigation, according to swarum, due to the different objectives and substance, eoi by request sometimes requires an immediate response to a specific taxpayer. aldo continued that indonesia's readiness in implementing the exchange of information that the regulatory tools already existed was regulated by pmk – 39/pmk.03/2017 then the implementing regulations related to the use of the data had already been implemented if there were also internal dgt parties who ensured the quality of the data, the distribution of the data had been done set out in these rules. in this readiness, the dgt has 3 directorates assigned to this aeoi, namely the directorate of international taxation as the bridge that connects indonesia with partner countries, then the directorate of data and information that processes the data, and then systemically there is the directorate of information and communication technology to prepare the system. the three directorates play a role in this information exchange. furthermore, aldo stated that after https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 125 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc obtaining the data from the common transmission system (cts), the data was downloaded and entered into the dgt's internal database, after that it was processed to be paired with the npwp and then sorted and then submitted to the tax office according to the registered npwp of the account holder. the data required by the dgt from the partner country are: 1. the name of the account holder 2. the balance of the account at the end of the year 3. the country where the taxpayer is registered 4. the name of the financial institution. receipt of revenue revenue generated from the account. however, according to mr. otto (price waterhouse cooper) when information from foreign tax authorities is used as a basis for carrying out a bank inspection and has even been raised to the level of sentencing in court: “there is one thing that needs to be observed from the experience of the trial in the tax court (it happened before 2019), there are at least two exchange of information (eoi) results used by the dgt as the basis for their defense before the tax court judges. however, to my knowledge, the results of the eoi were not considered by the judge in making a decision on the related dispute. either because the appellant/taxpayer objected that the information contained in the eoi results was biased and could not be used as a basis for correction by the dgt, or whether because the judge was of the opinion that the information from the eoi was not strong or relevant to the subject matter of the dispute. why did i draw that conclusion? because the taxpayer's appeal was granted by the judge at the tax court (hakim pp) and in the pp judge's decision there was absolutely no discussion of the issue of information contained in the eoi". in view of the author, the above incident indicates that the exchange of information (including aeoi) can be hampered in the tax court due to differences in perceptions between the tax authorities and the tax court in handling cases related to the case of multinational companies in indonesia which are also taxpayers in partner countries. in commenting how effective is the implementation of the aeoi? the author sees from the three indicators of effectiveness according to (berger & sikora, 1994), as follows: a. commitment in this exchange of information, g20 and oecd countries agreed to formulate this regulation with the common reporting standard (crs) with the cts system to provide information that the countries that are members of the jurisdiction have committed and are cooperative to start exchanging this information. aldo explained that the dgt exchanged information through the common transmission system (cts) and so far, the exchange of information with all the member countries has been cooperative. for example, greenland, a country that does not provide data, not because they do not comply but because there is no data on indonesian accounts in that country. so there is always an assessment from the global forum, they test or audit whether every country has complied and has implemented the rules that have been set according to the standards, and there is supervision from the global forum. aldo added that if there is a problem most related to technical reporting because there is a standard that must be followed, namely the common reporting standard (crs), the solution is that the dgt disseminates information to large financial service institutions as well as to microfinance institutions such as cooperatives. for exchange of information on request or by request if difficulties are found, for example the letter sent to the dgt is incomplete, the letter will be returned with clarification, and we can ask for the letter to be repeated to the partner country. “it is the same with us if you want to send a letter when https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 126 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc requesting data to a partner country, so there must be a screening check here at the dgt to ensure that the requirements for the letter sent are complete so that letters sent from indonesia are not returned. so what should be screened? the problem with aeoi is that the completeness of data related to the pairing of npwp is not the same as that sent from partner countries to us. we try to look in our system in terms of date of birth, home address, name and so on until we find”. desite the covid-19 pandemic, the government finally returned to exchanging financial information through the aeoi scheme. as is known, the delay in data exchange was caused by the relaxation of the submission deadline from the financial services authority (ojk) in line with the corona virus pandemic which is still not over. "indonesia will receive aeoi data from 103 jurisdictions and vice versa will send aeoi data to 85 jurisdictions," said director of international taxation at the directorate general of taxes at the ministry of finance john hutagaol. under normal conditions, ojk will submit aeoi data to the directorate general of taxes no later than the end of august 2020. however, in this year, the relevant authorities have given a relaxation of two months, which is a maximum of the end of last month. furthermore, the tax authorities will send the aeoi data to partner jurisdictions no later than the end of november 2020. the financial information exchange scheme appears in line with the prevalence and variety of tax avoidance practices through cross-jurisdictional transactions. the tax authority has been running aeoi since 2018, this year, the number of participating jurisdictions (inbound) is 103 countries. meanwhile, the directorate general of taxes will also send financial data to 85 other participating jurisdictions. meanwhile, since 2018 the government has received more than 1.6 million financial information worth more than 246.6 billion euros (suwiknyo, 2020b). b. competence/ability in implementing this aeoi, dgt is required to master this aeoi knowledge in order to make the aeoi run smoothly in accordance with the common reporting standard that has been set by the global forum. common reporting standard (crs) which must be followed by all jurisdictions that carry out information automatically, for employees involved in this field must master it, socialization will be carried out to financial service institutions, in addition to tax knowledge related to aeoi and of course must master the aeoi standards stipulated establish a mutually agreed global forum. regarding the importance of continuous training in order to increase the competence or ability and knowledge of tax officers in implementing the eoi & aeoi, it must be followed all jurisdictions that carry out information automatically, which is determined by the global forum through the common reporting standard (crs), aldo stated that there is continuous training related to international standards, trainers also come from outside parties from the organization de coopération et de dévelopment (oecd) who are based in france, we regularly communicate with them before the covid-19 outbreak. this training can be done in indonesia or in france or in other countries to update our friends' knowledge regarding this aeoi. but with the existence of covid for the last 3 to 4 months, communication is done online, there is team training, language training, technology training." meanwhile, mr. alif ramadhan as a practitioner/academic explained that skills must be possessed, firstly, officers must master the language and skills in processing data, understanding taxes up to the level of transactions between countries. c. coordination or directing and socialization activities according to aldo, in conducting socialization, dgt usually cooperates with the financial services authority (ojk) because ojk is the one who carries out the supervision of https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 127 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial services. dgt usually cooperates when dgt conducts outreach briefing, dgt will invite ojk and vice versa if ojk conducts socialization related to aeoi it will invite dgt because after all, dgt is the tax authority in indonesia. the socialization can be in the form of answering their questions because we provide a special email address for their electronic mail, they can ask questions related to aeoi, this can be a medium for financial service institutions to ask questions. aldo added that there had been socialization to external taxpayers to provide an explanation regarding this perpu no.1/2017, where the socialization was not only aimed at explaining how the aeoi system actually works. moreover, the dgt would like to provide information regarding the importance of this system being implemented by the government in fostering taxpayer compliance, and being able to direct taxpayers to be honest in reporting their tax obligations both in indonesia and abroad. this was acknowledged by alif ramadhan (practitioner/academic) who explained that there was indeed socialization to taxpayers when this regulation was just issued. socialization is carried out to taxpayers both for foreign taxpayers and wpdn. the parties involved in the socialization activities are dgt with partner countries, ojk, and banking. dgt and the tax office must be open to each other and have carried out everything effectively so that the mandate stated in the aeoi can be carried out properly. aldo stated that the coordination implementation has been effective, although there are issues related to data quality but because of the global forum is always monitored and reviewed regularly to ensure whether this aeoi can run effectively because it is global, hundreds of countries are doing this. if the quality of the data is very bad, there is no point in it even though it has worked optimally, it is anticipated by always conducting an assessment and reviewing it, and the results are quite good and we can use the data. coordination includes i. coordination with global forums related to general issues, to partner countries regarding data information ii. coordination with ojk and banking related to data information, and iii. coordination with the tax office related to the provision of data information. then what is the form of coordination with foreign tax authorities? in the implementation of the eoi & aeoi, aldo explained that: i. when it comes to general issues, the global coordination is with the global forum because they are the foreman. ii. between two related countries, for example indonesia and singapore, regarding formats that cannot be opened and cannot be read, we can directly coordinate it by email. 2. achieving goals/objectives: aeoi effectiveness perspective tax observers from the center for indonesia taxation analysis (cita) fajry akbar said that aeoi has a fairly important role in dealing with the performance of tax revenues that have fallen due to the pandemic. the tax authorities need to try harder in collecting tax revenue in the hope of achieving the target because tax revenue is still far from the target set. although the data held by aeoi is proven to be able to improve the quality of the data held by dgt, the government needs to pay attention to the data reported by aeoi. however, based on lessons learned from the panama papers, many data are actually invalid. the achievement of organizational goals/objectives is a must that must be achieved by a group of people who are members of a group. where with the agreement and understanding of all supporters of the organization it will achieve an organizational goal. based on the regulation of the minister of finance number 39/pmk.03/2017, the main purpose of the issuance of this https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 128 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc regulation is to encourage taxpayers to exercise their rights and fulfill their tax obligations from exchanging information based on international agreements, whether these objectives have been achieved/realized at the dgt. aldo stated that the dgt carried out this information exchange well. this means that we do well to exchange according to the time standards set by the global forum. the impact of aeoi is not only on state revenues, but also on the behavior of taxpayers who are increasingly complied. this is the power of information, without law enforcement action, taxpayers can be made more compliant with valid information. this aeoi can achieve the objectives of the dgt organization well because this aeoi has clear regulations so that it can reduce tax avoidance actions that will have an impact on state revenues. one of alternative in fighting tax avoidance practices is through information disclosure or exchange of information (eoi). meanwhile, the aims of eoi itself are: i. preventing tax avoidance practices ii. preventing tax evasion iii. preventing the misuse of p3b by unauthorized parties and/or iv. obtain information related to the fulfillment of taxpayers' tax obligations, v. collecting information to resolve cases of treaty shopping (beneficial owner), transfer pricing, or fiscal crime, vi. to test the "self-assessment" obligation carried out by the wpdn, related to income originating from abroad, vii. provide information to test the implementation of the worldwide income concept. according to aldo, when discussing the purpose of the aeoi itself, it is actually in the law, namely the goal is to prevent tax evasion and detect taxpayers who commit tax evasion and of course this all has an impact on optimizing state revenues from the tax sector. meanwhile, ddtc fiscal research partner b. bawono kristiaji stated that the use of data is a way that the government can use to increase tax revenue. the data and information obtained are used to test taxpayer compliance. to test taxpayer compliance, the government needs to optimize the data that has been received and explore the potential for existing revenues. based on tax revenue statistics for the period 2018-2020, it can be seen as follows: figure 1.1 tax revenue https://www.kemenkeu.go.id/media/18316/advertorial-rapbn-2022.pdf from figure i.1 above, it can be seen that for the 2017-2018 period, tax revenues experienced an average growth of 9.89%(2017) 10.24%(2018), which was influenced by, among other things, 2017 2018 2019 2020 pertumbuhan % 4,6 13 1,8 16,9 rp triliun 1343,5 1518,8 1546,1 1285,1 % thd pdb 9,89 10,24 9,76 8,33 0 200 400 600 800 1000 1200 1400 1600 1800 a xi s ti tl e https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 129 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc increased economic performance and prices of key commodities. from 2019 to 2020 tax revenues contracted to 9.76%(2019) 8.33%(2020), as a result of the economic slowdown and the provision of incentives. the scheme for exchanging financial information emerged along with the prevalence and variety of tax avoidance practices through transactions across jurisdictional borders. the tax authorities have been running the aeoi since 2018. the performance of tax revenues in 2020 was lagging due to the effects of the covid 19 pandemic, so that although the government is aggressively carrying out activities in this series of policies related to aeoi, from the point of view of tax revenues there is no visible result (in the form of an increase in tax revenues that significantly since the implementation of aeoi in 2018). swarum added to the statement of the director of international taxation of djp john hutagaol who said that 2020 will be the third year for indonesia to participate in the aeoi. aeoi continues to be implemented despite being hampered by the covid-19 pandemic. indonesia will receive aeoi data from 103 jurisdictions and will instead send aeoi data to 85 jurisdictions. john said the exchange of information was delayed from previous years due to the covid-19 pandemic, because it normally starts in august. john hutagaol said that the exchange of financial information through the aeoi scheme was delayed because the financial services authority (ojk) relaxed the data collection time for 2 months. this policy is in response to the current spread of the covid-19 pandemic. furthermore, the dgt of the ministry of finance will send the aeoi data to partner jurisdictions no later than the end of november 2020 (atpetsi, 2020). executive director of pratama-kreston tax research institute (tri) prianto budi saptono revealed the lack of dgt in uti lizing aeoi data. according to him, the aeoi data obtained by dgt also only includes financial data and does not include property data and crypto currency investments. in addition, the tax authorities still find it difficult to match the aeoi data due to several factors. first, the data does not have a taxpayer identification number (npwp) or a population identification number (nik). second, the data does not inform the address of the account holder abroad. "in the end, the tax authorities have not been able to optimize the aeoi data for 2018 and 2019 so they cannot pursue offshore tax evasion actors," (siswanto, 2022). 3. tax advoidance & tax evasion the practice of tax avoidance is divided into two parts, namely tax avoidance and tax evasion, and whatever the practice of tax avoidance is never morally justified, there is an old adage "no one likes to pay taxes" but all agree that taxes are very important and beneficial for the public interest. what is called voluntary in taxation means volunteerism that arises because of coercion. and one of the main causes of tax avoidance is the existence of asymmetric information, which is a condition where one party does not have information from the other party. the confidentiality of the information data system was initially very well maintained so that the dgt could not access taxpayer data at financial institutions, but with the existence of government regulation in lieu of law (perpu) no. 1 of 2017 concerning access to financial information for tax purposes which is clearly related the exchange of this information, the dgt can access taxpayer information data from banks or partner countries. this condition can be minimized to prevent tax evasion/evasion. because it is clear that there are rules, there are sanctions and fines if there are taxpayers who do tax avoidance/evasion. https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 130 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc aldo explained that one of the main causes of tax avoidance is the existence of asymmetric information, which is a condition where one party does not have information from the other party. in this case the tax authorities do not know the information stored by the taxpayer. with the aeoi, this condition can be minimized because there are clear rules, there are sanctions and fines if there are taxpayers who do tax avoidance/evasion. dgt regulates this information exchange system by socializing and collaborating with financial institutions and partner countries with the cts system for the use of aeoi information so that tax evaders know that dgt is acting on any behavior that violates the rules. so far, according to aldo, the aeoi system has been implemented in indonesia, and its implementation is quite effective and according to international standards because this information is very difficult for us to obtain before but now it is easier, and information for aeoi we get directly through the cts system every year. this is direct information from partner countries, not information from institutions that are not clear. but even if we make it even better, it is related to the completeness of the data because if we can improve it, we can add a tax review, but that is beyond the control of the dgt because the completeness of the data is determined by the sending party, that is a bit difficult to be resolved through multilateral discussions. but if it could be done it would increase very drastically.” currently, indonesia is undergoing peer review of assessment documents for assessment of beps minimum standards from the oecd. and if there is something you want to improve, it is in terms of completeness of data from partner countries. in terms of the imposition of tax sanctions on the taxpayer's actions to carry out tax evasion, basically tax evasion is characterized by tax avoidance that is carried out illegally in the sense that it is contrary to the applicable tax provisions. there have been many examples of actors carrying out this tax evasion practice which have been reported in mass media/social media print media, and this includes the case of the asian agri group (aag) as an example of tax evasion which is subject to prison terms for the perpetrators and payment of embezzled taxes to the state along with imposition a 100% fine. 4. automated information exchange inhibiting entities a. weaknesses: the implementation of aeoi in indonesia has a great opportunity to improve taxpayer compliance along with tax revenues. however, the aeoi also has many obstacles and challenges, especially since indonesia is a developing country that continues to strive to meet global standards for exchanging tax information between countries, as explained below: 1) the readiness of the internal system in each country is different and the capacity of each country is different and can affect the quality of data information. aldo said that the weakness of automatic exchange is the incomplete or unequal data completeness of the npwp system from partner countries, so that dgt has difficulty because there is no control feature on the system in pairing the npwp. we can't call it a problem spontaneously because we didn't ask for it, so if it's spontaneous, it's only voluntary from each partner country that has the data. and even that is only a one-sided assessment and we cannot request data from partner countries again if it is spontaneous because it is voluntary. maybe it's like this, indonesia has x data owned by singaporeans, this seems useful for singapore and we send it spontaneously, although not necessarily the data is useful for partner countries, maybe the problem can be like that. according to the sender, it had an impact but it didn't. weaknesses https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 131 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by request or by request from partner countries there is a sample letter sent by the singapore tax office asking us and sending the letter and this request does not meet the requirements we cannot process, for example the letter is incomplete or there is no indication of tax evasion so we return the letter to singapore as well with a letter that we send to our country if it is not complete it will be returned to us. and maybe the problem with the delivery period for the exchange of information on request is the 90day period for receiving back from partner countries which sometimes becomes an obstacle. because there are still partner countries that provide information beyond the 90 days requested by the dgt for examination or trial purposes, despite the rules the law has stipulated the time period for answering. 2) this was confirmed by swarum who explained “first, there are eoi document formats between countries that are still not standardized. second, the utilization of data exchange is still not optimal. third, data storage and maintenance requires high costs, thereby increasing the administrative cost structure. meanwhile, swarum agrees with the news from the independentnews.com editor who published an article entitled "highlighting the great challenges of automatic tax information exchange" (https://independennews.com/ highlighting-tantangan-besarpertukaran-information-pajak-auto/ on 2 jan 2022), there are four obstacles and challenges in the aeoi, namely: first, the reciprocity of information exchange (reciprocity). second, banking tends to be resistant to data access. third, the lack of technology that supports aeoi. fourth, the complexity of conversion of tax revenue data. in more details is described below: first, the demand for reciprocal information exchange (reciprocity): in the implementation of aeoi, one of the requirements set is that there is a reciprocal exchange of adequate information according to global standards. this shows that if a country receives information automatically, then that country needs to return the favor to the other country who sent the information. consequently, in this case, a country is not required to provide information to its partner country if the partner is unable to obtain and provide similar information in return according to its law and administration. indeed, basically, the principle of equal reciprocity is a fair agreement, but on the other hand, it can burden some developing countries, including indonesia, to participate in the aeoi system. indonesia is required to undergo a major re-priority and rapid effort to implement the necessary systems that allow it to automatically provide its treaty partners with information to meet standard reciprocal conditions. second, banking tends to be resistant to access to data: financial data is very sensitive information, so that in order to disclose it, it is necessary to guarantee that the tax authorities will not leak or use the information other than for tax purposes. the indonesian government has corrected regulations and prepared technical regulations through law number 9 of 2017 concerning stipulation of government regulations in lieu of law number 1 of 2017 concerning access to financial information for tax purposes which regulates breaches of bank secrecy. but unfortunately, there are still banks that tend to be resistant to accessing customer data for tax purposes. the banking side is of the opinion that customer data is something that is highly confidential in nature and emphasizes that their resistance in disclosing customer data for tax purposes is well-founded and is based on the banking law. https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 132 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc third, lack of technology that supports aeoi: as a member of the g20 countries, indonesia has committed to adapting the standard automatic exchange of financial account information in tax matters system which was implemented in 2018. the main focus in the implementation of the automatic exchange of financial account information in tax matters is the output of a database that is systematic and has global coverage. in line with the program, the government must have an adequate database system so that it can be exchanged with other countries. information technology owned by a country must meet confidentiality and safeguard standards. in its design, the aeoi was compiled by oecd member countries, a collection of developed countries that already have advanced administrative systems and infrastructure. as a result, there is an assumption that the standards drawn up are not in favor of developing countries, especially in terms of technological readiness required for the implementation of aeoi (panayi, 2016). this is not an easy thing for developing countries, especially indonesia because of limited infrastructure. therefore, indonesia as a developing country requires time, large costs, and quality resources to be able to compete with the capabilities of developed countries in the aeoi. fourth, the complexity of converting tax revenue data: recently, the directorate general of taxes (dgt), which was initially quite confident, is confused about following up on taxation data or information obtained from hundreds of partner jurisdictions. the director general of taxes, suryo utomo, in his presentation some time ago expressed his complaints regarding the many challenges to follow up on aeoi data. "unfortunately, most of the data obtained from partner jurisdictions are not accompanied by npwp, complete address or home abroad, and the name of the account holder is not found, it only includes financial data," said suryo. in addition, according to him, the data obtained by the dgt also does not include property and investment data in the form of cryptocurrencies. the minister of finance claims to have pocketed a lot of financial data since 2018 through aeoi, but unfortunately, these financial data cannot be directly converted into tax revenues. the tax authorities need to go through several verification processes which are quite complicated and lengthy. from data obtained through the directorate general of taxes, the funds that have been raised through aeoi in indonesia since 2018, amounted to idr 2,742 trillion from participating jurisdictions (inbound) and idr 3,574 trillion domestically. in addition, there are still approximately 5 trillion rupiah from the pairing of financial balances with cash equivalent assets which are still in the category of a complicated verification process. therefore, the government needs to continue to improve the global standard system of automatic tax information exchange, so that the opportunity for tax revenue is not just a breath of fresh air. b. threats (threats) there are still acts of tax avoidance/evasion by storing assets in foreign banks in every country, and detecting fraud is a challenge for dgt. aldo explained that in 2017 and below, the practice of tax avoidance was still rampant by evading taxpayers because there were still loopholes in the information regulations that were used before there was an automatic exchange of information or it was still on request. because this eoi by request can only be done while there is an inspection. there are still modes or potentials for tax avoidance and embezzlement by taxpayers, especially foreign taxpayers/multinational companies, which pose a threat to aeoi's success in boosting tax revenue. 5. automated information exchange encouraging entities https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 133 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strength: this aeoi has a fairly strong legal force and in its implementation is also supported by the existence of a binding regulation. in terms of the implementation of aeoi carried out by the directorate general of taxes, it is one of the measures used as a basic force to avoid tax evasion. aldo revealed that the regulation of law no. 1 of 2017 which has been changed to the law no. 9 of 2017 is a legal force for indonesia to carry out this automatic exchange of information, and there is also the regulation of the ministry of finance 039/pmk.03/2017 as implementing regulation. this is reinforced by swarum as a consultant/academic that the automatic implementation of aeoi in indonesia effectively since 2018 has been legally implemented, supported by legal instruments in the form of law number 9 of 2017 dated august 23, 2017, concerning stipulation of government regulation in lieu of law number 1 of 2017 concerning access to financial information for tax purposes to become law. a. this also marks the end of the era of banking secrecy, especially for tax purposes in indonesia readiness of the “common transmission system (cts)” information exchange system: the system that supports this aeoi mechanism is the “common transmission system (cts)” where every year, taxpayer accounts between countries at certain times are periodically sent through this cts system. this system is systematic. , and continuously from the country of income source or place of storing wealth to the resident country of the taxpayer. with this system, taxpayers who have opened accounts in other countries will be able to be tracked directly by the tax authorities of their country of origin. in the aeoi standard there is a common consensus to open and provide access to financial information in the country to the tax authorities of other countries and otherwise obtain access to financial information abroad automatically. b. opportunities (opportunities): to minimize tax avoidance/evasion, the director general of taxes can also supervise and explore potential taxation through banking transactions conducted by taxpayers abroad. so far, the request of the director general of taxes to request banking data has always been met with regulations regarding banking secrecy. aldo said that “this aeoi is an opportunity, especially because previously we didn't get any information and now we can get it routinely for the effectiveness of tax avoidance. for example, there are indonesian citizens who have accounts in australia and are not reported. with the aeoi, we can get information automatically from other countries as well. and this is an opportunity for dgt. it could also be a tool to explore the potential to increase state revenue if the taxpayer really hides his wealth.” this is reinforced by swarum who explained that “in general, first, the opportunity for additional sources of new tax revenue as a result of exploring the potential of eoi. second, the momentum for dgt to fix the issue of the rush of third-party data, including its management, to support the achievement of the state revenue target. third, the ability to see the economic structure outside of basketball so as to increase the effectiveness of policies that can be applied to attract the shadow economy sector into the official economy” (maydiana, 2022). conclusion 1. the implementation of the automatic information exchange (aeoi) in minimizing tax avoidance and tax evasion so far has been quite effective according to international standards, although there are still many complete data sets that have not been fulfilled by partner countries such as singapore, resulting in the data provided by the partner country cannot used https://www.ilomata.org/index.php/ijtc automatic exchange of information review from the perspective of its effectives in minimizing tax evasion pohan, rahmi, arimbhi, and junaidi 134 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by the indonesian tax authorities. however, aeoi's performance has not yet provided optimal results in increasing tax revenue, especially in 2020, which is hampered by its progress due to the covid 19 pandemic. meanwhile, it is anticipated that the exchange of information (including aeoi) cases solution might be hampered in the tax court due to differences in perceptions between the tax authorities and the tax court in handling cases related to the case of multinational companies in indonesia which are also taxpayers in partner countries. 2. the aeoi inhibiting entity is the readiness of the internal system in each different country and the capacity of each country is different regarding the completeness of data from partner countries and can affect the quality of data information even though the data provided is well verified. above that, there are four obstacles and challenges in aeoi, namely: first, reciprocity demands for information exchange (reciprocity). second, banking tends to be resistant to data access. third, the lack of technology that supports aeoi. fourth, the complexity of conversion of tax revenue data. 3. the entity that drives this information exchange in minimizing tax evasion is the existence of an information exchange system called the “common transmission system (cts)”, where every year the accounts of taxpayers between countries at a certain time are periodically sent through this cts system. in addition to having a fairly strong legal force, the implementation is supported by the existence of a binding regulation. recommendation 1. one of the solutions suggested by the tax justice network regarding reciprocity is staged reciprocity. this is done by setting aside the reciprocal requirement for developing countries at an early stage i.e., the standard will initially focus on the transfer of information, not the exchange of information with developing countries. developing countries will be given a certain grace period to build their capacity to finally meet the reciprocal requirements. 2. to anticipate differences in perceptions between tax court judges and the tax authorities, first, it is necessary to have ongoing audits of auditors and monitor the results of such education; second, a comparative analysis is carried out to improve the rules for future examinations; third, for the examiner to complete the findings of the examination with valid and relevant supporting evidence; fourth, for the dgt to revise the audit rules so that they are in line with the kup law and the tax court law; fifth, for the dgt to strengthen the legal basis for the examination and the legal basis for settlement at the level of objection (aritonang, 2020). 3. the readiness of the internal system in partner countries regarding the completeness of data from partner countries must be further improved, must be resolved multilaterally if there is no completeness of data from this partner country. there are indications/allegations that partner countries are not transparent in providing information to the indonesian tax authorities. 4. in addition to the need to provide guarantees for the confidentiality of banking data and detailed information regarding the mechanism for imposing sanctions for non-compliant financial service institutions, indonesia also needs to develop capacity to deal with aeoi. therefore, material and technical support from the oecd such as training, it infrastructure and assistance with legal and regulatory changes is urgently needed to help developing countries, such as indonesia to benefit from automated exchange systems. 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(2015). the hidden wealth of nations: the scourge of tax havens (1st ed.). the university of chicago press. https://press.uchicago.edu/ucp/books/book/chicago/h/bo20159822.html https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 328-338 328| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency rahadi pratomo singgih1, siffa fitri anisa2, mira permatasari3 123institut ilmu sosial dan manajemen stiami, indonesia correspondent: rahadipratomo@gmail.com1 received : june 5, 2022 accepted : july 15, 2022 published : july 31, 2022 citation: singgih, r,p. anisa, s, f., permatasari, m (2022). analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency. ilomata international journal of tax and accounting, 3(3), 328-338. https://doi.org/10.52728/ijtc.v3i3.533 abstract: this study analyzed the implementation of entertainment tax collection policies to increase local tax revenue at the regional revenue agency of dki jakarta. this study uses a qualitative descriptive method with the object of research based on primary data (interviews) and secondary data (field research). this study uses the concept of edward iii's theory, namely communication, resources, disposition, and bureaucratic structure. the results of this study indicate that the entertainment tax policy is not optimal because there are still constraints in the communication aspect, namely the lack of direct socialization with entertainment taxpayers, which causes a lack of understanding of taxpayers about local taxes from the information aspect there are still problems with entertainment providers who have not been registered and registered businesses. entertainment as a tax object, as well as the lack of human resources in implementing policies, can affect entertainment tax revenues. keywords analysis, policy implementation, entertainment tax, tax revenue of dki jakarta. this is an open access article under the cc-by 4.0 license. introduction as one of the efforts, taxes are used by the government to realize a nation's or state's independence as a development financing that is useful for the interests of the community and common interests (egbunike et al., 2018; herawati et al., 2018; lahiri & yang, 2021; suárez serrato & zidar, 2018). indonesia has income from various sources, which comes from tax collection. indonesia is also a developing country. tax collection is the largest source of state and local taxes (handoko et al., 2014; latofah & harjo, 2020; priyatin & rahmi, 2022). not infrequently, the problem of the lack of knowledge of taxpayers on tax collection and the lack of awareness of taxpayers is an obstacle even though tax collection is the largest source of state treasury income (adi, 2020; asshidiqi & irawan, 2021; rahmadhani et al., 2020). although tax collection is the largest source of state treasury income, it makes taxpayers unwise by not paying taxes to the state (kasper et al., 2015; perdana & dwirandra, 2020; reck et al., 2022). https://www.ilomata.org/index.php/ijtc mailto:rahadipratomo@gmail.com https://doi.org/10.52728/ijtc.v3i3.533 analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 329 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the source of tax collection income from various sources comes from local taxes (darwin, 2010; holm-hadulla, 2020; zhai et al., 2021). regional tax is a mandatory contribution to the region that is owned by a person or entity that is coercive based on the applicable laws and regulations and is used to finance the administration of regional government and regional development for the prosperity of the people (mardiasmo, 2006, 2016, 2018). based on law number 28 of 2009, local governments set local taxes and regional retributions. for this, the government manages the types of local taxes, such as provincial and district/city taxes. the government acts decisively to classify the authority to collect taxes, namely regional taxes. for the regions, taxes play an active role in financing the running of government and regional development as tangible evidence. to increase sources of income, people must also be able to understand the collection needed by the region, namely to improve welfare in the city of dki jakarta (dewanti, 2021; lovianna & rahmi, 2022; prawitra & lutfi, 2021). one of the taxes managed by local governments is the entertainment tax; the entertainment tax is a potential source of income in our country. one of which is the entertainment tax. the entertainment tax contributes to local revenue (pad) because the income from the entertainment tax is one source of local government funding to support the development of the city of dki jakarta (mulatsih et al., 2021; noviyanti, 2021; safitri, 2021). with entertainment, it will affect the increase in entertainment tax revenues, one of which is the entertainment tax, which later will be used to support the welfare of the community with better development and finance regional administration (capistrano, 2020; matti et al., 2022; octaviany et al., 2021). in the regional revenue agency, various entertainment taxes are levied, such as movie shows, beauty contests, karaoke, exhibitions, bodybuilding, circus, acrobatics, billiards, fitness centers, sports competitions, and reflection. night market, fishing spot/pond, spa, and others. the number of entertainment venues is increasing along with the number of residents left in dki jakarta (dantes & lasminiasih, 2021; farhah et al., 2021; patriandari & amalia, 2022). entertainment as a necessity is essential for life in society. various types of entertainment are found in the jakarta area; entertainment also plays a critical role in the daily life of residents in dki jakarta. and in its development, the entertainment tax plays a significant role in a business. every city government every year certainly has a target for entertainment tax revenue as a source of regional income. still, sometimes these targets and realizations do not run perfectly every year. of all the types of local taxes levied by the dki jakarta provincial government, one interesting observation is the entertainment tax collection. this is because jakarta, the state's capital city and the government's business center, should be able to rely on revenue from the entertainment tax sector to contribute to local income. the realization of entertainment tax revenue in 2016-2019 has increased, and some has decreased. in the last four years, the achievement of the revenue target occurred in 2016-2019, where achieving the target occurred in 2016, which exceeded the target above 109.93 %, while those who did not reach the target happened in 2017, 2018 which was only realized around 94,42% in 2017 and 96.33% in 2018. meanwhile, in 2019, entertainment tax revenue achieved 101.07% or exceeded the set target. however, compared to the target and realization of entertainment tax revenue in 2018, the ratio of the target and realization of revenue in 2019 decreased. this indicates that the entertainment tax collection has not been running optimally in dki jakarta province. https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 330 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc entertainment objects in dki jakarta have increased yearly; in 2016 there were 732 objects up to 847 in 2017. in 2018 it also increased to 992 objects and became 1191 objects in 2020. this proves that the potential for tax revenue from the entertainment sector in dki jakarta is enormous in achieving the entertainment tax revenue target in dki jakarta. the spread of entertainment to buffer areas is one of the factors causing the 2018 entertainment tax target not to be achieved in the dki jakarta provincial government. in addition, the level of compliance and fairness of payments from taxpayers that are not yet optimal also has a negative impact. the head of the dki jakarta provincial tax and levy agency, faisal syafruddin, said that the existence of closed entertainment venues also impacted entertainment tax revenues. where the closure was carried out due to violations in drug trafficking and adult entertainment, the authors found that objects in the entertainment sector do not report their taxes correctly, and many entertainments appear at night but are not recorded. some have not been recorded and have not been registered as taxpayers. there is also such a low level of compliance and obligations of taxpayers. in several places, cases of law violations were found, such as being used as a place for drug trafficking and adult entertainment so that it could negatively impact tax revenues from the entertainment sector. entertainment tax is one source of local tax revenue that significantly contributes to local income, considering the number of entertainment venues in dki jakarta. the potential of the entertainment tax is enormous, but because the management of the tax is still far from what is expected, the entertainment tax revenue has not been maximized. for this reason, efforts are needed to be made by local governments, namely tax officials to maximize entertainment tax revenues, such as increasing supervision on entertainment management or entertainment taxpayers who have not fulfilled their obligations in paying taxes and reaffirming policies on entertainment taxes. there are still many taxpayers who do not have the awareness and compliance to pay their taxes and entertainment taxes that have not been collected because they have not become taxpayers or are not registered as taxpayers and deposit their taxes, and also entertainment venues that are closed due to cases of law violations. so that the revenue from entertainment tax in dki jakarta province has not been maximized and has not provided a significant increase in revenue for the regional government. to measure a successful policy, the author takes the theory from george c edward iii; george c edward iii says that four entities determine success in implementing a policy. these entities cooperate simultaneously and influence each other to achieve a goal. therefore it is essential because these four entities are the key to the success of a policy. the definition of implementation, according to mazmanian and sabatier (wahab, 2008: 68) that: "implementation is what happens after a program is implemented or formulated, namely events and activities that occur after the process of ratification/legislation of public policies, whether to administer it as well as efforts to have a certain impact on society or events." meanwhile, according to edwards in winarno (2012: 177), policy implementation is one of the public policies, between policy formation and policy consequences for the people it affects. the problem is the target of the policy then may fail even if the policy is implemented very well. meanwhile, a policy that has been planned very well may fail if policy implementers do not implement the procedure correctly. in reviewing policy implementation, edwards begins by https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 331 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc asking two questions: what pre-conditions are needed so a policy implementation can be successful? and what are the main obstacles that cause a policy implementation to fail? edwards tries to answer these two essential questions by discussing four crucial factors or variables in implementing public policy. these factors or variables are communication, sources, tendencies or behaviors, and bureaucratic structure. edward proposes four factors that play an essential role in achieving successful implementation. the factors that influence the success or failure of policy implementation are communication factors, resources, disposition (disposition), and bureaucratic structure (bureaucratic structure) (edward in widodo 2011, 96-110). method the research approach is a method or method for conducting research. in this study, the author uses a qualitative approach; the definition of qualitative research methods according to sugiyono (2012: 9): qualitative research is a research method based on the philosophy of postpositivism, used to examine the condition of natural objects where the researcher is the key instrument. data collection is done by triangulation (combined) data analysis is inductive qualitative and research results emphasize more on meaning than generalization. qualitative research is an investigation process to understand social or human problems, based on creating a holistic picture formed with words, reporting informants' views in detail, and arranged based on a scientific background (natural setting). through qualitative research, researchers can identify subjects and feel what they experience in everyday life. the selection of this qualitative method aims to describe in detail the extent to which the effort to implement the entertainment tax collection policy increases local tax revenues at the dki jakarta regional revenue agency. the researcher will analyze the implementation of the entertainment tax collection policy in dki jakarta province and whether it has reached the operational standard or not in the performance of entertainment tax collection policy as an object of research by describing the extent of the implementation of this policy in the field and the impact of implementing this policy in dki jakarta province. data analysis techniques are used in data collection, reduction, presentation, and conclusions. informants in this study consisted of tax officials from the regional revenue agency, tax officers from the regional revenue and revenue unit, taxpayers, and academics. data collection techniques were used using interviews, observation, and documentation procedures. result and discussion implementation of the entertainment tax collection policy to increase local tax revenue at the dki jakarta regional revenue agency to increase dki jakarta's entertainment tax revenue, there is nothing wrong with implementing policies made by the dki jakarta provincial government. this can be seen from entertainment tax revenues in 2016 which exceeded the target of 109.93% or 769,540,265.13, then in 2017 entertainment tax revenues only reached 94.42% or 755,3799,514,979, in 2018 the achievement of entertainment tax revenues was only 96.33% or 867,004,115,175, and in 2019, entertainment tax revenues reached 101.09% or 859,061,073,573. and for the contribution of entertainment tax to increase revenue to local taxes from 2016-2019, namely for the realization of local taxes that https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 332 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc has increased every year, 2016 the percentage of entertainment tax contributions to local taxes was 2.43%, but in 2017, the percentage of entertainment tax contributions the regional tax decreased by 2.07% because the realization of the regional tax increased compared to 2016 and the entertainment tax realization decreased in 2017. in 2018 the percentage increased by 2.32% due to the realization of local and entertainment taxes. the increase from the previous year. for 2019 the percentage decreased by 2.13% because the realization of local taxes had increased significantly while the realization of entertainment taxes had decreased from the previous year. from these results, it can be concluded that the entertainment tax revenue is inconsistent with the year in the realization of entertainment tax revenue. it happened because of several factors. therefore, the implementation of policies was used to increase entertainment tax revenues. so the researcher uses the george c edward iii concept, namely policy implementation, which suggests that four factors influence the success of policy implementation, namely communication, resources, disposition, and bureaucratic structure, which will be explained as follows: a. communication excellent and effective policy implementation requires communication, namely the relationship between taxpayers and policy implementers. regional revenue agencies have attempted to carry out the process of delivering information to policy implementers to understand what are the objectives, content, directions, and target groups of policies, so that policy implementers prepare any matters relating to policy implementers in the context of implementing various entertainment tax collection policies that have been carried out. method. based on the results of interviews conducted at the dki jakarta regional revenue agency, the implementation of approaches made to increase tax revenue, several things are done, namely by communicating which is applied using socialization and also providing such as infographics and videographics so that taxpayers are more obedient in paying their taxes and conducting socialization. directly or online to taxpayers. the existence of socialization is directly or indirectly supported by the presence of socialization media such as infographics and videographics so that it can be understood by taxpayers so that taxpayers better understand tax collection procedures and tax supervision. in communication, information transmission, clarity of information, and data consistency are also aspects. in the transmission aspect, the implementation of the entertainment tax policy requires that a policy be conveyed to the implementers and the target group, namely the entertainment tax taxpayers, directly or indirectly. submission of information is good enough, although there are still obstacles in implementing information media tax officials use for taxpayers, namely through socialization or infographics and video graphics. according to guidelines, tax officers were given socialization to understand tax collection procedures and entertainment tax supervision. hence, taxpayers are more obedient in paying taxes. that of the six informants said that the information submitted by the implementers of the policy must be clear and not confusing to avoid misunderstanding of communication or miscommunication between the implementers and the taxpayers. in the aspect of clarity, this aspect requires that all parties, both implementers and target groups and parties with direct interest in the existence of the policy, can understand the intent of the https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 333 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc content and objectives of the policy as well as the substance of the policy. if the policies are to be implemented as desired, the implementing instructions do not have to be accepted but must also be clear. b. resource resources in an organization to carry out policy implementation will not be effective if the implementers lack the necessary resources to implement the policy. a lack of resources will result in ineffective policy implementation. these resources include adequate people in terms of numbers, abilities, precise information, infrastructure and facilities, and authority. implementing resources-related policies is still insufficient, so it requires recruiting resources (staff). regional revenue agencies are still inadequate in human resources. especially in the supervision of the entertainment tax because the entertainment tax sector operates operating hours at night, making it difficult for officers to supervise. there must be recruitment of human resources so that performance in the implementation of the entertainment tax policy can be improved. the quality of human resources is seen from the side of the regional revenue agency. the rate is very maximal because they are also quite reasonable in their competence in their respective fields. officers are given training on cases that have occurred by taxpayers so that officers understand the taxpayers' problems, one of which is the entertainment tax. the budget and facilities for implementing policies in regional revenue agencies, service activities, and regional collections are supported by a budget that allows the implementation of policies, so that budget funds have been made as needed for system facilities for payment delivery. reporting is adequate and has been made accessible by reporting and paying. online according to george c edward's theory, human resources include budgetary resources, facilities, information, and authority; human resources have an essential role in supporting successful policy implementation. c. disposition disposition is the character, characteristics, or traits that policy implementers must possess; in this case, they must have honesty and a high commitment to carrying out their duties, functions, and responsibilities. judging from the disposition of the character/nature of the executor must have a good character so that if the officer has a good character, then the taxpayer will be good/welcome. and the implementers must explore the potential for local tax revenues and provide continuous innovation following the provisions of the applicable legislation. in the aspect of disposition, researchers conducted research with six informants about the commitment of the implementers in providing entertainment tax services, then drawn from the six conclusions, namely that the coordination provided by the regional revenue agency was adequate, the implementers carried out according to procedures to offer convenience and exemplary service to mandatory taxes who do not understand and do not understand about the implementation of the entertainment tax policy continuously so that it is improved so that it is even better. following george c edward iii's theory, the disposition of behavioural tendencies or characteristics of policy implementers plays an essential role in realizing policy implementation with goals or objectives. the critical factors that must be https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 334 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc possessed are honesty and commitment. this attitude greatly influences the implementation of policies. d. bureaucratic structure the bureaucratic structure includes aspects of fragmentation and standard operating procedures. according to the six informants, the bureaucratic system is following the provisions of the governor's regulation number 250 of 2019 concerning the organization and work procedures of the regional secretariat or is following the requirements of the legislation, according to sops. the second indicator that influences policy implementation is fragmentation. fragmentation, namely the distribution of responsibility for a policy to several different agencies that require coordination, can be seen from the structure of the implementing bureaucracy that must have good coordination with officers and main functions in the implementation of entertainment tax policies and must maintain as much as possible maximally in utilizing public service units. and can make it easier. the second nature of the bureaucratic structure follows edward's theory that it has two indicators, namely standard operating procedures and fragmentation, which is the responsibility of a policy to several different agencies, so it requires coordination. inhibiting entities based on swot theory that is encountered in the implementation of dki jakarta's entertainment tax collection policy every regulation or policy must have an obstacle/disadvantage, as with rules related to the implementation of the entertainment tax policy, which has several obstacles, while the challenges are in the weaknesses and treat. 1. weaknesses based on secondary data from researchers, the first weakness is the lack of human resources to carry out supervision, and there are still taxpayers who do not comply with their obligations. the second weakness is in the implementation of the entertainment tax collection policy. namely, there are still many entertainments that are not detected or known to exist, and sometimes in the entertainment, there are cases of law violations. the third weakness is the existence of taxpayers who have never received socialization and the lack of officers' information, so taxpayers do not know how to pay, report and register as taxpayers. in carrying out the implementation of the policy, of course, there are obstacles faced. the problems that occur are first because of the lack of human resources to carry out supervision, and there are still taxpayers who do not comply with their obligations, which becomes an obstacle in collecting entertainment taxes. for example, there are still many entertainments that are not detected or whose existence is known, and sometimes in entertainment, there are cases of law violations. then the taxpayers themselves are taxpayers who have never received socialization and lack information from officers, so they do not know how to pay, report and register as taxpayers. 2. treat (threats related to the implementation of the entertainment tax collection policy. if the taxpayer may not pay his obligations within 3 or 4 months, upppd will send proposals to the agency, such as sticking stickers and installing signage to tax arrears. the second threat is that there will be letters of appeal, warning letters, installation of tax https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 335 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc arrears stickers, collection by forced letters, and confiscation of assets. the third threat is a fine that is quite large, and there will be a warning that the officer will give to taxpayers who have not paid off their tax obligations. the driving entity based on swot theory in the implementation of the entertainment tax collection policy in creating the entertainment tax collection policy, the regional revenue agency has a driving entity that becomes the benchmark to implement the policy well in the field. among them is a benchmark that must be the goal of the regional revenue agency to increase entertainment tax revenue. it is related to entertainment tax revenue as a material to be an encouraging or supporting factor by regional revenue agencies in planning for the benefit of an agency. a. strength (strength ) the first strength in collecting the implementation of the entertainment tax policy is that when implementing the policy, it must be based on a legal basis for the entertainment tax for the underlying regional regulation, namely number 3 of 2015, which is one of the legal umbrellas. the second strength is legal resources, budget, facilities, infrastructure, and sop support. b. opportunity jakarta to be one of the entertainment opportunities is relatively high; the opportunity collecting entertainment tax that can be obtained in the collection of entertainment tax is the number of entertainment venues that exist so that the chance of entertainment tax revenue can be more significant. the next opportunity is to provide installments in paying entertainment taxes. the existence of many existing entertainment venues can make entertainment tax revenue larger by providing installments in paying entertainment tax conclusion based on the exposure of the results of the research conducted, it can be concluded that the implementation of the entertainment tax collection policy at the regional revenue agency is good but not optimal because from the aspect of communication, namely from the information aspect, there are still many entertainment sector objects that do not report their taxes correctly, a lot of entertainment that appears at night but not recorded and some have not been recorded. socialization can be optimized to increase the knowledge and awareness of taxpayers in implementing the entertainment tax policy. inhibiting entities in collecting policy implementation based on entertainment tax collection, namely the lack of human resources to carry out supervision so that the supervision system is not maximized, and it is difficult to collect data on tax objects that have not been registered, primarily for entertainment tax objects that are hidden or invisible. there are still taxpayers who do not comply with their obligations. , there are still many entertainments that are not detected or whose existence is found out, and sometimes in the entertainment, there are cases of law violations, taxpayers who have never received socialization, and a lack of information from officers so that taxpayers do not know how to pay, report and register themselves as taxpayers. this will be the cause of the failure of regional revenue agencies in realizing tax revenue targets, and it can be seen that the programs being run are not running optimally. the driving entity in the collection of policy implementations based on entertainment tax collection is the number of entertainment venues that can increase local tax revenues as a supporting factor, providing sanctions, namely appeal letters, warning letters, warning https://www.ilomata.org/index.php/ijtc analysis of implementation of entertainment tax collection policy in the order to increase regional tax revenue at the dki jakarta regional revenue agency singgih, anisah and permatasari 336 | ilomata 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(2021). segmented carbon tax may significantly affect the regional and national economy and environment-a cge-based analysis for guangdong province. energy, 231, 120958. https://doi.org/10.1016/j.energy.2021.120958 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1 january 2023 page no. 1-13 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies taufiq akbar perbanas institute, indonesia correspondent: taufiq.akbar@perbanas.id received : october 12, 2022 accepted : january 22, 2023 published : january 31, 2023 citation: akbar, t (2023). the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies . ilomata international journal of tax and accounting, 4(1), 1-13. https://doi.org/10.52728/ijtc.v4i1.594 abstract: firm size is still an interesting topic regarding its role in moderating factors that affect share prices. therefore, the goal of this study is to determine how firm size affects the relationship of profitability, as measured by gross profit margin (gpm), operating profit margin (opm), and net profit margin (npm), on share prices of manufacturing companies in the food and beverage sector from 2016 to 2019. based on the purposive sample technique, 40 observations from 10 companies were chosen. amos 24 software was used to do the investigation using the structural equation modeling (sem) method. in the initial model, it is clear from this analysis that opm and company size significantly affected stock prices. at the same time, there is no significant effect of gpm and npm on share prices. the second model demonstrates that firm size can moderate the relationship between gpm and opm on share prices. however, this study cannot prove that firm size can moderate the effect of npm on share prices. keywords: profitability, moderating relationship, share price, food and beverage. this is an open access article under the cc-by 4.0 license. introduction the development of the business world in recent years has experienced very rapid development. these developments cover various fields of types and forms of business. the capital market is no exception. the capital market is currently experiencing very rapid development and has an essential role in mobilizing funds from people who want to invest in the capital market. the presence of the capital market adds alternative investment instruments for investors to invest their excess funds. according to (hadi, 2015), the capital market serves as a venue for bringing buyers and sellers together. the capital market can be defined as a market that is prepared to trade stocks, bonds, and other sorts of securities (sunariyah, 2011). the capital market serves another purpose, notably that of a middleman. this function demonstrates the vital role of the capital market in sustaining the economy by allowing individuals who lack the capital to interact with those who do. in https://www.ilomata.org/index.php/ijtc mailto:taufiq.akbar@perbanas.id https://doi.org/10.52728/ijtc.v4i1.594 the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 2 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc addition, the ability of people with extra cash (investors) to select the investment options that will yield the best return is another way that the capital market can promote the formation of an efficient allocation of resources. the most fruitful market segments are regarded as those that offer investments with reasonably high returns. food and beverage company is one of the indispensable business sectors for the people of indonesia. in 2020, household consumption to gdp accounted for 57% or more than half. the food and beverage industry contributes up to 23.8% of the gdp. stocks in the food and beverage sector still have future potential, considering that indonesia's current population has reached 270 million people. 70% of the people are at a productive age with a high consumption level (intan, 2021). therefore, the shares of food and beverage companies are still attractive to investors. according to (sartono, 2016), share prices are established through capital market transactions based on the supply and demand for the relevant shares, which are influenced by a number of factors. investors' expectations of the corporation issuing the shares impact share demand. the company's financial performance will influence an investor's high and low expectations. investor expectations rise as a company's financial performance improves. as a result, there will be a demand for the shares, raising the stock price. on the other hand, let us say a company's financial performance is poor. investors will then have low expectations, preventing them from purchasing company shares and causing a decline in the stock price. as indicated by profitability, the company's performance is one of the crucial aspects that might inspire important expectations in investors. there are numerous ways to gauge profitability, one of which is gross profit margin (gpm), a ratio of the gross profit (sales less cost of goods sold) to sales. the operating circumstances of the company are better the higher the gross profit margin since it indicates that the cost of goods sold is comparatively lower than sales. the "pure profit" earned for each rupiah of sales is described by the following metric, operating profit margin (opm). operating profit is referred to as "pure" profit because it is calculated from the company's operating results without taking into account debts like interest payments and tax commitments to the government. the operating profit margin ratio measures a company's performance, similar to the gross profit margin. net profit margin (npm), which refers to the ratio of net profit to sales after all costs, including taxes, have been subtracted, is another metric for profitability. the efficiency of the company's operations increases with the net profit margin. previous studies have been conducted on the relationship between gpm, npm, and opm on share prices. (peranginangin, 2019) found that gpm significantly affects share prices. in contrast, (mahruzal & khaddafi, 2020) get different results, where gpm does not significantly affect share prices. differences were also found related to the findings of the effect of opm on share prices. (mardianti et al., 2019) concluded that opm significantly influences share prices. not so with (peranginangin, 2019) and (dwiyanthi et al., 2021) found that opm results did not significantly affect share prices. in addition, (peranginangin, 2019) and (dwiyanthi et al., 2021) also found that npm did not significantly affect share prices. however, this study contradicts the results of (sudirman et al., 2020) which state that npm significantly influences share prices. https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 3 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc the existence of a moderating variable that diminishes or increases the relationship between the independent variable and the dependent variable can be the source of the inconsistent results of prior research. because business size is believed to affect the association between profitability and share prices, it is included in this study as a variable. (ariesa et al., 2020) discovered under the assumption that large organizations are more trustworthy than small companies. furthermore, many researchers have concluded that company size has a significant effect on stock prices (sitorus et al., 2021; warkula et al., 2022; yuliza, 2018). then, large companies with enormous profitability are preferred over small companies with enormous profitability. as a result, this study aims to ascertain how firm size influences the relationship between profitability and share prices in the food and beverage industry. signaling theory according to signaling theory, businesses would attempt to attract investors by providing them with positive information through financial statement transparency (miller & whiting, 2005). (brigham & houson, 2010) signals conveyed by management in financial reports can affect the market resulting in stock price volatility. accounting-related announcements signal whether a company's prospects are excellent or bad. according to the signal theory, a company's or entity's solid financial performance will affect share prices and stock returns because the corporation can communicate signals or information to outside parties or investors. this signal will assist third parties in gaining insight into a firm's financial health or performance, which will be taken into account when investing in the company's stock. effect of gross profit margin on share prices (hery, 2018), gross profit margin is a ratio used to measure gross profit percentage on net sales. the higher the gross profit margin, the higher the gross profit generated from net sales. this could be due to the high selling price and low cost of goods sold. conversely, the lower the gross profit margin, the lower the gross profit generated from net sales. this could be due to the low selling price and the high cost of goods sold. this ratio will be an assessment for investors to invest their shares in the company. in other words, the better the gross profit margin, the higher the gross profit, and the higher the company's stock price. (peranginangin, 2019) and (mukhtasyam et al., 2020) found that the increase in gpm significantly impacts changes in share prices. therefore, make a hypothesis as follows: h1: gross profit margin has a significant influence on the stock price of food and beverage companies effect of operating profit margin on stock price (gitman, 2009) states that without profit, the company will not attract investors, so the opm ratio is essential for investors to expect stock price performance in the future. a company with a good opm ratio can operate with high efficiency and reduce its cost structure to compete in its products' selling price. this means that the company has a good performance to be used as an investment area. investors that purchase firm shares may be impacted by the improvement in https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 4 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc operational performance, which is reflected in the rise in opm, increasing the business's share price (mardianti et al., 2019). this argument leads to the formulation of the following theory: h2: operating profit margin has a significant influence on the stock price of food and beverage companies effect of net profit margin on share prices the net profit to sales ratio is known as net profit margin (npm). the more profitable the business is performing, the more confident investors are in investing their money in the business. sales reflect the company's pricing strategy and capacity to manage operating costs, making this ratio crucial for operational management. by comparing net income with the number of sales, investors can analyze the percentage of income used to pay operational and non-operational costs and the percentage of dividend payments to shareholders or reinvest in the company (amalya, 2018). this is in line with (hadiyanti & saputra, 2020) statement, which found that an increase in npm significantly impacts increasing share prices. therefore, the hypothesis is formulated as follows: h3: net profit margin has a significant effect on the stock price of food and beverage companies the effect of company size on share prices a company's earnings depend on size (akram et al., 2021). if the business is large-scale, it can produce big profits and give stockholders significant returns (selfiani & yunita, 2021). furthermore, compared to businesses with mostly small-scale assets, large businesses have more excellent prospects for a reasonably long time, are more stable, and are better able to turn a profit. this viewpoint may attract investors and provide the impression that small businesses face greater investment return risk than large ones. the company's share price will rise as more investors choose equities from huge companies (sobana, 2021). this description is used to create the following theory: h4: company size has a significant effect on the stock price of food and beverage companies moderating effect of firm size on the effect of profitability on share prices as explained earlier, the company's size affects investors' perspectives on investing. this can be seen from the risk assessment, the fulfillment of resources to generate profits, and the sustainability of the company. therefore, the company's large size will obscure investors' assessment of the company's profitability performance, where large companies will be able to survive and have more substantial stability than small companies in the future. several previous studies stated that the larger the size of the company, the higher the stock price of (sitorus et al., 2021). this justification leads to the following theory being put forth: h5: company size can moderate the relationship between gpm and share prices of food and beverage companies https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 5 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc h6: company size can moderate the relationship between opm and share prices of food and beverage companies h7: company size can moderate the relationship between npm and share prices of food and beverage companies method research design associative research will be the method used in this investigation. according to (sugiyono, 2017), associative research tries to ascertain the influence or relationship between two or more factors. this study will be able to develop a hypothesis that aids in symptom explanation, prediction, and management. three types of relationships exist in associative research: symmetrical, causal, and interactive/reciprocal. profitability's impact on share prices is examined in this study using an associative causal link with business size acting as a moderating factor. the results of descriptive statistics will be coupled with those of inferential statistics for analysis. the latter will be utilized to gain a general understanding of the data under study. researchers used amos 24 software to prove the associative relationship between variables. this study analyzes the manifest variable to determine the relationship between variables. the steps taken in analyzing manifest variables using amos software begin with creating a research model using path analysis, conducting feasibility testing by looking at the degree of freedom value, and assessing normality and mahalanobis distance (ghozali, 2014). the rule of thumb for the degree of freedom must be more than 1. if the value of the degree of freedom is not more than one, then the probability value cannot be calculated. assessment of normality is done by looking at the critical skewness value with criteria below 2.58 for each variable and the multivariate kurtosis value below 2.58 for all variables. furthermore, the mahalanobis distance is done by looking at the value of the centroid distance with the requirement that the values of p1 and p2 must be greater than 0.000. the path analysis is then carried out in two stages. the first is done without a moderating variable, and then it is done using a moderating variable. population and sampling techniques all manufacturing businesses in the food and beverage industry listed on the indonesia stock exchange from 2016 to 2019 made up the study's population. purposive sampling was the method of sample selection employed in this investigation. the company's lack of delisting and loss over the observation period from 2016 to 2019 was the grounds for choosing the sample using purposive sampling. ten businesses were chosen as being observed over the 2016–2019 period based on the findings of the purposive sampling. forty observations make up the whole observed data. the total population of food and beverage companies on the indonesian stock exchange is 26 companies. however, only 10 companies were selected as samples in this study. https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 6 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc data types and sources this research's data were gathered from a second source or sources of secondary data that researchers needed, making them secondary data (bungin, 2017). the financial and annual reports of all manufacturing companies in the food and beverage sub-sector listed on the idx for the 2016–2019 period served as the primary source for the secondary data used in this study, which can be found at www.idx.co.id. variable operations the link between independent, moderating, and dependent variables was measured in this study. the variables for each of these variables are operationalized as follows: table 1. variable and measurement item variabels measurement sources gross profit margin (gpm) 𝐺𝑃𝑀 = 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑥 100% (sunaryo, 2022) operating profit margin (opm) 𝑂𝑃𝑀 = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑥 100% (peranginangin, 2019) net profit margin (npm) 𝑁𝑃𝑀 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑥 100% (sudirman et al., 2020) company size total assets (warkula et al., 2022) share prices closing price (dwiyanthi et al., 2021) source: data processed by researchers result and discussion descriptive analysis statistics employed in data analysis by describing or characterizing the acquired data is known as descriptive statistical analysis. according to (ghozali, 2018), the objective of this analysis is to give a general summary or description of the data in the variables as represented by the average (mean), minimum, maximum, and standard deviation values. the following are the outcomes of the descriptive statistical analysis: table 2. descriptive statistical analysis results gpm opm npm size share_price mean 37,65 18,70 13,65 15.835.983 4.847 standard error 2,98 2,33 1,81 4.301.591 688 median 31,50 13,00 8,00 2.908.295 2.905 standard deviation 18,85 14,74 11,44 27.205.648 4.354 kurtosis -0,72 0,30 0,20 4 0,33 https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 7 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc skewness 0,53 1,31 1,28 2 1,13 range 67,00 49,00 37,00 95.969.557 15.692 minimum 7,00 4,00 2,00 568.239 308 maximum 74,00 53,00 39,00 96.537.796 16.000 sum 1506,00 748,00 546,00 633.439.316 193.895 count 40 40 40 40 40 source: data processed by researchers path analysis path analysis was made based on the previously formulated hypothetical equation. as mentioned earlier, the equation model with path analysis is done by making two equations: without moderating and with moderating variables. the following is a path analysis model using moderating variables: figure 1. path analysis source: data processed by researchers degree of freedom analysis the analysis of the two models produces a degree of freedom value of 1 for both the path diagram equation one and the path diagram equation 2. this has met the criteria for the number of degrees of freedom so that it can be concluded that the p-value can be analyzed. assessment of normality it generates a critical skewness value for each variable below 2.58 and a multivariate kurtosis value below 2.58 based on the analysis of the two models. the multivariate kurtosis for the first model is 0.25, and the multivariate kurtosis for the first model is -0.197. mahalanobis distance test https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 8 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc the value of the mahalanobis distance generated from the two models has met the required criteria. the lowest value of the centroid distance with the requirements in the first model is 0.039 for p1 and 0.044 for p2. at the same time, the lowest centroid distance in the second model gets the lowest value of 0.019 for p1 and 0.37 for p2. hypothesis test after the model has the necessary degree of freedom, has been evaluated for normality, and has values for the mahalanobis distance, the hypothesis is tested. regression analysis was performed by analyzing the coefficients of each variable and the level of significance of the independent variables on the dependent variable. the p-value is derived from the regression weights' results, whereas the coefficient value is derived from the weights' normalized results. the link between the independent variable and the dependent variable in model one yielded the following coefficient and p-value results: table 3. coefficient value and p-value of the first model estimate p share_price <- gpm -,023 ,830 share_price <- op m 1,561 ,037 share_price <- npm -1,017 ,176 share_price <- size ,398 ,001 source: data processed by researchers operating profit margin and firm size variables are known to be the factors that influence share prices based on the findings presented in table 3. in contrast, neither the gross profit margin nor the net profit margin significantly influences share prices. additionally, operating profit margin and firm size significantly impact the stock price. this result implies that a business's stock price will increase proportionally based on the increasing operating profit and company size. the following are the outcomes of testing the second model: table 4. coefficient value and p-value of the second model estimate p share_price <- gpm -1,223 ,008 share_price <- opm -5,808 ,023 share_price <- npm -1,391 ,585 https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 9 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc estimate p share_price <- gpm_size 1,211 ,009 share_price <- opm_size 9,767 *** share_price <- npm_size -2,047 ,466 source: data processed by researchers it is clear from the second model that gpm has a significant impact on share prices. this is contrast in the first model that shows that gpm has no appreciable impact on share prices. furthermore, the interaction variables of gpm and firm size also significantly influence share prices. this result proves that firm size can moderate the relationship between gpm and share prices. the same result can be seen in opm. there is a change in the value of the p-value, wherein in the first model, the p-value between gpm and share prices is 0.37. meanwhile, in the second model, the p-value increased to 0.023. likewise, the interaction effect of gpm and company size on share prices is significant, namely 0.00. this result proves that firm size can moderate the relationship between the opm variable and share prices. in contrast to gpm and opm, in the first and second models, npm was not proven to affect share prices significantly. likewise, there is insignificant impact on share prices from the interaction variable of business size and npm. conclusion of the moderating effect of firm size on the effect of gpm on share prices this study was unable to show that gpm significantly affects share prices. this finding demonstrates why shareholder emphasis is not concentrated on gpm. according to (hanafi & halim, 2018), gpm measures a company's potential to generate a profit in relation to its own size by deducting cost of goods sold from net sales. however, other operating incomes and expenses are part of operational activities that can increase or decrease the profit margin value that should be considered to generate profits. as shown in table 1, the average value of gpm is greater than that of opm and npm, namely 37.65%, 18.75%, and 13.65%. in proportion, its value is far above the others. this result shows that there is a need to consider other costs other than the cost of goods sold that must be considered in assessing share prices. table 4 shows that firm size can moderate the effect of gpm on share prices. this result shows that companies with more considerable assets have higher investor confidence. so gpm, which initially has no effect on share prices, will influence share prices when interacting with company size. conclusion of the moderating effect of firm size on the effect of opm on share prices this study succeeded in proving that opm has a significant influence on share prices. as explained by (sherman, 2015), the higher the company's operating profit margin, the more reliable the company is in controlling operating costs or maintaining a solid gross profit margin. therefore, investors place opm as a variable that affects the share price of (mardianti et al., 2019). this https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc viewpoint demonstrates that operating income, in addition to the company's relative profit, should be taken into account when evaluating operating performance. this study was successful in demonstrating the importance of business size in moderating the relationship between opm and share prices. as shown in table 3 and table 4, there is an increase in p-value from before the moderating effect is given to after the moderating effect is given. conclusion of the moderating effect of firm size on the effect of npm on share prices this study was unable to demonstrate that npm had a large impact on share prices. this research proves that investors are not concentrated from net income, which has been deducted by other expenses such as interest expense, impairment of receivables, foreign exchange differences, tax expense, and other expenses outside the company's operations which tend to be beyond the company's control. therefore, the value of npm becomes smaller depending on other factors that can affect it, such as the level of solvency (batubara & damayanti, 2021). in line with the results of descriptive statistics in table 1, the proportion of npm is the most minor compared to gpm and opm, namely 13.65%, 37.65%, and 18.75%. this study fails to prove that firm size significantly moderates the effect of npm on share prices. since npm is not the main focus of investors, size also cannot moderate the effect of npm on share prices. that way, the company's size cannot change the investor's focus on npm influencing share prices. conclusion this study established that investors choose share prices for manufacturing firms in the food and beverage sector based on opm. this study cannot establish that gpm and npm have a substantial direct impact on share prices, however an increase in opm may have a considerable impact on an increase in share prices. it is because opm demonstrates the company's capacity to control operating costs and to maintain a healthy gross profit margin. gpm, on the other hand, merely demonstrates that it reflects the business's capacity to get a return on sales relative to cost of goods sold. leverage, which causes the company's interest expenditure, is one of the npm expenses whose triggers are external to operations. the influence of gpm on share prices and the effect of opm on share prices were two relationships between variables that this study shown might be moderated by firm size. this study proves that the size of the company can increase investor confidence. a bigger business offers a better assurance and lesser risk for investors' investment. the ability of firm size to reduce the correlation between npm and share prices, however, was not demonstrated by this investigation. it is because net income has different income characteristics whose value is smaller than the portion of gross profit and operating profit. in addition, net profit has a proportion of other expenses whose trigger factors are outside the company's operational activities, so the size of the company cannot influence the investors' decision to invest. https://www.ilomata.org/index.php/ijtc the role of firm size in moderating the relationship between profitability and share prices of food and beverage companies akbar 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference akram, t., farooq, m. u., akram, h., ahad, a., & numan, m. 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(2018). the effects of earnings per share and firm size to stock price lq45 company listed in indonesian securities. international journal of engineering & technology, 7(4.9), 247. https://doi.org/10.14419/ijet.v7i4.9.21089 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4, october 2022 page no. 448-460 448 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the implementation of hotel tax collection on boarding houses in depok city in 2018-2021 trie andari ratna widyastuti11, dadan hidayat2 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: audra_ran@yahoo.co.id1 received : august 15, 2022 accepted : october 22, 2022 published :october 31, 2022 citation: widyastuti, t, a, r., hidayat, d. (2022). analysis of the implementation of hotel tax collection on boarding houses in depok city in 2018-2021. ilomata international journal of tax and accounting, 3(4), 448-460. https://doi.org/10.52728/ijtc.v3i4.604 abstract: hotel tax on boarding houses is one of the original regional incomes (pad), which is categorized into hotel tax. there are several boarding house owners who do not report and pay for their boarding house business tax, which in this matter does not conform to the regulation related to boarding house tax which is laws number 28 of 2009 regarding regional rax and retribution and regional regulation of depok city number 07 of 2010. the purpose of this study is to find out and analyze the implementation of the hotel tax collection on boarding house in depok city within 2018-2020. the method used in this study is the qualitative method with descriptive research. the result indicates that the implementation of hotel tax collection on boarding houses in depok city within 2018-2020 has not yet been implemented well due to the awareness of the taxpayers is still low, the counseling, education, and socialization that has not yet maximum, and the lack of human resource amount who can handle the hotel tax collection on the boarding house. keywords: implementation, local taxes, hotel tax, boarding house tax. this is an open access article under the cc-by 4.0 license. introduction boarding houses are currently a big business opportunity in the city of depok. this is due to the large number of universities that have been established. every year the influx of students from outside the region increases to study. so that it has an impact on the need for residential facilities which continues to increase, especially the need for boarding houses. this correlates with the boarding house business in depok city which continues to increase due to the high demand for boarding houses. therefore, the depok city government established a policy regarding the collection of boarding house taxes in depok city as regional original income (pad). unfortunately, not all boarding house owners want to carry out their taxation properly and correctly. there are many cases of reluctance of boarding house owners to carry out their tax obligations. this is due to the absence of a counter-achievement that can be directly accepted by the owner of the boarding house, the lack of awareness that only with tax contributions can the mailto:audra_ran@yahoo.co.id https://doi.org/10.52728/ijtc.v3i4.604 the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 449 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc state build and do not understand the existing regulations (prabhaswara, 2015; sugiyanto et al., 2008). based on the law of the republic of indonesia number 28 of 2009 concerning taxes regional and regional levies in article 1 paragraph 21, hotels are facilities that provide lodging/rest services including other related services for a fee, which includes motels, inns, tourism huts, tourism guesthouses, guesthouses, lodging houses and the like, as well as boarding houses with the number of rooms is more than 10 (ten). based on the statement in the act, one of the categories of hotel tax is the boarding house tax (lee, 2014; utami & supadmi, 2020). therefore, the boarding house tax is included in one type of tax from the hotel tax. thus, the services and supporting facilities provided by the boarding house entrepreneur are the object of the hotel tax. as an object of hotel tax, the imposition of taxes on boarding houses is included in the indirect tax category. this means that the owner of the boarding house is a taxpayer who only acts as a tax collector (hapid & hadrah, 2016; mills et al., 2019). the boarding house tax has relatively promising potential which is part of the hotel tax category so that it can increase depok city's original revenue. based on the regional regulation of the city of depok number 07 of 2010 concerning regional taxes. this boarding house tax only applies to boarding houses that have more than 10 (ten) rooms, at a rate of 10% of the total payments made for one month. based on data obtained from the regional finance agency of depok city, the realization of hotel tax receipts for boarding houses in 2018-2021 every year always exceeds the target, this shows that the increase is very significant. in 2020, it decreased from rp. 3,054,927,423 to rp. 1,479,100,048, one of which was due to the covid-19 outbreak which caused some migrants affected by the pandemic to choose not to rent a boarding house anymore and return to their hometown (andrew & sari, 2021; indahsari & fitriandi, 2021; ozdemir et al., 2021; syahnaz, 2021). based on data on the growth of boarding house taxpayers from the regional finance agency of depok city, the number of boarding house taxpayers has increased from year to year. this shows the potential to increase the number of boarding house taxpayers in depok city along with the increasing number of boarding house businesses. problems that occur in the collection of hotel taxes on boarding houses of more than 10 rooms in depok city, including: first, the lack of understanding of the owner of the boarding house will be tax aware, this is proven by the many objects of boarding houses tax of more than ten rooms that have not been reported by the taxpayer. second, the socialization carried out by the relevant agency has not been effective to the owner of the boarding house. and boarding house owners are reluctant to fulfill their obligations to report and pay taxes. sometimes the owners of boarding houses cover up the truth, for example by saying that the number of rooms used is less than ten rooms. meanwhile, the regional finance agency, which handles hotel taxes on boarding houses, is having difficulty registering the owners. this is because the owner is difficult to find. with the problems encountered, researchers are interested in conducting research on "implementation of hotel tax collection on boarding houses in depok city in 2018-2021", with the aim of knowing the implementation of hotel tax collection on boarding houses in the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 450 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc depok city, knowing the obstacles that affect the implementation the policy as well as the efforts made in the obstacles that occur. basic tax theory taxes are public contributions to the state (which can be imposed) which are owed by those who are obliged to pay them according to general regulations (laws) with no return of achievement that can be directly appointed and whose purpose is to finance general expenses in connection with the duties of the state. to run the government (harjo, 2019; mardiasmo, 2016). tax elements 1. contributions from the people to the state. only the state has the right to collect taxes. the contribution is in the form of money (not goods). 2. based on the law. taxes are collected based on or with the force of the law and its implementing rules. 3. without reciprocal services or counter-achievements from countries that can be directly appointed. in the payment of taxes can not be shown the existence of individual contraachievement by the government. 4. used to finance state households, namely expenditures that are beneficial to the wider community local tax regional tax is a tax that the regional government determines and collects taxes based on regional regulations (perda) to be ratified in the regional revenue and expenditure budget and used to finance regional families (harjo, 2019; mardiasmo, 2018; pohan, 2021). types of regional taxes based on law number 28 of 2009 concerning regional taxes and regional levies (pohan, 2021; samudra, 2016), regional taxes are divided into 2 types, namely 1. provincial taxes, consisting of: a. vehicle tax; b. duty on transfer of motor vehicle names; c. motor vehicle fuel tax; d. surface water tax; and e. cigarette tax 2. regency/city taxes consist of: a. hotel tax; b. restaurant tax; the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 451 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. entertainment tax; d. advertisement tax; e. street lighting tax; f. tax on non-metal and rock minerals; g. parking tax; h. groundwater tax; i. swallow's nest tax; j. rural and urban land and building tax; k. fee for the acquisition of rights on land and buildings. hotel tax on boarding houses the boarding house is part of the hotel tax object. as written in law number 28 of 2009 concerning regional taxes and regional levies, that the object of hotel tax is lodging facilities or short-term stay facilities. in terms of lodging houses, it includes boarding houses with ten or more rooms that provide facilities such as lodging houses (bahmid & wahyudi, 2018; hadi, 2021; noviyanti, 2021). accommodation facilities/short-term stay facilities include: tourism huts (cottages), motels, tourism guesthouses, hostels, inns, and lodging houses. based on the explanation above, it can be concluded that the boarding house is part of the hotel tax object which in its journey must be taxed (octaviany et al., 2021; safitri, 2021). tariffs and calculation of taxes on boarding houses according to the regional tax service agency, the cost of tax rates varies and is adjusted to the policies of each region. the hotel tax rate for the boarding house category is regulated in law number 28 of 2009 and based on the depok city regional regulation number 07 of 2010 concerning regional taxes. this boarding house tax only applies to boarding houses that have more than 10 (ten) rooms, at a rate of 10% of the total payments made for one month. implementation there are six variables that affect implementation performance (dye, 2017; edwards, 1980; subarsono, 2019; van meter & van horn, 1975), namely: a. policy standards and objectives the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 452 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policy performance is an assessment of the achievement of policy standards and targets that have been set at the beginning. b. human resources refers to how much human resources support to implement a program or policy c. communication between organizations procedural mechanisms designed to achieve program goals and objectives. d. characteristics of executing agent indicates how much the carrying capacity of the organizational structure, developing values, relationships and communication occur in the internal bureaucracy. e. implementing disposition indicates that the attitude of the implementer becomes an important variable in policy implementation. how democratic, enthusiastic and responsive to the target group and the environment are some that can be appointed as part of the attitude of this implementer f. social, political, and economic conditions indicates that the environment in the direction of policy implementation itself. an environment that can support the successful implementation of policies. conceptual framework in this study, the author uses the theory proposed by donald s. van meter and carl e. van horne (subarsono, 2019) that there are six variables that affect implementation performance, namely; (1) standards and policy objectives, (2) resources, (3) relationships between organizations, (4) characteristics of implementing agents, (5) social, economic and political conditions, and (6) disposition of implementors. so based on the literature review and conceptual framework, the problem of this research can be presented through a model or an image that describes the entities that form each other simultaneously and the social phenomena under study, which are as follows: the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 453 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source : donald s. van meter and carl e. van horn (subarsono, 2019) method this study uses a qualitative approach with a descriptive type of research (creswell, 2017; guba & lincoln, 1994). the main purpose of using a qualitative approach is to uncover facts and phenomena (creswell & creswell, 2018; sugiyono, 2019), on the implementation of hotel tax collection on boarding houses in depok city in 2018-2021. the data collection techniques used in this study were in the form of observation, documentation and interviews with several informants, including the chief tax officer of the sub-division of data collection and registration of the regional finance agency of depok city, academic lecturer of the stiami institute and three taxpayers who own boarding houses. the analysis process carried out by the researcher is doing data reduction, presenting data and drawing conclusions (bungin, 2017; miles & huberman, 1994; moleong, 2018). the location of the study to determine the implementation of hotel tax collection on boarding houses in depok city was carried out at the bekasi city regional finance agency, which is located at jl. margonda raya no.54, depok, kec. pancoran mas, depok city, west java 16431. result and discussion in the research that has been done, the researchers used research instruments in the form of interviews, observations and documentation. the following are data relating to the main problems in the research obtained from the regional finance agency of depok city standard and target policy source power connection between organization obstacle reception tax effort disposition implementor characteristics agent executor social conditions, economics, and political implementation tax collection top hotels home cost in depok the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 454 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1 target and realization of hotel tax on boarding houses depok city 2018-2021 year target realization ratio 2018 rp. 2.782.889.958 rp. 2.944.777.810 106% 2019 rp. 2.996.491.008 rp. 3.054.927.423 102% 2020 rp. 1.185.000.000 rp. 1.479.100.048 125% 2021 rp 1.450.180.431 rp 1.860.568.741 128% source: depok city finance agency from table 1 above, it can be seen that the realization of hotel tax revenue on boarding houses in 2018 and 2019 has increased from the target and realization. in 2018 the target shows that rp. 2,782,889,958 can be realized at rp. 2,911,777,810. in 2019 there was an increase in the target of rp. 2,996,491,008 and an increase in realization of rp. 3,054,927,423. it can be said that in 2018 and 2019 there is a potential for boarding house tax revenues so that the target and realization can be achieved to the maximum. in 2020 and 2021 there will be a decrease in the target and realization of boarding house tax receipts. in 2020 the target shows rp. 1,185,000,000, a significant decrease, only realized by rp. 1,479,100,048. this is due to the covid-19 pandemic which has had an impact on the declining economy. and in 2021 there will be a slight increase in the target of rp. 1,450,180,431. and can be realized amounting to rp 1,860,568,741. boarding house tax receipts can be influenced by continuing to explore the potential for boarding house tax collection by local governments through established regional policies and regulations. the author also obtained data from the regional finance agency of depok city regarding the growth in the number of taxpayers who own boarding houses in depok city as follows: table 2 table of growth of hotel taxpayers on boarding houses depok city 2018-2021 years tax payers 2018 269 the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 455 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2019 307 2020 298 2021 304 source: depok city regional finance agency based on table 2 it can be concluded that the number of taxpayers and tax objects each year does not always increase but also decrease. in 2019, the number of taxpayers increased to 307 and 321 tax objects. meanwhile, in 2020 it decreased to 298 taxpayers and 271 tax objects. based on the above research related to data sources, the authors can conclude that the policy of collecting boarding house taxes in depok city has great potential and the government must routinely carry out punyuhan or direct socialization to the community and provide direct sanctions to the community in order to achieve maximum. analysis of the implementation of hotel tax collection on boarding houses in depok city in 2018-2021 in theory, this research is based on implementation theory according to donald s. van meter and carl e. van horn (subarsono, 2019), namely: 1. policy standards and objectives the main standards and targets are to provide services to boarding house taxpayers, carry out data collection, reporting, registration and payment processes to entrepreneurs who own a 10-door boarding house, provide an understanding of taxpayer awareness, information about boarding house tax collection policies as regulated in regional regulation no. . 07 of 2010. the hotel tax on houses is a local tax that has the potential to increase local tax revenue. however, there are still many people in depok city who do not understand the purpose of the hotel tax collection policy on houses. 2. resources resources are one of the important factors in determining the implementation and success of policy implementation. the process of implementing policy implementation requires the availability of adequate and quality resources in accordance with those required by the policy. in addition to human resources, the authors also discuss resources regarding the level of compliance and facilities. a. compliance rate the level of compliance greatly affects the success of a policy, with the obedience of the taxpayer in carrying out his tax obligations, it means that the taxpayer has understood the intent and purpose of establishing the policy. compliance is a benchmark in assessing the level of taxpayer compliance, it can be seen from the determination of taxpayers to pay their taxes, on time and without any delays. based on table iv.2 on the growth of mandatory/object hotel tax on boarding houses, there are still many who have not reported and understood the existence of boarding house tax the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 456 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc collection. in reality, it can be said that it is good. based on table iv.1 the achievement of the realization target in 2018 was idr 2,944,77,810 to idr 3,054,927,423 in 2019 and experienced a decrease in 2020 idr 1,479,100,048. the author can conclude that the depok city regional finance office has decreased paying taxpayers. b. facility facilities are one of the factors supporting the implementation of policies. the policy for collecting boarding house taxes is considered quite good with the assumption that the availability of adequate facilities and infrastructure adjusts to what is needed. based on the results of the interview with mr. dani as the head of the sub-division of data collection and registration, the facilities used as a tool in achieving the goals and objectives. based on the results of the author's observations, in terms of facilities, the regional finance agency has provided quite good facilities and infrastructure. so it can be concluded that human resources already have competence in their field and provide adequate services but in terms of quantity of human resources are not maximized. 3. inter-organizational relations based on the results of research through interviews with related parties that the relationship between organizations in implementing the implementation of hotel tax collection on boarding houses has been socialized to the maximum directly. one form of communication is socialization. the regional financial agency of depok city carried out socialization activities through electronic media, installed banners, distributed brochures and directly went into the field to visit the location of boarding house entrepreneurs providing information and data collection. informants 2 and 3, there have been key communications in increasing awareness and compliance of boarding house entrepreneurs taxpayers and transparency. informants 4 and 5 have received socialization. so it is concluded that the communication relationship between organizations has been directed and quite good, as evidenced by communication between implementers, when performing services there is a good direct communication relationship, with transparency in the socialization of taxpayers for boarding house entrepreneurs to get information and services. 4. characteristics of implementing agent based on the results of research through interviews with related parties that the characteristics of the implementing agent in implementing the hotel tax collection on boarding houses: informants 1 and 2, that the implementing agent has implemented it well with the standard operational procedure (sop) and mastered the implementation of house tax collection costs and monitoring. informants 3 and 4: implementing agents have worked according to their duties and sops and provided applicable information. informant 5: already understands according to applicable regulations and there is socialization. so it can be concluded that each implementing agent implements hotel tax collection on boarding houses properly, openly, in accordance with the stipulated provisions, and in accordance with the specified standard operating procedures (sop). there is training and socialization to implement the implementation of hotel tax collection on boarding houses. 5. social, economic, and political conditions the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 457 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results of the study show that social, economic, and political conditions also influence the achievement of the hotel tax revenue target for boarding houses. it can be seen from table iv.1 regarding the target and realization of hotel tax on boarding houses in 2019, the realization increased even though in 2020 it experienced a significant decline. this happened because of the covid-19 outbreak so that the potential for income automatically decreased. from a social perspective, due to the implementation of large-scale social restrictions, the environment in carrying out the process of collecting boarding house taxes is very limited. so that the owner of the boarding house understands and can implement it. with successful social, economic and political conditions, the implementation of hotel tax collection on boarding houses will be better. give tens or socialization so that the owner of the boarding house understands and can implement it. 6. implementor's disposition the results showed that the depok city finance agency supported the implementation of hotel tax collection on boarding houses. the implementor's response to the implementation of boarding house tax collection needs to improve the program, provide fairly good service, online services are available to make it easier for taxpayers, there is an information board that can be read by taxpayers and there is supervision related to taxpayer compliance. barriers to the implementation of hotel tax collection on boarding houses in depok city based on the results of the author's research either through observation, taking data or documents and interviews with informants, it shows that the obstacles to implementing hotel tax collection on boarding houses in depok city include: a. the level of awareness and understanding of the public and taxpayers is still low which causes boarding business owners not to register and pay taxes as taxpayers. b. the lack of quantity of human resources in conducting supervision, and socialization in terms of reporting and paying taxes is still not evenly distributed. c. having difficulty meeting the owners of the boarding house business directly because they are not domiciled in the city of depok. d. fraudulent reporting of the number of rooms by the owner of the boarding house does not match the number of rooms being rented out. efforts to overcome obstacles in the implementation of hotel tax collection on houses in depok city in collecting hotel taxes on boarding houses in depok city, there are several efforts to overcome the obstacles that occur. by conducting more in-depth interviews with related parties, the following efforts were made in the implementation of hotel tax on boarding houses in depok city, namely: a. increase awareness of taxpayers in paying taxes by providing socialization, education and information regarding the procedures for reporting tax payments and the function of collecting boarding house taxes. b. carry out direct supervision and routine inspections and cooperate with local sub-districts to recruit taxpayers. c. reviewing or reviewing mandatory/tax objects to avoid deviations. d. provide additional quantity of human resources, especially those directly related to field services. the effect of price earning ratio, return on equity, debt to equity ratio, firm size, and dividend payout ratio to the stock returns on banks listed in lq45 index 2015-2020 kartika, handrijaningsih, t.r, and anisah 458 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of research and discussion regarding the implementation of hotel tax collection on boarding houses in depok city, the authors can draw the following conclusions: 1. implementation of hotel tax collection on boarding houses in depok city in 2018 – 2021 even though it has met the target but has not fully gone well, because taxpayer awareness is still low, counseling, education, and socialization are still not optimal, and the lack of quantity of resources human resources who handle the collection of hotel taxes on boarding houses. 2. obstacles experienced in the implementation of hotel tax collection on houses are the lack of awareness of taxpayers in reporting and paying taxes, the low understanding of taxpayers not knowing the function of collecting boarding house taxes, there is fraud in reporting the number of rooms that are rented out and the difficulty of finding boarding house owners, and the lack of quantity of human resources in the regional finance agency of depok city. 3. efforts to overcome the obstacles experienced by the government and the community, namely conducting direct supervision and routine inspections by collecting data again or reviewing mandatory / tax objects, increasing the quantity of human resources and conducting socialization counseling to increase taxpayer awareness. reference andrew, r., & sari, d. p. 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(1975). the policy implementation process. administration & society, 6(4), 445–488. https://doi.org/10.1177/009539977500600404 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 951-965 951 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia azzam fuadudin dhiyaurrahman1, ardi paminto2, musdalifah azis3 123universitas mulawarman, samarinda, indonesia correspondent: musdalifah.azis@feb.unmul.ac.id3 received : august 4, 2023 accepted : october 26, 2023 published : october 31, 2023 citation: dhiyaurrahman, a, f., parminto, a., azis, m. (2023). analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia. ilomata international journal of tax and accounting, 4(4), 951-965. https://doi.org/10.52728/ijtc.v4i4.816 abstract: one indication of inclusive liquidity or vice versa is to detect investment patterns. the research method is descriptive-quantitative. the population taken is mutual funds that are selected based on the best return in 2022 and those that are publicly published in the financial services authority (ojk). following are the results of an analysis of mutual fund investment performance in the ability to regulate a higher liquidity increase in indonesia in 2022-2023. fixed income mutual funds: syailendra premium mutual funds show good performance in generating relatively stable returns. however, the trimegah fixed income plan mutual fund has a poor performance with higher volatility and lower returns. index funds: bnp paribas sri kehati mutual funds show good performance with high returns and controlled volatility. the allianz sri kehati index fund mutual fund also performed well. however, danareksa index syariah mutual funds showed poor performance and high risk in that period. equity funds: schroder dana prestasi plus mutual funds provide good returns with more controlled risk compared to stock market indices as a whole. the sucorinvest equity fund mutual funds show poor performance with negative returns. money market mutual funds: indonesian sharia money market major mutual funds can be a minimal choice. likewise with the sucorinvest sharia money market fund mutual funds. so in general terms, index funds and money market mutual funds show better performance than fixed income mutual funds and mutual funds in general. keywords: mutual funds, probability sampling, nonprobability sampling, liquidity management this is an open access article under the cc-by 4.0 license. introduction the high needs of life and the rate of inflation in indonesia from year to year are the background for the importance of conducting investment activities (batayneh et al., 2021; eldomiaty et al., 2020; paul et al., 2021). investment is an activity of placing a number of funds in investment instruments with the hope of obtaining added value in the future (arthur et al., 2016; khoerulloh & janwari, 2021; shaik et al., 2022; suprapto et al., 2022). an attractive investment instrument is https://www.ilomata.org/index.php/ijtc mailto:musdalifah.azis@feb.unmul.ac.id3 https://doi.org/10.52728/ijtc.v4i4.816 analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 952 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mutual funds where one can invest with very low capital, while at the same time being able to diversify, has a small risk, but has competitive returns. mutual fund investment has a steady flow of investment increases as seen in 2017 with a total of 1,777 and continued to increase in 2020 with a total of 2,219 and from 2021 to 2022 there has been a decline in the equity mutual fund sector (agustina & tamba, 2023; pangestuti et al., 2017; prananingtyas & soetomo, 2020). the good and bad performance of mutual funds is not measured by how much the return is generated or by how small the risk of price fluctuations is, but by the difference between the performance of the mutual fund and its reference index (e.g. duránsantomil et al., 2019; elton & gruber, 2020; farid & wahba, 2022; macgregor et al., 2021; paramita et al., 2018; samarbakhsh & shah, 2021). the performance of mutual funds in the previous period can be adopted as a reference in selecting mutual funds that have good future prospects. based on the existing phenomenon, the investment performance of mutual funds in the ability to regulate a higher increase in liquidity time can be influenced by various factors, including: the mutual fund performance measurement index fluctuates in the mutual fund market. the measurement index is like the treynor, jansen, and sharpe index, where the measurement is based on alpha (audita et al., 2023). alpha is a market model of risk-free investment and is proxied to the interest rate of the mutual fund's own risk (aprillia et al., 2018; banegas et al., 2013; burlacu et al., 2023; hombert & lyonnet, 2022; kantos & dibartolomeo, 2020; mohanty et al., 2021; traut, 2023). figure. 1: mutual fund flow (source: otoritas jasa keuangan, 2023) mutual funds are a collection of financial obtained by the public or investors to be managed by investment managers and invested in various types of securities investment portfolios or other financial products (kwon et al., 2020; saleem et al., 2021). anggraini et al. (2020) and azis et al. (2021; 2022) states that if grouped by portfolio, there are 4 types of mutual funds, i.e: (1) fixed income mutual funds, with an investment of at least 80% of managed funds (assets) in the form https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 953 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of debt securities; (2) equity mutual funds, with an investment of at least 80% of the funds under management are invested in equity securities; (3) money market mutual funds, with investments invested in debt securities with maturities of less than one year; (4) mixed mutual funds, with an asset allocation target ratio of stock securities and fixed income that cannot be categorized into the other three mutual funds. according to jasmine & basariya (2018) the benefits that investors get when investing in mutual funds including: (1) if investors do not have large enough funds, they can still invest in mutual funds; (2) mutual funds make it easier for investors to invest in the capital market; (3) developments in net asset value (nav) are announced every working day in several national newspapers; (4) mutual funds can be disbursed at any time if investors need it (see figure 1). figure. 2: mutual fund flow (source: modified from logitama et al., 2021; virlics, 2013) schoenmaker & schramade (2019) illustrated the investment is essentially the placement of a number of funds at this time with the hope of obtaining profits in the future. investment activities are generally divided into two forms, i.e. real assets and financial assets (malik, 2017). from tandelilin & usman (2023), the basis for investment decisions consists of the expected return rate, risk level, and the relationsship between return and risk. the investment decision making process is a crucial part (e.g. abdul kareem et al., 2023; kasozi, 2013; virlics, 2013). the investment decision process consists of five decision stages that run continuously until the best investment decision is reached. more details can be seen in the figure 2. https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 954 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure. 3: theoretical framework (source: created by authors) the portfolio is a way for investors to place a number of funds in places that are far from risk and maximize profits (ali et al., 2022; enad & gerinda, 2022; muhammad & triharyono, 2019; qamruzzaman, 2014;nurfadillah et al., 2023). portfolio theory is to select a portfolio from many portfolios and assets to maximize the expected return at a certain level of risk that investors are willing to bear. one way to maximize expected returns is to diversify investments. portfolio investment diversification is a form of investment diversity by placing data on more than one place of business or more than one security. based on the statement above, investment instruments that are portfolio and diversified are mutual funds. the framework for thinking in this study summarized in figure 3. method the research design used is descriptive. atmowardoyo (2018), nassaji (2015) and siedlecki (2020) explains that the descriptive research aims to describe facts in a systematic and characteristic manner regarding a particular population or field. the population taken as the object of research is several mutual funds selected based on the best returns in 2022 and those that have been publicly published and are active in the financial services authority (ojk). pace (2021) states that the sampling technique is divided into two, i.e.: probability sampling and non-probability sampling. sampling in this study was carried out using a non-probability sampling technique using a purposive sampling method. types and sources of research data use secondary data obtained from pasardana (2023), the otoritas jasa keuangan (2023), and pt kustodian sentral efek indonesia (2023) which are then reprocessed into needs and ease of analysis. https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 955 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis is the stage after data collection which includes three stages in it namely: preparation, tabulation, and application of data reffering to the research approach (arikunto, 2013). there are several data analysis techniques used, namely by: 1. liquidity, is the ability of an investment to be sold or liquidated quickly without experiencing significant losses. the ratio used in this liquidity analysis is the current ratio. the current ratio measures a mutual fund's ability to meet its short-term financial obligations. the higher the current ratio, the better the liquidity of the mutual fund. the formula for calculating the current ratio is as follows: current ratio = current asset current liabilities (1) 2. sharpe method, is a approach used to evaluate the investment performance of mutual funds by taking into account the risks taken. the formula for calculating the sharpe ratio is as follows: sharpe's ratio = average portfolio return average risk free instrument return portfolio return standard deviation (2) 3. treynor's method, is a parameter used to evaluate the investment performance of mutual funds by taking into account the risks taken. the formula for calculating treynor's ratio is as follows: treynor's ratio = average portfolio return average risk free instrument return beta (3) 4. jensen method, is a procedure used to evaluating the investment performance of mutual funds by taking into account the risks taken. the formula for calculating jensen's alpha is as follows: alpha jensen = average portfolio return [average risk free instrument return + beta x (average market return average risk free instrument return)] (4) 5. beta, is a measure that describes the sensitivity of a mutual fund to market movements as a whole. 6. return and standard deviation, is a performance measure that describes the return or profit obtained from the investment. the standard deviation is a measure that describes the level of volatility or investment risk. result and discussion after analyzing and calculating the research data, the following research results are obtained in table 1. based on the research results processed, it can be explained regarding the investment performance of mutual funds in the ability to regulate higher liquidity increases in indonesia in 2022-2023 with the best mutual fund performance category in each mutual fund. fixed income mutual funds found that result mutual funds syailendra pendapatan tetap premium has better performance compared to other samples. syailendra fixed income premium received the best https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 956 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc category in fixed income mutual funds in 2023 based on the results of this mutual fund research, by offering an annualized return of 7.06%, a standard deviation of 0.48% which shows relatively low volatility in the performance of this mutual fund, and has a positive sharpe ratio of 1.5777804 indicates that the rate of return earned by this mutual fund exceeds the level of free risk taking. this mutual fund has a good performance in generating a relatively stable return. based on this syailendra pendapatan tetap premium has several reasons why it can be considered the best in 2023, namely with an annualized return rate of 7.06%, this mutual fund has been able to generate consistent and profitable returns in the time period studied. index mutual funds found results that mutual funds bnp paribas sri kehati get the best category in index mutual funds in 2023. the results of this mutual fund study offer an annualized return of 11.45%, a standard deviation of 12.62% which indicates a moderate level of volatility in the performance of this mutual fund, and beta close to 1 which indicates a strong correlation with the movement of the market as a whole. this mutual fund has good performance with high returns and moderate volatility. based on this bnp paribas sri kehati can be considered as the best in 2023 for several reasons, namely with an annualized return rate of 11.45%, this mutual fund has provided investors with a high rate of return. equity mutual funds found results that mutual funds schroder dana prestasi plus has better performance compared to other samples. schroder dana prestasi plus offers an annualized return of 8.52% which shows this mutual fund has provided a good rate of return to investors, a standard deviation of 11.04% which shows this mutual fund has a fairly controlled volatility level, and has a low beta. this mutual fund provides a good rate of return with a more controlled risk compared to the stock market index as a whole. money market mutual funds found results that mutual funds majoris pasar uang syariah indonesia has better performance compared to other samples. majoris pasar uang syariah indonesia offers an annualized return of 4.50% which shows this mutual fund has provided a stable rate of return to investors, a standard deviation of 0.20% which indicates low volatility. this mutual fund can be a good choice for investors who are looking for investment instruments with minimal risk. majoris pasar uang syariah indonesia can be considered as one of the best mutual funds in 2023, by focusing on islamic money market instruments it can have safer investment characteristics and comply with sharia principles. equity mutual funds found results that mutual funds shroder dana prestasi plus has a sharpe ratio of 0.201, this mutual fund provides a relatively good rate of return compared to the risks taken, a treynor ratio of 0.025 shows a fairly good performance in generating profits relative to systematic risk. while the jensen alpha is 0.126 which indicates that this mutual fund generates a positive excess return compared to the expected rate of return from the risk measurement model. table 1: summary of research data analysis company name liquidity beta sharpe ratio treynor ratio jensen ratio annualized return standard deviation https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 957 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fixed fund syailendra pendapatan tetap premium 4.995.514.4 75 0.008523 26 1.57778 04 0.89156 22 0.007053 65 7.06% 0.48% trimegah fixed income plan 815.508.182 0.003 -1.941 -13.907 -0.039 2.37% 2.02% sucorinvest sharia sukuk fund 11.740.027. 787 -0.004 -2.694 1.742 -0.007 5.54% 0.28% sucorinvest stable fund 389.880.667 .262 -0.006 -2.429 1.395 -0.008 5.44% 0.35% trim dana tetap 2 2.484.965.1 94 5.28% 0.98% index funds bnp paribas sri kehati 547.475.083 0.975 0.408 0.053 0.030 11.45% 12.62% allianz sri kehati index fund 1.476.440.4 49 0.983 0.286 0.037 0.015 9.94% 12.73% bnp paribas idx growth30 78.155.308 0.986 0.105 0.014 0.012 7.71% 13.48% danareksa indeks syariah 885.632.726 0.955 -0.916 -0.120 -0.041 -5.20% 12.55% syailendra msci indonesia value index fund kelas a 1.238.206.8 45.160 0.962 0.413 0.057 0.169 11.76% 13.23% avrist indeks lq45 912.653.845 0.988 -0.810 -0.105 0.033 -4.12% 12.86% stock mutual funds schroder dana prestasi plus 40.666.422. 298 0.877 0.201 0.025 0.126 sucorinvest equity fund 65.968.818. 789 0.865 -0.890 -0.123 -0.004 -4.36% 11.97% https://www.ilomata.org/index.php/ijtc https://www.bareksa.com/id/data/mutualfund/2548/syailendra-pendapatan-tetap-premium https://www.bareksa.com/id/data/mutualfund/2548/syailendra-pendapatan-tetap-premium https://www.bareksa.com/id/data/mutualfund/2548/syailendra-pendapatan-tetap-premium https://www.bareksa.com/id/data/mutualfund/2548/syailendra-pendapatan-tetap-premium https://www.bareksa.com/id/data/mutualfund/3787/trimegah-fixed-income-plan https://www.bareksa.com/id/data/mutualfund/3787/trimegah-fixed-income-plan https://www.bareksa.com/id/data/mutualfund/3787/trimegah-fixed-income-plan https://www.bareksa.com/id/data/mutualfund/3787/trimegah-fixed-income-plan https://www.bareksa.com/id/data/mutualfund/4447/sucorinvest-sharia-sukuk-fund https://www.bareksa.com/id/data/mutualfund/4447/sucorinvest-sharia-sukuk-fund https://www.bareksa.com/id/data/mutualfund/4447/sucorinvest-sharia-sukuk-fund https://www.bareksa.com/id/data/mutualfund/4447/sucorinvest-sharia-sukuk-fund https://www.bareksa.com/id/data/mutualfund/4100/sucorinvest-stable-fund https://www.bareksa.com/id/data/mutualfund/4100/sucorinvest-stable-fund https://www.bareksa.com/id/data/mutualfund/386/trim-dana-tetap-2 https://www.bareksa.com/id/data/mutualfund/386/trim-dana-tetap-2 https://www.bareksa.com/id/data/mutualfund/386/trim-dana-tetap-2 https://www.bareksa.com/id/data/mutualfund/3624/reksa-dana-indeks-bnp-paribas-sri-kehati https://www.bareksa.com/id/data/mutualfund/3624/reksa-dana-indeks-bnp-paribas-sri-kehati https://www.bareksa.com/id/data/mutualfund/3624/reksa-dana-indeks-bnp-paribas-sri-kehati https://www.bareksa.com/id/data/mutualfund/2939/reksa-dana-indeks-allianz-sri-kehati-index-fund https://www.bareksa.com/id/data/mutualfund/2939/reksa-dana-indeks-allianz-sri-kehati-index-fund https://www.bareksa.com/id/data/mutualfund/2939/reksa-dana-indeks-allianz-sri-kehati-index-fund https://www.bareksa.com/id/data/mutualfund/4355/bnp-paribas-idx-growth30 https://www.bareksa.com/id/data/mutualfund/4355/bnp-paribas-idx-growth30 https://www.bareksa.com/id/data/mutualfund/4355/bnp-paribas-idx-growth30 https://www.bareksa.com/id/data/mutualfund/4355/bnp-paribas-idx-growth30 https://www.bareksa.com/id/data/mutualfund/1100/danareksa-indeks-syariah https://www.bareksa.com/id/data/mutualfund/1100/danareksa-indeks-syariah https://www.bareksa.com/id/data/mutualfund/1100/danareksa-indeks-syariah https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3244/reksa-dana-indeks-syailendra-msci-indonesia-value-index-fund-kelas-a https://www.bareksa.com/id/data/mutualfund/3730/reksa-dana-indeks-avrist-indeks-lq45 https://www.bareksa.com/id/data/mutualfund/3730/reksa-dana-indeks-avrist-indeks-lq45 https://www.bareksa.com/id/data/mutualfund/3730/reksa-dana-indeks-avrist-indeks-lq45 https://www.bareksa.com/id/data/mutualfund/131/schroder-dana-prestasi-plus https://www.bareksa.com/id/data/mutualfund/131/schroder-dana-prestasi-plus https://www.bareksa.com/id/data/mutualfund/131/schroder-dana-prestasi-plus https://www.bareksa.com/id/data/mutualfund/131/schroder-dana-prestasi-plus https://www.bareksa.com/id/data/mutualfund/136/sucorinvest-equity-fund https://www.bareksa.com/id/data/mutualfund/136/sucorinvest-equity-fund https://www.bareksa.com/id/data/mutualfund/136/sucorinvest-equity-fund analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 958 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc avrist ada saham blue safir 1.426.378.8 03 0.988 -0.493 -0.059 0.059 0.49% 11.80% bnp paribas ekuitas 544.802.807 0.867 -0.013 -0.002 0.102 6.16% 10.27% eastspring investment s alpha navigator kelas a 13.213.000. 000 0.922 -0.364 -0.044 0.069 2.21% 11.20% mandiri investa cerdas bangsa 12.945.415. 060 0.937 -0.259 -0.031 0.085 3.38% 11.26% sequis equity maxima 25.033.822. 183 0.963 -0.588 -0.068 0.049 -0.28% 11.20% bahana primavera plus 321.421.251 0.951 -1.420 -0.195 -0.073 -12.28% 13.08% batavia dana saham syariah 891.311.345 0.832 -0.711 -0.098 0.037 -1.89% 11.51% trim kapital 1.001.208.9 12 0.916 0.093 0.012 0.120 7.40% 11.84% money market mutual funds majoris pasar uang syariah indonesia 123.984.802 .546 0.000 -9.124 0.000 0.000 4.50% 0.20% sucorinvest sharia money market fund 26.087.284. 891 0.000 -18.787 0.000 0.000 3.70% 0.14% syailendra dana kas 26.087.284. 891 0.000 -10.744 0.000 0.000 4.29% 0.19% trim kas 2 186.618.762 .246 0.000 -12.911 0.000 0.000 4.07% 0.17% (source: output from spss) mutual funds sucorinvest equity fund has a sharpe ratio of -0.890 which indicates that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (0.123) indicates poor performance in generating profits relative to systematic. a negative jensen alpha (-0.004) indicates that this mutual fund generates an excess of negative returns compared to the expected rate of return from the risk measurement model. then, mutual funds avrist ada saham blue safir has a sharpe ratio value of -0.493 indicating that this mutual fund generates a low https://www.ilomata.org/index.php/ijtc https://www.bareksa.com/id/data/mutualfund/2576/avrist-ada-saham-blue-safir https://www.bareksa.com/id/data/mutualfund/2576/avrist-ada-saham-blue-safir https://www.bareksa.com/id/data/mutualfund/2576/avrist-ada-saham-blue-safir https://www.bareksa.com/id/data/mutualfund/25/bnp-paribas-ekuitas https://www.bareksa.com/id/data/mutualfund/25/bnp-paribas-ekuitas https://www.bareksa.com/id/data/mutualfund/25/bnp-paribas-ekuitas https://www.bareksa.com/id/data/mutualfund/125/eastspring-investments-alpha-navigator-kelas-a https://www.bareksa.com/id/data/mutualfund/125/eastspring-investments-alpha-navigator-kelas-a https://www.bareksa.com/id/data/mutualfund/125/eastspring-investments-alpha-navigator-kelas-a https://www.bareksa.com/id/data/mutualfund/125/eastspring-investments-alpha-navigator-kelas-a https://www.bareksa.com/id/data/mutualfund/125/eastspring-investments-alpha-navigator-kelas-a https://www.bareksa.com/id/data/mutualfund/79/mandiri-investa-cerdas-bangsa https://www.bareksa.com/id/data/mutualfund/79/mandiri-investa-cerdas-bangsa https://www.bareksa.com/id/data/mutualfund/79/mandiri-investa-cerdas-bangsa https://www.bareksa.com/id/data/mutualfund/79/mandiri-investa-cerdas-bangsa https://www.bareksa.com/id/data/mutualfund/2337/sequis-equity-maxima https://www.bareksa.com/id/data/mutualfund/2337/sequis-equity-maxima https://www.bareksa.com/id/data/mutualfund/2337/sequis-equity-maxima https://www.bareksa.com/id/data/mutualfund/12/reksa-dana-bahana-primavera-plus https://www.bareksa.com/id/data/mutualfund/12/reksa-dana-bahana-primavera-plus https://www.bareksa.com/id/data/mutualfund/12/reksa-dana-bahana-primavera-plus https://www.bareksa.com/id/data/mutualfund/19/batavia-dana-saham-syariah https://www.bareksa.com/id/data/mutualfund/19/batavia-dana-saham-syariah https://www.bareksa.com/id/data/mutualfund/19/batavia-dana-saham-syariah https://www.bareksa.com/id/data/mutualfund/19/batavia-dana-saham-syariah https://www.bareksa.com/id/data/mutualfund/143/trim-kapital https://www.bareksa.com/id/data/mutualfund/143/trim-kapital https://www.bareksa.com/id/data/mutualfund/1093/trim-kas-2 https://www.bareksa.com/id/data/mutualfund/1093/trim-kas-2 https://www.bareksa.com/id/data/mutualfund/1093/trim-kas-2 https://www.bareksa.com/id/data/mutualfund/1093/trim-kas-2 https://www.bareksa.com/id/data/mutualfund/mi/69/syailendra-capital-pt https://www.bareksa.com/id/data/mutualfund/mi/69/syailendra-capital-pt https://www.bareksa.com/id/data/mutualfund/mi/69/syailendra-capital-pt https://www.bareksa.com/id/data/mutualfund/mi/69/syailendra-capital-pt https://www.bareksa.com/id/data/mutualfund/mi/69/syailendra-capital-pt https://pasardana.id/fund/custodianbank/2 https://pasardana.id/fund/custodianbank/2 https://pasardana.id/fund/investmentmanager/79 https://pasardana.id/fund/investmentmanager/79 analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 959 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc rate of return compared to the risk taken. a negative treynor ratio (-0.059) indicates poor performance in generating profits relative to systematic risk. jensen alpha of 0.059 indicates that this mutual fund generates positive excess returns compared to the expected rate of return from the risk measurement model. mutual funds bnp paribas ekuitas has a sharpe ratio of -0.013, this mutual fund generates a low rate of return compared to the risk taken. treynor ratio which is close to zero (-0.002) shows a relatively low performance in generating profits relative to systematic risk. jensen alpha of 0.102 indicates that this mutual fund generates positive excess returns compared to the expected rate of return from the risk measurement model. mutual funds eastpring investment alpha navigator kelas a has a sharpe ratio of -0.364 indicating that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (-0.044) indicates poor performance in generating profits relative to systematic risk. jensen alpha of 0.069 indicates that this mutual fund generates a positive excess return compared to the expected rate of return from the risk measurement model. mutual funds mandiri investa cerdas bangsa has a sharpe ratio of -0.364 indicating that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (-0.044) indicates poor performance in generating profits relative to systematic risk. jensen alpha of 0.069 indicates that this mutual fund generates a positive excess return compared to the expected rate of return from the risk measurement model. mutual funds sequis equity maxima has a sharpe ratio of -0.588 which indicates that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (-0.068) indicates poor performance in generating profits relative to systematic risk. jensen alpha of 0.049 indicates that this mutual fund generates positive excess returns compared to the expected rate of return from the risk measurement model. mutual funds bahana primavera plus has a sharpe ratio of -1.420 which indicates that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (-0.195) indicates poor performance in generating excess negative returns compared to the expected rate of return from the risk measurement model. mutual funds batavia dana saham syariah has a sharpe ratio of -0.711 which indicates that this mutual fund generates a low rate of return compared to the risk taken. a negative treynor ratio (-0.098) indicates poor performance in generating profits relative to systematic risk. jensen alpha of 0.037 indicates that this mutual fund generates positive excess returns compared to the expected rate of return from the risk measurement model. mutual funds trim kapital has a sharpe ratio of 0.093, this mutual fund provides a relatively good rate of return compared to the risk taken. treynor ratio of 0.012 shows a fairly good performance in generating profits relative to systematic risk. jensen alpha of 0.120 indicates that this mutual fund generates an excess of positive returns compared to the expected rate of return from the risk measurement model. mutual funds syailendra pendapatan tetap premium having a sharpe ratio, this mutual fund reached 1.5777804, indicating a higher return ratio compared to the risk taken. the treynor ratio reaches 0.8915622, indicating the rate of return generated based on market risk. jensen alpha of 0.00705365 shows the ability of investment managers to generate returns that exceed market expectations. mutual funds trimegah fixed income plan has a negative sharpe ratio of -1,941 indicating a lower rate of return compared to the risk taken. treynor ratio which is also negative at -13,907 indicates a low return based on market risk. jensen alpha of -0.039 https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 960 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indicates that the performance of this mutual fund is lower than market expectations. mutual funds sucorinvest sharia sukuk fund has a sharpe ratio of -2,694 indicating a lower rate of return compared to the risk taken. the treynor ratio of 1,742 indicates a higher return based on market risk. jensen alpha of -0.007 indicates the performance of this mutual fund is slightly lower than market expectations. mutual funds sucorinvest stable fund has a sharpe ratio of -2,429 indicating a lower rate of return compared to the risk taken. the treynor ratio of 1,395 indicates a higher return based on market risk. jensen alpha of -0.008 indicates the performance of this mutual fund is slightly lower than market expectations. mutual funds bnp paribas sri kehati has a sharpe ratio of 0.408 indicating a relatively good rate of return compared to the risk taken. treynor ratio of 0.053 indicates a positive performance in generating returns based on systematic risk. jensen alpha of 0.030 shows the ability of this mutual fund to generate returns that exceed market expectations. mutual funds allianz sri kehati index fund have a sharpe ratio and treynor ratio tend to be lower, namely 0.286 and 0.037, jensen alpha of 0.015 shows the ability of these mutual funds to generate returns that exceed market expectations. mutual funds bnp paribas idx growth30 having a sharpe ratio, treynor ratio, and jensen alpha tend to be lower, namely 0.105, 0.014, and 0.012, these mutual funds still provide positive returns and are in line with market expectations. mutual funds danareksa indeks syariah has a negative sharpe ratio, treynor ratio, and jensen alpha, namely 0.916, -0.120, and -0.041, indicating poor performance compared to the risks taken. mutual funds syailendra msci indonesia value index fund kelas a has a sharpe ratio of 0.413 indicating a relatively good rate of return compared to the risk taken. treynor ratio of 0.057 indicates a positive performance in generating returns based on systematic risk. jensen alpha of 0.169 shows the ability of this mutual fund to generate returns that exceed market expectations. mutual funds avrist indeks lq45 have a sharpe ratio and treynor ratio tend to be lower, namely -0.810 and -0.105, jensen alpha of 0.033 shows the ability of these mutual funds to generate returns that exceed market expectations. mutual funds majoris pasar uang syariah indonesia having sharpe ratio and treynor ratio also shows negative numbers, namely -9.124 and 0.000, which indicates that the return rate generated is not proportional to the risk taken. jensen alpha also shows a number of 0.000, indicating that this fund has no advantage in generating excess returns compared to the expected return model. mutual funds sucorinvest sharia money market fund has a low sharpe ratio of -18,787 indicating that the rate of return generated is relatively low compared to the risk taken. the treynor ratio and jensen alpha also show the number 0.000, indicating that the performance of these mutual funds does not exceed the expected rate of return. mutual funds syailendra dana kas has a low sharpe ratio of -10,744 indicating that the risk taken is not proportional to the rate of return generated. the treynor ratio and jensen alpha also show the number 0.000, indicating that the performance of these mutual funds does not exceed the expected rate of return. mutual funds trim kas 2 has a low sharpe ratio of -12,911 indicating that the risk taken is not proportional to the rate of return generated. the treynor ratio and jensen alpha also show the number 0.000, indicating that the performance of these mutual funds does not exceed the expected rate of return. https://www.ilomata.org/index.php/ijtc analysis of mutual fund investment performance in the ability to regulate higher liquidity increases in indonesia dhiyaurrahman, parminto, and azis 961 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the empirical findings, it can be concluded into 4 points. first, from fixed income mutual funds: (1) mutual funds syailendra pendapatan tetap premium offers an annualized return of 7.06% with a low standard deviation (0.48%). this mutual fund has shown good performance in generating relatively stable returns; (2) however, mutual funds trimegah fixed income plan has a poor performance with an annualized return of 2.37% and a high standard deviation (2.02%). this indicates higher volatility and lower returns. seconde, by index mutual funds: (1) mutual funds bnp paribas sri kehati offers an annualized return of 11.45% with a moderate standard deviation (12.62%). this mutual fund has shown good performance with a high rate of return and controlled volatility; (2) mutual funds allianz sri kehati index fund also has a good performance with an annualized return of 9.94% and a standard deviation of 12.73%; (3) however, mutual funds danareksa indeks syariah has a negative return (-5.20%) with a high standard deviation (12.55%). this indicates poor performance and high risk in that period. using equity mutual funds: (1) mutual funds schroder dana prestasi plus offers an annualized return of 8.52% with a moderate standard deviation (11.04%). this mutual fund provides a good rate of return with a more controlled risk compared to the stock market index as a whole; (2) mutual funds sucorinvest equity fund shows poor performance with negative return (-4.36%) and high standard deviation (11.97%). fourth, money market mutual funds: (1) mutual funds majoris pasar uang syariah indonesia menawarkan annualized return sebesar 4.50% dengan low volatility (standard deviation 0.20%). this mutual fund can be a good choice for investors who are looking for investment instruments with minimal risk; (2) mutual funds sucorinvest sharia money market fund also shows good performance with an annualized return of 3.70% and a low standard deviation (0.14%). finally, index funds and money market mutual funds show better performance than fixed income mutual funds and equity mutual funds in general. reference abdul kareem, a. a., fayed, z. t., rady, s., amin el-regaily, s., & nema, b. m. 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(2013). investment decision making and risk. procedia economics and finance, 6, 169-177. https://doi.org/10.1016/s2212-5671(13)00129-9 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 628-645 628 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality emilio pascal1, suparna wijaya2 1politeknik keuangan negara stan, indonesia 2universitas pembangunan nasional veteran jakarta, indonesia correspondent: 4122220018_emil@pknstan.ac.id received : may 20, 2023 accepted : july 29, 2023 published : july 31, 2023 citation: pascal, e., wijaya, s.. (2021 searching for tax revenue determinants in n-11: the moderating role of regulatory quality. ilomata international journal of tax and accounting, 4(3), 628-645. https://doi.org/10.52728/ijtc.v4i3.844 abstract: this study aimed to analyze the effects of the agricultural sector and the foreign direct investment (hereinafter referred to as fdi) on tax revenue in the next eleven (n-11) countries. in this research, a moderating variable of regulatory quality was used. the data were obtained from the world bank and analyzed using panel data regression. the dependent variable in this study was tax revenue, whereas the independent variables comprised the agricultural sector, the fdi, the agricultural sector moderated by regulatory quality, the fdi moderated by regulatory quality, and the regulatory quality. the results indicate that all independent variables simultaneously affect tax revenue. however, when investigating partially, fdi, the agricultural sector moderated by regulatory quality, and regulatory quality have a positive effect on tax revenue while fdi moderated by regulatory quality shows a negative effect on tax revenue. as for the agricultural variable, a significant effect on tax revenue was not shown. it is recommended that governments in n-11 countries focus on developing quality regulations in another sector, particularly agriculture, and encourage foreign investments since these two aspects are proven to increase tax revenue. keywords: tax revenue, agricultural sector, fdi, regulatory quality, n-11 this is an open access article under the cc-by 4.0 license. introduction economy plays an important role in everyday’s life and is crucial for the development of a coherent country. the progress in economy helps improve the overall well-being of both the people and the nation. the importance of economy is evidenced by a number of international economic-based groups or organizations such as apec, brics, g7, g20 and oecd. each of these organizations has membership requirements based on the region and the size of the country's economy. brics was first mentioned by goldman sachs, a banking institution, and represents a group of countries that are potential to have the strongest economy in the world (o'neill et al., 2005). brics includes countries like brazil, russia, india, and china. https://www.ilomata.org/index.php/ijtc mailto:4122220018_emil@pknstan.ac.id https://doi.org/10.52728/ijtc.v4i3.844 searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 629 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a few years later, goldman sachs categorized a number of countries into a group called next eleven (n-11). the n-11 consists of bangladesh, the philippines, indonesia, iran, south korea, mexico, egypt, nigeria, pakistan, turkey, and vietnam. these countries following the brics are poised to have the potential in the economic sector (o'neill et al., 2005). the assessment uses a system called growth environment score (ges) and is based on five indicators, namely macroeconomic stability, macroeconomic conditions, technological capabilities, human capital, and political conditions. in addition, the n-11 countries vary widely in economic level, in which south korea is signified as a developed country with more than twice the income of other n-11 countries, whereas bangladesh becomes one of the poorest countries in the world (wilson et al., 2007). (ortiz-ospina & roser, 2016) stated that developed countries generate more tax revenue than developing countries. tax is a compulsory form of payment to the government, however the perceived benefits are not proportional to the amount paid (oecd, 2014). taxation is in fact the most practical way to raise revenue to finance government spending (tanzi & zee, 2001). there are major principles in taxation, among others are the principle of proportionality, the principle of certainty, the principle of convenience, and the principle of efficiency (smith & wight, 2007). the principle of proportionality emphasizes that everyone is obliged to pay taxes in accordance with their economic ability, whereas the principle of certainty clarifies the time of payment, the method of payment, and the amount of tax paid by the public. furthermore, the principle of convenience refers to the comfort of taxpayers when they are imposed to pay the taxes. finally, the principle of efficiency requires that the tax use and revenue system be made in such a way that the tax collected is not smaller than the cost incurred. according to ortiz-ospina & roser (2016), developed countries tend to rely on income tax, while developing countries tend to rely on trade and consumption taxes. low tax revenue in developing countries can hamper the state’s spending activities, therefore tax revenue is vital for the sustainability of a country's economy (salman et al., 2022). tanzi & zee (2001) argued that developing countries find it difficult to build an efficient tax system. the main reason is that most workers in developing countries work either in the agricultural sector or in other informal sectors and they do not have fixed income and bookkeeping system. as a result, it is not easy to calculate the basis for income tax calculation. in addition, workers in developing countries tend to spend their income to purchase daily needs in small shops without accurate records and this lessens tax contribution. the second reason is that developing countries are still working on the establishment of an efficient tax administration system with limited number of competent staff (tanzi & zee, 2001). instead of building an efficient, modern, and rational tax system, governments in developing countries create tax systems that allow them to exploit any options considered taxable. the third reason is that not only the informal economic structure in developing countries but also the financial limitations make it difficult for tax and statistical offices to produce reliable statistical data (tanzi & zee, 2001). such limitations lead to a lack of data for policymakers to assess the potential impact of changes to the tax system. consequently, governments in developing country tend to make marginal changes rather than major structural changes. the fourth reason is the income inequality in developing countries (tanzi & zee, 2001). although the increasing tax revenue https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 630 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc requires the rich to pay higher taxes than the poor, there is a chance for the economic and political power of the rich to intervene in fiscal reformation for the purpose of reducing the amount of taxes they are obliged to pay. this explains why developing countries are incapable of fully increasing the income tax and property tax revenues, and why the tax system is considered less progressive. figure 1 indicates that the larger a country's economy as measured by gdp per capita, the higher the country's tax revenue. goldman sachs projected that the large economies potential in the n11 countries will be followed by high tax revenue. figure i. comparison of tax revenue and gdp per capita of n-11 (except egypt) source: our world in data (2016) (o'neill et al., 2005) argued that one component of macroeconomic conditions in ges is investment. according to balıkçıoğlu et al. (2016), fdi has a greater impact on tax revenue for high-tech firms. in developing countries, fdi has a positive and significant effects on total tax revenue, cit (corporate income tax), pit (personal income tax), and vat (value added tax), but impactless on tax revenue from the property sector (pratomo, 2020). a recent study conducted by camara (2023) found that fdi has a positive effect on tax revenue, but no effect on tax revenue from the natural resource of exporting countries. however, fdi contributes to tax revenue by imposing tax on additional income generated by fdi in the recipient country (ketkar et al., 2005). similar results were found by okey (2013), where fdi has a positive and significant effect on the https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 631 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax revenue by increasing the tax base and the tax revenue and aslam (2015) who stated that fdi significantly affects tax revenue, and there is a long-term relationship between the two variables. minh ha et al. (2022) argued further that fdi acts as an important source of capital in overcoming the shortages of investment capital, thus, it contributes to the economic growth, and increase a country's tax revenue. on the other hand, inriama & setyowati (2020) found that fdi does not affect cit revenue. this occurs since incentives from fdi do not necessarily increase cit. gnangnon (2017) divides the impact of fdi on non-natural resources tax revenue and cit, where the impact of fdi on tax revenue depends on the ratio of fdi to gdp. on the non-natural resources of the tax revenue side, fdi has a negative and significant effects in countries with an fdi-to-gdp ratio below 1.49%, a positive and significant effect in countries with a ratio above 2.57%, and no effect in countries with a ratio between 1.49% and 2.57%. as for the tax revenue derived from companies, there is a threshold of 0.33%, where fdi has no significant effect in countries, bearing a ratio of fdi to gdp below the threshold, but a significant positive effect in countries having a ratio at the threshold. another study by gaspareniene et al. (2022) distinguishes two impacts of fdi on tax revenue. the first is that fdi inflow causes a decrease in tax revenue and the second is that fdi outflow causes an increase in tax revenue. he added that the decrease in tax revenue by fdi inflow is due to the tax incentives for foreign companies which then reduce the tax base and provide benefits the foreign companies at the expense of local companies. conversely, fdi outflow increases tax revenue since the recipient country provides tax incentives for multinational companies, therefore they pay lower tax than the local companies in the country. as one of the focuses on indonesia’s policies, fdi is seen as a more enhancing and durable form of capital, in which attracting greater fdi flows help place the country in the international trading system and promote a more competitive business environment (gopalan et al., 2016). similarly, mohamed (2020) emphasizes that fdi in egypt is considered one of the tools to promote economic growth and contribute to economic development. in bangladesh, fdi signifies the infrastructure development, creates many jobs, improves labor skills through the transfer of technological knowledge and managerial capabilities, and helps integrate the domestic economy with the global economy (islam, 2014). these advances have led to low wages for skilled labor and stable macroeconomic conditions. furthermore, fdi plays a significant role for iran’s economic growth, improves the balance of payments, transfers technology, increases employment, accelerates exports, and enhances tax revenues (rafat, 2018). fdi inflows also play a role in the structural transformation process of the mexican economy (mühlen & escobar, 2020). in nigeria, fdi is considered as crucial in its economic growth and development strategies (osabohien et al., 2020). fdi also benefits the domestic economy through knowledge spillover from multinational companies to local firms in pakistan (rehman, 2016). moreover, fdi in vietnam has a major influence on other economic sectors and it stimulates domestic investment, creates competition, promotes innovation and technology transfer, improves production efficiency, and develops supporting industries that help the country participate in global chains (hanh et al., 2017). as for the south korean government, it believes that fdi marks one of the main contributors to its economic growth (kim, 2015). in the philippines, although the overall is still limited and lagging https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 632 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc behind other countries in southeast asia, the investment policy reforms and the opening up of more foreign investment sectors resulted in the increased fdi inflows (aldaba & quejada, 2022). of all the countries described, however, it can be emphasized that turkey has not gained the expected positive benefits from fdi inflows as seen in the country's economic growth (temiz & gökmen, 2014). another contributor to the economic development is the agricultural sector (cao & birchenall, 2013). widyawati (2017) stated that the agricultural sector contributes the most to labor absorption in indonesia. she explained further that the agricultural sector acts as a supporting sector for the development of other sectors. even so, the agricultural sector in indonesia has not developed and its contribution to gdp is insignificant. the situation is different from pakistan, where the agricultural sector plays an important role in pakistan's economy (rehman et al., 2015). agriculture directly supports pakistan's population and contributes significantly to gdp. in addition, bangladesh has similar conditions where the economy and livelihoods of most of its population depend on the agricultural sector (ferdous et al., 2021). the condition is reflected in nigeria, where the agricultural sector is the foundation of the economy and a source of livelihood for most of the population (fao, 2018). the majority of agricultural workers in nigeria are on small-scale farms and most of the harvest is used for personal consumption. besides nigeria and pakistan, the agricultural sector becomes one of the most important sectors for the iranian economy (azadi & barati, 2013). additionally, all aspects of the economy in egypt are related to agriculture, despite its having little agricultural land (el-ramady et al., 2013). however, agricultural land in egypt is highly productive and can be harvested two to three times a year. in vietnam, the agricultural sector is crucial to alleviate poverty, to ensure the security of national food, and to maintain social stability (world bank, 2016). vietnam's agricultural sector is also experiencing explosive growth in its exports of agricultural products. in mexico, agriculture serves as one of the most important sectors, although there has been a decline in its contribution to gdp and a decline in the employment sector (unctad, 2014). similarly, the decline occurred in turkey, where the agricultural sector plays a vital role for the turkish economy and society, despite its minor contribution to the economy. if compared to the rapid growth of the industrial and service sectors, turkish agricultural has dropped significantly(giray, 2012). the decline is reflected in the low productivity, triggered by a poor mechanization, a small land size, and an uncoordinated and unplanned agricultural production. in the philippines, the agricultural sector absorbs a lot of labor but contributes little to gdp (briones, 2021). one of the reasons for the weak performance of the sector is the lack of competitiveness, marked by the low exports from the agricultural sector. moreover, south korea's agricultural sector is not export-oriented, as most farming is done on a small-scale (neszmelyi, 2017). he argued that the purpose of the agricultural sector in south korea is only to fulfill domestic needs, thus their agricultural products are not competitive in the international market. despite the important role of the agricultural sector in the economy, eltony (2002) found that it has no effect on tax revenue in the oil-producing arab countries. it is apparent that the economies of these countries are highly dependent on oil, used to finance its economic activities, therefore, there is no need for a sophisticated tax system. mahdavi (2008) elaborated further that the https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 633 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agricultural sector does not affect the overall tax revenue, except for the property tax. in fact, the agricultural sector has become a tax shelter, where there is a transfer of income from other sectors to the agricultural sector for the purposes of tax avoidance or reduction (chaudhry & munir, 2010). according to chelliah et al. (1975), developing countries find it difficult to tax the agricultural sector since the land is generally owned by the community and is an informal sector. this influences the negative relationship between the tax revenue and the agricultural sector (leuthold, 1991). furthermore, tanzi (1992) added that tax revenue is increasingly difficult to increase as the agricultural sector grows. this occurs since the administrative costs of tax authorities for regulating and supervising informal subsistence agriculture are higher, if compared to its revenue potential (ghura, 1998). similarly, gupta (2007) stated that there is a negative and significant relationship between the agricultural sector and tax revenue, where the agricultural sector is difficult to tax if it is mostly a subsistence farming system. a negative relationship between the agricultural sector and tax revenue was also found by keen & lockwood (2010), where almost all types of taxes on the agricultural sector, particularly the vat are difficult to impose. rodríguez (2018) emphasized that the difficulty of the taxable agricultural sector hurts tax revenue. a research by stotsky & woldemariam (1997) found that the agricultural sector has a negative and significant effect on tax revenue. this is in line with the findings by piancastelli (2001) which indicated that tax revenue is negatively and significantly related to the agricultural sector. additionally, bird et al. (2005) revealed that countries with a high ratio of the non-agricultural sector to gdp generate higher tax revenue as they tend to have a lower tax burden, resulting in lower tax revenue (sarmento, 2016). clearly, to ensure that the economy runs optimally, the role of the government is needed. the government plays a vital role in issuing regulations and policies to ensure every economic activity is under its respective corridors. the purpose of regulations includes preventing environmental damage as the impact of the economic activity, ensuring consumer rights are fulfilled, and preventing illegal economic activity (davis, 2022). nevertheless, a study by salman et al. (2022) found no effect between the regulatory quality and the tax revenue. the quality of the regulations issued by the governments affects tax revenue in developing countries (ajaz & ahmad, 2010). the government's ability to formulate policies and regulations that encourage private sector development will increase tax revenue (syadullah, 2015). asmah et al. (2020) examined further, where the quality of regulations has a positive effect on tax revenue and weakens the impact of trade misinvoicing, the tax revenue increases. based on the above description, there are some differences in the findings and no agreement on the determinants of tax revenue. with the diverse economic conditions in the n-11 countries and their potential to the brics, the author considers it is important to determine the effect of the agricultural sector, fdi, and regulatory quality on the tax revenue. this research is expected to provide a conclusion on what factors affect tax revenue and add more insight. below, the authors have several hypotheses, namely: h1: the agricultural sector has a negative effect on tax revenue h2: fdi has a positive effect on tax revenue https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 634 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3: regulatory quality moderates the negative effect of the agricultural sector on tax revenue h4: regulatory quality moderates the positive effect of fdi on tax revenue h5: regulatory quality has a positive effect on tax revenue methods this study used panel data regression with tax revenue, agriculture, and fdi variables from n-11 member countries within the period of 2010 to 2019. the data used were secondary data obtained from world development indicators, world bank. each independent variable is moderated using regulatory quality variables and processed through the stata 17 application. the definition of each variable can be seen in table 1. table 1. variable definition variable proxy unit tax revenue dependent tax revenue to gdp percentage agriculture independent contribution of the agricultural sector to gdp percentage fdi independent fdi inflow to gdp percentage regulatory quality moderation quality of regulations issued index source: processed by the author to determine the research model that can explain the relationship between variables, a test was conducted, and the best models among the common, fixed and random effects were selected (baltagi, 2021). the test for determining the best panel model can be seen in table 2. table 2. panel model determination test test h0 h1 chow test common/pooled is better than fixed effect fixed effect is better than common/pooled lagrange multiplier (lm) test common/pooled is better than random effect random effect is better than common/pooled hausman test random effect is better than fixed effect fixed effect is better than random effect source: processed by the author as seen in table 3, to ascertain whether or not the selected model can show the relationship between variables, several classical assumption tests were conducted (gujarati, 2022). a normality https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 635 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc test is a series of procedures to test whether the underlying distribution of random variables is normally distributed (d'agostino et al., 1990). meanwhile, a multicollinearity test is conducted to test whether there is more than one linear relationship between variables (gujarati, 2022). furthermore, the heteroscedasticity test is carried out to examine the systematic changes in the distribution of residuals over a range of measured values (frost, 2019). finally, the autocorrelation test is conducted to measure if there is a correlation between a series of data sorted in space or time (gujarati, 2022). table 3. classical assumption test test h0 h1 normality test data are normally distributed data are not normally distributed multicollinearity test no multicollinearity between independent variables there is multicollinearity between independent variables heteroscedasticity test data are homoscedastic data are heterosedastic autocorrelation test there is no autocorrelation there is autocorrelation source: processed by the author the form of the panel data regression equation used in this study is as follows: tr= β0 + β1.agri + β2.fdi + β3.agri.reg + β4.fdi.reg + β5.reg + ɛ where: tr = the percentage of tax revenue to gdp β0 = the constant β1 = the regression coefficient of the percentage of the agricultural sector to gdp agri = the contribution of the agricultural sector to gdp β2 = the regression coefficient of the percentage of fdi to gdp fdi = foreign direct investment β3 = the regression coefficient of agricultural sector on gdp that has been moderated by regulatory quality agri.reg = the percentage of the agricultural sector to gdp that has been moderated by regulatory quality β4 = the regression coefficient of fdi percentage to gdp that has been moderated by regulatory quality fdi.reg = the percentage of fdi to gdp that has been moderated by regulatory quality β5 = the regression coefficient of regulatory quality reg = the regulatory quality ɛ = the error https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 636 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results and discussions to determine the characteristics of each variable, descriptive analysis is conducted as shown in table 4. based on the table, the average value of tax revenue of n-11 countries is 11.78%. nigeria is the country with the smallest tax revenue ratio with a value of 3.37% in 2016. according to oyedele (2016), the low tax revenue in nigeria is due to several factors, namely incoherent fiscal policy, complicated and inefficient tax administration system, high level of tax evasion, ambiguity in tax laws, and lack of transparency regarding the utilization of tax revenues for social services and visible development. surprisingly, a country with the largest tax revenue in 2011 was turkey with a value of 18.68%. one of the factors for high tax revenue in turkey is the increase in tobacco tax. cetinkaya & marquez (2017) explained that turkey has significantly increased taxes on tobacco since 2002, and the tax revenue from tobacco from 2005 to 2011 increased by 124%. meanwhile, the contribution of the agricultural sector to gdp in n-11 countries averaged 12.24%, with pakistan having the highest ratio of 25.13%. the strong figures indicate that the agricultural sector is the 'backbone' of pakistan's economy (rehman et al., 2015). in 2019, a country with the lowest ratio was south korea, with a value of 1.62%. yoon et al. (2020) further explained that the agricultural sector in south korea was in a situation of massive import opening because it was driven by the fta. furthermore, for fdi, the average value in n-11 countries is 1.85%. in 2019, egypt became a nation with the lowest fdi percentage of -0.2%. this was due to the greater fdi outflow if compared to the inflow as the massive revolution took place in egypt on january 25, 2011 (kamaly, 2011). on the other hand, in 2019 it was indicated that the country with the highest percentage of fdi was vietnam, with the percentage of 6.9%. the high percentage of fdi to gdp in vietnam was triggered by the implementation of foreign investment regulations in 1987 aiming to encourage foreign investment through facilitation such as a full foreign ownership of investments and ruling out nationalization (le & thanh, 1995). thus, the average regulatory quality score of n-11 countries is -0.33. furthermore, iran has the smallest regulatory quality index, around -1.71 in 2010. ronaghi et al. (2020) stated that the country had difficulty in meeting the wgi. meanwhile, south korea had the largest regulatory quality index in 2016 with a value of 1.11. according to kim (2016), regulatory reform is one of the government's national priorities to support the economic growth, focusing on improving or removing regulations to encourage both employment and investment. it is expected that the priorities help increase the economy and step up the institutions’ efforts to facilitate the regulatory reform. table 4. descriptive statistics descriptive tax revenue agriculture fdi agriculture – regulatory quality fdi – regulatory quality regulatory quality mean 11,78 12,24 1,85 -6,66 -0,58 -0,33 median 12,45 12,58 1,42 -5,95 -0,49 -0,43 std. dev 3,71 6,65 1,56 7,09 1,11 0,66 minimum 3,37 1,62 -0,2 -19,28 -4,25 -1,71 https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 637 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc maximum 18,68 25,13 6,9 3,23 1,87 1,11 source: processed from stata 17 in table 5, a panel model determination test is conducted to select the model. first, a chow test is conducted to choose either fixed effect or common effect models. the test result is 0.00 or below α = 5% . this means that the fixed effect model is better. then the lm test is conducted to determine between the random effect or common effect model. the results show a value of 0.00 or below α = 5%, from which the random effect model is considered better. the last test is executed to examine between fixed effect or random effect using the hausman test. the result shows a value of 0.76 or above α = 5%. thus, it can be interpreted that the random effect model will be used in this study. table 5. the result of the panel model determination test test value result chow test 0,00 fixed effect is better than common effect lagrange multiplier (lm) test 0,00 random effect is better than common effect hausman test 0,76 random effect is better than fixed effect source: processed from stata 17 following the above steps, a classical assumption test is carried out to ascertain whether or not it meets the assumptions of normality, heteroscedasticity, and autocorrelation as listed in table 6. the normality test shows a value of 0.06 or above α = 5%, which means that the data used is normally distributed. whereas the heteroscedasticity test indicates a value above α = 5%, or 0.35. this signifies the homoscedastic data. however, there is still autocorrelation after the testing is completed, indicated by a value of 0.03 or below α = 5%. table 6. the result of classical assumption test test value result normality test 0,06 data is normally distributed heteroscedasticity test 0,35 data is homoscedastic autocorrelation test 0,03 there is autocorrelation source: processed from stata 17 furthermore, a test was conducted to ascertain whether the assumption of multicollinearity has been met, as shown in table 7. from the test results, it can be concluded that the variables of agriculture, fdi, agriculture moderated by regulatory quality, fdi moderated by regulatory quality, and regulatory quality moderated variables show values below 10. this indicates that all independent variables do not show symptoms of multicollinearity. https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 638 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7. multicollinearity test variable vif result agriculture 3,26 no multicollinearity between independent variables fdi 2,66 no multicollinearity between independent variables agriculture – regulatory quality 8,38 no multicollinearity between independent variables fdi – regulatory quality 3,97 no multicollinearity between independent variables regulatory quality 4,31 no multicollinearity between independent variables source: processed from stata 17 for autocorrelation symptoms that occur, treatment is carried out in the form of retesting using xtregar syntax on the selected panel model, namely random effect (baltagi & wu, 1999). the results of treatment and hypothesis testing can be seen in table 8. table 8. hypothesis test variable coefficient std. err z p>|z| agriculture 0,02 0,09 0,26 0,792 fdi 0,25 0,15 1,71 0,087 agriculture – regulatory quality 0,16 0,11 1,48 0,138 fdi – regulatory quality -0,63 0,28 -2,21 0,027 regulatory quality 2,09 1,09 1,92 0,055 constant 12,37 1,02 12,17 0,000 prob > f = 0.00 source: processed from stata 17 the f-test shows a value of 0.00 or smaller than α=5%, which means that all independent variables affect tax revenue simultaneously. since the p-value obtained from stata is two-tailed, it must be divided by two to test the one-tailed hypothesis (ucla, t.t.). the partial test results show that the value of agriculture is 0.396, which is greater than α = 5%. this demonstrates that the variable partially does not affect tax revenue. moreover, the finding remains unchanged when the agricultural sector is moderated with the regulatory quality, and the p-value signifies a value of 0.069, meaning that it affects significantly, at the α=10% level. on the other hand, fdi partially influences tax revenue as indicated by the z-test value that is smaller than α=5%, or 0.044. similarly, fdi has been moderated by regulatory quality, and there is a change to 0.014 or smaller than α = 5%, therefore it can be interpreted that the variable partially significantly affects tax revenue. moderately, the regulatory quality has a significant effect on tax revenue with a z-test result of 0.028 or lower than α = 5%. based on the description above, the regression equation is formed below: https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 639 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax revenue = 12,37 + 0,02agri + 0,25fdi + 0,16agrireg – 0,63fdireg + 2,09reg the agricultural sector has a coefficient value of 0.02 which indicates that a one percent increase in the contribution of the agricultural sector will be followed by a 0.02% increase in tax revenue. however, since the z-test result shows a value above α=5%, it can be interpreted that the agricultural sector has no effect on tax revenue in n-11 countries and is not in accordance with the hypothesis. this is in accordance with a study by mahdavi (2008) which found that the agricultural sector has a positive and insignificant effect on tax revenue. furthermore, chaudhry & munir (2010) argued that the agricultural sector is negatively and insignificantly related to tax revenue, since small scale farmers and subsistence farming normally occur in developing countries do not generate large taxable income. contrary to a study by ghura (1998) which stated the negative effect of the agricultural sector on tax revenue, it is indicated that tax revenue increases when there is a decline in the ratio of the agricultural sector to gdp. in addition, it is not easy for the agricultural sector to tax politically (gupta, 2007). piancastelli (2001) added that there is a need to improve the performance of fiscal revenue from the agricultural sector, particularly in low and middle-income countries. furthermore, when the agricultural sector is moderated by the quality of regulations, it significantly affects tax revenue. this finding is consistent with the hypothesis. that is, an increase in the agricultural sector moderated by regulatory quality to one percent will increase tax revenue by 0.16%. this shows that the quality of regulation in n-11 countries is able to regulate the agricultural sector, thus that tax revenue from the sector notably improves and contributes to tax revenue. these results are also reflected in the findings by leuthold (1991), which emphasized that the agricultural sector is difficult to tax. however, this can be overcome by a proper regulatory quality, therefore, tax revenue occurs. meanwhile, fdi with a coefficient value of 0.25 indicates that it has a significant positive effect on tax revenue, where a one percent increase in fdi will increase tax revenue in n-11 countries by 0.25%. this finding is consistent with the hypothesis. minh ha et al. (2022) found similar point, that fdi has a positive effect on tax revenue through not only export-import activities, but also infrastructure development and economic growth. the finding is in line with a research by okey (2013) which states that fdi can increase tax revenue directly to both foreign companies and entrepreneurs. in contrast to these findings, a study by gaspareniene et al. (2022) states that fdi inflow has a negative impact on tax revenue. it occured since small and medium-sized enterprises are incapable to compete with foreign companies formed from fdi, consequently, potential tax revenue is affected (unctad, 2012). interestingly, when fdi is moderated by regulatory quality, the coefficient becomes -0.63. this means that a one percent increase in fdi moderated by regulatory quality reduces tax revenue by 0.63%. this indicates that the application of both rules and regulations to fdi lowers tax revenue to n-11 countries and shows conformity with the hypothesis. mudambi et al. (2013) explains that the greater the economic freedom or the fewer regulations governing economic activity, the bigger the inflow of foreign investment. therefore, the application of regulations to foreign investment https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 640 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reduces fdi and results in a decrease of the potential tax revenue from the the utilization of these investments. for the regulatory quality variable itself, it shows a significant positive effect on tax revenue as indicated by a coefficient value of 2.09 and a z-test result of 0.028. if interpreted, an increase in regulatory quality by one signifies the tax revenue by 2.09% and it is obviously in line with the hypothesis. this suggests that regulatory quality plays an crucial role in increasing tax revenue in n-11 countries. similar results were found by syadullah (2015) who stated that regulatory quality has a positive impact on tax revenue, where good government policies and regulations towards the private sector improves tax revenue. in addition, asmah et al. (2020) found that an increase in regulatory quality will be followed by an increase in tax revenue. nevertheless, several research results do not match the findings. yaru & raji (2022) argued that regulatory quality has no impact on tax revenue, whereas salman et al. (2022) stated that the government's ability to formulate and implement the development policies of private sectors has no correlation with the level of the economy. conclusions this study examines the effects of the agricultural sector, fdi, and the moderating variable of regulatory quality on tax revenue in n-11 countries. the results indicate that the agricultural sector, fdi, agriculture moderated by regulatory quality, fdi moderated by regulatory quality, and regulatory quality simultaneously affect tax revenue. partially, the agricultural sector shows no effect on tax revenue. meanwhile, fdi, the agricultural sector moderated by regulatory quality, and regulatory quality affect tax revenue positively and significantly. however, when the fdi variable is moderated by regulatory quality, it shows a significant negative effect on tax revenue. from the findings, it is suggested that governments in n-11 countries not spend resources on regulating the fdi sector, especially when the aim is increasing tax revenue. this is because the quality of regulations will reduce tax revenue from fdi. instead, the government should issue quality regulations in other sectors, such as agriculture, and based on the analysis, agriculture will have a positive impact on tax revenue. moreover, the government needs to encourage the entry to foreign investment into n-11 countries for the purpose of increasing the tax revenue. it is obvious that the proper overall regulatory quality have a significant impact on increasing tax revenue. nevertheless, this study has limitations, in which only fdi inflow as a proxy for fdi and a short time span are used. for future research, it is recommended that not only the fdi inflow variable but also the fdi outflow and a longer time span be considered. moreover, it is necessary to investigate how the moderating variables of corruption control and the rule of law affect the tax revenue. https://www.ilomata.org/index.php/ijtc searching for tax revenue determinants in n-11: the moderating role of regulatory quality pascal and wijaya 641 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc references ajaz, t., & ahmad, e. 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(2020). factors affecting adoption of smart farms: the case of korea. computers in human behavior, 108, 106309. https://www.ilomata.org/index.php/ijtc https://doi.org/10.1017/cbo9780511628559.023 https://www.imf.org/external/pubs/ft/issues/issues27/ https://doi.org/10.1016/j.ibusrev.2013.03.003 https://unctad.org/system/files/official-document/wir2012_embargoed_en.pdf https://unctad.org/system/files/official-document/ditctncd2012d2_rev1_en.pdf https://datatopics.worldbank.org/world-development-indicators/ https://datatopics.worldbank.org/world-development-indicators/ https://doi.org/10.1596/24375 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 341-357 341 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc wealth taxes on individuals: an international comparative study estelle abrahams1, suzette bosman2 12sol plaatje university, south africa correspondent: estelle.abrahams@spu.ac.za1 received : february 8, 2023 accepted : april 21, 2023 published : april 30, 2023 citation: abrahams, e., bosman, s.(2023). wealth taxes on individuals: an international comparative study. ilomata international journal of tax and accounting, 4(2), 341-357. https://doi.org/10.52728/ijtc.v4i2.738 abstract: citizens contribute to the economy by creating wealth for themselves and in the way they use their assets. how assets, especially capital assets, are employed attracts tax and this influences how assets are used. in south africa, tax policy is one of the drivers in the decisions that individuals make regarding the use or disposal of their assets. wealth taxes are levied to address income disparities and mostly affect capital assets when they change ownership. this study compares developed and developing countries’ tax policies that impact capital assets when they are transferred or disposed of. the financial impact from using one’s assets drives economic participation. previous studies found that tax policy is influential in economic participation. a literature study was performed analysing wealth taxes, academic literature and legislation and incorporated a case study to illustrate the tax consequences of capital assets changing ownership in namibia, south africa, india and australia. the study found that, compared to the other countries, south africa taxes capital transfer both upon change of ownership by way of sale, donation and death of the owner. this study makes a novel contribution to the understanding of and development of improved and internationally comparable wealth tax legislation to address the wealth tax consequences of asset transactions in south africa. keywords: donations tax, wealth tax, capital gains tax, transfer duty, estate duty this is an open access article under the cc-by 4.0 license. introduction the economic growth of any country falls onto the shoulders of both the government of a country and its citizens (o.e.c.d., 2013). economic participation is a human right and interlinks with the idea that people are entitled to unencumbered economic participation and their share in the resultant benefits or riches of said participation (piovesan, 2013). this economic participation is comparable to a partnership between the authority figures of a country and the residents of said https://www.ilomata.org/index.php/ijtc mailto:estelle.abrahams@spu.ac.za1 https://doi.org/10.52728/ijtc.v4i2.738 wealth taxes on individuals : an international comparative study abrahams and bosman 342 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc country. according to (vogel et al., 2021) these cross-sector partnerships generally have a shared goal. this relationship between authorities and residents, is dependent on and informs the level of trust present in the partnership. a factor that impacts this trust relationship, is the perception and adoption of the legalised policies and regulatory environment that is prevalent in a country (o.e.c.d., 2013). if this trust relationship is compromised, increased occurrences of legislative non-compliance, decreased investment and decreased economic participation prevails amongst both companies and individuals (o.e.c.d., 2013). along with the need for economic partnership, individuals are also deeply motivated by their personal needs; this is confirmed by the work done of abraham maslow. maslow constructed the “hierarchy of needs” which, upon further exploration and understanding, concludes that human beings naturally seek to satisfy their own basic needs first before addressing the next need. desires to fulfil one need only appears once a more basic need has been met. the need for “safety” is one of the levels in maslow’s hierarchy of needs and includes feeling safe in your economic environment due to income stability (maslow, 1943). (yu, 2007) concluded that economics and psychology is related and that financial decisions are influenced by preconceptions (yu, 2007). similarly, a study by (kahneman & tversky, 1974) concluded that an individual’s existing knowledge about a topic has an influence on their behaviour regarding said topic or matter. subsequently, (bosman, 2020) concluded that an individual’s response to their regulatory environment is impacted by their perception or understanding of the ruling policies that govern this regulatory environment. consequently, if an individual perceives government policies as fair and equitable, the economic needs of a country and that of the individual would be in alignment (o.e.c.d., 2013). government utilises the taxes raised for the benefit of the citizens; a responsibility that falls on governing structures (bird-pollan, 2016). the tax system should be transparent and aimed at the advancement of the country through the advancement of its residents. (kamiru, 2005) found that redistribution is intrinsic to a taxation system and because of its nature, taxpayers are just in their expectation that this reallocation of tax monies is performed in an equitable manner. there are three components to taxes: tax on wealth, tax on purchases and income tax. the tax on these components is triggered at different times, and this sets them apart (arendse & stack, 2018). based on the cambridge dictionary, wealth tax is “a tax levied on personal property and financial assets above a certain level”. this tax type is triggered when ownership of an asset changes. wealth tax is imposed to raise additional revenue for government spending and to redress wealth disparity (arendse & stack, 2018). (basson, 2015) determined that wealth taxes include tax on capital gains (cgt), tax on donations, securities transfer tax (stt), transfer duty and tax on late estates which is also referred to as estate duty. motivation to the study utilising one’s productive assets, is one way to grow the economy and participate actively. deciding on whether to participate, is influenced by the policies that regulate this economy and in particular, tax policy is identified as a key policy (o.e.c.d., 2013; ramson, 2014). this study aims to identify https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 343 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and analyse the south african taxes that are levied when capital assets are transferred and compare them to similar taxes in other selected countries. the countries that will be compared are australia, india and namibia. australia, as a developed country, has a tax system comparable to south africa and levy cgt and stamp duty (halog & anieke, 2021). in addition, the south african cgt tax principles were informed by the equivalent australian policies and hence comparing these countries could potentially provide meaningful results (ramson, 2014). india forms part of the global emerging economy brics (brazil, russia, india, china & south africa) countries (arendse & stack, 2018) and is selected to directly compare developing countries’ tax systems. lastly, namibia, a country that does not levy the general taxes on created or existing wealth that are levied in south africa, to draw comparison and analyse how this country taxes their capital assets upon transfer or sale (k.m.p.g., 2022; pricewaterhousecoopers, 2019). limitations the study is limited to the wealth tax implications of selected capital assets and selected wealth taxes to ensure a succinct study. the assets are limited to assets that are at risk of attracting the highest wealth taxes and include shares, both listed and private and fixed property. the taxes considered are limited to donations tax, transfer duty, stt, cgt and estate duty. other forms of taxation will not be considered in the study. method this qualitative study takes the form of a literature study and an interpretivism philosophy is followed. interpretivism holds that reality has numerous perspectives and the interpretation of data is subjective and formed by the researcher. this paradigm ensures that deep knowledge of a subject matter is gained in its own context rather than a general view (pham, 2018). this study will analyse legislation and rules of specific taxes (wealth) related to specific assets. other sources of information that drives the study will be academic research references and other relevant general information. the study will identify, outline and draw a comparison of the applicable taxes, specifically wealth taxes, when assets change ownership. the study will firstly provide an overview of wealth taxes followed by an analyses of wealth taxes in each of the selected countries when assets are donated, transferred to a trust, sold, or retained until death. thereafter, the wealth taxes of the selected countries will be compared to draw conclusions regarding the comparability of south africa to these countries and make possible recommendations for future studies and improvements. a case study is incorporated to illustrate the impact of the tax policy analysed. https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 344 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion background to wealth tax (muller, 2010) concluded that the 1864 south african “recipient-based succession duty” was the earliest form of wealth tax in this country (basson, 2015). thereafter, the death duty act (29 of 1922) was legislated. in 1955, the estate duty act took its place. the debate surrounding wealth taxes is a recurring one and cannot exclude discussions and analyses of the wealth disparity and inequality considering, especially, south africa’s history (muller, 2010; roeleveld, 2015). in 2013, pravin gordhan, minister of finance, commissioned the davis tax committee (dtc) to perform a feasibility study on the imposition of a net wealth tax in this country that was benchmarked against countries including india and france. according to (roeleveld, 2015) the south african equivalent of wealth taxes are stt, donations tax, estate duty and transfer duty. the inclusion of cgt as a wealth tax attracts different viewpoints some researchers believe that cgt is taxation on deferred revenue or value appreciation and not on wealth (muller, 2010). according to (roeleveld, 2015) the international perspective indicates that the wealthiest individuals contribute the most to cgt tax revenue and the fact that upon death and emigration individuals are exposed to cgt, solidifies the argument that cgt is a form of wealth tax. this study takes on the view that cgt is indeed a form of wealth tax and therefore includes it in the study. the table below lists all the wealth taxes and their related information necessary to clarify the case study that follows. table 1. summary of selected wealth taxes in south africa tax levied which assets does it apply to events that are considered a disposal yearly exclusion or abatement percentage cgt most assets (exclusions apply) • donated asset • sale of asset • dispose asset that is held in a trust (living disposal) r40 000 40% of the taxable gain is included • individual passes away r300 000 securities transfer tax • listed shares • shares in private companies • selling the shares • donating the shares not applicable 0.25% (share value) https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 345 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc deceased estate duty assets belonging to deceased individual passes away r3 500 000 20% -amount below r30 million 25%amount above r30 million donations tax all donations (exemptions apply) individual gives asset away for no compensation r100 000 20% transfer duty immovable asset • sale r1 000 000 13% source: bosman,2020 case study assume this information to illustrate the taxes: mr. tax, a south african resident, owns fixed property and shares held as investments (private and listed on the johannesburg stock exchange (jse)). the fixed property consists of property 1 that was inheritance from a deceased aunt in 2012 and property 2 that was purchased in 2014. his share portfolio consists of 50 shares in private company a (a donation by a third party in 2015) and 700 shares in jse listed company b, bought in 2015. he has financial liabilities of r1 000 000 and estimated administrative costs of r400 000 will apply if he is to die today. assume that his net asset value is below r30 million, his income is within the maximum income tax bracket of 45% and he has a r680 000 assessed capital loss from the prior year. mr. tax founded an inter vivos1 trust, for estate planning, and donated property 3 (purchased in 2002 from a third party and earns rental income) to the trust in 2018. mr tax, mrs tax and their accountant are the trustees and the beneficiaries are his daughters, aged 15 and 22 and a nephew who resides in the united kingdom (uk). the beneficiaries have equal rights to the assets and income of the trust. property 1 will be bequeathed to his wife in his will. the table below summarises these facts including a cost price and market value when they are disposed of. the study assumes that proceeds are equal to market value when the disposal event occurs. table 2. case study data asset cost r’000 market value/proceeds r’000 acquisition date owner acquired from how was it acquired property 1 r1 500 r2 900 2012 mr. tax aunt inherited property 2 r5 000 r6 200 2014 mr. tax third party purchased https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 346 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc property 3 r500 r2 000 2002 mr. tax third party purchased property 3 r2 000 r2 400 2018 trust mr. tax donation private shares r125 r150 2015 mr. tax third party donation listed shares r800 r600 2015 mr.tax jse purchased analyses of wealth taxes when capital assets change ownership in south africa: capital gains tax – assets disposed if a capital asset is sold for more than it was purchased, a capital gain is realized and the inverse will cause a capital loss. therefore, capital gains and losses are influenced by the sales price and the cost (base cost) of the disposed asset. to calculate the possible cgt, base cost and proceeds must be determined. this section assumed that mr. tax disposed of property 1,2, company a shares and company b shares. the purchase price for the second property (property 2) and the 700 jse listed shares is used as “base cost” to determine any capital gain or loss (par 20, eighth schedule). as property 1 was inherited, the market value upon date of receipt is deemed as its base cost. this will be the same for the private company shares as these shares were a gift (sec 9ha, ita; par 38, eighth schedule). the cash sales price or cash consideration from the sale of these assets is the proceeds that is needed to determine the potential cgt impact (par 35, eighth schedule). for the purposes of this study, all sales are made to non-connected persons. to compute a net capital gain, the aggregate capital gains/losses for the tax year is reduced by the prior year’s assessed capital loss of r680 000 (stein, 2019). subsequently, the annual r40 000 exclusion is applied to this net capital gain. the calculation is represented in the table below. table 3. cgt calculation for disposal of assets r’000 capital loss/gain property 1 (2 900-1 500) 1 400 property 2 (6 200-5 000) 1 200 private shares (150-125) 25 listed shares (600-800) (200) aggregate capital gain 2 425 less prior year capital loss carried forward (680) net capital gain 1 745 par 5 exclusion (40) taxable capital gain 1 705 source: compiled by author based on case study data https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 347 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the taxable capital gain, computed in table 3 above will be added to mr. tax’s taxable income for the year of assessment. it will be included at 40%, which is r682 000, and taxed at 45% (maximum marginal tax rate). ultimately, r306 900 (r682 000*45%) will be capital gains tax (stein, 2019). capital gains tax – effect upon death this section examines the cgt impact upon the death of individuals. when an individual dies, for taxation purposes, all owned assets are transferred to the deceased estate that now becomes a tax payer. section 9h of the ita informs us that upon death, mr. tax is deemed to dispose his assets to a deceased estate at market value. consequently, this deemed disposal attracts cgt ((mescht, 2012; muller, 2010). the assets’ base cost will be the same as in the previous cgt discussion and the annual cgt exclusion increases to r300 000 upon death (loubser, 2016). the calculation is represented in the table below. table 4. cgt calculation upon death r’000 capital loss/gain property 1 (2 900-1 500) 1 400 property 2 (6 200-5 000) 1 200 private shares (150-125) 25 listed shares (600-800) (200) aggregate capital gain 2 425 less prior year capital loss carried forward (680) net capital gain 1 745 less par 5 exclusion in year of death (300) taxable capital gain 1 445 source: compiled by author based on case study data the taxable capital gain of r1 445 000 will be added to mr. tax’s taxable income and included at 40%, which is r578 000 and subsequently taxed at the appropriate tax scale. ultimately, r260 100 (r578 000*45%) will be included as capital gains tax. securities transfer tax (stt) mr. tax is liable for stt on the private company shares donated to him and the listed shares that the purchased (sec 7, stt act). the study assumes the value of the shares equal its cost, the stt liability is computed at 0.25% of the value of the securities (sars, 2022b; sec 2; stt act). respectively, the stt would be r312.50 (r125 000* 0.25%) and r2 000 (r800 000* 0.25%) for the private and listed shares. transfer duty upon purchasing property 2 and 3, transfer duty was payable (le grange, 2013). property 1 would be exempt from transfer duty, because it was inherited. transfer duty is determined based on the progressive table below, thus the duty payable for property 2 is calculated as r366 000 ((r5 000 000-r2 475 000)*11%)+ r88 250) and property 3’s purchase price is below the threshold of r1 000 000 and therefore there was no transfer duty payable. table 4 below contains the south african transfer duty rates. https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 348 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. transfer duty rates value of the property (r) rate 1 – 1 000 000 0% 1 000 001 – 1 375 000 3% of the value above r1 000 000 1 375 001 – 1 925 000 r11 250 + 6% of the value above r 1 375 000 1 925 001 – 2 475 000 r44 250 + 8% of the value above r 1 925 000 2 475 001 – 11 000 000 r88 250 +11% of the value above r2 475 000 10 000 001 and above r1 026 000 + 13% of the value exceeding r11 000 000 source: sars – online 2022 estate duty all owned assets minus liabilities and administrative expenses are included in a deceased estate when individuals die. section 4(q) of the estate duty act excludes bequeaths made to a spouse from estate duty. additionally, in terms of section 4a, r3 500 000 may be deducted from the net estate value. this abatement reduces the dutiable amount of estates. assuming, based on the case study information, that mr. tax is deceased, and his will is executed as per the case study, the potential estate duty of mr. tax is as follows: table 6. calculation of estate duty r’000 market value – property 2 900 market value – property 2 6 200 market value – private shares 150 market value – listed shares 600 total 9 850 less sec 4(q) spousal bequeath (2 900) less liabilities (1 000) less administrative costs (400) dutiable amount 5 550 less sec 4a abatement (3 500) net dutiable amount 2 050 source: compiled by author based on case study data the estate duty payable will be r410 000, which is 20% of the net dutiable amount. donations tax if assets are donated, then donations tax must be considered (basson, 2015). donations tax is governed by section 54 – 64 of the ita. section 56 lists certain donations that are exempt from https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 349 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc donations tax. to illustrate the effect of donations tax, this section assumes that mr. tax donates all his assets and none of them are within the ambit of the exemption list as mentioned earlier. when the assets are donated, their value is determined based on the market value at that date and in terms of legislation the first r100 000 is excluded from donations tax (mescht, 2012). refer to the table below for a snapshot of the potential taxable donations. table 7. calculation of taxable donations r’000 property 1 2 900 property 2 6 200 private company shares 150 listed shares 600 market value property 3 2 000 value of donation 11 850 sec 56(2) exclusion (100) taxable donations 11 750 source: compiled by author based on case study data mr. tax’s donations tax liability will be r2 350 000 (r11 750 000*20%) if he makes the donations as stipulated above. identification of wealth taxes when capital assets are transferred in namibia, india and australia: tax policy in namibia according to pwc (2022), namibia adopted many of their tax policies from historic south african tax policies, but their tax policy relating to wealth taxes is significantly different from this country. in contrast to south africa, namibian tax administrators do not levy cgt, donations tax nor estate duty when assets change ownership (kostiainen, 2018). legislation that governs how trusts and deceased estates are taxed is found in the “namibian income tax act 24 of 1981” (ita namibia). the wealth taxes identified in namibia are stamp duty and transfer duty and these are comparable to the south african stt and transfer duty (k.p.m.g., 2019; pricewaterhousecoopers, 2019). the “namibian transfer duty act 14 of 1993” governs the taxes that are to be levied on property transfers within its borders and the stamp duty act 15 of 1993 governs taxes when deeds and specific instruments are transferred (k.m.p.g., 2022; pricewaterhousecoopers, 2019). (kostiainen, 2018) concluded that the taxation approach in namibia and south africa is different, because of the contrasting wealth disparity statistics. the author also found that namibia addressed their wealth disparity through budget allocations whereas south africa attempts to address this by using tax income. according to (smicht, 2009), the poverty levels in namibia should significant improvement from 1993 to 2004. a study performed by the world bank concluded, based on statistical 2gini-coefficient measures, that the inequality in namibia is slightly https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 350 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc better compared to south africa. namibia’s gini-coefficient rating improved from an estimated 0.59 in 2015 to 0.49 in 2017; this improvement was attributed to the namibian fiscal policy of utilizing social expenditure to alleviate poverty and inequality (kostiainen, 2018). stamp dutynamibia schedule 1 of the countries’ stamp duty act indicates that this tax is raised on legal documents and applies to the transfer of shares, contracts, agreements or deeds and marketable securities (franzsen & mcclusky, 2017). the nature of each transaction drives the rate at which this tax will be levied as can be seen from the table below. table 8. namibian stamp duty rates transaction stamp duty agreements or contracts (other than those where duty is specifically provided for in the act) act) n$5 lease agreement or lease the stamp duty will be based on lease payments, together with additional considerations specified in the lease agreement transfer or issue of marketable securities and other share transactions n$2 for every n$1 000 or part thereof of the value/consideration, depending on the specific transaction transfer deed relating to immovable property purchased n$10 for every n$1 000 or part thereof is payable for values over n$600 000 source: pwc, 2022 estates – namibia the administration of deceased estates falls under the authority of the “administration of estates act 66 of 1965” (cronje & co, 2019) and does not prescribe any estate duty. section 26 states that income that would have accrued if the deceased was alive will accrue to the legal heirs on condition that it is proven to be to the current of future benefit of the heir. if this benefit cannot be proven, the income accrues to the deceased estate (section 26, ita namibia). section 1 excluded accruals that are capital in nature and thus income accruals from capital assets disposed will not be taxed when it accrues to the deceased estate. tax policy in india in 1956 the kaldor committee was established to investigate and address tax evasion and financial and equitable aspects of resident tax liabilities. these investigations concluded by introducing a gift tax, wealth tax and capital gains tax and the resultant “gift tax act of 1958” and “wealth tax act of 1957” and was legislated. subsequently, based on recommendations from the 1992 tax reform committee, wealth tax was limited to unproductive assets that included jewellery and luxury vehicles and in line with these recommendations in 1993 the wealth tax act was amended. this amendment was brief as the https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 351 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc administration and classification of unproductive assets was challenging and not applied uniformly and subsequently the “wealth tax act of 1957” was terminated in 2015 (batra, 2015). similarly, to the aforementioned, in 1998 india proceeded to abolish the “gift tax act of 1958”. indian tax authorities subsequently introduced a 2% surcharge for high-income persons to substitute the revenue erosion caused by the cessation of these two acts. indian tax authorities introduced cgt in 1981. cgt regulations are included in the “indian income tax act 43 of 1961” (ita india). section 47 of the ita india states that capital asset transfers in terms of a will are not regarded as transfers and thus there is no cgt consequences for a deceased estate. in 1953, india introduced the estate duty act in an attempt to address wealth disparities. due to the immense criticism this act received, it was terminated in 1985 (dutta & malhotra, 2018). based on the aforementioned, india does not charge estate duty, tax on donations and cgt on deceased estates, therefore, the south african equivalent wealth taxes that this study will analyse are limited to stamp duty, cgt and stt. stamp duty – india this duty is legislated in the “indian stamp act of 1899” and contains stamp duty rates applicable when property changes ownership, is transferred or new property acquired (included in the cost). it is similar to transfer duty in south africa. this act extends to the whole of india but excluded certain states. the rate that this tax is levied at varies from 5% to 8% of the property value (paisabazaar, 2021). cgt – india a capital gain is defined as a “profit arising from the transfer of a capital asset” and net gains are included in the taxable income of individuals. section 55 of the ita india states that the cost of the asset (comparable to base cost in south africa) is the acquisition costs, cost of improvements before april 1981 and transfer costs. if the asset being sold is equity shares or securities, stt is excluded form the cost of these assets. in terms of the act, capital gains or losses are calculated by deducting the determined cost of capital assets from the sales consideration that is received. the capital gain tax rate is variable and influenced by the nature of the asset that was disposed of. when capital gains are realised on so called “longer term” assets, it is taxed at 20%. capital gains on shorter term assets such as equity shares held for a short term, are taxed at 10%. the act also indicates that capital gains and – losses may be offset, provided that the balance of any losses are utilised within 8 years. stt india india legislated the securities transaction tax rules of 2004 which governs the levy of stt. it is charged when indian stock exchange securities (listed) are disposed of. the stt rate is variable and subject to the nature of the security. the rate ranges from 0.001% to 0.2% and either buyer or seller could be liable for this tax depending on the circumstances of each transaction. https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 352 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax policy in australia like some of the other selected countries, australia legislated stamp duty in their australian territory stamp duty of 1969. based on this act, taxes are levied on the transfer of certain assets. australia repealed its wealth, death and donation taxes respectively in the 1970s and 1980s. these acts were repealed as the administration was cumbersome, compliance costly on taxpayers and it facilitated tax evasion through the implementation of trusts consequently, cgt was legislated in the “australian income tax assessment act 38 of 1997” to substitute this loss of tax revenue (arendse & stack, 2018; ramson, 2014). stamp duty – australia when there is a change in ownership in moveable and immoveable assets, stamp duty is charged in australia. the affected assets include property, insurance policies, business or personal assets, motor vehicles and shares. the sliding stamp duty rate depends on the jurisdiction of the asset sold disposed of ranges up to 5.75%. the acquiring person is liable for the levied stamp duty. cgt – australia capital gains tax legislation can be found in the third chapter of the ita australia and contain regulations that pertain to the key considerations of cgt: disposals, proceeds, base cost and asset (ramson, 2014). according to the ita australia, there are no cgt consequences when the owner of an asset dies. any cgt consequences are only triggered when the legatee sells the inherited asset (ramson, 2014). if, however, the assets in a deceased estate are bequeathed to compliant superannuation entity, a foreign resident or a taxadvantaged entity then cgt will be triggered and taxed in the deceased estate (ramson, 2014). cgt is calculated when it has been concluded that there has been a capital gain from a disposal and then any applicable exemptions from cgt are considered. fifty percent of capital gains are included in taxable income if the asset has been owned for more than twelve months and the full capital gain is taxed if the asset has been owned for a lesser period. like south africa, capital losses and gains are netted off in a tax year and carried forward if there are no or insufficient gains. disposing assets via donation, has no cgt effect because both proceeds and base cost are deemed at market value. consequently, individuals may dispose of assets by donating them and there will be no cgt liability or consequences. findings south africa – cgt capital gains tax was effectively implemented from 1 october 2001 and is legislated in the “eighth schedule to the south african income tax act no. 58 of 1962”. any capital assets that are disposed after this date will have cgt consequences. disposals that trigger cgt include selling or donating assets and deemed disposals upon death (basson, 2015). all taxable capital gains, after the annual r40 000 exclusion or r300 000 in the year of death, are included in taxable income at 40% (loubser, 2016). capital losses during a year of assessment are only to be utilized against future capital gains. https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 353 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc australiacgt capital gains tax provisions was effectively implemented from 20 september 1985 and is legislated as part of the “australian income tax assessment act 1997”. disposals that trigger cgt include capital asset sales. all taxable capital gains are included in taxable income at a rate of 50%, if owned for more than twelve months and fully taxable if owned for less than twelve months. capital losses are utilized against any gains and any remainder is carried forward for offsetting against any future capital gains. capital assets that are disposed by donation, attracts no cgt as market value is used as both base cost and proceeds. upon death, there is no deemed disposal event, and any capital gain is deferred to future sales by the legatee, unless the legatee is tax advantaged entity. namibia – cgt there is no capital gains tax in this countryneither on disposals during a lifetime nor upon death. india cgt capital gains tax provisions was effectively implemented from september 1981 and is legislated as part of the income tax act, 1961. the capital gain inclusion rate is dependent on the classification of the capital asset as either long or short-term. the capital gains inclusion rate on equity shares vary from 10% to 100% depending on the classification. capital losses during a year of assessment are utilized against any capital gains and the remainder is carried forward for offsetting against future capital gains, but limited to a roll over timeframe of eight years. south africa – donations tax donations tax was legislated in the ita through a tax amendment bill (basson, 2015). a donation is made when a capital asset is gifted at no cost or for less than market value (sec 58(1), ita). donations tax is charged at 25% on donated values exceeding r30 million and 20% if the value is less than r30 million. deceased estates are exempt from donations tax if capital asset donations are made in terms of a valid will (sec 56(1)(c) & (d); ita). australia – donations tax none. namibia – donations tax none. india – donations tax none. south africa – estate duty this tax was legislated in 1955. estate duty of 20% is charged on the dutiable amount of an estate up to the value of r30 million and 25% on the value above r30 million (sars, 2022c). australia – estate duty this country does not tax individual’s estates when they are deceased. namibiaestate duty this country does not tax individual’s estates when they are deceased. https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 354 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc india – estate duty this country abolished estate duty law. south africa – transfer duty this is a form of indirect tax that is charged when immovable property is purchased. it forms part of the property acquisition cost and the purchaser has to pay it. australia – stamp duty stamp duty can be levied up to 5.75% of the property value and has to be paid by the acquirer. namibia – transfer duty transfer duty rates vary based on a sliding scale, has to be paid by the acquirer and is included in the cost of the immovable asset. india – stamp duty stamp duty ranges from 5% to 8% of the property value and has to be paid by the acquirer. south africa – securities transfer tax stt of 0.25% is raised on the value of share purchases. this tax is included in the cost of the securities and the acquirer is liable for payment. australia – securities transfer tax this country levies stamp duty on security transfers. stamp duty is discussed above. namibia – securities transfer tax this country levies stamp duty on security transfers. stamp duty is discussed above. india – securities transfer tax this tax is governed by the stt rules in india and vary from 0.001% to 0.2%. the charge is also based on the market value of the sold shares and a contract determines whether the buyer or seller is responsible for payment. table 9. findings summarised by country wealth tax investigated developed nation developing nation australia namibia india south africa estate duty none none none √ transfer duty none √ none √ securities tt none none √ √ cgt √ none √ √ donations tax none none none √ stamp duty √ √ √ none source: compiled by author https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 355 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the study found similarities for cgt between south africa, australia and india. these three countries charge cgt when capital assets are sold at varying inclusive rates. the treatment of assets upon the death of an individual is different as south africa appears to be the only country of the three, that taxes the deceased estate of an individual, due to the legislation of a deemed disposal upon death. regarding transfer duty and securities transfer tax, the study found that all four countries have a form of this tax, some in the form of stamp duty. the rate to determine these taxes varies but is based on the property or share value and mostly paid by the purchaser. the study found that south africa is the only country, out of the selected countries, that charges taxes when an individual is deceased (estate duty) and when individuals give gifts or make donations (donations tax). india and australia abolished their version of these taxes, due to the administrative burden and high compliance cost associated with it. the study notes that the introduction of cgt in both india and australia coincides with the timeframe that they abolished donations and estate taxes. the namibian tax system addresses income redistribution by making budget allowances and not from taxation revenue. this is evident from the findings indicating the absence of cgt, donations tax and death taxes and is also attributable to the fact that the namibian wealth disparity is less severe than in south africa. analyses of the namibian tax system indicates that market value increases or growth in asset capital values are not taxed in namibia. this could potentially influence and motivate residents to invest more in capital assets. the study found that in comparison to the selected countries, south african tax legislation has more avenues that tax the market value increases of capital assets disposed of by their residents. these taxes can potentially have a significant impact on the wealth of individuals and may influence their investment decisions in this country. further studies on the impact of double taxation are recommended. reference arendse, j., & stack, l. (2018). investigating a new wealth tax in south africa: lessons from international experience. journal of economic and financial sciences, 11(1), 175. basson, c. p. (2015). the implications of wealth transfer taxation in the absence of estate duty (master’s thesis. the university of cape town. https://open.uct.ac.za/bitstream/item/16569/thesis_com_2015_bsschr009thesis.pdf?sequence=1 batra, k. (2015). chartered club. wealth tax in india abolished & removed. budget. https://www.charteredclub.com/wealth-tax/ bird-pollan, j. e. (2016). taxation of wealth transfers: a philosophical analysis (doctoral dissertation). available from proquest dissertations and theses database. proquest, 103082232). https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 356 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc bosman, s. (2020). an analysis of wealth taxes applicable to the transfer of capital assets by an individual in south africa. north-west university. potchefstroom. cronje, & co. (2019). wills and estates. http://www.cronjelaw.com/wills dutta, d., & malhotra, h. (2018). india: estate duty act – a critical analysis of the journey so far. http://www.mondaq.com/india/x/708128/inheritance+tax/estate+duty+act+a+critica l+analysis+of+the+journey+so+far franzsen, r., & mcclusky, w. (2017). property tax in africa. https://www.researchgate.net/profile/naramonkam/publication/344257478_property_taxation_in_senegal_legislation_and_practic e/links/5f611fb1299bf1d43c0732f2/property-taxation-in-senegal-legislation-andpractice.pdf halog, a., & anieke, s. (2021). a review of circular economy studies in developed countries and its potential adoption in developing countries. circular economy and sustainability, 1, 209–230. https://doi.org/10.1007/s43615-021-00017-0. kahneman, d., & tversky, a. (1974). judgment under uncertainty: heuristics and biases, science. vol.185, 4157, 1124 – 1131. kamiru, j. g. (2005). tax policy, corporate savings, investment behaviour, and economic growth: the kenya experience. k.m.p.g. (2022). namibia tax budget guide. https://kpmg.com/na/en/home/insights/2022/03/kpmg-namibia-tax-budget-guide-20222023.html kostiainen, e. (2018). taxation and legitimacy : namibia in focus (master ‘s dissertation. the university of helsinki. https://helda.helsinki.fi/handle/10138/236857 k.p.m.g. (2019). india income tax. https://home.kpmg/xx/en/home/insights/2011/12/indiaincome-tax.html le grange, a. j. (2013). an analysis of the transfer duty implications on the ‘sale’ of a trust. loubser, m. (2016). a case study analysis of the impact of the davis tax committee’s first interim report on estate duty on certain trust and estate planning structures used by south african residents (master’s thesis. university of witwatersrand. http://wiredspace.wits.ac.za/handle/10539/22220 maslow, a. h. (1943). a theory of human motivation. psychological review, 50, 370–396. mescht, e. (2012). limited interests in property – an overview of limited interests in property with particular reference to the taxation of usufructs and more specifically the capital gains tax effects on disposal for individuals and for trusts (master’s thesis. the university of cape town. https://open.uct.ac.za/bitstream/handle/11427/12202/thesis_com_2012_van_der_mesch t_e.pdf?sequence=1&isallowed=y https://www.ilomata.org/index.php/ijtc wealth taxes on individuals : an international comparative study abrahams and bosman 357 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc muller, e. (2010). a framework for wealth transfer taxation in south africa (doctoral thesis. the university of pretoria, south africa. https://pdfs.semanticscholar.org/bf8a/5b6777744d3486ed11e861f1e132408775f3.pdf o.e.c.d. (2013). trust in government, policy effectiveness and the governance agenda”. in government at a glance 2013. oecd publishing. https://doi.org/10.1787/gov_glance-20136-en paisabazaar. (2021). stamp duty in india. pham, l. t. m. (2018). qualitative approach to research a review of advantages and disadvantages of three paradigms: positivism, interpretivism and critical inquiry (report. the university of adelaide. https://www.researchgate.net/publication/324486854 piovesan, f. (2013). realizing the right to development, chapter 6. essays in commemoration of 25 years of the united nations declarations on the right to development. https://www.ohchr.org/documents/publications/rightdevelopmentinteractive_en.pdf pricewaterhousecoopers. (2019). namibia, republic of – corporate. https://taxsummaries.pwc.com/republic-of-namibia/corporate/other-taxes ramson, v. (2014). the interface between capital gains tax and estate duty and the double tax implications thereof (masters mini-dissertation. the university of kwazulu natal. roeleveld, j. j. (2015). an argument for either excluding death as a capital gains tax event or abolishing estate duty. sa journal of accounting research, 26(1), 2012. smicht, m. (2009). institute of public policy research. poverty and inequality in namibia: an overview. https://ippr.org.na/wpontent/uploads/2010/06/poverty%20and%20inequality%20research.pdf stein, m. (2019). stein on capital gains tax. lexis nexis library. https://www.mylexisnexis.co.za/index.aspx vogel, r., matsuo, y., gobel, m., grewe-safield, m., herbert, m., & weber, c. (2021). crosssector partnerships: mapping the field and advancing an institutional approach. international journal of management review, 24, 394–414. yu, z. (2007). behavioural economic analysis of decision making: a case of marketing (pp. 10, 43–55). https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 215-225 215| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta winda wulandari1, fransiskus christanto kia teron2, dwi agustina3, eka rofiyanti4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: rofiyanti.ekasumarn0@gmail.com4 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: wulandari, w., teron, f, c, k., agustina, d., rofiyanti, e. (2022). evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta. ilomata international journal of tax and accounting, 3(2), 215-225. https://doi.org/10.52728/ijtc.v3i2.476 abstract: the covid 19 pandemic in almost all countries, including indonesia, has negatively impacted the economic sector, especially the msme business. the government has made various efforts to restore the indonesian economy. through the directorate general of taxes, under the authority of the ministry of finance, the government decided to provide tax incentives for taxpayers affected by the covid 19 pandemic. this final income tax incentive is based on the regulation of the minister of finance of the republic of indonesia no. 44 pmk/03/2020. this regulation focuses on small and medium enterprises. taxes are usually 0.5% of gross income that is self-paid or deducted or collected by withholders or collectors. however, with pmk44/pmk.03/2020, the tax is borne by the government, which means that the income is not subjected to tax from april 2020 to december 2020. this study used a descriptive method. the data was collected through a literature study where the author evaluated the implementation of government regulatory policies regarding applying tax incentives for msmes affected by covid-19. the purpose of providing tax incentives to msmes is to reduce their difficulty in meeting operational costs or expenses so that msmes can survive during the pandemic, as well as save the national economy and maintain financial system stability. the study results show that tax incentives and relaxation and the provision of tax incentives to the beneficiary sector msme are productive and able to support the recovery of the national economy. these programs and tactical steps ensure that economic growth is maintained even though these programs are separate and unrelated to the spread of covid-19, which can be controlled quickly. keywords: evaluation, incentives, taxes, smes. this is an open access article under the cc-by 4.0 license. introduction taxes are the primary source of state revenue that contributes to state development (amendolagine et al., 2021; egbunike et al., 2018; febyani & widodo, 2020;nguyen & darsono, 2022; sekiraqa et al., 2021; tibulca, 2021). state revenue in 2019 reached 86.50% from the tax mailto:rofiyanti.ekasumarn0@gmail.com https://doi.org/10.52728/ijtc.v3i2.476 evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 216 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sector (beny & loviana dewi, 2021; wantasen et al., 2021). the significant contribution of taxation to the state revenue sector encourages the government to increase taxpayer compliance. the covid-19 pandemic that has occurred in indonesia since 2020 has impacted various sectors, including the business sector, especially those carried out by micro, small and medium enterprises (msmes) (arianto, 2020; damayanti, 2021; kusumastuti, 2020; nabilah et al., 2021; rahmah, 2020). many msmes ' turnover has fallen drastically with the large-scale social restrictions (psbb) policy (anugerah et al., 2021; kurniawan, 2021; muhyiddin & nugroho, 2021; rofiyanti et al., 2021). other problems are the lack of tax literacy, difficulty accessing or reaching services, especially during the large-scale social restrictions (psbb), the lack of attractiveness of the incentives themselves, the reluctance of msme business actors to deal with taxes, and concerns about additional obligations for msmes (andrew & sari, 2021;marlina & syahribulan, 2021; rahmawati & apriliasari, 2021; resmi & barmawi, 2022; wardana, 2021). the tax incentive policy is one of the efforts made by the government to help the economy of msme actors during the pandemic. the policy for providing tax incentives is regulated through the minister of finance regulation number 44/pmk.03/2020 concerning tax incentives for taxpayers affected by the corona virus pandemic on 27 april 2020. this pmk 44/2020 revokes the regulation of the minister of finance of the republic of indonesia number 23/pmk.03 /2020 promulgated 37 days in advance. one of the most fundamental differences is that pmk 23/2020 only provides tax incentives for the industrial sector. no type of service business sector is given incentives except for repairs and installations (kementerian keuangan, 2020; masdi, 2021). the government hopes that msmes can survive in this pandemic situation. in this case, the support of the business world, msmes, was ratified in chapter iii of pmk no. 86/pmk.03/2020 concerning tax incentives for taxpayers affected by the covid-19 pandemic. the chapter describes the final income tax incentives based on government regulation no. 23 of 2018. the msme final income tax, whose tax rate has been 0.5% of gross turnover, is officially borne by the ministry of finance. msme taxpayers receive a final income tax facility of 0.5% (government regulation no. 23 of 2018), which the government bears. based on data from suku dinas koperasi, usaha mikro, kecil, menengah, dan perdagangan (kumkmp) koja jakarta utara, 8,023 msme actors have registered themselves through the integrated entrepreneurship development program in 2019. a total of 2,241 msme actors have received micro small business permits. a total of 2,307 msme actors have participated in the marketing stage, and 127 other msme actors have made financial reports and obtained access to capital. compared to 2018, of the 8,395 msme actors who registered, only 1,930 received the micro small business permit. meanwhile, three msme actors have access to capital. these data show that msme actors in koja, north jakarta, have developed quite significantly. on the other hand, the covid-19 pandemic can significantly impact the development and economy of msme actors . as quoted by the head of finance and banking of the central executive board, hipmi ajib hamdani, there are five problems faced regarding financial incentives faced by the community and business actors, including the lack of tax literacy. second is the difficulty of accessing or reaching services, especially during the large-scale social restrictions. third, concerns over the actions of post-pandemic tax authorities. fourth is information asymmetry regarding tax incentive policies at agencies outside the directorate general of taxes, such as local government and local government agencies. fifth, the issuance of a letter of request for explanation of data and information (sp2dk) and a request for correction is still being carried out by the directorate general of taxes. evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 217 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this research is descriptive research with a qualitative approach, further elaborated with secondary data from the play store, social media, or other news media. data collection techniques were carried out through interviews, observation, and documentation. in line with the expression of silalahi, which states that data collection techniques can be carried out through searching secondary data obtained from books, articles or news, comments, government publications (websites), and journals (creswell, 2017; silalahi, 2017; sugiyono, 2019). result and discussion evaluation of a government policy or program means assessing the goals, criteria, and targets to be achieved by a policy with the existing reality or achievements. the evaluation also means making information about how far a policy outcome contributes to achieving goals and objectives. therefore, in evaluating the provision of tax policies for the textile industry in indonesia, researchers will discuss the implementation of the provision income tax incentives, their objectives, and evaluation of the implementation (subarsono, 2019). 1. evaluation of the implementation of tax incentive policies for micro, small and medium enterprises affected by the covid-19 pandemic at kpp koja, north jakarta there are six criteria for conducting policy evaluations, here are some evaluation criteria in viewing the tax incentive application policy (dunn, 2018), namely as follows: a. effectiveness effectiveness is the relationship between output and goals. the more significant the contribution of output to achieving goals, the more effective a policy or program, will be. a policy or program is considered adequate if the output produced can meet the expected goals (benvenutti et al., 2016; roman & plopeanu, 2021; santhosh & baral, 2015; voronov et al., 2015). suppose it is related to the income tax incentives received by msmes in the koja area. in that case, it can be said to be effective if the output produced can meet the incentive objectives, namely increasing national welfare and encouraging government programs to create and absorb employment and prevent layoffs massively (ciesielska et al., 2022; holzer et al., 2021; tripon, 2015) . in connection with the turmoil in the financial market and the rupiah exchange rate during the covid-19 pandemic, the provision of income tax incentives to msmes in terms of effectiveness must involve equity and be right on target. if viewed from the aspect of awareness of msmes, it is already high in utilizing the pph incentive policy. providing income tax incentives to msmes has not been effective because there are still few msmes that apply for pph incentives (kumala & junaidi, 2020; malik et al., 2020; priyatin & rahmi, 2022; sarjono, 2021). an income tax incentive program can be effective if it produces one unit of output (output) and achieves the goal because the low application for income tax reduction incentives can be said to be ineffective. b. efficiency efficiency relates to the amount of effort required to produce a certain level of effectiveness (dunn, 2018). in implementing the tax incentive policy for msmes in koja during the pandemic, efficiency was seen, where the government's efforts to conduct socialization prior to implementation were estimated to be quite efficient (yang et al., 2022; zhang et al., 2022). with the existence of tax incentives, previously budgeted funds for paying taxes can be used for other purposes. the msmes at the pratama koja tax service office optimize income to survive during the pandemic. the use of tax incentive policies can at least provide relief on the evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 218 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc expenditure burden of msme actors during the covid-19 pandemic (chen et al., 2022). the provision of tax incentive policies for msme taxpayers, on the one hand, can ease the burden of spending but, on the other hand, reduce state revenues (wan et al., 2022). nevertheless, it is hoped that the provision of tax incentive policies is expected to be obedient in fulfilling tax obligations even though the community's economy is weakening due to the covid-19 pandemic c. adequacy sufficiency in public policy seen in achieving the goals that have been achieved has been felt to be sufficient in various ways (figueroa et al., 2021; simshauser, 2019; sukhwani et al., 2021; zapata et al., 2022). adequacy is concerned with how far a level of effectiveness satisfies a need, value, or opportunity (dunn, 2018). from the above understanding, it can be concluded that adequacy is still related to effectiveness by measuring or predicting how far the existing alternatives can satisfy the needs of the koja msmes during the pandemic period and the value or opportunity in solving problems that occur. the aspect of adequacy in applying the tax incentive policy is the satisfaction and adequacy of the koja msmes in surviving during the covid-19 pandemic. taxes are people's contributions to the state treasury based on the law (which can be forced) by not receiving reciprocal services (contra-achievements) that can be shown directly and which are used to pay general expenses (mardiasmo, 2006, 2016). indirectly, tax is a burden that taxpayers must pay. with the covid pandemic, where the community's economy, especially msmes, is very disturbed, the tax burden is felt to be burdensome for msme actors. with the tax incentive policy, it is felt that it can provide relief and solutions to the tax burden obligations by msme taxpayers. thus, msme actors feel that the policies issued by the government are beneficial in meeting their needs even though income is reduced as a result of the covid-19 pandemic. d. even distribution alignment in public policy means that justice is given and public policy targets are obtained. william n. dunn stated that the criterion of equity is closely related to legal and social rationality and refers to the distribution of results and efforts between different groups in society. an equalization-oriented policy is a policy that results or effort is equitably distributed. a particular program may be effective, efficient, and sufficient if evenly distributed cost benefits. the key to alignment is justice or fairness. the implementation of the incentive policy must be fair. all sectors and society's perspectives must enjoy the results of the policy because public services are services from the bureaucracy for the community in fulfilling community activities, either directly or indirectly. public services themselves produce public services. during the pandemic, many sectors are affected. the policy of providing tax incentives is one of the government's solutions to reduce the impact felt by the community, especially msme actors. the government has sought equality in implementing the policy of providing tax incentives. unfortunately, tax literacy and knowledge that is still low are obstacles and causes of taxpayers' ignorance in accessing these policies. the covid-19 pandemic has caused a decrease in the income of msme taxpayers, so many taxpayers complain that paying taxes of 0.5% of the total gross turnover every month is very burdensome. however, even so, after the government made it easy for msme taxpayers through pmk no 44 pmk/03/2020, many kpp pratama koja taxpayers still choose to pay pph final pp 23 compared to taking advantage of these incentives. the purpose of providing this tax incentive was stated in consideration of the pmk policy no. 44/pmk.03/2020 that in order to overcome the impact of covid-19, which affects the economic stability and productivity of business actors, the government needs to regulate provisions related to the provision of tax incentives due to the impact of the pandemic which has spread to the industrial sector. smes. to achieve the goals related to overcoming the impact of covid-19, the provision of tax incentives for msme taxpayers who carry out their tax obligations under pp 23/2018 is evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 219 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc emphasized in article 5 paragraph 6 pmk number 44/pmk.03/2020, stating that the final pph is based on pp 23/2018 borne by the government. this provision eliminates the obligation of pp 23/2018 taxpayers to bear a tax burden of 0.5% on their business income, including income originating from transactions with tax withholders or collectors. e. responsiveness the aspect of policy evaluation for responsiveness concerns policy outcomes in satisfying preference or value needs. the policy results can be seen in terms of the response of recipients or those who use the benefits of the policy. the income tax incentive policy can be seen from the level of taxpayer response, in this case, the koja msmes who want to take advantage of the income tax facility. the need for preference for income tax facilities has been fulfilled, or the results are following the common objectives of issuing a regulation of the minister of finance. the income tax incentive policy is considered to positively impact msme actors in koja. policy socialization is an effort that the government must make to provide information to the public, especially taxpayers, regarding policies and programs issued by the government. in this case, the tax incentive policy will impact msme actors if many access the policy. the more taxpayers who access the incentive policy, the more the benefits of this policy will be felt by taxpayers. as a form of government policy in economic recovery during the covid-19 pandemic, pmk no. 44 pmk/03/2020 was stipulated and enforced since april 27, 2020. the purpose of this policy was to facilitate the use of more comprehensive incentives. one of the sectors that can take advantage of incentives based on pmk no 44 pmk/03/2020 is the msme sector, usually referred to as final income tax incentives. as an effort to socialize so that the final pph incentive can be known, understood, and utilized by msme taxpayers, the tax officer at the koja pratama tax service office conducted socialization for msme taxpayers registered at the koja pratama tax service office. socialization activities that have been carried out at the koja pratama tax service office in order to provide education about final income tax incentives for msmes are in the form of submissions by each of the finance department of the koja pratama tax service office to msme taxpayers through communication media such as telephone and whatsapp, information dissemination through the social media of the koja pratama tax service office. this remote socialization is carried out to avoid the further spread of covid-19. socialization activities and several educations that have been carried out to introduce pmk no. 44 pmk/03/2020 to msme taxpayers are considered sufficient to provide understanding. however, there are still many taxpayers who have not taken advantage of these incentives. based on the data collection results from kpp pratama koja, msme taxpayers who take advantage of these incentives are 393 out of a total of 1,231 msme taxpayers. so taxpayers who take advantage of these incentives are only about 32% of the total msme taxpayers at the koja pratama tax service office. taxpayers who wish to take advantage of these incentives must submit an online realization report. suppose the msme taxpayer does not take advantage of the incentive. it is obliged to carry out its obligations following pp 23/2018, namely, on income from business received or obtained by the msme taxpayer; it is subject to final income tax within a certain period. the income tax rate imposed on the final income tax is 0.5% multiplied by the tax base. the tax base is the total monthly turnover before the sales discount (bandiyono & utami, 2021). the government's goal in providing tax incentives for msmes is to maintain the business continuity of msme taxpayers during the covid-19 pandemic. f. accuracy a successful and appropriate tax incentive is the goal of the income tax incentive policy program, suitable for a community or group currently impacted by covid-19. policies will be effective if policymakers understand what is needed by policy implementers. policymakers must evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 220 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc know and research problems in the textile industry to formulate a policy that is useful for msmes. based on the analysis of data obtained from msmes in koja, the number of msmes in koja that applied for the provision of tax incentives for pph 23 was correct. nearly 90% of msmes received government assistance funds for incentive policies during the covid-19 pandemic. administration to get this incentive is not suddenly a taxpayer who is included in the criteria of government regulation number 23 of 2018 will get it. however, there are special terms and conditions that the taxpayer must comply with. msme actors must fulfill the administrative process according to pmk number 23 of 2020. the covid-19 pandemic has affected economic stability in affected countries such as indonesia. the most affected business segment is the msme sector. msmes are the most vulnerable sector to the covid-19 pandemic. during the covid-19 pandemic, many msmes experienced business sluggishness and even went out of business (hendayana et al., 2020). msmes have a significant influence on economic stability in indonesia. based on the report on analysis of the competitiveness of msmes in indonesia (2018) by bappenas, it is stated that msmes have several reasonably significant roles, among others, expanding employment, absorbing labor, forming gross domestic product, and providing a net. therefore, the government needs to maintain the continuity of msmes, especially during the covid-19 pandemic. the government's step is to provide incentives for pp 23/2018. during the validity period of pmk number 44/pmk.03/2020, the number of submissions of realization reports continued to increase. this condition shows that the enthusiasm of pp 23/2018 taxpayers in utilizing incentives has increased during the enactment of pmk number 44/pmk.03/2020. details of the report on the realization of the final pph pp 23 dtp incentives in 2020 at the pratama jakarta koja tax service office with an initial budget of 1,346,472,000,000, but the realization increased to 1,372,748,468,227. based on the evaluation of the overall use of pph 23 dtp final pph incentives as regulated in pmk number 44/pmk.03/2020 by msmes during 2020 in the kpp pratama jakarta koja area, 393 taxpayers managed to take advantage of the incentives.. 2. barriers to the implementation of tax incentives for msme business actors at kpp koja, north jakarta policymakers and incentive policy implementation, in this case, is the pratama jakarta koja tax service office, whose task is to carry out policy implementation assisted by the directorate general of taxes, must face various obstacles and obstacles in implementing policies in the field. the tax incentive program is a policy that has emerged in order to respond to the impact of the covid-19 pandemic. implementers or staff interviewed at the koja pratama tax service office explained that taxpayers need to update tax information to determine if there are obstacles in its implementation and how to use them. however, many pp 23/2018 taxpayers are less proactive in finding out about the latest government policies. some pp 23/2018 taxpayers believe that taxation is only about the obligation to pay taxes without seeing any beneficial facilities that can be utilized. according to the results of darussalam's research (2020), the low absorption of incentives is caused by the community's lack of understanding and tax literacy. however, there are still taxpayers who only know about the existence of tax incentives but do not know in detail about them. this is also based on the low level of literacy of the ordinary indonesian people, so a direct approach is needed to achieve high publication effectiveness. many msmes still do not understand how to report their income via online applications. most of them during the pandemic period, msme actors do not follow our online socialization or information via social evaluation of the implementation of tax incentive policy for small and medium enterprises affected by the covid-19 pandemic at the tax service office pratama koja utara jakarta wulandari, teron, agustina, and rofiyanti 221 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc media. and the most severe problem. most msme taxpayers do not have a computer or laptop as a means of reporting the calculation of the allocation of tax incentives is based on tax revenues in the previous year, when the economic situation was still in good or at least "normal" condition. this calculation will certainly never be in line with the actual year conditions, namely in a recession, where the taxpayer's income decreases, and so does the tax. full utilization of tax incentives, especially in the first year of a recession, will never be achieved due to the nature of the tax incentives themselves. the tax incentive policy does not mean that the government has actual cash to offset losses. on the contrary, it is an allocation for possible losses due to reduced tax revenue in the sector that is given the incentive. yon asral, an expert staff of the ministry of finance, also conveyed the same reason when asked by the media about the slow use of incentives in the 2020 national recovery program (kontan, 2020). the implementation of socialization remotely provides challenges for both tax officers and taxpayers. an example is a disruption in the network that is often disrupted and causes the delivery of information and feedback from taxpayers to be not optimal. nevertheless, this activity is expected to help taxpayers understand these regulations to carry out their tax obligations still. conclusion based on the results of the above presentation, the following conclusions can be drawn: 1. evaluation of the implementation of tax incentives for micro, small, and medium enterprises affected by the covid-19 pandemic at the pratama koja tax service office, north jakarta, based on the policy proposed by william dunn with six criteria for evaluation, namely effectiveness, accuracy, efficiency, responsiveness, equity, and sufficiency. from the research guidelines, significant positive results were obtained that msme actors responded well to policy programs made by the government. it can be seen from the results of msme taxpayers who take advantage of incentives and reports on the realization of pph final pph 23 dtp incentives in 2020 at kpp pratama jakarta koja with an initial budget of 1,346,472,000,000 increasing to 1,372,748,468,227. in addition, msme actors have benefited from the tax-intensive policy during the covid-19 pandemic, namely, additional income for workers in the form of real money received every month to sustain life and fulfill household needs. 2. evaluation of the implementation of tax incentives for micro, small, and medium enterprises affected by the covid-19 pandemic at the pratama koja tax service office, north jakarta 2020, there are obstacles to implementing the implementation of tax intensive policies during the covid-19 pandemic due to the difficulty of socialization from the kpp pratama jakarta koja against smes because of the pandemic. all socialization systems are carried out online because msme actors do not have the media to access them. reference amendolagine andrew, r., & sari, d. p. 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(2022). can green credit policy improve the overseas investment efficiency of enterprises in china? journal of cleaner production, 340, 130785. https://doi.org/10.1016/j.jclepro.2022.130785 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 339-350 339| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 eko tjahjono1, pebriana arimbhi2 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: pebrianasusanto@yahoo.co.id2 received : june 5, 2022 accepted : july 15, 2022 published : july 31, 2022 citation: tjahjono, e., arimbhi, p.(2022). analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018. ilomata international journal of tax and accounting, 3(3), 339-350. https://doi.org/10.52728/ijtc.v3i3.534 abstract: public services are seen as evidence of a direct relationship between the government and the community in providing the best service following service standards and being able to satisfy the parties served. kppbc tmp c pasar baru post office in carrying out its duties and functions to realize its vision and mission is required to realize good governance and continue to maintain and improve service quality to be able to provide excellent service by referring to the provisions of the applicable customs and excise law. the purpose of this study is to analyze the quality of public services for imported goods sent for use in realizing excellent service at kppbc tmp c pasar baru post office in 2018. the analytical method used in this study is the descriptive analysis by conducting interviews with various informants such as users services, academics, or tax authorities. the results of the study indicate that there is still a lack of service quality and service performance achievements in realizing excellent service, namely: average service performance achievements, have not achieved very good performance; the quality of physical evidence services is still lacking, among others: there are no facilities for service users with special needs; there is no television monitor in the service room related to the mechanism or methods of managing consignments; less stable internet network facilities; the facilities for implementing pib pde (online) are not yet ready; and service rooms that are less clean, tidy and comfortable; the quality of service reliability is still lacking, among others: lack of discipline of officers for absenteeism in the system and being at the place of duty during working hours; have not implemented pib service by pde (online); unclear information service telephone number; the quality of responsiveness is still lacking, among others: slow response to questions via email and lack of socialization and education to the public. keywords service, import of shipments. this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:pebrianasusanto@yahoo.co.id https://doi.org/10.52728/ijtc.v3i3.534 analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 340 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction the directorate general of customs and excise (djbc), as a government institution under the ministry of finance of the republic of indonesia, as stated in its vision and mission has the vision to become the world's leading customs and excise institution and a mission to facilitate trade and industry (rashid khan et al., 2018; sinnasamy et al., 2015; zhamaladen et al., 2019), guard borders and protect indonesian people from smuggling and illegal trade, and optimizing state revenues in the customs and excise sector (al anshori, 2016; w. hidayat & arfin, 2017). in addition, by the regulation of the minister of finance (pmk) of the republic of indonesia number 217/pmk.01/2018 concerning the organization and work procedure of the ministry of finance, djbc in carrying out its duties, in addition to achieving optimization of state revenues in the fields of customs and excise, supervision, and law enforcement also provide services by the provisions of the legislation (sitanggang et al., 2018; syahputra et al., 2020). meanwhile, in carrying out its functions, djbc carries out the function of implementing policies in the fields of supervision, law enforcement, services, and optimizing state revenues in the customs and excise sector (irani & chalak, 2015; sugiyanto & kurniawan, 2019). in its duties and functions, service is one part of the duties and functions of the djbc (albram, 2016; dharmawan et al., 2019). to carry out its duties and functions, dgce delegates its authority to the lowest level, including the customs and excise supervision and service office of intermediate customs type (kppbc tmp) c pasar baru post office. in increasing community productivity and competitiveness in international markets as well as realizing economic independence by mobilizing strategic sectors of the domestic economy, djbc is required to be able to play a role by providing optimal services and providing facilities to domestic industries to have high competitiveness (ahmad et al., 2020; alsukait et al., 2020). various strategic and innovative steps have been implemented by dgce to become a credible institution. djbc's reform journey has never stopped from time to time. one of them is the launching of the customs and excise reform strengthening team at the end of 2016. the spirit of this reform is aimed at eradicating illegal trade, creating service practices that are free of illegal fees and corruption, and increasing service user satisfaction. the results of dgce's strategic achievements in 2017, can be seen from the realization of the achievement of customs and excise revenues that exceed the target, and if it includes other taxes in the context of imports (pdri), tax revenues collected by dgce in 2017, have recorded customs and excise revenues rp 192.2 trillion or 101.6 % of the apbn-p target, which was rp. 189.1 trillion, while the number of other pdris that dgce had collected throughout 2017 was rp. 195.9 trillion, or grew by 18.7%. compared to last year's rp. 165.05 trillion, so the total revenue of djbc in 2017 was rp. 388.08 trillion or contributed 29% in tax revenue. the achievement of this revenue performance is a result of the consistent performance of djbc through the programs and innovations that have been rolled out, including the controlling high-risk importer (pibt) program which was declared on july 12, 2017, and continued with the high-risk excise control program (pcbt). pibt and pcbt are program innovations resulting from a series of customs and excise reform strengthening programs (prkc) that have been run by dgce since december 2016 and have succeeded in becoming the runway for improving the quality of dgce's performance in 2017 and the following years. in addition, dgce's successful performance in supporting the trade sector is indicated by the increase in indonesia's ranking in the ease of doing business (eodb) survey conducted by the world bank in 2017 to 72nd, or an increase of 19 places from the previous year which was 91st. the program can be achieved as a concrete step to realizing https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 341 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dgce as a credible institution in the eyes of the community, both in providing services and in supervisory duties. one of the strategic policies of the directorate general of customs and excise is service acceleration, one of which is realized by accelerating the process of completing the import, export, and excise documents submitted by service users, while still considering the aspect of supervision. the smooth flow of goods is a condition of fast logistics traffic or imported and exported goods and is one of the parameters to creating an increasingly conducive business climate. index data was obtained through a survey conducted by the secretariat general of the ministry of finance of service users in each echelon i unit within the ministry of finance using the services of consultants from external parties. the 2017 service user satisfaction survey was conducted by the research team from gajah mada university (ugm) in 6 major cities, namely batam, medan, jakarta, surabaya, makassar, and balikpapan. the period of service time for which the survey is conducted is within the last year. based on the results of the 2017 service user satisfaction survey conducted by the ugm team, djbc obtained an index of 4.38 with the target set, namely an index of 4.06 (scale 5), by the target set in the 2017 dgce strategic plan and the target of the work plan. djbc 2017 is 4.00. the targets and achievements in 2017 have increased compared to 2016, namely the achievement of an index of 4.04 with an index target of 4 (scale 5). the kpi achievement index in 2017 was 108%. customs and excise supervision and service office type c customs post office pasar baru as the customs and excise supervision and service office under the directorate general of customs and excise which specifically handles services and supervision of foreign postal goods are also required to realize dgce's commitment to continuously make improvements to provide excellent service to service users by the principles of good governance. moreover, the growing online sales business has a direct impact on the increasing volume of postal shipments from abroad. in terms of service, kppbc tmp c pasar baru post office in carrying out its duties and functions as well as to realize its vision and mission is required to realize good governance with excellent service, while for the interest of the state and protection of the community, it is required to collect import duties and taxes in import framework and play an important role in enforcing regulations and legislation to prevent the entry of prohibited and restricted goods that can damage the indonesian people through international postal shipments. based on the data obtained, in collecting import duties and taxes in the context of importing kppbc tmp c, pasar baru post office in 2018 was able to realize revenues of 4.858 billion or 121.39% of the target of receiving import duties of 4.002 billion with import documents for shipments served by 100,825 documents and the achievement of service user satisfaction reached a satisfaction index of 4.35 out of a scale of 5. as for the number of complaints that came in through the internal compliance department as many as 13 complaints and for complaints related to application problems for imported shipments of goods as many as 87 complaints. in addition, 287 violations were found in 2018. from the large number of documents served at 100,825 documents which tends to continue to increase in line with the rapid e-commerce trade with service user satisfaction achievement reaching a satisfaction index of 4.35 out of a scale of 5, this shows that kppbc tmp c pasar baru post office has managed to provide excellent service to service users. however, on the contrary, there are still several violations and complaints from service users regarding the https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 342 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc supervision and services provided, so there is a need for continuous efforts to maintain and continue to improve in providing understanding to service users to reduce the level of violations and complaints that occur as well as in line with demands. of increasing service users. method this research is qualitative descriptive research (arikunto, 2013; creswell, 2017; sugiyono, 2019), which seeks to explain and analyze the quality of public services for the import of goods sent for use regarding the model, service process, service facilities, human resources that provide services and handling problems and complaints, providing information and efforts. improvements and efforts to maintain service quality in realizing excellent service at kppbc tmp c pasar baru post office in 2018. data collection techniques are carried out in the form of primary data collection through interviews, observations, and documentation with internal sources, namely: employees or 75 work partners at kppbc tmp c pasar baru post office, from service users or the public who utilize services at kppbc tmp c pasar baru post office and from widyaiswara/teacher at bppk (financial education and training agency); secondary data collection from documentation data, reports, websites, and others at kppbc tmp c pasar baru post office. result and discussion 1. service quality the following is an analysis of the quality of public services for imported goods sent for use in realizing excellent service at kppbc tmp c pasar baru post office using the theory (parasuraman et al., 1991; tjiptono, 2014), as follows: a. tangible quality of service regarding physical evidence, namely physical facilities which are service facilities, including buildings, rooms, parking lots, computer equipment, and infrastructure facilities to support services (esien, 2020; mandiri et al., 2021; ziemke et al., 2021). based on primary data physical evidence is quite complete. however, there are still some things that need to be improved, including the lack of 2 implementing officers, the network is not stable, there are no facilities available for those with special needs, there are no slides through the television monitor in the service room related to the mechanism or ways of managing consignments, not yet available. ready pib pde internet facilities. meanwhile, in terms of secondary data for office facilities and infrastructure, the results of the service user satisfaction survey reached a satisfaction index of 4.35 with a good performance score, namely: for the completeness and comfort of the main facilities and infrastructure, the index was 4.42, while for the completeness of supporting facilities and infrastructure index achievement of 4.35 and the comfort of supporting facilities and infrastructure with an index of 4.25. meanwhile, from the advice of service users, it is necessary to improve the cleanliness, tidiness, and comfort of service rooms and office areas. from secondary data, physical evidence is in the form of office facilities and infrastructure. https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 343 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on primary and secondary data, the quality of physical evidence needs to improve deficiencies, namely: lack of human resources for 2 implementing officers, less stable network, not yet available facilities for those with special needs, and slides through television monitors related to the mechanism or methods of managing consignments and not yet available. ready pib pde facilities. in addition, it is also necessary to improve the cleanliness, tidiness, and comfort of service rooms and office areas as well as improve the performance of physical evidence to achieve excellent performance. b. reliability quality of service reliability/reliability based on primary data (napirah et al., 2016; nasihah, 2020; pereira & gunaratna, 2020), among others: service promises and even included as head office kpi with achievements exceeding the target (114%), system improvement from manual to pde automation system with ceisa system for shipment so that service is smoother, faster, precise and accurate as well as paperless, and quick alertness of officers. from the primary data, many improvements have been made, but there are still shortcomings, namely regarding the discipline of officers in conducting system attendance, being at work during working hours and pib services are not yet pde (online). based on primary and secondary data, it shows: that the speed of service time index is 4.29, employee discipline reaches an index of 4.48, the clarity of service costs reaches an index of 4.27, and the speed of service officers is 4.29 with good performance scores and for employee integrity, the index achievement is 4, 54 with a very good performance value. the achievement of the quality of service reliability/reliability, the average performance achievement is good, namely 4.39. other secondary data are the existence of announcements and service promises so that the accuracy and speed of service can be measured, and the existence of an anti-corruption commitment so that employees maintain integrity in services. based on the primary and secondary data mentioned above, it shows that the quality of service reliability/reliability still needs to be improved so that all achieve excellent performance and some deficiencies need to be corrected, including attendance by officers in a system that is on schedule, pib service system by pde so that it is more efficient. facilitate, fast and accurate and reduce the element of human error. c. responsiveness the quality of responsiveness in services according to primary data, which shows a pro-active and fast attitude from employees in helping service users' difficulties (afifah & kurniawati, 2021; low et al., 2020; octaviany et al., 2021), including helping to resolve complaints such as billing problems and giving good and clear explanations, conveying information through socialization with various means ( coffee morning, goes to campus and through other social media) and immediately resolves all incoming complaints so that they get many thanks from service users. from the primary data, the service does not show any shortages. based on secondary data from service user satisfaction survey data, the assessment of the information service survey includes the following: ease of obtaining information with an index of 4.23, clarity of information services with an index of 4.33, and ease of submitting complaints with an index of 4.25 which all three show the achievement of good https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 344 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance scores. from the survey data, information services need to be improved to achieve excellent performance. in addition to the data from the satisfaction survey, secondary data regarding responsiveness in services can be seen from the presence of employees at the information service with complete facilities who are ready to help the public/service users answer or explain if they experience difficulties or do not know the procedures for managing imported goods, services at the front desk that serves as well as answers directly regarding the service process as many as 4 tables and the settlement of complaints immediately and does not exceed the time limit given. the quality of responsiveness in services needs to be improved in terms of performance to achieve excellent performance and correct deficiencies, namely: speeding up responding to complaints via email, increasing the number of face-toface socialization and targets to schools and the community as well as expanding socialization through collaboration with radio broadcast media and with other media. local government and others. d. assurance quality assurance in service is related to the skills of employees in understanding the applicable provisions regarding the import of consignments as well as their friendly attitude and politeness in providing services and good explanations to service users from primary data (afifah & kurniawati, 2021; arens & loebbecke, 2015; marginingsih, 2020), including ability and a good understanding of employees towards regulations which applies especially to consignments, efforts to organize an employee skills development program (ppkp) for employees to improve employee understanding and ability towards applicable regulations and supported by service level agreement (sla) and customs english club training to improve understanding of service quality. in addition, in providing services, is also based on the operating procedure system (sop) according to applicable regulations, supervision of services provided by the leadership is carried out by spot checks, disciplinary week activities, and surveillance through cctv, and services are provided with a queuing system that does not discriminate in the treatment of people. service users. while the primary data from the assessment of service users is that the officers are friendly in service and have good knowledge. secondary data regarding the quality of assurance according to the data from the service user satisfaction survey, there are 2 criteria whose performance is very good, namely: friendliness and courtesy of employees with a satisfaction index of 4.60 and fairness of service officers with an achievement index of 4.52. the performance is good, namely: clarity of administrative requirements, the satisfaction index achievement is 4.23, the clarity of service procedures with a satisfaction index of 4.35, the ease of service procedures with a satisfaction index of 4.35, and the skills and knowledge of employees with a satisfaction index of 4.44. the achievement of service quality assurance has an average of good performance, namely: 4.41. other secondary data are the implementation of ppkp and socialization to employees regarding applicable regulations and performance management and the availability of 173 sops for services to service users and internal employee services. based on the primary and secondary data mentioned above, for the quality of service assurance, there are very good achievements that need to be maintained, namely: friendliness https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 345 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and courtesy of employees with a satisfaction index of 4.60 and fairness of service personnel with a satisfaction index of 4.52. but on average it needs to be improved so that the performance achievement is very good. meanwhile, ppkp activities or dissemination of regulations and sops, sla training, and customs english club activities to employees have been carried out and need to be increased in frequency according to the available time. e. empathy quality of service on the empathy dimension based on primary data is carried out in the form of (al hujran et al., 2013; sakawati et al., 2017; yim & park, 2021), among others: providing a suggestion/input box as well as via telephone and email complaints, adding 2 employees to the pli subsection to handle incoming emails and quick response of officers in helping to resolve complaints, difficulties, and complaints. meanwhile, secondary data shows, among others: the results of the survey of service users show that the achievement of the ease of submitting complaints index is 4.25 with good performance achievements. with the placement and division of employee duties as needed in providing the best service, receiving and resolving complaints properly as many as 13 complaints, objections from service users received as much as 92.2%, and providing compliant services for service users. based on the primary and secondary data mentioned above, the dimensions of empathy for service quality with good performance achievement need to be improved to achieve excellent performance. in addition, it is necessary to improve existing deficiencies, namely: responding to complaints, difficulties, and complaints via incoming telephone and email quickly and reducing the occurrence of complaints, and even anticipating so that complaints do not occur. 2. inhibiting entity and encouraging entity inhibiting entities in providing services will always appear with the rapid development of trading systems and technology as well as increasing demands from the service user community (fadilah et al., 2021; r. hidayat et al., 2019; rusydi et al., 2020). moreover, to provide the best service or excellent service, it is necessary to anticipate the existence of these inhibiting entities so that they do not occur or if they do occur, it is necessary to find a quick and appropriate solution/solution. from the data obtained by the author, both primary and secondary data, there are several inhibiting entities in service. from the primary data, the obstacles include: hr/officers in service are still lacking, complaints about service operations that come in as many as 13 complaints, problems with the ceisa application system for shipments, slow network system disturbances, lack of timeliness of officers to perform attendance on the application system, lack of discipline of officers at work and online pib pde has not been implemented. meanwhile, from secondary data, data on obstacles include public understanding that is still lacking in the applicable laws and regulations from the many violations, and the existence of damaged pc facilities as many as 4 pcs and 87 application system disturbances. times in one year. of the several inhibiting entities in providing services that are still lacking and need to be improved, among others: application system disturbances, slow network systems, employee discipline in carrying out absenteeism in a system and presence at work during working hours, and the pib service process that has not been pde. online) so that services can be faster and more flexible. https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 346 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc entities that encourage quality services from primary and secondary data, among others: vision, mission, and motto of kppbc tmp c pasar baru post office, programs to increase knowledge and understanding of employees both on applicable regulations with ppkp and on excellent service quality with sla and customs english club, leadership role with surveillance through cctv, spot checks and discipline week, service process innovation from a manual process to automation, ministry of finance's work culture values, information and service promises and support and appreciation from service users as well as kppbc tmp post office performance contracts new market with key performance index determined by referring to and based on the djbc performance contract. 3. swot analysis from the discussion above, reviewed based on the swot analysis (erawati & wance, 2021; prasetiyani, 2006; sutandi, 2018), can be grouped as follows: a. strengths which is a condition that becomes a strength in the organization. strengths in kppbc tmp c pasar baru post office that need to be maintained and improved from primary and secondary data, among others: physical evidence of sufficient, adequate services and good performance achievements; service reliability with service promises as a measure of performance on the main performance index with an achievement of 114%, automation of delivery services and the average achievement of good performance even for the integrity of the achievement is very good; responsiveness of services with sufficient staff and a pro-active and prompt attitude in helping service users' difficulties, conveying information through various socializations, resolving all complaints and achieving good performance; service guarantees with good employee ability and understanding of applicable regulations, services in accordance with sops, intensive leadership supervision and performance achievements with good average achievements even for friendliness, employee courtesy and fairness of employees whose performance achievements are very good; and for empathy, among others: adequate complaint management with various options, namely: suggestion box, telephone and email complaints, resolution of 13 complaints that do not exceed the time limit for service promises and good performance achievements for ease of submitting complaints. b. weaknesses are conditions or everything that is a weakness or deficiency contained in the body of the organization. weaknesses in kppbc tmp c pasar baru post office that need to be improved, among others: regarding the quality of physical evidence, namely: the network is not stable, there are no facilities available for those with special needs, slides through television monitors related to the mechanism or methods of managing consignments and the pib pde facilities are not yet ready and it is necessary to improve the cleanliness, tidiness, and comfort of the service room and office area; for the quality of service reliability/reliability, among others: attendance system by officers is not according to schedule and the pib service system is not yet pde; while the quality of responsiveness includes: slow response to questions via email and lack of socialization and education to the public; c. opportunities are environmental conditions outside the organization that are beneficial and can even be a weapon to advance an organization. opportunities at kppbc tmp c pasar baru post office from primary and secondary data, among https://www.ilomata.org/index.php/ijtc analysis of the quality of public services on imported consigned goods for use in realizing excellent service at kppbc type c intermediate customs post office pasar baru in 2018 tjahjono and arimbhi 347 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc others: increasing performance achievements to achieve excellent performance, implementing pib services on a pde basis with the support of service users, increasing the number of socialization of public understanding regarding the process of delivering goods by post and postal services. to the prevailing laws and regulations and to expand the scope of socialization through collaboration with radio broadcast media as well as with local governments as well as correcting deficiencies that still occur. d. threats are external conditions that can disrupt the smooth running of an organization. threats to kppbc tmp c pasar baru post office that need to be anticipated from primary and secondary data, include increasing volume of imported goods through postal deliveries, increasing demands and public awareness of excellent service, and limited human resources and available budget. conclusion there is still a lack of service quality and service performance achievements in realizing excellent service, namely: a) average service performance achievements are not very good; b) the quality of physical evidence services is still lacking, among others: there are no facilities for service users with special needs; there is no television monitor in the service room related to the mechanism or methods of managing consignments; less stable internet network facilities; the facilities for implementing pib pde (online) are not yet ready; and service rooms that are less clean, tidy and comfortable; c) the quality of service reliability is still lacking, among others: lack of discipline of officers for absenteeism in the system and presence at work during working hours; have not implemented pib service by pde (online); unclear information service telephone number; d) the quality of responsiveness is still lacking, among others: slow response to questions via email and lack of socialization and education to the public; the existing inhibiting entities include: system and network disturbances; public understanding of the applicable laws and regulations is still lacking; and the process of pib services that have not been pde; the driving entities are, among others: the vision, mission and motto of kppbc tmp c pasar baru post office; ppkp programs, sla training and customs english club activities for employees; leadership supervision through cctv, spot check and discipline week; system innovation from manual service process to automation; the value of the work culture of the ministry of finance; notices and service promises; support and appreciation from service users; and kppbc tmp performance contract for pasar baru post office. reference afifah, a., & kurniawati, n. a. 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(2021). an efficient approach to create agentbased transport simulation scenarios based on ubiquitous big data and a new, aspatial activity-scheduling model. transportation research procedia, 52, 613–620. https://doi.org/10.1016/j.trpro.2021.01.073 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 613-627 613 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the determinants of tax revenue in the context of international transactions in the latin america and caribbean (lac) regions 2002-2019 hendiva tri nugraha1, suparna wijaya2 1politeknik keuangan negara stan, indonesia 2universitas pembangunan nasional veteran jakarta, indonesia correspondent: hendivatri23@kemenkeu.go.id1 received : may 19, 2023 accepted : july 27, 2023 published : july 31, 2023 citation: nugraha, h, t., wijaya, s. (2023). determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 20022019. ilomata international journal of tax and accounting, 4(3),613-627. https://doi.org/10.52728/ijtc.v4i3.843 abstract: tax revenue is one of the backbones of economy in almost every country in the world. there are several determinants that influence the amount of tax revenue in one country, one of which is international transaction activities. such activities can partly be presented by three variables; foreign direct investment (fdi), trade openness (to), and external debt. this study aims to acknowledge the effects of international transaction experienced by a country regarding its tax revenue. external debt is used as a moderating variable to the effects of fdi and to on tax revenue. the data source was taken from the world bank within the period of 2002-2019 in 19 countries around lac regions. the study implements an associative quantitative method with pcse regression. the result showed that fdi affects tax revenue negatively, whereas trade openness and external debt affect tax revenue positively. external debt as a moderating variable strengthens the effect of fdi and weakens the effects of trade openness to tax revenue. further research is expected to include all the lac countries, add more variables relevant to the international transactions, and renew the research period. keywords: tax revenue, foreign direct investment, trade openness, external debt, latin america and caribbean this is an open access article under the cc-by 4.0 license. introduction almost all countries in the world rely on taxes to support the government’s economy. taxation is the most practical system of raising government revenue to finance the spending on the goods and services demanded by the society” (tanzi & zee, 2001). the economic growth of one country depends on sustainable funding for programs such as social, health, education, and infrastructure to support the country in achieving its goals. therefore, the aspect of taxation should be a major highlight in state affairs. a measurement to valuate the taxation performance is the proportion of tax revenue to a country's gross domestic product (gdp). there are a number of factors affecting tax revenue, one of which is international transactions between countries. latin america and caribbean (lac) regions refers to a composition of countries characterized by diverse international transaction activities. one of the largest countries in the region, mexico, is https://www.ilomata.org/index.php/ijtc mailto:hendivatri23@kemenkeu.go.id https://doi.org/10.52728/ijtc.v4i3.843 determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 614 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc considered a nation with the most open economy in the world, establishing 50 free trade agreements (ftas) with other countries(trade.gov, 2022), whereas the other two major countries in the region with the closest economies are brazil and argentina. both countries have a proportion of international trade below 30% of gdp (o’neil, 2022). however, lac is considered regions with the most exports, with an average trade to gdp of 67% in 2019 if compared to the percentage of 56% for the average country. the diversity across lac countries is an interesting research topic, from which an investigation regarding how the region’s tax revenue is related to international transaction activities was conducted. as can be seen from table 1, the tax revenue of countries in the lac region varies with an average above the world’s revenue of 16.5%, whereas the average tax revenue in the world is 13.8%. there are three international transactions affecting a country's tax revenue, among others are foreign direct investment (fdi), trade openness (to), and external debt (ext or foreign debt). fdi or foreign direct investment is an international capital flow in which companies from other countries or multinational companies invest their capital either in the form of establishing or expanding their business in other countries (obsfield, 1991). fdi is not only limited to the establishment of new corporate units, but also in the form of acquisitions of fdi recipient of companies in one country, to companies in others. as defined by the world bank, to or trade openness is the ratio between the amount of exports and the amount of imports either in a form of goods or services with other countries, calculated as a proportion of gdp. the ext, in this case the government external debt is a debt owned by the central government, comprising bilateral and multilateral debts, export credit facilities, commercial debts, leasing, and some other kinds. table 1 tax revenue (%gdp) of lac countries in 2019 negara tahun tax revenue (%gdp) argentina 2019 10.64932467 belize 2019 26.25967344 bolivia 2019 24.61570104 brazil 2019 13.73616364 colombia 2019 15.07137014 costa rica 2019 13.47177923 dominica 2019 24.14728928 dominican republic 2019 13.3027786 ecuador 2019 14.35727421 el salvador 2019 18.071017 grenada 2019 21.558417 guatemala 2019 10.45602392 haiti 2019 12.83992672 honduras 2019 18.70742178 jamaica 2019 27.45394175 mexico 2019 13.14822085 nicaragua 2019 17.5430986 https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 615 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc paraguay 2019 10.00060649 peru 2019 14.5160313 source : worldbank there are several researches that examine how fdi affects tax revenue. pratomo (2020) stated that fdi inflows have a positive effect on tax revenue in the developing countries. in addition, camara (2023) argued that fdi inflows serve as a stimulus to increase tax revenue. however there is no connection with countries exporting the natural resources since tax revenues are not sensitive to fdi inflows. nevertheless, gaspareniene et al. (2022) stated the opposite. in european union countries, fdi inflows have dampening implications for tax revenues. their argument was fdi generates a reduction in tax revenue through tax incentives offered by the state in order to attract investors, for instance free trade zones where goods are exempt from duties and taxes. similarly, other studies examining the relationship between trade openness and tax revenue have been conducted. a research by kwaku et al. (2018) explained that trade openness has a positive effect on tax revenue, particularly the international trade tax. on the contrary, shubita & warrad (2018) emphasized that there is a negative relationship between trade openness and government revenue. it occurred as taxation is "forced" to compete, which ultimately reduces state revenue, a condition signaling economic openness (liberalization), another research by wijaya & dewi (2022) pointed out that trade openness has no effect on tax revenue in indonesia. (khalid, 2016) stated further that aside from being related to tax revenue, trade openness has a direct effect on economic growth through international competitiveness, productivity, and other economic activities .these economic activities need funding, and if the government cannot rely on the revenue generation, it will be in debt. eddine salhi & el aboudi (2021) conducted a study on the relationship between external debt and tax revenue. the results indicated that foreign debt affects the tax revenue and it was signified by currency devaluation. furthermore, saibum m.o. & olatunbosun (2013) revealed that foreign debt in nigeria erodes tax revenue. it directly affects not only the tax revenue, but also the relationship between the two other variables. external debt can influence government response to fdi inflows. the economic growth in countries with high levels of external debt differs from those with low external debt (tanna et al., 2018). pyeman et al. (2016) stated further that these two variables have a negative relationship, where the amount of foreign debt of a country will affect investors' decisions regarding the location of investment and the type of investment. with to, foreign debt has a positive relationship, since the higher the foreign debt, the more increased the export activities will be (zakaria, 2012). other studies however, revealed a negative relationship between these two variables. mugasha (2007) argued that the debt problem in a developing country with stagnant economic conditions will be considered unfavorable for trade partners, which has implications for the decline in to. the emergence of various opinions related to the influence of international transactions on tax revenue and the importance of taxes for a country's economy creates an urgency for further research on this matter. furthermore, the diversity of international transactions in the lac region signifies an interesting point of research. therefore, this study aims to determine how fdi, to, and foreign debt impact the tax revenue and how the role of foreign debt as a moderating variable on the effect of fdi and to is on tax revenue in the lac regions within the periods of 20022019. https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 616 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc methods the research method implemented is quantitative associative research, aiming to determine the influences between the independent variable and the dependent variable. the data of over an 18year period from 2002 to 2019 in 19 latin american and caribbean (lac) countries were used. the countries listed are argentina, belize, bolivia, brazil, colombia, costa rica, dominica, dominican republic, ecuador, el salvador, grenada, guatemala, haiti, honduras, jamaica, mexico, nicaragua, paraguay, and peru. whereas for the secondary data, the sources from the world bank were added. the dependent, independent, moderating, and control variables used in this study are described in table 2. table 2 research variables dependent variables unit data scale data transformation tax revenue (%gdp) percent ratio independent variables unit data scale data transformation foreign direct investment (fdi) usd ratio natural logarithm trade openness (%gdp) (to) percent ratio moderating variables unit data scale data transformation external debt (ext) usd ratio natural logarithm control variables unit data scale data transformation corr index ratio eff index ratio law index ratio operationalization variable tax revenue (%gdp) tax revenue refers to mandatory transfers to the central government for public purposes. the mandatory transfers include fines, penalties, with the exclusion of most social security contributions. refunds and corrections of erroneously collected tax revenues are treated as negative revenues. trade openness (%gdp) trade openness is the total value of exports (+) and imports (-) of goods and services measured as a proportion of gdp. external debt https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 617 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc external debt is a debt to a country that is repayable in currency, goods, and services. the analytical tool used is multiple linear regression analysis with panel data type. the data processing application implemented is stata 17 as described in the following regression equation: 𝒀 = 𝜶 + 𝜷𝟏𝑭𝑫𝑰 + 𝜷𝟐𝑻𝑶 + 𝜷𝟑𝑬𝑿𝑻 + 𝜷𝟒𝑬𝑿𝑻. 𝑭𝑫𝑰 + 𝜷𝟓𝑬𝑿𝑻. 𝑻𝑹𝑫 + 𝜷𝟔𝑪𝑶𝑹𝑹 + 𝜷𝟕𝑬𝑭𝑭 + 𝜷𝟖𝑳𝑨𝑾 + 𝜺 where 𝑌 = 𝑇𝑎𝑥 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝛼 = 𝐶𝑜𝑛𝑠𝑡𝑎𝑛𝑡 𝛽1−8 = 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝐹𝐷𝐼 = 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝐷𝑖𝑟𝑒𝑐𝑡 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑇𝑂 = 𝑇𝑟𝑎𝑑𝑒 𝑂𝑝𝑒𝑛𝑛𝑒𝑠𝑠 𝐸𝑋𝑇 = 𝐸𝑥𝑡𝑒𝑟𝑛𝑎𝑙 𝐷𝑒𝑏𝑡 corr = corruption control level eff = government effectiveness law = quality of law enforcement 𝜀 = 𝑅𝑒𝑠𝑖𝑑𝑢𝑎l the classical assumption test is carried out before the hypothesis testing, in order to ascertain whether or not the model fulfills the econometrics model (purba et al., 2021). the classical assumption tests are normality, heteroscedasticity , multicollinearity , and autocorrelation tests with details in table 3. table 3 classical assumption test test h0 h1 skewness and kurtosis tests data is normally distributed data is not normally distributed breusch–pagan/cook– weisberg test homoskedastic data variance heteroscedastic data variance breusch–godfrey lm test model is not autocorrelated model is autocorrelated <10 ≥10 variance inflation factor (vif) data is not multicollienar data with multicollienar problem after ensuring that the model meets the classical assumption test, the goodness-of-fit (gof) test was proceeded. the gof of a model describes how well the model fits a set of observations(alberto & forero, 2010). the gof test was conducted with an alpha level = 5% as in table 4 below. table 4 goodness of fit test gof test h0 h1 https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 618 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc t test independent variables partially have no effect independent variables partially affect f test all independent variables simultaneously have no effect all independent variables simultaneously affect strong moderate weak adjusted r-squared >0.67 0.67<r-squared<0.33 <0.33 results and discussions descriptive analysis the research began with descriptive analysis to provide an overview of information in a more concise presentation. the data distribution are described as follows: table 5 variable description analysis variabel min max mean std. deviation tax revenue 7.108 33.692 15.89667 5.501 foreign direct investment -4.974 16.229 3.883 2.790 trade openness 22.106 136.489 65.232 25.578 external debt 20.469 27.137 23.639 1.625 the descriptive analysis indicates that there is a significant difference between countries with the lowest and highest shares of tax revenues. in 2014, bolivia ranks the highest with a tax revenue of 33% of gdp, whereas paraguay is the lowest, at only 7.1% in 2002. if the 4 highest and lowest data are taken, bolivia will be in the same position, marking the country with the highest tax revenue meanwhile paraguay is a nation with the lowest tax revenue. this is an interesting finding since bolivia is a lower-middle income country and paraguay is an upper-middle income country with the tax revenue considered much lower . it is apparent that paraguay is the country in latin america with the lowest tax rate, around 10%, compared to another similar country such as brazil with a tax rate of 30% (biz latin hub, 2023). paraguay is often regarded as a country of tax haven. one of the reasons lies in paraguay’s implementation of territorial taxation, which means that the country only taxes income generated from the jurisdiction of paraguay, whereas paraguayans’ income outside the territory is excluded from the tax calculations(paraguay solutions, 2023). the tax rate for individuals ranges from 8%-10% and for entities 10% with a special scheme for msmes (micro, small, and medium enterprises). therefore, paraguay is considered a primary destination for tax residency of global entrepreneurs (soomro, 2022). a country's low taxation strategy has a strong impact on the investment decisions of foreigners into the country (bellak & leibrecht, 2005). the attractiveness of the tax system in paraguay lures a lot of incoming foreign investment. in accordance with the empirical data, in 2006 paraguay becomes a country with highest fdi data amounted to 16,229. in addition, the nation remains on https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 619 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the top of the fdi data. in contrast, guatemala is marked as a country with the lowest fdi data, at around -4.974 in 2002, followed by bolivia at -2.4988 in 2005. it is likely that bolivia has low fdi values if compared to other regions each year. moving away from paraguay and bolivia, a country with interesting tax revenue and fdi data is dominica. it has the second highest tax revenue and the third highest fdi of all latin american and caribbean countries. according to sunlife (2023), dominica's tax system is similar to paraguay, it includes territorial taxation but with higher rates within the range of 25%-35% for its income tax. dominica is an upper-middle income caribbean country termed as the nature island a region blessed with natural beauty as its main attraction. this signifies a 'branding' to attract investors, especially those interested in sustainable activities (investdominica, 2023). it can be stated that the combination of these two attributes helps dominica generate high tax revenue with the qualified fdi inflow. further on is honduras. the data from its to range from as low as 22.106 for brazil in 2009 to as high as 136.489. among all latin american and caribbean countries, honduras has the highest trade openness, and it remains stable, above 100. the region focuses mainly on exporting agricultural products, especially bananas and coffee beans. from the data published by statista, honduras is among the top 10 coffee bean exporting countries in the world. as shown in figure 1, the products form the agriculture sector serve as its primary export. nevertheless, brazil, unlike honduras, tends to have low trade to gdp figures. despite being one of the largest economies in the world, brazil's economy sector is one of the closest economies in the world (fleischhaker et al., 2015). figure 1 honduras's top 10 export products, source: exportgenius to determine the relationship between all variables after the analyses of each descriptive variable, a regression test is used. however, before the regression test is conducted, a series of classical assumption tests on the model are carried out . the classical assumption tests performed are (1) normality test; (2) heteroscedasticity test; (3) multicollinearity test; and (4) autocorrelation test. table 6 indicated the results in which the model fails all the classical assumption tests. as for the https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 620 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc problem of non-normally distributed data, based on the central limit theorem it can be stated that since n has a big number (more than 30), a larger sample follows a normal distribution (hays, 1994). the multicollinearity problem can be ignored due to its use of panel data and considering that combining cross section and time series data is one of the rules of thumb (gujarati, 2004). therefore, to overcome the problems of heteroscedasticity and autocorrelation, panel corrected standard error (pcse) regression is used in this study. it can be described in table 6 below: table 6 classical assumption test results test prob > chi2 interpretation skewness and kurtosis tests 0.0001 not normally distributed breusch–pagan/cook–weisberg test 0.0013 heteroskedastic autocorrelation woolridge test 0.0187 autocorrelated vif interpretation variance inflation factor (vif) 186.39 multicollinear problem next is the pcse regression results described in table 7. from the results obtained, the f test value (prob> f) is below the alpha value of 0.000, which means that all variables simultaneously and significantly affect the tax revenue in 18 countries. the r-squared value obtained is 0.2973 or 30% which means that the dependent variable is influenced by 30% of the independent variables used in the study, thus the remaining 70% is the impact of other variables not being tested. according to (chin & marcoulides, 1998) the r-squared value below 33% indicates a weak category, which means that the ability of the independent variables to explain the dependent variable is considered insufficient (ghozali, 2016). moreover, the partial tests show that fdi and trade openness have a significant effect on tax revenue, even after being moderated by the external debt variable. table 7 pcse regression results variables coefficient prob cons -42.3263 0.000 foreign direct investment (fdi) -3.1239 0.057 trade openness (to) 1.4895 0.000 external debt(ext) 2.3872 0.000 fdi.ext 0.1301 0.064 to.ext -0.0627 0.000 corr 3.197 0.001 eff 3.776 0.000 law -5.304 0.000 r-squared 0.2973 prob > f 0.0000 https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 621 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effects of fdi on tax revenue the results of partial tests conducted on fdi indicate that fdi has a negative effect on tax revenue. it contradicts the research by pratomo (2020) which states that the increase in fdi has a positive relationship with the total tax revenue, alongside with the corporate, the personal, and the value added taxes in the developing countries. the study states further that the type of fdi shows its effects on the tax revenue. fdi inflow is divided into two types, greenfield and brownfield. greenfield fdi is fdi in the form of construction of new production units by multinational companies in the recipient country, whereas brownfield fdi is fdi in the form of acquisitions or mergers of domestic companies in the recipient country, carried out by multinational companies (takayama, 2023). it is apparent that greenfield fdi has a positive effect on tax revenue while brownfield fdi tends to dampen the revenue. referring to pratomo's research, latin american and caribbean countries are prone to accept brownfield fdi (on the ground that fdi has a negative impact on tax revenue). one of the recent investment issues of latin america and the caribbean with other countries is its cooperation with china, channeled through the china and the community of latin america and caribbean states (celac) meeting. since 2015, chinese investment in latin america and the caribbean has become more massive, with the proportion of brownfield fdi or mergers and acquisitions (m&a) amounting to 35% from the total investment (abdenur, 2017). figure 2 the accumulated chinese fdi outflows to the lac region in billion usd 2000-2001, source : european parliament over the years, the trend of chinese brownfield fdi into lac has been increasing, with the average share of chinese fdi deals from 2015-2021, thus the m&a (merger and acquisitions) was 47%. even in 2019 (12 out of 19 deals were m&a) and 2020 (13 out of 20 deals were m&a), m&a transactions exceeded greenfield fdi. in terms of numbers, m&a transactions were recorded at 66.45 billion usd while greenfield reached only 22.68 billion usd. this trend can be attributed to the opposition and social conflicts associated with greenfield investments in lac https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 622 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (raza & grohs, 2022). however, m&a is only limited to change of ownership of existing companies/projects. the effects of trade openness on tax revenue partial tests conducted on trade openness indicate that trade openness has a positive effect on tax revenue. the result is in line with a study by gnangnon & brun (2019) which stated that through tax reform, developing countries which become more open to international trade receive more positive impacts on tax revenue than countries with closed economies. similarly, another research by kwaku et al (2018) examined the effect of trade openness on trade tax revenue in ghana. the results obtained are that trade openness has a positive effect on tax revenue in the international trade sector (import / export taxes, import / export duties) both in the short and long terms. in lac, a country with the highest level of trade openness is honduras and its biggest exported product is coffee reaching a value of 1.35 billion usd (this marks honduras the seventh largest coffee exporting country in the world) with the united states as its largest export market (oecd, 2023). the driving factor is the fiscal policies that intersect with the coffee production sector in honduras. an annual report on the honduran coffee sector published by the united stated department of agriculture foreign agricultural service (usda) reported that in 2022, the honduran government passed a regulation that excludes the imposition of a 12% sales tax on the country’s coffee production. the policy is estimated to generate usd 183 million in fiscal relief which will reduce the cost of coffee production and increase the competitiveness of the honduran coffee sector, including the export policy (fiallos, 2022). with a reference to the research results described, it can be concluded that the implementation of tax relief policies in leading export sectors will increase exports of these products, trade openness rates, and tax revenues. the effects of foreign debt on tax revenue as a moderating variable partial tests conducted on foreign debt revealed that a foreign debt borne by the government has a positive effect on tax revenue. a research by eddine salhi and el aboudi (2021) indicated a similar result: a foreign debt has a positive effect on the tax revenue. the study measures foreign debt associated with currency devaluation (it relates to foreign debt payments and the exchange rates) against tax revenue. basically, devaluation is a factor that makes the government fails to pay foreign debt. therefore, the government is encouraged to continue seeking for more state revenue, one of which is by increasing tax revenue. however, foreign debt management must be implemented with the right strategy. accumulating economic growth through debt proposals is not the right strategy to implement, since reducing high debt levels will benefit the country's economic performance (chien et al., 2022). the foreign debt variable as moderation of fdi (foreign direct investment) strengthens the effect of fdi on tax revenue, from the initial coefficient value of -3.1239 to 0.1301 after moderation. the relationship between foreign debt and fdi in a country can be stated in an analogy : a country with high foreign debt will try to find more revenue to pay its debts, one of which is from fdi entering the country. similarly, a research by tanna et al. (2018) emphasized that fdi-based economic growth depends on the level of foreign debt owned by a country. when a country has a high level of foreign debt (high indebtedness), the economic growth from fdi can no longer be https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 623 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc generated since the country will focus more on paying off its foreign debt. one of the steps taken by the state in response to this case is to improve its international tax competitiveness strategy to help increase foreign investment. if a country's domestic tax base tends to be higher than other countries, investors will move their operations to countries with a smaller tax base, and this will result in fdi outflows (gropp & kostial, 2001). foreign debt variable as moderation of trade openness weakens its effect on tax revenue, from the initial coefficient value of 1.4898 to -0.0627 after moderation. a number of studies indicate a positive relationship between foreign debt and trade openness. a research by zakaria (2012) that trade openness has a significant positive effect on pakistan's foreign debt. it is proven that the country's economic openness is one of the stimuli for the growth of its foreign debt. a similar relationship is shown in a study by casares (2015) which indicated an increase in the proportion of foreign debt to gdp and a decrease in the currency exchange rate, thus it results in a relative price decrease of non-tradable good. non-tradable goods are goods which are not offered to international market, such as electricity, water, or goods with high accommodation costs or specialized commodities, including the public service sectors like hotels, construction, real estate, and some others (jenkins et al., 2011). figure 3 service sector contribution to gdp in lac in 2019, source : worldbank from the previous explanation given, it can be emphasized that countries in lac tend to have a high contribution to gdp from the services sectors as shown in figure 3. the implication is that the decline in the relative price of the services sector in lac countries affects a decrease in tax revenue. as for the tax calculations, when the nominal transaction on which the tax base decreases, the tax imposed by the state will proportionally become lower. therefore, it can be stated that a foreign debt will affect the trade openness on tax revenue through a decrease in the tax base of non-tradable goods, particularly the service sectors. https://www.ilomata.org/index.php/ijtc determinants of tax revenue in the context of international transactions in the latin america and carribean (lac) region 2002-2019 nugraha and wijaya 624 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusions tax revenue serves as the backbone of the economy in almost every country in the world. factors affecting the amount of tax revenue generated by the state include international transaction activities. the activities can partially be represented by three variables, fdi, to, and foreign debt. the results of the study using regression model suggest that fdi has a negative effect on tax revenue in lac. this occurs since brownfield fdi dominates fdi transactions in the lac region, particularly from china. to has a positive effect on tax revenue, on the grounds that exports of honduras' main product, coffee beans, are given tax incentives to stimulate growth in the sector. as a result, the export activities become better, the international trade increases, and so does the tax revenue. furthermore, foreign debt has a positive effect on tax revenue. this is explained an analogy, that if a country is indebted, it will try to increase its state revenue, one of which is from taxes. foreign debt as a moderating variable of fdi is able to strengthen the influence of fdi on tax revenue through a tax competitiveness strategy for the purposes of attracting investors to come and encouraging tax revenue to increase. conversely, foreign debt as a moderating variable of to, weakens its influence on tax revenue. this is due to the impact of foreign debt that causes currency devaluation and lowers the price of non-tradable goods, thus a decrease in the basis of tax calculation occurs, particularly in the service sectors in lac regions. it is suggested that the regions set up more strategies to utilize fdi inflows and optimize foreign debt management in the context of tax revenue. as a study has limitations, future research is expected to involve all countries in the lac region, add variables that represent international transactions, and consider a more recent research period. references abdenur, a. e. 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(2012). interlinkages between openness and foreign debt in pakistan. dogus universitesi dergisi, 13(1), 161–170. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 782-798 782 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers lord eddie i. aguilar university of mindanao, phillipines correspondent: aguilar_lordeddie@umindanao.edu.ph received : july 20, 2023 accepted : october 18, 2023 published : october 31, 2023 citation: aguilar, l, e. (2023). dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers. ilomata international journal of tax and accounting, 4(4), 782-798. https://doi.org/10.52728/ijtc.v4i4.796 abstract: time has entered the digitized era where electronic systems have penetrated transactions, including taxation, simplifying processes among taxpayers for better revenue collection. with the aim of helping tax authorities in administering revenue collection, the study determines the factors influencing the adoption of the philippines tax epayment channels in paying income taxes among individual taxpayers and develop a research framework that illustrates the relevance and structure of the extracted factors. using the technology acceptance model (tam) and the unified theory of acceptance and use of technology (utaut) as a guide model, the study applies the quantitative research method as the research design. the assumption of the adoption of e-payment channels in paying income taxes among individual taxpayers is multifaceted that is based on the perception of the relative technology system. an exploratory factor analysis (efa) was employed to analyze a dataset of 110 respondents using random sampling collected through modified questionnaires. the study revealed that perceived usefulness, perceived benefit, perceived trust, social influence, facilitating conditions, and perceived cost influence the adoption of the bir e-payment channels in paying income taxes among individual taxpayers in davao city. keywords: tax e-payment, factor analysis, individual taxpayers, technology acceptance model, unified theory of acceptance and use of technology this is an open access article under the cc-by 4.0 license. introduction the covid-19 pandemic in the philippines has emphasized digitized tax administration to help the country recover economically (national tax research council, 2020). according to the (department finance, 2021), only 17 to 24 percent represent electronic payers from the total number of taxpayers in 2020, with an increase of 44 percent in revenue collection by the bureau of internal revenue through electronic payment channels. a country diagnostic report discussed that many filipino adults still are accustomed to manual cash transactions with no intention of shifting to digital payments (better than cash alliance philippine country diagnostic, 2019). https://www.ilomata.org/index.php/ijtc mailto:aguilar_lordeddie@umindanao.edu.ph https://doi.org/10.52728/ijtc.v4i4.796 dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 783 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc despite slowly adopting the digitized economy and in the middle of the pandemic, there are still drivers for an electronic payment system failure that challenges limited acceptance by users (simatele, 2021). the usage of electronic systems in the contemporary era in simplifying and automating processes has become essential such as the tax payment process in the digital age (palas et al., 2019). moving forward to a digitized economy entails pertinent transactions, including payments for merchants, remittances, utility payments, social benefit transfers, and supplier payments on which businesses in the philippines could save 20 to 45 billion annually (better than cash alliance philippine country diagnostic, 2019). in addition, taxation is the tool for economic recovery that has been a great challenge ever since the outbreak of the covid-19 pandemic (nwaeze, 2022). in a research congress, (ching, 2017) presented in her study that the government has provided channels in trying to improve the usage of electronic payment systems as part of its national strategy for financial inclusion, based on the privacy, trust, security, and general preferences of the filipino citizens. the study of (soneka & phiri, 2019) expresses the significance of evaluating technology acceptance levels, such as the online tax system, for further technology implementation. in their study, significant determinants such as perceived risk, perceived accessibility (ease of use), and perceived productivity and effectiveness (usefulness) influenced the respondents to adopt electronic tax filing and payment systems in zambia. even before the onset of the pandemic, a study finding by (kishura, 2020) about the revenue collection in tanzania revealed an increased performance after introducing the e-payment system. furthermore, a study by (s. k. singh, 2020) during the pandemic concluded a positive relationship between e-payment and revenue collection, revenue sources monitoring, and financial reporting. the shift towards digital payment in the "new economy" environment has become imperative in the philippines (bangko sentral pilipinas, 2022). tax collection as a form of financial resource ensures that every country is functioning satisfactorily and administering fiscal sovereignty, which became pertinent in the time of crisis today (kovac & klun, 2021). however, even with supporting approval from the philippine government, many filipinos still depend on cash and cheque (ching, 2017). considering the implication in the recovering economy of our country, the researchers decided to study the significant factors influencing the adoption of bir e-payment channels in paying income taxes among individual taxpayers in the philippines. two theories were used in the study, namely the "technology acceptance model" and the "unified theory of acceptance and use of technology." the technology acceptance model is one of the most well-used theories to determine the user's behavior regarding technology systems acceptance. it is proposed by (davis, 1985) to determine the individuals' acceptance, usage, and adoption of new information technology systems among users. this theory features two theoretical constructs that induce the users' adoption: perceived usefulness and ease of use that significantly affect the user's attitude and behavioral intention in using newly introduced technology systems that predict user acceptance. the theory concluded that the identified constructs are significantly https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 784 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc correlated with the current self-reported and future self-predicted usage of new technology systems which are pivotal in understanding the acceptance and behavior of end-users upon a new system being introduced (najib & fahma, 2020). the primary purpose of this theory is to provide a theoretical basis for pursuing the influence of variables on the users' perceptions, attitudes, and behavioral intentions to predict the future use or adoption of the technology system (olushola & abiola, 2017). this theory has been widely applied by many researchers that have given innovation and new technology adoptions, further establishing expanded frameworks and models by modifying the original constructs to analyze and resolve specific research problems (ibidunmoye, 2018). moreover, it has been modified and expanded by (venkatesh & davis, 2000), referred to as tam 2, which studies how the original constructs, precisely the perceived usefulness and adoption intention, are affected by the motivational social influence approaches and cognitive instrumental determinants in the workplace. meanwhile, a further extension of this acceptance and adoption model referred to as tam 3 was conducted by (venkatesh & bala, 2008) to focus on management support and interventions and their effects on the adoption and usage of newly introduced information technology systems in the workplace. specifically, this model's proposed modifications and antecedent studies are relevant to determining the diverse phenomena of mobile payment system adoption and provide an in-depth view of the literature (herget & steinmüller krey, 2021). (sondakh, 2017) noted that this theory is helpful in studies regarding technology acceptance and adoption that aim to explain the behavior of the users over new technologies and systems being introduced to a wide variety of end-users of technologies. it provides a well-defined understanding of the variables used in the study as it is also easy to apply and analyze, especially in determining the factors affecting the online tax payment system adoption (othman, 2012). moreover, this theory shows a fundamental basis in which a taxpayer's behavior regarding the usage of tax systems like bir e-payment channels is induced as his beliefs enhance over time, which affects tax compliance (night & bananuka, 2019). the unified theory of acceptance and use of technology (utaut) as proposed by (venkatesh et al., 2003) aims to determine the users' behavioral intention and intended use of the newly introduced information technology systems within the organization that would suffice the users' acceptance and adoption. it highlights four independent determinants: performance expectancy, effort expectancy, social influence, and facilitating conditions. it is also further constrained by the user's differences, namely, age, gender, experience, and voluntariness of use. these are significant in solving phenomena that identify the motivation to adopt a technology system (shafie et al., 2020). this theory was based on the preexisting technology acceptance theories available that were empirically synthesized to integrate the salient findings, features, and constructs relevant to determining the end user's behavior towards specific technology systems within the organization, particularly the employees who are the primary users of such advancement mechanisms (yavwa & twinomurinzi, 2018). https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 785 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc specifically, this theory has been extended further to emphasize the objectives of diverse phenomena regarding technology acceptance, predict the use of technology systems, and give significant findings to develop a unified system that would reach a broad range of technological users (blut et al., 2022). (williams et al., 2011) indicated that utaut developers aspire that future technology acceptance and adoption studies would use this unified model to better understand the exploration of information technology adoption and need not integrate variables and constructs from diverse theories. consequently, (venkatesh et al., 2012) modified this theory called utaut 2, incorporating three additional factors hedonic motivation, price value, and habit that believe in improving the determination of the consumers' intention and usage behavior relating to the adoption of technology systems which the original model did not precisely detail as it highlights the organizational settings (dwivedi et al., 2020). however, (dwivedi et al., 2019) noted that the moderating variables recognized in utaut might only be suitable for some technology adoption studies. other propositions of these variables are established to refine the model's limitations and resolve the specific technological acceptance phenomena. according to (ann et al., 2021), this model is considered a successful theory in determining technology usage, acceptance, and adoption because it explains 70% variance in acceptance and user behavior that identified several social and organizational factors as significant factors to influence the user adoption in organizational settings and consumers' perspectives. whereas, (junadi & sfenrianto, 2015) specified that this theory could help explore the perceptions of different users regarding the adoption of e-payment systems as it provides an efficient and reliable basis to thoroughly explain the significance of the context that influences the development of service technology systems. method this study used the quantitative research method using an exploratory factor analysis research design. the quantitative research method examines the relationships of the variables in a research phenomenon utilizing numerical data and statistical measures (creswell, 2009). additionally, the exploratory factor analysis determines the underlying structure of the factors influencing the variables. it aims to avoid data redundancy as the items of the factors are reduced to more minor significant meanings by getting the variances and relationships of the factors (yong & pearce, 2013). it is the appropriate method to determine the underlying structure of the factors to identify whether these factors are inter-correlated and sufficiently significant with the adoption to use the digital payment system in paying income taxes (watkins, 2018). individual taxpayers are the primary respondents of this research. these include single proprietors, professionals, and mixed-income earner taxpayers in a defined population. the researchers used simple random sampling, a probability sampling that chooses a sample in which all the population members will be given an equal chance to be selected as respondents. in addition, the sample size of the population is 110 individual taxpayers who opted to pay their income taxes using bir ehttps://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 786 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc payment channels. (memon et al., 2017), a sample size of 100 is suitable and appropriate for an exploratory factor analysis following the sample-to-item ratio. this study used questionnaires from published literature of several studies in designing a survey questionnaire as a guide. then, the developed questionnaire was used in conducting the focus group discussion to polish the design of the survey questionnaire adapted for this study. the validation of the research instrument was composed of two parts. the first part employed the focus group discussion (fgd) of three (3) respondents participating. these participants were selected upon their socio-demographic profile. overall, there were a total of 63 questions used in conducting the focus group discussion. furthermore, upon the conduct of the fgd, a specific number of item questions were identified. these questions became the modified questionnaire used in administering the pilot test to examine its validity further. the research advisor approved the initial 63-item questions to check their validity. a specific number of participants were selected for the pilot testing to assess the instrument's reliability. right after the focus group discussion (fgd) with the expert, it revealed and identified 60 final scale items to run for pilot testing to examine whether these scale items collected by the research proponents are suitable for the data gathering phase. moreover, the instrument's structure was measured using a five-point likert-type scale which equates to 5 as strongly agree, 4 as agree, 3 as neutral, 2 as disagree, and 1 as strongly disagree. figure 1 below shows the instrument development process of determining the factors influencing the adoption of philippines e-payment channels in paying income taxes. figure 1: the research instrument development process https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 787 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion in table 1, the kaiser meyer – olkin's measure of sampling adequacy and barlett's test of sphericity are presented in which the kmo score of 0.917 depicts that the sample size is sufficient enough for factor analysis as it was beyond the satisfactory standard score of 0.60 estimation threshold. at the same time, bartlett's test of sphericity shows the acceptance of the assumption, which presents the test esteem of 6502.795 with the level of degree of freedom (df) value of 1431 and level of essentialness value of 0.000, depicting that the data set is appropriate and suitable for factor investigation as it is less than 0.05 level of significance that help to determine the salient and underlying factors that influence the individual taxpayers' adoption of bir e-payment channels. table 1: measures of sampling adequacy and sphericity measurement value kaiser_meyer_olkin measure of sampling adequacy 0.947 barlett’s test of sphericity approx. x2 6502.795 degree of freedom 1431 sig. (p-value) 0.000 source: data processed result, 2023 in table 2, the rotated component matrix results are shown. the varimax orthogonal rotation method identified six factors with scale item loading with significant coefficient values above ±0.50. fifty (50) out of sixty (60) scale items were retained and further formulated six latent components. conversely, the ten items, specifically item numbers 58, 60, 37, 59, 57, 56, 32, 24, 33, and 55, did not pass the loading coefficient value threshold of ±0.50; as such, these items were eliminated for the factor analysis. upon evaluating the commonality of these remaining scale items, such items were loaded and generated factors; then, the factors were further labeled based on the dominant nature of the scale items. table 2: rotated component matrix items component perceived perceived perceived social facilitation & perceived usefulness benefit trust influence conditions cost (1) (2) (3) (4) (5) (6) item_7 0.848 item_10 0.806 item_9 0.804 item_8 0.782 item_2 0.718 item_4 0.713 item_1 0.705 item_11 0.704 item_5 0.683 https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 788 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc item_3 0.663 item_6 0.645 item_12 0.619 item_51 0.758 item_48 0.750 item_52 0.722 item_54 0.705 item_53 0.686 item_49 0.674 item_47 0.641 item_43 0.638 item_44 0.618 item_45 0.605 item_46 0.592 item_50 0.577 item_42 0.549 item_30 0.712 item_31 0.676 item_29 0.661 item_27 0.627 item_28 0.612 item_26 0.590 item_25 0.529 item_23 0.521 item_16 0.785 item_15 0.781 item_17 0.780 item_14 0.693 item_18 0.558 item_13 0.547 item_20 0.594 item_36 0.579 item_19 0.576 item_34 0.542 item_35 0.528 item_21 0.512 item_22 0.506 item_40 0.833 item_41 0.772 item_39 0.688 item_38 0.608 source: data processed result, 2023 https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 789 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3: extracted factors influencing the adoption of e-payment channels among individual taxpayers item perceived usefulness (12 items) loading i use e-payment channels (gcash, paymaya, pesonet, union bank, etc.) because q7 there should be some authority to approach in the case of failed online tax return reporting transactions. 0.848 q10 i like those tax payments done through e-payment channels require minimum effort. 0.806 q9 legal disputes about online tax returns should be resolved in a timely manner. 0.804 q8 there should be transparency in settling claims for failed online tax reporting transactions. 0.782 q2 i believe e-payment channels would be useful for conducting tax payment transactions. 0.718 q4 using e-payment channels would make it easier for me to make tax payments. 0.713 q1 using it would enable me to pay income taxes more quickly. 0.705 q11 paying income taxes through e-payment channels is easy as minimum steps are required. 0.704 q5 i believe e-payment channels improve the quality of tax payment transactions. 0.683 q3 using e-payment channels would improve my efficiency in tax payment transactions. 0.663 q6 using e-payment channels would improve my performance. 0.645 q12 e-payment channels are very easy to use. 0.619 item perceived benefits (13 items) loading i used the e-payment channels (gcash, paymaya, pesonet, etc.) because q51 i think e-payment channels are more convenient than manual tax payment (paying manually in banks) 0.758 q48 i am happy to try new technology. 0.750 q52 e-payment channels are faster than manual tax payments (paying manually in banks). 0.722 q54 e-payment channels are more effective in managing tax payments than manual payments. 0.705 q53 e-payment channels are more advantageous than manual tax payments (paying manually in banks). 0.686 q49 even if i am curious to know if anyone else has had this experience, i still use the e-payment channels to pay. 0.674 q47 among people of the same age, i am usually the first to try new technology (using e-payment channels). 0.641 q43 e-payment channels are fast and worth using. 0.638 q44 e-payment channels are very entertaining. 0.618 q45 e-payment channels are a special experience. 0.605 q46 i feel happy when i use e-payment channels to pay. 0.592 q50 i know more about e-payment channels than my friends. 0.577 https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 790 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc q42 using e-payment channels is fun. 0.549 item perceived trust (8 items) loading i use e-payment channels (gcash, paymaya, pesonet, etc.) because q30 i trust income tax payments made through e-payment channels will be processed securely. 0.758 q31 my personal information on e-payment channels will be kept confidential. 0.750 q29 tax payment transaction conducted through e-payment channels is secure and private. 0.722 q27 the e-payment channels can be safer than traditional manual payment, such as paying manually in banks. 0.705 q28 the technology used in e-payment is very secure. 0.686 q26 i will be confident making income tax payments through e-payment channels. 0.674 q25 using e-payment channels is completely compatible with my current situation. 0.641 q23 using e-payment channels fits into my lifestyle. 0.638 item social influence (6 items) loading i used the e-payment channels (gcash, paymaya, pesonet, etc.) because q16 almost all my friends usee-pay ment channels. 0.758 q15 people in my community widely use e-payment channels. 0.750 q17 my family members use e-payment channels. 0.722 q14 people who are important to me think that i should use e-payment channels 0.705 q18 i am given the necessary support and assistance to use e-payment channels. 0.686 q13 people who influence my behavior think i should use e-payment channels. 0.674 item facilitating conditions (7 items) loading i used the e-payment channels (gcash, paymaya, pesonet, etc.) because q20 i can access the devices and mobile payment applications required to use epayment channels. 0.5944 q36 compared with traditional manual payment, e-payment channels provide a good economic value in terms of current market prices. 0.579 q19 i have the financial and technological resources required to use e-payment channels. 0.576 q34 i believe that e-payment channel service providers follow consumer and tax laws. 0.542 q35 compared with traditional manual payment, the transaction cost paid using epayment channels is reasonable. 0.528 q21 my e-payment channels are well-integrated and provide a stable service infrastructure. 0.512 q22 my service provider/operator facilitates the use of e-payment channels. 0.506 item perceived cost (4 items) loading i used the e-payment channels (gcash, paymaya, pesonet, etc.) because q40 i would have to make a lot of effort to obtain the information that would make me comfortable adopting mobile payment. 0.833 https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 791 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc q41 it takes time to go through the process of moving ta a new means of payment like the e-payment channels. 0.772 q39 i would have financial barriers to using the e-payment channels. 0.688 q38 the e-payment channels would be very expensive. 0.608 source: data processed result, 2023 perceived usefulness. the individual taxpayers found perceived usefulness as a factor influencing the adoption of philippines e-payment channels in paying income taxes. in particular, individual taxpayers agreed and believed that they should be able to approach a specific authority for instances of failed online tax payment transactions (.848), that tax payments through e-payment channels are made with minimum effort (.806), that legal proceedings or lawsuits relating to online tax payment should be resolved in a timely manner (.804); that transparency is evident in settlement of claims for online tax payment failed transactions (.782); and that e-payment channels would help conduct tax payment transactions (.718). furthermore, using e-payment channels would make it easier for individual taxpayers to make tax payments (.713), would enable them to accomplish paying income taxes more quickly (.705); that it is easy to pay income taxes through e-payment channels as minimum steps required (.704); that it improves the quality of tax payment transactions (.683); that it would improve their efficiency of tax payment transactions (.663); that it would improve their performance (.645); and that epayment channels are straightforward to use (.619). this affirms the study of davis (1985), which identified five indicators that assess perceived usefulness: work more quickly, practical, increase productivity, increase effectiveness, and enhance task performance. a study on e-filing system implementation regarding compliance with tax reporting concluded a positive influence connecting perceived usefulness and intention to use electronic filing (rekayana, 2016). conversely, a study by tahar et al. (2020) indicated that perceived usefulness does not significantly affect the adoption and intention to use electronic filing. perceived benefit. in adopting e-payment channels for paying income taxes, perceived benefit is one of the factors influencing individual taxpayers. they agree that e-payment channels are more convenient than manual tax payment (.758); that they are happy to try new technology (.750); that it is faster than manual tax payment (.722); that it is more effective in managing tax payment than manual payment (.705); that it is more advantageous than manual tax payment (.686); and that even if they do not know if anyone else had experienced it before, they will still use the e-payment channels to pay their income taxes (.674). additionally, the individual taxpayers agree that in the adoption of e-payment channels, they are usually the first to try new technology among people of the same age (.641), that e-payment channels are fast and worth using (.638), that it is very entertaining (.618); that it is an as exceptional experience (.605); that they feel happy when they use to pay their taxes (.592); that they feel that they know more about e-payment channels than their friends (.577); and that it is fun (.549). ligon et al. (2019) revealed that perceived benefits play a significant role in adopting a system. their study explored digital payment adoption and found that perceived benefits positively influence customers' intention to pay tax digitally. the same https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 792 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result is found in (al-debei et al., 2015) study regarding consumers' attitudes toward online transactions. they emphasized the importance of perceived benefits as a critical factor in forming consumers' attitudes. perceived trust. this variable is another factor in adopting e-payment channels to pay income taxes among individual taxpayers. respondents have claimed that in using e-payment channels for income tax payments, they trust that it will be processed securely (.712); they believe that their personal information will be kept confidential (.676); they trust that the transaction is secure and private (.661); it has the potential to be safer than traditional manual payment (.627); they believe that technology used for such payments are very secure (.612); they are confident making such payment (.590); it is entirely compatible with their current situation (.529); and it fits into their lifestyle (.521). a study by (night & bananuka, 2019) concluded that trust directly and positively affects taxpayers' attitudes toward adopting online systems. the study further stated that the taxpayers perceive the electronic tax system as secure, making them trust and adopt it. in another study, trust as a factor significantly influences the intention and attitude of a user in new technology adoption, thus making a binding effect (alswaigh & aloud, 2021). it proposed that trust positively and significantly affects the user attitude towards adopting a digital payment system called money wallet services. social influence. in the adoption of e-payment channels in paying income taxes, individual taxpayers consider social influence as a factor because they claimed that almost all of their friends use it (.785); such e-payment channels are widely used by people in their community (.781); their family members use it (.780); important people in their lives urge them to use the e-payment channels (.693); they are given the necessary report and assistance to use it (.558); and people who have an impact on their behavior urge them to use the e-payment channels (.547). a study conducted by (abdul aziz, 2016) reveals how acceptability affects the non-compliance behavior among tax agents in adopting the corporate tax electronic filing system through factors such as social influence. it concludes a positive and significant effect connecting social influence and the taxpayers' intention to use the e-filing system for tax return reporting and payment. however, a study on the intention to use and adopt mobile banking by (s. singh & srivastava, 2018) concluded that social influence does not affect the customer's intention. it revealed no significant connection between social influence and intention to use electronic banking. facilitating conditions. the individual taxpayers found facilitating conditions to influence the adoption of e-payment channels in paying income taxes. correspondingly, these taxpayers, in using the e-payment channels, believe that: they have access to the devices and mobile payment applications required (.594); that it provides economic value in terms of current market prices compared with the traditional manual payment (.579); that they have financial and technological resources required in using it (.576); that its service provider follow consumer and tax laws (.542); that the transaction costs paid are reasonable compared with the traditional manual payment (.528); https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 793 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that it is well integrated and provide a stable service infrastructure (.512); and that their service provider or operator facilitates its use (.506). research on behavioral expectations toward electronic tax filing adoption concluded that facilitating conditions positively and significantly affected taxpayers' intentions (chaouali et al., 2016). it further demonstrated that it integrates as a key factor in providing knowledge that may foster the adoption process of electronic filing. similarly, the same result is found in the study of (moorthy et al., 2022) on mobile payment adoption, revealing a significant relationship with facilitating conditions. it implies an improvement in service providers' quality through enhancing facilitating conditions. perceived cost. individual taxpayers have taken perceived cost as a factor influencing their payment of income taxes through adopting e-payment channels. adopting the e-payment channels requires much effort in gathering the necessary data to use it comfortably (.833); it may take a while to transfer to a new means of payment like the e-payment channels (.772). moreover, the results also showed negative perceptions that the respondents considered the relative cost; they believe using the e-payment channels would have financial barriers (.688) and be costly (.608). a study conducted by (azam et al., 2021) reveals that perceived cost is one factor affecting the adoption of electronic commerce in the country. in contrast, a negative relationship is found between perceived cost, mobile payment adoption, and intention to use (sena abrahão et al., 2016). perceived cost as a construct was found insignificant regarding payment transactions in mobile phones that possess flexible and convenient processing. table 4 presents the percentage of variances of the extracted factors, further explaining the general variations of the analyzed data. specifically, the first component, perceived usefulness, illustrates 52.956 percent of the factor structure that signifies the highest factor influencing the adoption of the e-payment channels, gaining the highest initial eigenvalue of 28.596 with 12 retained items. the second component, the perceived benefit, explained 7.085 percent of the structure of the data and garnered the second-highest initial eigenvalue of 3.826 with six loaded items. the third component, perceived trust, explains 4.667 percent of the data variations with an initial eigenvalue of 2.520 and 8 cross-loaded items. the fourth component, social influence, has an initial eigenvalue of 1.792 and 3.318 percent of the variance, having six items retained. table 4: latent roots criterion results of the extracted factors factors initial eigenvalue % of variance cumulative variance perceived usefulness 28.596 52.956 52.956 perceived benefit 3.826 7.085 60.041 perceived trust 2.520 4.667 64.708 social influence 1.792 3.318 68.026 facilitating conditions 1.384 2.563 70.589 perceived cost 1.314 2.434 73.023 source: data processed result, 2023 https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 794 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc subsequently, the fifth factor is labeled as facilitating conditions with an initial eigenvalue of 1.384 and 2.563 percent of the total data variance with seven items. the last factor, the perceived cost, has an initial eigenvalue of 1.314 and 2.434 percent of the total variance. overall, the 60-item pilottested scale comprising statements that signify components influencing the adoption of e-payment channels was diminished to a six-factor scale with 50-retained item statements. these retained items illustrate a cumulative 73.023 percent of the factor analysis structure that determines the underlying factors influencing the adoption of bir e-payment channels among the research respondents. meanwhile, the 26.977 percent of the remaining variance can be explained by other factors viewed beyond and not accounted for in this study's results. shown in figure 2 is the formulated thematic framework based on the results of this study. as such, it was identified that there are six latent factors influencing the adoption of philippines epayment channels in paying income taxes among individual taxpayers. results showed that 50 items were retained after the cross-loadings, which further identified six significant components in this research undertaking. these components are namely: perceived usefulness, perceived benefit, perceived trust, social influence, facilitating conditions, and perceived cost. the developed framework illustrates what factors induce individual taxpayers to adopt the suggested electronic payment system in paying their income taxes. figure 2. thematic framework of the study conclusion the factors influencing the adoption of e-payment channels in paying income taxes among individual taxpayers are perceived usefulness, perceived benefit, perceived trust, social influence, facilitating conditions, and perceived cost. the developed research framework of this study shows perceived usefulness, perceived benefit, perceived trust, social influence, facilitating conditions, https://www.ilomata.org/index.php/ijtc dimensions in the adoption of philippine tax e-payment channels in paying income taxes among individual taxpayers aguilar 795 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and perceived cost as the identified constructs that illustrate the relevance and structure of factors influencing the adoption of e-payment channels in paying income taxes among individual taxpayers. furthermore, the assumption of the adoption of e-payment channels in paying income taxes among individual taxpayers, specifically the single proprietors, mixed-income earners, and professionals, is multifaceted that is based on the perception of the relative technology system users and is a function of factors of perceived usefulness, perceived benefit, perceived trust, social influence, facilitating conditions, and perceived cost. the researchers extracted six factors influencing the adoption of e-payment channels in paying income taxes. the purpose of identifying these factors is to determine those considerations in mind by the philippines’ bureau of internal revenue (bir) e-payment channel adopters using such a payment mode to pay their income taxes. it addresses the electronic taxpayers' attitude toward using the electronic system. using the digitized system increases the percentage of revenue collection that helps the country recover from the covid-19 pandemic that paralyzed the flow of our economy. when situations that may shut down transactions done physically might re-occur, the blood life of the government will continue to operate and serve its purpose for the welfare of its citizens. as such, one of the sheer forces of exploring this study is to enable the non-adopters of the e-tax payment system to consider using such a mode of payment in paying their income taxes and know the factors that influence the adoption of the e-payment channels. it helps to encourage the non-adopters to embrace the continuous development and revolution of centralizing the e-tax payment system for efficient and boosting tax revenue collection of the country. the study further added empirical knowledge regarding the salient factors influencing the adoption, and it found out that aside from the perceived usefulness, social influence, and facilitating conditions coming from the theories used by this study, it revealed that perceived benefit, perceived trust, and perceived cost were considered as primary factors. this study concluded that the respondents also have negative perceptions of the relative cost of using such a mode of payment, considering its transaction price and financial barriers. these were based on the study results on commonality and dominance among the scale items retained after the factor loadings and analysis. moreover, the study agrees with the technology acceptance model (tam) theory, in which perceived usefulness was identified as one of the primary factors to consider in technology acceptance and adoption. it also agrees with another theory on which this study was grounded, the unified theory of acceptance and use of technology (utaut), which identified social influence and facilitating conditions as salient factors influencing an individual's behavior regarding the adoption and relative use of certain technological advancements. as such, this implies that perceived usefulness, social influence, and facilitating conditions can induce an individual taxpayer's ability to adopt the 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(2013). a beginner’s guide to factor analysis: focusing on exploratory factor analysis. tutorials in quantitative methods for psychology, 9(2), 79–94. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 191-201 191| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vita vitisia1, trie andari ratna2, dwikora harjo3, erika oktavia4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: vitavitisia.vv@gmail.com1 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: vitisia, v., ratna, t.a., harjo, d., oktavia, e. a. (2022). strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara. ilomata international journal of tax and accounting, 3(2), 191-201 https://doi.org/10.52728/ijtc.v3i2.463 abstract: this study was conducted to analyze the strategy of increasing taxpayer compliance through theprovision of pph 21 tax incentives borne by the government during the covid-19 pandemic at kpppratama north bekasi in 2020. the results of this study indicate that the implementation has not beengoing well because there are still many tax payers who have not do neso.reporting on the use of incentives. in this study, the author uses richard's theory of strategy which according to him in general,the core of the strategy there are three entities, namely problem identification, guiding policy and coherent action.the approach use din this research is qualitative with descriptive method.data collection in this study is by observation, documentation and interviews. the results of this study indicatethat the implementation has not gone well because there are still many taxpayers who have not reportedthe use of incentives. there are obstacles faced by kpp pratama bekasi utara, including the lack of awareness of tax payers that need tobe improved,and difficulties in reporting due to the lack of information related to reporting on the use of tax incentives. then, when tax payers are going to reportonline, the dgt server often has problems or experiences errors when they want to report. as a result,there was a delay in submitting the report.this has resulted in the low realization of tax payer compliance. keywords: compliance,strategy,tax incentives. this is an open access article under the cc-by 4.0 license. introduction in march 2020, indonesia experienced the impact of the covid-19 virus pandemic which forced the government to implement a lockdown policy which had a very large impact on the economy in indonesia. many companies and business owners are racking their brains to keep their business running, one of which is by laying off workers or cutting employee salaries (anugerah et al., 2021; dai et al., 2021; górska et al., 2021; gupta et al., 2022; malahayati et al., 2021; stephens et al., 2021; yao & ngai, 2021). according to data from the ministry of manpower mailto:vitavitisia.vv@gmail.com https://doi.org/10.52728/ijtc.v3i2.463 strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 192 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reported by kompas.com that as of july 31, 2020, the number of workers who have been laid off or laid off has reached more than 3.5 million. the government, which is also having trouble with this epidemic, does not want to lose state revenue through taxes . the government is trying to achieve the tax revenue target. the taxes paid by the public will lead to the apbn which will then be spent to meet the needs of the state, which will later be allocated according to its functions, namely public services, defense, order and security, economy, environmental protection, housing and public facilities, health, tourism, religion, education, and social protection. by finally revising the tax incentives for 2020. on the one hand, the government needs state revenue through taxes in order to help deal with the covid-19 outbreak, but on the other hand, the government also doesn't want to burden its people who are hit by economic turmoil (ashraf, 2020; brodeur et al., 2021; nezafat maldonado et al., 2020; sekiraqa et al., 2021; thomson et al., 2021; tibulca, 2021; vardavas et al., 2021). the government itself has made changes in policies regarding tax incentives in the midst of the covid-19 outbreak through minister of finance regulation number 23 of 2020, replaced by minister of finance regulation number 44 of 2020, then changed to minister of finance regulation number 86 of 2020. and the regulation changed became minister of finance regulation number 110 of 2020 which later changed to minister of finance regulation number 239 of 2020. and now it has changed to minister of finance regulation number 9 of 2020 concerning tax incentives for taxpayers affected by the corona virus disease 2019 or covid-19 pandemic (anggara et al., 2020; aulawi, 2020; bai et al., 2021; han et al., 2020; shafi et al., 2020). according to the minister of finance regulation no. 110/pmk.03/2020, the tax incentives consist of: article 21 income tax incentives borne by the government (dtp), msme final pph incentives based on government regulation no. 23/2018, article 22 import pph incentives, final pph incentives for construction services, article 25 income tax installment incentives, and vat incentives. however, researchers want to focus more on research on how to improve taxpayer compliance through the provision of pph 21 tax incentives borne by the government during the covid-19 pandemic (hu et al., 2022; kumala & junaidi, 2020; ozer & okan sakar, 2022). the provision of tax incentives during this pandemic can be used as an entry point to educate the real benefits of taxes that are felt directly. with the existence of education which is a crucial element to increase tax awareness which ultimately increases taxpayer compliance. the participation of taxpayers will determine the achievement of the tax revenue plan under any circumstances. in practice, it is often found that taxpayers lack or do not have awareness in carrying out tax obligations properly and even make tax avoidance efforts, so that this affects the level of taxpayer compliance and reduces state revenue (latofah & harjo, 2020). the phenomenon found that the low absorption of pph 21 tax incentives borne by the government is allegedly because there are still many taxpayers who use the facilities who have not reported in an orderly and obedient manner, even many taxpayers do not take advantage of this strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 193 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc government policy. another cause is the complexity of the requirements and stages of tax incentives which will lead to the reluctance of taxpayers to take advantage of them. the low level of socialization and tax literacy of the public is also the cause of the small absorption of this article 21 income tax incentive (priyatin & rahmi, 2022; sarjono, 2021; selvi & ramdhan, 2020). on the taxpayer side, compliance in reporting the realization of incentives still needs to be improved. this is important in terms of the number of incentives and taxpayers who use them (batrancea et al., 2019; damayanti et al., 2015; saad, 2014). therefore, a strategy that can be said to be effective is needed because of the actions of the tax authorities in an effort to increase taxpayer compliance. one of them is by building tax moral values and tax law enforcement. there are several goals that are expected to be achieved from the results of this study, including: 1. to analyze the strategy in improving taxpayer compliance through the provision of tax incentives pph21 during the covid-19 pandemic at the north bekasi kpp. 2. to analyze the obstacles faced by the north bekasi kpp in an effort to improve taxpayer compliance through the provision of pph 21 tax incentives during the covid-19 pandemic. 3. to analyze the efforts made by the north bekasi kpp in improving taxpayer compliance through the provision of tax incentives for pph21 during the covid-19 pandemic. this literature review discusses the theories related to the subject matter in this research, including the following: a. administration tax administration can be defined as all activities carried out by all government officials from a country in an effort to achieve state goals (siagian, 2012; wirman, 2012). b. analysis analysis is an activity to look for patterns besides analysis is a way of thinking related to systematic testing of something to determine parts, relationships between parts and their relationship to the whole (hamilton & finley, 2019, 2020; sandiford, 2015; spradley, 1979; sugiyono, 2019). c. strategy the definition of strategy is a coherent action supported by reason, an effective mix of thought and action with a basic structure called the kernel or in simple language the application of force in the most promising opportunities where strategy has three cores, namely (rumelt, 2012): a) problem identification, namely a diagnosis that explains and simplifies the complexity of reality by identifying the most important parts among various aspects of the underlying problem situation. b) the guiding policy is to face challenges and is the overall approach chosen in overcoming obstacles to identify problems. c) coherent action is a series of actions designed to carry out the guiding policy. these are steps that build on each other to work towards a guiding policy. d. tax rochmat soemitro said that taxes are people's contributions to the state treasury based on the law (which can be enforced) without receiving reciprocal services (counter achievements) that can be directly shown and which are used to pay general expenses (harjo, 2019). strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 194 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc e. tax compliance tax compliance is a condition in which the taxpayer fulfills all tax obligations and carries out his taxation rights in accordance with the applicable laws and tax regulations (harjo, 2019). f. pph 21 incentives borne by the government according to the regulation of the minister of finance number 110/pmk.03/2020 income tax incentives article 21 dtp is about taxing the income of individual taxpayers borne by the government during the april 2020 tax period until the december 2020 tax period. criteria for individuals who can obtain tax incentives this is an employee who earns income from an employer who has a business field classification code (klu) or an export destination import facility (kite). the employee must also have a tin and income for the period in question and earn a gross income of not more than rp.200,000,000 in a year.  conceptual framework tax is a mandatory contribution of society to the state. however, with the corona virus that hit indonesia in 2020, the government made efforts to achieve the tax revenue target by finally revising the tax incentives for 2020. however, currently the absorption of pph 21 tax incentives borne by the government is still low and this is because there are still many taxpayers who use the facilities who have not reported in an orderly and obedient manner. therefore, taxpayer compliance is required which is driven by regulatory enforcement (the power of tax authorities) and compliance with incentives from within the taxpayer (tax morale) caused by trust in tax authorities/government (trust to tax authorities). in the strategy, it is necessary to identify the fundamental problems and a comprehensive approach as a guiding policy to overcome these problems, as well as the existence of interrelated and beneficial actions between taxpayers and tax authorities. to describe this strategy, this study uses theory of strategy with an approach of three core elements of the strategy, namely the first diagnosis/problem identification (diagnosis), the second is a guiding policy, namely tax enforcement and tax morale. taxpayer morals) and the three coherent actions (set of coherent actions). diagnosis/identification of problems in this case is tax non-compliance and guiding policies as a comprehensive approach to resolving the results of problem identification. this approach is the enforcement of tax law and taxpayer morale (rumelt, 2012). from these problems and guiding policies, interrelated actions can be taken (coherent actions). coherent actions in tax enforcement are: a. tax audit (tax audit) b. tax investigation (tax investigation) c. tax collection, active tax collection, including giving a warning letter to taxpayers. meanwhile, coherent actions in building the moral values of taxpayers are: a. develop an attitude of empathy or feel for taxpayers and society in general. b. build taxpayer morale and help taxpayers to distinguish between right and wrong from a tax compliance perspective. c. developing justice, namely by developing an open attitude and behaving in a balanced manner, without discriminating against anything. strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 195 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc  conceptual model figure 1. conceptual model source: (rumelt, 2012) . method a. approach and type of research judging from the type of data, the research approach used in this study is a qualitative approach. qualitative is used to understand the phenomenon of what is experienced by the research subject holistically, and by way of description in the form of words and language, in a special natural context and by utilizing various natural methods. b. data collection techniques data collection methods are the methods used by researchers to collect data. without knowing the data collection techniques, the researcher will not get data that meets the data standards set. data collection techniques carried out by researchers include: observation, documentation, and interview (spradley, 1979; sugiyono, 2019; wirman, 2012). c. data analysis techniques data analysis was carried out so that the existing research data could more easily arrive at the decision-making process. data analysis is the analysis of research data was carried out before entering the field, during the field and after the field (bungin, 2017; dai, 2017; moleong, 2018; sugiyono, 2019). the process of data analysis in this study is as follows: data reduction, data presentation, and drawing conclusions. d. research location and schedule this research was conducted at the pratama tax office, north bekasi, graha persada 2 building, jl. k.h. noer ali jl. kalimalang bridge 2 no. 89a kec. north bekasi, bekasi city. strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 196 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion the results of the study contain an explanation of the data and information that have been obtained in the study through interviews with parties involved in this research, such as fiskus, academics, and taxpayers. in conducting this research, the researcher conducted interviews with several parties below: table.1 list of informants who interview researchers no informant name characteristics of informants 1 ibu elvi edita siahaan kepala seksi pengawasan dan konsultasi 2 bapakradenmaosul se.,mm dosenperpajakaninstitutstiami bekasi 3 ibulusimilenia wp penerima insentifpph21 4 bapakajiali wp penerima insentifpph21 5 bapak sandy wp penerima insentifpph21 6 bapaksammy wp penerima insentifpph21 7 bapakagus dharmawan wp penerima insentifpph21 table.2 realization of pph 21 tax incentives borne by the government at kpp pratama north bekasi in 2020 year pph21 incentive realization 2020 8.877.334.397 table.2 realization of pph 21 tax incentives borne by the government at kpp pratama north bekasi in 2020 director of counseling, services and public relations of djp hestu yoga saksama said that the factors that caused the absorption of tax incentives to remain low were the weak economic condition and the low level of compliance of the beneficiary taxpayers. table.3 targets and realization of taxpayer compliance at kpp pratama north bekasi in 2020 year must report reporting realization 2020 576 378 source: pdi kpp pratama section, north bekasi table. 2 shows that the taxpayer compliance ratio in 2020 still needs to be improved. the director of counseling, services and public relations of the dgt, hestu yoga saksama said that the guidance or guidance and supervision of the tax service office will always be carried out, especially for taxpayers who have not submitted a report on the realization of incentives until the deadline in september 2020. strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 197 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc after conducting research and presenting the results of research regarding strategy analysis of taxpayer compliance improvement through the provision of pph 21 tax incentives during the covid-19 pandemic, the author will interpret it based on qualitative data analysis techniques. so it can be drawn for discussion as follows: 1. strategy to increase taxpayer compliance through the provision of tax incentives for pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara in 2020. based on what has been described [in previous chapters, the author conducted a study to analyze the strategy for increasing taxpayer compliance during the covid 19 pandemic using strategy theory and has 3 cores consisting of problem identification, guiding policies, and coherent actions (rumelt, 2012). a) identification of problems in this problem identification, there is non-compliance with tax payers in reporting the use of incentives and the low realization of providing incentives for pph 21 dtp. based on the analysis of problem identification, namely that a strategy is needed to improve taxpayer compliance and also the realization of the pph 21 dtp incentive, namely by issuing a warning letter and conduct socialization on how to report procedures and reinforce tax sanctions against non-compliant taxpayers. then, carry out more effective and fair supervision, as well as expand information regarding the existence of the pph 21 tax incentive. b) guiding policy comprehensive approach as a guiding policy to resolve problem identification results. this approach is the enforcement of tax law and the moral values of taxpayers. based on the analysis of the guiding policy, it is clear that the law enforcement process must continue with the imposition of stricter employment sanctions so that reporting on the use of tax incentives can be realized properly. of course, it is also necessary to encourage tax moral values from taxpayers who can help tax authorities to increase the realization of taxpayer compliance. and besides that, the level of trust from the tax authorities to taxpayers must continue to be increased because this can affect tax morale. c) coherent action from these problems and guiding policies, interrelated actions can be taken. coherent actions in enforcement of tax laws are tax sanctions and . coherent actions in the moral values of taxpayers are education, motivation, social values and also tax sanctions. based on the analysis of coherent actions that by conducting counseling and also expanding information on social media about taxes can increase the knowledge of taxpayers. and also the existence of tax sanctions that have been running with the provisions of sanctions, namely by providing deterrent action by not being entitled to get incentives back, of course, it will make taxpayers not take the reporting compliance lightly. 2. obstacles faced by kpp pratama bekasi utara in improving taxpayer compliance through the provision of pph 21 tax incentives borne by the government during the covid-19 pandemic. regarding the obstacles faced by kpp pratama bekasi utara in improving taxpayer compliance through the provision of pph 21 incentives during the covid-19 pandemic, namely: strategy for improving taxpayer compliance through the giving of tax incentives pph 21 borne by the government during the covid-19 pandemic at kpp pratama bekasi utara vitisia, ratna, harjo, and oktavia 198 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a. there is still a lack of awareness of taxpayers that needs to be improved. and there are difficulties in reporting because of the lack of information related to reporting on the use of tax incentives. b. when taxpayers will report online, the dgt server often has problems or experiences errors when they want to report. as a result, there was a delay in submitting the report. 3. efforts have been made by the north bekasi kpp to improve taxpayer compliance during the covid-19 pandemic. in the analysis of the strategy for increasing taxpayer compliance through the provision of pph 21 tax incentives during the covid-19 pandemic, there are efforts made by the north bekasi kpp in increasing taxpayer compliance during the covid-19 pandemic. a. issuing warning letters and re-informing via e-mail, as well as conducting tax class counseling by providing tax knowledge education and implementing tax laws that provide a deterrent effect to taxpayers. b. perform regular dgt server strengthening and maintenance so that the server does not experience frequent problems conclusion based on the results of the research, discussion, and interpretation described in the previous chapters, and referring to the theory and results of previous studies, the researcher can draw the following conclusions: 1. the strategy to increase taxpayer compliance through the provision of pph 21 tax incentives borne by the government during the covid-19 pandemic at kkp pratama north bekasi in 2020 has not been implemented well, because there are still many taxpayers who have not reported the use of incentives. 2. obstacles in increasing taxpayer compliance through the provision of pph 21 tax incentives borne by the government during the covid-19 pandemic, namely: a. there is still a lack of awareness of taxpayers that needs to be improved. and there are difficulties in reporting because of the lack of information related to reporting on the use of tax incentives. b. when taxpayers will report online, the dgt server often has problems or experiences errors when they want to report. as a result, there was a delay in submitting the report. 3. efforts made by the kpp 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(2021). engaging social media users with attitudinal messages during health crisis communication. lingua, 103199. https://doi.org/10.1016/j.lingua.2021.103199 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 599-612 599 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the mediating effect of the intention to quit as the impact of locus of control on dysfunctional audit behavior iman supriadi stie mahardhika surabaya, indonesia correspondent: iman@stiemahardhika.ac.id received : april 28, 2023 accepted : july 25, 2023 published : july 30, 2023 citation: supriadi, i. (2023). the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior. ilomata international journal of tax and accounting, 4(3), 599-612. https://doi.org/10.52728/ijtc.v4i3.743 abstract: auditing is an essential process in maintaining accountability and transparency within an organization. however, some dysfunctional audit behaviors can threaten audit integrity and cause significant losses to the company. this study aims to prove whether or not the intention to quit can mediate the indirect effect between locus of control on auditor acceptance of dysfunctional audit behavior, especially in all public accounting firms in east java region. this is a quantitative causality research, and the data source in this study are generated from the primary data. the data are obtained from the respondents' answers to questionnaires given to all auditors who work at public accounting firms in east java region. the 11 itemsquestionnaire was distributed via google form. the results indicated that locus of control has a positive effect on auditors’ acceptance of dysfunctional audit behavior, intention to quit has a positive effect on auditors’ acceptance of dysfunctional audit behaviors, and locus of control has a positive effect on the intention to quit. finally, the intention to quit is able to mediate the indirect effect of locus of control on auditors’ acceptance of dysfunctional audit behaviors. keywords: intention to quit, locus of control, dysfunctional audit behavior thisisan open accessarticleunderthe cc-by 4.0 license. introduction financial records are an extremely important aspect in a business. these serve as a summary of information concerning the monetary problems of a business, which can be utilized as a manner for choice creating. audit, in relation to financial records is an important process in maintaining accountability and transparency within an organization. however, some dysfunctional audit behaviors can threaten audit integrity and cause significant losses to the company. one factor known to have an effect on dysfunctional audit behavior is employee locus of control. according to (nehme, 2022; sulistiyo, 2018), locus of control can be treated as a manner for choice creating, from which the info included in the monetary declarations exist in 2 qualities, https://www.ilomata.org/index.php/ijtc mailto:iman@stiemahardhika.ac.id https://doi.org/10.52728/ijtc.v4i3.743 the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 600 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc specifically appropriate as well as dependable, and each type of qualities are extremely challenging in determining the choices . to evaluate the significance as well as the dependability of a monetary record, a 3rd party referred to as an outside auditor, has to carry out an evaluation of the monetary declarations. community relying on the investigation outcomes provided by community accounting professionals needs auditors to take note on the high top premium of the resulting audits (anugerah, anita, sari, et al., 2016; fiolleau, 2018; yustina & sutarsa, 2020). nevertheless, the limited competitors as well as the enhanced need for monetary declaration audits, become the issues in the community in regards to the failure of auditors to satisfy the high top premium with the audit results. inefficient investigation habits is actually the habits of auditors throughout the investigation procedure since there's a mismatch between the established and the executed investigation courses. simply put, inefficient investigation habits refers to an activity that deviates from developed requirements (anita et al., 2018). inefficient investigation habits is actually performed by auditors throughout the application of the investigation course. the investigation course itself is a compilation of investigation treatments that should be actually performed throughout the prevailing procedures. in accordance with (abdillah, 2018; balasingam, 2019; johari, 2022) it is stated that inefficient investigation habits that occur can easily decrease an investigation of high top premium directly or indirectly. furthermore, these will risk towards fair investigation of high top premium since the investigation is proven to be inept as well as inadequate, a result from auditors’ inappropriate manners on the problem viewpoint (christine, 2019). there is a possibility that the auditor will issue a wrong investigation pattern, in other words, the auditor performs dysfunctional audit behavior in implementing the audit activity. clearly, one of the causes of audit failures is that the auditor does not apply or carry out all audit procedures carefully and thoroughly or unable to evaluate audit evidence in accordance with the audit standards (aida, 2021; moradi et al., 2019). existing matters about dysfunctional audit behavior shown by auditors have attracted great attention from researchers in accounting such as (anita et al., 2018; janie, 2019; mardi et al., 2022). locus of command is actually a representation of an individual's propensity towards thinking management, the condition that reflects a lifestyle (interior) or presumably one that originates from various other points, for instance the energy of others, which is actually an outside element (nadi, 2020). in his study (galvin et al., 2018) discovered that the external locus of control has a tendency to be associated with the decreasing habits in investigating high top premium compared to the internal locus of command. this implies that in fact, people own an external locus of control if they wish to fulfil their desires, through either scamming or controlling. in relation to the external circumstances, the inability to cope with the external locus of control can be minimized through the reinforcement of internal locus of control (masriah & yoni, 2020). controlling or scamming refers to efficient and inefficient habits accordingly. this habits is actually performed by auditors towards controling the investigation procedure so as to accomplish the efficiency of private audit (masriah & yoni, 2020). when efficiency is hard to accomplish, auditors can choose not to perform their task. in the case of not being able to conduct efficient investigation, an auditor may choose not to continue the auditing work. (putri et al., 2020) emphasized that in certain conditions when https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 601 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc auditors consider that preventing inefficient investigation from occurring help minimize the feeling of being worried. once the feeling is spotted, the auditor will certainly choose to leave the business behind. from what occurs, it can be argued that an auditor who prefers to stop the investigation most probably because the work of investigating is inefficient (putu, 2020). studies on auditors’ inefficient work habits have been conducted by a number of researchers, among others are (anita et al., 2018; anugerah et al., 2019; habibi et al., 2022; nadi, 2020; nugraha et al., 2021; paino, 2019; prabangkara, 2021; syam, 2020; wetmiller, 2022; yulianti, 2022). they claimed that the inefficiency in the auditors’ work habits when performing investigation activities are impacted from locus of control and the intention to quit work. nevertheless, the majority of the researches associated with locus of command, the intention to quit and the inefficient investigation habits are still carried out separately, therefore it still faces a challenge so as to find out a wider perspectives regarding the issues. in comparison to the previous studies, this research is intended to investigate whether or not the locus of control influences the intention to quit and the inefficiency in the auditors’ investigating habits. in addition, this study further explains the possibility of minimizing the indirect effects of locus of control towards the inefficiency of investigation work habits, particularly in the eastern part of java, indonesia. since similar studies are still limited, thus, it is expected that the research results can enrich the literature for people residing in east java, specifically concerning the discussion about the locus of control, the intention to quit, as well as the dysfunctional audit behaviors. locus of control and dysfunctional audit behavior a number of studies have investigated that individuals with an external locus of control have a strong correlation to use fraud or manipulation to achieve personal goals (anugerah, anita, nelly sari, et al., 2016). this indicates that auditors who have an external locus of control tend to engage in deviant acts, known as dysfunctional audit behavior and will allow such conducts, whereas those with an internal locus of control will not tolerate these typical dysfunctional behaviors (emmanuel chijioke et al., 2021). furthermore, (galvin et al., 2018) stated that auditors having an internal locus of control take into consideration whether or not certain behaviors are right or wrong. they also tend to accept the consequences of whatever occurs. on the other hands, auditors with an external locus of control believe that a failure or a success is not the impact of improper behavior, thus there is a little possibility that they will realize it. dysfunctional behaviors are in fact violate the ethics valued by noble professionals. hence, auditors with an internal locus of control is prone to maintain their integrity. furthermore, studies by (anugerah, anita, nelly sari, et al., 2016; nadi, 2020; sunyoto, 2019) revealed that dysfunctional audit behaviors and an external locus of control are inter-related. auditors with external locus of control tend to show improper behavior and perform their work inefficiently. based on the description, the first hypothesis of this study is "locus of control has a positive effect on the acceptance of dysfunctional audit behavior". https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 602 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc intention to quit and dysfunctional audit behavior auditors turnover or those leaving or quitting from the organization is a phenomenon that occurs particularly in public accounting firms. there are times when auditors turnover has a positive impact, however, the change will have an adverse effect on public accounting firms in terms of costs, time lost, and the opportunity to take advantage. according to (nugraha et al., 2021) "intention to quit is marked by various things related to auditors’ behaviors: from an increased absenteeism, laziness at work, work rules violations, rebellious acts to superiors, and reluctance to complete the given tasks." these indications can be used as a reference to predict employee’s intention to quit in a company. the auditor behavior as mentioned by (nugraha et al., 2021) will have an impact on the acceptance of dysfunctional audit behavior, which is considered as deviant. auditors with the intention to quit might or might not realize the effects incurred from their habits. (nugraha et al., 2021) argued further that auditors with dysfunctional behaviors no longer feel worried if such conducts are spotted. a number of studies have revealed that the intention to quit has a positive effect on the auditors’ acceptance of dysfunctional audit behavior (nehme, 2022; nugraha et al., 2021). the results of this study indicate that the stronger the desire an auditor has to leave his job, the higher the tendency is to accept dysfunctional audit behavior. on the other hands, the stronger the desire of an auditor to keep the job, the higher the tendency to not accept dysfunctional audit behavior. based on what has been described, the second hypothesis of this study is as follows: "the intention to quit has a positive effect on the acceptance of dysfunctional audit behavior". locus of control and the intention to quit researches conducted by (anugerah, anita, sari, et al., 2016) show a considerable effect between the internal locus of command and the intention to quit. people with an internal locus of control are less likely to quit their job, if compared to people with a dominant external locus of control. locus of control can be defined as a psychological concept that refers to how strongly people believe they have control over the situations and experiences that affect their lives. (habibi et al., 2022) emphasized that at work, people with external locus of control fail to show specialized skills necessary to complete the tasks, quit easily and blame others when situations are not favorable. on the contrary, those with internal locus of control own the following characteristics: the ability to take control in times of hardship and difficulties, the willingness to resolve any dispute proportionally, and the perseverance to remain consistent on the given tasks. as mentioned earlier, auditors who have an internal locus of control tend to have the capability to resolve conflicts with superiors at work. in addition, they will be more self-introspective since they believe that the conflict can be resolved properly without having to blame others. simply put, to ensure whether or not people have an internal locus of control is when they are in the midst of dispute and how they can handle the disputes. reversely, people with an external locus https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 603 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of control will have the tendency to criticize others or even their superiors. other researches about locus of control and the intention to quit were also conducted by (anugerah, anita, nelly sari, et al., 2016; habibi et al., 2022) who discovered that there's a considerable effect between the two variables. the outcomes of the study by anugerah, anita, sari, et al is actually (2016) discovered that external locus of control has an impact on the intention to quit. this suggests that auditors with an external locus of control tend to show a stronger desire to quit, while auditors who have an internal locus of control help lower the intention to quit. more specifically, the external locus of control detected in an auditor demonstrates a higher level in showing the desire to quit (intention to quit) or look for other job alternatives. based on the explanation of locus of control both internal and external, the hypothesis can be formulated as "locus of control has a positive effect on the intention to quit". the mediating role of intention to quit and locus of control with the dysfunctional audit behavior in fact, the external locus of control has a favorable impact on turnover or even on the intention to quit (masriah & yoni, 2020). this suggests that auditors showing an external locus of control incline to have a stronger desire to quit, whereas auditors with an internal locus of control have the tendency to help reduce turnover. more specifically, the ones with the external locus of control will show a stronger desire to quit work (intention to quit) or to look for alternative employment. research study that links locus of control along with the approval of the inefficient investigation habits as well as the intention to quit as a mediating variable is conducted by (anita et al., 2018). the study discovered that there's a considerable effects between the locus of control on the approval regarding the inefficient investigation habits and the intention to quit as an adjusted mediating variable. this suggests that people with an external locus of control show a bigger wish to leave their work, so the tendency to accept dysfunctional audit behavior is higher. conversely, individuals who have an internal locus of control shows no desire to leave work, so the tendency to accept dysfunctional audit behavior is lower. based on the analyses, the fourth hypothesis of this study is "locus of control affects the acceptance of dysfunctional audit behavior throughthe intention to quit". method this study implements a causality quantitative method. the information resource within this particular testing originates from the major information generated from respondents' responses to questionnaires distributed to all of auditors that operate at community bookkeeping companies in the eastern java area. the questionnaire utilizes google.com along with an overall of 11 concern products. the locus of control is actually determined through 2 signs https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 604 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc industrialized by (spector, 1988). the options for each question use a likert scale with 5 points. high scores indicate individuals with external locus of control, conversely low scores show individuals with internal locus of control. on favorable question items, a score of 5 is given for strongly agree option and a score of 1 for strongly disagree option, whereas the opposite scores are for unfavorable question items. the intention to quit within this particular testing is measured by 3 signs. it is determined by utilizing a multi-time duration method tool sustained from the previous literary works, specifically by (aranya & ferris, 1984). the tool utilizes a likert scale with a 5-point range, where 1 (highly concur) and 5 (highly differ). auditor acceptance of dysfunctional investigation habits within this particular testing is determined through 3 signs of inefficient habits that can easily decrease the investigation of high top premium specifically: early sign-off, a change in investigation treatment and under reporting of investigation opportunity (kelley & margheim, 1990). additionally, inefficient investigation habits are determined by utilizing a survey tool encompassing 3 concerns. option solution to the listing of concerns also utilize a likert range utilizing 5 factors, where 5 (highly concur) as well as 1 (highly differ). a higher accumulation suggests a higher degree of approval of inefficient habits. on the other hand, a reduced accumulation demonstrates a reduced degree of approval of inefficient habits. the data analysis in this study use structural equation modeling with a partial least square (sempls) approach through smartpls version 3.8 software. sem-pls is a variant-based structural equation analysis (sem) that can simultaneously evaluate the measurement model as well as the structural model. the reason for using sem-pls analysis is because the variables in this study are unobserved variables so that these variables are measured using some indicators. pls analysis consists of two steps (hair et al., 2014) where the first step is to evaluate the measurement model (outer model) and the second step is to evaluate the structural model (inner model). results and discussions evaluation of the measurement model the first analysis carried out in evaluating the sem-pls results is to point out the measurement model (outer model) by testing the validity and reliability for each research variable. the evaluation of the outer model in this study aims to see whether the instruments used for the locus of control, dysfunctional audit behavior and intention to quit variables have a good level of precision, accuracy and consistency. evaluation of the outer model in pls is done through convergent validity, discriminant validity, and reliability tests. table 1. outer loading factor constructs original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values dysf_1 <dysfunctional audit 0.835 0.834 0.026 32.517 0.000 https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 605 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dysf_2 <dysfunctional audit 0.843 0.843 0.023 36.245 0.000 dysf_3 <dysfunctional audit 0.775 0.771 0.034 22.749 0.000 int_1 <intention to quit 0.824 0.823 0.028 29.169 0.000 int_2 <intention to quit 0.875 0.876 0.018 48.952 0.000 int_3 <intention to quit 0.861 0.862 0.019 44.393 0.000 locus_1 <locus of control 0.778 0.780 0.024 32.370 0.000 locus_2 <locus of control 0.844 0.842 0.021 40.976 0.000 locus_3 <locus of control 0.853 0.852 0.018 48.568 0.000 locus_4 <locus of control 0.768 0.766 0.034 22.497 0.000 locus_5 <locus of control 0.789 0.786 0.030 26.705 0.000 the reliability items of the loading factor are shown in table 1. all values of loading factor above 0.5 indicate that the indicator is valid. in addition, the significance of reliability items or validity indicator is tested with t-statistic. the results show that all indicators have a t-statistic value> 2.0, so it can be concluded that the instrument is valid instrument. the second measure of convergent validity is to see the value of cronbach's alpha and its composite reliability. the results are as follows: table 2. construct reliability and validity constructs cronbach's alpha rho_a composite reliability ave r2 r square adjusted dysfunctional audit behavior 0.752 0.752 0.859 0.670 0.279 0.271 intention to quit 0.814 0.817 0.890 0.729 0.305 0.301 locus of control 0.867 0.876 0.903 0.652 cronbach's alpha and composite reliability values are above 0.70 which indicate a high reliability of the measuring instrument. the third check of convergent validity is to look at the ave value. an ave value above 0.50 is highly recommended. from the table shown, the ave value of all constructs is above 0.50. after the convergent validity evaluation is fulfilled, the next is an examination of discriminant validity which includes cross loading and comparing the ave root with the correlation between constructs. the following are the results of cross loading. table 3. cross loading discriminant validity indicator dysfunctional audit behavior intention to quit locus of control dysf_1 0.835 0.363 0.386 https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 606 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dysf_2 0.843 0.364 0.404 dysf_3 0.775 0.353 0.403 int_1 0.344 0.824 0.455 int_2 0.348 0.875 0.480 int_3 0.430 0.861 0.478 locus_1 0.456 0.547 0.778 locus_2 0.397 0.436 0.844 locus_3 0.410 0.457 0.853 locus_4 0.352 0.385 0.768 locus_5 0.314 0.358 0.789 all indicators are more closely correlated with their respective constructs than with constructs from other blocks. another check of discriminant validity is to compare the ave root with the correlation between constructs. the results are as follows: table 4. comparison of ave and ave root constructs ave root ave dysfunctional audit behavior 0.670 0.819 intention to quit 0.729 0.854 locus of control 0.652 0.807 the table above is the correlation between constructs with the ave root. the ave root for the dysfunctional audit behavior construct is 0.819, the results show that the ave root of the dysfunctional audit behavior construct is higher than the ave value of 0.670. likewise, the intention to quit and locus of control constructs have an ave root higher than the correlation between their constructs and other constructs. this meets the requirements of good discriminant validity. evaluation of structural model evaluation of the structural model in this study aims to predict the causal relationship between variables that have been hypothesized. the results of the structural model evaluation in this study indicate that the first hypothesis (h1) is statistically supported a p-value, which is smaller than 0.01 and a path coefficient of 0.350. this proves that locus of control has a positive effect on the acceptance of dysfunctional audit behavior. the results of this study are consistent with the previous researches by (anugerah, anita, nelly sari, et al., 2016; emmanuel chijioke et al., 2021; galvin et al., 2018; nadi, 2020; sunyoto, 2019). the second hypothesis (h2) is statistically supported with a p-value smaller than 0.01 and a path coefficient of 0.247. this proves that intention to quit has a positive effect on the acceptance of dysfunctional audit behavior. the results of this study are consistent with the former studies conducted by (nehme, 2022; nugraha et al., 2021). this explains that the stronger the desire of https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 607 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an auditor to leave his job, the higher the tendency to accept dysfunctional audit behavior. on the contrary, the stronger the desire of an auditor to maintain his job, the higher the tendency to not accept dysfunctional audit behavior. the third hypothesis (h3) is statistically supported with a p-value smaller than 0.01 and a path coefficient of 0.552. this proves that locus of control has a positive effect on the intention to quit. the results of this study are consistent with the studies by (anugerah, anita, nelly sari, et al., 2016; habibi et al., 2022) who argue that auditors with an external locus of control are prone to have a high intention to quit, whereas auditors who have an internal locus of control tend to show a low intention to quit. figure 1. the relationship among research constructs table 5. path coefficient correlation between constructs original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values intention to quit -> dysfunctional audit 0.247 0.250 0.063 3.952 0.000 locus of control -> dysfunctional audit 0.350 0.351 0.067 5.221 0.000 locus of control -> intention to quit 0.552 0.553 0.046 12.061 0.000 the fourth hypothesis testing was carried out by utilizing the sobel test (baron & kenny, 1986). from the calculation of the sobel test, it was found that the t-value was 3.711. hence, the fourth hypothesis in this study is statistically supported by a significant value at the alpha level of 1 percent or p-value <0.01 (above 2.58). this proves that locus of control affects the acceptance of dysfunctional audit behavior through the intention to quit. individuals who have an external locus of control have a high desire to leave work, so the tendency to accept dysfunctional audit https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 608 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc behavior is higher. conversely, individuals who have an internal locus of control have a low desire to leave work, so the tendency to accept dysfunctional audit behavior is lower (anugerah, anita, sari, et al., 2016). the path coefficient of the guide impact of locus of control on auditors’ approval of inefficient investigation habits without the intention to quit is mediated and the result is 0.236, considerable at the 1 per-cent alpha degree (p-value <0.01). nevertheless, when the impact is mediated through an intention to quit, the course coefficient enhances in size up to 0.279, a considerable result at the 1 per-cent alpha degree (p-value <0.01). this concludes that the intention to quit partly mediates the indirect impact of locus of control on the auditors’ approval of inefficient investigation habits. the outcomes of this particular testing are in accordance with a research result by (baron & kenny, 1986) which demonstrates that partial arbitration occurs when a guide impact stays considerably valid to the adjustable mediation. this form of partial mediation indicates that the intention to quit is not the only mediating variable in the indirect effect of locus of control on auditor’s acceptance of dysfunctional audit behavior, where cases of partial mediation in behavioral research are very likely to occur as in predicting human behaviors, several alternatives are to be put into account (baron & kenny, 1986). to measure how big is the influence of the intention to quit variable used as a mediating variable from which the effect size (f2) value can be calculated is with the implementation of the formula proposed by (chin, 1998) who conveyed: the intention to quit, while the r2 is without mediator figure is obtained from the r2 of dysfunctional audit behavior variables, excluding the intention to quit variable as a mediating variable. the results of the calculation of r2 with the intention to quit as a mediating variable and without the intention to quit as a mediating variable are as follows: constructs r2 (intention to quit as a mediating variable) r2 (without intention to quit as a mediating variable) dysfunctional audit behavior 0.279 0.236 𝑓2 = (𝑅2𝑤𝑖𝑡ℎ 𝑚𝑒𝑑𝑖𝑎𝑡𝑜𝑟 − 𝑅2𝑤𝑖𝑡ℎ𝑜𝑢𝑡 𝑚𝑒𝑑𝑖𝑎𝑡𝑜𝑟) (1 − 𝑅2 𝑤𝑖𝑡ℎ 𝑚𝑒𝑑𝑖𝑎𝑡𝑜𝑟) 𝑓2 = (0.279 − 0.236) (1 − 0.279) = 0.043 0.721 = 0.060 the r2 along with mediator number is acquired as a result of the r2 of the inefficient investigation habits (adjusted endogenous) through the intention to quit, while the r2 without https://www.ilomata.org/index.php/ijtc the mediating effect of intention to quit on the impact of locus of control on dysfunctional audit behavior supriadi 609 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mediator number is actually acquired from the r2 of the inefficient investigation habits adjusted without the intention to quit as a mediating adjustable. the computation outcomes discovered an impact dimension worth of 0.060. this concludes that the intention to quit as a mediating variable has little or even weaker impact (chin, 1998). conclusions the outcomes of hypothesis screened as well as conversation formerly explained, the writers end very initial, that locus of command has actually a favorable impact on auditor approval of inefficient investigate habits. 2nd, objective towards stop has actually a favorable impact on auditor approval of inefficient investigate habits. 3rd, locus of command has actually a favorable impact on objective towards stop. lastly, locus of command impacts auditor approval of inefficient investigate habits with objective towards stop. from the outcomes of the hypothesis screened as well as the final thoughts formerly explained, the writers offer the very initial recommendation that this study is actually an anticipation towards empirical proof on the evaluation of auditor’s approval of inefficient investigation habits by taking a closer look at the individual qualities of auditors comprising both the locus of control and the intention to quit. moreover, another suggestion is that the result of the study is expected to serve as an input for each public accounting firm concerning the importance of understanding the personal characteristics of an auditor from which an auditor's personal characteristics can be distinguished from the other auditors through accepting or rejecting dysfunctional audit behavior. in addition, a thorough recruitment process for prospective auditors who will be employed in a public accounting firm is strictly required, since the process will help determine which auditorto-be has an internal locus of control and which having an external locus of control. both internal locus of control and external locus of control identifies whether or not an auditor is prone to have a high or low intention to quit. as a matter of fact, the results of this study cannot be generalized widely to every company in indonesia because it employs only respondents from east java region. further studies are expected to expand the scope of research so that the level of generalization becomes more accurate. furthermore, it is suggested to add one or more variables such as variables of ethics, ideology of ethics, corporate code of ethics and work stress which are thought to affect the acceptance of dysfunctional audit behavior. references abdillah, m. 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(2020). the role of professional commitment and suspension of judgment in decreasing auditors’ premature sign-off. jurnal akuntansi, 10(2), 153–164. https://doi.org/10.33369/j.akuntansi.10.2.153-164 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 296-310 296 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati1, musa maha sulung sitinjak2, dwikora harjo3, aramia fahriah4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: ukhti.ra@gmail.com1 received : january 3, 2023 accepted : april 14, 2023 published : april 30, 2023 citation: irawati., sitinjak, m, m, s., harjo, d., fahriah, a. (2023). analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office. ilomata international journal of tax and accounting, 4(2), 296-310. https://doi.org/10.52728/ijtc.v4i2.682 abstract: e-objection is one of the services of the directorate of taxes that can be used by taxpayers in submitting tax objection letters. e-objection is an adoption policy that is an alternative to the previous program, namely the manual submission of objection letters. e-objection can be accessed via e-filling. this research is motivated by the lack of exploration of the introduction of e-objection to taxpayers that there are still many who submit objection letters manually. based on the data submitted by the directorate general of taxes (direktorat jenderal pajak/djp) and previous research in 2021 based on 2020 data, data on submitting objection letters online (eobjectionareis still very minimal so that are problems in analyzing the effectiveness of e-objection. therefore, this study was conductedtoo to analyze the effectiveness of e-objection from 2020 to 2021 at kpp pratama cibitung, but because the data of taxpayers who submitted objection letters by e-objection was confidential, it was hindered from interviewing informants who had accessed e-objection besides that because e-objection data could not be accessed from kpp pratama, so in this study using two research objects, namely kpp pratama cibitung and kanwil djp ii. so that the purpose of this study can determine the effectiveness of e-objection as an alternative to the previous system. based on e-objection data in the west java djp regional office ii in 2020 there were 109 data and in 2021 there were 115 data so it could be known that there was an increase, but based on the percentage of effectiveness criteria, the percentage of e-objection effectiveness in the djp of the west java regional office ii in 2020 was 8.93% and in 2021 it was 9.75% so that it can be concluded that the analysis of the effectiveness of eobjection in kpp pratama cibitung during the covid-19 pandemic (2020-2021) was ineffective. keywords: effectiveness, e-filling, e-objection, taxpayers, covid-19 this is an open access article under the ccby 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:ukhti.ra@gmail.com https://doi.org/10.52728/ijtc.v4i2.682 analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 297 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction e-objection is one of the channels for submitting a letter of objection, based on article 9 of pmk 9/2013 which states that the objection letter can be submitted elsewhere, namely electronically (efiling). the e-objection feature service also makes monitoring data collection by the cibitung primary tax service office easier (kumala et al., 2021; revida & dkk, 2020). in 2020 covid-19 began to spread in indonesia, requiring each individual to maintain distance and limit activities (safitri et al., 2021; taylor & knipe, 2022). however, to maintain the indonesian economy, work continues to run but using (work from home) and automatic tax payments continue. however, due to this pandemic situation, the government has made new policies such as large-scale social restrictions (psbb) and the implementation of community activity restrictions (ppkm) (hadi, 2017; ispriyarso, 2019). for stem to can continue to run in a balanced manner, the obligations and rights of each taxpayer can still be fulfilled by an alternative system from the previous policy or manually. one of the policies adopted as an alternative to the previous policy is e-objection (satria et al., 2021; segal & gerstel, 2018.; wright et al., 2022; zhang et al., 2022). based on data obtained from the west java djp regional office ii, the number of taxpayers registered at the west java regional office ii in 2020-2021 is as follows: table 1 number of taxpayers registered with west java regional office ii for 2020-2021 no. kpp number of taxpayers 2020 number of taxpayers 2021 1. pratama karawang 764.630 819.353 2. pratama cikarang selatan 314.620 338.989 3. pratama cikarang utara 269.975 290.700 4. pratama cirebon satu 135.867 142.253 5. madya bekasi 2.054 2.059 6. pratama cibitung 508.073 545 224 7. pratama indramayu 397.832 431.327 8. pratama kuningan 533.186 564.133 9. pratama subang 411.503 446.548 10 pratama cirebon dua 480.276 513.784 11. pratama madya karawang 2.070 total 480.019 4.096.440 source: west java regional office ii, 2022. based on table 1 above, there are several numbers of taxpayers in 2020 and 2021 from each kpp from the west java regional office ii. one of them is the object of this study, namely kpp pratama cibitung. in 2020 there were 508,073 taxpayers and became the second highest position in the west java regional office ii. in 2020 there were 545,224 taxpayers and became the second highest position in the west java regional office ii. https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 298 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on data sourced from kpp pratama cibitung, the number of taxpayers registered with kpp pratama cibitung in 2020-2021 is as follows: table 2 number of taxpayers registered by the cibitung primary tax service office for 2020-2021 no. types of taxpayers tax year 2020 2021 1. corporate 19.954 22.711 2. non-employee private persons 85.517 92.161 3. employee personal persons 402.602 430.352 total 508.073 545.224 source: cibitung primary tax service office, 2022 based on table 2 above, according to what can be obtained from kpp pratama cibitung, there are several numbers of taxpayers in 2020 and 2021. in 2020, the number of taxpayers was 508,073 consisting of 3 types, namely corporate taxpayers as many as 22,711, non-employee individual taxpayers as many as 85,517 and individual employees taxpayers as many as 402,602. in 2021, the number of taxpayers is 545,073 consisting of 3 types, namely corporate taxpayers as many as 19,954, non-employee individual taxpayers as many as 92,161 and individual employee taxpayers as many as 430,352. the directorate general of taxes (djp) said that the intensity of using electronic objection submission applications or e-objection is still relatively low (liu et al., 2011). djp director of objections and appeals wansepta nirwanda said the use of the e-objection application is still relatively low since its release on august 1, 2020 (nasution, 2020; petrila et al., 2022; rey, 2021; valenzuela et al., 2023). according to him, taxpayers still rely on conventional channels in raising objections. "e-objection which began to be implemented on august 1, 2020, but has not been optimally utilized by taxpayers. it takes time to change people's mindset to want to take advantage of his new channel," he said, quoted on tuesday (23/11/2021) https://news.ddtc.co.id/djp-sebutwajib-pajak-belum-manfaatkan-e-objection-secara-optimal-34697. based on data obtained from the regional office of djp west java ii, the following is the number of objection letter submissions by e-objection and manual 2020-2021: table 3 number of e-objection and manual submissions for 2020-2021 at the west java regional office ii no. type 2020 2021 grand total djp online tpt kpp total djp online tpt kpp total 1. objection 109 1.111 1.220 115 962 1.077 2.297 2. article 36(1) a 3.359 3.359 3.300 3.300 6.659 3. article 36(1) b 113 113 102 102 215 4. article 36(1) c 478 478 386 386 864 5. article 36(1) d 19 19 19 https://www.ilomata.org/index.php/ijtc https://news.ddtc.co.id/djp-sebut-wajib-pajak-belum-manfaatkan-e-objection-secara-optimal-34697 https://news.ddtc.co.id/djp-sebut-wajib-pajak-belum-manfaatkan-e-objection-secara-optimal-34697 analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 299 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 6. grand total 109 5.080 5.189 115 4.750 4.865 10.054 source: west java regional office ii, 2022. in table 3, it can be seen data on the number of e-objection submissions in 2020 with the types of objections in djp online as many as 109 and tpt kpp as many as 1,111 with a total of 1,220 and a difference of 1,002. in 2021, the types of objections to djp online were as many as 115 and tpt kpp as many as 962 with a total of 1,077 and a difference of 847. the submission of objection letters by djp online in 2020 and 2021 has increased, namely by 6 and the submission of objection letters by kpp tpt in 2020 and 2021 has decreased by 149. previously, research was conducted by ratih kumala, agus subagyo, dwikora harjo, pebriana arimbhi, and mainita hidayati (2021) (kumala et al., 2021) regarding the effectiveness of eobjection at the south bekasi pratama tax service office. however, from the results of the study, there is an obstacle, namely that socialization has not been carried out for all taxpayers of the south bekasi primary tax service office (drucker et al., 2020; ravenda et al., 2020). therefore, the author will conduct a study with the research title "analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung pratama tax service office" with a systemization, namely analyzing the effectiveness of eobjection in making it easier for officers and taxpayers at the cibitung pratama tax service office. by the parameters of effectiveness measurement (putra, 1983; qadri & fatmawati, 2021; sa’adah, 2018). literature review a. effectiveness according to mahmudi (2010: 143): "effectiveness is the relationship between output and the goal or objectives to be achieved. it is said to be effective if the process of activities achieves the goals and objectives of the end of the policy". b. measurement of effectiveness after knowing the aspect of the dimension of effectiveness, then measuring the effectiveness of the policy requires measurement. (hamad, 2022; saragih, 2018) explained that the measurement of the effectiveness of a policy can be seen by, among others: • the success of the program is a measurement of effectiveness in the sense of achieving predetermined goals. • the success of goals/targets is a measurement of effectiveness in terms of achieving goals, where the success of an organization must consider not only organizational goals but also mechanisms for maintaining goals. in other words, the assessment of effectiveness must be related to the problem of goals and objectives. • satisfaction with the program is a measurement of effectiveness in terms of the satisfaction of its objects the program. • achievement of overall goals, the existence of goals achieved as a whole including programs and targets. https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 300 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. effectiveness criteria the e-objection effectiveness measurement formula is obtained by using the formula: 𝐸𝑓𝑒𝑐𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠 = 𝑆𝑢𝑏𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝑜𝑓 𝐿𝑒𝑡𝑡𝑒𝑟 𝑜𝑓 𝑂𝑏𝑗𝑒𝑐𝑡𝑖𝑜𝑛 (𝐸 − 𝑂𝑏𝑗𝑒𝑐𝑡𝑖𝑜𝑛) 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑢𝑏𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑓𝑜𝑟 𝑙𝑒𝑡𝑡𝑒𝑟 𝑐𝑜𝑛𝑐𝑒𝑟𝑛 𝑥 100% table 4 percentage of effectiveness criteria d. tax according to mardiasmo in (kashefi pour & lasfer, 2019; lazăr & istrate, 2018; mardiasmo, 2013; revesz, 2020): "taxes are dues paid by the people to the state that are included in the state treasury that implements the law and its implementation can be forced without repayment". e. taxpayer the definition of taxpayer according to diana sari (2016: 178) (gonzález canché, 2022; rahmi et al., 2022)is as follows: "taxpayers are parties based on the provisions of tax laws and regulations to carry out tax obligations." taxpayers are divided into 2 types, namely: 1. individual taxpayers individual taxpayers are tax subjects who have income from their own business or have non-free jobs such as employees or employees who only earn passive income whose income is above nontaxable income (ptkp), which is idr 54,000,000.00 and each taxpayer registers and has a taxpayer identification number (npwp). 2. corporate taxpayers according to the kup law of the republic of indonesia no.16 of 2009 article 1 paragraph 3 states that: "corporate taxpayers are a group of people and/or capital that is a unit both doing business and not doing business which includes limited liability companies, private companies, other companies, state-owned enterprises or regional-owned enterprises under any name and in any form, firms, congregations, cooperatives, pension funds, alliances, associations, mass organization foundations, socio-political or other organizations, institutions and other forms of entities including collective investment contracts and permanent establishments". no. range percentage information 1. > 100% highly effective 2. 90% 100% effective 3. 80% 90% enough effective 4. 60% 80% less effective 5. < 60% ineffective https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 301 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc f. tax objections tax objection is the way taken by a taxpayer if he is not / dissatisfied with a tax provision imposed on him or for withholding/collection by a third party. the legal basis for tax objections is article 25 and article 26 and many more legal bases for tax objections are listed in other laws. g. e-objection e-objection is an electronic submission of a letter of objection available on the djponline.pajak.go.id website. conceptual framework in this concept, the author processes a framework in the form of policy effectiveness has 4 (four) to measure policy effectiveness according to campbell in saragih (2017)(rex & campbell, 2022) as follows: 1. the success of the program, which is researched in this case from the effectiveness of the program that can be run with operational capabilities in implementing the program how the program is successful, with the effectiveness of the e-objection feature to improve employee performance at the cibitung primary tax service office and make it easier for taxpayers to submit objection letters online. 2. the success of the target/ target, which is studied in this case is the realization of an action, especially within the directorate general of taxation with one of them conducting an application, one of the implementations is the e-objection service feature which came into effect on august 1, 2020. 3. program satisfaction, which is studied in this case is towards the e-objection service feature program the results of the author's interview with several informants can be drawn conclusions the service product from the e-objection service feature is intended to provide services electronically to improve the effectiveness and efficiency of delivering objection letters online, this service feature produces a good service product and there are no obstacles related to the satisfaction of the e-objection service program only features e-objection services are still limited, only for filing tax decree objections and not many have used them. 4. the achievement of the overall goal, which is studied in this case is the achievement of the overall goal of this feature of the e-objection service, judging from the results of the author's interviews with several informants (officers and taxpayers). method this research uses a qualitative approach with data collection techniques (moleong & j., 2014)using in-depth observations and interviews with informants including staff of the kpp pratama cibitung secretariat, staff of the west java djp regional secretariat ii, academics and taxpayers of kpp pratama cibitung (suci, 2013). https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 302 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc until now, there has been no research that discusses the analysis of the effectiveness of eobjection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office. so it is hoped that the results of the author's research will be constructive input and can make it easier for taxpayers who want to submit a tax objection letter through e-objection. according to miles and huberman in(sugiyono, 2020) stated that "activities in qualitative data analysis are carried out continuously until complete so that the data is saturated". result and discussion table 5 informant data based on primary data (interviews) that the author has conducted to obtain and collect more accurate data and secondary data in the form of documentation related to the analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid19 pandemic (2020-2021) at the cibitung primary tax service office. according to mahmudi (2010: 143): "effectiveness is the relationship between output and the goal or objectives to be achieved. it is said to be effective if the process of activities achieves the goals and objectives of the end of the policy". therefore, the e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office is said to be effectively measured by the relationship between outputs and goals and objectives of the eobjection program. the following is data analysis of data that has been found as a result of research using data analysis according to campbell j.p in saragih (2017) that there are 4 elements of measuring effectiveness in analyzing the effectiveness of e-objection effectiveness analysis in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office as stated in the conceptual model that has been set: 1. analysis of taxpayers' understanding at the cibitung primary tax service office on eobjection. a. program success the thing behind the e-objection policy as a fulfilment of the rights of the tax system is that the djp wants to provide the best service for taxpayers so that taxpayers can submit their objection letters easily and more effectively. therefore, the directorate general of taxes issued e-objection as an alternative policy to the previous policy. the legal basis or regulation regarding e-objection is written in the regulation of the director general of taxes per-14 / pj / 2020 concerning no. name position information 1. rizkah student taxpayer 2. gabriella employee taxpayer 3. mrs ratih kumala academic parties taxpayer 4. mr alfin west java djp regional office secretariat ii tax officer of the regional office of djp west java ii https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 303 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc procedures for submitting objection letters electronically (e-filing) and article 9 of the minister of finance regulation number 9 / pmk.03 / 2013 concerning procedures for submitting and resolving objections as amended by minister of finance regulation number 202 / pmk.03 / 2015. the party involved in the formulation of the e-objection program is the directorate general of taxes based on the aim of aspiring taxpayers. the benefit of the e-objection system for taxpayers is that it makes it easier for taxpayers to submit tax objection letters, which saves more time and facilitates interaction distances so that they can still submit objection letters during the pandemic and in the future. regarding the e-objection program as an effort to fulfil tax rights for taxpayers, the government wants to provide an alternative electronically so that, taxpayers can submit objection letters anywhere without queuing and as an effort to tax officers is to make it easier for tax officers to respond to each objection letter. by electronic means, it can review the letter of objection filed. and according to informants, an effective way to introduce e-objection to the public, especially taxpayers, is during the current pandemic, efforts are being made in introducing e-objection by using electronic media in the form of online education that explaining e-objection and tutorials on submitting objection letters electronically. the institution that plays a role in the formulation of the e-objection program is the government (directorate general of taxes). the part responsible for introducing e-objection is the tax apparatus of the directorate general of taxes which procounsellingseling on tax knowledge and assigned tax officers. the efforts of tax officers at the cibitung primary tax service office as part of the institution that plays a role in the eobjection program to introduce e-objection to taxpayers are tax officers introducing e-objection through electronic media or social media. introducing an e-objection to the public, of course, has an sop, the thing that must be considered in introducing e-objection is of course paying attention to the current conditions but still making efforts to introduce e-objection. so that the party who can provide socialization is the tax officer in the service department who certainly understands. given that this policy is only in the release. the result of efforts to introduce e-objection to the public is that the public is already familiar with e-objection because the efforts of tax officers in introducing e-objection have been many, not only at kpp pratama cibitung but at other kpp pratama and djp as well. b. target/target success the objectives and targets to be achieved from the establishment of the e-objection program are to make it easier for taxpayers to process the submission of objection letters, anytime and anywhere; improve services to the community and also streamline the operations and administration of the directorate general of taxes (djp); providing the latest facilities for taxpayers to be able to submit objection letters online by utilizing internet technology; make it easier for tax officers to serve and process data collection of objection letter submissions. what makes the target in introducing e-objection is for specific targets there is no, but the target of this e-objection is to make the process of submitting and reviewing the submitted objection letters more effective and can be done anywhere and anytime. of course, after taxpayers already know this e-objection program, of course, it will be more effective, because the submission of https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 304 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc objection letters electronically, is not limited to the kpp work operation time and can also be submitted at any time. based on e-objection data obtained from the west java djp regional office ii, since the e-objection was released in unin021, quite a lot of taxpayers have used eobjection to submit objection letters. things that must be prepared by the public (taxpayers) who want to register an e-objection account are active efin, register an account on the djp online page and have a valid electronic certificate. while the steps to register yourself using e-objection are: a) login to djp online is like submitting an annual tax return (spt) report. b) go to the profile menu. c) check the permissions for e-objection. d) select the e-objection tab. e) fill in the tax determination letter number to which the objection will be raised. c. satisfaction with the program e-objection is more effective than manual ones because it is basically. e-objection is an alternative to the previous policy (manual submission of objection letters) so e-objection succeeds as an alternative way to submit objection letters. e-objection is more effective in accommodating objection letters, so it can assist the performance of the authorities in responding to the option letters. d. achievement of overall goals e-objection can be accepted by the public as an alternative to submitting a letter of objection so since per-14/pj/2020 came into force some taxpayers have taken advantage of the e-objection service. in introducing this e-objection to the public, there are no obstacles so far, because the eobjection recognition efforts only utilize social media so that it can be accessed anytime and anywhere. based on the explanation of other dimensions, it has been known that e-objection is an alternative to the previous program, namely manually, so it can be interpreted that e-objection is a policy adopted from a previously existing program. during the period of introduction of the program, this adoption does not have a specific time calculation, because the tax officer will always update the development of the introduction of e-objection during the community. the strategy used to monitor the success of the e-objection program, the officer who is engaged always monitors the development of the number of comparisons of e-objection use manually. https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 305 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. constraints on the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office. the obstacle encountered by the author in analyzing the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 306 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc primary tax service office is to interview taxpayers who have submitted a tax objection letter through e-objection cannot be implemented because taxpayers who have submitted a tax objection letter through e-objection are confidential. in addition, to obtain data on the number of e-objections, it turned out to be inaccessible at the tax service office, so the author was directed to look for data at the regional office of kpp pratama cibitung, namely the west java regional office ii. based on the e-objection data that the author got from the west java regional office ii, the amount of data for submitting tax objection letters manually is more than submitting a letter of objection by e-objection. this is due to the limited scope for introducing e-objection directly. so other alternatives are used such as using a digital system as a solution. 3. analyzing the effectiveness of e-objection during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office based on e-objection data since the release of e-objection on august 1, 2020, until the end of 2021, the number of e-objection submissions that the author received from the west java regional office ii has increased. in 2020 it was recorded at 109 and in 2021 it was recorded at 115. however, the data for submitting objection letters manually is also still more than for eobjection. in 2020 the number of data on manual submission of objection letters was recorded at 1,111 so a difference of 1,002 data was obtained. likewise, in 2021 the data for submitting objection letters manually was recorded at 962 so a difference of 847 data was obtained. however, based on this data, it can be seen that the effective percentage of e-objection in 2020 reached 8.93% and in 2021 it reached 9.75% so it can be said that so far the submission of objection letters by e-objection is not effective. conclusion based on the results of research, discussion, and achievements described in the previous chapters, as well as regarding theories and research results. so the author can conclude the analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid19 pandemic (2020-2021) at the cibitung primary tax service office. as follows: 1. of the 4 indicators of effectiveness measurement that the authors have seen, overall eobjection has succeeded in becoming an alternative program adopted from the previous system, namely manually. which, the thing behind the creation of e-objection as an alternative to increasing rights for taxpayers is the limited location and time of the tax office, previously by manual means taxpayers could file a letter of objection to having to come to the tax office at the time of work operation. so that with the release of the e-objection, taxpayers get convenience in submitting a letter of objection https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 307 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. the obstacle experienced related to the analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office is to interview taxpayers who have submitted a tax objection letter through e-objection cannot be implemented because taxpayers who have submitted a tax objection letter through e-objection are confidential. in addition, to obtain data on the number of e-objections, it turned out to be inaccessible at the tax service office, so the author was directed to look for data at the regional office of kpp pratama cibitung, namely the west java regional office ii. based on the e-objection data that the author got from the west java regional office ii, the amount of data for submitting tax objection letters manually is more than submitting a letter of objection by e-objection. this is due to the limited scope for introducing e-objection directly. 3. based on e-objection data since the release of e-objection on august 1, 2020, until the end of 2021, the number of e-objection submissions that the author received from the west java regional office ii has increased. in 2020 it was recorded at 109 and in 2021 it was recorded at 115. however, the data for submitting objection letters manually is also still more than for e-objection. in 2020 the number of data on manual submission of objection letters was recorded at 1,111 so a difference of 1,002 data was obtained. likewise, in 2021 the data for submitting objection letters manually was recorded at 962 so a difference of 847 data was obtained. however, based on this data, it can be seen that the effective percentage of eobjection in 2020 reached 8.93% and in 2021 it reached 9.75% so it can be said that so far the submission of objection letters by e-objection is not effective. recommendations for further development, the author provides constructive suggestions and inputs to improve the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office as follows: 1. increasing the effectiveness of e-objection as an alternative to submitting a letter of objection, the system of introducing e-objection to the public (taxpayers) is further improved, although for now it only utilizes digital media, the author suggests that on social media such as (instagram, youtube and others) can be posted about e-objection so that more taxpayers know e-objection. so that e-objection can be used as a fulfilment of the rights of taxpayers, as well as tax officers so that it can be made easier to accommodate the objection letter submitted. 2. to minimize the possibility of confusion from taxpayers in accessing e-objection, should be given a guide to submitting e-objection visually like a tutorial on youtube so that taxpayers can more easily access e-objection. https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic at the cibitung primary tax service office irawati, sitinjak, harjo, and fahriah 308 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference drucker, j., funderburg, r., merriman, d., & weber, r. 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(2022). covid-19’s impacts on the scope, effectiveness, and interaction characteristics of online learning: a social network analysis. plos one, 17(8 august). https://doi.org/10.1371/journal.pone.0273016 https://www.ilomata.org/index.php/ijtc introduction result and discussion table 5 informant data a) login to djp online is like submitting an annual tax return (spt) report. b) go to the profile menu. c) check the permissions for e-objection. d) select the e-objection tab. e) fill in the tax determination letter number to which the objection will be raised. c. satisfaction with the program e-objection is more effective than manual ones because it is basically. e-objection is an alternative to the previous policy (manual submission of objection letters) so e-objection succeeds as an alternative way to submit objection letters. e-objectio... d. achievement of overall goals e-objection can be accepted by the public as an alternative to submitting a letter of objection so since per-14/pj/2020 came into force some taxpayers have taken advantage of the e-objection service. in introducing this e-objection to the public, there are no obstacles so far, because the e-objection recognition efforts only utilize social media so that it can be accessed anytime and anywhere. based on the explanation of other dimensions, it has been known that e-objection is an alternative to the previous program, namely manually, so it can be interpreted that e-objection is a policy adopted from a previously existing program. during the p... 2. constraints on the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office. primary tax service office is to interview taxpayers who have submitted a tax objection letter through e-objection cannot be implemented because taxpayers who have submitted a tax objection letter through e-objection are confidential. in addition, to ... based on the e-objection data that the author got from the west java regional office ii, the amount of data for submitting tax objection letters manually is more than submitting a letter of objection by e-objection. this is due to the limited scope fo... 3. analyzing the effectiveness of e-objection during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office based on e-objection data since the release of e-objection on august 1, 2020, until the end of 2021, the number of e-objection submissions that the author received from the west java regional office ii has increased. in 2020 it was recorded at 109 and... conclusion based on the results of research, discussion, and achievements described in the previous chapters, as well as regarding theories and research results. so the author can conclude the analysis of the effectiveness of e-objection in making it easier for ... 1. of the 4 indicators of effectiveness measurement that the authors have seen, overall e-objection has succeeded in becoming an alternative program adopted from the previous system, namely manually. which, the thing behind the creation of e-objection... so that with the release of the e-objection, taxpayers get convenience in submitting a letter of objection 2. the obstacle experienced related to the analysis of the effectiveness of e-objection in making it easier for officers and taxpayers during the covid-19 pandemic (2020-2021) at the cibitung primary tax service office is to interview taxpayers who ha... based on the e-objection data that the author got from the west java regional office ii, the amount of data for submitting tax objection letters manually is more than submitting a letter of objection by e-objection. this is due to the limited scope fo... 3. based on e-objection data since the release of e-objection on august 1, 2020, until the end of 2021, the number of e-objection submissions that the author received from the west java regional office ii has increased. in 2020 it was recorded at 109 ... reference the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 208-220 208 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua bagas johantri1, rachma aprilia2, sopian3 123politeknik keuangan negara stan, indonesia correspondent: bagasjohantri@pknstan.ac.id received : january 21, 2023 accepted : april 6, 2023 published : april 30, 2023 citation: johantri, b., aprilia, r. sopian. (2023). market concentration in construction tenders in west papua. ilomata international journal of tax and accounting, 4(2),194-207. https://doi.org/10.52728/ijtc.v4i2.708 abstract: this study aims to determine the level of market concentration in construction work tenders in west papua and to investigate the correlation between the market concentration index and the average participation in tenders, the number of work packages, and average tender savings. west papua has privileges in procurement and has special autonomy funds for development. the study uses tender data from 2018-2022 and employs the herfindahl-hirschman index (hhi) and concentration ratio 4 (cr4) to calculate market concentration. the results indicate that, based on hhi, the market concentration in the building construction and civil engineering subsectors is generally low, except for civil engineering in 2022. however, based on cr4, the market concentration in the building construction subsector is moderate, and in the civil engineering subsector, it is low, except for 2018. moreover, there is a negative correlation between the number of packages and average participants, as well as between the number of packages and cr4 values. the findings of this study can be useful for construction providers to understand the competition in tenders and assist the government in developing competitive procurement strategies. future research can investigate the economic benefits of local west papua businesses when market concentration is low. keywords: concentration ratio, government procurement, herfindahl-hirschman index, tender. this is an open access article under the cc-by 4.0 license. introduction government procurement of goods and services (pbj) is a potential market for businesses in indonesia. according to the (lkpp, 2022), at least 1,052 t rupiahs of the national budget is spent on pbj. given this sizeable proportion, pbj is regulated by presidential regulations and other derivative regulations, which are continuously adjusted to meet the government's needs and circumstances. however, for a market, rigid regulations can be a barrier to entry. the presidential regulation on pbj is mandatory for government agencies, including local governments such as the west papua province. the indonesian government provides special autonomy funds (dana otonomi khusus) to west papua and other provinces with similar special https://www.ilomata.org/index.php/ijtc mailto:bagasjohantri@pknstan.ac.id https://doi.org/10.52728/ijtc.v4i2.708 market concentration in construction tenders in west papua johantri, aprilia, and sopian. 209 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc autonomy status. the government allocated idr 12.8 trillion as the special autonomy fund for papua and west papua provinces (ardimansyah, 2022), which can be utilized to accelerate the economic development and welfare of the people in the autonomous region. one of the ways this is achieved is through pbj. regarding pbj, the indonesian government has introduced presidential regulation 17 of 2019 as a measure to expedite economic growth in papua and west papua. this regulation is aimed at regulating the procurement of goods and services in the two provinces. among the provisions of the regulation is a concession granted to local papuan entrepreneurs, allowing them to participate in the pbj without compromising the quality of their work. this move is expected to promote the involvement of papuan businesses in government procurement activities, and consequently stimulate the economic development of the region (mansawan, 2021). the purpose of the special autonomy fund and the specialization of pbj regulations in west papua may face obstacles. the results of the integrity assessment in a survey conducted by the corruption eradication commission show that the integrity index in west papua is below the national average (wibowo et al., 2021). moreover, in developing nations, (williams-elegbe, 2018) discovered that deviation in government procurement is primarily driven by weak regulations and law enforcement, insufficient accountability to the public, and limited public participation in reporting fraudulent activities to internal control mechanisms or law enforcement agencies. referring to the presidential regulation, the purpose of pbj is to increase the role of business actors and ensure value for money for the goods and services obtained (presiden republik indonesia, 2021). many barriers to doing business can weaken the competition (diaby & sylwester, 2015). to improve the role of businesses, the government's policy is to make it easier for them to participate in pbj as procurement service providers, which is also expected to create employment opportunities and stimulate economic growth. with more businesses providing services, these objectives become more achievable. value for money in pbj can be assessed from the cost perspective. pbj is expected to provide the best goods and services at the lowest possible cost without sacrificing quality or timeliness. in terms of cost, procurement service providers are expected to provide competitive bids, which ultimately result in savings for the national budget. thus, competition is essential to create the fair price (mcafee & mcmillan, 1987). in another study, competition reduced collusion (ryvkin & serra, 2020). one of the procurement methods that allows open competition is tender. tender in government procurement is the selection of providers through an open announcement with the determination of the winner based on the bids submitted by participants (lkpp, 2021). auction is an economic game that contains format and information (watson, 2013). in this case, the format determines the rules on how to announce, submit bids, and determine the winner. each participant will conduct an assessment of the qualifications they have, the value of the work, potential competitors, and the risks involved in the work before submitting a bid (ballesteros-pérez et al., 2016; hanák et al., 2021; kocher et al., 2015; mcafee & mcmillan, 1987). when evaluating bids, the participant with the lowest price and the technical qualifications is selected as the winner so the bid price becomes important. https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 210 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in a cost accounting perspective, prices can be determined by adding the costs and the desired rate of return (carter, 2006). each participant has information that influences their assessment of the auction object. the value of the object surely differs among participants. according to (vickrey, 1961) the optimal bid a provider can offer is the value they expect to receive from the project in the tender. (podwol & schneider, 2016) shows that there is nonstandard bidder behavior in auctions. in tender markets, providers who have a competitive advantage, whether it be in technical qualification or pricing, may come to dominate the market by consistently winning project bids. this is not a problem for the government as long as the advantage is gained through legitimate means such as efficiency and capacity. however, if the advantage is due to collusion with procurement actors, then it becomes a major issue that needs to be addressed to prevent unfair competition. procurement of goods and services in indonesia has been previously studied. from a governance perspective, the use of information technology through e-procurement is believed to have reduced the potential for collusion in pbj implementation ((huda et al., 2017)(salman & survanto, 2019); (nani & ali, 2020); (wicaksono et al., 2017)). the use of it can reduce face-to-face meetings between tender organizers and bidders, thereby reducing the risk of collusion between bidders and organizers. in addition to governance aspects,(johantri et al., 2022) examines the relationship between contract prices in public procurement tenders and several other variables. (johantri et al., 2022), which uses tender data from the ministry of finance, is corroborated by the findings of (raharjo & gultom, 2022), who uses data from all local governments. both studies show that the more tender participants, the greater the government's cost savings. the number of participants can indicate that competition will affect prices. in an economy, companies that have the ability to establish prices above marginal cost hold an advantage over those that cannot. the presence of market power and its evaluation through market concentration as a measure of market power is a significant issue (pavic et al., 2016). previous research has been conducted on market concentration in public procurement. (svoboda, 2016) examined market concentration in public procurement using the herindahl-hirschman index (hhi) and concentration ratio of the top four companies (cr4). (peleckis, 2022) studied the construction market, while (berkovich et al., 2021) focused on the internet market, both using hhi to measure market concentration. the studies on market concentration of construction industry have been carriedout ((kawai & nakabayashi, 2022); (škuflić et al., 2018); (dinarjito, 2022); (wang & li, 2021)). however, market concentration in government procurement for construction tenders is still difficult to find. the aim of this study is to determine the level of market concentration in government procurement tenders in the construction sector in west papua, and to investigate the correlation between market concentration and the average number of tender participants, number of tender packages, and average percentage of tender savings. the study found that there were differences in market structures in the construction subsector when using different measures. the findings of this study could be valuable for practitioners and policy-makers seeking to enhance the effectiveness and efficiency of tendering practices, particularly in the context of west papua. https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 211 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this study employs construction tender data from the period of 2018 to september 2022, obtained from the government tender announcement website of west papua province, available at https://tender.papuabaratprov.go.id/eproc4/lelang. the sample data were purposively selected based on data completeness, resulting in a sample size of 796 construction job packages. the tender population, and research samples are as shown in table 1 below: table 1. population and sampel discriptions package registered tenders 1.679 the tender failed, and the data is incomplete 164 non-construction tenders 719 sample 796 once the data has been obtained, the next steps in the research process involve descriptive analysis, determination of market concentration, and correlation analysis. this study employs the herfindahl-hirschman index (hhi) and concentration ratio 4 (cr4) to measure market concentration. hhi is considered more precise as it includes all business players in the calculation of market concentration, while cr4 only describes the strength of the top 4 providers (pavic et al., 2016). however, the study uses cr4 to determine the level of concentration in the four dominant providers. hhi is calculated based on formula (pavic et al., 2016): 𝐻𝐻𝐼 = ∑(𝑀𝑆𝑖) 2 𝑁 𝑖=1 the msi represents the total contract value of packages won by a provider, with n being the number of providers. a hhi value below 100 indicates high competition, a value below 1,500 indicates an unconcentrated market, a value between 1,500 and 2,500 indicates moderate concentration, and a value above 2,500 indicates high concentration. the cr4 calculation is performed using the formula (pavic et al., 2016): 𝐶𝑅4 = 𝐶1 + 𝐶2 + 𝐶3 + 𝐶4 cr4 represents the sum of the market share of the top four largest companies. low concentration occurs when the cr4 value is up to 40%. values between 40%-70% indicate moderate concentration, while values between 70%-100% indicate the presence of oligopoly to monopoly in the procurement of goods and services. market concentration calculations are carried out for each fiscal year with reference to ramadhani & setiawan (2019), who stated that fiscal year has an influence on government budget absorption. calculation was also conducted based on the construction subsector given that each subsector has https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 212 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc different job characteristics and requires different provider requirements (lkpp, 2021). this study categorizes construction into building construction subsector (building), civil engineering subsector (civil), and other subsectors (other). the next step is to calculate the correlation between market concentration and the average number of participants, the number of packages, and the percentage of savings. this study employed spearman's rho analysis as the data was not normally distributed. in addition, due to data limitations, correlation analysis was not conducted for the other subsectors. result and discussion during 2018-2022, the majority of tenders for construction in west papua are civil engineerings. there is a significant difference in the quantity of the number of tender packages between the subsectors. there are 631 tenders were civil, 154 tenders were building, and 11 were other. table 2 describes construction tenders by fiscal year. table 2. tender per years sub-sector 2018 2019 2020 2021 2022 total building number of package 51 40 25 24 14 154 number of participant 1.396 1.130 725 945 579 4775 max participant 67 85 65 65 113 113 min of participant 7 6 7 14 12 6 average participant per package 27,37 28,25 29 39,38 41,36 31,00 civil number of package 125 108 149 146 103 631 number of participant 3.148 1.928 3.202 3.791 1.645 13.714 max participant 79 85 81 86 48 86 min of participant 4 3 5 6 3 3 average participant per package 25,18 17,85 21,49 25,97 15,97 21,73 other number of package 8 3 11 number of participant 150 27 177 max participant 24 18 24 min of participant 11 4 4 average participant per package 18,75 9 16,09 overall total packages 184 151 174 170 117 796 total participant 4.694 3.085 3.927 4.736 2.224 18.666 max partisipan 79 85 81 86 113 113 min partisipan 4 3 5 6 3 3 average participant per package 25,51 20,43 22,57 27,86 19,01 23,45 https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 213 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table 2, the number of participants in civil engineering tenders is greater than the number of participants in building tenders. however, the average number of participants per civil tender is smaller than the average number of participants per building tender. the competition to win a building construction contract is tighter compared to civil engineering contracts, and this condition occurs throughout the observation period (2018-2022). on average, each building construction project is followed by 31 participants, while each civil engineering package is followed by 22 participants. the competition to win tenders is looser for other subsector as the average number of participants is only 16 per project. this data needs to be carefully considered by providers who want to participate in procurement in west papua. referring to the study by (raharjo & gultom, 2022), the average number of participants in tenders in west papua is higher than the average number of bidders in tenders in java and bali for 2020-2021. however, according to (johantri et al., 2022), the average number of bidders in west papua is lower than the average number of bidders in the ministry of finance for 2019-2021. from the perspective of the value for money objective, table 3 shows the average percentage of budget savings from the tender process. tender savings are calculated as the difference between the self-estimate price (harga perkiraan sendiri or hps) and the contract value. the savings percentage represents the percentage of this difference from the hps value. tabel 3. average percentage of tender saving subsector 2018 2019 2020 2021 2022 min max average building 6,99% 3,80% 5,36% 6,49% 3,95% 3,80% 6,99% 5,54% other 2,98% 1,39% 1,39% 2,98% 2,55% civil 4,51% 3,37% 3,50% 3,70% 3,79% 3,37% 4,51% 3,77% average 5,13% 3,45% 3,77% 4,10% 3,81% 4,10% the average value from table 3 over the course of 5 years was only 4.1%, with the highest average in 2018 and the lowest in 2019. when observed by sub-sector, the highest savings were achieved in 2018 for building, while the lowest savings were achieved in 2019 for other. the percentage of savings from construction tendering can be considered relatively low compared to the ministry of finance, which shows that the difference between contract values and tender ceiling prices ranges between 8% to 10% (johantri & aprilia, 2021). the data indicates that construction job tenders in west papua utilize budget more optimally. optimizing budget utilization is directly related to the goal of economic equality in government expenditure. however, the value for money of the work outcomes still needs to be further investigated. this study uses the lkpp regulations to divide the construction subsector. although (rajala et al., 2022) concludes that there is a difference between profits from renovation works and those from new building construction, research data does not allow for an accurate division. the concentration index of each sub-sector is as table 4. https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 214 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4 shows the results of hhi and cr4 based on sub-sector. tabel 4. hhi and cr4 per sub-sector hhi cr4 building civil other building civil other 2018 633,86 289,51 1.426,18 39,01 23,79 66,95 2019 1.381,17 229,21 7.527,63 51,20 18,76 100,00 2020 1.462,36 215,55 54,74 17,30 2021 815,31 202,98 46,39 18,13 2022 1.673,11 276,51 70,39 24,33 referring to (pavic et al., 2016), based on the calculations in table 4, the hhi of the sub-sector for building construction indicates low market concentration, except for 2022 where it shows moderate concentration. the result is in line with (dinarjito, 2022). however, if market concentration is measured using cr4, there is moderate concentration in 2019-2022. this may be due to the presence of one or two large companies that have a significant market share, thus affecting the overall market concentration. in this case, although the hhi indicates low market concentration, the cr4 indicates moderate concentration because the market share of the top four companies is still quite significant. therefore, the results of the hhi and cr4 measurements can provide different information about market concentration in an industry. the high market concentration can be interpreted as a situation where a few providers are capable of winning many contracts. to win tenders, providers usually need to offer lower prices in addition to meeting all technical requirements. in this context, competitive advantages can differentiate one provider from another. since 2020, the ministry of public works has issued regulations on what can be required in tenders. essentially, these regulations align with the spirit of the presidential regulation on procurement of goods and services, in which technical requirements are simplified to facilitate providers in participating in tenders. these regulations reduce entry barriers for providers who previously found it difficult to enter the pbj tender market. however, given the high concentration that occurred in 2022, further research could delve deeper into how concentration can be moderated despite the decreasing barriers to entry for providers. in table 2, the number of contracts awarded for each sub-sector of work varies by year. when the market share being contested is low, concentration may occur because winning a few contracts is enough to dominate the market. on the other hand, a larger number of participants will result in greater competition, and concentration may decrease when the number of participants increases. a larger number of participants, budget savings will be greater (johantri et al., 2022; raharjo & gultom, 2022). to show the correlation between these factors, the correlation matrix is as follows: https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 215 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. correlation of hhi in building construction subsector hhi building cr4 building participan t building package building saving buildin g spearma n's rho hhi building correlation coefficient 1,000 1,000** ,700 -,700 -,700 sig. (2-tailed) . . ,188 ,188 ,188 n 5 5 5 5 5 cr4 building correlation coefficient 1,000** 1,000 ,700 -,700 -,700 sig. (2-tailed) . . ,188 ,188 ,188 n 5 5 5 5 5 participa nt building correlation coefficient ,700 ,700 1,000 -1,000** -,300 sig. (2-tailed) ,188 ,188 . . ,624 n 5 5 5 5 5 package building correlation coefficient -,700 -,700 -1,000** 1,000 ,300 sig. (2-tailed) ,188 ,188 . . ,624 n 5 5 5 5 5 saving building correlation coefficient -,700 -,700 -,300 ,300 1,000 sig. (2-tailed) ,188 ,188 ,624 ,624 . n 5 5 5 5 5 **. correlation is significant at the 0.01 level (2-tailed). based on spearman's rho correlation calculation in the building construction subsector, the hhi is not significantly correlated with the number of tender packages, average tender participants, or average savings percentage. thus, even though the studies by (raharjo & gultom, 2022) as well as (johantri et al., 2022) show that the number of bidders has a negative effect on contract prices, the decrease in value is not significantly correlated with market concentration. there are several possible reasons why the decrease in value due to the presence of more bidders may not be significantly correlated with market concentration. while market concentration is an important factor in determining pricing power, it is not the only factor that affects the competitiveness of the bidding process. other factors such as the level of competition, the quality of the bids, and the level of demand for the project may also have a greater impact on the final contract price. secondly, even if there are a few dominant firms in the market, if they do not have a significant market share, they may not be able to exert enough pricing power to affect the contract price. in such cases, the number of bidders may have a more significant impact on pricing than market concentration. the other possibility is the data used in this study is relatively limited, therefore future research is recommended to use more data to better explain the correlations. https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 216 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table 5, there is a significant correlation between the number of tender packages and the average number of participants, with a negative correlation coefficient of 0.9. the finding indicates that as the number of tender packages increases, the average number of participants decreases, and this relationship is statistically significant. the negative correlation coefficient of 0.9 suggests a strong negative relationship between these two variables. this means that there is a tendency for fewer bidders to participate in tenders when the number of tender packages is high. this finding could be used by policymakers and practitioners to develop strategies to increase the number of participants in tender processes, which may lead to increased competition and better value for money in public procurement. table 6. correlation of hhi in civil engineering subsector hhi civil cr4 civil participan t civil packag e civil saving civil spearma n's rho hhi civil correlation coefficient 1,000 ,800 -,400 -,600 ,600 sig. (2-tailed) . ,104 ,505 ,285 ,285 n 5 5 5 5 5 cr4 civil correlation coefficient ,800 1,000 -,500 -,900* ,600 sig. (2-tailed) ,104 . ,391 ,037 ,285 n 5 5 5 5 5 participa nt civil correlation coefficient -,400 -,500 1,000 ,700 ,200 sig. (2-tailed) ,505 ,391 . ,188 ,747 n 5 5 5 5 5 package civil correlation coefficient -,600 -,900* ,700 1,000 -,200 sig. (2-tailed) ,285 ,037 ,188 . ,747 n 5 5 5 5 5 saving civil correlation coefficient ,600 ,600 ,200 -,200 1,000 sig. (2-tailed) ,285 ,285 ,747 ,747 . n 5 5 5 5 5 *. correlation is significant at the 0.05 level (2-tailed). based on the correlation matrix in table 6 for the civil engineering subsector, the results differ from those of the building construction subsector. although both cr4 and hhi describe market concentration, cr4 is significantly correlated with the average number of participants, with a negative correlation coefficient of 0.9. a negative correlation coefficient indicates an inverse relationship between the two variables being studied. in this case, the significant negative correlation between cr4 and the average number of participants in the civil engineering subsector suggests that as the concentration of the market increases (as indicated by the cr4), the number https://www.ilomata.org/index.php/ijtc market concentration in construction tenders in west papua johantri, aprilia, and sopian. 217 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of participants in tender packages decreases. this finding may suggest that a more concentrated market in the civil engineering subsector is associated with fewer participants in tender packages. this result is in line with (svoboda, 2016). the reason why cr4 is significantly correlated with the average number of participants in the civil engineering subsector may be due to the characteristics of the industry. additionally, a more concentrated market may result in barriers to entry for smaller companies, which can limit competition and decrease the number of participants in tender packages. further research is needed to explore the underlying factors that contribute to this relationship between market concentration and the number of tender package participants in the civil engineering subsector. conclusion market concentration refers to the extent to which market share is concentrated. in the context of the objectives of government procurement, the division of a larger market share among many business actors brings the objectives of economic equality and increasing the role of business actors closer to achievement. although procurement in west papua still has risks, based on hhi, market concentration for the building construction and civil engineering sub-sectors is relatively low except for the building construction sub-sector in 2022. based on the cr4 value, the market concentration for the building construction subsector is moderate while the market concentration for the civil engineering subsector is low. in the subsector of building construction, there is a significant and strong negative correlation between the number of tender packages and the average number of participants. meanwhile, in the civil engineering subsector, there is a significant and strong correlation between the cr4 value and the number of tender packages, with a negative correlation direction. this suggests that the market concentration of the four dominant players decreases as the number of tender packages in the civil engineering subsector increases. the current study employs the names of business entities in calculating market concentration. future research can utilize the names of business owners to gain a deeper understanding of market concentration in west papua. other approaches may also be used in future studies to determine whether indigenous west papua business players benefit economically in government procurement when market concentration is low. reference ardimansyah. 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(2018). systemic corruption and public procurement in developing countries: are there any solutions? journal of public procurement, 18(2), 131–147. https://doi.org/10.1108/jopp-06-2018-009 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 226-235 226 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara totok priyono1, fika wulandari2, eka rofiyanti3, dwi agustina4 1234institut ilmu sosial dan manajemen stiami, indonesia correspondent: rofiyanti.ekasumarn0@gmail.com3 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: priyono, t., wulandari, f., rofiyanti, e., agustina, d. (2022). analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara. ilomata international journal of tax and accounting, 3(2), 226-235. https://doi.org/10.52728/ijtc.v3i2.475 abstract: taxes are the largest source of state revenue to meet routine state expenditures or finance national development. in the increasingly rapid development of information technology, various innovations have been created to facilitate human life. one of them is in the service sector. to improve the quality of tax services, the government created an online tax payment service system called electronic samsat or e-samsat. e-samsat is considered a solution for tax payment services, especially motor vehicle taxes, during the covid-19 pandemic because it is faster and there is no need to queue, such as direct tax payment services at the samsat office. however, unfortunately, many taxpayers have not taken advantage of these services. this is due to the administrative system, which is considered complicated, and people's digital literacy is still low. the method used in this research is descriptive qualitative to describe this research in-depth. the results of this study are public participation in the payment of motor vehicle taxes through e-samsat services during the covid pandemic at the north jakarta samsat office, judging from the six participation criteria presented by mangkunegara, that has gone quite well. the community as taxpayers has participated in implementing the esamsat service system. however, unfortunately, not all people can access these services. the service procedure is quite long, and the people's digital literacy level is still low, causing the community not to be able to take full advantage of the service system. keywords: participation, tax payment, service, esamsat. this is an open access article under the cc-by 4.0 license. introduction indonesia is a country that has developed various technologies and information. however, the government requires a relatively large source of revenue or income to finance state expenditures, both routine expenditures for the state and routine expenditures for development at the center or in the regions (beny & loviana dewi, 2021; menichini, 2020; octaviany et al., 2021; pohan, 2017, 2019, 2021). following article 23 a of the 1945 constitution of the republic of indonesia, mailto:rofiyanti.ekasumarn0@gmail.com https://doi.org/10.52728/ijtc.v3i2.475 analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara priyono, wulandari, rofiyanti, and agustina 227 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc it is stated that taxes and other levies that are coercive for the needs of the state are regulated by law (kumala & junaidi, 2020; selvi & ramdhan, 2020; supriatiningsih & jamil, 2021; wulandari, 2021). tax collection is carried out throughout the territory of indonesia, which consists of two institutions, namely the central tax and regional taxes, which the central government and regional governments carry out (darwin, 2010; karo et al., 2019; muhaimin et al., 2019). taxes are the largest source of state revenue to meet routine state expenditures or finance national development (egbunike et al., 2018; li et al., 2021; majoral et al., 2021; nguyen & darsono, 2022; sekiraqa et al., 2021; tibulca, 2021). based on data from the dki jakarta regional revenue agency, from 2016-to 2020, the number of realized motor vehicle tax receipts in dki jakarta fluctuated every year; in the previous four years, the realization of revenue had reached the target. in the last year, during the covid-19 pandemic, the number of realizations has been reached. very far from the target of rp. 7,879,223,484,468 with the percentage only reaching 82.94%. from this, it can be seen that during the covid-19 pandemic, more and more people are less concerned about paying their motorized vehicle tax. the development of information and communication technology (ict) has brought a significant transformation in how business organizations deliver their products or services and build relationships with their customers (cascio & montealegre, 2016; faraj et al., 2021; kulathunga et al., 2020; means & neisler, 2020; mergel et al., 2019; șerban et al., 2020). not wanting the highest from the private sector, the government began to use ict as a public sector organization to strengthen relations with citizens, the business world, and fellow government agencies using ict by the government, which became known as electronic government or egovernment. this change in management changes the government's behavior; this managerial reform is needed as the first step toward behavioral reform. one of them is implementing electronic government. one of the local governments has implemented the national online samsat and has successfully implemented it in the jakarta city government, namely the one roof manunggal administration system (samsat). the north jakarta samsat office does not only use the national online samsat to serve the community as for others such as esamsat, samsat drive-thru, and mobile samsat. advances in information technology provide the most significant benefit to society's problems. of course, in a globalized world, egovernment helps the government provide information to citizens with the help of information technology so that the government does not have to bother with providing information to its citizens. for example, the government's samsat is in the manufacture and management of letters in the form of extending stnk, making bpkb. people paying taxes usually have long queues and complain about the services, facilities, and infrastructure at the north jakarta samsat office. many taxpayers make samsat services take a long time and are not optimal, especially during the covid-19 pandemic, which can cause the spread of the covid virus. so we need innovation to improve services from samsat to the taxpayer community. the development of information technology has provided a bright spot for solving these problems. management information system (sim) based on online web services (e-samsat) or the national online samsat is one solution. so far, face-to-face public services are only 8 hours a day from monday to friday. with e-government, public service offices are open 24 hours a day, seven days a week without waiting for government offices to open and can reduce the spread of the coronavirus that is endemic in the world. now there is no analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara priyono, wulandari, rofiyanti, and agustina 228 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc longer any excuse for not paying taxes (hartanti et al., 2020; herawati & hidayat, 2022; megayani & noviari, 2021; susanti & ery setiawan, 2019; utina & gobel, 2020). however, it has been facilitated by implementing e-government in public services; there are times when people are still reluctant to make payments. the success of government policies is strongly influenced by the participation of various sectors and the active participation of taxpayers. based on data from the dki jakarta regional revenue agency, the presence of the e-samsat system, starting from 2017 until now, annually for motor vehicle tax payments has increased with a total number of 86,812 motorized vehicle units, accumulating the amount of motor vehicle tax payments of rp. 142,795,444,400 until 2020. however, with the number of active motorized vehicles already paying taxes of 15,309,938 units, only 0.56% using the esamsat system is very far from expected. if the number of motorized vehicles that are passive and have not fulfilled their obligations by paying using the e-samsat system, as many as 21,381,597 units can reach 58.27% of the number of existing vehicles. so that the total payment of 8 can reach the specified target and cover the current shortfall in realization. at the same time, taxpayers can make payments through the e-samsat system, making it easier to pay motor vehicle taxes and no longer wait in line for hours. method this research is descriptive research with a qualitative approach, further elaborated with secondary data from the play store, social media, or other news media. data collection techniques were carried out through interviews, observation, and documentation, in line with the expression of (silalahi, 2017), which states that data collection techniques can be carried out through searching secondary data obtained from books, articles, news, comments, government publications (websites), and journals (bungin, 2017; creswell, 2017; hamilton & finley, 2019, 2020; moleong, 2018; silalahi, 2017; sugiyono, 2019). result and discussion to analyze the level of public participation in motor vehicle tax payments through e-samsat services during the covid pandemic at the north jakarta samsat office, the author uses the theory (mangkunegara, 2017), where public participation includes several elements, including: a. coverage. coverage includes all groups of people who are in one area. the development of information technology impacts various fields, one of which is public services (benkraiem et al., 2022; kasper et al., 2015; kuroki, 2022; yang et al., 2022). improving public services in various regions spurs the spirit of innovation to make it easier for the community. this effort is carried out by cutting procedures and service flows to integrate services into online systems. the samsat electronic service is an online motor vehicle tax payment service issued by the indonesian national police. the purpose of the creation of e-samsat is to provide convenience and ease for all taxpayers in carrying out the fulfillment of motor vehicle tax obligations in their jurisdiction. convenience are demands on every service delivery, including the services provided in the payment of motor vehicle taxes (garcía-fernández et al., 2018; roy et al., 2018; van de pol et al., 2021). usually, taxpayers pay motor vehicle taxes directly at the samsat office. the disadvantage of paying taxes directly at the samsat office is that you have to queue for a long time, while the e-samsat service can be done quickly, and there is no need to queue. the eanalysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara priyono, wulandari, rofiyanti, and agustina 229 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc samsat service system, namely an electronic-based payment channel menu, can provide more effective convenience for taxpayers in paying the annual motor vehicle tax without having to queue for too long and live far from home, only paying via atm. closest to the bank that has collaborated at the samsat office. so that it saves transportation costs to come to the samsat location and time, the main goal of e-samsat is to reduce crowds or the number of taxpayers at the north jakarta samsat office with a faster process. for the implementation of e-samsat in 2020, around ± 74,696 e-samsat users. every year, e-samsat increases and makes it easier for users to get tax information on taxes to be paid because on the official website, the terms, how to use it, services, benefits, and laws can be seen in detail and clarity on the website. however, some people state that the presence and implementation of esamsat is not adequate because there are still many people who pay motor vehicle taxes directly to the samsat office, and are not a means of providing tax information to the public because there are still some people who do not understand how to pay via atm. or do not know about the e samsat b. cooperation. cooperation requires the cooperation of various parties from all members of the community. participation is not only one of the goals of social development but is an integral part of the process of social development (fujiwara et al., 2019; marra et al., 2018; vlasova, 2021). the demands for community participation are increasingly running along with awareness of the rights and obligations of citizens. the importance of participation at its core lies in its function. the first function is to educate the public about various public issues. in this function, public participation will not threaten political stability and should run at all levels of government. the function of participation is to display the balance of power between the community and the government so that the interests and knowledge of the community can be absorbed in the government agenda. participation in the payment of motor vehicle taxes through the e-samsat service system can be seen in the involvement of various parties. the e-samsat service system can bridge communication between the government and the community, such as the two-door interaction between the community and the samsat office staff. allows the public to submit complaints, information, and or responses online because the meeting of taxpayers and e-samsat officers is only at the time of taking tbpkp/stnk by showing proof of payment via atm. implementing the e-samsat service system must also be socialized, considering that the service system is a new thing for taxpayers. in the implementation of socialization, e-samsat service providers use various media. socialization has been adequate, especially in this pandemic season; social media are perfect for providing socialization to the public. for example, the media used are social media, banners, press conferences, newspapers, and flayers carried out by public relations. cooperation will be established when each actor in implementing the e-samsat service system knows and understands their respective roles. c. empowerment the involvement of various parties cannot be separated from all the strengths and weaknesses of each party (lefstein & perath, 2014; markantoni et al., 2018; shnabel et al., 2016). through active involvement in each activity process, there is a process of mutual learning and mutual empowerment of each other. the concept of empowerment is interpreted as an effort to build power by encouraging, motivating, and raising awareness of the potential of the community and efforts to develop it. the e-samsat service system is a service provided by the government by utilizing the development of information technology. the e-samsat service system allows for reciprocal relationships that provide more benefits for both parties, providing more citizencentric services and responsive government, increasing public trust. the contribution made to analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara priyono, wulandari, rofiyanti, and agustina 230 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the e-samsat system has been outstanding because the enthusiasm of taxpayers increases every year, especially during this pandemic. e-samsat is participating in the framework of breaking the chain of the covid-19 virus outbreak. e-samsat is one of the taxpayer's processes to extend the vehicle to 134 shorter, only by paying through about five banks that have collaborated with the samsat office. when you have paid via atm, the tbpkp/stnk can be taken to the samsat office without queueing longer and longer. so that e-samsat is one solution to avoid crowds and the accumulation of the number of taxpayers at the samsat office. from some people, e-samsat has not been fully effective and has not seen a massive contribution from this system, so public enthusiasm is not high and still not optimal. several factors affect this system; first, there is still a lack of knowledge about e-samsat. second, many taxpayers are still afraid to leave the house during this pandemic. at the same time, the public still has to come to the samsat office to verify and collect tbpkp/stnk by showing proof of payment transfer via atm after the samsat office has visitor restrictions. furthermore, if there are complaints or problems accessing the esamsat service system, the handling of problems is still minimal. taxpayers during the pandemic can only communicate through the related samsat call center or email. if the e-samsat system is made a much easier application that can be accessed anytime and anywhere, then after the payment is completed, there is no need to come to the samsat office; tbpkp/stnk can be sent directly to the taxpayer's domicile address will be much more effective and efficient. finally, many use the e-samsat system, and the website's appearance does not confuse taxpayers in seeing the procedures for the e-samsat system. obstacles to implementing the e-samsat service system can only be accessed by taxpayers who have a high level of knowledge of the development of information technology, given the administrative procedures that tend to be lengthy. d. equality and partnership. everyone has the skills, abilities, and initiatives and has the right to use these initiatives to be involved in every process to build dialogue without considering each party's level and structure. implementing the e-samsat service system involves various parties, including the republic of indonesia police, regional revenue agency, regional banks, and taxpayers. samsat is a service for managing vehicle documents such as cars and motorcycles. samsat is also a form of collaboration between the indonesian national police, pt jasa raharja, and the provincial revenue service to provide community services in the extension and manufacture of stnk and motorized vehicle signs. the national police has the authority to issue stnk, pt jasa raharja manages swdkllj (compulsory donations to road traffic accident funds), and the provincial revenue service determines the amount of pkb and bbnkb. the main samsat is a service for taxpayers in carrying out new vehicle registration payments, re-registration/ratification of vehicles, five-year re-examination, registration of mutation vehicles, vehicles for which insurance will be transferred (leasing), duplicate stnk/bpkb so far, the implementation of the tax payment service system has been carried out manually. the government has created an online service system to accommodate motor vehicle tax payments through the e-samsat application to simplify the service process further. with e-samsat, tax payments are made through the website and bank channels (atm, mobile banking, and internet banking). , maybank atms, and bukopin atms. the indonesian national police has opened esamsat services in various cities, including west java, east java, central java, and dki jakarta. e-samsat services in each province are not the same, depending on the program of each samsat office area. some open online services through the official website specifically analysis of community participation in paying motor vehicles tax through e-samsat service during covid pandemic at the samsat office in jakarta utara priyono, wulandari, rofiyanti, and agustina 231 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc for samsat online; some use android-based applications. however, the online means or media used do not affect the terms and scope of the samsat online service. e. equality of responsibility various parties have clear responsibilities in each process because of the equality of authority (sharing power) and their involvement in the decision-making process and subsequent steps. in the implementation of the e-samsat service system, the following parties are involved: 1. the police are authorized to register and identify in-vehicle data, including ratification of stnk. 2. bapenda is authorized to collect regional taxes, particularly pkb and bbn-kb. 3. bank dki, which is authorized in terms of payment. 4. taxpayer. as the party being served, the taxpayer must play an active role in providing feedback on the service products provided to improve the service system in the future. these parties have their respective roles in implementing the e-samsat service system. for the flow of complaints or problems that occur in the process of fulfilling tax obligations, especially motor vehicle taxes, all of them already have their respective sections that respond to every complaint or problem that comes giving directions and explanations that are easy to understand by taxpayers and can minimize difficulties and can contact at number 1500177 or send a message via email according to the area of each samsat office. however, if a payment does not arrive at the samsat office, the taxpayer will be advised to check his account or to the relevant bank to find out whether the payment that has not arrived has been refunded or not. f. transparency. the application of the e-samsat service system can increase transparency (management and services) and support the prevention of corrupt practices because without going through an intermediary, one of them is a human officer or broker and avoids interaction between human parties to other human parties, especially motor vehicle taxes, because if esamsat all payments are made online (cashless) through banks that have collaborated with samsat as well as payments directly from each taxpayer into the regional treasury or directly to the dki jakarta provincial government account managed by the bpkd (regional financial management agency). reconciliation of receipts will be carried out. however, it is also challenging to connect e-samsat with transparency which depends on taxpayers. there are still people who make payments directly to the samsat office, 133 because if you pay via atm, it is more confusing step by step to make a vehicle tax payment. motorized, there is an stnk number whose letters are filled with numbers on the atm, and there are also people who do not want to be complicated in matters of payment submitted through the service bureau. regarding minimizing corruption, it is possible that this still exists. precisely this system will reduce meetings between officers and taxpayers so that actions outside the regulations can be avoided and transparency is only in the service process conclusion public participation in payment of motor vehicle taxes through e-samsat services during the covid pandemic at the north jakarta samsat office, seen from the six participation criteria presented by mangkunegara; 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(2022). does energy tax subsidy policy promote the development of the biomass energy industry? a case of densified biomass fuel industry in china. energy reports, 8, 6887–6900. https://doi.org/10.1016/j.egyr.2022.04.080 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 438-450 438 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effects of ownership concentration, company size, and profitability on internet financial reporting tri utami lestari1, muhammad nur fauzi2 12telkom university, indonesia correspondent: triutamilestari@telkomuniversity.ac.id1 received : may 24, 2023 accepted : july 14, 2023 published : july 30, 2023 citation: lestari, t.u., fauzi, m.n. (2023). the effect of ownership concentration, company size, and profitability on internet financial reporting (energy sector companies listed on the idx 20192021). ilomata international journal of tax and accounting, 4(3), 438-450 https://doi.org/10.52728/ijtc.v4i3.760 abstract: as we have entered the digital age, a shift has occurred in which the internet has considerably become a significant aspect in all sectors. not only individuals but also organizations use internet for a number of purposes. internet financial reporting (ifr) is a company web-based information provided to stakeholders with the aim of disclosing information and minimizing information gaps. the data in this study are taken from the energy company listed in the indonesian stock exchange (idx). the objective of this study was to analyze the effects of ownership concentration, company size, and profitability on ifr using purposive sampling technique, generated from the total of 144 samples comprising 48 companies with a period of 3 years. the regression method in this study uses panel data regression. the results indicate that ownership concentration, company size, and profitability simultaneously affect ifr. partially, independent variable company size positively and significantly affect internet financial reporting, while ownership concentration and profitability do not affect ifr as the dependent variable. keywords: internet financial reporting (ifr), ownership concentration, company size, profitability this is an open access article under the cc-by 4.0 license. introduction the internet appeared as a communication platform for the companies all over the world and was used for the dissemination of information around 1990s (dolinšek & lutar-skerbinjek, 2018). the internet makes technological developments in this era very rapid, therefore, not only the public but also the companies need to get used to using the internet for information disclosure (abdelsalam, 2007) in (meinawati et al., 2020a). otoritas jasa keuangan (ojk) regulation no. 8 of 2015 states that companies are required to keep pace with technological developments by having a website and submitting company information to investors on the website. with these demands, companies must be able to convey all forms of information via the internet (rizqiah & lubis, 2017). the research of accounting regarding this issue increased due to the rapid use of internet financial reporting (ifr) (mokhtar, 2017). ifr is a corporate responsibility to stakeholders so that companies should be transparent (khotimah & hapsari, 2022). disclosure of financial information on company https://www.ilomata.org/index.php/ijtc mailto:triutamilestari@telkomuniversity.ac.id https://doi.org/10.52728/ijtc.v4i3.760 the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 439 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc websites provided to stakeholders is internet financial reporting (rizqiah & lubis, 2017). ifr is a recent phenomenon that is growing fast (sukmadilaga et al., 2019). internet financial reporting became the prime channel for disclosing company information due to the high profile accounting scandals in the global scale, this made the regulatory of accounting tried to enhance information transparency so that companies can disseminate information directly to the internet (sandhu & singh, 2019). ifr is one method from which a company uses internet website to disclose company financial information (abdillah, 2019). the financial disclosure of the company is the key point to assure trust from various stakeholders (hussein & nounou, 2022). the dissemination of company financial information determines whether or not investors will invest by looking closely into the official website of the company, a medium any investors use to see and learn the progress of the company performance from year to year (sirait & lestari, 2022). according to (nassir zadeh et al., 2018) the relevance of the information and the few content disclosed is due to the delay in the publication of financial statement. in addition, it is likely another consideration so as to how investors convince themselves in making a decision for an investment. the distribution of the performance of the company financial information using the website of the company is to reach a larger scale of users for decision making on time (dolinšek & lutar-skerbinjek, 2019). according to (abdelsalam et al., 2007) a medium that is unique and can provide information instantly to global audience is the internet. presentation and disclosure of the internet financial reporting through the website make it easy and simple for investors to access the information of the company, hence, it serves as one of the factors considered in making fast and accurate investment decisions (amalia & azib, 2016). indonesia energy exploitation tbk (cnko) and elnusa tbk (elsa) experienced a decrease in ifr points in 2020. from the maximum ifr score of 12, cnko’s ifr points were lower, from 6 to 5 in 2020 cnko’s main page of the website failed to issue current news. similarly, the points ifr elsa dropped from 7 to 6 in 2020. the results of the study regarding the correlation between the ownership concentration, company size, and profitability on ifr still need to be updated since there are so many differences of opinion. the present conditions serve as the background of the research. based on the explanation before, the writer proposed a hypothesis: h1: internet financial reporting is impacted by ownership concentration, company size, and profitability ownership concentration is an investor or shareholder who owns the majority of all outstanding shares in a company and highly influences company decisions (lestari & naimah, 2020). managers who are more disciplined is a reflection of ownership concentration, and this can be used to monitor managers' performance (permatasari et al., 2021). however, according to (dâmaso & lourenço, 2011) if the concentration of ownership is high, there will be fewer shareholders in a company, an effect from a reduced disclosure information shared in ifr . the more concentrated shareholders structure in the company the less incentive the company has to disclose information voluntarily (khlifi, 2022). this research conducted by (oktaviani et al., 2020), (khlifi, 2022) and (dâmaso & lourenço, 2011) indicated similar results. however, (nazar & syafrizal, 2019) and (dewi, 2019) obtained different results and found no correlation between ownership concentration and ifr. from the description stated, the writer proposed a hypothesis: https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 440 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2: internet financial reporting is negatively impacted by ownership concentration (sharma & bhardwaj, 2022), and (meinawati et al., 2020a), in their study found that the larger the company, the higher its ifr points. company size is a scale of how big the company is measured by the market capitalization, total of sales, or total assets (suzan & aini, 2022). (nurbaiti et al., 2021) states that company size is a benchmark for how big the company is in conducting economic activities. the bigger the company, the more responsibility it has to share more complete information (rahmawati, 2020). (fortanier et al., 2011) stated , the company great impact that made the company more visible and generate more pressure from the stakeholder is due the company size. large companies generally provide more complete information because investors will pay more attention to and seek information about the company activities, therefore large companies are presumably more stable and have higher ifr points, the conditions that would attract investors (sabrina et al., 2019). nevertheless, different research results by (fitrian & navilah, 2022) and (rahmawati, 2020) show no connection between company size and ifr. from the aforementioned explanation, the writer proposed a hypothesis: h3: internet financial reporting is positively impacted by company size. profitability is a company ability to make profits within certain of period of time and to perform beyond the targeted level of sales, shared capital, and the company assets (agustina & yanto, 2022). one of the major concerns of every firm is the profitability of the company (lim & rokhim, 2020). (marwa et al., 2017) stated that profitability is the result of various company policies and decisions. profitability can also measure the company capability to generate profits by calculating the assets of the company and the costs adjusted from the total of the assets (kurniawati, 2018). undoubtedly that the company profits can attract investors (dwiastuti & dillak, 2019). company profitability reflects on how the company management manages the company assets properly , and how performance-related information is adequately-conveyed through the internet financial reporting since these two factors serve as indicators towards the company success (adugna & kumar, 2021). (alarussi & alhaderi, 2018) also stated that the ability to identify the chance of profit reflects the quality and efficiency of the managers of the company. companies with most profit will provide better quality in disclosing information for the market (bini et al., 2011) in (musleh al-sartawi & reyad, 2018). furthermore, (sharma & bhardwaj, 2022) explained that companies showing an increase in profit will get more benefits by spreading the good information about their company. additionally, the research conducted by (meinawati et al., 2020b) and (kurniawati, 2018) demonstrated similar results. however, (agustina & yanto, 2022), (ariani & putri, 2021), and (adugna & kumar, 2021) obtained different results and they found no connection between profitability and ifr. hence, the writer proposed a hypothesis: h4: internet financial reporting is positively impacted by profitability. method this study uses a quantitative analysis method to identify the correlation between ownership concentration, company size, and profitability on ifr. the observation companies is selected as the method of data collection. the energy sector companies listed in the idx from 2019 to 2021 https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 441 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc are the population of this research. this study uses purposive sampling as a method to determine the samples. the criteria used are: 1. energy sector companies listed in the idx from 2019 to 2021. 2. energy sector companies with websites or the websites can be accessed from the 2019 to 2021 period. 3. energy sector companies that have annual reports from 2019 to 2021. based on the criteria above, the samples of 144 companies comprising 48 energy sector companies from 2019 to 2021. the study uses f test and t test for the hypothesis testing. the regression method is the panel data regression. all the data were processed using the eviews 12 application. table 1. variable and measurement item variables measurement sources dependent variable internet financial reporting ifr-ftse = ifr-1p + ifr-ir + ifr-ar + ifr-oi (dâmaso & lourenço, 2011) independen t variable ownership concentration oc = percentage of majority shareholding of the company (dâmaso & lourenço, 2011) company size cs = ln (total asset) (kurniawati, 2018) profitability prof = return on assets (roa) (agustina & yanto, 2022) results and discussions descriptive statistic test descriptive statistic analysis is a method to analyze and describe data collected without drawing generalized conclusions. the descriptive analysis describes data from the value of mean or the average value, maximum or higher, minimum or lower value on the data, and the standard deviation of the data. the amount of the data observed was 144 gained within 3 years of observation, from 2019-2021. the description of each variable is shown in figure 1. source: data processed by researchers with eviews 12 (2023) figure 1. descriptive analysis y x1 x2 x3 mean 5.576389 0.567151 12721.21 0.008278 median 5.000000 0.563650 2750.350 0.020250 maximum 10.00000 0.966200 108258.0 0.498300 minimum 3.000000 0.199800 27.60000 -1.573600 std. dev. 1.683236 0.148031 24400.10 0.206275 skewness 0.472091 0.047963 2.723604 -4.115958 kurtosis 2.805163 2.732918 9.646355 31.47190 jarque-bera 5.576652 0.483208 443.0766 5270.481 probability 0.061524 0.785367 0.000000 0.000000 sum 803.0000 81.66970 1831854. 1.192100 sum sq. dev. 405.1597 3.133595 8.51e+10 6.084545 observations 144 144 144 144 https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 442 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc classcial assumption test results 1. multicollinearity test source: data processed by researchers with eviews 12 (2023) figure 2. multicollinearity test figure 2 shows that the values such as the independent variables, namely ownership concentration (x1), firm size (x2), and profitability (x3) are smaller than 0.9, so it can be concluded that there is no multicollinearity, which means between each independent variable, there is no correlation found. 2. heteroscedasticity test source: data processed by researchers using eviews 12 (2023) figure 3. heteroscedasticity test figure 3 shows that ownership concentration (x1), firm size (x2), and profitability (x3) have a probability value > 0.05, meaning that there is no heteroscedasticity found. panel data regression analysis 1. chow test source: data processed by researchers with eviews 12 (2023) figure 4. chow test x1 x2 x3 x1 1.000000 -0.165757 -0.047364 x2 -0.165757 1.000000 0.099479 x3 -0.047364 0.099479 1.000000 https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 443 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 4 indicates that that the probability of the cross section f on the test is 0.0000, which is <0.05. based on the test results, h0 is rejected but h1 is accepted, so it can be decided that the correct model is fixed effect model (fem). afterwards, the step after the chow test is re-tested to investigate if the fem is still the correct model or it’s the random effect model (rem) by using hausman test. 2. hausman test source: data processed by researchers with eviews 12 (2023) figure 5. hausman test figure 5 of the hausman test shows that the value of the probability on the random cross section is 0.1089, which is > 0.05. based on the results of the test, h0 is accepted but h1 is rejected, meaning that rem is the right model to use. once hausman test is completed, the next testing must be conducted, to see whether rem or cem by the lagrange multiplier test serves as the correct model of the test. 3. lagrange multiplier test source: data processed by researchers with eviews 12 (2023) figure 6. lagrange multiplier test https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 444 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on figure 6, the probability value for breusch-pagan is 0.0000, meaning that it is lower, compared to the significance level (0.0000 <0.05), which accepts h0. therefore, this lagrange multiplier test shows that rem is the correct model to use. thus, it can be concluded that the most suitable model for the panel data regression is rem. panel data regression analysis panel data regression is used to analyze this study because this method is appropriate for not only they can be separately time-series data or cross-section data, but also a combination of both. from the results of the three models testings, rem is a selected model for this study. the eviews 12 software is used to analyze the results. source: data processed by researchers with eviews 12 (2023) figure 7. random effect model based on figure 7, it is concluded that the right equation for this study or the panel data regression is: 𝐼𝐹𝑅 = 5,026752 − 0,592144𝑂𝐶 + 0,000017𝐶𝑆 − −0,0260795𝑃𝑟𝑜𝑓 + ɛ information: ifr : internet financial reporting (y) https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 445 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc oc : ownership concentration (x1) cs : company size (x2) prof : profitability (x3) ɛ : error term hypothesis test hypothesis testing is conducted to determine the correlation between the independent variables and the dependent variable, namely ownership concentration (x1), company size (x2), and profitability (x3) on internet financial reporting (y). to test this hypothesis, the coefficient of determination (r2) is selected as the first step, then the f-test for simultaneous hypothesis, and finally the t-test for partial. coefficient determination source: data processed by researchers with eviews 12 (2023) figure 8. coefficient of determination according to figure 8, adjusted r-squared in this research model is 0.043200 or 4.32%. the conclusion is that ownership concentration, company size, and profitability are able to explain the internet financial reporting of 0.043200 or 4.32%. in comparison, other variables outside this study indicate the remaining 0.956800 or 95.68%. f -test source: the data processed by researchers with eviews 12 (2023) figure 9. f test as can be seen in figure 9, the probability (f-statistic) value is 0.026951 where the value is <0.05. based on the results, h0 is rejected, and it is interpreted that the company size, ownership weighted statistics r-squared 0.063273 mean dependent var 0.613158 adjusted r-squared 0.043200 s.d. dependent var 0.306804 s.e. of regression 0.300104 sum squared resid 12.60872 f-statistic 3.152170 durbin-watson stat 1.649921 prob(f-statistic) 0.026951 weighted statistics r-squared 0.063273 mean dependent var 0.613158 adjusted r-squared 0.043200 s.d. dependent var 0.306804 s.e. of regression 0.300104 sum squared resid 12.60872 f-statistic 3.152170 durbin-watson stat 1.649921 prob(f-statistic) 0.026951 https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 446 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc concentration, and profitability simultaneously affect the ifr of the energy sector companies listed on the 2019-2021 idx . t test source: data processed by researchers with eviews 12 (2023) figure 10. t test 1. the effect of ownership concentration on internet financial reporting the probability value (p-value) of ownership concentration shown in figure 10 is 0.2032, where this value indicates that 0.2032 > 0.05 (5% significance level) with a coefficient of 0.592144. therefore, it can be interpreted that it has a positive connection on the ifr. the conclusion is that h0 in this test is accepted, which means concentration of ownership partially does not affect the independent variable, hence, the internet financial reporting. furthermore, it can be stated that any changes occur in the ownership concentration will not result in the ifr changes of the energy sector companies listed on the 2019-2021 idx. the dominance of share ownership does not affect the amount of information disclosure provided through ifr, this is because those who need the information are not only investors, but also creditors and other stakeholders. as a consequence, the companies are suggested to disseminate complete information despite the small number of shareholders. in addition, since the hypothesis of this study is rejected, the ownership concentration has a negative influence on ifr. this is a similar research result by (nazar & syafrizal, 2019) and (dewi, 2019) where evidence for correlation of the ownership concentration on the ifr was not found. 2. the effect of company size on internet financial reporting the p-value of firm size is 0.0211, this indicates that 0.0211 <0.05 (5% significance level) with 0.000017 as the coefficient, where evidence for correlation of the ownership concentration on the ifr was not found. thus, the correlation between company size and ifr is considered positive. to conclude, it can be stated that h0 is rejected, which means the company size partially affects ifr positively and significantly. furthermore, there is an evidence that any increase occurs in the company size will also affect in the increase of internet financial reporting. conversely, any decrease in the company size will also result in a decrease in ifr for energy sector companies listed on the idx from 2019-2021. the company size plays a crucial role in ifr, and as a result, thorough information must be conveyed. the underlying reason is that large companies usually pay more attention on the information of disclosure level. therefore, large companies must provide access to punctual, easy to access, and accurate data, to create a good image. the website (ifr) is the right way to convey this information. thus, the bigger the company, the higher the level of ifr weighted statistics r-squared 0.063273 mean dependent var 0.613158 adjusted r-squared 0.043200 s.d. dependent var 0.306804 s.e. of regression 0.300104 sum squared resid 12.60872 f-statistic 3.152170 durbin-watson stat 1.649921 prob(f-statistic) 0.026951 https://www.ilomata.org/index.php/ijtc the effect of ownership concentration, company size, and profitability on internet financial reporting lestari and fauzi 447 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc disclosure is. this hypothesis of this study was accepted and the previous studies by (sharma & bhardwaj, 2022) and (meinawati et al., 2020a) were conducted, from which similar results could be identified. 3. the effect of profitability on internet financial reporting profitability has p-value of 0.1279, indicating the 0.1279 > 0.05 with -0.260795 as the coefficient, which means it has a negative correlation with the ifr. this could be concluded that h0 is accepted, thus, the profitability partially does affect ifr. this means, any changes in profitability will not result in the changes in ifr of energy sector companies listed on the 2019-2021 idx. in addition, ifr is the obligation of every company to disclose company information and company financial information, whether it is in a state of profit or loss. in financial reporting, if the company experiences a loss, the accuracy of the financial statements is not affected. the company is suggested to report not only the good news of the company conditions, but also the bad news. to sum up, it can be stated that the author's hypothesis is rejected, as profitability should have a significant positive effect on ifr. similar studies were conducted by (agustina & yanto, 2022), (ariani & putri, 2021), and (adugna & kumar, 2021) with the same research results. conclusions from the results of the tests, the study concludes as follows: 1. ownership concentration, company size, and profitability simultaneously and significantly affect the ifr of the energy sector companies listed on the 2019-2021 idx. 2. ownership concentration does not affect the ifr of the energy sector companies listed on the 2019-2021 idx. 3. company size affects the ifr of the energy sector companies listed on the 2019-2021 idx. 4. profitability does not affect the ifr of the energy sector companies listed on the idx for 20192021. to sum up, the results of the research could be used as information for management of the companies to increase the disclosure of the information on the company website. this is crucial because there are still many companies whose internet financial reporting disclosure level is still below the average. large companies should disclose information comprehensively because the bigger the company, the higher the investors' expectations for the company are. furthermore, investors can use it for disseminating information, especially to those who plan to invest in energy sector companies. lastly, it is advisable to pay attention to the company size. this is due to the fact that it gives impacts to the implementation of a company ifr. references abdillah, m. r. 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(2022). pengaruh profitabilitas , umur listing dan reputasi auditor terhadap internet financial reporting ( studi pada perusahaan sub sektor makanan dan minuman terdaftar pada bursa efek indonesia periode 2018-2021 ) the effect of profitability , age listing and . 9(5), 3177–3184. sukmadilaga, c., ritchi, h., suciati, h., lestari, t. u., & ghani, e. k. (2019). digital financial reporting practices among public listed mining companies in indonesia. international journal of innovation, creativity and change, 5(2), 1116–1133. suzan, l., & aini, c. (2022). the influence of intellectual capital and company size on financial performance (study on banking subsector companies listed on the indonesia stock exchange in 2017-2020). ieom society international, 6(4), 183–191. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 584-598 584 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia ariyadi teguh wibawa1, agustinus nicholas l. tobing2 12university of indonesia, indonesia corresspondent : aryd.tw@gmail.com1 received : may 13, 2023 accepted : july 23, 2023 published : july 31, 2023 citation: wibawa, a., & tobing, a. (2023). maturity level of fraud risk management in tax institutions in indonesia. ilomata international journal of tax and accounting, 4(3), 584-598. https://doi.org/10.52728/ijtc.v4i3.765 abstract: this study aims to determine the maturity level of fraud risk management in the tax payer compliance supervision function at the head office level run by vw and the xyz units. the enterprise anti-fraud maturity assessment model was implemented to provide a clear picture of conditions and effectiveness, as well as the existing gaps between the implementation and ideal conditions based on the principles of coso fraud risk management. the descriptive qualitative research uses a case study approach by collecting data from semi-structured interviews with 12 informants involved in risk management and fraud risks handling, then all documents are analyzed. as for the data analysis technique, content analysis is selected. the purpose of this study is to provide a tool for dgt (the directorate general of taxes) to determine the role and level of fraud risk management in the taxpayer compliance supervision function. the results which are at level 2 (initial) indicate that there is still a lot of room for improvement in order to achieve the desired maturity level target. dgt, especially the vw unit and xyz unit, are suggested to immediately integrate fraud risk management with the existing anti-fraud programs and strengthen the role of the units involved in accordance with the coso (committee of sponsoring organizations) fraud risk management principles. keywords: fraud risk management, fraud risk, tax compliance, maturity level this is an open access article under the cc-by 4.0 license. introduction the success of the directorate general of taxes (dgt) in supporting more than 82% of state revenue (ministry of finance, 2022) gives an impact on the smooth and efficient operations of the state functions. (neog & gaur, 2020), stated that one of the indicators of success is the achievement of the sustainable development goals (sdgs) target of a 15% tax ratio(oecd, 2018). regardless of the average tax ratio that has never reached 11% (dihni, 2022), a problem faced by every country in increasing tax revenue is related to taxpayer compliance (al-karablieh et al., 2021; vincent, 2023). therefore, one of the important functions performed by the dgt is to supervise taxpayer compliance. on the other hand, there is another factor causing a decrease https://www.ilomata.org/index.php/ijtc mailto:aryd.tw@gmail.com1 https://doi.org/10.52728/ijtc.v4i3.765 maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 585 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is the decline in taxpayer confidence (gonzález canché, 2022; litina & palivos, 2016; rahmi et al., 2022) which is triggered by corruption cases (aktaş güzel et al., 2019), is part of occupational fraud (wells, 2018). the tax administration sector is highly vulnerable to the risk, from policy making, human resources organization, service delivery, to procurement of goods and services (jenkins, 2018). fraud risk is a variety of potential fraud possibilities that may occur and which can and must be managed (ait novatiani et al., 2022; power, 2013). fraud is mostly intensified by pressure, opportunity, and rationalization (cressey, 1953). the risk of fraud in dgt is still high, as seen from the number of mass media coverage of corruption cases. employees involved in fraud range from staff such as objection reviewers to echelon iii (aji & febriyan, 2023; amali, 2021), and echelon ii (riana, 2021). internally, an average of 100 employees were sentenced to severe disciplinary punishment from 2017 to 2021 (directorate general of taxes, 2022). one of the reasons why employees are sentenced to severe punishment is because they commit fraud such as receiving gratuities and abuse of authority as stipulated in the government regulation number 94 of 2021 concerning discipline of civil servants. controlling the risk of fraud such as corruption is a crucial matter dgt should focus on, to implement its vision of organizing an efficient, effective, integrated, and fair tax administration. fraud risk management (frm) is one of the control efforts recommended to be carried out by an organization (power, 2013). frm can effectively control fraud and reduce the likelihood of fraud from occurring (paulinus & jones, 2017), prevent financial loss, and avoid the risk of damaged reputation of the organization (power, 2013). a widely used frm guide is the fraud risk management guide published in 2016 by the committee of sponsoring organizations of the treadway commission (coso) together with the association of certified fraud examiners (acfe), hereinafter referred to as coso frm. the coso frm complements other coso frameworks (internal control-integrated framework and enterprise risk management-integrated framework) and aims to serve as a framework for management in designing, implementing, running internal controls, and assessing the effectiveness of existing internal controls related to fraud risk (cotton et al., 2016). there are 5 principles in coso frm, the first is fraud risk governance where coso frm recommends the division of roles and responsibilities in risk management, based on a three lines of defense approach in conducting risk management (cotton et al., 2016). the institute of internal auditors (iia) has published the three lines model in 2020 which is an update of the three lines of defense (the institute of internal auditors, 2020. the second is a comprehensive fraud risk assessment. the third is an implementation of preventive and detective activities in fraud control (fraud control activities). the fourth is the establishment of fraud investigation and corrective actions. finally, the organization monitors the process (fraud monitoring activities) including reporting the results, and improving the fraud risk management. dgt has implemented risk management since 2008 (directorate general of taxes, 2022). however, the obligation to identify fraud risk is only emphasized in the decree of the minister of finance number 105/kmk.01/2022 and the decree of the director general of taxes number kep-621/pj/2022. in these regulations, each risk-owning unit is required to identify fraud risk https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 586 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc categories. dgt has also implemented various anti-fraud programs such as the establishment of a gratification control unit, integrity pact, mandatory wealth reporting, whistle blowing system, knowing your employee (kye), employee profiling, handling and investigating fraud cases, and so forth. despite several regulations and programs made to prevent corruption or fraud, fraud will still exist (biduri et al., 2022; cui, 2015; kasim et al., 2016). based on the previous explanation, it is important for dgt to obtain a clear picture of fraud risk management carried out in its units, especially the one related to the taxpayer compliance supervision function. former studies related to the measurement of the maturity level of risk management have been carried out by praditya (2021) and simanungkalit and tobing (2022). praditya (2021) conducted a research on medium and large companies in indonesia based on iso 31000: 2018, whereas simanungkalit and tobing (2022) investigated xyz agency, a public sector, using the rims risk maturity model. nevertheless, none of the two studies focused on the maturity level of fraud risk management. research that is specifically related to fraud risk management has been conducted by chairunnisa and ibrahim (2019). both researchers used the 5 coso frm principles to evaluate the implementation of risk management at pt x, but the maturity level of fraud risk management based on these principles is not measured. based on the background and previous discussion above, this research will examine the maturity level of fraud risk management conducted by the dgt unit in the function of supervising taxpayer compliance at the head office of the directorate general of taxes. the units at the head office of the directorate general of taxes that perform this function are in vw and xyz units. the difference between this and previous studies is that the research focuses on evaluating fraud risk management based on the coso frm with a maturity level model based on the enterprise antifraud maturity assessment model©. acfe recommends this model in the anti-fraud playbook: the best defense is a good offense, since it is specifically based on the five principles of coso frm (acfe & grant thornton llp, 2020). the relationship between the coso frm principles and the maturity level in the model can be seen in figure 1. in addition, based on yeni et al (2020) studies related to fraud with the object of research in the public sector such as government and dgt are rarely found. the evaluation to measure the maturity level of the fraud risk management program in the dgt unit will provide a clear picture of the condition and the effectiveness of fraud risk management being carried out and will identify areas that need improvement to achieve the desired level. https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 587 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. relationship between 5 coso frm principles and maturity levels source: acfe & grant thornton llp (2020) method this is a qualitative descriptive approach study designed to understand a phenomenon from the perspective of participants, thus the results are descriptive. (merriam & grenier, 2019). the object of this research is the directorate general of taxes (dgt). the case study is conducted on the taxpayer compliance supervision function at the head office level carried out by 2 echelon ii units in the dgt, namely the vw and the xyz units. for the data collection, semi-structured interviews and document analysis were implemented. interviews were conducted with 12 informants involved in the risk management process in both units, the risk management in dgt, the investigation unit, as well as the implementation of antifraud programs in dgt. the informant profile details for vw unit are 2 echelon iv level officials as business process owners and 1 echelon iv level official who handles risk management and risk management compliance unit (ukmr). meanwhile in the xyz unit, there are 1 echelon iv level official and 1 staff member as the owner of the business process, 1 staff member who handles risk management and 1 staff member who serves as ukmr. in addition, interviews were also conducted with the directorate of internal compliance and apparatus resource transformation (kitsda) which is a unit that handles risk management, internal compliance and investigation units at the dgt level. moreover, interviews at the directorate of kitsda were conducted with 1 echelon iv-level official related to risk management, 1 echelon iv-level official of internal compliance testing, 1 echelon iv-level official related to the internalization of anti-fraud programs in dgt, and 2 echelon iv-level officials in the internal investigation function in dgt. the interview results serve as the primary data in this study, whereas the secondary data is obtained https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 588 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from internal documents such as documents related to risk management structure, regulations related to risk management, socialization materials of anti-fraud programs and leadership commitment. the documents related to risk management are confidential and cannot be disclosed to public. additionally, documents obtained externally include journals, publications, frameworks/theories, internet pages, and other supporting documents. furthermore, content analysis is selected as the data analysis techniques. the analysis aims to draw conclusions from documents (transcripts of interview results, and documents) by conducting indepth discussions (maulid, 2021). in this study, the results of interviews with informants ware content analyses, with quotes and words used to answer the research questions and the interpretation of the selection of fraud risk management maturity levels. the results of the interview as evidence are then interpreted and conclusions are made by the author through an assessment based on the value score in accordance with the five principles of coso fraud risk management (frm) and the level of maturity based on the level of maturity enterprise anti-fraud maturity assessment model©. the results will produce a maturity level for each coso frm principle and an overall level of fraud risk management. furthermore, the value and maturity level of each principle are compared with the desired target. the author refers to the publication of the internal audit service of un women which sets the condition of their anti-fraud program should be level 4 (managed) (un women, 2021). the conclusions drawn must also be validly replicable (kurniasih & tobing, 2022). the process of drawing conclusions related to measuring the maturity level of fraud risk management in this study can be traced and replicated validly. table 1. maturity level score range maturity level score range level one-ad hoc 1,0 ≤ nilai > 2,0 level two-initial 2,0 ≤ nilai > 3,0 level three-repeatable 3,0 ≤ nilai > 4,0 level four-managed 4,0 ≤ nilai > 5,0 level five-leadership nilai ≥ 5,0 source: author's processed result (2023) results and discussions in order to achieve its objectives, dgt conducts risk mitigation that has been carried out since 2008 (directorate general of taxes, 2022). currently, the implementation of risk management is based on minister of finance regulation number 222/pmk.01/2021, the minister of finance decree number 105/kmk.01/2022, and the director general of taxes decree number kep621/pj/2022. in the last regulation, all risk owner units are required to identify risks with fraud categories. the risk management structure at the ministry of finance consists of: risk management committee, risk owner unit (upr), risk management compliance unit (ukmr), and inspectorate general. the risk management committee serves as the party that determines the policy, profile and mitigation, and effectiveness of risk management at the ministry of finance https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 589 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc level. upr is the unit that owns the strategy map and is responsible for implementing the risk management process for organizational goals according to the unit's duties and functions. ukmr is the internal compliance unit (uki) in charge of monitoring the implementation of risk management and following up on the results of risk management reviews and/or audits. the inspectorate general serves to provide assurance and consultation on the implementation of risk management. the upr structure is tiered based on the level of the organization. upr-wide is the risk owner unit at the ministry of finance level, upr-one is the risk owner unit at echelon i level, upr-two is the risk owner unit at echelon ii level, and upr-three is the risk owner unit at echelon iii level. the upr structure for vw and xyz units is a upr-two structure consisting of a risk manager, risk coordinator, and risk administrator as well as a pic and application operator. the upr structure has the responsibility to carry out risk management including the process of context formulation, risk identification, risk analysis, risk evaluation, risk mitigation, monitoring and review, as well as communication and consultation. each upr reports its activities to the higher upr. the results of document analysis based on document analysis of the decree of the minister of finance number 105/kmk.01/2022, and internal documents of the vw unit and xyz unit, there is a upr structure determined by the head of the unit, the structure is as follows: table 2. upr structure in vw unit and xyz unit role description position risk manager upr-two leader echelon ii risk coordinator risk administrator's superior officer echelon iii risk administrator officials with duties and functions in risk management echelon iv pic and operator aplication staff of the risk administrator staff source: internal documents of vw unit and xyz unit have been reprocessed ukmr at the upr-two level is played by a section, and led by an echelon iv official who acts as a risk administrator at the upr. this ukmr task will be carried out by different staff who act as pic and application operator. all echelon iii under the leadership of the upr is the owner of the business process. the risk management structure for the vw and xyz units has the same structure and there is a clear identification of the roles and responsibilities of each line function. based on the three line model approach (the institute of internal auditors, 2020) the relationship between these lines is shown in the following figure: https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 590 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2. risk management structure of vw unit and xyz unit source: author's processed result (2023) the governing body in charge of providing oversight in the risk management process is the risk management committee at the ministry of finance level. the business process owner is echelon iii at vw unit and xyz unit which is the first line. the structure at upr-two, namely the risk manager, risk coordinator, risk administrator and pic and application operator, is included in the first line and can also be the second line, since it conducts the on-going monitoring in the risk management process. in addition, ukmr is in the second line. this is because for the upr-two level, the subdivision of administration performs 2 roles, being included in the upr structure and acting as ukmr in connection with its function as an internal compliance unit. the inspectorate general acts as an internal audit. external auditors for the government are the supreme audit agency and the financial and development supervisory agency. dgt has standardized the implementation of risk management. fraud risk is part of the risks that must be identified and managed in risk management. there is no specific risk management process related to fraud risk. the risk management process begins with the context formulation stage to determine the scope and period of risk management implementation, set organizational goals, identify stakeholders, and establish the upr structure. further on, they proceed with the identification of risks related to events, causes, and impacts on the achievement of predetermined goals. there are 2 risk classifications, namely organizational risk and state budget (apbn), contingency, and balance sheet (akn) risk. not all uprs have imr risk but definitely have organizational risk. fraud risk is part of the organizational risk that must be identified. the next stage is to conduct a risk analysis with the aim of determining the amount of risk and risk level based on risk criteria by considering the reliability of internal control. risk criteria include likelihood criteria and impact criteria. the determination of criteria, including those related to fraud risk, already has a choice of methods and standards. the result of this process is a 5x5 risk analysis matrix that has described the risk level, which is then proceed to the risk evaluation stage to determine risk priorities, expected residual risk magnitude/level, determination of risk appetite, risk mitigation decisions, key risk indicators (iru) and risk maps creation. the risks in low and very low levels are the categories that enter the acceptance area, while for medium, high and very https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 591 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc high levels are the main risks that must be mitigated and have iru. this stage of identification to risk evaluation is submitted by the business process owner to the upr structure. figure 3. risk map and risk level source: decree of the minister of finance number 105/kmk.01/2022 has been reprocessed (2023) the upr structure together with the business process owner then discusses what risk mitigation should be done. the mitigation stages are carried out in the hope of reducing the likelihood of the risk occurring and/or reducing the occurring impact. upr should develop a mitigation plan and document it. furthermore, the monitoring and the review of risk management are carried out. the monitoring is carried out by the upr structure through quarterly meetings of the organizational performance dialogue (dko) or other forums conducted by upr itself. moreover, the review of risk management implementation is carried out by ukmr and inspectorate general. the last stage is communication and consultation which includes reporting on the risk management process, efforts to obtain risk awareness and feedback for the improvement of risk management carried out. the risk management process in dgt, compared to the risk assessment process and in accordance with the principles of fraud risk assessment (fra) in coso frm can be briefly described as follows: table 3. comparison of the fra-coso frm with the dgt risk management process fra-coso frm dgt's risk management process establish a fraud risk assessment team context formulation identify fraud schemes and risks risk identification estimated occurrence and impact of each scheme and risk risk identification determine the personnel and departments potentially involved by considering the fraud triangle. identify the existing controls risk analysis assess and respond to residual risks that need to be mitigated. risk evaluation risk assessment documentation administration and reporting reassess periodically, considering changes monitoring and review source: author's processed result (2023) https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 592 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from table 3 above, a step that should be done in the fra but does not appear in the risk management process carried out by dgt, is one related to determining personnel and departments that are potentially involved by considering the fraud triangle. in the provisions of risk management in dgt, there are no specific steps related to this matter. this is because the reference basis for risk identification in the dgt risk management process is the achievement of organizational goals related to a particular risk owner unit. therefore, the fraud risk that will be identified is fraud risk generally not as detailed as the identification result in fra. fra aims to find out all fraud schemes and risks that occur in an organization. interview results interviews were conducted with 12 informants from internal dgt. the selection of informants is based on their duties and functions as the structure of upr, ukmr, business process owners, risk management in dgt, compliance testing, implementation of anti-fraud programs, and investigations in dgt. the interviews were conducted face-to-face in the period of late february to early april 2023 with a duration of 30 to 90 minutes. the interview technique was semistructured. previously, a structure of questions was made with sources from the areas, and factors or considerations in the five principles of coso fraud risk management described in the fraud risk management scorecard (acfe, 2022). the answers given by the informants were recorded using a voice recorder, then transcribed and interpreted using the author's expertise when observing the interviewees and through the process of listening to the recording again. the results of these interviews when grouped according to the principles in the coso frm are as follows: 1. fraud risk governance a. there is a commitment from leadership to fraud risk management, and employees have understood the commitment but fraud risk is not among the main risks considered. b. there is a clear division of functions in risk management for each level of the organization, where fraud risk is one of the risk categories that must be identified. c. the internal compliance unit has a tough task, given its position as ukmr which also plays a role in the upr structure that carries out risk management. d. fraud risk management is not yet comprehensive, where the anti-fraud programs carried out have not been well coordinated with the risk management and have not been able to identify fraud risks appropriately. e. there is documentation of a fraud risk management program reviewed regularly. f. communication of fraud risk awareness to all levels of the organization has been conducted and can be tracked. 2. fraud risk assessment a. there is a team that conducts risk assessment on risks in general, not specifically related to fraud risk. b. the team that conducts risk assessments has not identified fraud risks appropriately. c. there is a methodology in risk assessment in general including fraud risk categories that refer to the decree of the minister of finance number 105/kmk.01/2022. d. there is documentation of the general risk assessment process. 3. fraud control activities a. formalized fraud risk control activities are in place, but have not fully considered the results of the fraud risk assessment. https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 593 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. fraud risk control activities at vw and xyz units have begun to consider the use of data analytics. c. organizational processes and antifraud controls are established, understood, and consistently executed, and reporting mechanisms and documentation are in place. 4. fraud investigation and corrective action a. an investigation unit has been established with clearly defined roles. b. there is a reporting channel related to fraud committed by dgt employees and there are procedures for handling it. c. corrective actions resulting from investigations are submitted and monitored for implementation. d. there is no evaluation related to the investigation activities carried out. e. there is no tiered training standard for employees assigned to the investigation unit. 5. fraud monitoring activities a. monitoring procedures are in place for general risk management processes and anti-fraud programs. however, performance is not consistent. b. there is a mechanism for reporting and documenting the results of monitoring risk management and anti-fraud programs to employees, as well as to leaders and higher levels. c. there is no data analytic used in monitoring risk management or anti-fraud programs. from the results of the document analysis and the interviews with informants, the level of maturity of fraud risk management based on the principles of coso fraud risk management (frm) and with a level of maturity based on the enterprise anti-fraud maturity assessment model© at unit xyz and unit vw related to the supervisory function, a total score of 2.4. was obtained. table 4. shows a recapitulation of the assessment results from the level of fraud risk management for the two units. table 4. results of fraud risk management maturity level assessment coso frm principle current level target level level score level score fraud risk governance level 2 (initial) 2 level 4 (managed) 4 fraud risk assessment level 2 (initial) 2 level 4 (managed) 4 fraud control activites level 3 (repeatable) 3 level 4 (managed) 4 fraud investigation and corrective action level 3 (repeatable) 3 level 4 (managed) 4 fraud monitoring activities level 2 (initial) 2 level 4 (managed) 4 average level 2 (initial) 2,4 level 4 (managed) 4 source: author's processed result (2023) the information in table 4 indicates that the fraud risk management in the supervisory function carried out in both units is still at level 2 (initial). the fraud risk management is part of the risk https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 594 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management carried out by the units in dgt. in general, at this level, vw and xyz units have actually realized the need for a formal fraud risk management approach, a continuous (recurring) fraud risk management process in dgt but the parts of the organization define it differently. this research is in line with the results shown in simanungkalit and tobing's study (2022) and indicated that the risk management maturity level of public sector institutions is still below the ideal level. about 3 principles are still at level 2 (initial), namely fraud risk governance, fraud risk assessment, and fraud monitoring activities. based on the results of the interviews with informants, fraud risk management is still not a major consideration, and is managed reactively. the risk owner unit at the vw unit and xyz unit have been unable to define fraud risk appropriately. the monitoring of anti-fraud programs is still considered a formality and is limited to the completeness of documents and the continuity of their contents. the monitoring by ukmr has not touched on the material, due to a lack of understanding of fraud risk, resulted in miscategorization of fraud risk escape. the principles of fraud investigation and corrective actions and fraud control activities are already at level 3 (repeatable). the analysis of the gap between the overall level of maturity of fraud risk management in both the vw and the xyz unit are related to the supervisory function with the current condition of level 2 (initial) bearing the intended target for level 4 (managed) in accordance with the target set by the author who refers to the publication of the internal audit service from un women (un women, 2021) as depicted on the following graph: figure 4. radar gap analysis chart source: author's processed result (2023) conclusions the results of the fraud risk management maturity level assessment for the taxpayer compliance supervision function at the vw unit and xyz unit are at level 2 (initial). at this level, both units have realized the need for a formal fraud risk management approach. the fraud risk management process is ongoing (recurring) but parts of the organization define it differently, considering it is still not a primary consideration, thus it is managed reactively. vw and xyz units as well as dgt need to immediately integrate fraud risk management program with their anti-fraud programs. in 0 1 2 3 4 fraud risk governance fraud risk assessment fraud control activites fraud investigation and corrective action fraud monitoring activities gap analysis current score target score https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 595 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc improving its maturity level, dgt needs to conduct training and increase the competence of the risk owner unit regarding fraud risks that can occur in its unit. at the policy-making level, dgt needs to strengthen the position and competence of risk management structures such as ukmr to be more independent and to function effectively and efficiently. in addition, the strengthening of the investigation unit needs improvement so as to intensify control in terms of fraud detection. similarly,the evaluation of the coso frm principles implementation should also be standardized and carried out periodically by utilizing data analytic. this research has several limitations that should be taken into consideration when other researches with similar themes are conducted. this study however, raises the maturity level of fraud risk management in the taxpayer compliance monitoring function carried out at head office of the directorate general of taxes run by 2 units, namely the vw and the xyz units. moreover, the source of informants is still limited to the internal dgt, not the ministry of finance level such as the inspectorate general. therefore, future research can develop it by adding focus group discussion or questionnaire methods to deepen the analysis. lastly, the future research can also use other fraud risk management maturity level models in addition to the enterprise anti-fraud maturity assessment model© based on coso frm principles. references acfe, & grant thornton llp. 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(2018). corruption risks in tax administration, external audits and national statistics. in transparency international anti-corruption helpdesk. https://knowledgehub.transparency.org/assets/uploads/helpdesk/corruption-risks-in-taxadministration-external-audits-and-national-statistics-2018.pdf kasim, r., umar, m. a., & martin, d. (2016). a reformation model of compliance to improve the property tax revenue generation in malaysian local governments. social sciences (pakistan), 11(11), 2885–2896. https://www.scopus.com/inward/record.uri?eid=2-s2.084988316958&partnerid=40&md5=ec29a69a4e3775ed959f100a67e46b9a kurniasih, f., & tobing, a. n. l. (2022). risk analysis in the business process management and recording electricity costs (case study in an oil and gas company in indonesia). budapest international research and critics institute-journal (birci-journal), 3, 21089–21104. https://doi.org/https://doi.org/10.33258/birci.v5i3.6128 litina, a., & palivos, t. (2016). corruption, tax evasion and social values. journal of economic behavior & organization, 124, 164–177. https://doi.org/https://doi.org/10.1016/j.jebo.2015.09.017 maulid, r. (2021, may 25). mengenal analisis konten dalam analisis data kualitatif. dqlab.id. https://dqlab.id/mengenal-analisis-konten-dalam-analisis-data-kualitatif https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 597 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc merriam, s. b., & grenier, r. s. (2019). qualitative research in practice : examples for discussion and analysis. john wiley & sons, incorporated. http://ebookcentral.proquest.com/lib/indonesiau-ebooks/detail.action?docid=5630257 ministry of finance. (2022, september 2). pemerintah rancang apbn 2023 dengan semangat optimisme namun tetap waspada. kemenkeu.go.id. https://www.kemenkeu.go.id/informasi-publik/publikasi/berita-utama/pemerintahrancang-apbn-2023-dengan-optimisme neog, y., & gaur, a. k. (2020). tax structure and economic growth: a study of selected indian states. journal of economic structures, 9(1). https://doi.org/10.1186/s40008-020-00215-3 oecd. (2018, february 14). countries must strengthen tax systems to meet sustainable development goals. oecd. https://www.oecd.org/ctp/countries-must-strengthen-tax-systems-to-meetsustainable-development-goals.htm paulinus, e. c., & jones, a. s. (2017). financial risk management and corporate performance of deposit money banks in nigeria. archives of business research, 5(12). power, m. (2013). the apparatus of fraud risk. accounting, organizations and society, 38(6–7). https://doi.org/10.1016/j.aos.2012.07.004 praditya, t. a. (2021). perancangan risk maturity model berdasarkan iso 31000:2018 pada perusahaan di indonesia [universitas islam indonesia]. https://dspace.uii.ac.id/handle/123456789/34699 rahmi, n., selvi, s., & purwaningtyas, a. s. (2022). pentahelix collaboration in improving taxpayer compliance. ilomata international journal of tax and accounting, 3(4), 351–358. https://doi.org/10.52728/ijtc.v3i4.562 riana, f. (2021, september 22). angin prayitno aji jalani sidang perdana, berikut fakta-fakta kasus suap pajak. tempo.co. https://nasional.tempo.co/read/1508871/angin-prayitno-aji-jalanisidang-perdana-berikut-fakta-fakta-kasus-suap-pajak simanungkalit, d., & tobing, a. n. l. (2022). a study on the maturity of risk management using the rims risk maturity model ® approach in investigating activities at law enforcement agencies for corruption. budapest international research and critics institute (birci-journal) humanities and social sciences, 5, 9–23. https://doi.org/10.33258/birci.v5i2.5377 the institute of internal auditors. (2020). the iia’s three lines model. the institute of internal auditors. un women. (2021). thematic audit review of anti‐fraud programme at un women. https://www.unwomen.org/sites/default/files/2021-12/un-womenaudit-report-2021-006-review-of-anti-fraud-programme-at-un-women-en.pdf vincent, r. c. (2023). vertical taxing rights and tax compliance norms. journal of economic behavior & organization, 205, 443–467. https://doi.org/https://doi.org/10.1016/j.jebo.2022.11.003 wells, j. t. (2018). international fraud handbook: prevention and detection (acfe ser.). john wiley & sons, incorporated. http://ebookcentral.proquest.com/lib/indonesiauebooks/detail.action?docid=5399249 https://www.ilomata.org/index.php/ijtc maturity level of fraud risk management in tax institutions in indonesia wibawa and tobing 598 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc yeni priatnasari, widagdo, a. k., & gantyowati, e. (2020). a review on fraud research : a study of vote count. ilomata international journal of tax and accounting, 1(2). https://doi.org/10.52728/ijtc.v1i2.59 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 358-373 358 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria atinuke adebimpe orekan bells university of technology, nigeria correspondent: aaorekan@bellsuniversity.edu.ng received : january 27, 2023 accepted : april 22, 2023 published : april 30, 2023 citation: orekan, a, a. (2023). a framework for boosting revenue generation from land taxes in ogun state, nigeria. ilomata international journal of tax and accounting, 4(2), 358-373. https://doi.org/10.52728/ijtc.v4i2.719 abstract: the study developed a framework for boosting revenue generation from land taxes in ogun state nigeria. the choice of ogun state was hinged on the fact that it is both an economically and an industrial state. it exhibits the dynamism of land activities traceable to land taxation. financing a budget for a particular fiscal year, requires government to source for revenue to meet up with the demand. land taxes is still an untapped resources which government has not fully utilised and coupled with the fact that there are no adequate literatures on the development of framework to mobilise revenue from land taxes, necessitated this study. in view of this, data were collected through a wellstructured questionnaire, personal interviews and review of government documents were also conducted. questionnaires were administered to the 23 top management staff at the board of internal revenue services in ogun state. personal interviews were also conducted. using the frequency table and spss to analyse, the result revealed that government does not have enough information on property, property owners and property transactions. these which affected the revenue from land taxed to fall-short. in conclusion, land titling should be made compulsory and at the same time be flexible, so that government can have access to property information which will in turn improve revenue mobilisation for the state government. keywords: framework, taxation, land taxes, revenue, ogun state this is an open access article under the cc-by 4.0 license. introduction in nigeria, some major issues have been identified by some researchers as a set-back to a good tax system which has affected the revenue generation and these are; absence of a comprehensive land registration policy. (cui, 2015; dixon & elston, 2019; ellahi, 2020; nuhu, 2008; trojanek et al., 2021; wang et al., 2022) recommends that at various levels, land titling should be promoted, encouraged and facilitated. absence of a comprehensive land registration policy has left most of the properties that could have provided taxes outside the purview of tax register. tax administration involves tax policies, tax reforms and law, tax method of collection and tax mobilisation for revenue generation. mobilisation of land tax for revenue in the study area (ogun state) is an area that is yet to be exploited by researchers. in view of this, the study will reveal and https://www.ilomata.org/index.php/ijtc mailto:aaorekan@bellsuniversity.edu.ng https://doi.org/10.52728/ijtc.v4i2.719 a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 359 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc examine major obstacles that have effect on revenue realisation through land tax in the study area (cho & choi, 2014). the act of harnessing some forms of revenue generation after oil in nigeria seems to be weak. poor governance, corruption and lack of strict legal framework to support taxation administration are likely cause of it. without a proper and quick implementation of policies in the mobilisation of revenue in nigeria apart from oil, it is possible that nigeria will still be characterised with high rate of unemployment, poor provision and maintenance of infrastructure for years to come. (kim & park, 2020; okwori & sule, 2016) supported this by revealing that extending less in investment, upward rise in the level of corruption, lack of institutional strength, less development in infrastructure, low per capita income, substandard economic activity, increase in debt accumulation, is still common in the nation. (mogues & olofinbiyi, 2020) revealed that the budgetary operation in nigeria over the years has amounted to varying proportion of deficit financing and this has shown tremendous effect on the economy. cbn (2010) shows that deficit financing remain high at n117.2 billion, n47.4 billion and n810.0 billion in 2007, 2008 and 2009 respectively. all these are expected to spur nigerian government in seeking alternative ways of revenue mobilisation (agboga, 2021; houeland, 2022). it is imperative to have the knowledge of revenue generated from land taxes over years to have a clear picture of how dependable and feasible land taxes are. lagos state for example had successfully introduced a composite land use charge which is known to have been beneficial to the state. (grover et al., 2019; olowu, 2002; zdrazil & pernica, 2021), compared property rates in cities like port-harcourt, (a large oil city) to be 0.3% to ikeja, lagos to be 44% in 1989, this which has contributed to 58.3% of the city’s revenue in 1994. this was due to the fact that ikeja is a city in lagos state with strong property tax policy which has been used to boost the overall municipal finances. it is obvious that there is a growth in trend in property taxes in lagos city. this study will uncover the strategy that can be put in place to boost revenue mobilisation in the study area and this can be adopted in other parts of the country. the reasons for the pattern of performance between land tax and total revenue generated shall be investigated and having gone through different literatures, a generally practicable framework for revenue mobilisation through land taxes is not available, so it is perceived that a frame work would be necessary in this study on how revenue can be boosted through the effectiveness of land taxation. in view of this, government would be able to set in all machineries to sustain the growth of property tax. the study will reveal why land taxes should be given a good attention in the governing of any developing countries, mostly nigeria and develop a framework that can be developed to promote the optimal generation of revenue from land taxes in the study area (ocheni et al., 2013). literature review (kete, 2018) discussed that taxation in any nation serves as the most substantial part of any political and economic system of a country. for any tax system to work well, it has to be administered appropriately. the administration of tax entails quality service delivery, implementation of tax laws and policy, fairness and equity and tax compliance. if any of these characteristics is not in place, then tax is not well administered or managed. https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 360 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a good quality tax service delivery system ensures that tax payers are exposed to purpose of taxation and the need to accept it and comply with its laws. widayet and nurlis (2013) opined that the encouragement of taxpayers is necessary so as to make them easily accept tax as a participation of all taxable adults to support government in the financing the nation. the delay in the payment of tax should be seen as a detriment to the quick response of government in supplying infrastructure to the state. asian development bank report (2016), revealed that the administration of tax system in any nation determine the extent of yield, its incidence and efficiency. a good tax administration system is expected to tax and collect revenue from wage collectors, business enterprise and professionals. asian development bank further revealed that tax system usually are not planned properly with the business community, most business owners complain about the tax assessment method which often is based on subjective method and resulted to them paying more tax unlike the public servants. when taxpayers are given proper knowledge about taxation, which will make them to understand the basic concept of taxation, it is likely that people will embrace it and pay tax. (jones & rhoadescatanach, 2010; overton & nukpezah, 2020), buttressed this by stating that the tax payers are only willing to pay tax only if the intricacies of taxation is well understood and accepted by them. he referred to japan as having a high level of tax compliance and the reason for this is the efforts being made by their government. to further buttress this, ogbonna and appah (2012) opined that tax is a major source of government revenue all over the world. in this case, nigeria is not exempted from this fact despite the fact that nigerian government has placed higher priority on oil as major revenue. apart from taxation as a source of revenue mobilisation, it has also played significant role in a nation’s economic growth and development by serving as an instrument for fiscal policy. the capitalisation theory of taxation is based on the assumption that whenever a tax is imposed on land as an asset, the capital value of the land is diminished by an amount equivalent to the capitalised value of the tax at the prevailing rate of interest. in essence it is assumed that subsequent landowners/buyers would first capitalise the annual tax then deduct from the sales price. hence the subsequent landowner/buyer would pay a diminished price for the value of the land (mcclusky, 2012; patrick & mothorpe, 2017). this theory is not applicable in all cases most especially in nigeria where most of the lands acquired are not registered and making it difficult to tax since there are no records of them, in essence, most of the land owners hardly pay any amount as tax. theory of taxation one of the means by which government mobilise income (revenue) to support the growth of a country is through taxation. government’s ability to finance the nation or produce public goods and services can be influenced by tax policy. one of the earliest australian judicial pronouncements on the notion of taxation is found in r v barger (1908) 6 clr 41, where griffith cj, barton and o’connor jj 2014 (2014) stated that “taxation primarily means raising money for government by means of contributions from individual persons. different authors had explained tax in various ways. tax can be defined as a sum of money paid by citizen of a country, state or community to the government for public purposes (borge & rattsø, 2014; drucker et al., 2020; oyegbile, 1996). it can also be defined as the system of charging https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 361 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc individuals, income, goods, services and properties of individuals, partnership, trustees, executorships and companies compulsorily by the government (alm et al., 2014; mccluskey & trinh, 2013; samuel & simon, 2011; yunusa, 2003). ale (1999), defines tax as that which the state, in its absolute power, takes away from the income, resources or wealth of a target person. he goes further to assert that the only reason for the exposure is the fact that the target person is involved in an activity that the state, by law, prescribes as forming the basis of taxation. the activity may be the act of living in a place, the earning of an income, the consumption of goods and services, possession and use of property, entry into contracts, birth and death of persons or the transfer of resources. (umezuruke, 1998) is of the view that tax is levied on corporations, estates and trusts by the authority for the execution of all government expenditure. he believes that government are supposed to raise much of the funds they require for public purposes through taxation process. this, according to him, is because government is not a trading or business concern which is supposed to make profit for its routine expenditures. commenting further on the issue of tax, he opined that the citizens of a country ought to contribute, by way of payment of taxes according to their ability in terms of income, benefit, security of life and property accrued to them. lots of tax experts have formulated theories on taxation as a way of bringing about more resources to the various units of government. structure of taxation has also been delved into and frequent questions that arose from studies are if taxes should be levied on citizens equally. this prompted the theories in taxation which are benefit theory, ability to pay theory and cost of service theory. benefit theory it can be inferred from this theory that individuals should be charged by the authority based on the benefit accrued to them. (abbasian & myles, 2006), opined that the benefit theory of taxation is a system in which individuals are taxed according to the benefit they received from the state expenditure. benefit principle can be likened to prices paid for to render services in private transaction. they made some likely possible logical explanations of benefit principle. first is that taxes can be apportioned to individuals based on the limited or gradual benefit they received from the provision of infrastructure by the state. individual could then be allowed to pay for each unit of the service accrued to them which is equal to the limited benefit received. secondly, individual can be taxed following the approach of moulin in 1987, who proposes the egalitarian –equivalent solution as an alternative method of allocating tax burden in a way that avoids the problems of endogenous prices. in the egalitarian equivalent scheme, every consumer is treated as if he received an endowment of public goods which is less than that provided by the government. the implementation of this theory in tanzania brought about the fact that the various taxes and levies charged and collected in the local jurisdiction were used to improve and maintain different infrastructure that resulted to have positive impact all and sundry. (copper, 1994) this theory has been criticized as follows; (a) if the tax authority conserve some affinity in the positive reward derived, it will go against the basic canon of tax. this is because a tax is known as an obligatory benefaction made to government to assist in the expenditure and provision of common infrastructure. there is no direct way in the case of a tax. https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 362 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (b) expenditure of the state is for the benefits of all citizens. it is likely going to be impossible to estimate the benefit enjoyed by every citizen of a state every year. (c) the benefit theory of taxation if applied in a state will negatively affect the poor because the poor benefits from the social amenities made available by the government. this will result to the poor paying more than the rich and is against the canon of taxation. ability to pay theory this theory came into existence due to the lapses in the benefit of theories of taxation. it is the most commonly accepted theory because it supports the canon of fairness in taxation. it further implies that citizen of a nation ought to pay taxes to the authority based on their respective capability in terms of finances. (grassi, 2015) opined that tax payer’s budget, (income and expenditure) should reveal its capability to support state spending. mostly, it is the individual income that is normally used to test such capacity. it is possible that if the taxes are based on the ability to pay principle, then justice can be achieved. examples of this principle is that taxes that resorted to charging a higher tax rate (%) on higher income and wealthy people progressively and low rate (%) on lower income or wealth. despite the points raised above, jan (2016) raised some arguments in favour of the principle which are: 1. the resources available to the rich are far more than their major necessities and since a normal consumer acts rationally, wealthier people derive less and less additional satisfaction (marginal utility) from an additional dollar spent. in other words, the value of a dollar for a wealthy person reduces as they spend more. the marginal utility per dollar for a poor person also falls however; it is still much higher than that of a wealthier person. this means that if equal nominal taxes are charged, it will cause unfairly high utility sacrifice for a poor person than for a wealthier person. to equalize to the utility sacrifice caused by taxes, poor people should pay less and wealthier should pay more. 2. progressive taxes, which follow ability-to-pay principle, can quickly fulfil the revenue needs of a government and also result in more revenue for government, provided there is no tax evasion. arguments against the ability-to-pay are: a.) it is difficult if not impossible to determine the ability of a person to pay taxes. the term “ability –to-pay” is ambiguous. it leads to questions such as: should the taxes be charged at a uniform percentage for all taxpayers or is it based on a higher percentage on high income and low percentage on low income? b.) taxes enable government to provide social amenities and service to the citizen and the availability and use of these by citizen offer public goods and services and the users of those goods and services should pay taxes according to extent to which they use public goods and services and not on the basis of how much they have earned. j.s mill and some other classical economist have proposed that the principle of proportionate in taxation should be reckoned in other to meet the idea of the administration of land. whereas, the contemporary economist have a different view. they stated that as income increases, the marginal utility of income decreases. the state of sacrifice can only be achieved if one with more income is taxed with a high tax rate than those with a low income. https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 363 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cost of service theory some economists came up with the opinion that if public are charged based on the services available to them, then the principle of equity in taxation would be satisfied. this principle is also applicable to those services rendered out of price like postal, transportation services and electricity. although, a greater proportion of expenditure incurred by the government cannot be allocated to each individual due to the fact it is easily determined. the grand unified theory of revenue generation (gut-rg) according to ramdas (2012), he scrutinised this theory and likened it to the general principle of physics, which offers an interesting analogue to revenue mobilisation value chain that starts with good process or technique of promoting a product which will end up being sold. he discussed that the word of hypothetical physics gives an attractive analogue to the revenue mobilisation of the market price chain that starts in the projecting of products finishes in sales. he further explained that the ordinary word of selling products and making money has similarities. businesses perform with a neo-classical approach that is against the two major forces in revenue realisation in the universe and these are; marketing and sales. with more than a dozen years in the 21st century, the methods, ways and discussions in marketing products and making sales has not changed much. ramdas (2012), likened it to the historical disputes between particles physicist and astrophysicist. in other words, he suggested that the grand unified theory of revenue generation (gut-rg) would be needed to boost revenue generation in business. this theory (gut-rg) replaces the incapable conventional principles and encourages a better method of finding customers and making sales. in the grand unified theory of revenue generation, the question that what’s our “string theory” that underpins the gut-rg and serves as a revenue rallying point was argued. it explained that “sales funnel” might not allude to ownership, it’s the product of a single unified suspect –to –customer process that improves revenue and marketing automation is the technology enabler that makes sales funnel a powerful tool. marketing automation, is the main essential factor in “sales funnel” manager for any business venture. it extends to reach into areas that will improve sales and increase revenue generation. marketing exercise is the primary control in the funnel theory. this platform also provide a specific factor for all involving in the funnel process. marketing and sales are more focused on and used as a revenue generation, whereas, business counterparts to particle physicists and astrophysicists are finding more common ground to agree that cooperation and common ownership may yield a superior result. in a nutshell, this theory proves that marketing and sales are more process oriented than in the past. the theory measures and optimizes continually without regard for organisational boundaries. https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 364 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. the grand unified theory of revenue generation source: https://www.pinterest.com, 2019. the figure above further revealed the sales funnel theory in which the manger needs to grow the sales team, organising new marketing campaigns and increasing top of funnel activity will improve and increase revenue generation. also increasing revenue and blowing up sales is aligning to criteria like; scrutiny, strategy and structure. study areaogun state geographical location ogun state (in the south-western part of nigeria), was created in 1976. it lies between latitude 70 00’ n and longitude 30 35e. it borders lagos state in the south, oyo and osun states to the north, ondo to the east and republic of benin to the west. these are shown in figures 1.0 and 2.0 below. it covers a total land area of 16,980.55km2 (6,556.238sqm) with a density of 220/km2 (570/sqm). the largest city and the state capital is abeokuta; it is fondly referred to as the “gateway state” because of its strategic location as an entry point to the country from west africa. it is noted for its large number of industrial estates and major manufacturing hubs in nigeria, some of which are; dangote cement factory, ibese; nestle and lafarge cement factory. other urban infrastructural services such as road facilities, parks and public utilities are duly provided. a total population of 3,751,140 reside in ogun state according to the 2006 census record. it has a per capita income of $2,744 and the gdp is $10.470b. having a number of twenty local government areas, the state is dominated by the yorubas, who are the main ethnic group in south western nigeria. the state composition is made up of six ethnic groups which are the egba, the ijebu, the remo, the egbado, the awori and the egun. the state comprises several dialects such as egbas in abeokuta north, abeokuta south, ifo, ewekoro, obafemi –owode, odeda and ado-odo/ota https://www.ilomata.org/index.php/ijtc https://www.pinterest.com/ a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 365 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc lgas, the egbados in egba-north, egbado-south, imeko-afon and ipokia lgas. the ijebus in ijebueast, ijebu-north, ijebu-ode, odogbolu and ogun watersides lga; the remos in sagamu, remo-north and ikenne lgas. other dialectical groups in the state include oyo (owu), awori, ikale and ilaje. figure 2. map of ogun state showing different geopolitical zones. source: https://www.researchgate.net method personal interview was conducted amongst government officials and likewise questionnaires were administered to them as well. at the ogun state board of internal revenue services, 5 departments are relevant to this study and these are, (i) assessment (ii) other taxes (iii) research and statistics (iv)withholding taxes (v) collection. the table below provides details of questionnaire distribution to the various departments/units at the state board of internal revenue service in ogun state. this study will adopt the grand unified theory of revenue generation (gut-rg). this is because the theory is hinged on a better model of marketing and sales. this theory, replaces the inefficient traditional structure of making sales and promote a better model of finding customers and selling stuff. bases on this, information on ways of proving the marketing of taxes to taxpayers to improve the revenue mobilisation was made available through the use of a structured questionnaire and interview conducted. variables from marketing and sales from land taxes as suggested from the respondent were used to analyse and develop a framework for optimal generation of revenue from land tax. https://www.ilomata.org/index.php/ijtc https://www.researchgate.net/ a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 366 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion development of a framework for optimal generation of revenue from land taxes table 1: questionnaire distribution and retrieval rate in ogun state board of internal revenue service. units/ departments number of staff response level % of response strategy and planning 5 5 100 finance and account 4 4 100 withholding tax 5 5 100 road and other taxes 9 9 100 total 23 23 100% source: author’s field survey, 2022 the table above provides details of questionnaire distribution to the various departments/units at the state board of internal revenue service and bureau/ministry of land and survey in the study areas. table 2: factors to be adopted for optimal generation of revenue from land taxes in ogun state board of internal revenue service. source: field survey, 2022 26.09% agreed that improving marketing plans and availability of adequate information on property statistics are major ways by which government and achieve optimal generation of revenue through tax. it further revealed that enforcement of tax laws and policy (17.39%) and creation of no options responses percentage 1. improved marketing plan (revenue outline 06 26.09 2. adequate information on property statistics 06 26.09 3. awareness creation 04 17.40 4. availability of trained personnel 01 4.34 5. re-branding/quality control system 02 8.69 6. enforcement of tax laws and policy 04 17.39 total 23 100 https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 367 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc awareness amongst taxpayers (17.40%) are other ways in revenue mobilisation can be improved. in view of the information revealed from table 2 and as discussed in chapter two, it can be traced to the theory of grand unified theory of revenue generation. improvement in marketing strategies will definitely affect sales of a product positively. they are more process-oriented in business organisation so as to achieve a positive result. factors like awareness, consideration of product, choice of product are determined by effort put into marketing. a framework for generating revenue, identifies which revenue source to pursue and how revenue can be generated from a known available source. every business is expected to have a key business outline on who to improve the income. without a well-defined revenue outline and a clear plan on how to improve one’s income generation, every businesses or company might likely struggle to meet up with the cost and other expenses in the business. the need to formulate a framework emanated from the necessity to improve/increase revenue generated from land taxes as it is a prominent component in the internally generated revenue (igr). thus, the framework is to improve/increase revenue generated form land taxes and consequently improve the total igr. in the framework, various action based factors are raised with a view to improving the volume of revenue generated from land taxes. poor statistic and data of properties and property owners is a major set-back on revenue yield from land taxes. proper data need to be put in place by the state government, this will enable the government to have a clue on who to tax, which properties should be exempted, how many people are paying the tax? and how much revenue has been generated. with this, a proper accountability will be reinforced. government does not have enough information on property, property owners and property transactions. this has affected the revenue from land taxed to be shortfall. government needs to really upgrade the tools in getting information on property a matter of urgency. the system should generate and record accurate information on properties. the process of land titling should be made flexible and less costly, with this more people will be encouraged to register their properties and government can has access to information of properties through that. multi tenurial system, most especially in the south-west has reduced the effect of land tax on revenue generation. for a clear business outline, business is expected to have marketing plans, focus and target on the appropriate group so as to raise capital and be able to sustain the business. the framework of this study is hinged on three ‘revenue pillars’ and these are scrutiny, strategy and execution as shown in figure 3 below: https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 368 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3 conclusion framework for generating revenue, identifies which revenue source to pursue and how revenue can be generated from a known available source. every business is expected to have a key business outline on who to improve the income. without a well-defined revenue outline and a clear plan on how to improve one’s income generation, every businesses or company might likely struggle to meet up with the cost and other expenses in the business. the need to formulate a framework emanated from the necessity to improve/increase revenue generated from land taxes as it is a prominent component in the internally generated revenue (igr). thus, the framework is to improve/increase revenue generated form land taxes and consequently improve the total igr. examine the adequacy of property information and statistics examine the methods used in assessing examine the availability of trained personnel scrutiny strategy improved marketing plan (revenue outline) awareness creation re-branding /quality control system execution tackle the obstacles in the revenue mobilisation enforcement tax laws & policy accountability/ provision of infrastructure result optimal revenue generation https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 369 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the framework, various action based factors are raised with a view to improving the volume of revenue generated from land taxes. poor statistic and data of properties and property owners is a major set-back on revenue yield from land taxes. proper data need to be put in place by the state government, this will enable the government to have a clue on who to tax, which properties should be exempted, how many people are paying the tax? and how much revenue has been generated. with this, a proper accountability will be reinforced. government does not have enough information on property, property owners and property transactions. this has affected the revenue from land taxed to be shortfall. government needs to really upgrade the tools in getting information on property a matter of urgency. the system should generate and record accurate information on properties. the process of land titling should be made flexible and less costly, with this more people will be encouraged to register their properties and government can has access to information of properties through that. multi tenurial system, most especially in the south-west has reduced the effect of land tax on revenue generation. for a clear business outline, business is expected to have marketing plans, focus and target on the appropriate group so as to raise capital and be able to sustain the business. the framework of this study is hinged on three ‘revenue pillars’ and these are scrutiny, strategy and execution from fig. 3 above. the first pillar : scrutiny this is expected to be the starting point of any business. it is recommended that one should scrutinize the revenue generation system that is existing in the business very well. in the course of that, several questions such as; what is wrong with the system?, what are the loopholes in the system affecting the performance in terms of optimal revenue generation? and what can be done to improve the performance. all these are questions that accurate answers would be required for. secondly, it is necessary to understand the existing laws supporting the business. with this improvement, can be done on compliance and review so that revenue which is the ultimate goal of any business can be achieved. thirdly, there are data or information as regards the business. in the case of property taxation, it is expected that data on income generating properties, information about the owners and the area of properties should be available and captured for critical examination. in as much as these information are available, then they should be interpreted very well. the inability to interpret these data would lead to lack of appropriate scrutiny. the ability to interpret the data will enable the marketers to have a broad knowledge of the market to penetrate and how to diffuse into the market. with all of these, planning to perform better will be easily made available. second pillar : strategy there should be a clear-goal strategy in any business organisation. it is extremely difficult to improve revenue without a strategy. having no strategic plans can be very devastating on the business. strategy can be likened to building a strong structure for a business. https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 370 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxation for example has been the government business all along in nigeria. there could be a shift of government involvement in taxation business to private-sector. privatisation of service delivery is a profit oriented game rather than provision of service to everyone. with private sector involvement in taxation, they will be able to produce a workable data on all properties and as well on their owners too. with the introduction of cadastral system of coverage, which is linked to land registration, it will assist in property taxation purpose, there will be an organised data base of property. this can be referred to as fiscal cadastral, with this lot of properties would not be left untaxed. in addition, making more people to be aware of one’s service and the benefit accrued to it is another marketing strategy to use to improve revenue in any business. with the involvement of private-sector in taxation business, they will bring more taxable adult into it with a strong awareness strategies. if tax payers are made to be aware of benefits amassed in it, more people will be attracted to paying of tax. for example property tax can serve as a poll tax in the sense that it can be used as a criterial for voting. with the certificate of tax, signifying payment of tax, that should serve as a voters card and more taxable adult will be made to participate. another strategy could also be employed in tax payment is making people to register their land at a subsidized rate when they produce the tax certificate of tax. once people are aware of these benefits, more people will participate in the civil responsibility. with all of these, quality control measure is another an important tactic in business. it is a system of maintaining standards and to ensure that product quality is maintained or improved upon. quality control ensures that business creates an environment where the management and the employees strive for perfection. it can be depicted from this that despite good business strategies, there is need for frequent check, coordinating and moving human resources and equipment to a final destination of acceptance. third pillar : execution with proper scrutiny of data or information and strategy plans, they will not yield any positive results if there is no well-oiled execution machine in place. with the execution of the strategies most especially in taxation, the followings need to be in place for a proper execution; with the implementation of proper execution frameworks and process, together with proper tools and support structure in place, execution becomes efficient. execution is supported by data, strategy and educated team to be able to accomplish the goal of the business. in taxation the main goal is revenue derivation and with that following needs to support goal to yield a positive result and these are; 1. law enforcement the legal underpinning and the technical capacity to implement property tax should be made strong. the laws are on ground but the implementation of the laws are weak. tax defaulting can be resolved through the following; (a) introduction of a fixed percentage or interest on arrears; (b) tax certificates or clearance must be made available before any transfer of property interest is granted; (c) forfeiture of the defaulting property through seizure or auctioning can be introduced and; https://www.ilomata.org/index.php/ijtc a framework for boosting revenue generation from land taxes in ogun state, nigeria orekan 371 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (d) publishing of names of tax defaulters in the national newspapers, radio and television stations. 2. accountability parts of the execution plans should be proper accountability of funds collected and disbursed. this should be made open to all and sundry. once the tax payers are aware of the outlay of revenue collected, they will be encouraged to do more. 3. involvement of experts as part of the execution process, there need to be the involvement of experts in driving the revenue. starting from the appraisers that will determine the value of property for taxation, the marketers for awareness, accountant for accountability and legal advisers for the implementation of laws. these are the will support the accomplishment of business 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(2021). stimuli contributing to local property taxation with the focus on spatial effects of industry and functional urban areas. central european journal of public policy, 15(5), 55–66. https://doi.org/10.2478/cejpp-2021-0004 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 2 april 2022 page no. 150-161 150 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) panji harapan agung 1, endro andayani 2, ratih kumala3 direktorat jendral pajak kpp badora1, institut ilmu sosial dan manajemen stiami23 correspondent: harapanagung99@gmail.com1, endroandayani@gmail.com2; rhaty07@gmail.com3 received : february 25, 2022 accepted : april 15, 2022 published : april 30, 2022 citation: agung, p.h., andayani, e., kuma;a, r. (2022). effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora). ilomata international journal of tax and accounting, 3(2), 150-161. https://doi.org/10.52728/ijtc.v3i2.466 abstract: this study aims to analyze the application of value added tax collection policies on trading transactions through electronic systems at the corporate and foreign tax service office. this research is a qualitative descriptive study with data collection techniques through interviews, observations and using written documents. the results showed that the implementation of the vat collection policy on pmse, vat receipts decreased in 2019 due to covid, the number of additional pmse vat taxpayers tended to decrease every semester, psme vat receipts tended to increase every semester, in terms of the level of effectiveness in 2020, respectively. less effective but in the 2021 period, very effective per semester, the application of the regulations has several weaknesses, namely related to the affirmation of sanctions against collectors who are negligent in carrying out their tax obligations and activities to explore potential business actors who are ready to be appointed as pmse vat collectors. in addition, public awareness about taxation is still very low, there are still many users who use the service for free and also the prevalence of piracy, this has more or less affected the number of transactions that can be subject to value added tax. keywords: effectiveness, kpp badora, pmse, vat this is an open access article under the cc-by 4.0 license. introduction today, the covid-19 pandemic has hit almost all countries in parts of the world hit. the covid19 virus that was first detected in the city of wuhan, china on december 1, 2019 until now seems to have not been indicated to subside, facing this condition developed countries supported by the availability of resources and technology working hand in hand to make antivirus to save the world from the pandemic situation. in indonesia alone, a positive case of covid-19 was first detected on march 2, 2020, when two people were confirmed to have contracted it from a japanese citizen. departing from this, the indonesian government began to aggressively make a special preparednessbased policy to deal with the covid-19 virus, one of the preventive measures taken was with very strict supervision on access to indonesia from other countries including airports, ports, and land routes (anugerah et al., 2021; dai et al., 2021; górska et al., 2021; gupta et al., 2022; malahayati et al., 2021; stephens et al., 2021; yao & ngai, 2021). https://www.ilomata.org/index.php/ijtc mailto:harapanagung99@gmail.com mailto:endroandayani@gmail.com2 mailto:rhaty07@gmail.com3 https://doi.org/10.52728/ijtc.v3i2.466 effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 151 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc until now the covid-19 virus has hit the world for more than a year, especially indonesia, the government is still working hard to form a defense and protect the health of citizens from the threat of exposure to the covid-19 virus, including with the policy of implementing restrictions on community activities and covid-19 vaccination for all communities (unicef, 2021; worldometers, 2022). not only in indonesia, in fact, all countries in the world are hit by this pandemic condition, why the covid-19 pandemic affects all vital joints of statehood ranging from socio-culture, security and of course in terms of economy. the indonesian government must act immediately in seeking the stability of the country's economy before it becomes more fragile, on the other hand, all countries are also competing to adapt to the current conditions, where forced life activities must coexist with the existence of the covid-19 virus until the new normal appears (ashraf, 2020; brodeur et al., 2021; nezafat maldonado et al., 2020; sekiraqa et al., 2021; thomson et al., 2021; tibulca, 2021; vardavas et al., 2021). the government of indonesia needs to immediately determine policies and measures to save the national economy and the stability of the financial system related to the implementation of the state budget. the policies taken focus more on health spending, national security, and economic recovery efforts, as well as opening opportunities for authority for institutions in the financial sector by providing adequate legal foundation facilities, one of which is by issuing government regulations of law. the implication is that the constitution of state life in indonesia has undergone new developments with the birth of perpu number 1 of 2020 dated march 31, 2020, which contains a new paradigm on the imposition of taxes in trading activities through electronic systems (anggara et al., 2020; aulawi, 2020; bai et al., 2021; han et al., 2020; shafi et al., 2020). to implement the provisions of article 6 paragraph (13) a perpu number 1 of 2020, it is necessary to implement the regulation of the minister of finance on procedures for the appointment of collectors, voting, and depositing and reporting of vat on the utilization of bkp tb / jkp from outside the customs area through trade through electronic systems, then on may 5, 2020 the minister of finance of the republic of indonesia stipulates pmk no. 48 / pmk.03 / 2020. furthermore, in the implementation of the regulation, it is mentioned in article 4 paragraph (4) that the minister of finance delegates the authority to appoint business actors as pmse vat collectors to the directorate general of taxes (masdi, 2021). in order to facilitate administration and increase supervision in the implementation of tax obligations and/or fulfillment of tax obligations on the activities of business actors who carry out business activities through electronic system trading (pmse), it is necessary to regulate the registered places of foreign traders, foreign service providers, and/or organizers of trade through electronic systems (ppmse) abroad and domestically in tax administration (cunningham & tynan, 1993; ding & hiltrop, 2010; käppi & siivonen, 2000; liao et al., 2008).. the director general of taxes confirmed in the regulation number per-07 /pj/2020 that the kpp agency and foreigners (badora) are given the mandate and responsibility to manage all business actors who are organizers of trade through electronic systems or pmse (hu et al., 2022; kumala & junaidi, 2020; ozer & okan sakar, 2022) please note that the period before the enactment of pmk-48, then vat on digital transactions is managed and administrated by each tax service office where taxpayers are registered. provided that full deposits and reporting are self-assessment and of course supervision is very minimal, now with the issuance of pmk-48 it is expected that dgt as the institution of absolute authority holders in the implementation of tax potential supervision in indonesia has instruments and legal umbrellas adequate in securing tax potential from the digital transaction sector (widianto & puspita, 2020). especially when viewed during the pandemic, user traffic in digital networks has https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 152 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc increased rapidly. here is a table of recapitulation of business actors that have been designated as psme vat collectors: table 1 number of business actors who have been designated as pmse vat collectors year month number of business actors 2020 july 6 august 10 september 12 october 8 november 9 december 6 total 51 2021 january 2 february 0 march 4 april 8 may 8 june 2 total 24 july 6 august 2 september 4 october 0 november 4 december 3 total 19 source: www.pajak.go.id from the table above, it can be known for 2020 from july to december, dgt has succeeded in confirming a total of 51 business actors as pmse vat collectors, while throughout 2021, the january-june period of 24 and the july-december period of 19, so that the dgt has succeeded in confirming a total of 43 business actors as pmse vat collectors, it is hoped that in the future the government through dgt can continue to expand the collector of digital taxes abroad. this study was conducted to analyze the application of psme vat on vat receipts before the implementation of vat with covid, the number of additional pmse vat taxpayers during the period 2020 to 2021, psme vat receipts in the period, and the effectiveness rate in 2020 to 2021, as well as weaknesses in the regulation related to death sanctions. and measure the growth rate and contribution of value added tax on trading through electronic systems against other central tax revenues. researchers also want to know the efforts made by fiscus to increase the receipt of value added tax on trading through electronic systems. based on the background that has been explained, researchers are interested in raising the topic in a scientific journal entitled “effectiveness of pmse vat receipts in the new normal era in kpp badan dan orang asing (kpp badora)”. https://www.ilomata.org/index.php/ijtc http://www.pajak.go.id/ effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 153 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc • literature review regulation of the minister of finance number 48/pmk.03/2020 the arrangement structure consists of: article 1 :d general definition article 2: provisions for the imposition of pmse vat article 3: provisions for the use of intangible bkp article 4: criteria for pmse business actors appointed as collectors article 5: criteria for buyers of goods and/or recipients of services article 6: basic provisions for the imposition of vat and tariffs article 7: provisions of proof of vat levy article 8: provisions for depositing vat article 9: vat reporting provisions article 10: provisions of vat transaction details report article 11: the time of entry into force of pmk source: ministry of finance (2020) this pmk regulates the vat imposed on the use of intangible bkp and/or jkp from outside the customs area within the customs area through pmse. this pmk regulates the vat imposed on the use of intangible bkp and/or jkp from outside the customs area within the customs area through pmse. vat on the use of bkp / jkp is collected, deposited, and reported by pmse business actors appointed by the directorate general of taxation. the amount of the tariff is 10% of the value paid. these business actors are foreign traders, foreign service providers, foreign pmse organizers, ppmse in the country. ppmse is a business actor providing electronic communication facilities used for trade transactions. meanwhile, the ministry of finance of the republic of indonesia (2020) states that foreign service providers are private persons or entities that reside or occupy positions outside the customs area who conduct transactions with buyers of goods within the customs area through the electronic system. figure 1 transaction scheme and parties collecting pmse vat https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 154 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc • previous research research on cross-border taxation is widely done. in european union countries charge vat for purchases originating from other countries through import duties (goolsbee, 2001). for developing countries will face trade-offs from generating revenue from by ignoring economic efficiency and building policies for digital vat or enterprises in cyberspace (bunn et al., 2020). method the type of research conducted is descriptive-qualitative research. descriptive research is research intended to investigate the circumstances, conditions or other things that have been mentioned, the results of which are presented in the form of research reports (arikunto, 2013; neuman, 2011; sugiyono, 2019). data collection techniques are carried out through interviews, observations and using written documentation. the informant of this research is the head of the supervision section and system administrator in the data quality assurance section at the kpp badora. the data used is secondary data with periodic types of data that have been processed by the data quality assurance section in kpp badora. result and discussion in the current pandemic situation, many sectors of state revenue are weakened including the taxation sector, therefore the government must immediately find other sources of state revenue to cover the lost nominal, one of which is by the enactment of pmk-48 which targets the vat sector for digital transactions, kpp badora as a dgt agency appointed to manage and administrate state revenue from the digital tax sector sticking to pmk-48 as an instrument. legal umbrella and the basis of policy implementation. the target of pmk-48 policy, namely pmse vat, is not a new sector, it's just that in pmk-48 it is more detailed and simplified in the voting so that the badora kpp is appointed as the managing party. with the presence of pmk-48 is expected to increase tax revenues in the long run. the implementation of vat rates for foreign products is a form of leveling for domestic and international businesses. kpp badora is supported by the dgt head office has adequate resources in the implementation of pmk-48, fiscus has been equipped with technical knowledge of the administration of the imposition of pmse vat so as to minimize technical problems. this policy has been supported by special infrastructure in the form of the pmse vat platform on the https://digitaltax.pajak.go.id/ page where all services related to pmse vat have been integrated on the portal. in its implementation, kpp badora in coordination with the dgt head office of course still faces obstacles, business actors who are targeted are mostly foreign business actors but their products or services that can be utilized by the people of indonesia so that these business actors can open markets and receive income from indonesia. the difference in distance and time is more or less very influential, for example, during the one on one meeting process with prospective collectors, it must be adjusted the schedule and time of implementation as both parties can be https://www.ilomata.org/index.php/ijtc https://digitaltax.pajak.go.id/ https://digitaltax.pajak.go.id/ effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 155 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc present online, but more crucially related to the time of interconnection of banking data, not infrequently the process of transferring funds experiences obstacles due to differences in transfer systems and supporting facilities. another obstacle is that there has not been the establishment of sanctions for the pmse vat collector if it does not deposit the vat value it collects appropriately, because on the other hand it is not easy for the fiscus to open and get data related to the company's financial flow statements considering that it is still a taxation system that adheres to self-assessment. from the observations of researchers, global vat receipts at the kpp badora itself can be concluded quite positively from year to year, here is a recapitulation table: table 2 recapitulation of vat receipts source: secondary data, the data quality assurance section figure 2 vat receipt rate (rp) source: secondary data, the data quality assurance section meanwhile, if we pull back, the determination of business actors as pmse vat collectors is first on july 01, 2020, then for each business actor set on july 1, 2020, it is necessary to collect pmse year amount (idr) 2016 596.483.064.541 2017 1.070.446.678.151 2018 1.258.321.744.867 2019 1.065.669.330.600 2020 1.265.616.275.708 2021 4.241.918.280.761 596.483.064.541 1.070.446.678.151 1.258.321.744.867 1.065.669.330.600 1.265.616.275.708 4.241.918.280.761 0 500.000.000.000 1.000.000.000.000 1.500.000.000.000 2.000.000.000.000 2.500.000.000.000 3.000.000.000.000 3.500.000.000.000 4.000.000.000.000 4.500.000.000.000 2016 2017 2018 2019 2020 2021 jumlah https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 156 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc vat on august 1, 2020 and no later than deposit vat that was successfully collected on september 30, 2020. based on the results of observations on the kpp badora, the following data was found: table 3 pmse vat receipts 2020-2021 year vat revenue target realization of pmse vat 2020 (period july-december) idr 729.421.803.000 idr 731.418.896.996 2021 (period january-june) idr 1.444.976.953.000 idr 1.646.966.171.686 2021 (period july-december) idr 1.744.491.954.000 idr 2.256.323.359.505 total 2021 idr 3.918.890.710.000 idr 4.634.708.428.187 source: secondary data, the data quality assurance section it is known that the realization of pmse vat receipts in the first semester of 2021 reached idr1,646,966,171,686 and semester 2 amounted to idr2,256,323,359,505. receipts from collection and deposit by the pmse vat collector in 2021 semester 1 compared to 2020 (july to december 2020) increased by 225% or idr915,547,274,690. and for 2nd meter of 2021 compared to the first semester of 2021 increased by 137% or idr609,357,187,819. to measure the achievement of the kpp badora on the receipt of pmse vat on all revenue targets, it is necessary to know the level of effectiveness and targets and realizations. effectiveness is a level of achievement that indicates whether the amount of realization of tax revenue is in accordance with the target of tax revenue (mardiasmo, 2016). the formula calculates it: the criteria for assessing the effectiveness of pmse vat collection is that the higher the effectiveness ratio, it describes the better regional capabilities shown in the table below: table 3 effectiveness assessment criteria source: kepmendagri no.690.900.327 year 1994 persentase criteria > 100% highly effective 90 – 100 % effective 80 – 90 % effective enough 60 – 80 % less effective < 60 % ineffective 𝐸𝑓𝑒𝑘𝑡𝑖𝑣𝑖𝑡𝑎𝑠 = realisasi penerimaan target penerimaan 𝑥 100% https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 157 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3 effectiveness of pmse vat receipts by kpp badora in 2020 and 2021 source: secondary data, the data quality assurance section table 4 realization of pmse vat on kpp badora in 2020 and 2021 source: secondary data, the data quality assurance section calculation of the effectiveness of pmse vat collection as follows: effectiveness in 2020: effectiveness in 2020 = idr 731.418.896.995,72 idr 729.421.803.000,00 𝑥 100% = 100,27% effectiveness in 2021: effectiveness in 2021 = idr 3.903.289.531.190,41 idr 3.189.468.907.000,00 𝑥 100% = 122,38% based on the above percentage obtained using the formula so that the effectiveness rate of pmse vat on kpp badora in tax revenue in 2020 the effectiveness rate is at 57.79% with ineffective criteria. the increase is due to the determination of the appointment or inauguration of the pmse vat collector in 2021 has increased. obstacles jul-des 2020 jan-jun 2021 jul-des 2021 target pajak 729.421.803.000 1.444.976.953.00 1.744.491.954.0 realisasi ppn pmse 731.418.896.996, 1.646.966.171.68 2.256.323.359.5 rp rp500.000.000.000 rp1.000.000.000.000 rp1.500.000.000.000 rp2.000.000.000.000 rp2.500.000.000.000 year tax revenue target realization of pmse vat % criteria 2020 idr 729.421.803.000 idr 731.418.896.996 100,27 highly effective 2021-(jan-jun) idr 1.444.976.953.000 idr 1.646.966.171.686 113,97 highly effective 2021-(jul-dec) idr 1.744.491.954.000 idr 2.256.323.359.505 129,34 highly effective total 2021 idr 3.189.468.907.000 idr 3.903.289.531.191 122,38% highly effective https://www.ilomata.org/index.php/ijtc effectiveness of pmse vat in the new normal era in kpp badan dan orang asing (kpp badora) agung, andayani, and kumala 158 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the implementation of the pmse vat collection policy at kpp badora is based on regulation of the minister of finance number 48 /pmk.03/2020 dated may 5, 2020. in the implementation of the policy, kpp badora experienced several obstacles such as the interconnection of banking data and the open access to financial flow statements of business actors both established and not yet established, it is very important to measure whether the entity is included in the criteria to be designated as a pmse vat collector. in addition, binding sanctions for business actors that have been confirmed are considered not fully optimal. conclusion the results showed that vat receipts decreased in 2019 from the previous year of rp 1,258,321,744,867 to rp 1,065,669,330,600 due to covid that hit indonesia. the government is trying to find other sources of tax, namely with the issuance of 48 / pmk.03 / 2020 then there is an additional number of psme taxpayers in the 2020 period increased by 51, then there is an increase in pmse vat taxpayers every semester, although the increase decreases. however, psme vat receipts tend to increase every semester. if viewed from the level of effectiveness in 2020 is very effective, as well as in the period 2021, per semester is very effective, the application of regulations has several weaknesses, namely related to the affirmation of sanctions against collectors who are negligent in carrying out their tax obligations and potential mining activities of business actors who are ready to be appointed as vat collectors of pmse. in addition, public awareness about taxation is still very low, there are still many users who use the service for free and also the rise of piracy, it more or less affects the number of transactions that can be subject to value added tax. reference anggara, s., afiyah, s., farida, a. s., & muslim, j. 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(2021). engaging social media users with attitudinal messages during health crisis communication. lingua, 103199. https://doi.org/10.1016/j.lingua.2021.103199 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 863-877 863 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) sutri handayani1, djoko suhardjanto2, e . muhtar3, setianingtyas honggowati4 1234 universitas sebelas maret, indonesia correspondent: sutrihandayani@unisda.ac.id1 received : august 25, 2023 accepted : october 21, 2023 published : october 31, 2023 citation: handayani, s., suhardjanto, d., muhtar, e., honggowati, s. (2023). analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period). ilomata international journal of tax and accounting, 4(4), 863-877. https://doi.org/10.52728/ijtc.v4i4.900 abstract: a change in profit is a condition in which a company over a period of time has an increase or decrease in profits compared to the previous period. failure to make a profit will seriously affect business operations. in the short term, losses may not matter unless the business suffers a substantial loss. the purpose of this research is to empirically examine if the ratios of current, debt, net profit margin, and total asset turnover have a significant impact on the growth of income for mncs included in the idx index between the years 2020 and 2022. this kind of study is quantitative and makes use of already collected data. for the years 2020-2022, this research focuses on american mncs trading on the indonesia stock exchange (idx). a total of 68 samples were collected for this investigation through a purposive sampling strategy. several different types of statistical tests (descriptive, multiple regression, traditional, and hypothesis) were utilized to analyze the data for this study. this research found that although changes in the debt ratio, net profit ratio, and total asset turnover did impact profits, current ratio no effect on profits. financial development. in addition, the findings demonstrate that the ratios of current, debt, net profit margin, and total asset turnover all have a synergistic impact on the rate at which income fluctuates. keywords: current ratio, debt ratio, net profit margin, total asset turnover, change in income this is an open access article under the cc-by 4.0 license. introduction in today's age of globalization, the growth of indonesia's economy is seen as crucial to a company's long-term viability. an organization in the modern world must strive for continuous growth and development (susilawati et al., 2022; u. et al., 2016). this happens because today's evolving business world requires a company to be optimally prepared for business competition, fierce business competition will erode companies that are not able to compete. or have financial performance problems. one of the things one can do to know if a company is doing well financially is to look at the change in profit that occurs every year, if the company's profits https://www.ilomata.org/index.php/ijtc mailto:sutrihandayani@unisda.ac.id https://doi.org/10.52728/ijtc.v4i4.900 analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 864 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc increase then that indicates that the company is in good financial performance(irawati et al., 2019; mahrani & soewarno, 2018; minggus et al., 2020). conversely, if the company's earnings drop throughout the year, it's smart to put in place methods that can be utilized to boost profits in the near and far future (imani et al., 2020)); (allozi & obeidat, 2016); (suzan, 2019). profit is a key indicator of financial health and may be used in a variety of contexts. the growth of earnings refers to information that can bring about the results or image of the company in the future (suharti & kalim, 2019); (imani et al., 2020; minggus et al., 2020; rahmawati et al., 2022). the phenomenon that occurred in one of the production companies that experienced a decrease in revenue was as follows: source: data processed by researchers, kontan.co.id figure 1. revenue of cement sub sector company companies listed on the indonesian stock exchange (idx) who operate in the cement industry are expected to have a decline in revenue during 2020, as shown in figure 1. the first drop in revenue occurred at pt. indocement tunggal perkasa tbk (intp), a cement maker with a tricycle brand, recorded a net profit of rs 1,000,000,000. rp 14.18 trillion in 2020 down 11% from 2019 revenue of rp 15.94 billion. from a financial results perspective, intp also reported reduced net profit in 2020 of 2,56 trillion. in addition, pt. semen indonesia tbk (smgr), reported net income decline throughout 2020 of rp 35.17 trillion. this is down 12.87% from the 2019 revenue of rp 40.36 billion. however, smgr achieved a net profit increase in 2020 of p 2.79 trillion, up 16% from rp 2.39 trillion in 2019. third, pt. solusi bangun indonesia tbk (smcb), recorded revenue of rp 1,000,000,000. in 2020, a decrease of 8.58% compared to 2019 of rp 11.050 billion. however, smcb posted a net profit increase in 2020 of rp 1,000,000,650.98 billion, up from 2019 of rp 30.44% or rp 499.05 billion. wednesday, pt. semen baturaja tbk (smbr) recorded a revenue of rp 1.72 trillion in 2020, down 13.9% from 2019 of rp 1.72 trillion (rp 1.99 trillion). smbr also recorded a decrease in net profit attributable to the parent company of rp 1,000,000.10.98 billion in 2020, down 6% from 2019 of rp 30.07 billion (kontan.co.id, 2021). (zamzami faiz, 2016) states that the primary function of a manufacturing company is to manage raw materials into market-ready products. according to the institute of corporate finance 0 10 20 30 40 50 intp smgr smcb smbr 15.94 40.36 11.05 1.99 14.18 35.17 10.1 1.72 2019 2020 https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 865 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (2021), the idx-listed multinational corporations are one of the most sought-after industries in indonesia. according to harahap (2016: 297), a financial ratio is a comparison figure used to assess the relative importance of two different variables. the liquidity ratio, often known as the working capital ratio, is a metric used to assess a company's liquidity, as noted by (kasmir, 2019); (hertina & sutarman, 2020; imani et al., 2020; khoiriah, 2022; maria & kosasih, 2022; minggus et al., 2020; susilawati et al., 2022; suzan, 2019; utami, 2017). the conceptual framework figure 2. conceptual framework hypothesis 1. effect of current ratio on profit changes the current ratio is a measure of the stability of a business. total current assets are compared to current liabilities to get the overall liquidity ratio. according to kasmir (2019: 134), a company's current assets are its assets that can be quickly converted to cash (within a year or less). a company's current liabilities are its obligations that can be paid off within a year. the longest length of liability for the business is one year. the company has sufficient cash on hand to meet its short-term commitments, putting it in a strong position to maximize its earnings from customers' purchases and interest on accounts receivable, according to (maria & kosasih, 2022);(allozi & obeidat, 2016; irawan & setyono, 2013; lee, 2020; susilawati et al., 2022). consistent with the findings of yuigananda et al. (2020) and kusumawardani et al. (2021), this research found that the current ratio affects earnings volatility. therefore, we may state the hypothesis as: h₁ : multinational idx-listed firms' profit fluctuations around 2020-22 may be influenced by the current ratio. https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 866 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. effect of debt to equity ratio on changes in income since banks (creditors) bear more of the cost of any potential business collapse, a higher ratio indicates poor profitability (hertina & sutarman, 2020). the corporation, however, believes that a larger ratio is preferable. when the ratio is low, the owner is more likely to give financing and the borrower is more likely to have a larger security limit in the case of an asset value decline or loss (kasmir, 2019: 160). the higher a company's debt, the higher its interest expense will be. this, in turn, will have a negative effect on the company's bottom line, as the money made by the business will have to go toward servicing its debts and interest. significant if the firm has an excessive amount of debt (maria & kosasih, 2022; (irman & purwati, 2020). in contrast, if debt levels are kept low, the firm should be able to make a healthy profit. therefore, the debt to equity ratio affects the profitability of a business (handriani & robiyanto, 2018); (hersugondo & handriani, 2020); (agustia et al., 2021); (indriyani & mudjijah, 2022). research by rahmawati et al., (2022), widiasmara et al., (2022), and firman & salvia (2021) corroborate our findings that the debt to equity ratio affects earnings volatility. in order to establish a hypothesis: h₂ : changes in the profitability of multinational firms included on the idx in 2020–2022 are anticipated to be influenced by the debt to equity ratio. 3. effect of net profit margin on profit changes profit after interest and taxes as a percentage of sales is a useful indicator of financial health. kasmir (2019: 202) defines net profit as "net income divided by sales." this ratio reveals whether or not the company's after-tax profit has decreased, and a drop in profits indicates that the company is in a financial crisis, while an increase in profits indicates that the company is doing well financially (khoiriah, 2022; suzan, 2019). it follows that changes in the net profit margin will have an effect on the bottom line(rizky & aryani, 2020); (anwar et al., 2018); (linda, 2022). this study's findings that the net profit margin affects profit fluctuations are consistent with those of widiasmara (2022) and paputungan (2021). in order to establish the hypothesis: h₃ : profit fluctuations among idx-listed multi-nationals may be influenced by net profit margin between 2020 and 2022. 4. effect of total asset turnover on changes in profit how many rupiah in sales are generated for every one rupiah in the company's assets is calculated using this ratio. a higher ratio of sales to assets means profits may be earned more quickly, while a lower ratio means profits can be earned over a longer period of time. therefore, tact has an impact on variations in net income (firman, 2019); (sunjoko & arilyn, 2016); (karim et al., 2023); (andani et al., 2020). https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 867 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc total asset turnover has a considerable beneficial influence on changes in profits, as shown in this research and by estininghadi (2019) and widati & yuliandri (2020). in order to establish the hypothesis: h₄ : global idx-listed corporations' 2020-2022 earnings fluctuations may be influenced by total asset turnover. 5. effect of current ratio, debt to equity ratio, net profit margin, and total asset turnover on profit changes based on the theory stated above, variations in the value of current assets, the value of current liabilities, and the turnover of all assets all affect the variation in the value of the firm's net income (karim & syamsuddin, 2023). consistent with previous research, our findings suggest that the cash ratio, debt to equity ratio, total asset turnover, and net profit margin all play a role in explaining variations in profitability. in order to establish the hypothesis: h₅ : it is hypothesized that in the years 2020 and 2022, the profit fluctuations of multinational businesses traded on the idx are influenced by the current ratio, the debt to equity ratio, the net profit margin, and the total asset turnover. method quantitative methods were used for this study. quantitative research methods, as defined by sugiyono (2018: 13), involve the study of populations or samples through the use of random sampling techniques, the collection of data through the use of research tools, the use of quantitative data analysis or statistics, and the testing of hypotheses. according to hendriyadi (2015: 110), the most significant benefit of quantitative research is the generation of more trustworthy data, with the ultimate goal of generalizing results to wider populations. using quantitative methods, scientists may also put previously held beliefs and hypotheses to the test. the participants in this research were international corporations trading on the idx. the research strategy used here is quantitative. a quantitative approach is one that use numerical data and statistical analysis to provide an impartial evaluation of outcomes. this research relied on secondary sources for both data and information. from 2020 to 2022, the idx will include 551 different multi-national corporations. in this investigation, we used a targeted sample strategy. researchers selected a sample of 118 multinational corporations traded on the idx between 2020 and 2022 based on predetermined sampling parameters. descriptive statistics, multiple regression analysis, tests of classical assumptions, and hypothesis testing were utilized to analyze the data in this research. https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 868 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion 1. uji statistik deskriptif research variables are explained using a descriptive statistics test. the following analysis provides examples of the research variables with respect to minimum, maximum, median, mean, and standard deviation. table 1 provides some basic descriptive statistics. table 1. descriptive statistics test results source: results of spss data processing (2023) the number of observations at idx-listed international firms is broken down by minimum, maximum, average, and standard deviation in table 1. it reveals that between 2020 and 2022, 68 observations were taken at idx-listed global corporations. 2. classic assumption test a reliable set of regression analysis findings was sought, hence a conventional assumption test was conducted. normality tests, multicollinearity tests, heteroscedasticity tests, and autocorrelation tests are all examples of classical assumption tests. table 2 displays the results of the normalcy test: normality test to determine whether a data set has a normal distribution, the normality test may be performed. table 2 displays the results of the normalcy test: https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 869 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. data normalization test results one-sampleikolmogorov-smirnovitest source: results of spss data processing (2023) the sig value of (0.091) > (0.050) seen in table 2 indicates that the data set is regularly distributed. these findings are corroborated by another kind of graphical analysis, namely the normal probability plot. source: results of spss data processing (2023) figure 1. normal probability plot graph points in figure 1 are typically distributed because they are close to or on the diagonal. autocorrelation test the purpose of the autocorrelation test is to ascertain whether or not the interfering errors in the ti period are correlated with the interfering errors in the ot-1 (prior) period in the linear regression model. table 3 below displays the results of the autocorrelation test: https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 870 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. autocorrelation test results (durbin watson) source: results of spss data processing (2023) calculations of autocorrelation yielded a durbin watson value of 1.735, as shown in table 3. it can be concluded that the autocorrelation test results show (1.7001) (1.735) 4-du (2.300) from the durbin watson table at a significance level of 5% for the number of independent variables (k) = 4 and the number of observational data (n) = 68, where du = 1.7001 and dl = 1.516, respectively. as a result, we may infer from this study's autocorrelation measurement that h0 is accepted and no autocorrelation exists. multicollinearity test the purpose of the multicollinearity test is to see whether the regression model has discovered any relationships or correlations among the independent variables. an elevated varianceinflation-factor (vif) indicates the presence of multicollinearity. if the value of vif is less than 10, and the tolerance value is more than 0.100, then multicollinearity is not present. table 4 below displays the results of the molticolinarity analysis: tabel 4. hasil uji multikolinearitas source: results of spss data processing (2023) table 4 shows that the test results show a tolerance value for the current ratio variable of 0.819 > 0.100, debt to equity ratio 0.671 > 0.100, net profit margin 0.892 > 0.100, and total asset turnover 0.823 > 0.100. meanwhile, the vif (variance inflation factor) value for the current ratio variable is 1.221 < 10.00, debt to equity ratio is 1.490 < 10.00, net profit margin is 1.121 < 10.00, and total asset turnover is 1.215 < 10.00. so it can be concluded that there are no symptoms of multicollinearity between each variable in this model. https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 871 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc heteroscedasticity test the purpose of the heteroskedastisity test is to determine whether there are significant variations in the residuals and variance of the observations in the regression model. table 5 below displays the results of a glejser test for heteroscedasticity. table 5. glejser test results source: results of spss data processing (2023) based on the data in table 5, we can deduce that the current ratio (x1) is highly significant (p=0.934), the debt to equity ratio (x2) is moderately significant (p=0.540), the net profit margin (x3) is slightly significant (p=0.273), and the total asset turnover (x4) is slightly significant (p=0.358). according to the criteria for reaching a judgment in the glejser test, we can say that heteroscedasticity was absent in this research since the significant value of the 4 variables was more than 0.050. 3. multiple regression analysis researchers used multiple regression analysis to examine the linear connection between their independent variables and the dependent one. using the value of the independent variable on two or more independent variables, this test attempts to predict the mean value of the population. table 6 below displays the results of a multiple regression analysis: table 6. results of multiple regression analysis source: results of spss data processing (2023) https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 872 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table 6, the multiple linear regression equation is obtained as follows: y= 1.083 + 0.026 cr + 0.681 der + 1.843 npm + 0.823 tato + 𝑒 4. hypothesis test coefficient of determinationi(r²) this analysis was performed to determine the level of significance of the relationships between the independent variables (current ratio, debt to equity ratio, net profit margin, and total asset turnover). the results of the test for the correlation coefficient (r2) are shown below. table 7 below displays the findings of the coefficient of determination: table 7. test results for the coefficient of determination (r²) source: results of spss data processing (2023) table 7 displays a r square (r2) value of 0.682, which represents the findings of the coefficient of determination. this implies that current ratio, debt to equity ratio, net profit margin, and total asset turnover all have an effect on the dependent variable, which in this case is the variation in profits. while the remaining 31.8% is affected by factors outside the scope of this investigation. partial test (uji t) partially testing the influence of the independent variables (current ratio, debt to equity ratio, net profit margin, and total asset turnover) on the dependent variable (changes in profit) was the purpose of the test. table 8 below displays the findings of a test of hypotheses with missing data (t test): table 8. partial hypothesis testing (uji t) model t sig. nilai (ttabel) 1 (constant) -3.271 0.002 2,015 cr 0.315 0.755 2,015 der 4.349 0.000 2,015 npm 2.539 0.015 2,015 tato 4.404 0.000 2,015 https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 873 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: results of spss data processing (2023) profit changes of idx-listed mncs in 2020 and 2022 as shown by testing the partial effect of the independent variables current ratio (cr), debt to equity ratio (der), net profit margin (npm), and total asset turnover (tato) (table 8). 1. since the current ratio's osig value is more than or equal to 0.050, namely (0.755) > (0.050), and since -t table tcount ttable, namely -2.016 0.315 2.015, we accept h0 and reject h1, indicating that the current ratio has only a minor influence on changes in profits. 2. the regression coefficient of the debtto equity ratio variable has a positive and significant effect on changes in earnings, as indicated by a sig value (0.050), or (0.000) (0.050), and a tcount > ttable, or (4.349) > (2.015), thus rejecting h0 and accepting h2. 3. third, the regression coefficient of the variable net profit margin has a sig value of (0.050), or (0.015) (0.050), and tcount > ttable, or (2.539) > (2.015), indicating a positive and significant effect on profit changes. this leads to the acceptance of h3, and the rejection of h0. 4. since the value of the regression coefficient for total asset turnover is positive and significantly related to changes in earnings, the null hypothesis (h0) can be rejected, and the alternative hypothesis (h4) can be accepted. the exact values of the sig and tcount and ttable are (0.000) and 4.404 and 2.015, respectively. simultaneous test (uji f) the f test determines if there is a statistically significant relationship between four independent variables—current ratio (cr), debt to equity ratio (der), net profit margin (npm), and total asset turnover (tato)—and one dependent variable—the rate of profit growth (y). check out table 9 for a summary of the findings from running many tests of a hypothesis at once (test f). table 9. simultaneous hypothesis testing (uji f) source: results of spss data processing (2023) according to table 9, the fcount is 23.066 and the significance level (sig) is 0.015 when testing the influence of the independent variables current ratio (cr), debt to equity ratio (der), net profit margin (npm), and total0 asset turnover (tato) simultaneously (simultaneously) on the dependent variable, namely profit changes in mnes listed on the indonesian stock exchange (idx) for 2020-2022. h0 is rejected due to the values of fcount > ftable, which https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 874 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc equals (23.066) > (2.507) and df 1 = number of variables 1 = (5-1) = 4, and df 2 = n-k-1 = (685) = 63, thus the ftable value is 2.507 and the significance level (sig) is 0.050. this demonstrates that there is a positive and statistically significant relationship between the independent variables (current ratio [cr], debt to equity ratio [der], net profit margin [npm], and total asset turnover [tato]) and the dependent variable (earnings growth). therefore, h5 is a valid hypothesis to test. conclusion since the magnitude of the current ratio has no influence on changes in earnings, h0 is allowed but h1 is denied for idx-listed multinational corporations where the current ratio is a determinant of the outcome. unlike the intended profit, the current ratio is mainly concerned with paying off the company's short-term debt. a low current ratio is not always an indication that a manufacturing firm is struggling to turn a profit; rather, it indicates that the firm is allocating part of its liquid assets on ensuring the continuity of operations rather than growing its bottom line. multinational companies listed on the idx have a variable debt to equity ratio that affects their profits partly due to the company's efficiency in optimizing its own capital as opposed to relying on capital from outsiders (creditors), so h0 is rejected and h2 is accepted. companies employ high capital to improve corporate earnings, however money from outside the firm will hurt the company in the long run. changes in the company's earnings will be influenced by the company's ability to generate profit. since most of the company's owned capital is generated internally, profit generation is a top concern. multinational corporations listed on the idx may maximize their profits by optimizing their sales, therefore h3 is approved and h0 is refused. the variable net profit margin has a partial effect on profit fluctuations in these companies. the capacity of a business to turn a profit increases as the net profit margin rises. an improvement in net profit margin predicts future financial success for a business. we can rule out h0 and accept h4 since the total asset turnover variable has some bearing on the variation in earnings of multinational businesses listed on the idx; the higher the total asset turnover value, the better it is for the company. impacts the company's ability to raise revenues significantly. the greater a company's asset turnover, the greater its profits. changes in earnings for idx-listed multinational corporations are influenced by four independent variables: the current ratio, the debt-to-equity ratio, the net profit margin, and the total asset turnover. this is due to a positive and statistically significant relationship between the independent variables (current ratio [cr], debt to equity ratio [der], net profit margin [npm], and total asset turnover [tato]) and the dependent variable (profit variation). therefore, h5 is a valid hypothesis to test. this demonstrates that the rise or fall in earnings is significantly affected by the independent variables of current ratio (cr), debt to equity ratio (der), net profit margin (npm), and total asset turnover (tato). https://www.ilomata.org/index.php/ijtc analysis of current ratio, debt ratio, net profit margin, and total asset turnover change in income (study of multinational companies listed on the idx for the 2020-2022 period) handayani, suhardjanto, muhtar, and honggowati 875 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference agustia, d., asyik, n. f., & midiantari, n. 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(2017). analysis of current ratio changes effect, asset ratio debt, total asset turnover, return on asset, and price earning ratio in predictinggrowth income by considering corporate size in the company joined in lq45 index year 2013 -2016. international journal of economics, business and accounting research (ijebar), 1(01). https://doi.org/10.29040/ijebar.v1i01.253 zamzami faiz. (2016). akuntansi pengantar 1 (2016th ed.). https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3, july 2023 page no. 374-384 374 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx) sari bulan tambunan universitas medan area, indonesia correspondent: sari@staff.uma.ac.id received : april 28, 2023 accepted : june 10, 2023 published : july 31, 2023 citation: tambunan, s, b.(2023). analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). ilomata international journal of tax and accounting, 4(3),145-163. https://doi.org/10.52728/ijtc.v4i3.755 abstract: this study aims to determine, analyze, and test tobin's q, market-to-book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). this study uses a quantitative descriptive approach with the support of a panel regression model, which is used as a predictive analysis tool. the sampling technique used a non-probability random sampling approach with a purposive sampling method. the results of this study indicate that the independent variables (tobin's q (tq), mbv, and roa) both simultaneously or together and partially or individually have no effect on the dependent variable (asset growth). the r square value, or the coefficient of determination (r2), is 0.54. this shows the ability of tobin's q (tq), mbv, and roa to explain the growth of assets of property companies listed on the indonesia stock exchange by 54%, or, in other words, the ability of tobin's q (tq), mbv, and roa to have an effect of 54% on asset growth variables. meanwhile, the remaining 46% is influenced by other variables not discussed in this study. keywords: tobin’s q, market to book value of equity, profitabilitas (roa), asset growth, idx this is an open access article under the cc-by 4.0 license. introduction good company performance can be seen in the growth of assets. growth and continuing asset increases become something that is desired by internal and external parties within the company. growth asset is a variable considered by an external company in decisions about debt and investment (saputra et al., 2014). growth in assets will have favorable prospects for investment. because the possible return that will be obtained is also high, that becomes a signal positive for investors and causes an increase in stock prices (brigham & houston, 2010; hansen, 2014). https://www.ilomata.org/index.php/ijtc mailto:sari@staff.uma.ac.id https://doi.org/10.52728/ijtc.v4i3.755 analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 375 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc growth assets have a powerful effect on companies, especially small and medium ones, because with an investment company or activity financing done, the rate of return can be predicted by investors. because that is growth asset in matter count mark company one tool measure can use indicator tobins q, market to book value, and profitability (return on assets) (sudiyatno & puspitasari, 2010). use indicators as tools for measuring something for which variables are indispensable. this is related to giving convenience in understanding meaning (d. astuti, 2009; r. a. astuti, 2014). no, of course, for determining something as an indicator as a gauge variable, because an indicator must be capable of representing a variable to be measured in a manner right, so in a manner scientifically accepted and accounted for the truth as the right indicator to measure a variable (gitman & j., 2015). an indicator used as a gauge variable must be tested, especially formerly. for the precision. tobin's q as one indicator to gauge variable growth assets in a mark company from the perspective of investment has been tested on a wide range of management situations. tobin's q is a ratio that provides an explanation mark from something in which market the company is in a market value company should change its active. if the value of tobin's q is firmer than one, the mean company market value is more than the assets listed company. because the market will evaluate a good company that owns mark tobin's high q. otherwise, if mark tobin's q is not enough from one, indicate that cost change assets are bigger than company market value, so the market will evaluate the company as not enough (keown, 2010; subramanyam & wild, 2010). another measuring tool for growth assets is the market-to-book value of equity and profitability (return on assets). the market-to-book ratio is a capable ratio that estimates the influence between mark-tobook and stock returns and also determines whether investors will get capital gain (profit) or capital loss (loss) on investment shares that they have chosen. counting stock returns in a cross-sectional way also uses the market-to-book ratio. whereas return on assets (roa) is a ratio used to measure profitability of assets as a whole. because of that, the more positive (high) value return on assets (roa), the better the ability of the company to exploit the assets it owns to produce profit, so that growth asset will be higher. conversely, a negative return on assets (roa) small) shows that of the total assets used, the company is not capable of making a profit, so that growth asset will be more than too small (riyanto, 2012). based on the background behind the problem before, the researcher formulates the problem in the study. this, namely: 1. formulation problem regression panels: does tobin's q, market to book value of equity, and profitability (roa) have an effect in a positive and significant manner on asset growth in the company's property on the indonesia stock exchange (idx)? 2. formulation problem simultaneous: does tobin's q, market to book value of equity, and profitability (roa) have an effect in a manner simultaneous to growth assets in the company's property on the indonesia stock exchange (idx)? https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 376 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the formula problem above, the goals from study are: 1. panel regression research objectives: to identify and analyze positively and significantly the effect of tobin's q, market to book value of equity, and profitability (roa) on the company's property on the indonesia stock exchange (idx). 2. simultaneous research objectives: to identify and analyze simultaneously the influence of tobin's q, market to book value of equity, and profitability (roa) on asset growth in property companies on the indonesia stock exchange (idx). benefit from studying this is as follows: 1. for investors, research this expected growth can serve as a foundation for investors and potential investors when making investment decisions. 2. for academics, research this can become a material reference. for study next related to tobin's q, market to book value of equity and profitability (roa) to growth asset 3. for researchers, research this will add insight and knowledge by connecting existing theory with phenomena and empirical experiences, all at once applying acquired knowledge in the study program of accounting inside practice and theory. 4. for researchers, next, research this is beneficial as information and comparison for the researcher next. literature review growth asset assets are sources of expected economic benefit to the company in the future (ezebilo, 2014; horngren, 2019; shuai, 2015). assets are all owned by a wealth company and deliver economic benefits in the future (reeves et al., 2014). increase and decrease asset effects on company capital enhancement causes assets because results performance companies can form profit from business companies, from matter this means that own capital will increase, and the capital ratio between capital and debt will change. the company wishes to increase its level of production by adding fixed assets; currently, the company's assets are insufficient. for continuity in production, the steps taken are to get additional funds from outside, form debt against the bank, or publish bonds. acquisition of funds from outside: this will make a comparison between capital and debt changes (prasetyo et al., 2016). variable assets every period give a unique view. for explored. clear presentation of data with the assumption that the company publishes real data makes observation of assets more focused. asset figures from period to period are capricious in accordance with performance. the company also makes management decisions. growth trends in assets will have an effect on decisions made by management in determining the development of a company (sudana, 2011). https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 377 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1-t assettotal 1t assettotalt assettotal growth −− = tobin’s q tobin's q, also known as the q ratio or q theory, was introduced for the first time by james tobin in 1969. james tobin is a successful american economist who reached the nobel prize in the field of economics with the hypothesis that a market-value company should be the same as a costreplacement asset company, so that creates circumstances of equilibrium. the definition of tobin's q is: "tobin’s q is the ratio of the market value of a firm's assets (as measured by the market value of its outstanding stock and debt) to the replacement cost of the firm’s assets". tobin's q offers an explanation from something company. tobin's q model defines a mark company as a mark combination of tangible and intangible assets. the value of tobin's q low firm (between 0 and 1) indicates that cost change assets of the company are larger than the company's market value. this indicates that the market does not rate enough companies. whereas if the value of tobin's q of a company is high (more than 1), then mark company is bigger than mark assets listed company. this indicates that there are a number of assets in companies that aren't measurable or recorded. tobin's q formula : tobin's q = me + ps + debt / ta where: me = the number of common shares of the company outstanding multiplied by the closing price of the stock ps = liquidation value of the company's preferred shares outstanding. debt = (total payables + inventories current assets) ta = book value of total company assets the tobin's q formula with the financial transaction conditions of companies in indonesia is as follows: tobin’s q = me + debt / ta market to book ratio market to book ratio is size relatively from how much big growth for mark company compared to with asset his physique . with so , increasingly big expected growth and value on the ratio the , https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 378 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc increasingly the market to book ratio is also high . (mabelane et al., 2023; penman, 2013; ritonga & suyanto, 2022) explains about market to book ratio , is as follows : “ price, in the numerator of the p/b ratio, is based on the expected future earnings that investors buy. so, the higher the expected earnings relative to book value, the higher the p/b ratio ." from the explanation above , it is explained that mark seen of the p/b ratio , based on future earnings come what is expected by investors who invest capital in shares the . so, more and more tall profit relatively expected to mark books, increasingly tall also the p/ b ratio. formula for count market to book ratio : stock common of shareper valuebook stock common of shareper pricemarket ratio bookmarket = in market to book ratio is also calculated book value per share ( value books per share ). book value per share measure mark book per sheet that becomes right holder share when all riches company sold and whole obligation paid . this value can counted with share the amount of own capital that becomes right holder share including retained earnings ( common stockholder's equity ) with amount sheet issued shares . profitability ratio profitability is a ratio showing the magnitude of profit earned. a company in a specific time period, how efficient is the management company in producing profit, focusing on costs, and utilizing funds to maximize profit (deborah, 2015; naur & nafi, 2017). according to (horne et al., 2012; mishchenko et al., 2021), profitability (profitability ratio) consists of two types: ratios showing profitability in relation to sales and ratios showing profitability in relation to investment. in this study, the researcher chose a tool measuring return on assets. where for measuring the ability of a company to obtain profit from assets, use the formula: assetstotal incomenet asset on return = method study this is a quantitativstudy aiminge aim for know the connection between two variables or moreor more. with study, this will build a working theory for explaining, predicting, and controlling symptoms (russiadi, 2014). technique used for collecting data, i.e., with method documentation, researchers look for information and learn about various source documentation like books, journals, articles, magazines, the internet, and libraries. data analysis technique https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 379 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. analysis statistics descriptive statistics descriptive is a method of research that tries to describe and interpret objects that exist. the goal is to describe facts, objects, or subjects that exist with an objective in a systematic manner. by and large, the object being described will be depicted through tables, graphs, diagrams, and pictodiagrams, accompanied by simple analysis statistics like frequency, size tendency central (mean, median, mode), size distribution (range, variance, standard deviation, interquartile range), and others from observed variables in object research (buckley, 2018; hurtado-parrado et al., 2022). 2. analysis panel data regression study this uses regression double double. analysis and regression aim for measuring the strength of the connection between two variables or more as well as showing the direction of the connection between variable independents and variable dependencies used in a research, estimation of multiple linear regression models: a study this uses a tool for analysis, namely eviews 10 software. research this uses panel data. panel data is combined between coherent time series and cross-sectional data. (widarjono, 2010) identifies a number of profits earned by using panel data. first, panel data is a combination of time series data and cross-sectional data capable of providing more data, so that will produce more degrees of freedom. second, combining information from time series data and cross-section can overcome problems that arise when there is a problem disappearance variable (ommited variable). in testing hypothesis, research this uses panel data regression. panel data used is intermediary data, time, and data between companies. panel regression was used to get the results of the estimation of each characteristic individual separately. testing panel regression with a formula: gw it-p =α+β 1 tobins'q it +β 2 mbv it +β 3 roa it + € description: gw : growth assets (%) tobin's q : tobin's q (%) mbv : market to book value (%) roa : profitability (roa) (%) € : term error ? : coefficient regression ? : constant p : optimum lag length https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 380 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc i : amount observation (12 companies) t : many time (5 years ) result and discussion influence tobins' q to growth asset tobin's q as one indicator to gauge variable growth assets in a mark company from a perspective of investment has been tested on a wide range of situations, including management peak. research results this shows that tobin's q is influential in a manner significant to growth assets. this was showed with a t-count value of -0.652807 1.66298 (t-table) and a sig of 0.5175 > 0.05. research results this is consistent with the results of studies by (r. a. astuti, 2014; hansen, 2014; naur & nafi, 2017; nurohman et al., 2016), which reveal that tobins' q no is influential on growth assets. tobins' q no can be used to measure growth assets in the company's properties because the market price of property companies varies every time depending on market, economic, and political conditions. growth the company is highly expected by internal and external parties because good growth is a sign of a developing company. of corner from an investor's point of view, growth in a company is a sign of the company's own favorable aspects, and investors will too expect a level return (rate of return) on investment made to show good development. but on the company properties, predicting profit is difficult because it is influenced by the external sector from within the company. research results can say that movement direction tobin's q against growth assets is compared to upside-down or not linear. until we can conclude that when tobin's q goes up, growth assets go down, and vice versa, when tobin's q goes down, growth profits go up, company data property mark tobin's q-nya below 1, value this inclusion in the low category (between 0 and 1) indicates that cost change assets in a company are more important than company market value. this means that the market does not rate enough companies. influence market of book value (mbv) to growth asset the market to book ratio reflects the appreciation or investors' assessment of a company's market value via price share with a balance sheet picture. research results this shows that the market for book value (mbv) is not influential in a manner significant to growth assets. this showed a tcount value of 0.984346 1.66298 (t-table) and a sig of 0.3307 > 0.05. research results this is consistent with the results of studies by (r. a. astuti, 2014; hansen, 2014; naur & nafi, 2017; nurohman et al., 2016), which reveal that mbv is not influential on growth assets. mbv can't be used to measure growth assets in property companies because mbv is a relative size of asset growth, https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 381 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc while in property companies, prices and asset growth are just fast increases, so it can't be measurable in a relatively meaningful manner. use more debt lots of equity at source funding will have a negative impact on growth assets (fadhilah, 2020; gerdsri & manotungvorapun, 2021; oliinyk et al., 2021). from the trade-off theory explained, using debt after a certain point will lower growth assets. addition of debt will increase the risk for the current income company. where income company influenced factors external besides that, more and more tall debt means that flower debt will increase more tall than savings tax, so that policy debt is influentially negative to growth assets. from the results of the study, it can be said that movement mbv direction to growth asset is compared to straight or linear. so we can conclude that if mbv goes up, growth assets go up, and vice versa, when mbv goes down, growth profit goes down. value for market to book value equity for company property in category yag medium, approaching value 1. this indicates that investors will get capital gains (profits) on their investment in selected stocks. effect of return on assets (roa) on growth assets profitability is a series of decisions taken by managers in a company to produce profit or profit on the management asset company at the time of walk operational company. research results this shows that return on assets (roa) is not influential in a manner significant to growth assets. this was showed with a t-count value of 0.627701 1.66298 (t-table) and a sig of 0.5337 > 0.05. research results this is consistent with the results of studies by (r. a. astuti, 2014; hansen, 2014; naur & nafi, 2017; nurohman et al., 2016), which reveal that roa is not influential on growth assets. profitability proxy with roa, no effect of roa is suspected as investors tend to ignore existing roa information in a manner maximum so that management too is not motivated to align profit through variable profitability. companies with high-growth assets will have higher roa in the future. growth is a great asset that shows potency and benefits the economy at the time front, so a company with a great asset trend has a large roa also in the future front. other factors that have an impact and have implications for profit, i.e., factors external like influence policy, monetary and fiscal, developments in the sector, industry, and others, factors in the economy, for example, inflation (an increase in prices), deflation (a decrease in prices), the rupiah exchange rate, and factors in the world economy the value for return on assets (roa) is reasonable, around 6.87%, p this indicates that the company has the ability to exploit the assets it owns for profit. https://www.ilomata.org/index.php/ijtc analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx). tambunan 382 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the research findings and the previous discussion, the following conclusion was reached. hypothesis test results in a manner simultaneous from the results of the regression analysis in the table above, a f count of 1.05 is more small than the f table, which is equal to 2.71, with a level of significance of 0.43, which is a remote more big 0.05, then it can be concluded that the ha hypothesis is accepted, which means variable independent (tobin's q (tq), mbv, and roa) are not influential in a manner simultaneously or together with variable dependent (growth assets). tobin's q, mbv, and roa hypothesis test results: partial, tobin's q, mbv, and roa, respectively. partial no factor is influential in a manner significant to growth assets, and hypotheses that state tobin's q, mbv, and roa matter in a manner significant to growth assets can be rejected. from the results of the study, it can be said that the movement direction of tobin's q, mbv, and roa against growth assets compared backwards or was not linear. so we can conclude that if tobin's q, mbv, and roa increase, then growth asset goes down, and vice versa, if tobin's q, mbv, and roa decrease, growth profit goes up. in accordance with the conclusions obtained, any advice to be delivered is as follows: suggestions for companies, improving function management company in growth assets to get apply asset management so management can maximize company for increase profit with various ratios performance finance and minimize possible factors lower profit company. suggestions for researchers next, it is recommended for study to add variable macro like inflation, interest rates, or even different variables with variable in study so that more results can be obtained. reference astuti, d. 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(2010). analysis statistics multivariate applied. upp stim ykpn. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 145-163 145 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable riski ayu fitriani1, menik indrati2 12universitas esa unggul, indonesia correspondent: riski.a.fitriani99@student.esaunggul.ac.id1 received : december 30, 2023 accepted : april 1, 2023 published : april 30, 2023 citation: fitriani, r, a., indrati, m.(2023). the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable. ilomata international journal of tax and accounting, 4(2),145-163. https://doi.org/10.52728/ijtc.v4i1.678 abstract: this study's objective was to analyze the impact of capital intensity, inventory intensity, and profitability on tax aggressiveness, with debt level serving as a moderator. this study includes three independent factors, namely capital intensity, inventory intensity, and profitability; one dependent variable, namely tax aggressiveness; and one moderating variable, namely debt level or leverage. in this study, 17 firms out of a total observation of 45 companies with research objects on the lq45 company index listed on the indonesia stock exchange (idx) from 2017 to 2021 met the inclusion requirements. according to the findings of this study, capital intensity has a beneficial effect on tax aggression. the variable inventory intensity has no positive impact on tax aggression. the unpredictable profitability has a favorable impact on tax aggressiveness. the association between capital intensity and tax aggression cannot be moderated by the variable of leverage. the association between inventory intensity and tax aggression cannot be moderated by the variable of leverage. the variable of leverage moderates in a positive way the association between profitability and tax aggression. this research can also be used to encourage investors and shareholders to receive financial statement information offered by companies with greater care when making investment decisions. for companies to be able to determine positive policies that can maintain business continuity and can meet the expectations of shareholders will carry out tax aggressiveness. keywords: capital intensity; inventory intensity; profitability; tax aggressiveness; debt level. this is an open access article under the cc-by 4.0 license. introduction one of the sources of state finance is taxes, where taxes are one of the most important supports for state financing. tax contribution to state revenue reaches 80%. even though tax revenue has increased every year, there are always deficiencies so that the tax target is not achieved like the current covid-19 pandemic. according to data (www.bps.go.id, 2022) state tax revenue has https://www.ilomata.org/index.php/ijtc mailto:riski.a.fitriani99@student.esaunggul.ac.id https://doi.org/10.52728/ijtc.v4i1.678 the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 146 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc decreased. in 2019-2021 the covid-19 pandemic occurred which caused many companies to go bankrupt, so that the amount of company income will affect the payment of income tax to the company. in order to reduce the income tax paid to the government, companies usually carry out tax aggressiveness by reducing the profits earned by the company. that way people's economic activities are also very limited during the covid-19 pandemic. meanwhile, tax performance and economic recovery have started to increase from the impact of the co-19 pandemic since 2021. a firm will make an investment in the form of fixed assets, and the company will do depreciation to calculate the amount of tax that must be paid and how the funds will be utilized to generate a profit (ratnawati & utomo, 2022). a high inventory intensity of a company can help reduce the amount of tax payments. (oktaviani et al., 2021) states that when inventory intensity results in an increase in profit due to additional costs, as a result it will cause an increase in tax payments so that companies will carry out tax aggressiveness. (suhendar et al., 2022) said the effectiveness of a company's work processes in identifying a company's ability to seek profit can use profitability. company profits will be used to pay shareholders. the company will carry out tax aggressiveness if the level of profit earned by the company increases (kasmir, 2017). leverage is used to increase a company's ability to achieve its goals, both small and large. companies that are in debt do not carry out tax aggressiveness because companies have interests with creditors, so companies must maintain their profits (santini & indrayani, 2020). (iswari et al., 2019) emphasized that tax aggressiveness refers to tax payment schemes implemented by management, both legally and criminally, with the intent of manipulating corporate income as the basis for tax collection. according to research (ahdiyah & triyanto, 2021) and (nugrahadi & rinaldi, 2021), capital intensity has a beneficial effect on tax aggression. in addition, inventory intensity has a good impact on tax aggressiveness (sumiati & ainniyya, 2021) (sormin, 2021). and the positive effect of profitability on tax aggressiveness (hidayat & dewi, 2022) (gunawan & resitarini, 2019). several studies have found a positive relationship between leverage moderating several independent variables on research tax aggressiveness (isa et al., 2019)(marlina et al., 2022). there are several things that distinguish this research from previous research by changing the independent commissioners' moderation variable to leverage moderation on the lq45 company index for 2017-2021. the reason the authors chose the leverage variable in this study is because companies with high debt ratios have a high level of tax aggressiveness. this occurs because corporate debt increases interest expense, which in turn reduces company profits. this study's objective was to investigate the impact of capital intensity, inventory intensity, and profitability on tax aggressiveness, with debt level serving as a moderating variable, for the lq45 firm index from 2017 to 2021. this research has benefits for companies for contributing thoughts and references for company owners, managers, regulators, and investors in decision-making actions regarding tax aggressiveness. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 147 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc positive accounting theory the purpose of positive accounting theory is to provide an overview of the accounting process running from the beginning to the present and accounting information to be presented so that it can be communicated to related parties. this theory is based on the fact that stakeholders, shareholders and tax authorities try to be persistent in maximizing their activities, which from time to time can also affect the compensation and welfare received. according to watts & zimmerman, (1986) there are 3 hypotheses that can be a reference for explaining and predicting events in accounting. of the three existing hypotheses, this study uses the positive cost hypothesis. if the conditions don't change, then the profit is relatively large, so it's the same as the company returning current profits to the future. regarding tax aggressiveness, companies with higher profits in the current period will pay higher tax payments. the bigger the company, the more resources it will require and the company will carry out tax planning with the aim of saving tax payments. to reduce the number of current profit periods, company management has made preparations to move the current profit period to the next period (amalia, 2021). tax aggressiveness (balakrishnan et al., 2019) stated that various forms of tax planning are used by the business world to monitor their own tax obligations, so companies take tax aggressive actions which of course must be sanctioned because their actions are very detrimental to society. the effective tax rate (etr) is the calculation used in this study. (iswari et al., 2019) states that tax evasion is an act in which illegal tax planning is carried out. usually companies that carry out tax aggressiveness have the goal of reducing the burden of paying taxes. this action is carried out to minimize or reduce tax costs (sunarto et al., 2021). the company will carry out a plan or scheme to avoid paying taxes. companies that have a savings plan in paying taxes will tend to be tax aggressive, this needs to be considered in fulfilling taxes by looking at the regulations set by the government (putri malinda et al., 2022). capital intensity capital intensity is a form of company fixed assets invested from the company's principal amount. according to (afiana & mukti, 2020), capital intensity is a type of investment activity carried out by business actors in the form of fixed assets such as buildings, machinery, land, etc. (christina & wahyudi, 2022) state that capital intensity is debt and equity which companies usually use for company capital policies to ensure that the company's debt and equity are maximized. capital intensity relates to business investment in assets that increases as the cost of assets decreases. because this will have an impact on the company's profit growth, the need for tax obligations will decrease. when capital intensity increases, corporate tax aggressiveness will also increase (ratnawati & utomo, 2022). total net fixed assets to total assets is the most widely used indicator to measure capital intensity. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 148 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inventory intensity if the intensity of invested capital in the form of fixed assets is different from the intensity of inventories that invest in the company's inventory. (oktaviani et al., 2021) states that companies that invest a lot in inventory are referred to as inventory intensity. (meylina & manalu, 2022) states that inventory is a company's current current assets that are used to produce goods to be sold or used in the future. any business that invests in inventory will incur costs for growing and managing inventory. this can lead to reduced company profits and increase company costs. companies with high inventory intensity will tend to do tax aggressiveness. companies can increase company profits by making cost savings when inventory intensity increases. that way the company can allocate current year's profit to the next period when inventory is high. therefore, the company will reduce profits so that it will also cause a smaller tax burden to be paid (ahdiyah & triyanto, 2021). profitability (jumono et al., 2019) stated that profitability is a tool used to evaluate a company's internal operations. with this profitability will help the company to achieve its final goal. according to (mauren & purwaningsih, 2022) profitability is the main key to the long-term success and survival of the company, which is reflected in the return on company assets. increased company profits can show an increase in profitability ratios as well. the greater the profitability value, the greater the company's performance in terms of profit generation. an increase in profitability will result in a rise in tax value; hence, corporations tend to engage in tax aggression. a corporation use a profitability ratio to measure its capacity to make profits. profitability ratios can indicate the efficiency of a company's management (sari et al., 2021). additionally, revenue is utilized to evaluate the location of the company's earnings in the prior year and in the current year. leverage according to (nilmawati et al., 2021), leverage is the ratio that compares corporate assets to company debt and measures the company's usage of debt in relation to the cost of company assets. the ratio is used to measure leverage, which is a liability possessed by the company. leverage can improve a company's ability to achieve both modest and broad objectives (gunawan & resitarini, 2019). it indicates the company's ability to meet its commitments with its assets, or how much of its assets must be liquidated in order to settle all of its liabilities. it illustrates the company's total debt burden (tahir et al., 2020). (vijayakumaran & vijayakumaran, 2019) state that with leverage, companies can finance assets with borrowed funds and describe the company's financial risks. companies that finance their assets using debt borrowed from third parties or creditors will usually incur interest costs that must be paid. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 149 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the relationship between capital intensity and tax aggressiveness fixed assets show the wealth shown by the companies because the more companies invest their fixed assets, the more companies bear depreciation costs. this utilization will have an impact on decreasing company profits. companies that invest their capital in the form of fixed assets can take advantage of depreciation costs which are a deduction from the tax burden. this provides a choice of accounting theory when companies invest in assets, allowing them to choose the depreciation method they deem appropriate to increase company profits, and positive accounting theory exists to increase profits according to (santini & indrayani, 2020). so when the company's capital intensity ratio increases, tax aggressiveness will increase. thus, to manage the company, it will use unused funds to invest in fixed assets and get profits from depreciation which will later be used for corporate tax deductions (marlina et al., 2022). so along with the increasing intensity of activity in a company, the tax aggressiveness practices carried out by the company will also increase as well. thus, the hypothesis is as follows: h1 : capital intensity is positively related to tax aggressiveness. the relationship between supply intensity and tax aggressiveness according to (ahdiyah & triyanto, 2021), inventory intensity represents how much a company invests in its own inventory. companies with a high level of inventory intensity are typically tax aggressive. companies with large inventories will also have large inventory costs. maintenance and inventory costs will also help break down profits and tax payments that companies will make to the state. managers will try to minimize the tax burden by having a large inventory so that profits will decrease. therefore, companies apply positive accounting theory in choosing profitable jobs, with the assumption that companies will succeed in making high investments in the future and enjoy lower tax payments. consequently, if a company's inventory intensity is high, its tax aggressiveness will increase. this is consistent with the findings of (sumiati & ainniyya, 2021) that inventory intensity positively affects tax aggression. thus, the following is the hypothesis: h2 : inventory intensity is positively related to tax aggressiveness. the relationship between profitability and tax aggressiveness researchers use roa to measure company profitability, according to (aksoy hazır, 2019) profitability has a relationship between company profits and income tax burden for companies. high profits can trigger tax aggressiveness for companies with high profitability values that can be described as company efficiency, high tax costs due to the high profits that the company has. it is viewed as an attempt to engage in tax aggression. profitability can be accomplished by supplying information about the company's profits, and tax aggressiveness can be attained if the company's profits are increasing. there are substantial political consequences, including high taxation. the larger the attained profitability, the bigger the company's profitability. the results are consistent with research (dianawati & agustina, 2020) and (hidayat & dewi, 2022) indicating that the roa ratio influences the amount of tax aggression. therefore, the hypothesis is the following: h3 : profitability is positively related to tax aggressiveness. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 150 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc leverage moderation on the relationship between capital intensity and tax aggressiveness leverage compares the company's assets to its debt and gauges the company's utilization of its debt in relation to the cost of its assets. in assessing the company's ability to meet its long-term obligations, the leverage ratio might be utilized (suyono, 2018). companies with significant levels of debt will incur substantial interest costs. in addition, these expenses can affect the firm's profitability. decreasing company profits causes the effectiveness of companies in managing the company's tax burden to decrease and shows an increase in tax aggressiveness. so when the company's leverage ratio increases, the tax aggressiveness will increase. if the amount of leverage used to invest in the form of fixed assets so that it can take advantage of high depreciation costs to reduce the tax burden on the company. positive accounting theory explains the decline in corporate earnings reports. conflicts between managers and government may arise due to political costs when viewed as sharing responsibility for the social good of society. tax obligations are the guidelines for the state regarding this matter. management will report low profits in order to avoid paying high taxes, that is because the company's income is high, the taxes paid will also be high. so the results are in line with research (afiana & mukti, 2020) which states that if capital intensity increases, tax aggressiveness will also increase, this will be strengthened by leverage, but not supported by (ratnawati & utomo, 2022). thus, the hypothesis is as follows: h4: leverage positively moderates the relationship between capital intensity and tax aggressiveness. leverage moderation on the relationship between inventory intensity and tax aggressiveness the level of debt or leverage is typically represented by the company's obligation to repay debt. inventory intensity is a measure of how much a firm invests in inventory; if a company has a large inventory, it will incur a greater burden in managing that inventory. the positive theory of accounting shows that conflicts generally occur in companies due to fund allocation problems. (gita et al., 2021) explains that the leverage exercised by the entity will be able to provide additional funds to purchase inventory for the entity concerned, even though it must bear the interest expense on this obligation. this is in line with the idea (marlina et al., 2022) that there is a close influence between leverage, inventory intensity, and tax aggressiveness. thus, the hypothesis is as follows: h5 : leverage positively moderates the relationship between inventory intensity and tax aggressiveness. leverage moderation on the relationship between profitability and tax aggressiveness (kasmir, 2017) states that a company's profitability indicates the period in which it will create money. taxes paid by the company will be directly proportional to its income, so a rise in profits will result in a greater tax burden for the company. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 151 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in order for businesses to profit from these tax benefits, they must increase their overall debt, resulting in a high total debt to asset ratio. according to (alexander & minnema, 2018), for this indicator to be theoretically more beneficial for the organization, it must have a high level of total debt, implying a positive association between total debt and profitability. according to the research of (hidayat & dewi, 2022), there is a close relationship between leverage, profitability, and tax aggression. thus, the following is the hypothesis: h6 : leverage positively moderates the relationship between profitability and tax aggressiveness from the hypothesis above, the following is the research model framework: figure 1. research framework source: data proceed method this research was conducted using etr. etr is determined by dividing total income tax expense by total pre-tax profit. the tax aggressiveness measurement utilizing etr can address the existence of issues and constraints. this quantitative research employs secondary data acquired from a variety of sources. this research requires information from the annual financial report (annual report) of the lq45 company index for 2017-2021, which includes 45 companies listed on the indonesia stock exchange. the technique of purposive sampling utilized in this study yielded the following results: 45 lq45 companies listed on the indonesia stock exchange (idx) in 2017-2021, 28 companies that present incomplete annual financial report data, 28 companies that do not generate profits, and 17 companies multiplied by 5 years. therefore, the collected sample data is 85. using the econometric views software, this study employed the panel data regression analysis technique (eviews 12). this study's data analysis includes descriptive statistical tests (mean, https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 152 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc median, maximum, minimum, and standard deviation), analysis and selection of panel data regression using the chow and hausman tests, and descriptive statistics (mean, median, maximum, minimum, and standard deviation). in statistical testing, gujarati and porter (2009) state that the hausman test follows the chi-square statistical distribution. then, execute the classical assumption testing, which includes the multicollinearity test and the heteroscedasticity test, followed by the hypothesis testing, which includes the simultaneous significance test (f test), the partial significance test (t test), and the coefficient of determination (adjusted r-squared) at a significance level of 0.05 (5%). result and discussion descriptive statistics test using the minimum value, maximum value, average (mean), and standard deviation for each independent variable and the dependent variable, descriptive statistical analysis is utilized to provide an overview of the distribution and behavior of the research sample data. the descriptive test results are shown in the table below: table 1. statistical analysis test results variable n min max mean median std. deviation capint 85 0.044000 2.351000 0.393365 0.339000 0.342227 ip 85 0.008000 3.184000 0.216388 0.111000 0.474544 roa 85 0.004000 0.723000 0.125424 0.098000 0.16531 der 85 0.041000 3.413000 0.873565 0.643000 0.763282 etr 85 0.146000 0.718000 0.255176 0.243000 0.086196 valid n 85 source: data proceed this study has 85 reliable data obtained from the financial reports of the lq-45 companies listed on the indonesia stock exchange bei from 2017 to 2021. it can be seen that erajaya swasembada ltd (erra) had the lowest capital intensity value of 0.044000 in 2018 and sumber alfaria trijaya ltd (amrt) had the highest capital intensity value of 2.351000 in 2021. the median value is 0.339000 and the standard deviation (level of data distribution) is 0.342227. it is anticipated that the average capital intensity of the lq45 companies from 2017 to 2021 will be 0.393%, or 39.9%. inventory intensity variable or proxied by ip has the lowest value of 0.008000 indicated by the company mitra keluarga karyasehat ltd (mika) and the highest value of 3.184000 indicated by the company sumber alfaria trijaya ltd (amrt) in 2021, the median value is 0 .111000 and the standard deviation (data distribution level) is 0.474544. it can be assumed that the average value of inventory intensity on the lq45 company index from 2017 to 2021 is a value of 0.216 or 21.6%. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 153 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the profitability variable or proxied by roa has the lowest value of 0.004000 which is owned by aneka tambang ltd (antm) and the highest value of 0.723000 indicated by the company sumber alfaria trijaya ltd (amrt) in 2021, the median value is 0.098000 and the standard deviation (level of data distribution) is 0.116531. it can be assumed that the average value of profitability on the lq45 company index from 2017 to 2021 is 0.125 or 12.5%. the leverage variable or proxied by der has the lowest value of 0.041000 indicated by the company charoen pokphand indonesia ltd (cpin) in 2021 and the highest value of 3.4113000 indicated by the company unilever indonesia ltd (unvr) in 2021, the middle value 0.643000 and the standard deviation (level of data distribution) is 0.763282. it can be assumed that the average leverage value on the lq45 company index from 2017 to 2021 is 0.873 or 87.3%. the tax aggressiveness variable or proxied by etr has the lowest value of 0.146000 which is owned by astra international ltd (asii) in 2020 and the highest value of 0.718000 indicated by the company aneka tambang ltd (antm) in 2019, the middle value 0.243000 and the standard deviation (level of data distribution) is 0.086196. it can be assumed that the average value of tax aggressiveness on the lq45 company index from 2017 to 2021 is 0.255 or 25.5% panel data regression model selection chow test in the chow test of the two models that have been carried out, both have a prob value. crosssection f and ci-square which is smaller than 0.05, with these results means that the hypothesis is rejected. so it was concluded that the fixed effect model was the best and data testing continued to hausman. hausman test based on the hausman test of the two models that have been tested, the value in model 1 is p = 0.2259 > 0.05 and the value in model 2 is p = 0.7131 > 0.05, meaning that the random effect model is the best model. the lagrange multiplier (lm) test must be continued because the random effect model (rem) was selected by the chow test and the hausman test. lagrange multiplier test after the chow test and hausman test were carried out with the best model results, namely rem, then proceed to the lm test. based on the two models that have been tested, the probability values of the cross-section are 0.0000 <0.05 and 0.0001 <0.05, meaning that the best method is the random effect model.. best panel data regression model the following table summarizes the results of the panel data regression model selection test performed on each model. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 154 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. the best panel data regression model test model 1 model 2 result chow test cem vs fem cem vs fem fixed effect model hausman test rem vs fem rem vs fem random effect model lagrage multiplier test cem vs rem cem vs rem random effect model source: data proceed from the results of testing the best model for all equations except the first model is the random effect model. classic assumption test multicollinearity test based on the sample data that has been tested, the results of all variables are below 0.80. it can be concluded that the independent and dependent variables in this study are free from multicollinearity. heteroscedasticity test based on the tested sample data, the probability value is more than 0.05. it may be stated that heteroscedasticity does not exist between the independent and dependent variables in this study. panel data regression analysis based on the findings of the panel data regression analysis test, the equation model between variables can be formed as follows: etr = -1.518 + 0.111capint + 0.062ip + 0.182roa – 0.066der – 0.093 der×capint – 0.024der×ip + 0.372der×roa + ꜫ the constant value in this study is -1.518, meaning that the independent variable has a value of 0. then the tax aggressiveness of the lq45 company index for the period 2017 to 2021 is predicted to be -1.518. based on the research sample data, the results of capital intensity are related to tax aggressiveness with a value of 0.111, meaning that the capital intensity variable has an increase in value of 0.111 to tax aggressiveness, which indicates that the coefficient is positive. inventory intensity variable has an impact on tax aggressiveness with a value of 0.062, meaning that the inventory intensity variable has an increase in value of 0.062 on tax aggressiveness, indicating that the coefficient is positive. the profitability variable is related to tax aggressiveness with a value of 0.182, meaning that the profitability variable has an increased value of 0.182 to tax aggressiveness, which indicates that the coefficient is positive. leverage and tax aggressiveness variables with a value of -0.066, meaning that the leverage and tax aggressiveness variables have decreased in value -0.066. leverage variable can moderate the relationship between capital intensity and tax aggressiveness with a value of -0.093, meaning that https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 155 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc leverage moderation has decreased the value of -0.093 on capital intensity and tax aggressiveness, which indicates that the coefficient is negative. the leverage variable moderates the relationship between inventory intensity and tax aggressiveness with a value of -0.024, meaning that leverage moderation has decreased by -0.024 on inventory intensity and tax aggressiveness, indicating that the coefficient is negative. the leverage variable moderates the relationship between profitability and tax aggressiveness with a value of 0.372, meaning that leverage moderation has increased by 0.372 on profitability and tax aggressiveness, which indicates that the coefficient is positive. panel data hypothesis test t-test (partial) the t (partial) statistical test has measurement provisions, namely the prob value. on eviews research <0.05 then the variable is accepted or significant, conversely if the value is > 0.05 then the variable is rejected or not significant to y or etr. based on the results of the t test with a significance level of 0.05, this table displays the t-statistic value and the prob value for the capital intensity variable. etr yields a value of 0.0330 0.05 with t count (2.170185) > t table (1.19900), so h1 is acceptable, i.e. capital intensity has a positive effect on tax aggression. in the inventory intensity t-statistic and probability values. etr yields a value of 0.1277 > 0.05 with t count (1.539236) t table (1.9900), hence h2 is rejected, i.e. inventory intensity has no significant effect on tax aggressiveness. then, based on the value of the t-statistic variable, profitability and probability are determined. etr produces a result of 0.000 0.05 with t count (4.991810) > t table (1.9900), so h3 is acceptable, i.e. profitability has a favorable influence on tax aggression. table 3. research model hypothesis test results hypothesis statement results positive/negative decision h1 capital intensity has a positive effect on tax aggressiveness t compute > t table 2.170185 > 1.9900 prob value < 0.05 0.0330 < 0.05 positive hypothesis accepted h2 inventory intensity has a positive effect on tax aggressiveness t count < t table 1.539236 < 1.9900 prob value > 0.05 0.1277 > 0.05 negative hypothesis rejected https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 156 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis statement results positive/negative decision h3 profitability has a positive effect on tax aggressiveness t compute > t table 4.991810 > 1.9900 prob value < 0.05 0.000 < 0.05 positive hypothesis accepted h4 leverage positively moderates the relationship between capital intensity and tax aggressiveness t compute > t table -1.863317 < 1.9900 prob value > 0.05 0.0660 > 0.05 negative hypothesis rejected h5 leverage positively moderates the relationship between inventory intensity and tax aggressiveness t compute > t table -0.761014 < 1.9900 prob value > 0.05 0.4489 > 0.05 negative hypothesis rejected h6 leverage positively moderates the relationship between profitability and tax aggressiveness t compute > t table 2.492821 > 1.9900 prob value < 0.05 0.0147 < 0.05 positive hypothesis accepted source: data proceed test eviews for moderation moderation can be examined by searching for significant interactions between the moderating variable (z) and the independent variable (iv) (x). notably, it is essential to mean-center both your moderator and your dependent variable in order to reduce multicolinearity and facilitate interpretation. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 157 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. moderation test source: data proceed the results from the eview table above show that the prob of the calculation between capital intensity and leverage or proxied in der1 has a value of 0.0660 > 0.05, so according to the calculation results it is concluded that the leverage relationship (z) cannot moderate capital intensity (x1) on tax aggressiveness (y). thus the h4 hypothesis is rejected and the data does not support the model. table 5. moderation test source: data proceed the results from the eview table above show that the prob of the calculation between inventory intensity and leverage or proxied in der2 has a value of 0.4489 > 0.05, so according to the calculation results it is concluded that the leverage relationship (z) cannot moderate inventory intensity (x2) on tax aggressiveness (y). thus the h5 hypothesis is rejected and the data does not support the model. table 6. moderation test source: data proceed the results from the eview table above show that the prob of the calculation between profitability and leverage or is proxied in der3 which has a value of 0.0147 <0.05, then according to the variable coefficient std. error t-statistic prob. c -1.194476 0.114916 -10.39434 0.0000 capint 0.116600 0.069411 1.679846 0.0968 der 0.073294 0.044547 1.645329 0.1038 der1 -0.093096 0.049962 -1.863317 0.0660 variable coefficient std. error t-statistic prob. c -1.375613 0.114425 -12.02191 0.0000 ip 0.001836 0.046450 0.039532 0.9686 der 0.033813 0.042786 0.790269 0.4317 der2 -0.024104 0.031673 -0.761014 0.4489 variable coefficient std. error t-statistic prob. c -1.963638 0.142355 -13.79394 0.0000 roa -0.201696 0.045278 -4.454613 0.0000 der -0.048730 0.045083 -1.080913 0.2829 der3 0.372003 0.149230 2.492821 0.0147 cross-section random 0.157870 0.4622 idiosyncratic random 0.170278 0.5378 https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 158 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc calculation results it is concluded that the relationship leverage (z) can moderate profitability (x3) on tax aggressiveness (y). thus the h5 hypothesis is accepted and the data supports the model. simultaneous significance test f simultaneous results of research sample data show the results of the prob value (f-statistic) of 0.000282 less than 0.05 so that it can be interpreted that capital intensity, inventory intensity, profitability are simultaneously related to tax aggressiveness. coefficient of determination based on the sample data that has been tested, it shows that the adjusted r-squared value is 0.192428 (19.2%) which means that the overall etr ratio has an impact on the capint, ip and roa ratios. while the remaining 80.8% is explained by other variables outside the research model. discussion effect of capital intensity relationship and tax aggressiveness capital intensity is positively associated to tax aggression on the lq45 company index on the indonesia stock exchange (idx) from 2017 to 2021, according to the study's findings, so h1 is acceptable. these results are consistent with research (ahdiyah & triyanto, 2021) and (afiana & mukti, 2020) which states that capital intensity is positively related to corporate tax aggressiveness. so when the company's capital intensity ratio increases, tax aggressiveness will increase. thus, to manage the company, it will use unused funds to invest in fixed assets and get profits from depreciation which will later be used for corporate tax deductions (marlina et al., 2022). so the higher the tendency of the intensity of the company's fixed assets, the higher the tax aggressiveness practices will be carried out. the influence of supply intensity and tax aggressiveness relationship inventory intensity has a positive correlation with tax aggressiveness for the lq45 company index on the indonesia stock exchange (idx) for the period 2017 to 2021, hence h2 can be disregarded. research (sormin, 2021) and (sumiati & ainniyya, 2021) indicates that inventory intensity has a beneficial influence on tax aggression. this is consistent with the research of (sugeng et al., 2020), which argues that inventory as an investment is not the best strategy for minimizing the tax burden because companies with higher levels of inventory are viewed as being at a disadvantage due to inventory that has been stored for an extended period of time expiring or having been damaged. (oktaviani et al., 2021) states that low additional inventory costs will increase company profits with lower additional inventory costs and company profits will increase, which indicates that the company will not be able to take advantage of additional inventory costs to reduce tax payments. the influence of profitability relationship and tax aggressiveness according to the findings of the study, profitability is positively correlated with tax aggressiveness for the lq45 company index on the indonesia stock exchange (idx) from 2017 to 2021, therefore h3 is acceptable. these findings are consistent with research (dianawati & agustina, 2020) indicating that profitability influences the amount of tax aggression. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 159 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as a result of being able to engage in tax planning, companies with a high profit margin will be able to minimize their overall tax burden. when a corporation's profits are greater, its income tax liability and tax aggressiveness also grow. as a result, the company will be more aggressive in avoiding its tax obligations. when the company receives high profits in the current period, the amount of tax paid will be higher. this condition can increase the tendency of companies to carry out taxes (suhendar et al., 2022). the effect of leverage moderation on the relationship between capital intensity and tax aggressiveness therefore, h4 can be refused. according to research (afiana & mukti, 2020) and (marlina et al., 2022), if capital intensity increases, tax aggression will also increase and will be increased by leverage. in accordance with the research of ratnawati and utomo, companies do not use leverage to provide fixed assets and reduce the tax burden in manufacturing companies. instead, leverage is used to finance company operations, so that the depreciation profit that should be used as a large corporate tax deduction for corporate tax payments cannot be reduced or the company cannot be tax aggressive. the effect of leverage moderation on the relationship of inventory intensity to tax aggressiveness the study's findings indicate that leverage positively moderates the association between inventory intensity and tax aggression for the lq45 company index on the indonesia stock exchange (idx) from 2017 to 2021, hence h5 can be rejected. this contradicts scientific findings (marlina et al., 2022) which states that there is a strong influence between leverage, inventory intensity, and tax aggressiveness. this is in line with research og (suyono, 2018). the company does not use leverage to own inventory and additional costs to reduce its tax burden, so the company chooses not to carry out tax aggressiveness or pay the tax burden according to the company's situation. most companies prefer to use leverage to maximize profits for shareholders. the company will increase profits and reduce the tax burden if the intensity of the company is higher (pasaribu & mulyani, 2019). the effect of leverage moderation on the profitability relationship against tax aggressiveness therefore, h6 is okay. this is consistent with the findings of hidayat and dewi's research from 2022, which indicates a close relationship between leverage, profitability, and tax aggression. taxes paid by the company will be directly proportional to its income, so a rise in profits will result in a greater tax burden for the company. in order for businesses to profit from these tax benefits, they must increase their overall debt, resulting in a high total debt to asset ratio. according to (alexander & minnema, 2018), for this indicator to be theoretically more beneficial for the organization, it must have a high level of total debt, implying a positive association between total debt and profitability. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 160 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of the author's research, it can be stated that the purpose of this study was to examine the impact of capital intensity, inventory intensity, and profitability on tax aggressiveness, with leverage as a moderating variable, for the lq45 companies listed on the indonesia stock exchange (idx) from 2017 to 2021. capital intensity, inventory intensity, and profitability are simultaneously associated to tax aggressiveness, and all independent variables modulated by leverage are simultaneously connected to tax aggressiveness. the link between capital intensity and tax aggressiveness is positive, suggesting that as capital intensity rises, corporations tend to be more tax aggressive. there is no substantial association between inventory intensity and tax aggressiveness, therefore a company's inventory intensity has little effect on its ability to reduce tax payments. significantly positive correlation exists between profitability and tax aggressiveness, indicating that an increase in the profitability of a company will result in an increase in company profits, so that the company will use positive accounting methods to reduce profits, thereby reducing the amount of tax paid by the company. and leverage does not modify the link between capital intensity and inventory intensity and tax aggressiveness. in the meantime, leverage can dramatically decrease the connection between profitability and tax aggression. reference afiana, n., & mukti, i. 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(2019). debt maturity and the effects of growth opportunities and liquidity risk on leverage: evidence from chinese listed companies. https://www.ilomata.org/index.php/ijtc the influence of capital intensity, inventory intensity, and profitability on tax aggressiveness with debt levels as a moderating variable fitriani and indrati 163 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc journal of asian finance, economics and business, 6(3), 27–40. https://doi.org/10.13106/jafeb.2019.vol6.no3.27 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 272-289 272 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc importance of liquidity indicators in intervening the dividend policy deni sunaryo serang raya university, indonesia corrospondent : denisunaryomm@gmail.com received : may 19, 2022 accepted : july 16, 2022 published : july 31, 2022 citation: sunardo, d. (2022). importance of liquidity indicators in intervening the dividend policy. ilomata international journal of tax and accounting, 3(3), 272-289. https://doi.org/10.52728/ijtc.v3i3.504 abstract: this study aims to determine the effect of managerial ownership, institutional ownership and investment decisions on dividend policy with liquidity as an intervening variable in lq45 companies listed on the indonesia stock exchange (idx) for the period 2018-2021. this study uses the causal associative method. this population is 45 companies using purposive sampling method . this research was conducted in lq45 companies listed on the indonesia stock exchange (idx) for the period 2018-2021. the type of data used in this study is secondary data and analyzed using spss 25. the analysis technique in this study uses regression analysis and path analysis.the results of the analysis show that managerial ownership, institutional ownership and investment decisions partially affect dividend policy. indirectly, liquidity can intervene in managerial ownership and also institutional ownership on dividend policy, while liquidity cannot intervene in investment decisions on dividend policy. keywords: managerial ownership, institutional ownership, investment decisions, liquidity and dividend policy. this is an open access article under the cc-by 4.0 license. introduction dividend policy is essentially a decision in determining the proportion of profits to be distributed to shareholders and which will be retained as part of retained earnings (stereńczak & kubiak, 2022). dividend policies in companies are very much considered by investors (hussain & akbar, 2022). consideration for investors is the rate of return on the funds they invest in the form of shares in the form of dividends or in the form of capital gains (l. liu & shu, 2022). the authority to control dividend policy is one of the powers delegated by shareholders to the board of directors (akindayomi & amin, 2022; lee, 2022) companies that decide to distribute their profits in the form of dividends will make available company funds limited, but on the other hand the distribution of dividends can give a positive signal for companies in the capital market because the company is considered capable of providing returns to shareholders in the form of dividends (cao et al., 2022; kasahara & orihara, 2022). shareholders or investors certainly want the company's profit and profit per share to be stable or even increase every year (barros et al., 2021, 2022; grassetti et al., 2022). mailto:denisunaryomm@gmail.com https://doi.org/10.52728/ijtc.v3i3.504 importance of liquidity indicators in intervening the dividend policy sunaryo 273 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dividend policy is also related to the relationship between managers and shareholders (nguyen & tran, 2022). agency problems occur when management does not own a majority stake in the company. shareholders want managers to work with the aim of maximizing shareholder wealth (ali & hegazy, 2022; fernández-portillo et al., 2022). the agency conflict can be minimized by providing an opportunity for management to be involved in the ownership of a company's shares so that the management and the shareholders have the same interests, namely in order to benefit from the funds invested (h. liu, 2021; xu & huang, 2021; yu et al., 2021). company liquidity is one of the main considerations for managers in determining the amount of dividend policy because a company's liquidity will indicate a company's ability to provide company operational funds and to pay off its short-term obligations (berrospide & herrerias, 2015; lin et al., 2019; ly & shimizu, 2018). liquidity problems are related to the ability of a company to meet its financial obligations which must be fulfilled immediately in the short term, therefore the high and low liquidity of a company can affect the company's dividend policy, to assess the company's liquidity position can use the current ratio (norvaišienė & stankevičienė, 2014; vijayakumaran, 2021; yeo, 2016). the ownership structure can minimize the occurrence of agency conflicts, one of which is the existence of managerial ownership in a company (aksoy et al., 2020). managerial ownership will align the interests of management and shareholders, so that managers will directly feel the benefits of decisions taken correctly and will feel the losses as a consequence of making wrong decisions (karminsky & rybalka, 2019). the greater the managerial ownership in the company, the management will tend to try to improve its performance for the benefit of shareholders and their own interests (cui et al., 2019). the better the company's performance, the higher the value of the company and the welfare of shareholders will be realized (alhazaimeh et al., 2014; jiang & li, 2015). in addition to managerial ownership, institutional ownership can also minimize agency conflicts (rhou et al., 2019). institutional ownership in a company will encourage increased supervision of management performance, because share ownership represents a source of power that can be used to support management performance (shan et al., 2021). supervision carried out by institutional investors is highly dependent on the size of the investment made (park et al., 2022). investment decisions have a term a long time, so the decisions taken must be considered well, because it has long-term risks as well. a decision investment is strongly influenced by the availability of company funds originating from internal funding sources and external funding sources (fabisik et al., 2021). company management has a goal to increase the value of the company through the implementation of financial decisions consisting of investment decisions, funding and dividend policy, therefore in its implementation must be carried out carefully and precisely, bearing in mind every decision financial decisions taken will affect other financial decisions and will impact on the achievement of company goals (paula monteiro et al., 2022). based on the description above, this research focuses on the discussion title "importance of liquidity indicators in intervening the dividend policy”. agency theory agency theory is a theory that regulates the relationship between shareholders as principal with the manager as agent (solomon et al., 2021). the principal authorizes the agent to run the company's business in the interests of the principal (zapparoli et al., 2022). if managers act to prioritize their individual interests rather than the interests of shareholders, the company will be importance of liquidity indicators in intervening the dividend policy sunaryo 274 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc harmed. this situation gives rise to agency conflicts between managers and company owners. each party has a purpose and has different risks associated with its behavior. if managers fail to carry out their functions, they risk not being appointed again as company managers, while shareholders will risk losing their capital if they choose the wrong manager (fan et al., 2021). conflicts of interest between managers and shareholders can be minimized by a monitoring mechanism that can align these related interests (cruz & haugan, 2019). however, with the emergence of this supervisory mechanism, there is a cost called agency cost (marks-bielska, 2021) . this agency cost will increase the use of debt, if debt increases, the company's risk will be higher and the dividend distribution expected by shareholders will be reduced, because the company must pay debts and previous debt burdens (meilita & rokhmawati, 2018). to minimize agency costs , it can be done by increasing ownership structures such as managerial ownership and institutional ownership (yusuf et al., 2018). dividend policy dividend policy is a company's decision about how much profit earned will be distributed to shareholders as dividends or even prefer to hold these profits as retained earnings of the company. dividends are the rate of return or the level of profit expected by shareholders who invest their funds in a company (hussain & akbar, 2022; stereńczak & kubiak, 2022). the size of the dividends paid will affect the achievement of the goal of maximizing shareholder welfare. the company's dividend policy is reflected in its dividend payout ratio , namely the percentage of profits distributed in the form of cash dividends, meaning the size of the dividend payout ratio will affect the investment decisions of shareholders and on the other hand affect the company's financial condition. in general, shareholders expect a relatively stable dividend distribution because this will reduce uncertainty over the desired results from the investments that have been made and can also increase shareholder confidence in the company so that the share value can also increase. for companies, the choice to distribute profits in the form of dividends will reduce their internal sources of funds, on the contrary if the company holds its profits in the form of retained earnings, the ability to form internal funds will be greater which can be used to finance company activities, thereby reducing the company's dependence on external funds (akindayomi & amin, 2022; ali & hegazy, 2022; l. liu & shu, 2022). if the company chooses to distribute profits as dividends, the growth rate will decrease so that it has a negative impact on the company's shares. on the other hand, if the company does not distribute dividends, the market will give a negative signal to the company's prospects so that an increase in dividends signals a favorable change in manager expectations and a decrease in dividends shows a pessimistic view of the company's prospects in the future (cao et al., 2022). managerial ownership managerial ownership is a share ownership consisting of management parties who take part in making company decisions such as managers, directors and commissioners. managerial ownership in a company can make management have a common interest with outside investors, namely to obtain a return (refund) on the funds invested in the form of dividends from the profits earned by the company (gilje et al., 2020; guthrie & hobbs, 2021). managerial ownership will make managers act carefully in managing the company and in making company decisions, because every decision making the manager will feel directly from the decision making (iwasaki et al., 2020). the greater the insider ownership (managerial ownership), then the difference in interests between shareholders (owners) and company managers importance of liquidity indicators in intervening the dividend policy sunaryo 275 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (management) will be smaller because they will act more carefully because managers also bear the consequences of the decisions they have taken (chen et al., 2022). if the insider ownership is small, it means that only a small number of shareholders are involved in managing the company, so the higher the possibility of agency problems (simanjuntak, 2019). institutional ownership institutional ownership is share ownership by other institutions originating from external parties (outside) the company. in addition to managerial ownership, institutional ownership can also minimize agency conflicts. because institutional investors will appoint managers to manage the funds they invest and manage the company in order to expect a return from the investment funds. this is because institutional investors have greater resources than other shareholders so they are considered capable of implementing a good supervisory mechanism (mishra, 2022). the greater the ownership of the institution, the greater the voting power and encouragement of the institution to oversee management. as a result, it will provide a greater impetus to optimize the value of the company so that the company's performance will increase. this increased performance will be beneficial for shareholders because in other words shareholders will get a lot of benefits in the form of dividends (wang & sun, 2022). investation decision investment is an activity in investing funds in a particular field. investments can be made in various ways , one of which is investing in shares (haque et al., 2022). the right and maximum investment decision will give a positive signal to investors so that investors will no longer hesitate to invest their funds in the company (siganos, 2022). however, investors must also pay attention to other things that can support or hinder the return of the funds invested. liquidity liquidity is an indicator of the company's ability to pay all short-term financial obligations at maturity using available current assets. liquidity is not only related to the overall state of the company's finances, but also relates to its ability to convert current assets into cash (afriani et al., 2013; vijayakumaran, 2021). companies that have a high level of liquidity tend to have good financial conditions because they can immediately disburse available assets to pay off debts when they fall due. the better the liquidity of a company, it will be able to pay more dividends (ly & shimizu, 2018). the company's liquidity position is an important factor that must be considered before making a decision to determine the amount of dividends to be paid to shareholders. because dividends are cash outflows, the stronger the company's liquidity position , the greater the company's ability to pay dividends (yeo, 2016). importance of liquidity indicators in intervening the dividend policy sunaryo 276 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc framework research hypothesis 1. managerial ownership has an effect on dividend policy. 2. institutional ownership has an effect on dividend policy. 3. investment decisions affect dividend policy. 4. liquidity can intervene between managerial ownership of dividend policy. 5. liquidity can intervene between institutional ownership and dividend policy. 6. liquidity cannot intervene between investment decisions and dividend policy. 7. liquidity has an effect on dividend policy. method quantitative research method is a research method based on the philosophy of positivism and research data in the form of numbers and analysis using statistics (ghozali, 2016; sugiyono, 2019). the research design used in this study is a causal associative design, namely research that aims to determine the causal relationship between two or more variables in the presence of intervening variables (basuki & prawoto, 2019; santoso, 2014). population and sample in this study, the authors took the population of lq45 companies listed on the idx as many as 45 companies . the sampling technique in this study was using the purposive sampling method, which means that the sample was taken based on predetermined criteria with the following criteria: importance of liquidity indicators in intervening the dividend policy sunaryo 277 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sample criteria results no criteria amount 1 lq45 companies listed on the idx for the period 2018-2021 45 2 companies that do not publish consecutive financial statements during the study period (0) 3 companies that do not use rupiah currency (12) 4 companies that do not earn net profit (2) 5 companies that do not distribute dividends (dps) consecutively during the research period (3) 6 companies that do not have managerial and institutional shares respectively during the study period (16) number of companies sampled 12 total sample 12 x 4 years 48 research variable the dividend policy variable uses a ratio scale with its measurement using the formula by distributing dividends per share (dps) with earnings per share so that the dividend payout ratio percentage of each company can be known. the managerial ownership variable uses a ratio scale with the measurement using a formula that divides the number of managerial shares with the number of shares outstanding so that the percentage of managerial ownership can be known. the institutional ownership variable uses a ratio scale with the measurement using a formula that divides the number of institutional shares with the number of outstanding shares so that the percentage of institutional ownership can be known. the investment decision variable uses a ratio scale with the measurement using a formula by dividing the price per share with the outstanding earnings per share so that the percentage of the price earning ratio can be known . the liquidity variable uses a ratio scale with its measurement using the current ratio formula by dividing total current assets with total current liabilities so that the percentage of liquidity level can be known. result and discussion the process of data analysis in this study is to process data using the spss 25 application with data analysis techniques using multiple regression and path analysis. the multiple regression model in this study is as follows: information : y = dividend policy a = constant x1 = managerial ownership x2 = institutional ownership x3 = investment decision , 3 = regression coefficient y = α + β1x1 + β2x2 + β3x3 + e importance of liquidity indicators in intervening the dividend policy sunaryo 278 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc e = error and the regression model for path analysis in this study is as follows: y = pyx1 + pyx2 + pyx3 + .................................... 1 substructural 1 z = pzx1 + p zx2 + pzx3 + pzy ......................... 2 substructural 2 the hypothesis was tested with a significance level of 5% with the decision-making criteria, namely if the value of sig < 5% or 0.05, the research hypothesis rejected ho and accepted ha, which means that there is an influence between the independent variables on the dependent variable. in addition, if the value of direct influence < value of indirect influence, it can be said that the intervening variable (intermediary) can intervene between the independent variable and the dependent variable. descriptive statistics descriptive statistical tests are used to describe the minimum, maximum, mean and standard deviation of each variable, while the results of the descriptive statistical tests are as follows: descriptive statistics n minimum maximum mean std. deviation mown 48 ,000 ,920 ,16041 ,271895 cr 48 ,482 2,463 1.35627 ,424495 invs 48 ,962 34,143 16.63621 7.037462 dpr 48 8,616 77.057 35.71440 18.102482 inst 48 48,915 325,087 69.60211 39.684860 valid n (listwise) 48 source: spss 25 output, 2019. classic assumption test normality test one-sample kolmogorov-smirnov test unstandardized residual n 48 normal parameters a,b mean ,0000000 std. deviation 15.07276910 most extreme differences absolute ,103 positive ,103 negative -,064 test statistics ,103 asymp. sig. (2-tailed) ,200 c,d a. test distribution is normal. b. calculated from data. c . lilliefors significance correction. d. this is a lower bound of the true significance. importance of liquidity indicators in intervening the dividend policy sunaryo 279 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the table above shows the results of asymp. sig. (2-tailed) is greater than 0.05 (0.200 > 0.05) which means that the data in this study are normally distributed so that the regression model can be said to be good and can be continued. multicollinearity test coefficients a model collinearity statistics tolerance vif 1 (constant) lag_x1 ,835 1,198 lag_x2 ,849 1,177 lag_x3 ,788 1,269 lag_z ,860 1,162 a. dependent variable: lag_y based on the table above, it can be seen that the tolerance value of each variable is for managerial ownership variables 0.835, institutional ownership 0.849, investment decisions 0.788 and liquidity 0.860 which is greater than 0.10 so that the calculation results of the tolerance value indicate that there is no correlation between independent variables. . meanwhile, the vif value of each variable shows results that are less than 10 so it can be concluded that there is no multicollinearity between the independent variables in the regression model. autocorrelation test runs test unstandardized residual test value a -3.23951 cases < test value 23 cases >= test value 24 total cases 47 number of runs 24 z ,000 asymp. sig. (2-tailed) 1,000 a. median based on the autocorrelation table, the results obtained from the asymp value. sig. (2-tailed) which is greater than 0.05 (1,000 > 0.05) which means that in the regression model there is no autocorrelation so that there is no correlation between the confounding variable in a certain period and the previous variable. importance of liquidity indicators in intervening the dividend policy sunaryo 280 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multiple regression analysis coefficients a model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 11.533 10,018 1.151 ,256 lag_x1 1,524 10.088 ,022 ,151 ,881 lag_x2 ,143 ,061 ,334 2,367 ,022 lag_x3 ,973 ,368 ,400 2,646 ,011 a. dependent variable: lag_y the table above can be formulated a regression equation to determine the effect of managerial ownership, institutional ownership and investment decisions on dividend policy with the following mathematical equation: dpr = 11.533 + 1.524 mown + 0.143 inst + 0.973 invs + e hypothesis test ( testt) coefficients a model t sig. 1 (constant) 1.151 ,256 lag_x1 ,151 ,881 lag_x2 2,367 ,022 lag_x3 2,646 ,011 a. dependent variable: lag_y to answer the hypothesis regarding the effect of the independent variable on the dependent variable partially, it can be seen through the sig value in the table and then compared with the alpha level value of 0.05 and also looking at the value of the t-count and then compared with the t-table. 1st hypothesis test based on the test results using spss 25 for the managerial ownership variable, it obtained a significance value of 0.881, which means it is greater than 0.05 and t count is smaller than t table (0.151 < 1.677), it can be concluded that the first hypothesis accepts ho and rejects ha, which means that managerial ownership has no effect on dividend policy. 2nd hypothesis test based on the test results using spss 25 for the institutional ownership variable, it obtained a significance value of 0.022 which means it is smaller than 0.05 and t count is greater than t table (2.367 > 1.677) so it can be concluded that the second hypothesis accepts ha and rejects ho, which means that institutional ownership effect on dividend policy. 3rd hypothesis test based on the test results using spss 25 for the investment decision variable, it obtained a significance value of 0.011 which means it is smaller than 0.05 and t count is greater than t table importance of liquidity indicators in intervening the dividend policy sunaryo 281 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (2.646 > 1.677) so it can be concluded that the third hypothesis accepts ha and rejects ho, which means that investment decisions effect on dividend policy. pathway analysis pathway analysis 1st (one) path coefficients a model standardized coefficients t sig. beta 1 (constant) 1.151 ,256 lag_x1 ,022 ,151 ,881 lag_x2 ,334 2,367 ,022 lag_x3 ,400 2,646 ,011 a. dependent variable: lag_y pathway analysis of path 2 (two) coefficients a model standardized coefficients t sig. beta 1 (constant) 6,292 ,000 lag_x1 ,171 1,186 ,242 lag_x2 ,173 1,170 ,249 lag_x3 -,306 -1.901 ,064 lag_y ,367 2,441 0.019 a. dependent variable: lag_z to answer the hypothesis regarding the effect of the independent variable through the intervening variable on the dependent variable, it can be seen through the beta value in the analysis of path one for the value of direct influence and the value of indirect influence can be calculated by the value in the table in lane two. fourth hypothesis based on the path table 1, the direct value of the managerial ownership variable is 0.022 and the indirect effect value is obtained by multiplying the beta value of the x1 variable against y with the beta value of z against y (0.171 x 0.367 = 0.062). the result of the multiplication is also added up with the direct influence value, namely 0.022 + 0.062 = 0.084, then the indirect effect value is greater than the direct effect value (0.084 > 0.022). this result indicates that x1 through z indirectly has an influence on y. thus that managerial ownership through liquidity has an effect on dividend policy. fifth hypothesis based on the path table 1, the direct value of the institutional ownership variable is 0.334 and the indirect effect value is obtained by multiplying the beta value of the x1 variable to y with the importance of liquidity indicators in intervening the dividend policy sunaryo 282 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc beta value of z to y (0.173 x 0.367 = 0.063). the result of the multiplication is also added with the direct influence value, namely 0.334 + 0.063 = 0.397, then the indirect effect value is greater than the direct effect value (0.397 > 0.334). this result indicates that x1 through z indirectly has an influence on y. thus that institutional ownership through liquidity has an effect on dividend policy. sixth hypothesis based on the path table 1, the direct value of the investment decision variable is 0.400 and the indirect effect value is obtained by multiplying the beta value of the x1 variable against y with the beta value of z against y, namely (-0.306 x 0.367 = -0.112). the result of the multiplication is also added up with the direct influence value, namely 0.400 + (-0.112) = 0.288, then the indirect effect value is smaller than the direct effect value (0.288 < 0.400) this result indicates that x1 through z indirectly has no effect on y thus, investment decisions through liquidity have no effect on dividend policy. seventh hypothesis based on the test results using spss 25 for the institutional ownership variable, it obtained a significance value of 0.019, which means it is smaller than 0.05 and t count is greater than t table (2,442 > 1,677), it can be concluded that the seventh hypothesis accepts ha and rejects ho, which means that liquidity has an effect to dividend policy. discussion effect of managerial ownership on dividend policy the results of the tests carried out using a partial hypothesis test that mown has no effect on dividend policy. this is based on that the statistical significance value in spss is greater than 0.05 (0.881 > 0.05) and the t count is smaller than the t table (0.151 < 1.677). this means that the higher the managerial ownership in a company, the dividend policy will decrease. this is not in line with agency theory where high managerial ownership will encourage the relationship between managers and shareholders to get better, so that the debt used to monitor managers will decrease, managers who have shares in the company certainly do not like debt, because with high debt will increase the risk of bankruptcy. managers who own shares in the company certainly try to increase the prosperity of shareholders. the more shares owned by the manager, the lower the agency cost and the managerial will act more carefully considering that the managerial party will also bear the risk of making the dividend policy. the effect of institutional ownership on dividend policy the results of the tests carried out using a partial hypothesis test that inst has an influence on dividend policy. this is based on that the statistical significance value in spss is less than 0.05 (0.022 < 0.05) and the t count is greater than the t table (2.367 > 1.677). the bigger the institutional share ownership, the bigger the dividend policy will be . the existence of institutional owners is expected to be able to carry out an effective monitoring function on company management. the monitoring function aims to make management act with the aim of prioritizing the prosperity of the shareholders, not prioritizing their interests and acting opportunistically. however, this research is contrary to previous research which states that institutional ownership has no effect on dividend policy which states that the existence of institutional ownership in a company has no impact or effect on the company's dividend policy, which means this is contrary to the assumption which states that the presence of high importance of liquidity indicators in intervening the dividend policy sunaryo 283 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc institutional ownership will make institutional investors carry out intensive supervision of the manager's performance so that managers will strive to provide high returns on share ownership. the effect of investment decisions on dividend policy the results of the tests carried out using a partial hypothesis test that invs has an influence on dividend policy. this is based on the statistical significance value in spss which is less than 0.011 (0.011 < 0.05 ) and t count is greater than t table (2.646 > 1.677). the right investment decisions taken by the company are expected to provide good profits for the company by generating maximum profit from the investment. the existence of a maximum profit allows managers to allocate these profits to the expected dividend distribution for both managerial and institutional investors by taking into account other factors that can influence the dividend policy taken. this is not in line with research conducted by damaris simanjuntak which states that investment (in) has a negative and significant effect on dividend policy (dpr). this shows that the opening of investment opportunities has encouraged companies to pay dividends in small amounts, so that companies have internal equity to fund investments. on the other hand, companies that do not have good prospects will be reflected in the limited opportunities available for making investment decisions. limited opportunities for investment will encourage companies to make large dividend payments. liquidity can intervening between managerial ownership and dividend policy the results of hypothesis testing using spss 25 regarding managerial ownership on dividend policy through intervening obtained the results of a direct influence between managerial ownership on dividend policy of 0.022 and an indirect effect of 0.084, which means that the indirect effect is greater than the direct effect (0.084 > 0.022), with this shows that managerial ownership indirectly affects dividend policy with liquidity as the intervening variable. the existence of high managerial ownership and the existence of a high level of liquidity provide a signal to managerial investors to invest their funds in the company. because with a high managerial level, it will be able to minimize conflicts and agency costs because the manager will have the same interests as the principal who wants a high dividend distribution. the high level of liquidity also gives a signal to investors that the company is able to meet its short-term obligations with liquid assets. the existence of the ability to fulfill its short-term obligations gives an illustration that the company also has the ability to distribute dividends in accordance with the expectations of managerial investors. therefore, liquidity is able to intervene between managerial ownership and dividend policy. liquidity can intervene between institutional ownership and dividend policy the results of hypothesis testing using spss 25 regarding institutional ownership on dividend policy through intervening obtained a direct effect between institutional ownership on dividend policy of 0.334 and an indirect effect of 0.397, which means that the indirect effect is greater than the direct effect (0.397 > 0.334), with this shows that institutional ownership indirectly affects dividend policy with liquidity as the intervening variable. high institutional ownership will provide intensive supervision of the performance of managers or companies, maximum company performance is expected to produce maximum company profits as well. the existence of high profits obtained by the company, it is possible that the company will distribute dividends in high amounts as well. the company's liquidity position is an important factor that must be considered before making a decision to determine the amount of dividends to be paid to shareholders. because dividends are cash outflows, the stronger the company's liquidity position importance of liquidity indicators in intervening the dividend policy sunaryo 284 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc , the higher the company's ability to pay dividends. therefore, liquidity is able to intervene between institutional ownership and dividend policy. liquidity can intervene between investment decisions and dividend policy the results of hypothesis testing using spss 25 regarding institutional ownership on dividend policy through intervening obtained a direct effect between institutional ownership on dividend policy of 0.400 and an indirect effect of -0.112, which means that the indirect effect is smaller than the direct effect (-0.112 < 0.400), hereby indicates that the investment decision indirectly does not affect the dividend policy with liquidity as the intervening variable. the investment decision is a decision that must be considered maximally by the company, because the investment decision taken will have an impact on the value of the company. investment decisions are related to company funding, if the company uses more of its funds to invest in various types of investments, it will reduce the amount of dividend distribution for investors. the high level of liquidity for the company has no impact on the level of investment decisions taken by the company. the effect of institutional ownership on dividend policy the results of the tests carried out using a partial hypothesis test that cr has an influence on dividend policy. this is based on that the statistical significance value in spss is less than 0.05 (0.019<0.05) and t-count is greater than t-table (2.441>1.677). liquidity has a positive and significant effect on the amount of dividends distributed to shareholders of manufacturing companies listed on the idx. liquidity is one of the main considerations in dividend policy because dividends are cash outflows, the greater the amount of cash available along with the company's liquidity, the greater the company's ability to pay dividends. companies that are able to distribute dividends according to investors' expectations will give a positive signal to the company in the capital market. conclusion the first hypothesis (h1) is rejected, which means that there is no influence between managerial ownership variables on dividend policy with a significance value greater than 0.05, namely 0.881 > 0.05 with a t count < t table (0.151 < 1.677) so that high managerial ownership does not guarantee that the company will pay high dividends as well. the second hypothesis (h2) is accepted which means that there is an influence between institutional ownership variables on dividend policy with a significance value smaller than 0.05, namely 0.022 and the value of t arithmetic > t table (2.364 > 1.677) so that high institutional ownership allows intensive supervision of company performance so that managers will follow the interests of institutional shareholders which in this case are in the form of dividend distribution in the hope that institutional shareholders will continue to invest their shares in the company. the third hypothesis (h3) is accepted, which means that there is an influence between the investment decision variables on dividend policy with a significance value smaller than 0.05 and a t count > t table (2.646 > 1.677) so that the decisions taken by the company in the form of investment have an influence on the distribution of dividends to shareholders. shareholders by considering other factors that influence the distribution of the dividend. the fourth hypothesis (h4) is accepted, which means that liquidity can intervene (become an intermediary) between managerial ownership of dividend policy with the value of indirect influence > direct influence (0.084 > 0.022) so that the level of liquidity of a company which, if associated with the level of managerial ownership, can indirectly influence the distribution of dividends. the fifth hypothesis (h5) is accepted, which means that liquidity can intervene (become an intermediary) between importance of liquidity indicators in intervening the dividend policy sunaryo 285 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc institutional ownership of dividend policy with the value of indirect influence > direct influence (0.397 > 0.334) so that the level of liquidity of a company which, if associated with the level of institutional ownership, can indirectly provide influence in the distribution of dividends. the sixth hypothesis (h6) is rejected, which means that liquidity cannot intervene (become an intermediary) between investment decisions on dividend policy with the value of indirect influence < direct influence (0.288 < 0.400) so that the level of liquidity of a company which, if associated with the level of managerial ownership indirectly cannot influence the distribution of dividends. the seventh hypothesis (h7) is accepted, which means that there is an influence between the liquidity variable on dividend policy with a significance value smaller than 0.05, i.e. 0.019 and the value of t count > t table (2,441 > 1,677) so that the company's liquidity level is one of the factors that must be considered in distribution of dividends to shareholders. limitations based on adjusted r2 obtained a value of 0.151 which means 15.1% obtained through path 1, changes in dividend policy variables as proxied by the dividend payout ratio can be explained by changes in managerial ownership, institutional ownership, and investment decisions as well as changes in dividend policy together. same. while the remaining 84,9 % is influenced by other factors outside this research model such as debt policy variables, 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(2018). rethinking agency theory in developing countries: a case study of pakistan. accounting forum. https://doi.org/10.1016/j.accfor.2018.10.002 zapparoli, l., paulesu, e., mariano, m., ravani, a., & sacheli, l. m. (2022). the sense of agency in joint actions: a theory-driven meta-analysis. cortex, 148, 99–120. https://doi.org/10.1016/j.cortex.2022.01.002 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 236-249 236 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) dianila oktyawati1, hilda octavana siregar2, rumiyati3 123universitas gadjah mada, indonesia correspondent: dianila.oktyawati@ugm.ac.id1 received : january 26, 2023 accepted : april 7, 2023 published : april 30, 2023 citation: oktyawati, d., siregar, h.o., rumiyati.(2023). earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia). ilomata international journal of tax and accounting, 4(2), 236-249. https://doi.org/10.52728/ijtc.v4i2.718 abstract: companies facing financial crises tend to manipulate reported earnings in unfavorable markets. earnings management is an effort to manage earnings by managers to meet the expected profit level to obtain personal gain. the covid-19 pandemic has caused the government to issue various tax incentives that individuals and companies can utilize. under these conditions, management as an internal party can manage earnings to meet its expectations. this study examines differences in earnings management before and during the covid-19 pandemic and the effect of earnings management on tax aggressiveness. the data from this study are the financial statements of manufacturing companies listed on the indonesia stock exchange. the sampling method is purposive sampling. the analytical method used is the comparative test and multiple regression analysis. the results of this study are the same in the level of tax avoidance, accrual earnings management, and actual management before and during the covid-19 pandemic. this study also concludes that real earnings management negatively affects tax aggressiveness, while accrual earnings management does not. this research indicates that the government needs to increase supervision and control over the possible tax avoidance that companies can carry out. while accrual earnings management does not. this research indicates that the government needs to increase supervision and control over the possible tax avoidance that companies can carry out. while accrual earnings management does not. this research indicates that the government needs to increase supervision and control over the possible tax avoidance that companies can carry out. keywords: earnings management, tax aggressiveness, pandemic, covid-19 this is an open access article under the cc-by 4.0 license. introduction financial performance and market activity have been adversely affected by the covid-19 pandemic (estrada et al., 2020). covid-19 has had significant adverse effects on several companies, resulting in financial losses and the closure of operations. since the outbreak of covid-19, the government https://www.ilomata.org/index.php/ijtc mailto:dianila.oktyawati@ugm.ac.id https://doi.org/10.52728/ijtc.v4i2.718 earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 237 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc has instructed policies that limit community mobilization. people are advised to stay indoors to prevent the transmission of the covid-19 virus. as a result, the company experienced a sharp decline in revenue because buying and selling activities were disrupted, which affected the company's profits. profit is an important item in financial statements and is believed to be a measure of the performance of an entity (cohen, 2010; haque, 2016). profit is considered a benchmark for achieving performance for an entity. (lev, 1989) states that an increase in an entity's profit is a good signal that the company's performance is increasing. conversely, a decrease in profit indicates that the company's performance is declining. it causes management to be motivated to engage in deviant behavior. managers carry out earnings management so that financial reports are good. companies facing financial crises tend to manipulate reported earnings in response to a negative market environment (ait novatiani et al., 2022; choi et al., 2011). earnings management attempts to manipulate profit managers to meet the expected profit level to obtain personal gain (pipatnarapong et al., 2020; schipper, 1989). internal parties, such as managers, have more information than external parties. to take advantage of this information asymmetry, managers may resort to opportunistic behavior, such as taking personal advantage under the guise of compensation. managers, acting in the capacity of agents assigned to oversee company operations, are frequently faced with conflicts of interest. according to jensen and meckling (jensen & meckling, 1976), (gunny, 2010) and (kim et al., 2018) stated that earnings management is divided into accrual and real earnings management. the practice of accrual earnings management is legal because it is under the umbrella of generally accepted accounting principles (pabu). accrual earnings management can be done by modifying the accumulation of income or expenses in financial accounts (badertscher, 2011). accrual earnings management arose because management could adopt an accounting system to help them achieve their financial goals. in contrast, actual earnings management is the practice of managing earnings badly. managers generate actual profits in a variety of ways, including through unconventional methods such as the use of time and operating structures, investments, on the other hand, the covid-19 pandemic has prompted the government to carry out various initiatives to maintain economic stability, such as providing tax subsidies to taxpayers, especially business taxpayers, so that the economy does not fluctuate (keuangan, 2020). incentive package that includes reduced corporate tax rates and import taxes. minister of finance regulation number 23 of 2020, later replaced by pmk number 110 of 2020, regulates the provision of tax incentives during a pandemic. company managers can use tax avoidance techniques to respond to tax incentives during a pandemic. (kovermann & velte, 2021; shackelford & shevlin, 2001) state that managers are faced with a trade-off when determining the amount of profit in financial statements with tax reporting. managers who want to reduce corporate taxes will issue or delay revenue recognition and speed up expense recognition to lower profits and taxes. (abdelfattaha & aboud, 2020; kovermann & velte, 2021; pipatnarapong et al., 2020; ravenda et al., 2020) stated that increasing tax rates could reduce company profits. taxes payable include items that maximize business value as long as the https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 238 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc benefits outweigh the costs. (desai & dharmapala, 2009; suk et al., 2021). shareholders will also encourage management to manage the tax burden to be competitive (h. chen et al., 2021). in addition, managers can use tax incentives to carry out tax avoidance operations. (frank et al., 2009) define tax aggressiveness as an act of reducing the tax burden legally or illegally by a company. companies can exploit tax laws to their advantage because there are usually loopholes or loopholes that can be exploited. tax aggressiveness is part of aggressive tax avoidance(rusli, 2021) states that tax evasion is more common during a pandemic. the work-from-home policy implemented during the pandemic can also decrease control over tax service activities. during the pandemic, (rusli, 2021) also stated that the government provided many incentives to implement incentives at a fast pace. accrual-based earnings management has increased while actual-based earnings management has experienced a significant decline in companies infected with covid-19, according to research conducted by (xiao & xi, 2021) with a company background from china. aspects of corporate governance and corporate social responsibility (csr) are also studied as moderating variables in the study of (xiao & xi, 2021). in the era of covid-19, (h. chen et al., 2021; s. chen et al., 2010) stated that opportunistic management behavior increased after the covid-19 crisis because managers were more willing to take advantage of the situation to maximize their profits. the opposite result, (azizah, 2021) found that earnings management in indonesia was different between the first quarter of 2019 (before the pandemic) and the first quarter of 2020 (during the pandemic). during a pandemic, earnings management practices have decreased because managers are more careful in managing their earnings. (firmansyah, 2020) came to a different conclusion stating that there is no difference between accrual and actual earnings management in the pandemic era. then a study on tax aggressiveness during the covid-19 pandemic was conducted by (rusli, 2021), who compared indonesia and malaysia using financial performance as a moderating variable. according to the conclusions of this study, capital intensity, inventory intensity, and sales growth in indonesia and malaysia all contribute to tax aggressiveness. according to (firmansyah, 2020), the level of tax evasion before and after the pandemic was similar. (simamora & rahayu, 2020) shows that actual earnings management does not affect tax evasion. in comparison, (machdar, 2019) found that both types of earnings management, accrual and actual, affect tax evasion. there needs to be more consistency in the results of previous studies. this study tries to reduce the gap in research results and uses earnings management and tax aggressiveness variables before and during the pandemic. this study relies on the indonesian stock market for its data, namely the indonesia stock exchange (idx). covid-19 has had the most significant impact on the manufacturing industry, so we chose this sector. manufacturing companies consist of different types of industries, namely consumer goods, basic and chemical industries, and other industrial sectors. (nurhaliza, 2021) stated that manufacturing companies experienced a decline in revenue of around 90% due to covid-19. previous studies in indonesia only used companies in the consumer goods industry sector. this study tries to expand the research object, namely the manufacturing sector. https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 239 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this study used a purposive sampling method in sampling. the criteria set are manufacturing companies with complete data listed on the idx in 2019 and 2020. this study has two main variables to calculate tax aggressiveness: earnings management and tax aggressiveness. earnings management is divided into two, namely accrual earnings management and actual earnings management (gunny, 2010). (gunny, 2010) explains that accrual earnings management is a legal earnings management practice because this practice is still within the scope of generally accepted accounting principles. unlike the case with actual earnings management, which includes illegal practices, managers carry it out to achieve the desired profit level through deviant actions. tax aggressiveness is reducing taxable income designed through tax planning, whether using methods classified as legal (tax avoidance) or: tax evasion). there are two proxies: the effective tax rate and the cash effective tax rate. the formula for calculating the effective tax rate used in (hidayati & fidiana, 2017) is as follows. 𝐸𝑇𝑅 = 𝐵𝑒𝑏𝑎𝑛 𝑃𝑎𝑗𝑎𝑘 𝑃𝑒𝑛𝑔ℎ𝑎𝑠𝑖𝑙𝑎𝑛 𝐿𝑎𝑏𝑎 𝑠𝑒𝑏𝑒𝑙𝑢𝑚 𝑝𝑎𝑗𝑎𝑘 meanwhile, the second proxy for tax aggressiveness is the cash effective tax rate (cash etr), which describes the ratio of taxes paid by companies per rupiah of income received (cheng et al., 2012). low cash etr values can indicate tax evasion practices. 𝐶𝑎𝑠ℎ 𝐸𝑇𝑅 = 𝑃𝑎𝑗𝑎𝑘 𝑃𝑒𝑛𝑔ℎ𝑎𝑠𝑖𝑙𝑎𝑛 𝑌𝑎𝑛𝑔 𝐷𝑖𝑏𝑎𝑦𝑎𝑟 𝐿𝑎𝑏𝑎 𝑠𝑒𝑏𝑒𝑙𝑢𝑚 𝑝𝑎𝑗𝑎𝑘 then, accrual earnings management in this study uses discretionary accruals using the model in kothari et all (2005) or performance-matched discretionary accruals. this proxy is also used by (firmansyah, 2020). the equation used to calculate the value of discretionary accruals is as follows. 𝐴𝑐𝑐𝑟𝑢𝑎𝑙𝑠 𝑇𝐴 𝑡 − 1 = 𝛽0 ( 1 𝑇𝐴 𝑡 − 1 ) + 𝛽1 ( δ𝑅𝐸𝑉 − δ𝑅𝐸𝐶 𝑇𝐴 𝑡 − 1 ) + 𝛽2 ( ppe 𝑇𝐴 𝑡 − 1 ) + 𝛽3 𝑅𝑂𝐴 + 𝜀 information accruals : income after taxcash from operations ta t-1 : total assets of the company in the previous year δ𝑅𝐸𝑉 : change in income from the previous period δ𝑅𝐸𝐶 : change in accounts receivable from the previous period ppe : plant, property, and equipment https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 240 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc roa : return on assets is obtained from net income divided by total assets meanwhile, actual earnings management in this study follows zang (2011) by adding up abnormal overproduction and discretionary expenses. this study uses estimates for normal production costs according to research by roychuwdury (2016). the formula used to obtain the abnormal overproduction value is as follows. 𝑃𝑟𝑜𝑑 𝐴𝑡 − 1 = 𝛼0 + ( 1 𝐴𝑡 − 1 ) + 𝛽1 ( 𝑆𝑡 𝐴𝑡 − 1 ) + 𝛽2 ( δ𝑆𝑡 𝐴𝑡 − 1 ) + 𝛽2 ( δ𝑆𝑡 − 1 𝐴𝑡 − 1 ) + 𝜀 information: prod/at-1 : production costs in year t scaled by total assets in year t-1 where prodt = cogst+δinvt 1/at-1 : intercept that is scaled by total assets in year t-1 with the aim that operating cash flows do not have a value of 0 when sales and running lag are 0 st/at-1 : sales in year t scaled by total assets in year t-1 δst/at-1 : sales in year t minus sales in year t-1 scaled by total assets in year t-1 δst-1/at-1 : change in sales in year t-1 scaled by total assets in year t-1 𝛼0 : constant 𝜀 : error in year t if the residual result is positive, the company takes real earnings management actions by manipulating production costs. based on roychuwdury (2006), earnings manipulation by reducing discretionary expenses is calculated using the following formula. 𝐷𝐼𝑆𝐸𝑋𝑃𝑖 𝐴𝑡 − 1 = 𝛼0 + 𝛼1 ( 1 𝐴𝑡 − 1 ) + 𝛽 ( 𝑆𝑡 𝐴𝑡 − 1 ) 𝑖 + 𝜀 information: disexp/ at-1: discretionary expenses are defined as the sum of advertising expenses, research and development expenses, selling expenses, and administrative and general expenses t scaled by total assets in year t-1 1/at-1: intercept scaled with total assets in year t-1 with the aim that operating cash flow does not have a value of 0 when sales and sales lag are 0 st/at-1: sales in year t scaled by total assets in year t-1 𝛼0 : constant https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 241 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 𝜀 : residual in year t if the residual value is negative, it indicates that the company is taking real earnings management actions through discretionary expense manipulation, then the value is multiplied by -1. this study uses control variables: profitability, firm size, and leverage. profitability is measured using return on equity (roe), which compares profit after tax with the company's total equity. 𝑅𝑂𝐸 = 𝐿𝑎𝑏𝑎 𝐵𝑒𝑟𝑠𝑖ℎ 𝐸𝑘𝑢𝑖𝑡𝑎𝑠 while the company's size uses the natural asset logarithm, the third control variable is leverage, measured by the debt-to-equity ratio (der) with the following formula. 𝐷𝐸𝑅 = 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑎𝑠 𝐸𝑘𝑢𝑖𝑡𝑎𝑠 the statistical analysis method used in this study consists of classic assumption tests and hypothesis testing. hypothesis testing on hypotheses 1, 2, and 3 in this study was made using a different test. meanwhile, testing for hypotheses 4 and 5 was carried out using multiple linear analyses. the research model is as follows. model 1 etrit =𝛽0 + 𝛽1𝐴𝐸𝑀𝑖𝑡 + 𝛽2𝑅𝐸𝑀𝑖𝑡 + 𝛽3𝑅𝑂𝐸𝑖𝑡 + 𝛽4𝐷𝐸𝑅𝑖𝑡 + 𝛽5𝑆𝐼𝑍𝐸𝑖𝑡 model 2 cash etrit =𝛽0 + 𝛽1𝐴𝐸𝑀𝑖𝑡 + 𝛽2𝑅𝐸𝑀𝑖𝑡 + 𝛽3𝑅𝑂𝐸𝑖𝑡 + 𝛽4𝐷𝐸𝑅𝑖𝑡 + 𝛽5𝑆𝐼𝑍𝐸𝑖𝑡 information: etr : tax avoidance using effective tax rate company i in year t cash etr : tax avoidance using cash effective tax rate company i in year t aem : company i accrual earnings management in year t aem : actual earnings management of company i in year t roe : profitability of company i in year t der : leverage of company i in year t size : the size of the company i in year t result and discussion table 1 shows descriptive statistics for each variable in the pre-pandemic period. table 1. variable descriptive statistics before the pandemic https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 242 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc n means median mode std. deviation minimum maximum valid etr 2019 200 ,2565330 ,0200800 ,00000a ,71950793 -3.37055 6.93455 ctr 2019 200 ,1817500 ,1994550 ,00000 1.06269304 -5.52588 7.62781 aem 2019 200 ,0000003 -,0005900 ,02962a ,11006349 -,47995 ,65368 rem 2019 200 ,0000009 ,0680200 -,00353 ,28558980 -1.38484 ,66504 prods 2019 200 ,0000003 ,1412500 ,00240a ,60268114 -3.10594 1.05823 disexp 2019 200 -,0000001 -,0261650 ,00946a ,21742316 -,52730 1.33310 roe 2019 200 ,0484097 ,0643150 ,09864a ,38122668 -2.89562 2.02779 der 2019 200 1.1129604 ,8787800 ,08117a 1.18027923 -2.54227 8.23216 2019 sizes 200 28.1345614 28,1949250 26.50683a 2.21565671 16.06332 32.40329 source: processed data table 2 shows descriptive statistics for each variable in the period during the pandemic table 2. descriptive statistics during the pandemic n means median mode std. deviation minimum maximum valid etr 2020 200 ,2229400 -,0307600 -,15451a 1.23040438 -9.68534 8.03168 cetr 2020 200 ,2322691 .0541850 ,00000 1.56154568 -9.61590 8.44500 aem 2020 200 ,0000002 1.1247200 -70.32097a 10.04207386 -70.32097 32.80996 rem 2020 200 ,0000007 1.4656050 -87,67827a 21.99990091 -87.67827 166.87846 prods 2020 200 -,0000002 2.4466400 -130.3542a 44.58513750 -130.3542 330,65192 disexp 2020 200 ,0000002 -,3531650 -21.30531a 8.55472511 -21.30531 52.02845 2020 roes 200 -,0966620 .0326750 -,14445a 1.05765451 -9.22724 2.03554 der 2020 200 1.2176699 ,8514900 ,08978a 1.88620117 -6.30052 10.41667 2020 sizes 200 28,1108370 28.1442750 26.54570a 2.29091571 16.09223 32.72561 source: processed data https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 243 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3 shows descriptive statistics before and during the pandemic table 3. descriptive statistics before and during the pandemic n means median mode std. deviation minimum maximum valid etr 400 ,1394140 -,0010500 ,00000 1.00667024 -9.68534 8.03168 cetr 400 ,2070095 ,1292400 ,00000 1.33418120 -9.61590 8.44500 aem 400 ,0000003 .0662750 ,02962a 7.09234063 -70.32097 32.80996 brake 400 ,0000008 ,1387100 -,00353 15.53808186 -87.67827 166.87846 prod 400 ,0000000 ,2201650 ,00240a 31.48979802 -130.3542 330,65192 disexp 400 ,0000000 -,0573350 ,00946a 6.04347000 -21.30531 52.02845 roe 400 -,0241262 .0475050 -,14445a ,79729175 -9.22724 2.03554 der 400 1.1653151 ,8662250 ,08117a 1.57224388 -6.30052 10.41667 size 400 28.1226992 28,1730400 26.50683a 2.25080590 16.06332 32.72561 a. multiple modes exist. the smallest value is shown table 4 summary of “ranks” comparative test var negative ranks positive rating ties q means sum q means sum q etr 106 103,39 10959 92 95.02 8742 2 cetr 109 95.63 10424 87 102.09 8882 4 aem 37 108.97 4032 163 98.58 4032 0 brake 64 124.95 7997 136 88.99 12103 0 prod 73 124.66 9100 127 88.61 11000 0 disexp 132 112.81 14891 68 76,6 5209 0 table 5 comparative test summary variable wilcoxon asymp.sig. (2-tailed) etr 0.170 cetr 0.332 aem 0.000 brake 0.012 prod 0.246 https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 244 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc disexp 0.000 source: processed data table 6 shows no difference in tax aggressiveness before and during the pandemic using the effective tax rate (etr) and the cash effective tax rate (cetr) because both values were above the significance value of 0.05. meanwhile, in terms of earnings management, both accrual earnings management (aem) and actual earnings management (rem), there are differences between the period before and during the covid-19 pandemic. there was no difference in actual profit management proxied by production expenses before and during the pandemic. in contrast, actual profit management proxied by discretionary expenses showed a level of difference between before and during the pandemic. table 6 summary of hypothesis testing 4 and 5 var model 1 (etr) model 2 (cetr) coeff t-stat prob coeff. t-stat prob c 1.575 2,509 0.012 0.446 0.551 0.582 aem 0.001 0.184 0.427 0.024 2,644 0.005 ** brake -0.001 -0.269 0.394 0.010 2,435 0.008 ** roe 0.157 2,437 0.008 ** 0.119 1,436 0.078 * der 0.044 1.316 0.095 * 0.147 3,411 0.001 ** size -0.057 -2,565 0.006 ** -0.014 -0.504 0.307 r2 0.141 0.243 adj. r2 0.132 0.227 f-stat 2,514 7,378 probs (fstats) 0.029 0.000 source: processed data based on table 6, both models show a prob f stat value of less than 0.005, meaning both models are feasible to use. model 1 shows the significant value of aem and rem above the significance value of 0.05, which indicates that earnings management cannot increase tax aggressiveness (etr). in model 2, the significance value of aem and rem is less than 0.05, indicating that earnings management can increase tax aggressiveness (cetr). differences in accrual earnings management (aem) levels before and during the pandemic the results of hypothesis testing show differences in the accrual earnings management (aem) level before and during the pandemic. these results differ from the research by firmansyah and ardiansyah (2020), which tested 37 companies in the consumer goods sector, while in this study, 200 companies were used in the manufacturing sector. the results of this study support azizah's research (2021) which shows differences in the level of accrual earnings management before and during the pandemic, although in azizah's study, the periods used were different, namely q1 2019 and q2 2020. https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 245 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc descriptive statistical results show differences in the accrual management level before and during the pandemic. the average before and during the pandemic is above 0, meaning that the company is still managing earnings, so its performance is still considered good even though it is a pandemic. however, on average, it shows a downward trend between the period before and during the pandemic. there are several reasons for the decline in earnings management during a pandemic. namely, management is more focused on business continuity than earnings management. management is still considering the level of earnings management appropriate to pandemic conditions so that it is not too conspicuous. differences in real earnings management (rem) levels before and during the pandemic the results of hypothesis testing show differences in the accrual earnings management (aem) level before and during the pandemic. the level of accrual earnings management has decreased. it can be because almost all companies have experienced a decline in profits. if a company does too much earnings management, the company may even look strange and can be suspected of manipulating profits during a pandemic. in this study, the rem value is the sum of overproduction and manipulated discretionary expenses. companies can carry out overproduction activities to reduce the cost of production so that company profits can increase. furthermore, in terms of the manipulation of discretionary expenses, the results of statistical tests show that discretionary expenses have increased, which indicates that the level of manipulation of discretionary expenses has also increased. the reason is that amidst the uncertain conditions of a pandemic, companies are also pressing discretionary expenses, for example, by suppressing or postponing employee training, official travel, and transportation expenses. these costs can be reduced because of instructions from the government regarding restrictions on mobilizing community activities or what is called large-scale social restrictions (psbb). the uncertain pandemic conditions have led to uncertain economic conditions, so high profits are considered strange and suspicious. thus, aggressive earnings management can threaten the management's position (azizah, 2021). differences in the level of tax aggressiveness before and after the pandemic the results of the hypothesis test showed that there was no level of tax evasion before and during the pandemic. even though there were opportunities for managers to take advantage of tax avoidance more aggressively during a pandemic, such as tax incentives, this condition did not result in managers being more aggressive in tax evasion. the results of this test are following firmansyah and ardiyansah (2020). even during work-from-home for tax officials, the level of control and supervision of the provision of tax incentives still needs to be improved. in addition, during a pandemic, tax incentives in the form of reducing pph rates can make management focus on goals other than tax avoidance. the results of the descriptive analysis show that before the pandemic period, the average tax burden ratio was25.65% then decreased to 22.29% during the pandemic even though the government has provided tax incentives and reduced tariff adjustments for go-public companies that meet the requirements of perppu no. 1 of 2020 article 5 paragraph 3. effect of accrual profit management (aem) on tax aggressiveness https://www.ilomata.org/index.php/ijtc earnings management and tax aggressivity before and during the covid-19 pandemic (an evidence from indonesia) oktyawati, siregar, and rumiyati 246 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the statistical test results show that accrual earnings management does not affect tax aggressiveness (etr) during the pandemic. this result is different from the research of pajriansyah and firmansyah (2017) and suyanto and supramono (2012). in the pandemic era, profit management is no longer the goal of aggressively avoiding taxes (tax aggressiveness) because, in the pandemic era, there are tax incentives and reduced rates provided by the government to taxpayers. thus, managers usually carry out earnings management to pursue incentives in the form of bonuses. however, earnings management is carried out at a reasonable stage to not arouse suspicion from the auditor or shareholders (azizah, 2021). effect of real earnings management (rem) on tax aggressiveness statistical test results show that during the pandemic period, actual earnings management positively affects tax aggressiveness (cetr). these results show that tax aggressiveness decreased when managers in companies used profit manipulation through real activities—the pandemic period resulted in high uncertainty about economic conditions resulting in the management of real earnings by managers allegedly not intended for tax avoidance activities. managers carry out real earnings management to increase company profits in order to achieve predetermined profit targets. even though the pandemic tends not to disrupt companies in the consumer goods industry sector as much as companies in other sectors, companies need to increase profits to convince company owners about the company's sustainability in the future. managers' efforts to achieve this targeted profit can be based on gaining shareholder trust in the hope that they will still be allowed to occupy the current position. therefore, managers make all efforts to meet the targeted profits, one of which is practicing real earnings management. however, incentives from the government in the form of reduced tax rates make the relative cost of using real earnings management practices lower so that managers are more flexible in practicing real earnings management. on the other hand, the advantages of real earnings management in the form of being more difficult to detect by tax authority employees make companies refrain from using their discretion in carrying out earnings management for tax avoidance motives vulnerable to future tax audits and risk-endangering their position. conclusion the conclusion is that there were differences in the level of earnings management before and during the pandemic. however, it was found that there was no difference in tax aggressiveness before and during the pandemic. then accrual and actual earnings management partially have a positive effect on tax aggressiveness proxied by the effective cash rate, but when proxied by etr, it has no effect. this research is expected to provide both theoretical and practical contributions. theoretically, this research will add references related to earnings management and tax aggressiveness. whereas practically, it can add input to the government, especially the directorate general of taxes, so that tax aggressiveness by companies can be minimized. the limitation of this study is that it only used one period before and one period during the pandemic. future research can use a 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(2021). the covid-19 and earnings management: china’s evidence. journal of accounting and taxation, 12(2), 59–77. https://doi.org/10.5897/jat2020.0436. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 646-667 646 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession: a systematic literature review diajeng fitri wulan1, reni oktavia2, usep syaipudin3 123university of lampung, indonesia correspondent: diajengfitriw@gmail.com1 received : june 20, 2023 accepted : october 10, 2023 published : october 31, 2023 citation: wulan, d, f., oktavia, r. syaipudin, u. (2023). the reasons why accounting student (not) pursuing public accounting profession: a systematic literature review. ilomata international journal of tax and accounting, 4(4), 646-667. https://doi.org/10.52728/ijtc.v4i4.775 abstract: the accounting industry is considered a good career choice and the ideal outcome for accounting graduates. however, the number of public accountants has decreased recently. the public accounting profession is declining due to several causes, including the need for more laws and legal protection for the industry, accounting reporting, and the small market share for audit services. the identification, screening, and selection phases of the systematic literature review process were used in this study to review previous research. the data analysis utilized in this study was predicated on the basis of the 21 papers that were found in the google scholar database and dated from 2006 to 2023. students' decisions to pursue a career in public accounting are influenced by a number of different factors, according to the findings of a comprehensive evaluation of all of the research that was published between the years 2006 and 2023. academics less frequently use regression to manage data than sem analysis. future research is expected to concentrate mainly on extending the use of variables as a factor influencing students' motivation to become public accountants and the approaches used. keywords: accounting, career, public accountant, student, systematic literature review this is an open access article under the cc-by 4.0 license. introduction the accounting industry is currently regarded as a good career choice and the ideal endpoint for accounting graduates. even if they must pass numerous exams and certification tests, the results can unquestionably inspire pride in someone. according to information from the ministry of education and culture's 2020 higher education statistics report, there is still much interest in accounting majors at the diploma, bachelor's, and even master's level. accounting is still indonesia's most popular occupational education subject, even at diploma level 3. additionally, in indonesia, the master's degree in accounting is ranked second, and the bachelor's degree in accounting is ranked fifth most intriguing. https://www.ilomata.org/index.php/ijtc mailto:diajengfitriw@gmail.com https://doi.org/10.52728/ijtc.v4i4.775 the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 647 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. the highest students in the vocational study program however, other evidence indicates that there has been a fall in interest in indonesia in recent years in becoming a public accountant. the growth of indonesian public firms that need public accountants is distinct from the expansion of the public accounting profession. there were only about 28,110 certified public accountants in indonesia as of 2016. far fewer accountants than in other southeast asian nations like thailand (71.128), singapore (31.118), and malaysia (32.990) (iai, 2015). this reveals a gulf between indonesia and the remaining asean allies. according to the table below, indonesia comes in fourth place, behind singapore, malaysia, and thailand. table 1. accountant data from accounting profession associations in asean num. country pao amount per january 2015 1 brunei darussalam bicpa 56 2 cambodia kicpaa 291 3 indonesia iai 24.587 4 laos licpa 176 5 malaysia mia 31.815 6 myanmar mac 1.948 7 filipina picpa 18.214 8 singapura icpas 28.891 9 thailand fap 62.739 10 vietnam vaa 9.800 total 178.517 table 2. public accountant addition throughout the years year amount of public accountant addition 2014 999 2015 1.053 54 2016 1.093 40 2017 1.279 186 2018 1.358 79 2019 1.424 66 2020 1.429 5 40.193 64.284 55.172 33.307 31.271 accounting nursing midwife informatics management pharmacy the highest students in the vocational study program (2020) amount https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 648 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to the information provided in the iai database, the number of public accountants decreased between 2017 and 2020. even the increase in the number of public accountants suffered the lowest growth from 2019 to 2020; there were only five new public accountants in 2020 (iai, 2020). this was the lowest increase of all of the categories. according to yustika et al. (2021), regulations and legal foundations linked to the public accounting profession and accounting reporting in indonesia may be a contributing factor to the downward trend in the number of public accountants in indonesia. these are regarded as insufficient to ensure the role of public accountants in corporate audit compliance and obligations, as well as a limited market share of audit services. another reason is that there are fewer auditing services available to choose from. between 2017 and 2022, there was an increase in the number of issuers listed on the idx. the idx and the bps report that 43 companies had their ipo between the beginning 2022 and the middle of 2022. this demonstrates that by the end of 2022, the total number of companies trading their shares on the idx reached around 800 companies. this figure has also climbed since the end of the previous year, reaching 5.61%. on the other hand, according to the submission of periodic financial reports of issuers and public companies listed in the decree of the chairman of the capital market and financial institution supervisory agency number kep-346/bl/2011, is required a certified public accountant audit the annual financial statements of the company. this requirement was established in 2011. companies are required to be able to present audited financial statements in order to fulfill this requirement. this is done so that the companies can provide results to public accounting firms that urge such firms to improve the quality of their audit results. the extent to which the audit was carried out before submitting financial reports significantly impacts how the company is perceived on the stock exchange. as a result of this regulation, issuers in indonesia are increasingly turning to certified public accountants for help. since an audit opinion, which can only be issued by a public accountant, is needed by a wide range of entities (not just issuers), employment opportunities for public accountants have grown substantially. this study compiles and summarizes the results of previous studies. differences in background and outlook among respondents account for the discrepancies in the results of the extensive studies on accounting students' motivations for pursuing public accounting in different cities across indonesia and other countries. these differences have been caused by the large amount of research conducted. to this day, there hasn't been a full review of the study done on the interests and ideas of accounting students who are thinking about becoming public accountants. because of this, the research was done using the literature review method, which involved looking at research that had already been done. the main goal of this study was to fill in the research gap by giving a full analysis. this study takes a thorough look at what accounting students are interested in and how they feel about becoming public accountants. the study focuses on the following issue formulations in particular: 1. what are the distributions of journals? 2. what are the theories used? 3. what are the methods used? 4. what factors are proven to be influential in the topic? 5. what are the topics related? https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 649 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 6. who is the most influential author? 7. what is the framework for future research? in order to carry out systematic literature reviews, the data used in this investigation came from various scientific journal articles published between 2000 and 2023. additionally, in order to enhance the discussion of the problem formulation that was presented, they made use of content analysis and bibliometric tools. examining the articles' contents was performed to ascertain their respective theories, methodologies, topics, variables, advantages, and limits. in addition, bibliometric research was utilized to establish the distribution of subjects and notable writers associated with this subject. last but not least, the researcher talks about the students’ plans for future study on what accounting students are interested in and how they feel about becoming public accountants. this study makes accounting students more interested in and optimistic about the chance of becoming public accountants. this study shows that the variables, theories, methods, and other factors that affect students' decisions to become public accountants are different from those that are usually used in similar studies in different countries and towns across indonesia. the following outline is how this research is laid out for your perusal. the reader will be presented with each of the themes explored in this paper after the introduction in the literature review section. after that, a detailed explanation of the research methodology follows, which explains how we screened, identified, and interpreted the publications. the findings are then presented and discussed, emphasizing the most salient aspects of the findings and how they relate to previous research. in addition to providing succinct results, the report discusses the study's merits and limitations and recommends additional research. method this research examined the process of excluding and including articles through a series of steps, beginning with the formulation of search words, continuing with the selection of a database for the search, and culminating with the formulation of criteria for the selection of papers (snyder, 2019). the first thing that we did was figure out the search terms and keywords that were being used to look through the particular database. snyder (2019) suggests that search phrases be derived from words and ideas that are immediately relevant to the study subject. both google scholar and web of science were utilized as the search engines for this study. it was determined that google scholar was the most effective tool for locating documents with a high number of citations (hu et al., 2020). in addition, hu et al. (2020) said that it has a broad search scope without restricting the type or source of documents that are returned by the search. for this study, only papers written between the years 2000 and 2023 were taken into account. we take advantage of this observation time because between those times, we study behavioral accounting, especially between the students. despite the fact that the determination of the year 2023's finish is made in order to collect the most recent pertinent articles. there were a total of 360 publications found as a result of the search parameters. in this particular search, the keywords https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 650 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc "accounting student," "career," "public accountant," "interest," and "perception" were utilized. after collecting 360 publications in the first stage, the screening process in the second stage was carried out by screening them according to the publication type, title, keywords, and abstract. after looking over 360 articles and deciding which ones to include based on several factors, such as the fact that they had to be articles and not books or proceedings, and that the study had to be written in bahasa indonesia or english; at least coming from scopus-indexed articles (scopus q1, q2, q3, q4) or sinta-indexed articles (sinta 1, 2, 3, 4), as they are known for the reputable and proper publication; we finally met 30 articles related to our review scope, which is the interest of the readership after that, we attempted to download the information; however, there were a number of problems with the paper, and as a result, we were only able to make use of 21 articles as observations in this study. this quantity was regarded adequate due to the fact that it was acquired through a series of meticulous methods that were openly discussed. in addition, the list of these 21 articles was arranged in ascending order both by the year the publication was made and the year the author was born, as shown in table 1. figure 1 shows how the pieces are checked for quality. in order to answer the research questions, a summary of each of the research findings was also made. during the analysis, we also found out about and looked into the quality of the pieces in question. by doing these things, it is possible to learn everything there is to know about the study results in all of the publications that were looked at. figure 2. articles selection process google scholar database journal found in the database (n = 414) using keywords of "accounting student" "career" "public accountant" "interest" "perception" the exclusion criteria: other than english and bahasa indonesia other topics unrelated unfound material double articles eligible journal to review (n = 21) the inclusion criteria: published in: 2000 – 2023 type of publication: journal scopus indexed: minimum at q4 sinta indexed: minimum at s4 journal screening after inclusion criteria (n = 114) journal screening after exclusion criteria (n = 21) id en ti fi ca ti o n s cr ee n in g s el ec te d jo u rn al https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 651 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion the methodology section provides an explanation of the screening procedure that twenty-one articles went through and passed. table 1 contains a listing of the chosen article titles, together with the names of the authors and the publication year, as well as the names of the publishers of the journals and their respective rankings. table 3. list of selected articles to review num. journal journal rank title author and year of publication 1 current: jurnal kajian akuntansi dan bisnis terkini s4 pengaruh pasar tenaga kerja, kompensasi finansial, disrupsi akuntan dan lingkungan kerja dalam karir akuntan nur (2023) 2 central european management journal q3 generation z accounting students: what affects their perceptions about career choices as public accountants? reschiwati & yoga, (2022) 3 humaniora s2 the mediating effect of student’s perception and satisfaction on the relationship of learning environment and accounting career yusuf et al. (2021) 4 akuntansi dewantara s4 the intention to obtain chartered accountant: a theory of planned behavior and motivation theory approach riadi (2021) 5 journal of applied business administration q4 determinants of students interest in pursuing professional certifications in accounting rikawati & arumsari (2020) 6 binus business review q2 understanding the intentions of accounting students to pursue career as a professional accountant srirejeki et al. (2019) 7 international journal of innovation, creativity and change q3 university students’ intentions to become accountants: examination using fishbein and ajzen’s theory ghani et al. (2019) 8 journal of accounting and strategic finance s2 accounting students perceptions on factors affecting career choices cahyadi et al. (2019) https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 652 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 9 journal of accounting in emerging economies q2 public accounting vs private accounting, career choice of accounting students in china wen et al. (2018) 10 international journal of engineering & technology q4 the intention of accounting students in pursuing professional qualification saat et al. (2018) 11 meditari accountancy research q1 what explains student’s intentions to pursue a certified professional accountancy qualification? owusu et al. (2018) 12 journal of economics, business, and accountancy ventura s2 patterns and determinants of indonesian accounting students’ career choice indriani (2018) 13 accounting education q1 social cognitive career theory and the goal of becoming a certified public accountant schoenfeld et al. (2017) 14 accounting education q1 awareness of the public versus private accounting divide, and its impact on the career path preference of accounting students crossman (2017) 15 jurnal akuntansi s4 the factors that influence the selection of career as public accountant and non-public accountant hatta & sartika (2016) 16 accounting education q1 understanding the intentions of accounting students in china to pursue certified public accountant designation wen et al. (2015) 17 education and training q1 to be or not to be: an investigation of accounting students’ career intentions ahmad et al. (2015) 18 education and training q1 the perception of undergraduate students towards accountants and the role of accountants in driving organizational change nga & wai mun (2013) 19 accounting education q1 the accounting profession as a career choice for tertiary business students in japan-a factor analysis sugahara & boland (2009) 20 accounting education q1 analyzing the factors relevant to students' estimations of the benefits chen et al. (2008) https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 653 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and costs of pursuing an accounting career 21 equilibrium: jurnal ekonomi, manajemen, akuntansi s4 analisis faktor-faktor yang mempengaruhi mahasiswa akuntansi di universitas wiajaya kusuma surabaya dalam memilih karir sebagai akuntan publik pramudianti (2006) the assessment and preliminary screening of journals led to the discovery of 21 journals from various periodicals. there was a total of four accredited journals that came from sinta, as well as three journals that came from sinta that were also accredited. in the meantime, this research discovered a further 14 journals published worldwide, scopus-accredited publications. of these, eight journals originated from indexed articles in the q1 category and two from each of the q2, q3, and q4 categories. figure 3. journal index distribution used and mentioned theory table 4. used and mentioned theory num. theory used used and mentioned 1 planned behavior theory 11 2 reasoned action theory 5 3 social cognitive career theory 3 4 expectancy theory 1 5 trait and factor theory 1 6 the holland theory 1 7 motivation theory 1 38% 9%10% 10% 14% 19% amount of journals scopus q1 scopus q2 scopus q3 scopus q4 sinta 2 sinta 4 https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 654 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 8 hierarchy of needs theory 1 9 motivation-hygiene theory 1 10 behavioral decision theory 1 11 self-determination theory 1 12 self-efficacy theory 1 13 agency theory 1 14 the trait and factor theory 1 based on 21 articles that have been reviewed in-depth, 14 theories are obtained, often used as reference theories in research. in the articles used on this topic, it is not uncommon for researchers to combine several related theories and mutually support the hypotheses formulated by researchers. however, the most widely used theories in the several articles used in this review are planned behavior theory, reasoned action theory, and social cognitive career theory. the planned behavior hypothesis is the first hypothesis that is most frequently applied. when making decisions and carrying out an activity, a person's conduct can be controlled according to the planned conduct theory from 1991. according to this hypothesis, there is a connection between a person's objectives, beliefs, attitudes, and conduct. according to the theory of perceived behavior (ajzen, 1991), which has three elements—attitudes, subjective norms, and perceived behavioral control—a person's behavior is not impacted by their intention to act in a certain way. controls). the chart below explains perceived behavior theory in more detail. this theory is a development of reasoned action theory, the second-most popular theory. the theory of reasoned action has come under heavy fire because many believe it ignores social elements that can have a substantial impact on an individual's conduct in real life. this has led to a change in the theory that is employed in research. in this investigation, the social cognitive career theory was the last and most frequently applied theory. based on social cognitive theory, the scct model emphasizes the reciprocal interaction of personal, behavioral, and environmental factors that contribute to the formation of academic and career objectives. (bandura, 1999). over the past two decades, the scct paradigm has been utilized in numerous contexts to examine academic and professional behavior. the scct provides a comprehensive framework that clarifies the dynamic processes that lead to the selection of a major and career path. according to schoenfeld et al. (2017), multiple individual inputs, as well as environmental and situational context elements that interact and alter over time, have an effect on the scct process. https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 655 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc methodology used table 5. methodology used num. title instrument data analysis sample and total respondent 1 pengaruh pasar tenaga kerja, kompensasi finansial, disrupsi akuntan dan lingkungan kerja dalam karir akuntan questionnaire pls accounting final year student at riau university (83) 2 generation z accounting students: what affects their perceptions about career choices as public accountants? questionnaire pls generation z, and accounting student from a accreditation in jakarta (75) 3 the mediating effect of student’s perception and satisfaction on the relationship of learning environment and accounting career questionnaire pls accounting student in dki jakarta, west java, east java, and central java (677) 4 the intention to obtain chartered accountant: a theory of planned behavior and motivation theory approach questionnaire pls final year accounting student from politeknik negeri batam, university of riau kepulauan, university of putera batam, stie galileo and batam international university (100) 5 determinants of students interest in pursuing professional certifications in accounting questionnaire spss higher education in indonesia (250) 6 understanding the intentions of accounting students to pursue career as a professional accountant questionnaire pls university in indonesia (439) 7 university students’ intentions to become accountants: examination using fishbein and ajzen’s theory questionnaire pls accounting student from our public universities in indonesia (300) 8 accounting students perceptions on factors affecting career choices questionnaire spss final year accounting student in stie perbanas surabaya (219) 9 public accounting vs private accounting, career choice of accounting students in china questionnaire spss undergraduate and graduate accounting student in china (163) 10 the intention of accounting students in pursuing professional qualification questionnaire spss final year accounting student in utm malaysia (130) https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 656 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 11 what explains student’s intentions to pursue a certified professional accountancy qualification? questionnaire pls university of ghana business school (641) 12 patterns and determinants of indonesian accounting students’ career choice questionnaire spss indonesian accounting students (261) 13 social cognitive career theory and the goal of becoming a certified public accountant questionnaire spss senior accounting student in aacsb accredited college of business of a public university in the southeastern united states (228) 14 awareness of the public versus private accounting divide, and its impact on the career path preference of accounting students questionnaire spss higher level accounting student (416) 15 the factors that influence the selection of career as public accountant and non-public accountant questionnaire spss final year student in universitas bengkulu 16 understanding the intentions of accounting students in china to pursue certified public accountant designation questionnaire spss college accounting students in china (288) 17 to be or not to be: an investigation of accounting students’ career intentions questionnaire spss seven universities in malaysia (804) 18 the perception of undergraduate students towards accountants and the role of accountants in driving organizational change questionnaire spss undergraduate students from a business school in malaysia (279) 19 the accounting profession as a career choice for tertiary business students in japan-a factor analysis questionnaire pls japanese undergraduate and graduate universities (463) 20 analyzing the factors relevant to students' estimations of the benefits and costs of pursuing an accounting career questionnaire spss business students from a large university in the southeastern usa (556) 21 analisis faktor-faktor yang mempengaruhi mahasiswa akuntansi di universitas wiajaya kusuma surabaya dalam memilih karir sebagai akuntan publik questionnaire spss mahasiswa akuntansi tahun akhir di universitas swasta wijaya kusuma surabaya (100) https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 657 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the 21 journals that have been reviewed, all journals use a questionnaire as a research instrument. based on the 21 journals used, all conduct research with student respondents both in the early and final semesters and those from private and public tertiary institutions. of the 21 journals, 11 were found to be conducting research in indonesia, while ten other journals were conducting research in several other countries, such as america, japan, china, malaysia, and ghana. as for the data analysis software used, most researchers use pls compared to spss. this is because spss provides sem analysis that can be used to measure the magnitude of the relationship (influence) between a series of (complex) variables, both direct and indirect influences that are carried out simultaneously (yamin & kurniawan, 2009) so that it is suitable to see what factors influence interest in becoming a public accountant in college students. based on the 21 journals that have been reviewed, 62% of 13 journals use spss as an analysis tool. figure 4. data analysis software based on figure 5, it was found that there were differences in the use of the data analysis software used, where in 2018 to 2023 many of them used pls compared to spss compared to 2006 to 2017. figure 5. comparison of the use of data analysis methods 62% 38% data analysis software spss pls 5 8 7 1 0 2 4 6 8 10 2018 2023 2006 2017 comparison of the use of data analysis methods spss pls https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 658 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variables supported table 6. variable supported num. title independent variable used supported independent variable 1 pengaruh pasar tenaga kerja, kompensasi finansial, disrupsi akuntan dan lingkungan kerja dalam karir akuntan konsiderasi pasar tenaga kerja, kompensasi finansial, disrupsi profesi akuntan, lingkungan kerja konsiderasi pasar tenaga kerja, kompensasi finansial 2 generation z accounting students: what affects their perceptions about career choices as public accountants? learning approach, financial award, motivation, work environment, labor market considerations learning approach, motivation 3 the mediating effect of student’s perception and satisfaction on the relationship of learning environment and accounting career learning environment, student perception, student satisfaction learning environment, student perception, student satisfaction 4 the intention to obtain chartered accountant: a theory of planned behavior and motivation theory approach attitude, subjective norms, perceived behaviour control, comprehension, career motivation, economic motivation, achievement motivation attitude, career motivation 5 determinants of students interest in pursuing professional certifications in accounting personality, labor market consideration, professional recognition, financial recognition, working environment personality, labor market consideration, professional recognition, financial recognition 6 understanding the intentions of accounting students to pursue career as a professional accountant career prospect, financial reward, interest, subjective norm, perceived behavioral control, gender career prospect, financial reward, subjective norm, perceived behavioral control 7 university students’ intentions to become accountants: examination using fishbein and ajzen’s theory personal beliefs, career influencers, career exposure personal beliefs, career exposure https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 659 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 8 accounting students perceptions on factors affecting career choices financial reward, professional recognition, professional training, job market considerations, personality financial reward, professional recognition, professional training, job market considerations 9 public accounting vs private accounting, career choice of accounting students in china compensation, experiences, marketability, turnover, dynamic, norm, difficulty, certification, travel turnover, dynamic, travel 10 the intention of accounting students in pursuing professional qualification attitude, subjective norm, perceived behavioral control attitude, subjective norm, perceived behavioral control 11 what explains student’s intentions to pursue a certified professional accountancy qualification? capabilities, constraints, environmental issues, preference, socio cultural issues capabilities, constraints, preference, socio cultural issues 12 patterns and determinants of indonesian accounting students’ career choice salary expectation, professional recognition, social value, labor market opportunity, family & colleagues’ encouragement, last education, gender professional recognition 13 social cognitive career theory and the goal of becoming a certified public accountant self-efficacy, expectations of: higher income, job security, advancement, status and prestige, interesting work, work independence, challenging work expectations, selfefficacy 14 awareness of the public versus private accounting divide, and its impact on the career path preference of accounting students quality of life, salary quality of life, salary 15 the factors that influence the selection of career as public accountant and non-public accountant penghargaan finansial, pelatihan profesional, pengakuan profesional, nilai-nilai social, lingkungan kerja, pertimbangan pasar kerja, personalitas penghargaan finansial, pelatihan profesional, nilainilai social, lingkungan kerja https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 660 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 16 understanding the intentions of accounting students in china to pursue certified public accountant designation social, market, financial, interest, independence, influence, difficulty in exam, difficulty in maintaining market, interest, independence, influence, difficulty in maintaining 17 to be or not to be: an investigation of accounting students’ career intentions self-efficacy, anticipated conflict, intrinsic interest, subjective norms, extrinsic interest, commitment intention unconditional commitment, noncommitment self-efficacy, anticipated conflict, intrinsic interest, subjective norms, extrinsic interest, commitment intention unconditional commitment, noncommitment 18 the perception of undergraduate students towards accountants and the role of accountants in driving organizational change leadership qualities, ethical values, professionalism leadership qualities, ethical values 19 the accounting profession as a career choice for tertiary business students in japan-a factor analysis intrinsic value, career prospects, job market considerations with employability, working environment, financial rewards, persons’ influence good initial salary, job availability, interaction with others 20 analyzing the factors relevant to students' estimations of the benefits and costs of pursuing an accounting career perceived benefits, perceived costs perceived benefits, perceived costs 21 analisis faktor-faktor yang mempengaruhi mahasiswa akuntansi di universitas wiajaya kusuma surabaya dalam memilih karir sebagai akuntan publik faktor intrinsic, penghasilan, pertimbangan pasar tenaga kerja, persepsi kelebihan, persepsi kekurangan, kecerdasan, personalitas faktor intrinsic, penghasilan, kecerdasan, personalitas in light of the previous research, this investigation uses a wide range of different sorts of independent variables. thirty different independent variables are utilized and supported throughout the research of the 21 publications. figure 6 contains a list of the ten variables that received the most support from this research. https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 661 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 6. most-supported variable topic distribution figure 7. network visualization of co-accurance metadata (keywords) based on the bibliometric analysis used, a network of keywords related to the interest to pursue the student's career in public accounting and their relationship with other topics that have developed a lot in this research were found. this co-occurrence has three scattered clusters (red [1], green [2], and yellow [3]) with 40 total items, which means a wide range of research on the topic of interest to pursue the student's career in public accountant and the topics related to it. this shows that the theme of industrial relations has been developed so that the appearance of these keywords is not visible in the image compared to other keywords. the overlay visualization becomes what is displayed regarding the industrial relations keywords by identifying co-occurrence during the research period that has been analyzed. fortunately, the dark 10 6 5 3 3 3 2 2 2 2 2 2 2 2 2 2 most-supported variable supported amount https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 662 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc blue cluster means that the research was carried out in 2000 until the color changes and shifts to the right which shows a lighter color, namely yellow, which means that the research was carried out in 2023. the brighter a keyword in the visualization above, the authors recently researched the research. in contrast, the darker the color of the keyword cluster means, the longer a keyword or topic has been researched. according to figure 8 below, the topics related to personality, career selection, career interest, and student interest are in the yellow line so that it can be implied that the topic is still relatively new to be researched. figure 8. overlay visualization of co-occurrence metadata (keywords) most influenced author figure 9 visualizes the identified co-authorship in the form of a paired visualization network. as has been raised, three different colors indicate the existence of 3 clusters with seven items of the author's name that are connected. judging from the size of the circle of each pair of authors, it shows that the number of research articles written by the authors' names regarding this topic is different from each other because the circle size is quite large. ghani, ek is a researcher with three articles entitled belief, preference and constraint factors influencing malaysian accounting students' intention to pursue professional qualification, university students' intentions to become accountants: examination using fishbein and ajzen's theory, and factors driving the intention to pursue internal auditing certification and career among future graduates in malaysia. these three articles are essential in discussing research related to interests and perceptions in choosing a career to become a public accountant for accounting students, considering that they have been cited more than ten times. https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 663 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 9. network visualization of co-authorship metadata (pairs) future framework research research on student interest and attitudes in selecting a career as a public accountant has been evolving quickly and is being evaluated from a variety of angles. we used the bibliometric citation analysis to generate recommendations for future study, and we then carried out a content analysis of these papers to determine future research directions. four prospective research agendas were generated by the process, as will be explained below. 1. explore graduate students, not only the undergraduate students this suggestion would be helpful for the discussion of the research. the students' answers may vary due to the knowledge they know about the public accounting profession. that would be much better than the author trying to expand the research by using more respondents for the sample. 2. try to explore in a more sophisticated way, explaining the relationship of the factors affecting the intention to pursue the pa career and the perception of it too. the perception of the public accounting profession, too, may affect the reasons for the respondent's answer. that would be better if the researcher explored the perception first, then tried to put it in the intentional move. 3. explain the difference in the intention between the junior-sophomoreand senior accounting students. it would be better if the research could provide more detailed answers in a descriptive section related to how each year students answered the questions. this condition may be related to how, each year, students' knowledge regarding the risk and the whole job regarding the public accounting profession. https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 664 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. use more new variables such as the working dynamic, flexibility, constraint, intelligence, ethical values, personality, it risk, and ai risk. according to the bibliometric analysis, several variables are still not used for the research on this topic. these variables will be needed in the future for the research, as the variables are more related in the following research. 5. use other methods of data instruments, it would be better if the researchers tried to use the interview method to understand the exact reasons. most of the research used the interview method, as this method would not capture extensively why and the reasons the respondents answer and pick the answer to each question. it would be great if the researcher could understand the reasons why they answered so and also could expand the discussion more. conclusion the findings of the research may be extrapolated to the research, which was carried out using the systematic literature review methodology and attempts to identify and assess the relevance of journals, influential variables, research subjects, and trends, as well as the techniques employed in data gathering. the results of the research search selection led to the acquisition of 21 periodicals. numerous studies have looked at accounting students' opinions and motivations for choosing the profession of public accountant. a questionnaire was used to collect the majority of the data for this study from junior and senior university students (both private and public). software tools sem and pls were used to analyze the data. the study focuses on the elements that affect students' judgments about their choice of a public accounting job in the future. however, further observation and research into public accountant opinions and the actions that influence this career decision are still required. the findings of this study form the basis for future scientific research. it can provide accounting students ideas for new issues pertaining to interests and perceptions in choosing a career as a public accountant, which will increase the quantity of research and its usage in indonesia. the manual data processing employed in this study was a limitation; future research can utilize several databases and systematic literature review (slr) techniques to maximize outcomes and gather even more comprehensive data. future research might evaluate the interests and attitudes of accounting students toward choosing a profession as a public accountant throughout indonesian regions and cities, as well as between nations on a regional or international scale. https://www.ilomata.org/index.php/ijtc the reasons why accounting student (not) pursuing public accounting profession wulan, oktavia, and syaipudin 665 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference ahmad, z., ismail, h., & anantharaman, r. n. 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(2021). the mediating effect of students’ perception and satisfaction on the relationship of learning environment and accounting career. https://journal.binus.ac.id/index.php/humaniora/article/view/7114 https://www.ilomata.org/index.php/ijtc https://doi.org/10.1080/09639284.2016.1274909 https://doi.org/10.21512/bbr.v10i1.5232 https://doi.org/10.1080/09639280701820035 https://doi.org/10.1080/09639284.2015.1051561 https://doi.org/10.1108/jaee-09-2016-0080 https://journal.binus.ac.id/index.php/humaniora/article/view/7114 ilomata international journal of tax and accounting vol.4 no.3 1 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 e-issn: 2714-9846 issn: 2714-9838 vol. 4 no. 3 july 2023 analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx) sari bulan tambunan……………..…………………………………………………………………………………………………... 371-384 https://doi.org/10.52728/ijtc.v4i3.755 repeated tax amnesties in indonesia: an evaluation of tax compliance indradi………………………………………………………………………………………………………………………………………… 385-406 https://doi.org/10.52728/ijtc.v4i3.759 the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office novianita rulandari, salsabila rahmayani………………..…………………………………………………………………… 407-437 https://doi.org/10.52728/ijtc.v4i3.861 the effects of ownership concentration, company size, and profitability on internet financial reporting tri utami lestari, muhammad nur fauzi…………….……………………………………………………………………….. 438-450 https://doi.org/10.52728/ijtc.v4i3.760 the moderation role of tax rate reduction and firm size in the effect of tax aggresiveness on company value faisal ardhi, arief wibisono lubis……………………….……………………………………………………………………….. 451-469 https://doi.org/10.52728/ijtc.v4i3.777 the effects of green innovation, eco-efficiency, business strategy, technology information investment, and profitability on firm value david silaban, r.rosiyana dewi………………………………….………………………………………………………………… 470-490 https://doi.org/10.52728/ijtc.v4i3.791 an empirical study of the effect of managerial competence on firm profitability beny mwenda, magwana ngollo, amosi mwasota……………………………………………………………………….. 491-507 https://doi.org/10.52728/ijtc.v4i3.794 https://www.ilomata.org/index.php/ijjm https://doi.org/10.52728/ijtc.v4i3.755 https://doi.org/10.52728/ijtc.v4i3.759 https://doi.org/10.52728/ijtc.v4i3.861 https://doi.org/10.52728/ijtc.v4i3.760 https://doi.org/10.52728/ijtc.v4i3.777 https://doi.org/10.52728/ijtc.v4i3.791 https://doi.org/10.52728/ijtc.v4i3.794 2 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 the tax revenue from agriculture and manufacturing sectors in lower middle-income countries with exchange rate as a moderating variable destiny wulandari, suparna wijaya…………………………………………………………………………………………… 508-523 https://doi.org/10.52728/ijtc.v4i3.798 tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation firda maharani anwar, suparna wijaya..…………………………………………………..……………………………….. 524-545 https://doi.org/10.52728/ijtc.v4i3.799 the influence of operating cash flows, investments cash flow, and funding cash flow on value of company at technology sector herman, randy chaidir..…………………………………………………………………………..…………………………….….. 546-560 https://doi.org/10.52728/ijtc.v4i3.780 juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia heriantonius silalahi………………………………………………………………………..…………………………….……………. 561-583 https://doi.org/10.52728/ijtc.v4i3.778 maturity level of fraud risk management in tax institutions in indonesia ariyadi teguh wibawa, agustinus nicholas l tobing…………………………………………………………………… 584-598 https://doi.org/10.52728/ijtc.v4i3.765 the mediating effect of the intention to quit as the impact of locus of control on dysfunctional audit behavior iman supriadi………………………………………………………………………..…………………………….……………………… 599-612 https://doi.org/10.52728/ijtc.v4i3.743 the determinants of tax revenue in the context of international transactions in the latin america and caribbean (lac) regions 2002-2019 hendiva tri nugraha, suparna wijaya………………………………………………………………………..……………….. 613-627 https://doi.org/10.52728/ijtc.v4i3.843 searching for tax revenue determinants in n-11: the moderating role of regulatory quality emilio pascal, suparna wijaya………………………………………………………………………..…………………………….. 628-645 https://doi.org/10.52728/ijtc.v4i3.844 https://www.ilomata.org/index.php/ijjm https://doi.org/10.52728/ijtc.v4i3.798 https://doi.org/10.52728/ijtc.v4i3.799 https://doi.org/10.52728/ijtc.v4i3.780 https://doi.org/10.52728/ijtc.v4i3.778 https://doi.org/10.52728/ijtc.v4i3.765 https://doi.org/10.52728/ijtc.v4i3.743 https://doi.org/10.52728/ijtc.v4i3.843 https://doi.org/10.52728/ijtc.v4i3.844 3 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 eissn: 2714-9846 issn: 2714-9838 vol. 4 no. 3 july 2023 ilomata international journal of tax and accounting is a periodical scientific journal on finance and tax law. ilomata international journal of tax and accounting is published four times a year (january, april, july, and october) by the ilomata foundation. ilomata ilomata international journal of tax and accountinghas been indexed by science and technology index (sinta) 4 and directory of open access journal (doaj). editorial team editor in chief dr. daryanto hesti wibowo, se, ak, ma institut ilmu sosial dan manajemen stiami, indonesia (scopus id: 57203340054) advisory international editorial board prof. naoyuki yoshino keio university japan & adjunct national graduate institute for policy studies, japan (scopus id: 7006313177) prof. victor van kommer international bureau of fiscal documentation, netherlands (scopus id: 57200100198) dr. ahmad omar hardan university malaysia terengganu, malaysia (scopus id: 57190378861) dr. sadaf khan sunway business school, sunway university malaysia, malaysia dr. damith gangodawilage sltc research university, sri lanka dr. ibrahim abubakar abubakar tatari ali polytechnic, india editorial board dr. nur zeina maya sari universitas langlangbuana, indonesia (scopus id: 57193777855) rudy hartanto, se, m.si universitas islam bandung, indonesia (scopus id: 56122127700) jovan febriantoko, s.e., ak., m.acc politeknik negeri sriwijaya, indonesia (scopus id: 57920616900) dirvi surya abbas.,se.,m.ak universitas muhammadiyah tangerang, indonesia (scopus id: 57223199080) mesri welhelmina nisriani manafe, se., m.sc universitas kristen artha wacana, indonesia (scopus id: 57222180580) https://www.ilomata.org/index.php/ijjm 4 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 dr. jamaluddin majid, m.si state islamic university alauddin makassar, indonesia dr. yeni priatna sari, msi.ak.ca politeknik harapan bersama, indonesia dr. lilis puspitawati, se.,m.si.,ak universitas komputer indonesia, indonesia dr. irwan sutirman wahdiat universitas swadaya gunung jati, indonesia dr. lesi hartati universitas indo global mandiri, indonesia ratih kumala, s.ap., m.a., bkp institut ilmu sosial dan manajemen stiami, indonesia address secretariat of ilomata international journal of management editorial office jl. pangkalan asem raya no. 55 cempaka putih jakarta pusat email: novia@ilomata.org wa: +62 812 8993 5858 https://www.ilomata.org/index.php/ijjm mailto:novia@ilomata.org 5 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 preface in the name of allah, the most compassionate, the most merciful. ilomata international journal of tax and accounting, volume 4, issue 3, july 2023, has been published. this edition consists of ten articles from two focuses and scopes: finance and tax law. the articles are titled:”analysis of tobin's q, market to book value of equity and profitability (roa), on asset growth in property companies on the indonesia stock exchange (idx)” (tambunan), “repeated tax amnesties in indonesia: an evaluation of tax compliance” (indradi), “the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office” (rulandari, et al), “the effects of ownership concentration, company size, and profitability on internet financial reporting” (lestari, et al), “the moderation role of tax rate reduction and firm size in the effect of tax aggresiveness on company value” (ardhi, et al), “the effects of green innovation, eco-efficiency, business strategy, technology information investment, and profitability on firm value” (silaban, et al), “an empirical study of the effect of managerial competence on firm profitability” (mwenda, et al), “the tax revenue from agriculture and manufacturing sectors in lower middle-income countries with exchange rate as a moderating variable” (wulandari, et al), “tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation” (anwar, et al), “the influence of operating cash flows, investments cash flow, and funding cash flow on value of company at technology sector” (herman et al), “juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia” (silalahi), “maturity level of fraud risk management in tax institutions in indonesia” (wibawa, et al), “the mediating effect of the intention to quit as the impact of locus of control on dysfunctional audit behavior” (supriadi), “the determinants of tax revenue in the context of international transactions in the latin america and caribbean (lac) regions 2002-2019” (nurgarha, et al), “searching for tax revenue determinants in n-11: the moderating role of regulatory quality” (pascal, et al). the various studies had been written from two countries that were indonesia and tanzania. the various research findings are expected to serve as a foundation for stakeholders and policymakers related to broader finance & tax law and to stimulate the development of ideas for further research. finally, we would like to express our gratitude to all contributors, including authors, expert reviewers, and all editors, for making the publication of this journal a reality. jakarta, indonesia july 2023 editor in chief dr. daryanto hesti wibowo, se, ak, ma https://www.ilomata.org/index.php/ijjm 6 | ilomata international journal of management https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting vol.4 no.3 manuscript guidelines a. manuscript submission criteria guidelines: 1. the manuscript is a result of management and business research. the manuscript should have a novelty/authenticity contribution or uniqueness for academic (science) development. 2. the manuscript contains original research work, free from plagiarism and other unethical attitudes. 3. the author must ensure that the manuscript has not been published in the other periodical journals at the time of manuscript submission. b. submission of manuscript manuscripts for submission should be complete in all respects, original in content, and have not previously been published or being considered for publication elsewhere. all manuscripts must be written in english, complete with tables and/or figures, and should be submitted to the 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(2000). the duality of collaboration: inducements and opportunities in the formation of interfirm linkages. strategic management journal, 21(3), 317-343. felstead, a., jewson, n., phizacklea, a., & walters, s. (2002). opportunities to work at home in the context of work-life balance. human resource management journal, 12(1), 54-76. hair, j. f., black, w. c., babin, b. j., anderson, r. e., &tatham, r. l. 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(2022). analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period. ilomata international journal of tax and accounting, 3(4), 461-473. https://doi.org/10.52728/ijtc.v3i4.605 abstract: this study aims to determine the company's financial condition based on the altman (z-score) method and the effect of the ratio of working capital to total assets, retained earning to total assets, earning before interest and tax to total assets and market value of equity to book value of debt on the company's financial soundness (altman z-score). the population in this study is the transportation sector listed on the indonesia stock exchange for the period 2019-2021. sampling in this study was to use the purposive sampling method so as to obtain a sample of 36 from 12 companies. the data used in this study is the company's annual financial statements obtained from the indonesia stock exchange. the data is then grouped and entered into the altman z-score formula and analyzed using the multiple linear regression method using the spss version 23 program. the results from the altman z-score show that in 2019 there were 5 companies in good health, 4 companies in an emergency (grey area) and 3 companies in a potentially bankrupt condition. in 2020 there are 6 companies in good health, 4 companies in an emergency (grey area) and 2 companies in a potentially bankrupt condition. in 2021 there are 6 companies in good health, 3 companies in an emergency (grey area) and 3 companies in a potentially bankrupt condition. meanwhile, the results of the analysis test show that the variables working capital to total assets, retained earning to total assets, earning before interest and tax to total assets and market value of equity to book value of debt, individually and jointly significant effect the level of financial health of the company (altman z-score). keywords: wcta, reta, ebita, mvbv, altman zscore. this is an open access article under the cc-by 4.0 license. mailto:gadisrasela@gmail.com https://doi.org/10.52728/ijtc.v3i4.605 analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 462 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction in an effort to support the development of the unitary state of the republic of indonesia (nkri), the transportation sector in indonesia has an important role in achieving three goals, namely: supporting economic movement, national stability, and reducing development gaps between regions by expanding the distribution of goods and services to all corners of the archipelago. . transportation in indonesia is divided into 3 types, namely land transportation, water transportation and air transportation (bilal et al., 2021; kadarisman et al., 2015; nafi’ah, 2021; widiyatmoko, 2018). land transportation is a mode of transportation that operates on land lines. types of land transportation, namely motorbikes, cars, buses, trucks, trains and so on (listantari et al., 2022; mu’allimah & mashpufah, 2022). water transportation is a mode of transportation that operates on rivers and seas. examples of water transportation are passenger ships, motor ships, and others (samuel & pardosi, 2022; sugeng, 2010). while air transportation is a mode of transportation that operates in the air. examples are planes and helicopters (darwis, 2014; ikhsan et al., 2019). percentage of decrease in the number of public transportation passengers in may 2020 source: badan pusat statistik (2020) from the picture above, it is explained that there was a decrease in the number of transportation passengers in may 2020. the decline occurred as a result of the implementation of restrictions on community activities or ppkm (masitha, 2022). the decline in the number of passengers occurred quite significantly where domestic air transportation passengers’ fell drastically by up to 90% and international passengers fell by 55% compared to last month. the decrease in passengers also occurred in sea transportation which decreased by up to 50% compared to the previous month. meanwhile, rail transportation decreased by about 10% (badan pusat statistik, 2021). as a result of the decrease in the number of passengers above, it can indicate the analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 463 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc occurrence of financial distress in the transportation company (pitalokananta, 2022; sembe et al., 2021). the most popular research on financial distress and bankruptcy prediction is done by edward altman (qiu et al., 2020; wu et al., 2022). there are five financial ratios that are considered the most contributing to the bankruptcy prediction model using one equation model (altman, 1968; altman et al., 2019; altman & hotchkiss, 2005; gilson & altman, 2010). the z-score model is a model that can be used to predict financial difficulties. the z-score value is used to classify whether a company is bankrupt or not (almamy et al., 2016; elliott et al., 2014; pratama, 2022; rim & roy, 2014). from the background and limitations of the problem above, this research can be formulated as follows: (1) what is the financial health condition of transportation companies listed on the indonesia stock exchange based on the altman (z-score) model for the 2019-2021 period? (2) is there a significant effect of the ratio of working capital to total assets on the altman value? (3) is there a significant effect of the retained earning to total assets ratio on the altman value? (4) is there a significant effect of the ratio of earning before interest and tax to total assets on the altman value? (5) is there a significant effect of the ratio of market value of equity to book value of total debt on the altman value? (6) is there a significant effect of the ratio of working capital to total assets, retained earning to total assets, earning before interest and tax to total assets and market value of equity to book value of total debt on altman value? method the method and type of research used, namely the research conducted by the author, cannot be separated from the knowledge of the experts, and an in-depth and systematic preparation has been carried out. this study uses a quantitative approach method (creswell, 2017). this study will use a cross-sectional study. cross-sectional is research conducted at a certain time and with several different objects (sugiyono, 2019). in this study, the independent variables used were (1). liquidity ratio (wcta) (x1), which measures liabilities by comparing net liquid assets with total assets. net liquid assets or working capital are defined as current assets minus total current liabilities (current assets – current liabilities). usually companies experience financial difficulties, working capital will decrease faster than total assets, causing this ratio to fall (rudianto, 2013). wcta = (2).profitability ratio (reta) (x2) this ratio is a profitability ratio that detects the company’s ability to generate profits. this ratio measures the size of a company’s ability to earn profits, in terms of the company’s ability to earn a profit compared to the operating assets turnover speed as a measure of business efficiency or in other words, this ratio measures the accumulated profits during the company's operations (rudianto, 2013). analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 464 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reta = (3).profitability ratio (ebita) (x3) this ratio measures profitability, which is the rate of return on assets calculated by dividing the company’s annual earnings before interest tax by the total assets of the balance sheet at the end of the year (rudianto, 2013). ebita = (4).solvency ratio (mvbv) (x4) this ratio is a ratio that measures the company’s activities. this ratio measures the company’s ability to provide guarantees for each of its debts through its own capital (leki, 2021). mvbv= (5). dependent variable the dependent variable is the variable caused or influenced by the independent variable. the existence of this variable as a variable described in the focus/topic of research . in this study the dependent variable is the z-score. z-score is a ratio model that uses multiple discriminate analysis (mda). the mda method requires more than one financial ratio related to corporate bankruptcy to form a comprehensive model. by using discriminant analysis, the final discriminant function is used to predict the bankruptcy of the company based on the financial ratios used as the variables (rudianto, 2013). z=6,56(x1)+3,26(x2)+6,72(x3)+1,05(x4) in this research, the data sources used are data from various books, financial reports and previous research journals that can support this research. the source of data that will be processed in the analysis of this research is from the official website of the indonesia stock exchange (bursa efek indonesia, 2022). in this study, the object of research raised in this paper is a transportation company listed on the indonesia stock exchange in 2019-2021. the population in this research are transportation companies that go public and have been listed on the indonesia stock exchange in 2019-2021, namely: no company’s code company’s name 1 apol arpeni pratama ocean line tbk 2 assa adi sarana armada tbk 3 bbrm pelayaran nasional bina buana raya tbk 4 bird blue bird tbk 5 blta berlian laju tanker tbk 6 bptr batavia prosperindo trans tbk. 7 bull buana listya tama tbk analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 465 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 8 cani capitol nusantara indonesia tbk 9 cass cardig aero services tbk 10 cmpp airasia indonesia tbk 11 deal dewata freightinternational tbk. 12 giaa garuda indonesia (persero) tbk 13 heli jaya trishindo tbk 14 hits humpuss intermoda transportasi tbk 15 iata indonesia air transport & infrastruktur tbk 16 indx tanah laut tbk 17 ipcm jasa armada indonesia tbk 18 jaya armada berjaya trans tbk. 19 karw ictsi jasa prima tbk 20 kjen krida jaringan nusantara tbk. 21 lead logindo samuderamakmur tbk 22 lrna ekasari lorena transport tbk 23 mbss mitra bantera segara sejati tbk 24 mira mitra international resources tbk 25 nely pelayaran nelly dwi putri tbk 26 pura pt putra rajawali kencana tbk 27 port nusantara pelabuhan handal tbk 28 ptis indo straits bk 29 rigs rig tenders indonesia tbk 30 safe steady safe tbk 31 sapx satria antaran prima tbk. 32 sdmu sidomulyo selaras tbk 33 ship sillo maritime perdana tbk 34 smdr samudera indonesia tbk 35 soci soechi lines tbk 36 tamu pelayaran tamarin samudra tbk 37 taxi express transindo utama tbk 38 tcpi transcoal pacific tbk. 39 tmas pelayaran tempuran emas tbk 40 tnca trimuda nuansa citra tbk. 41 tpma trans power marine tbk 42 tram trada maritime tbk 43 truk guna timur raya tbk. 44 weha weha transportasi indonesia tbk 45 wins wintermar offshore marine tbk 46 zbra zebra nusantara tbk source: sahamu.com (data is processed by the author) the sampling method in this research is a purposive sample. purposive sampling is a sampling technique with certain considerations. the criteria used are a) perusahaan transportation sector companies listed on the idx in this study, the transportation sector is a company that provides goods and services transportation services. https://www.sahamu.com/giaa/profil-garuda-indonesia/ analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 466 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b) have an ipo (initial public offering) and publish its financial statements for 3 consecutive years. this study uses a time span of 3 years on the grounds that in that time span before the onset of the covid-19 pandemic and the ongoing covid-19 pandemic, it greatly affected the results of the financial statements. c) the company did not suffer any losses during the 2019-2021 period as for the sampling above, a sample of 12 companies from the transportation sector was obtained, namely: no company’s code company’s name 1 assa adi sarana armada tbk 2 bptr batavia prosperindo trans tbk. 3 heli jaya trishindo tbk 4 ipcm jasa armada indonesia tbk 5 jaya armada berjaya trans tbk 6 nely pelayaran nelly dwi putri tbk 7 ptis indo straits tbk 8 sapx satria antaran prima tbk. 9 ship sillo maritime perdana tbk 10 soci soechi lines tbk 11 tcpi transcoal pacific tbk. 12 tpma trans power marine tbk based on the sample criteria above, so that the number of samples obtained is 12 companies. all of the selected companies have met the sampling criteria conducted by the author. result and discussion to answer the formulation of the first problem and the first hypothesis regarding the company’s financial health condition, a z-score analysis was carried out as follows: ratio calculation results of wcta(x1) no company’s code 2019 2020 2021 1 assa -0,121201108 -0,156499829 -0,020050566 2 bptr -0,234028013 -0,219685468 -0,133055891 3 heli 0,177624078 0,040686418 0,009207947 4 ipcm 0,439505693 0,376571923 0,410595403 5 jaya -0,039802418 0,102503578 0,392385816 6 nely 0,210123495 0,21929619 0,133494909 7 ptis -0,005572709 0,118915244 0,160984693 8 sapx 0,58111727 0,516551412 0,509436248 9 ship -0,019022008 -0,008380691 -0,011555853 10 soci 0,105429495 0,099798867 0,099102365 11 tcpi -0,00110738 -0,059725799 -0,067505451 12 tpma 0,797830989 0,838434105 0,847460073 analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 467 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc value calculation results of mvbv(x4) no company’s code 2019 2020 2021 1 assa 0,381123626 0,385713766 0,413813041 2 bptr 0,687860067 0,7198165 0,427810833 3 heli 1,851915366 0,648811371 0,880514666 4 ipcm 5,399967637 3,447564866 4,259942584 ratio calculation results of reta(x2) no company’s code 2019 2020 2021 1 assa 0,096942645 0,108466257 0,118550733 2 bptr 0,051679118 0,065221186 0,061480748 3 heli 0,214640341 0,143220503 0,171009872 4 ipcm 0,157854071 0,137302089 0,169560475 5 jaya 0,010134354 0,043668981 0,069964332 6 nely 0,391619305 0,428163103 0,427491161 7 ptis -0,04859182 -0,04908494 -0,04231438 8 sapx -0,18300732 0,009393744 0,089403528 9 ship 0,209128478 0,217169231 0,222081793 10 soci 0,230786125 0,279022497 0,302509206 11 tcpi 0,162316919 0,190199807 0,212004653 12 tpma 0,409109278 0,419898043 0,439648524 ratio calculation results of ebita(x3) no company’s code 2019 2020 2021 1 assa 0,024205351 0,01324626 0,036990974 2 bptr 0,023241096 0,011649039 0,021001712 3 heli 0,147115537 0,025482114 0,016519858 4 ipcm 0,10335826 0,079308055 0,119734243 5 jaya 0,030147426 0,052024355 0,051321385 6 nely 0,107002547 0,083731319 0,099908205 7 ptis 0,007489257 0,000473668 0,00114655 8 sapx 0,253958087 0,193956582 0,211765122 9 ship 0,091791639 0,088555464 0,07402547 10 soci 0,018943509 0,047293652 0,012280944 11 tcpi 0,087716305 0,021032544 0,038735699 12 tpma 0,078930901 0,02469353 0,045010356 analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 468 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5 jaya 2,255877421 4,318128106 9,395265409 6 nely 7,060762939 7,19709758 8,083029799 7 ptis 0,852394518 0,889672423 0,839614516 8 sapx 2,121694592 1,904838293 2,026482376 9 ship 0,910928329 0,84504663 0,863970667 10 soci 0,951221771 1,208577755 1,403744382 11 tcpi 0,878127252 1,083977396 1,178458987 12 tpma 2,426833407 2,877836306 3,472849431 the results of the research show that the transportation companies that have been studied from 2019-2021 are many companies that are in good health. pt ipcm, nely, sapx, and tpma are companies that do not experience financial difficulties and are in good health based on the altman z-score value. pt ship is one of the companies that are in a potentially bankrupt condition (gray area) for 3 consecutive years. at pt heli, in 2019 it was in good health but in 2020-2021 it was in a potentially bankrupt condition (grey area). in 2019 pt jaya, soci, and tcpi experienced a potentially bankrupt condition (gray area) but in 2020-2021 the company could recover and be in good health. at pt ptis in 2019 the results of the altman z-score value showed that the company went bankrupt then in 2020-2021 it could improve even though it was still in a potentially bankrupt condition (grey area). and finally, pt assa and bptr from the results of the altman z-score value show that the two companies went bankrupt from 20192021. effect of working capital to total assets (wcta) on altman z-score based on the results of the study, it showed that wcta had a significant effect on the altman z-score value. the effect is shown by the value of t-count of 201,051 with a significance of 0.000 while the t-table of 1.694 with a significance of 0.05. then the value of t-count is greater than ttable, in this case it indicates that the ratio of working capital to total assets has a significant effect on the altman z-score (y) value variable in transportation companies listed on the indonesia stock exchange in 2019-2021. the results of testing the second hypothesis show that working capital to total assets has a significant effect on the altman z-score value. value calculation result of z-score no company’s code year 2019 2020 2021 1 assa 0,1 -0,2 0,9 2 bptr -0,5 -0,4 -0,1 3 heli 4,8 1,6 1,7 4 ipcm 9,8 7,1 8,5 5 jaya 2,3 5,7 13,0 6 nely 10,8 11,0 11,4 7 ptis 0,8 1,6 1,8 8 sapx 7,1 6,7 7,2 9 ship 2,1 2,1 2,1 10 soci 2,6 3,2 3,2 11 tcpi 2,0 1,5 1,7 12 tpma 9,6 10,1 10,9 analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 469 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this is in line with research conducted by (putri & diyani, 2016), which shows that the ratio of working capital to total assets affects the level of financial health of the company which is marked by the larger current assets owned by the company than current liabilities, the company's short-term debt can be guaranteed by current assets owned by the company. effect of retained earning to total assets (reta) on altman z-score based on the results of the research, it shows that reta has a significant effect on the altman z-score value. the effect is shown by the value of t-count of 114.683 with a significant 0.000 while the t table is 1.694 with a significant 0.05. then the value of t-count is greater than t-table, in this case it indicates that the ratio of retained earning to total assets (x2) has a positive and significant effect on the altman z-score (y) value variable on transportation companies listed on the indonesia stock exchange in 2019-2021. the results of testing the third hypothesis show that retained earning to total assets has a significant effect on the altman z-score value. this is in line with research conducted by (asia & irwan, 2015), which shows that the results of the t-count are 5.052 with a significance of 0.000 while the t-table is 1.694 with a significant 0.05 of 1.681. the calculation results show that t-count is greater than t-table (5.052 > 1.681). the significance value of 0.000 is smaller than the 0.05 significance level. thus indicating that at a significance level of 5%, reta has a significant effect on bankruptcy prediction. effect of earning before interest and tax to total assets (ebita) on altman z-score based on the results of the research, it shows that ebita has a significant effect on the altman z-score value. the effect is shown by the value of t-count of 71.477 with a significance of 0.000 while the t-table of 1.694 with a significance of 0.05. then the value of t-count is greater than ttable, in this case it indicates that the ratio of earnings before interest and tax to total assets (x3) has a positive and significant effect on the altman z-score (y) value variable on transportation companies listed on the indonesia stock exchange in 2019-2021. the results of testing the fourth hypothesis show that earnings before interest and tax to total assets have a significant effect on the altman z-score value. this is in line with research conducted by it is in line with research conducted by (asia & irwan, 2015), which shows that the results of the t-count are 3.737 with a significance of 0.001 while the t-table is 1.681 with a significance of 0.05. the calculation results show that t-count is greater than t-table (3.737 > 1.681). the significance value of 0.001 is smaller than the 0.05 significance level. thus, it shows that at the 5% significance level, ebita has a significant effect on bankruptcy prediction. effect of market value of equity to book value of total debt (mvbv) on altman z-score based on the results of the research, it showed that mvbv had a significant effect on the altman z-score value. the effect is shown by the value of t-count of 457.064 with a significance of 0.000 while the t-table of 1.694 with a significance of 0.05. then the value of t-count is greater than t-table, in this case it indicates that the ratio of market value of equity to book value of total debt (x4) has a positive and significant effect on the altman value variable z-score (y) in transportation companies listed on the indonesia stock exchange in 2019-2021. the results of testing the fifth hypothesis show that the market value of equity to book value of total debt has a significant effect on the altman z-score value. this is in line with research conducted by (karlingsih, 2021), which shows that the results of the t-count are 120.543 with a significant 0.000 while the t-table is 1.669 with a significant 0.05. the calculation results show that t-count is greater than t-table (120.543 > 1.669) and a positive tanalysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 470 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc count indicates that the market value of equity to book value of total debt has an effect on financial distress in islamic commercial banks for the 2015-2019 period. effect of working capital to total asset (wcta), retained earning to total asset (reta), earning before interest and tax to total asset (ebita) and market value of equity to book value of total debt (mvbv) on altman z-score based on the results of the research, it showed that wcta, reta, ebita and mvbv had a significant effect on the altman z-score value. the effect is shown by the value of fcount of 227994.790 with a significance of 0.000 while f-table is 2.668 with a significance of 0.05. then the value of fcount is greater than f-table, in this case it indicates that the ratio of working capital to total assets (wcta), retained earning to total assets (reta), earning before interest and tax to total assets (ebita) and market value of equity to book value of total debt (mvbv) has a significant effect on the altman z-score (y) value variable in transportation companies listed on the indonesia stock exchange in 2019-2021. the results of testing the sixth hypothesis show that working capital to total assets, retained earning to total assets, earning before interest and tax to total assets and market value of equity to book value of total debt together have a significant effect on the altman z-score value. conclusion based on the results of the discussion above, the conclusions obtained are as follows: 1. based on research results from transportation companies in 2019-2021, itcan be categorized into 3 assessments, namely healthy, potentially bankrupt (grey area) and bankrupt with the following details: a) in 2019 there were 5 companies in healthy condition, namely pt heli, ipcm, nely, sapx and tpma. furthermore, there are 4 companies in a potentially bankrupt condition (grey area), namely pt jaya, ship, soci and tcpi and 3 companies in a state of bankruptcy, namely pt assa, bptr and ptis. b) in 2020 there are 6 companies in healthy condition, namely pt ipcm, jaya, nely, sapx, soci and tpma. furthermore, there are 4 companies in a potentially bankrupt condition (grey area) namely pt heli, ptis, ship and tcpi and 2 companies in a state of bankruptcy namely pt assa and bptr. c) in 2021 there are 6 companies in healthy condition, namely pt ipcm, jaya, nely, sapx, soci and tpma. furthermore, there are 3 companies in a potentially bankrupt condition (grey area), namely pt ptis, ship and tcpi and 3 companies in a state of bankruptcy, namely pt assa, bptr and heli. 2. based on the results of the research above, it is proven that working capital to total assets (wcta) has a significant effect on the altman z-score value. 3. based on the results of the research above, it is proven that retained earning to total assets (reta) has a significant effect on the altman z-score value. 4. based on the results of the research above, it is proven that earning before interest and tax to total assets (ebita) have a significant effect on the altman z-score value. 5. based on the results of the research above, it is evident that the market value of equity to book value of total debt (mvbv) has a significant effect on the altman z-score value. 6. based on the results of the research above, it is proven that working capital to total assets (wcta), retained earning to total assets (reta), earning before interest and tax to total assets (ebita) and market value of equity to book value of total debt (mvbv) has a significant effect on the altman z-score value. analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 471 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference almamy, j., aston, j., & ngwa, l. n. 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(2014). classifying manufacturing firms in lebanon: an application of altman’s model. procedia social and behavioral sciences, 109, 11–18. https://doi.org/10.1016/j.sbspro.2013.12.413 rudianto. (2013). akuntansi manajemen: informasi untuk pengambilan keputusan strategis (1st ed.). analysis of financial health level using the z-score (altman) method in transportation companies listed on the indonesia stock exchange for the 2019-2021 period aidi, setiawan, junaidi, budiwaluyo, and agoestyowati 473 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc erlangga. http://pustaka.unm.ac.id/opac/detail-opac?id=44464 samuel, s., & pardosi, b. r. (2022). studi perancangan kapal ferry ro-ro model katamaran di perairan danau toba. jurnal rekayasa mesin, 13(2), 503–512. https://doi.org/10.21776/jrm.v13i2.1085 sembe, a., mokodompit, m., & parastri, d. h. 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(2022). financial distress prediction using integrated z-score and multilayer perceptron neural networks. decision support systems, 159, 113814. https://doi.org/10.1016/j.dss.2022.113814 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 491-507 491 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an empirical study on the effects of managerial competence on firm profitability beny mwenda1, magwana ngollo2, amos mwasota3 123college of business education, tanzania correspondent: benybnjmn@gmail.com 1 received : june 7, 2023 accepted : july 16, 2023 published : july 31, 2023 citation: mwenda, b., ngollo, m., mwasota, a. (2023). an empirical study of the effect of managerial competence on firm profitability. ilomata international journal of tax and accounting, 4(3), 491-507. https://doi.org/10.52728/ijtc.v4i3.794 abstract: profits are generated by managing assets and using them wisely to create revenues that exceed costs. this study aimed to analyse the effects of managerial competence on firm profitability listed in the dar es salaam stock exchange (dse). the quantitative research design was used to collect, analyse and interpret data in this research while panel regression model was selected to analyse the influence of managerial competence on profitability of listed firms. pols technique was used to check robustness and diagnostic tests were used to meet the criteria of regression analysis. the regression analysis indicate that managerial competence had a significant effect on firm profitability. raising managerial competence has the potential to significantly increase business profitability, as managers play a key role in an organization's overall functioning. the researchers suggested that shareholders should thoroughly analyse potential managers' competencies and credentials before allocating managerial duties since hiring a competent management team is likely to have a beneficial impact on the firm's profitability. shareholders should strive to reduce the risk of choosing managers who lack the requisite abilities to maximize the firm's profitability by performing due diligence in the selection process. keywords: profitability, management competence, stock exchange this is an open access article under the cc-by 4.0 license. introduction the aspiration to attain the utmost profits has been an enduring pursuit of firms and businesses since the dawn of time (ajanthan, 2013). profits are the heart and soul of any businesses and are derived from the difference between the two components of daily business operations specifically revenues and expenses(akinleye. & ademiloye, 2018). profits can be generated by managing intangible assets such as labour carefully and using them wisely to create revenues that exceeds costs, resulting in a positive profit margin(alarussi et al., 2018). profits can be affected by a variety of factors such as unique characteristics of a firm and its industry (assenga et al., 2018) as well as the different leadership styles (ayako et al., 2015) https://www.ilomata.org/index.php/ijtc mailto:benybnjmn@gmail.com https://doi.org/10.52728/ijtc.v4i3.794 an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 492 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc leadership styles have a substantial influence on employee performance and productivity(bae et al., 2017). at this juncture, it becomes clear that in order for the firms to maximize profits, it is imperative to have executives with the necessary skills required and the knowledge to manage resources and workforce of the firms by executing the tasks of planning, organizing, directing, and supervising activities competently while keeping in mind, the common aim of achieving the desired objectives of the firms(batchimeg, 2017) building upon the concept that profits stem from executives possessing the necessary skills and knowledge, a vital question emerges: how can managerial competence be identified?. managerial competence is a subjective evaluation of an individual's knowledge, skills, and abilities required for effective performance as a manager under certain conditions (banafa et al., 2015). in other words, a manager is considered competent if they can demonstrate the required skills and knowledge for their job(biorn, 2017). indicators of managerial competence include factors such as educational background and management tenure(borda et al., 2017). for the sake of obtaining a better comprehension of the significance of managerial competency, it is necessary to differentiate between profit and profitability (mwenda et al., 2021). by distinguishing between these two concepts, a manager's ability to create values for a company and its stakeholders more accurately can possibly be identified. this is essential as it has been the common adage for firms to seek maximum profit but at the end it is essential to ask do maximum profits makes the firm profitable? whereas profit is the monetary difference between revenues and expenditures(mutende et al., 2017), profitability on the other hand is a comparative metric that evaluates the effectiveness and efficiency with which a company generates earnings relative to its expenses and other costs(mwenda & magwana, 2022; omondi & muturi, 2013). return on assets, return on equity, and net profit margin are common measures of profitability (mwenda et al., 2023). these ratios provide insightful information regarding a company's ability to generate returns and create value. from the observed differences between profit and profitability it becomes apparent that profit alone does not ensure a sustainable business, but the ability to consistently generate profit, i.e., profitability, acts as a moderator for sustainable business(matar & eneizan, 2018; mule et al., 2015). in addition, it is logical to believe that having a high degree of management competence increases the likelihood of company profitability, and this will lead to successful and sustainable firms (mwenda et al., 2021). furthermore, researchers across the globe have also been interested in the subject matter of this research. (sumaira & amjad, 2013) studied 64 indonesian insurance firms between 2011 and 2015 and determined that managerial competency had a positive effect on roa. they used the ratio of profit to total number of professionals to calculate the management competence index.(bist et al., 2017; bryman, 2016) studied insurance companies listed in amman stock exchange and concluded that management competence had a positive and significant effect on roa and roe. they measured management competence as a ratio of net income to total number of employees. besides, (dioha et al., 2018) researched small firms in ghana and determined that top management had the skills and attitudes to improve performance, nevertheless, due to some factors they failed to employ these talents effectively to enhance firm performance. https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 493 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in addition to the previous studies mentioned, (daniel & tilahun, 2013) conducted a research in 23 insurance companies in kenya and determined that managerial competence had a positive and significant influence on their profitability. management competence was measured as a ratio of profit to total number of professionals. lastly, (pervan et al., 2017; rwechungura et al., 2020) studied commercial banks in uganda. their findings highlighted managerial competence's critical role in commercial banks' financial performance. they measured the competence in terms of knowledge, skills and experience of staff while financial performance was measured through by profitability and liquidity. (siwandeti et al., 2021), used profitability as a proxy for financial performance and concluded that there was a significant positive relationship between managerial competence and financial performance of abu sacco. their dimension of managerial competence included interpersonal skills, training and professional competence. (pantea et al., 2014) stated that there was a significant association between managerial competence and financial performance of small businesses operating in mbarara district in uganda. they measured management competence as knowledge, skills, and abilities using a point scale system, whereas knowledge was focused on the collection of current information, skills emphasized on the identification of problems, and abilities centred on achieving business objectives or goals. even though there is a common consensus on the relationship between managerial competence and profitability, the arising greatest challenge is the manner in which the managerial competence is measured. some researchers measures it qualitatively as skills, knowledge and attributes (too & simiyu, 2019; ubesie, 2014; zainudin et al., 2018) while other researchers measured it quantitatively. apart from that, (taouab & issor, 2019) also concluded that possession of competence doesn’t necessarily lead to its proper and effective utilization in enhancing the firm performance. as it stands, managerial competence is a highly subjective measure and cannot be generalized to all firms at once. the same measure may lead to different results if employed elsewhere or a different proxy for managerial competence can also lead to different results due to the geographical locations, firm specific factors, culture and human behaviour. hence, to simply conclude that managerial competence has a positive effect on the outlook which is based only on a highly agreeable consensus from elsewhere in the world will be a denial of further attainment of knowledge that would have proved otherwise. specific researches on specific markets such as dse that leads to sub-optimal decision making due to its lack of specific clarity are still rare to find. most of the prevailing researches have addressed firms’ specific factors such as liquidity, leverage and gearing, and as such becomes imperative to conduct this study so as to analyse the effect of managerial competence on profitability of firms listed in the dse. the findings will contribute to the current body of knowledge and provide a more specific and distinguished understanding of the issue as studied in the tanzania’s market. apart from that, the need for empirical study will always persist in order to account for diverse factors affecting the relationship between managerial competence and firm profitability such as geographical diversification of the firm as a control variable in this study. with such view in mind, the researchers went forth and formulated the following hypothesis. 𝐻𝑜: managerial competence does not influence profitability of firms listed at dse. https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 494 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc theoretical reviews underpinnings the paper this research employed resource based theory (rbt) introduced by werner felt’s (1984) and supported by barney's (1991) to analyse how management competence affects profitability of a firm. according to the rbt, a company's competitive advantage lies in the sum of its parts, including its assets, capabilities, talents, and other non-financial resources (tailab, 2014). both financial and non-financial resources are taken into account as contributing factors to a firm’s ability in generating profit. non-financial resources that comprises managerial competence, refers to the ability to optimize the existing professional and physical resources to effectively and efficiently generate the desired profit levels for the firm. scholars have used this theory (dioha et al., 2018; lazăr, 2016) to examine the connection between non-financial indicators and performance in a variety of settings. in this research, we use the rbt to investigate the impact of management skills on firm profitability in tanzania. method this study employed a quantitative research design, a methodology which enables the gathering, analyzing, and interpreting the data using quantitative techniques (creswell & plano clark, 2018). quantitative data analysis was chosen due to its efficacy in elucidating the relationships between variables (bryman, 2016). this approach has also been utilized by numerous researchers (chandrapala & knápková, 2013; dioha et al., 2018; omondi & muturi, 2013) mainly due to its proficiency in establishing links between two variables model specification and analysis the panel regression model was employed to examine the impact of managerial competence elements on the profitability of firms listed on the dar es salaam stock exchange. the data set utilized in this research (panel data) was ideally compatible with this model and was expected to yield legitimate results. the model was selected following the footsteps of previous researchers who have used similar approaches in their researches. given that the dependent variable is numerical, it was deemed appropriate to use the model in this study. the panel regression model and its associated variables are depicted in equation (i)𝑅𝑂𝐴𝑖𝑡 = 𝛽0 + 𝛽1𝑚𝑐𝑖𝑡 + 𝛽2𝑠𝑔𝑟𝑜𝑤𝑡ℎ𝑖𝑡 + 𝛽3𝑑𝑖𝑣𝑝𝑎𝑦𝑖𝑡 + 𝛽4𝑓𝑖𝑟𝑚𝑙𝑒𝑣𝑖𝑡 + +𝛽5𝑓𝑠𝑖𝑧𝑒𝑖𝑡 + 𝛽6𝑓𝑎𝑔𝑒𝑖𝑡+ 𝑓𝑑𝑖 + 𝑡𝑑𝑡+𝜀𝑖𝑡………………………………………………… (i) in the provided equation, the dependent variable is represented by 𝑅𝑂𝐴. the constant is denoted by 𝛽0 , while the coefficients 𝛽1 𝑡𝑜 𝛽8 represent coefficients of a set of independent variables (such as management competence, firm leverage, sales growth, dividend payout, firm size, and firm age). the variable that signified a firm-specific effect that doesn't change over time was the firm dummy (𝑓𝑑𝑖), while a variable that signified a time-specific effect that varies over time was time dummy (𝑡𝑑𝑡). the error term is represented by ; 𝜀 and it was assumed to be a white noise. the variables i and t represent firm and time units respectively. to verify the robustness of the results, the pooled ordinary least squares technique (pols) was implemented and was executed with three estimations, labeled as 1, 2, and 3. this involved the https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 495 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc exclusion of control variables to ascertain whether or not the results were in line with those of the baseline model (fixed effect). data type and source the study gathered panel data on return on assets (roa, the dependent variable), managerial competence (the independent variable), and various control variables including leverage, sales growth, dividend pay-out, firm size, and firm age. this data was sourced from the audited annual reports of companies listed on the dse. the panel data from all locally listed firms for the period spanning of 2006 to 2022 were collected. panel data was chosen because of its distinct advantages: it is highly informative, offers more variability, reduces collinearity, and has a higher degree of freedom and efficiency. additionally, it can detect and measure effects that are not easily identified through cross-sectional and time series dimensions, leading to more reliable and generalized outcomes (batchimeg, 2017). the data from 2006 onwards were used as this was the year when electronic data records began for listed firms in accordance with the company ordinance. it's also the same year that dse started maintaining electronic data. additionally, this year marked the start of compliance with the international financial reporting standards by listed firms, which were introduced in 2004. thus, for this research, the collected data for each year spanned from january to december sampling and sample size a census method was employed to select a comprehensive sample of 21 local trading companies that had been officially listed by the end of the year 2022. the rationale was due to the limited number of firms listed on the dse. if the sample size was reduced, it would have compromised the accuracy and reliability of the results. thus, all 21 firms were included in the analysis for this research. measurement of variables the measurement of firm profitability in this study was through the utilization of return on assets (roa). this choice was made due to roa being an accounting performance metric that effectively assesses a company's capacity to generate profits by efficiently utilizing its available resources. as a result, it serves as a valuable indicator of managerial competence in the realm of profitability (liargovas and skandalis, 2010). other studies (mwenda et al., 2023), employed roa in determining firm profitability. table 1 presents the measurement of each variable and the expected signs. table 1: explanation of variables and expected signs parameters of study descriptive name definition of quantification anticipated sign target parameter roa return on asset profit before tax divided by total assets expressed as a percentage +/ explanatory parameter https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 496 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mc management competence profit before tax divided by the number of professionals with degrees.* + control firmlev firm leverage total debt to equity (debt/equity ratio) + sgrowth sales growth current year's sales minus previous year's sales divided by previous year's sales + divpay dividend payout dichotomous variable: 1 for some dividend, 0 for none + fsize firm size natural logarithm of total assets +/ fage firm age number of years since incorporation until the study period +/ the study focuses on the pre-tax profits from each year between 2006 and 2022. the count of degree-holding professionals remains constant throughout these years, assuming the firm has been listed during this period. it's presumed that any changes during these years are minor and have minimal or no impact. anyone classified as professionals have to meet two requirements. firstly, they must have a university degree. secondly, they must either have direct control or be part of the management team, as previously defined by skandalis et al., in 2008. diagnostic tests regression analysis is done under the guidance of necessary conditions that guarantee the validity and precision of the results. as a result, these circumstances were investigated before doing the study. according to (nwanna & ivie, 2017) important assumptions include normality, multicollinearity, heteroscedasticity, and autocorrelation which were all evaluated in order to meet the criteria of regression analysis in this study. normality for classical linear regression to produce the best unbiased estimates the residuals must be assumed to have a normal distribution. data with a normal distribution should have 0 skewness, an acceptable range of -1.0 to +1.0, and a kurtosis range of -3.0 to 3.0. the results shown in table 7 demonstrates that all variables are within the acceptable ranges for both skewness and kurtosis to confirm the assumption of normality. multicollinearity test a matrix of pair-wise correlations between variables and correlation coefficients of these variables was used to investigate multicollinearity. correlation coefficients often reflect the strengths and linear relationship lies between the two variables. while they should not be highly associated, their value does not fully reflect their connection. the assumption of multicollinearity is met when correlation coefficients between variables lie between the ranges of +0.9 or -0.9. in absolute terms, the correlation coefficients in table 2 were determined to be within the required ranges of +0.9 or -0.9. conclusion was reached that there was a lack of multicollinearity among the variables included in the multiple regression model used for this study. https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 497 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2: pair-wise correlation matrix of the explanatory variables roa levera ge sales growth divid end payout manageri al competen ce firm size firm age roa 1 leverage 0.2955 1 sales growth 0.0094 -0.0539 1 dividend payout 0.5451 -0.0627 -0.2134 1 managerial competence 0.4824 -0.5563 -0.0348 0.4178 1 firm size 0.4286 -0.4198 0.0543 0.1764 0.7736 1 firm age 0.4671 -0.4073 -0.0624 0.1208 0.1841 -0.0413 1 furthermore, variance inflation factors (vifs) were used to assess multicollinearity. that claims independent variables have multicollinearity if the inverse of the vif value is less than 0.1 or if the vif is more than 10. table 3: variance inflation factor (vif) for multicollinearity test table 3 shows that none of the variables confers to multicollinearity since the inverse values of the vif are more than 0.1. heteroskedasticity test in this study, the researchers employed the breusch-pagan/cook-weisberg test to assess heteroskedasticity in panel data, as illustrated in table 4. the null hypothesis for this test indicates that the error variance remains constant (homoskedastic). 𝐻𝑜: constant variance table 4: breusch-pagan / cook-weisberg test for heteroskedasticity return on assets (roa) chi2(1) 6.31 prob > chi2 0.6542 for the roa model, the breusch-pagan test yielded a p-value of 0.6542 and a chi-square value of 6.31. at a 5% level, the chi-square probability was statistically significant. since there was no evidence of heteroskedasticity in the study's data, the null hypothesis (h0) of constant variance was not rejected (p-value 0.05). variables management competence firm size firm age leverage dividend payout sales growth vif 3.41 3.52 1.53 1.70 1.36 1.05 1/vif 0.2632 0.2721 0.5024 0.5174 0.6151 0.8204 https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 498 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc auto-correlation test the wooldridge test was used in this work to assess auto-correlation, as shown in table 5. the results showed that roa had a p-value of 0.2421 and an associated f-statistic value of 1.213. this test's null hypothesis assumed that the data lacked first-order auto-correlation. 𝐻𝑜: no first-order auto-correlation table5: wooldridge test for auto-correlation in panel data return on assets (roa) f(1,18) 1.213 prob > f 0.2421 the p-value for the roa results was 0.2421, higher than the chosen alpha threshold of 0.05 (pvalue 0.05). as a result, the null hypothesis that there was no serial correlation rejected, indicating that all relevant variables had been taken into account for the study and that the model had the proper functional form. hausman test to decide whether to utilize the fixed effect (fe) or random effect (re) model, the hausman specification test was used. the fe model implies that these mean scores are fixed, whereas the re model assumes that the group's mean scores are picked at random from the population. according to the hausman null hypothesis there is no systematic difference between the coefficients. the alternative hypothesis (fixed effects would be consistent and efficient) was accepted in the case of the roa model test because the reported p-value of 0.0124 was lower than the chosen alpha level of 0.05 (table 6). this resulted in the rejection of the null hypothesis (random effects would be consistent and efficient). 𝐻𝑂: difference in coefficients is not systematic table 6: hausman test for fixed effects model return on equity (roe) chi2(8) 13.61 prob >chi2 0.0124 the fixed effect model was deemed appropriate in light of the results of this investigation because the prob > chi2 value was 0.0124, which is lower than the 0.05 alpha level used. in order to analyse the effects of managerial competence on firm profitability of listed enterprises, the study used the fe model as a foundation. results and discussions descriptive statistics on managerial competence, profitability and control variables by displaying the descriptive statistics for the research variables, this part provides a thorough overview of the variables and aids in understanding their behaviour. the mean and the minimum, maximum, and standard deviations were used as indices of central tendency and dispersion respectively. table 7 provides an overview of the estimated descriptive statistics. https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 499 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7: descriptive statistics summary of dependent and independent variables variable ob s mean std. dev min max skewnes s kurtosis roa 265 13.1732 24.0152 -103.77 60.15 -0.3243 2.2325 leverage 265 0.4723 0.5424 0.0170 3.5144 -0.5364 2.1510 sales growth 265 0.6343 8.6343 -0.7651 101.414 1 0.4273 2.2110 dividend pay-out 265 0.5422 0.4712 0 1 -0.3732 1.1342 managerial competence 265 13.6622 4.2721 3.7423 18.8432 0.1861 2.2151 firm size 265 7.5670 1.2043 3.4634 10.2455 0.2364 2.0652 firm age 265 24.5541 16.1702 0 69 0.8836 2.0353 descriptive statistics from table 7 shed light on how the study variables such as roa, leverage, sales growth, dividend pay-out, managerial competence, firm size, and firm age behaved. the data were generated from 265 observations that cover 21 companies between the year 2006 and 2021. the profitability of various businesses showed significant variation with a mean of 13.1732 and a standard deviation of 24.0152 for roa. the distribution characteristics of the roa values are further highlighted by the skewness of -0.3243 indicating that there is a higher concentration of firms with roa values below the mean. since roa measures efficient utilization of assets to generate profit, this is an indication that a large proportion of firms in dse may not be efficient in utilizing their assets to generate average profits event though the kurtosis value for roa of 2.2325 indicates that the majority of the firms' profitability is concentrated not far from the mean value. leverage among listed companies had a mean value of 0.4723 which shows that businesses finance around 47.23% of their assets through borrowing (debt) with equity accounting for the remaining 52.77%. the standard deviation of 0.5424 indicates that there is a wide range in the firms’ levels of leverage. given that the distribution of leverage values is negatively skewed. a skewness of 0.5364 indicating a higher concentration of businesses with leverage values that are below the mean indicating a modest borrowing rate. this could be an indication that businesses have various strategies, risk tolerances, or financing availability, all of which could affect their overall risk appetite and the desire for leverage. with as low as -0.7651 and a maximum of 101.4141, sales growth had a mean of 0.6343 and a standard deviation of 8.6343 indicating a considerable dispersion with some firms seeing negative growth and others seeing astounding increase of in sales. the large variation in sales growth rates among the businesses as indicated by the standard deviation of 8.6343 , could possibly be the result of the differences in the industries, market conditions, level of competition or other factors that can hardly be comprehended at the time of publishing this paper. however there is higher https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 500 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc concentration of businesses with sales growth rates above the mean as indicated by the positive skewness of 0.4273. with a minimum of 0 and a maximum of 1, the dividend pay-out had a mean of 0.5422 and a standard deviation of 0.4712. implying that, 54% of firms in the dataset distribute portion of their earnings as dividends to shareholders, with some variation in the pay-out. the distribution of dividend pay-out values is further described by the skewness of -0.3732 and kurtosis of 1.1342. a minimum score of 3.7423 and a maximum score of 18.8432 were displayed for managerial ability, with a mean of 13.6622 and a standard deviation of 4.2721. since the mean is close to the maximum value, it can be conferred that on average, firms have managerial staffs that are highly competent. the distribution of managerial skill levels among the enterprises is shown by the slight skewness of -0.1861 which indicates a few firms might have managerial competence levels which are below average. the kurtosis of 2.2151 shows that the majority of managerial competence is clustered around and slightly over the average competence value, which indicates a few firms with exceptional managerial competence levels. firm size had a mean of 7.5670, a standard deviation of 1.2043, and values as low as 3.4634 and as high as 10.2455. additional details on the distribution of business sizes are provided by the skewness of -0.2364 and kurtosis of 2.0652, and when taken together with the mean, it can be conferred that the majority of the firms in the dse are of moderate size with many of them clustered close but below the mean value. firm age ranged from 0 to 69, with a mean value of 24.5541suggesting that the majority of firms in the data set have been in operation for a relatively long period of time. a standard deviation of 16.1702 indicates that there is a relatively high level of dispersion or variability in the ages of the firms in the sample with some firms being much older or younger than others. the distribution of firm ages among the listed firms is shown by the skewness of 0.8836 and the kurtosis of 2.0353 which indicate that there are relatively older firms in the sample than younger firms and they are clustered close yet above the average age value. regression results and discussion on managerial competence and firm profitability regression analysis was conducted to investigate the effect of managerial skill on the profitability of listed firm using the fixed effect (fe) model. table 8 presents a summary of the findings based on the three baseline model estimations denoted 1, 2, and 3 in table 8. the three models were tested to gauge the effect of the control variables in the results of the model. model 1 incorporated all the variables , while in model 2 and 3, some of the variables were dropped to see if the effect of managerial competence on profitability would still be significant even in their absences. table 8: baseline model on management competence and firm profitability variables 1 2 3 firm leverage 9.6779*** 9.3776*** 10.8014*** (3.360) (3.363) (3.206) https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 501 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sales growth 1.0540*** 1.0540*** 1.0680*** (0.123) (0.124) (0.110) dividend pay-out 6.0739** 6.7701** 5.5028** (2.781) (2.870) (2.710) management competence 1.1410** 1.7989*** 1.2650*** (0.46) (0.44) (0.408) firm size 3.9801* 3.8113* (2.0591) (2.080) firm age 0.2220** 0.2640*** (0.086) (0.083) firm dummy yes yes yes time dummy yes yes yes constant 7.4042 22.4222 13.1908 (29.081) (28.123) (10.377) number of firms 21 21 21 standard errors in parentheses key: * significant at 10%, ** significant at 5%, *** significant at 1% table 8 displaying the findings from three fixed effects (fe) regression models examined how management competence affects a company's profitability as determined by return on assets. the fe model was used so as to account for time-invariant, unobserved firm characteristics. in this case, managerial competence should ideally exhibit changes across time. from table 8, it can be observed that management competence variable positively and significantly affects profitability (roa) at the 95% confidence level across the three models. this suggests that raising managerial competence raises business profitability. all models of standard errors are fairly low, giving an indication that the estimates are accurate. the results aligns with the resource-based theory used in this study which holds that a firm's distinct and priceless resources and skills are what provide a competitive edge, thus it enhanced profitability. a key resource in this study is management competency. highly competent managers are more likely to have the necessary information, skills and aptitudes to efficiently distribute and use resources, make wise choices, and adjust to the ever-changing market conditions. higher degrees of management competences increases the likelihood that the management team will successfully use and leverage the firm's resources to increase profits. it is arguably true that an increase in management competence has the potential to dramatically increase the business profitability. this is partly because managers play a key role in an organization's overall functioning, since they constantly make decisions that have a significant influence on its future direction. by maximizing resource allocation, establishing a positive work atmosphere, and making well-informed choices, competent managers have the ability to build a successful and profitable firm (kazibudzki, 2023). when management competence develops, there is a higher chance for more informed decisions that allow the organization to thrive in the long run. competent managers have the skills and knowledge required to allocate resources appropriately, ensuring that the appropriate resources are assigned to the appropriate tasks at the https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 502 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc appropriate time. this effective resource allocation boosts production and contributes to higher profitability. furthermore, a stronger capability for risk management inside the company may be attributed to higher managerial expertise. competent managers are proficient at putting into practice effective risk mitigation measures and have a keen grasp of various risks and issues the firm may face. this proactive risk management approach decreases the possibility of expensive failures and boost firm profitability. when risks are reduced and workers are motivated and interested in their work, employee morale goes up. this boost in morale leads to higher output, which has a direct effect on the amount of profit the company makes. inspired workers who are driven by their own needs tend to go above and beyond standards and deliver increased output. another angle of enhanced profitability due to managerial competence may arise from customer satisfaction. competent managers are adept at discovering and comprehending the demands and preferences of their target market . firms may nurture a loyal client-based business and achieve better levels of customer satisfaction by properly meeting their demands. customers that are satisfied are more inclined to repurchase, suggest the company to others, and contribute to improved sales and profitability (jin et al., 2022). an informed and educated decision making is required to effectively meet consumer’s expectations and demands . competent managers can obtain and evaluate relevant data, allowing them to make well-informed decisions crucial to meet customers’ satisfaction. lastly, it can be summarized that with good management, the firm is more likely to have highquality internal control mechanisms and better company governance instituted in place. competent managers are likely to put in place solid systems and procedures to assure the organization's openness, accountability, and ethical behaviour. as a result, this improves overall organizational efficiency and protects against fraudulent or mismanaged actions fostering long term profitability. robustness check on managerial competence and profitability a pooled ordinary least squares (pols) regression was used as an alternative baseline model to confirm the consistency and trustworthiness of the data obtained from the fixed effect model. pols was chosen because of its broad use in researching firm profitability and its constant track record of producing satisfying results. furthermore, pols is a straightforward and suitable approach for estimating relationships in econometric models like the one used in this work. the same variables as in the baseline model were used, the dependent variable was the return on assets (roa), functioned as a measure of firm profitability. management competence was the independent variable while dividend payout, sales growth, leverage, firm size and age were the control variables. the results of the pols regression analysis are then reported in table 9. https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 503 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 9: analysis of effect of managerial competence on firm profitability by using pols variables 1 2 3 firm leverage 13.9946*** 11.6527*** 14.1414*** (3.522) (3.621) (3.544) sales growth 1.0534*** 1.0483*** 1.0544*** (0.133) (0.134) (0.137) dividend pay-out 7.9821*** 8.2360*** 6.8023** (2.764) (2.950) (2.858) management competence 2.1702*** 1.5032*** 2.1855*** (0.422) (0.477) (0.713) firm size 3.8208* 3.7291* firm age (2.092) 1.3043*** (2.063) 1.2203*** (0.329) (0.257) firm dummy yes yes yes time dummy yes yes yes constant -33.2194*** -17.7147** -44.2609*** (7.146) (8.899) (16.889) number of firms 21 21 21 standard errors in parentheses key: * significant at 10%, ** significant at 5%, *** significant at1%. the findings clearly show that the factors of statistically significant impact on firm profitability in the baseline model also had a statistically significant impact on firm profitability when assessed using the pols technique. as indicated in table 8, the similarity of findings between the two models improves the robustness of the results obtained. as a result, these data provide compelling evidence to reject the null hypothesis. conclusions this study looked at the effect of managerial competency on the profitability of firms listed on the dse. the study findings demonstrated a favourable relationship between management competency and profitability for publicly traded enterprises. it is quite likely that organizations with competent management teams will be more likely to achieve profitability. competent managers have the abilities and expertise required to efficiently utilize the resources available to them, hence increasing the firm's total profitability. the capacity to make educated financial judgments is an important part of good management. competent managers understand the purpose of borrowing and when and how to get essential finance through borrowing. they can also identify the types of individuals who will contribute https://www.ilomata.org/index.php/ijtc an empirical study of the effect of managerial competence on firm profitability mwenda, ngollo, and mwasota 504 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc favorably to the firm's overall objectives and put in place strategic initiatives targeted at growing the firm's sales volume, which has an impact on profitability. when all of these aspects are adequately-controlled, businesses are more likely to run smoothly and profitably. it can, therefore, be conclusively argued that management competence positively and significantly affect firm profitability. the researchers make the following suggestions based on the insights generated from the output of this research. given the favourable influence of management competence on profitability, it is recommended that the owners of the firms thoroughly analyse potential managers' competencies and credentials before allocating managerial duties. additionally, it is critical to properly investigate and evaluate the managerial candidates. competent managers may successfully mix financial and non-financial resources to boost overall corporate profits. as a result, hiring a competent management team is likely to have a beneficial impact on the firm's profitability. shareholders should strive to reduce the risk of choosing managers who lack the requisite abilities to maximize the firm's profitability by performing due diligence in the selection process and emphasizing management competency. contribution of the paper and areas for further study the study contributes to the existing body of knowledge by focusing on the tanzanian market and examining the specific relationship between managerial competence and firm profitability in that particular context. it provides empirical evidence that managerial competence has a significant influence on firm profitability and it highlights the importance of competent management in maximizing firm’s profitability. the resource-based theory study emphasizes the significance of non-financial resources including managerial capabilities in generating a competitive advantage and enhancing profitability. additional areas for research in this field of study might be to examine the specific aspects of managerial competence and how they influence profit. such study provides a glimpse of which managerial competence has the greatest effect on firm profitability. industrial or sectoral comparisons could be carried out. it is possible that different industries have distinctive traits that affect the association between managerial competence and profitability. examining different industrial settings and traits might make the results more generalized. lastly a qualitative research can be employed to provide a better comprehension of the ways in which management competency influences profitability. the experiences, viewpoints and tactics of managers in regard to profitability might be captured via qualitative methods like interviews or case studies, hence, these can offer further insights on the subject matter. references ajanthan, a. 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(2018). firm-specific internal determinants of profitability performance: an exploratory study of selected life insurance firms in asia. journal of asia business studies, 12(4), 533–550. https://doi.org/10.1108/jabs-09-2016-0129 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 258-271 258| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4) dian wahyudin1, indriani rahayuning tyas2, anwar atmojo3, iin andrayanti4, faizah julina5 12345institut ilmu sosial dan manajemen stiami, indonesia correspondent: zahidah181011@gmail.com received : june 5, 2022 accepted : july 15, 2022 published : july 31, 2022 citation: wahyudin, d., tyas, i.r., atmojo, a., andrayanti, i., juliana, f(2022). the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). ilomata international journal of tax & accounting, 3(3), 258-271. https://doi.org/10.52728/ijtc.v3i3.501 abstract: the level of formal taxpayer compliance is still not satisfactory if it is associated with the selfassessment system because there are still quite high gaps. for this reason, it is necessary to carry out a tax audit as a supervisory measure. through the audit, it is hoped that it will increase the awareness of taxpayers to fulfil their tax obligations and increase tax revenues. this study uses a descriptive qualitative approach with the type of case study. the author uses a target approach, a source approach and a process approach to analyse the effectiveness of tax audits as an act of supervising the self-assessment system and supporting tax revenue. the results of the study indicate that the tax audit is quite effective as an act of monitoring the self-assessment system. this is evidenced by a change in the behaviour of the taxpayers who have been audited. however, it is not effective enough to support tax revenue. the inhibiting factors include the amount of data that must be processed and analysed, facilities and infrastructure with limited capabilities. efforts have been made to provide infrastructure, especially computers, which can process and analyse large amounts of data quickly, optimize data from internal parties and anticipate field inspections using zoom and being more selective. keywords: tax audit, self assessment system supervision, tax revenue support. this is an open access article under the cc-by 4.0 license. introduction the formal compliance of taxpayers in indonesia is still not satisfactory because if it is associated with the self-assessment system, all taxpayers should report their tax returns (damayanti & martono, 2018; purwanto & safira, 2020; saptono & khozen, 2021; syafriel, 2018). table 1 taxpayer formal compliance 2016-2020 year taxpayer mandatory taxpayer report achievement 2016 20.16 million 12.29 million 61,0% 2017 16.60 million 12.11 million 73,0% mailto:zahidah181011@gmail.com https://doi.org/10.52728/ijtc.v3i3.501 the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 259 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2018 17.65 million 12.55 million 71,1% 2019 18.33 million 13.37 million 72,9% 2020 18.72 million 14.60 million 78,0% source : directorat general of tax, 2020 in the table above, it is seen that the level of formal compliance of indonesian taxpayers in 2020 is still below the target which set by the directorate general of taxes of 80% of the total 19 million taxpayers registered as corporate taxpayers and private taxpayers, including employee taxpayers, although increased when compared to 2019 (erdiansyah & khoirunurrofik, 2021). the increase in formal compliance of taxpayers in 2020 only occurred in employee personal person taxpayers by 85.42%, or as many as 12.1 million taxpayers out of a total of 14.17 million employee personal taxpayers who are obliged to report tax returns. the percentage is higher when compared to 2019 which only reached 73.2%. meanwhile, the formal compliance of corporate taxpayers and taxpayers of non-employee personal persons actually decreased, reaching only 60.17% and 52.45%, lower when compared to 2019 of 65.28% and 75.31%. the above phenomenon shows that between the expectations to be achieved from the implementation of the self-assessment system and the level of compliance of taxpayers there is still a fairly high gap (puspitasari, 2019). the logical consequence of choosing a self-assessment system requires the tax authorities to focus on the tasks of fostering and supervising the implementation of taxpayers' tax obligations based on tax laws and regulations through tax audits. audit of taxpayers is an inseparable part of tax collection through a self-assessment system (klaser & mittone, 2022; reck et al., 2022; siglé et al., 2022). tax audits are expected to provide education so that they can increase awareness in carrying out their tax obligations. in addition, tax audits are expected to provide a deterrent effect on taxpayers who commit violations. in this way, tax audits are expected to further improve taxpayer compliance, which in turn can increase tax revenues (barrios et al., 2020; carrillo et al., 2021; kasper & alm, 2022; privitera et al., 2021). however, in practice the tax audit has not been able to provide an optimal contribution to tax revenue in the last 5 years which tends to decline as shown in the following table: table 2 indonesian tax revenues 2016-2020 (in trillions rupiah) year 2016 2017 2018 2019 2020* target 1,355. 20 1,283.6 0 1,424.0 0 1,577.6 0 1,198.8 2 realization 1,105. 97 1,151.0 3 1,313.3 3 1,332.6 0 1,070.6 2 achievement 82% 90% 92% 84% 89.3% source : ddtc, 2020 also reflected in indonesia's tax ratio for five years is still around at the same rate and no increase except in 2018 as presented in the following table: table 3 indonesia’s tax ratio 2016-2020 year tax ratio the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 260 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: processed by researcher, 2020 this shows that the tax audit as one of the tools to improve taxpayer compliance through the implementation of the self-assessment system has not met the expectations and objectives which already set. this also happened with the acceptance of the lto 4 which tended to decrease in the last 3 years as presented in the following table: table 4 target and realization of tax revenues lto 4 2018 – 2020 year target realization achievement 2018 98,466,170,46 1,000 98,920,116,7 49,283 100.4% 2019 118,563,370,0 76,000 96,951,587,4 43,514 81.77% 2020 85,632,182,95 3,000 74,079,715,9 34,627 86.51% sumber : kpp wp besar empat, 2020 the table above shows that tax revenues lto 4 declined significantly in 2019 and 2020, without ruling out the impact of the pandemic covid-19 in 2020. the number of tax returns reported by the taxpayer lto 4 only ranges figure 70%. this proves that although the audit being conducted by the lto 4, but from the data above shows that his role as a means of monitoring the implementation of self-assessment system and an increase in tax revenue has not been effective. based on the problems above, this study will evaluate the effectiveness of the implementation of tax audits as a self-assessment system supervision and support for tax revenues at the lto 4, the obstacles faced and the efforts made to overcome these obstacles. tax administration tax administration in a narrow sense is the administration and service of the rights and obligations of tax payments, both administration and services carried out at the tax office and at the taxpayer's place, while tax administration in a broad sense includes functions, systems and organizations or institutions (faúndez-ugalde et al., 2020; paramitha & supadmi, 2021; widilestariningtyas, 2017). as a function, tax administration includes planning, organizing, mobilizing and controlling taxation (surjono, 2016). as a system, tax administration is a set of elements, namely statutory regulations, facilities and infrastructure, and interrelated taxpayers who jointly carry out their functions and duties to achieve certain goals (huang et al., 2022). meanwhile, as an institution, tax administration that manages the system, the taxation process and services. the quality and quantity of human resources is also one of the benchmarks for tax administration performance (keen & slemrod, 2017; martínez et al., 2022; nguyen et al., 2020). 2016 10.3% 2017 10.9% 2018 10.2% 2019 9.7% 2020 7.9% the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 261 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax audit tax audit is an instrument to determine compliance, both formal and material, whose main purpose is to test the level of compliance in fulfilling tax obligations that have been carried out on the basis of a self-assessment system (eulaiwi et al., 2021; kasper & alm, 2022; ma et al., 2021). the definition of tax audit is a series of activities to seek, collect, data and other information process, to test compliance with tax obligations and for other purposes, in the context of implementing the provisions of tax laws and regulations (mardiasmo, 2016). meanwhile, to increase tax compliance, through law enforcement efforts, so as to increase tax revenue . in general, the main purpose of tax audits is testing compliance with tax obligations, including tax collectors and withholders (bag & wang, 2021; gupta & jalles, 2022). the types of tax audits are routine inspections, selection criteria audits, special audits, preliminary evidence audits, location tax audits, current year audits, integrated audits and audits for tax collection (febrian, 2019; irawan & budiono, 2019). meanwhile, the scope of the tax audit consists of field and office audit (benkraiem et al., 2021; brushwood et al., 2018). the stages of implementing the tax audit must be carried out accordance the tax laws and regulations in order to obtain maximum results and also so that it does not go out of line with the regulations that have been previously set and to be disciplined in its implementation, starting from preparation, implementation to making work reports and audit results (garcíameca et al., 2021; mendoza et al., 2017). the reasons behind the general policy of tax audits are the consequences of tax compliance, to minimize tax avoidance and tax evasion, reduce the level of income tax leakage, and the imposition of sanctions from the results of the audit (kurauone et al., 2021). tax audit standards include general standards, implementation standards and audit results reporting standards (lesmana & setyadi, 2020). the audit standard is the minimum achievement that must be achieved in carrying out the audit (chan et al., 2015). the implementation of tax audits may be better or above the audit standards that have been set (kuchumova, 2017). if the result is below the standard, there is actually no sanction for the tax audit but it will be a measure of guidance for the implementation of the audit by the directorate of audit (nugrahanto & andri nasution, 2019). self assessment system self-assessment system is a tax collection that gives authority, trust and responsibility to taxpayers to calculate, pay and self-report the amount of tax to be paid (sakinah, 2018; satyawati & cahjono, 2017). the self-assessment system is a tax collection system that authorizes taxpayers to determine the amount of tax payable each year in accordance with the applicable tax laws (masrullah et al., 2021). the self-assessment system causes taxpayers to receive a heavy burden because all activities to fulfill tax obligations are carried out by themselves (subing et al., 2011). taxpayers must report all relevant information in the spt, calculate the tax base, calculate the amount of tax owed, deposit the amount of tax owed (zaimah, 2016). because it demands voluntary compliance from taxpayers, this system will also create great opportunities for taxpayers to the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 262 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc commit fraudulent actions, manipulate the calculation of the amount of taxes, and embezzle the amount of taxes that should be paid (lim & indrawati, 2016). the procedure for collecting taxes with a self-assessment system will work well if the public has tax knowledge highly and discipline, where the characteristics of the self-assessment system are simple legal certainty, calculation, easy implementation, more fair and equitable, and tax calculations are carried out by taxpayer (batrancea et al., 2019; gechert & heimberger, 2022). tax control supervision is a process to ensure that all activities carried out are in accordance with what has been previously planned (gangl et al., 2014). supervision is the process of observing the implementation of all organizational activities to ensure that all work being carried out goes according to the established plan. meanwhile, in terms of public administration, supervision is defined as an activity process that compares what is carried out, carried out, or carried out with what is desired, planned, or ordered (savić et al., 2022). supervision of taxpayers is a series of data research activities to follow-up supervision in the context of extracting tax potential, supervision of compliance with taxpayers' tax obligations, and increasing tax revenues in accordance with the provisions of laws and regulations in the field of taxation. tax supervision is carried out to determine whether the taxpayer is correct, it is reasonable to pay taxes. from there, it is necessary to have data support that shows the seriousness of taxpayers in paying taxes. the reference for the supervision of taxpayers is an overview of the overall results of data pairing which indicates the existence of noncompliance by taxpayers, both formally and materially (yuan et al., 2022). the supervisory function as one of the main tasks of the directorate general of taxes basically includes research and audit activities in the field of taxation, one of which is the completeness of tax reporting (christian & aribowo, 2021). when viewed in terms of implementation, these activities are a process that is related to each other, especially in relation to efforts to enforce tax laws and regulations that aim to improve taxpayer compliance with their tax obligations, one of which is the issuance of tax warning letters for those who have not reported (yap & mulyani, 2022). tax revenue tax revenue is a source of revenue that can be obtained continuously and can be developed optimally according to government needs and community conditions (mardiasmo, 2016). if the tax contribution from the people to the state is smooth, then development will be smooth and run in a sustainable manner. sources of tax revenue include income tax (pph), value added tax (ppn), sales tax on luxury goods (ppnbm) and stamp duty (ratnaningsih & waluyo, 2019). one of the steps taken in increasing tax revenue is the enactment of taxpayer identification number (tin) ownership as an obligations for taxpayers. all taxpayers who have met the subjective and objective requirements in accordance with the provisions of the tax laws and regulations based on the self-assessment system, are required to register at the office of the directorate general of taxes to be recorded as taxpayers and at the same time to obtain a tin (anggraini & kusufiyah, 2020). the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 263 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc several factors that play an important role in ensuring the optimization of tax revenue are clarity, certainty and simplicity of tax laws and regulations, government policies in implementing tax laws, administrative systems, quality services, awareness and understanding citizens and the quality of tax officers which include intellectual, skill, integrity and high morals (irawan & budiono, 2019). effectivity effectiveness is a measure of success, the extent to which the program or activity achieves its goals and objectives (dimos et al., 2022). effectiveness is the relationship between output and goals, or it can also be said to be a measure of how far the level of output, policies and procedures of the organization (afif et al., 2022). effectiveness is also related to the degree of success of an operation in the public sector so that an activity is said to be effective if the activity has a major influence on the ability to provide public services which is a predetermined target (dixit et al., 2022). effectiveness is a measurement of predetermined goals or objectives. in detail. in assessing the effectiveness of programs/activities. several approaches that can be used are the goal approach, the system resource approach, and the internal process approach. these approaches are used by the authors to evaluate the effectiveness of tax audits as a form of monitoring the implementation of the self-assessment system and supporting tax revenues at the lto 4 (hajawiyah et al., 2021). method this study uses a descriptive qualitative approach, which problem solving is done using empirical data (sugiyono, 2019). qualitative research seeks and obtain in-depth information rather than breadth and abundance of information (creswell, 2017). the reason for using this approach is because this study wants to have a deeper understanding of the implementation of tax audits as an act of monitoring the implementation of the self-assessment system by taxpayers and supporting tax revenues at the lto 4. the focus of this research is on 1) the implementation of tax audits at the lto 4 while still paying attention to the procedures and procedures for implementing tax audits, internal organizational conditions (coordination and communication) and sources owned (number of human resources, data/information needed in audit activities), 2) the effectiveness of the audit as an act of supervising the self-assessment system and supporting tax revenue, 3) the obstacles faced in the implementation of the tax audit and 4) the efforts made to overcome these obstacles. the informants consist of people who are selected on the basis of certain criteria made by researchers based on the research objectives. questions in in-depth interviews were asked to informants, namely individuals who were believed to have knowledge and understanding of the research topic. data collection techniques in the study consisted of interviews, observation and documentation. the analysis process is carried out starting from data reduction, selecting, focusing attention so that the data can be simplified, abstracted and transformed into the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 264 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research. then the author analyzes the feasibility so that the data that is really needed can be selected. the next step is to present the data. the author limits the data by collecting information that has been adjusted and clarified in order to facilitate data mastery. the last stage is drawing conclusions in the form of meanings that will be tested for authenticity, rationality and applicability, so that conclusions are obtained with important research results and values. the author uses triangulation as a tool to test the validity of the data. result and discussion after conducting interviews with informants, documentation studies and observations, the results showed that the tax audit activities carried out by the lto 4, apart from referring to the regulations governing tax audits, also referred to material tax provisions and regulations. a. tax audit effectiveness as self-assessment system supervision and tax revenue support it is known that the tax audit is considered quite effective as an act of monitoring the implementation of the self-assessment system by taxpayers. this is indicated by the implementation of the right strategy, the tax audit has also been carried out in accordance with the stages, procedures and standards that have been set. tax audit activities are carried out using the examination desktop application to record all activities and ensure that every procedure and stage is carried out in accordance with the provisions of laws and regulations. the examination desktop application helps the administration of inspection activities starting from the preparation, implementation and reporting of examinations. examination preparation activities are also supported by the examination desktop application, as an audit plan. meanwhile, the issuance of audit order (sp2) and field audit notification letters (sppl) or summons for office audits (sppk) have been supported by the sidjp inspection module. internal data testing which obtained from taxpayers and third parties are supported by audit tools such as excel, power query, acl, apiseta, e-audit utilities and others. in addition, as an effort to improve the quality of audits, the director general of taxes has implemented a peer review policy on tax audits that have been carried out. the purpose of peer review is to improve audit quality by assessing the ability of tax auditors, both in terms of understanding the business world of the taxpayer being audited, understanding accounting and fiscal juridical aspects, as well as technical mastery of audits. peer review also includes an assessment of the discipline and compliance of the tax examiner in carrying out the audit as well as the orderly administration of the audit. tax audit are also carried out by functional auditors who are professional, have high integrity, independent, carry out an audit carefully while still paying attention to applicable professional and moral norms and experience in making audit working papers (kkp). kkp has a very important role in documenting the implementation and results of the audit and also useful for subsequent audit. thus, the implementation of the audit carried out by the functional auditor of the lto 4 has fulfilled the basic concepts in the audit (duan et al., 2021; goldman et al., 2022). the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 265 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc support from the leader and co-workers is also provided and goes well starting from the preparation, implementation to reporting stages, so that the results of the audit can be accounted for and are of high quality. this shows that the existing organizational structure strongly supports the implementation of an effective tax audit. the implementation of tax audits is still carried out optimally even though the number of auditors is limited at certain times, especially when the audit orders (sp2) are issued simultaneously. the required data can be obtained easily because it is supported by very cooperative taxpayers. thus, the effectiveness of the tax audit carried out by the auditors of the lto 4 has been achieved with the fulfillment of the approaches used (cunningham, 2010). the implementation of the audit is also required to have an effect as a supporter of tax revenue. the results of the tax audit are expected to provide a significant contribution to tax revenue increase with a positive correction of the tax return reported by the taxpayer. for the tax service office, tax receipts of whatever type, it be income tax, value added tax, and other types of taxes. from the interviews with informants, the authors obtained information that the tax audit indirectly affects the tax revenue of the lto 4, although it is not too significant. taxpayer deposits increase after the audit is carried out. this is evidenced that the results of tax audits always reach the target in 2020. the following table shows the value of receipts obtained from the results of the examination of the lto 4 : tabel 5 total revenue from tax audit year total revenue 2018 idr 3,396,151,466,589 2019 idr 2,426,721,300,729 2020 idr 2,304,201,829,295 source : lto 4, 2020 from the description above, it can be seen that the implementation of the tax audit is considered quite effective as an act of monitoring the self-assessment system but is not effective enough if it is associated with supporting tax revenues. tax revenues at the tax service office will increase along with the growth of taxpayer compliance as a result of the implementation of tax audits as an effort to monitor the self-assessment system (salip and wato, 2016). b. obstacle factor from the results of interviews with informants, that the inhibiting factor faced in conducting tax audits was the slow processing of taxpayer data due to the large amount of data that had to be analysed with limited facilities and infrastructure, especially the limited ability of computers to process and analyse large amounts of big data. considering that the corporate taxpayers registered at lto 4 are large companies with a fairly broad business scale and have branches or subsidiaries spread throughout indonesia, this results in field inspections not being able to reach all locations where the branch or subsidiary is located. . the limited supporting data possessed is also a factor that hinders the implementation of the tax audit because it requires careful analysis in order to obtain strong of tax audit results. meanwhile, the obstacles felt by tax auditor are more than uncomfortable feelings the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 266 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc caused by mutations that require to change places of duty. this mutations can affect the psychology of an auditor so that it is feared that he will not focus on carrying out his duties so that he cannot show good work performance. meanwhile, the obstacles faced by taxpayers are related to the search for data needed by auditors in tax audits because the data is old and difficult to find quickly, especially regarding company data in a province, employees who used to handle the data have resigned from the company. another obstacle is the difference in interpretation of the provisions and regulations of tax laws between taxpayers and the auditors, resulting in a dispute which leads to the submission of objections even to the level of appeal by the taxpayer. inadequate number of functional auditors is also one of the inhibiting factors, considering that examinations for overpaid tend to increase and are quite time-consuming and require special attention and treatment to obtain greater results. c. efforts made various efforts have been made by the leader and the head of the audit section and their staff to overcome these inhibiting factors, among others by proposing the provision of computers capable of processing large amounts of data, although so far this has not been fulfilled due to budgetary constraints. especially in 2020 with the social distancing policy, the efforts made are to anticipate field audit through zoom and be selective. data needs are sought to be obtained from internal parties, especially account representative officers who already know the condition of the taxpayer to be audited. however, what needs to be a concern is the importance of increasing audit raw materials that have gone through rigorous and mature analysis stages so that the potential tax that can be extracted from the taxpayer to be audited can be identified. the head of lto 4 can also follow up on the results of the training followed by the auditor so that it can be seen the increase in abilities and skills after attending the training. so that the implementation of tax audits becomes more accurate and the expected results can be obtained satisfactorily and can minimize the emergence of lawsuits or appeals filed by taxpayers due to disputes due to differences in the interpretation of tax laws and regulations. the directorate general of taxes also needs to think about giving rewards to taxpayers who show their compliance, either voluntarily or after an audit, as a form of appreciation for their obedient and obedient attitude in fulfilling their tax obligations in accordance with the laws and regulations. in addition, it is also necessary to think about the career path for each auditor to reach the highest level so that the spirit and work motivation of the auditor remain high and can produce quality audit. the function of dgt is to facilitate the self-assessment system to run properly. if this function can be carried out optimally, the voluntary compliance of taxpayers in fulfilling their tax obligations will increase, this will have an impact on the tax coverage ratio as well as tax revenue. the effectiveness of tax audit as a self assessment system supervision measures and tax revenue support (study at the large tax office 4). wahyudin, tyas, atmojo, andrayanti, and juliana 267 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion from the research findings, it can be concluded that the tax audit is considered quite effective as an act of monitoring the self-assessment system. this is evidenced by a change in the behavior of the taxpayers who have been audited. however, it is not effective enough to support tax revenue, especially in the lto 4. the audit target can indeed be achieved but its contribution to tax revenue is not significant. the inhibiting factors for the implementation of tax audits faced by the lto 4 include the large amount of data that must be processed and analyzed with limited facilities and infrastructure that cannot be fulfilled due to budget constraints. the social distancing policy as a form of compliance with health protocols has resulted in limited and more selective field inspections. meanwhile, the inhibiting factors experienced by taxpayers are the difficulty of finding long data in a fast time and the differences in interpretation of the tax laws and regulations. from the psychological side of the examiner, the factor of working comfort is also a separate inhibiting factor. to overcome these obstacles, the lto 4 has made various efforts, among others by providing the availability of computer infrastructure that has the ability to process large amounts of data quickly, anticipate field inspections through zoom and seek the availability of data 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(2016). efektivitas sistem self assessment dalam pajak penghasilan di kantor pelayanan pajak pratama batu. jurnal jurisdictie, 7(1), 44. https://doi.org/10.18860/j.v7i1.3678 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 250-264 250 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi directorate general of taxes, indonesia correspondent: indra.dhee@gmail.com received : january 23, 2023 accepted : april 10, 2023 published : april 30, 2023 citation: indradi.(2023). repurchase agreement: dual perspectives in indonesian income tax law. ilomata international journal of tax and accounting, 4(2), 250-264. https://doi.org/10.52728/ijtc.v4i2.712 abstract: there are two fundamental issues of taxing repo based on indonesian income tax law. first, there is no specific tax law addressing repo transaction and second, indonesia applies hybrid income tax system, global and schedular income tax. this paper aims to describes and analyses two perspectives, the global dan schedular system, of taxing repo based on indonesian income tax law. from legal perspective, a repo is taxed under schedular income tax system where it views a repo as two transactions. meanwhile, from economic perspective, a repo is viewed as a single transaction that is based on comprehensive income tax system. although, prevailing law principle favors the first perspective, the latter is logically more sensible and far more equitable than the first. regulatory measures based on a comprehensive income tax system are needed to resolve the dispute. keywords: repurchase agreement, legal perspective, economic perspective, comprehensive income tax system, schedular income tax system this is an open access article under the cc-by 4.0 license. introduction when indonesia experienced shortage in its money market back in 2014, there were high demands for repurchase agreements (repo) (kurniawan, 2014). since then, repo becomes important instrument in indonesia money market, and even, on 19 august 2016, the 7-day repo rate has become a reference rate which is used by the central bank of indonesia (bank indonesia, n.d.). however, the increasing of repo transactions has not been followed by adequate income tax law and regulations. as a result, there is ambiguity and dualism in terms of tax treatment of such transactions. repo is basically an agreement in which a seller of securities sell the securities to a buyer and at the same time the seller agrees and commits to repurchase the securities at a certain price at a future date (international capital market association, n.d.). therefore, a repo consists of two-legged transaction, which are the securities sale and reacquisition. consequently, the repurchase price includes agreed interest as stated in the agreement (acharya & öncü, 2011; schultz & bockian, 2017). for that reason, repo can be viewed as secured or collateralised loan in which the seller https://www.ilomata.org/index.php/ijtc mailto:indra.dhee@gmail.com https://doi.org/10.52728/ijtc.v4i2.712 repurchase agreement: dual perspectives in indonesian income tax law indradi 251 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc acting as short-term debtor while the buyer as short-term creditor. in this paper, i use the terms “seller” or “debtor” and “buyer” or “creditor” interchangeably. an interesting aspect of repo analysis is that it has two points of view (al-rushou & al saeed, 2008). first, tax legal perspective that views a repo consists of two transactions which are sale and buy-back or repurchase of securities, where the buyer is only temporary owner of the securities(reiff, 2022). second, based on economic or accounting perspective that views a repo as a loan agreement (reiff, 2022). furthermore, those views affect tax treatment that should be applied, considering that indonesian tax law regime implements schedular income tax for certain types of income, including some income derived from securities such as bond interest and dividend. there are two main categories of income derived from a repo transaction, which are repo interest as stated in the agreement and manufactured income (international capital market association, n.d.), that is income derived from the securities, i.e. dividend. one of the differences between repo interest and manufactured income is that the repo interest can be calculated in advance, while sometimes the manufactured income cannot be calculated in advance, depending on the type of the securities. there is a possibility of other income derived by an agent or third party related to some type of repo that is the agent’s fee. however, there is no ambiguity on such income according to indonesian income tax law (ordower, 2014). this paper aims to explain and analyse the dualism of perspectives relating to the nature of repo transaction and the income derived from these transactions according to indonesian income tax law. however, this paper does not discuss cross-border repo transactions because it focuses on problems and debates in domestic tax law. method this paper is designed using qualitative research method in order to describe, explain, and analyse indonesian income tax law regarding repo transaction (hurtado-parrado et al., 2022). the method is chosen because the approach on the discussion on this paper is based on implementation of positive tax law and its gap with the ideal provision relating to repo transaction. linos and carlson (2017) stated that qualitative methods are particularly well suited for law reviews. however, to circumscribe the analysis and discussion, i only explain and discuss repo transaction of bonds and stocks. furthermore, the principle analysis of those two types of security is sufficient to explain other types of repo’s collaterals. result and discussion 1. mechanism and income from repo transaction repo consists of two legs of transactions. the first leg is completed when the seller (the debtor) sells securities to the buyer (the creditor) (gottardi et al., 2019; ruchin, 2011; sissoko, 2019). in this leg, the securities will be legally delivered or transferred to the buyer or in a case of tri-party repo, to third-party agent as security custodian. consequently, the buyer should transfer the money https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 252 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc or cash to buy the securities. the second leg is done when the seller repurchases the securities from the buyer at specified date and at agreed upon price, which is definitely higher than the initial purchase. commonly, this arrangement is covered in a written agreement, therefore it is called repurchase agreement (reiff, 2022). the duration between the first leg and the second leg or the “holding period” according to the agreement can be overnight up to one year (choudhry, 2010) . generally, the longer holding period of the buyer the higher risk will be faced by the buyer and as a result, the yield or the repo interest will be higher. in substance, the buyer is acting as a creditor who gives a loan to the seller and the collateral is the securities being sold. therefore, the legal owner of the collateral (or the securities) is the creditor, provided that there is actual sale transaction between the debtor and the creditor. although, from economic or accounting perspective, repo transaction and collateralised loan are substantially very similar transactions, but those two transactions have a substantial difference from legal perspective (makwae, 2021). the effect of the legal owner of the collateral in repo is that if there is default event by the debtor, the creditor or the buyer has the right to sell the collateral immediately without consent of the seller or the creditor (choudhry, 2010). the types of income generated in repo transaction can be categorised into three types, which are repo interest (international capital market association, n.d.), margin (reiff, 2022), and manufactured income or payment (fernando, 2022). repo interest is the main income, because this type of income is the driver of repo, whether the transaction is agreed and exercised by the parties. it is basically the expected or required return of the buyer which is stated in the agreement. it is calculated by multiplying the repo rate and the initial price or deducting buyback price with initial price (armakolla et al., 2019; baklanova et al., 2019). margin is another type of income from repo, but it is derived only in specific cases and mainly expected as protection. there are two types of margin which are initial margin and variation margin or haircut (choudhry, 2010). initial margin is derived when the cash proceed from sale of securities, in the first leg of repo transaction, is lower than the amount of delivered or transferred securities by the seller (choudhry, 2010). meanwhile, variation margin is basically applied in a case of increasing or decreasing of market value of the securities (choudhry, 2010). if the market value of the securities increases by certain amount (as stated in the agreement), then the seller will usually demand additional cash equivalent. in contrast, when the market value drops, then the buyer will demand additional collaterals or securities. manufactured income, the third category of income, is income related to the securities and it is paid by the issuer of the securities that does not involve in repo transaction. the type of income varies depending on the securities being sold, such as bond interest, dividend, or certificate of deposit’s interest. the manufactured income in terms of legal is the buyer’s right, however repo agreement usually provides that the manufactured income should be transferred back to the seller, the substantial owner of the securities. to describe all of the incomes might be involved in a repo transaction, there is a simple illustration as follows: https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 253 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc x corp is the buyer and y corp is the seller in a repo transaction. on 1 january 2020, y corp agreed to sell its 1,000 bonds to x corp at us$1,290,000.00 and to repurchase it at us$1,300,000.00 on 28 february 2020. the bonds at the sale date have total market value at us$1,297,000.00 while the face value (actual value) of the bond is us$1,295,000.00. however, since the bonds market value dropped to us$1,290,000.00, on 31 january 2020, x corp demanded other bonds to be delivered worth at us$5,000 as additional collateral to maintain the agreed value of collateral. on 1 february 2020, y corp fulfilled its obligation to deliver us$5,000 extra bonds. at the same time, z corp (the bonds issuer) paid us$2,500 as the bonds interest to x corp. on 2 february 2019, x corp transferred back us$2,500 bonds interest to y corp. finally, the repo transaction completed when y corp bought back the bonds at us$1,300,000.00 on 28 february 2020. from the illustration, it is clear that the repo interest is us$10,000 which is the difference between sale price and repurchase price. the initial margin is the difference between the face value and the purchase price which is us$7,000, but this type of gain would not be realised until the seller fails to repurchase the bonds (default). the variation margin which was derived by x corp is us$5,000. the variation margin is also another type of unrealised gain. in addition, us$2,500 transferred by z corp to x corp is the manufactured income (bonds interest). 2. income tax system in indonesia in general, there are two income tax system in indonesia, which are global or comprehensive income tax (cnossen, 2018; fischer, 2015)and schedular income tax system (bucheli & olivieri, 2019; creedy & sanz-sanz, 2011). broadly speaking, global income tax is based on comprehensive concept of income which was developed by georg von schanz in 1896, robert m. haig in 1921, and lastly by henry simons in 1938 and it has been termed as schanz-haig-simons model (holmes, 2001). meanwhile, some scholars believe that schedular income tax system is rooted from the united kingdom income taxation in 1803 (holmes, 2001). the basic idea of schedular income tax system was to separate income based on its type, such as business profit or gain from sale of land, in order to reduce taxpayer’s burden of tax. when the schedular income tax system was introduced in the united kingdom, it was initially imposed on individual taxpayer (holmes, 2001). comprehensive income definition in indonesian tax law is provided in article 4 section (1) law no.7 year 1983 concerning income tax as amended several times and last by law no. 7 year 2021 concerning harmonization of tax regulations (indonesian income tax law). according to the article, income is any increase in economics capacity received by or accrued by a taxpayer, both originating from indonesia as well as from outside indonesia, which may be utilised for consumption or increasing the taxpayer’s wealth, by any name and any form (law of the republic of indonesia, 1983 ) (law of the republic of indonesia, 2021). the definition is similar with schanz-haig-simons comprehensive income which can be simply defined as net increase or accretion of wealth or economic power during a period of time. based on indonesian income tax law, comprehensive income should be taxed by applying progressive tax rate for individual taxpayer or single rate for corporation taxpayer as provided in article 17 of the law (law of the republic of indonesia, 1983) (law of the republic of indonesia, 2021). most https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 254 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of types of income will be imposed with the same rate as stated in article 17 and hence, this provision is so-called “general provision” of income tax law. unlike comprehensive income, there is no definition of schedular income in indonesian tax law. however, schedular income tax in indonesian income tax law is mostly called “final income tax” despite another slightly different type of tax which is known as income tax based on special norm of calculation. there are some articles in indonesian tax law that contain imposition of final income tax. notwithstanding, there is one particular article that is commonly known as main source of imposition based on schedular income tax system. the article is article 4 section (2) of indonesian income tax law. the article provides that several types of income, mostly passive income, such as bond interest, saving interest, deposit interest, sale of stocks which are traded in indonesia stock exchange, and income from construction business, may be imposed with final income tax (law of the republic of indonesia, 1983) (law of the republic of indonesia, 2021). furthermore, the imposition of final income tax on several types of income will be prescribed more detail by government regulations. even though, there is no clear definition of what is final income tax and its characteristics, based on government regulation no. 94 of 2010, we can conclude some distinctive characteristics of final income tax compared to comprehensive income tax. those differences are as follows: 1. specific incomes that are imposed with final income tax should be separated from comprehensive income and therefore there is no need to accumulate those income with comprehensive income for calculating taxable income in the end of the taxable year. each type of income liable to a final income tax will be taxed individually and mostly paid off by withholding mechanism if the income provider is a withholding agent. as a result, there are several income tax rates in indonesia income tax law, especially because of the application of final income tax. 2. costs or expenses exist due to a specific income liable to a final income tax cannot be deducted from the income (gross income). if there is an expense that is not directly related to the income, or the expense incurred for generating the income and comprehensive income, the expense should be separated and calculated proportionally according to both incomes. thus, the expense portion of specific income cannot be deducted from the income. such method is called joint cost allocation. therefore, based on this characteristic, final income tax can be imposed on any circumstance of the taxpayer regardless if there is profit or loss from the specific income. succinctly, the taxable income of the specific income liable to a final income tax is the gross amount of such income. 3. the isolation of specific income liable to a final income tax is much more emphasized with the prohibition of loss resulted from comprehensive income to be compensated with the specific income. therefore, not only disallowance of loss on the same specific income or other specific incomes under final income tax regime, but also loss from comprehensive income cannot be compensated with such income. https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 255 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc most of the final income tax imposed by withholding mechanism, but withholding income tax in indonesian income tax law is not always referred to final income tax. furthermore, article 19 of government regulation no. 94 of 2010 provides that final income tax regime is a special law (lex specialis) and comprehensive income tax regime is a general law, thus final income tax law overrides comprehensive income tax law based on “lex specialis derogat legi generali” doctrine (government regulation of the republic of indonesia, 2010). however, this doctrine adds more complexities on a tax matter of repurchase agreement. the application of hybrid income tax system in indonesia is the central issue in this article, resulting on dualism of tax perspectives of a repo transaction, although as lex specialis, the final income tax regime should be prioritised. 3. repo transaction from tax legal perspective this perspective is based on the implementation and interpretation of schedular income tax system in which prevailing law applied to some specific incomes. according to this perspective, repo is regarded merely from indonesian tax legal point-of-view which suggests that the sale and the buyback or repurchase treated as if they are two independent transactions. this perspective suggests that the repurchase event treated as if there is no relation with the sale event of the securities. thus, the two transactions are considered as an outright sale and buyback of the securities. there is no different of tax treatment between sell-buyback repo and classic repo. 3.1. bond case based on indonesian income tax law, the initial and variation margin of a repo transaction with collateral in form of bonds is called discount. discount in a sale of bonds is classified as specific income liable to final income tax, therefore it is taxed under schedular income tax system and should be calculated individually. government regulation no. 91 year 2021 concerning income tax on income in form of bond interest which is received or accrued by resident taxpayer and permanent establishment provides that any discount from sale price or face value/ par value of bonds is subject to final income tax. the definition of bond interest in that regulation is extended including premium and discount of bond. the final income tax rate of such income is 10% from the gross amount. however, if there is loss from sale of coupon bonds, the loss can be deducted from the gross amount of bond interest in the current year (government regulation of the republic of indonesia, 2021). there are two types of resident taxpayer and permanent establishment, pension fund and bank, that are excluded from the imposition of final income tax. for those two taxpayers, income in form of bond interest is liable under general law. meanwhile, foreign/non-resident taxpayer is taxed at 20% of the taxable income or according to the tax treaty between indonesia and the resident country. the confounding of tax treatment under schedular income tax system is the existence or realisation of the income being taxed. in general, according to the definition of income as provided in article 4 section (1) of indonesian income tax law, any income is realised when it exists to be utilised https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 256 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc for acquiring assets or consumption. in the case of bonds’ repo, the discount is not going to be realised until two events have already occurred, either there will be termination of repo contract (repurchase event) or any default by the seller or debtor. in the repurchase event, substantially, the discount transformed into repo interest, because the discount is included in the repurchase price of the bond. meanwhile, in the default event, when the seller fails to buyback the bonds, the discount can be realised if the buyer sells the bonds to other party above the initial purchase. however, based on the government regulation concerning bond interest, both the realised gain which is the repo interest and the unrealised gain which is the margin or the discount are liable to final income tax. for illustration, if there are zero-coupon bonds with face value of us$500,000.00 bought for us$499,000.00 in a repo contract, the buyer derived discount worth us$1,000.00. even though this discount is not realised until the termination of repo contract or default event, this unrealised gain is still subject of final income tax. if the seller buyback the bonds for us$500.000, in the termination date of repo contract or buyback date, the buyer derived us$1,000.00 that is called repo interest. therefore, the unrealised discount will be replaced by repo interest. this interest is also a taxable income of final income tax. on the other hand, when the seller cannot fulfil the contract (in the event of default) and the buyer decides to sell the bonds to other party for us$500,000.00, the buyer derives the same us$1,000.00 gain from the sale of the bonds. the imposition of final income tax based on the illustration are as follows: 1) if the termination of repo contract completed without default, the unrealised discount of the buyer from the purchase price us$1,000.00 as well as the repo interest with that same amount will be taxed equally; 2) if there is default event, the unrealised discount which turn into realised discount will also be taxed. from the above discussion, we can conclude that there are at least two main problems in the implementation of final income tax on repo transaction of bond. the first problem is economic double taxation exists in the transaction as it is described in the illustration. second, since repo transaction is regarded as two independent transactions or in other words, that the indonesian income tax law disregarded the repo contract, the imposition of schedular tax system for specific income in a repo transaction potentially violates the definition of income as provided in article 4 section (1) of the indonesian income tax law. the violation lies on the taxing mechanism of unrealised gain, the discount, under final income tax. another possible type of income in repo of bond is manufactured income. again, the schedular income tax system operates on this type of income. the law and regulations applied to the bond interest is exactly the same as the discount. the issue and complication of taxing the interest is also similar with the discount. it is known that legal owner of the bond after the first leg of repo is the buyer, despite the fact that based on repo’s contract, the economic or beneficial owner is the seller, or it can be said that the buyer is a temporary owner of the bond. if there is bond interest during repo’s term, from tax legal perspective the interest is derived by the buyer. however, based on the repo contract, especially classic repo, the interest should be transferred immediately to the seller as economic owner of the bond with the same amount and hence, the manufactured income exists and the seller is actually the ultimate recipient of the interest (choudhry, 2010). according to government regulation no. 91 year 2021, the buyer as a legal owner of the bond should be taxed through withholding agent with the same rate as the discount. https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 257 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc therefore, economic double taxation exists, because substantially, the interest already transformed into manufactured income and the tax subject should be the seller as a beneficial owner of the bond. as in the case of the discount, the interest income that is normally taxed once will be taxed twice, only because the tax subject is different person. to add another perplexity, the same interest that is received by the seller should be taxed under global income tax and it should be calculated altogether with other income derived by the seller. thus, the same income is treated differently only because it is received by two different persons. the taxing mechanism of bond interest under final income tax will be justified only if there would be no manufactured income derived by the seller. however, in the repo contract the condition happens if the seller fails to repurchase the bonds or the bond interest is not paid during repo contract. ultimate income that is expected as return for the creditor by entering repo arrangement is repo interest. repo interest in case of repo of bond will be treated the same as the discount. as shortly, the interest only earned by the buyer if the seller fulfils its obligation in the repo contract to repurchase the bond, otherwise if the seller breaches the contract, the repo interest will not be realised, but it will be transformed into discount. from the substantive perspective, only tax imposition on repo interest is the most valid income tax in repo transaction. however, because of the operation of indonesian’s final income tax with its unique characteristics, repo interest can be problematic. as discussed earlier, the discount already taxed albeit it is unrealised, thus if repo interest should be taxed, the buyer has to pay income tax twice. this condition of course against equity principle of taxation. another perplexing fact of the implementation of final income tax on repo of bonds is that the discount, the bond interest, and the repo interest will be taxed with the same rate and treated as bond interest provided that all of them are defined as bond interest according to the government regulation concerning bond interest. 3.2. stock case indonesian income tax law differentiates tax treatment of sale of stocks into two main categories, which are sale of stocks on indonesia stock exchange (ise) and sale of stocks off indonesia stock exchange (over the counter or private sale of stocks). income tax for income from sale of stocks is provided in government regulation no. 41 of 1994 concerning income tax on income from sale of stock on stock exchange amended by government regulation no. 14 of 1997. on the other hand, income from sale of stocks other than sale of stocks on ise provided directly within indonesian income tax law. the tax treatments of sale of stocks in indonesia are quite complex. according to the government regulation, there are three tax treatments according to the type of the stocks and the sale mechanism. first, the sale of non-founder’s stocks on ise which is imposed with final income tax at 0,1% of the sale proceed (the gross amount) regardless there is capital gain or loss. second, the sale of founder’s stocks on ise and third, the sale of any kind of stocks off or outside ise. in a case of sale of founder’s stocks on ise, taxpayer will have two options of paying the additional income tax of founder’s stock sale. first option, before sale the founder’s stock, the founder’s https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 258 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc stocks holders can pay additional final income tax in advance at 0,5% of stocks price at the date of initial public offering in a period of no later than one month after the founder’s stocks have been traded on ise. if the taxpayers choose to exercise the option, they will pay final income tax twice, they should pay the additional final income tax at 0,5% within the time period and 0,1% of final income tax (the normal tax) when they have already sold the founder’s stock. therefore, if the founder’s stocks holders opt to pay additional income tax in advance, when there is sale of the founder’s stocks, the seller or the founder’s stocks holders should only pay 0,1% of final income tax on the sale event (government regulation of the republic of indonesia, 1994) (government regulation of the republic of indonesia, 1997) second, if the taxpayers (the founder’s stocks holders) refuse to pay additional final income tax within the period, the income will be imposed with two income tax regimes, which are the final income tax for the sale event regardless there is gain or loss and when there is capital gain, it will be taxed under comprehensive income tax. if there is no capital gain, the taxpayers should not pay additional income tax. the tax rate of the second option depends on the type of the taxpayer, whether individual or corporate taxpayer, and especially for individual taxpayer, the rate also depends on the income tax bracket because the capital gain will be calculated altogether with other comprehensive income. furthermore, when the founder’s stocks are sold to other party, the stocks are no longer considered as founder’s stocks. the sale of stocks off or outside ise means that the stocks are sold without trading mechanism on ise. in this case, the seller pays income tax under comprehensive income tax and only liable to the income tax if there is a capital gain from the transaction. in a repo transaction of stocks, complexities and double even triple income tax does exist. in the case of stocks which are sold on ise, for non-founder’s stocks and founder’s stocks that the holder opts to pay additional income tax in advance, the initial margin is taxed 0,1% from the gross amount of sale and special for the founder’s stocks will be taxed with additional final income tax at 0,5%. the holder is only considered opting to pay in advance if 0,5% additional final income tax is paid within one month after the founder’s stocks have been traded on ise. meanwhile, the founder’s stocks which are sold on ise but the holder of the stocks does not choose the payment of additional income tax in advance, the additional income tax at 0,5% of initial margin will not be imposed with income tax because it has not been realised. hence, whether the buyer of the stocks derived initial or variation margin or not, as long as the stocks are traded on ise, the seller of the stocks should pay final income tax. the result of final income tax applied on repo transactions of stocks will be similar with the application of repo transactions of bonds, unless for stocks which are traded outside ise. the stocks which are traded outside ise will only be liable to comprehensive income tax. this mean that there is no income tax for initial margin and variation margin since the margin has not been realised. meanwhile, the repo interest derived by the buyer at the end of repo contract if the interest paid separately from the stocks’ price, it will be taxed under comprehensive income tax. however, if the interest included in the stocks’ repurchase price, the income tax which should be imposed is only 0,1% of final income tax based on the gross amount of repurchase price. https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 259 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc notwithstanding, if dividend distributed to the stockholder during repo period, then there is manufactured income for the seller in repo transaction since the buyer (the stockholder during repo) is a temporary owner and should transfer the dividend to the seller. again, there is complexity and economic double tax for the manufactured income. based on indonesian income tax law, income tax for dividend which is derived by individual taxpayer and corporate taxpayer are different. dividend derived by individual is liable to 10% of final income tax from the gross amount of the dividend, whereas dividend derived by corporate is liable to comprehensive income tax. in the case of repo, when the dividend is received by the buyer and the buyer is an individual, the dividend has already been taxed through withholding mechanism by the payor. while, if the buyer is a corporation, there is no liable income tax since the dividend should be transferred immediately to the buyer. double tax and complexity do exist if the buyer is an individual taxpayer, because despite the fact that the dividend has been taxed, the seller (the ultimate income recipient) should also bear the income tax burden as part of its comprehensive income in the end of the fiscal year. in contrast, when the buyer is a corporation, double tax and such complexity do not exist. however, based on the revised articles of income tax law in law no 11 of 2020 concerning job creation (the omnibus law), dividend which is derived by individual taxpayer may not be liable to income tax if it is invested in indonesia under certain terms and condition. the result of tax treatment of repo transaction with stocks collateral are varied depending on the circumstances. the result of the application of final income tax is somewhat similar with bonds despite that the tax rates are different. moreover, the implementation of comprehensive income tax in repo of stocks reveal the perplexity and discrimination on the tax treatment for exactly the same transactions. from the discussion, we can conclude that if a repo transaction using stocks as collateral, the imposition of the income tax can be double or even triple, especially for stocks which are traded on ise. 4. repo transaction viewed from accounting perspective as aforementioned, indonesian prevailing tax law does not provide specific law with respect to repo transaction. therefore, repo transaction is not regarded as one set of transaction but as separated transactions, predominantly provided under schedular income tax system depending on repo’s collateral. however, a general principle in relation with accounting has been provided in article 28 of law no. 6 of 1983 concerning general provisions and tax procedures as amended several times and lastly by law no. 7 of 2021 concerning harmonization of tax regulations. article 28 section (1) provides that corporate taxpayer and individual taxpayer who is conducting business activities or performing independent personal services shall be obliged to maintain bookkeeping (1983a) (2021). furthermore, article 28 section (5) provides that the bookkeeping shall be maintained consistently in either accrual or cash basis. notwithstanding, elucidation of article 28 section (5) states that a consistency principle provides the same accounting principles shall be used from year to year, to prevent any shifting of profit or loss. the principle, for example, applies to as among other things income recognition. the consistent application of the accounting principles has also stated in several divisions in the elucidation of indonesian income tax law, including the general elucidation of the law. https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 260 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the general principle in terms of consistency in applying accounting principles can be used as a basis to interpret the imposition of income tax on repo transaction. as of 1 january 2014, indonesia as a member g-20 countries has substantially adopted international financial reporting standards (ifrs) (ifrs foundation, 2017). ifrs provides guidance in treating repo based on the risk and return concept or economic substance as opposed to legal form of such transaction. in economic substance viewpoint, the seller in a repo transaction is still the beneficial owner and risk bearer of securities in the transaction, even though the securities have been sold as part of the agreement. the recognition principle of financial assets, including bond and stock in ifrs 9 financial instruments (current standard) remains the same as its predecessor, ias 39 financial instruments: recognition and measurement. based on ifrs 9 paragraph 3.2.6 (a)-(b), the derecognition of financial assets in a case of transfer, such as in repo transaction, is basically applied if all the risks and rewards of a financial asset substantially have been transferred to other entity. furthermore, ifrs 9 paragraph 3.2.6 (c) prescribes that if there is a doubt whether there is substantial transfer of all risks and rewards of a financial asset, then the entity should assess control of the asset. if the entity has control over a financial asset, the entity should remain recognise the asset (ias plus, 2012). from the brief discussion of accounting treatment on repo transaction, we can conclude that the accounting (beneficial) owner of a financial instrument in a repo is remain the seller. there is strong argument that support the conclusion, which is the risks, rewards, and control of the asset are still on the seller given the fact that there is a contract in which the buyer cannot sell or pledge the asset to other party and the manufactured income is still earned by the seller. if a repo transaction is treated based on the accounting perspective, repo will be liable under comprehensive income tax. therefore, the tax treatment of repo does not depend on the type of the collateral (securities being sold) because the tax proceed will be the same. all types of income that are derived from repo transaction will be calculated altogether as a comprehensive income and consequently there is no double income tax. furthermore, there is no flaw on taxing unrealised gain, which is happened in a case of taxing repo transaction under final income tax. in accounting or economic perspective, the manufactured income is only liable to the seller as an ultimate income recipient, not the buyer, even though the manufactured income is received firstly by the buyer as the legal owner of the securities. on the other hand, the repo interest is liable to the buyer only if the seller has already repurchased the securities (the collateral). if the seller fails to repurchase the securities, there is no income tax for the repo interest. in this perspective, the tax treatment of repo is not problematic and much simpler, unlike tax treatment based on the legal perspective. therefore, it provides certainty and fairness to the taxpayer. conclusion in indonesia income tax law, repo transaction is perceived as unique and novel. taxing repo under indonesian income tax law is quite complex, problematic, and lack of fairness. the root https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 261 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cause of the complexity is implementation of hybrid income tax system in indonesian income tax law, comprehensive and schedular income tax system. even though, there is no specific income tax regulation on repo transaction, the strongest argument is that repo is taxed under schedular income tax system based on lex specialis derogat legi generali doctrine. there is another argument that is much more logical, which support taxing repo under comprehensive income tax system. the schedular income tax system views repo from legal aspect of a repo transaction which is the same as outright sale of securities. the problem and complexity of the tax treatment based on this treatment is there are various and segmented tax treatment and tariff (final income tax) depending on the type of the securities that are involved in repo transaction. under final income tax (the schedular income tax system), repo transaction will be taxed with various scenarios and it will end up on double taxation of income. the double income tax will exist because the schedular income tax system fails to identify and view repo as one-set of transactions. it is only focus on legal aspect of each leg of transaction and hence the system does not treat repo transaction comprehensively. therefore, the system imposes tax not only to beneficial owner or the ultimate recipient of the income but also the legal owner of the income which actually is only surrogate entity or agent for the beneficial owner, such as in a case of repo of bond. as a result, exactly same transaction (the repo transaction) is taxed with different tax treatment and tariff. the implementation of final income tax is certainly harsh and very burdensome for the taxpayer. even, the party, that does not economically earn the income, should also bears income tax burden. on the other hand, although based on prevailing indonesian income tax law, the comprehensive income tax system has weaker argument to be implemented on repo transaction, it is much more reasonable and logical. there is no various tax treatment for the same transaction (the repo transaction), because it views repo as one-set of transaction. the system will view repo based on accounting or economic perspective, the loan arrangement. therefore, it avoids double taxation on repo transaction. the implementation of comprehensive income tax regime on repo transaction also promotes fairness and simplicity. treating repo merely based on its legal aspect will cause a failure in examining and overlooking the transaction as a whole scheme and thus creating complexity and inequality in the tax treatment. the justification of taxing repo based on economic perspective will be more solid, if the repo transaction does not use written agreement of repurchasing the securities, such as in a case of sell/buyback repo. the problem of taxing repo will persist, unless indonesian government issues new tax law or regulation that will overrule the implementation of schedular income tax law regime and therefore taxing repo will be based on comprehensive income tax regime. alternatively, indonesian government may issue specific regulation concerning repo based on comprehensive income tax regime. this alternative is not easy since there are some special regulations (lex specialis) that are applied and interconnected with repo transaction. another solution is not tax solution but modification of the provision in the repo agreement, so that repo transaction does not require sale of the securities. this solution will ignore repo’s nature because repo will be the same as common collateralised loan agreement. however, this solution, https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 262 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by far, is the easiest and it has been implemented since 2016 by the relevant authority governing (financial services authority/ojk) repo transaction (dwijayanto, 2016). reference acharya, v. v, & öncü, t. s. (2011). the repurchase agreement (repo) market. in regulating wall street: the dodd-frank act and the new architecture of global finance (pp. 319–350). https://doi.org/10.1002/9781118258231.ch11 al-rushou, a., & al saeed, m. (2008). repurchase agreements in financial markets: financial and legal prospective. arab law quarterly, 22(2), 112–157. https://doi.org/10.1163/026805508x287658 armakolla, a., douady, r., & laurent, j.-p. (2019). repurchase agreements and the european sovereign debt crises: the role of european clearinghouses. in handbook of global financial markets: transformations, dependence, and risk spillovers (pp. 467–492). https://doi.org/10.1142/9789813236653_0018 baklanova, v., caglio, c., cipriani, m., & copeland, a. (2019). the use of collateral in bilateral repurchase and securities lending agreements. review of economic dynamics, 33, 228–249. https://doi.org/10.1016/j.red.2019.05.002 bank indonesia. 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(2022, may 22). what is a manufactured payment? investopedia.com. https://www.investopedia.com/terms/m/manufacturedpayment.asp fischer, a. (2015). a comprehensive approach to stateless income. george washington law review, 83(3), 1028–1057. https://www.scopus.com/inward/record.uri?eid=2-s2.085028945390&partnerid=40&md5=b9d42fbc5cdc857474d005f1a2702ba1 gottardi, p., maurin, v., & monnet, c. (2019). a theory of repurchase agreements, collateral reuse, and repo intermediation. review of economic dynamics, 33, 30–56. https://doi.org/10.1016/j.red.2019.04.009 https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 263 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc government regulation of the republic of indonesia. (1994). government regulation number 41 year 1994 concerning income tax on income from sale of stock on stock exchange. government regulation of the republic of indonesia. 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(2021). legal frameworks for personnel records management in support of accountability in devolved governments: a case of garissa county government. records management journal, 31(2), 109–133. https://doi.org/10.1108/rmj-05-2019-0024 ordower, h. (2014). schedularity in u.s. income taxation and its effect on tax distribution. northwestern university law review, 108(3 spec. issue), 905–924. https://www.scopus.com/inward/record.uri?eid=2-s2.084904684648&partnerid=40&md5=84d19e4c7183b4e6eb0263c47089a2b6 reiff, n. (2022, june 18). bonds: fixed income. investopedia.com. https://www.investopedia.com/terms/r/repurchaseagreement.asp https://www.ilomata.org/index.php/ijtc repurchase agreement: dual perspectives in indonesian income tax law indradi 264 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ruchin, a. (2011). can securities lending transactions substitute for repurchase agreement transactions? banking law journal, 128(5), 450–480. https://www.scopus.com/inward/record.uri?eid=2-s2.084861831728&partnerid=40&md5=b371a19588cb30aaedc9eaa96cdab97e schultz, k., & bockian, j. (2017). repurchase agreements. in capital markets: evolution of the financial ecosystem (pp. 184–204). https://doi.org/10.1002/9781119220589.ch9 sissoko, c. (2019). repurchase agreements and the (de)construction of financial markets. economy and society, 48(3), 315–341. https://doi.org/10.1080/03085147.2018.1525155 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 385-406 385 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi directorate general of taxes, indonesia correspondent: indra.dhee@gmail.com received : may 1, 2023 accepted : june 11, 2023 published : july 31, 2023 citation: indradi (2023). repeated tax amnesties in indonesia: an evaluation of tax compliance. ilomata international journal of tax and accounting, 4(3),385-406. https://doi.org/10.52728/ijtc.v4i3.759 abstract: for some countries, tax amnesty is viewed as a shortcut tool to raise additional tax revenue. however, many of them seem to be unaware of the medium to longterm impact to tax compliance. indonesia has already launched two tax amnesties between 2016 and 2022, yet there have been no comprehensive studies to evaluate long term compliance impact of the amnesties in indonesia. this study aims to evaluate the impact of repeated tax amnesties in indonesia from a tax compliance perspective. it focuses on the medium to long-term effects and uses income tax revenue as a variable to measure tax compliance. the research methods employed in the study are both qualitative and quantitative, allowing for a comprehensive examination of the topic. one important aspect of the study is the use of time series analysis with an arima model to analyse the income tax revenue. this analysis helps in understanding the trends and patterns in income tax revenue over time and allows for the identification of any significant changes or impacts caused by the tax amnesties. the findings in this study align with other previous research, which indicate that tax amnesty does not affect long-term tax revenue and may adversely influence medium to long-term compliance. it can also cause a decline in short-term compliance, particularly when taxpayers expect repeated amnesties. keywords: tax amnesty, tax compliance, income tax revenue, time series analysis, arima this is an open access article under the cc-by 4.0 license. introduction there are several driving factors as well as goals of tax amnesty. the main factors and goals of tax amnesty are increasing short, medium, and long-term tax revenue, broadening taxpayers base, and ultimately improving tax compliance (baer & le borgne, 2008)(damayanti et al., 2020). from those factors, the majority of tax scholars agree that tax amnesty increases short-term tax revenue. https://www.ilomata.org/index.php/ijtc mailto:indra.dhee@gmail.com https://doi.org/10.52728/ijtc.v4i3.759 repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 386 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, some studies show that tax amnesties do not affect medium and long-term revenue, let alone improving tax compliance (sabnita, 2019). tax amnesty is indeed a contentious issue amongst policymakers and tax scholars. on one side, it is perceived to be an effective tool to raise short term revenue(alm & beck, 1990) (baer & le borgne, 2008) (sabnita, 2019). on the other side, it is often regarded as unfair policy because it accommodates and treats tax evaders, including tax criminals, with much lower tax burden compared to compliant taxpayers. furthermore, tax amnesty can also be viewed as weaknesses of tax administration and law enforcement from the perspective of the tax authority (pohan et al., 2019). many countries, even in provincial or state level, have implemented tax amnesty in various forms (baer & le borgne, 2008) (sabnita, 2019) from the perspective of short-term revenue, some countries can be classified as successful and some other are the opposite (baer & le borgne, 2008)(luitel & sobel, 2007). however, measuring tax amnesty only from this perspective can mislead the holistic triumph of the amnesty, which is incremental increase of taxpayers’ compliance. indonesia has experienced five times implementation of tax amnesty with different backgrounds, schemes and mechanisms (assidiki mauluddi & widyawati, 2022). the first amnesty had been applied before so called “tax reform 1983”, which was in 1964. the second was held in 1984, one year after the reform. the third had been implemented in 2008 and become a milestone of second-phase tax reform in indonesia. nevertheless, this third amnesty is well known as sunset policy and it has quite different features and scheme compared to other amnesties. the fourth and fifth had been applied in 2016 to 2017 and 2022. although, the last one refers to what is called “voluntary disclosure program”, but the scheme is basically similar with other amnesties. there is plethora of books and articles that explain, analyse, and describe tax amnesty. many of them discuss tax amnesty and its effect to tax compliance and revenue. however, to the best of my knowledge, hardly any of those discuss repeated tax amnesty in indonesia and its effect to medium and long-term revenue, which could be argued as prima facie evidence of tax compliance. many studies use survey to measure the compliance level of the taxpayer, which is conceivable, considering that taxpayers’ identity and data are classified. one approach of study to fathom tax compliance through its proxy, which is long-term revenue, such as conducted by james alm and william beck (1993) is very relevant. medium and long-term tax revenue is an appropriate figure to define taxpayer’s compliance level because it represents the ultimate goal of compliance, which is tax burden paid by the taxpayers. the approach is followed by some other studies with similar approach, such as conducted by gerger (2012) and villalba (2017). this study discusses brief history of tax amnesties in indonesia, measures and evaluates the effectivity of the two last amnesties in terms of increasing taxpayers’ compliance. measurement method of the amnesties’ effectivity is based on long-term revenue projection as a proxy of the compliance, similar with study conducted by alm and beck (1993). the revenue will be represented by income tax revenue instead of taxes revenue in a whole considering that commonly, the ransom in tax amnesty program is a substitution of income tax liability that should be paid in the past. the projection of income tax revenue will be created with time series analysis using arima model. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 387 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method qualitative and quantitative research method are used in this paper. the qualitative method will be used in the discussion and synthesis of previous research, brief history of tax amnesties in indonesia and statistical description of the three last amnesties. meanwhile, the quantitative method will be adopted in measurement and analysis of the three last amnesties in indonesia in terms of long-term income tax revenue as a proxy of tax compliance. the three last amnesties, which are implemented on 1 january 2008 to 28 february 2009, 1 july 2016 to 31 march 2017, and in 2022, are the basis of discussion in this paper considering that these three events are the most influential to the current compliance condition in indonesia. this paper is going to follow alm and beck (1993) method (time series analysis) using auto regressive integrated moving average (arima) model, which is designed with rstudio, to make a forecasting of income tax revenue. the arima model will be used to make a forecasting of income tax revenues from 2023 to 2042 and the observed income tax revenues as projection bases are from 2002 to 2022. nevertheless, since this study measures the long-term compliance with one variable through time series analysis, it might be followed by other studies providing other variables to assess the long-term impact of repeated amnesties. result and discussion 1. theoretical framework many studies of tax amnesties in various regions discuss tax amnesties and its effect on tax compliance, some other analyse amnesties in relation with tax revenue. nevertheless, there is a niche between those two main issues in amnesty, that is trying to connect tax amnesty and tax revenue as a projection of compliance. in the context of indonesia, the majority of tax amnesty’s research either designed purely using literature review or perceptive survey method. however, there are fewer studies analyse the effect of repeated tax amnesties, especially in indonesia. tax amnesty has three general features, which are specific or limited time of implementation, the target of this program is non-compliant taxpayers or tax avoiders, and the benefit for the participants is much lower tax burden (sometimes called ransom) than the normal tax rate as well as freedom from sanctions and legal prosecution (baer & le borgne, 2008) (gerger, 2012).the ultimate goal of those three features is to attract as many as possible existing non-compliant taxpayer to join the program and to be registered in the tax administration, therefore broadening tax base and increasing tax compliance. it is reasonable that the specific target of tax amnesty participants is partially or fully non-compliant taxpayers, because this group obtain the largest benefit of the amnesty compared to fully compliant taxpayers, who are suffering from unfair treatment (saraçoğlu & çaşkurlu, 2011)(gerger, 2012) (sayidah & assagaf, 2019). as mentioned earlier, tax amnesty has two dimensions of objectives, which are short to mediumterm goals and medium to long-term goals. the first dimension can be predicted and achieved relatively easy because the results are immediate and temporary in nature, such as generating significant amount of revenue, immediate responses from taxpayers who are previously unregistered or unidentified in the tax administration or partially compliant taxpayers who are already administered or registered but do not pay tax and/or submit tax return. the most difficult https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 388 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc part is achieving the medium to long-term goal, which is retaining and even improving tax compliance level that is already gained in the short-term period. the implementation of tax amnesties in various countries or states have different backgrounds or triggers. however, it could be argued that, like any other tax policies or measures, the ultimate objective of the amnesties is to increase the level of tax compliance or voluntary compliance. improving voluntary tax compliance, along with discussion of imposing tax itself, is an old subject (e hassan et al., 2021). the definition of tax compliance is simple, which is basically the degree of individual and other tax subjects’ ability and willingness to comply with or satisfying the tax laws (sarker, 2003)(james et al., 2002)(e hassan et al., 2021). furthermore, the definition of tax compliance contains two aspects which are formal compliance and material compliance. formal compliance relates to compliance of non-paying obligations in the tax laws, such as registration and on-time filing of tax return. meanwhile, material compliance relates to willingness to pay taxes in accordance with the tax laws. considering that the material compliance is basically represented by the amount of tax revenue, especially income tax, therefore measuring tax compliance using income tax revenue as a proxy is relevant. the approach that is trying to connect tax amnesty and tax revenue has been applied by alm and beck (1990) and then followed by a study to measure long run compliance using time series analysis as an effect of repeated tax amnesties (alm & beck, 1993). finding in the first paper is that amnesties may increase tax compliance and revenue if a taxpayer believes that paying taxes is an obligation and assumes that future amnesty will apply tougher enforcement than current amnesty (alm & beck, 1990). however, another possible argument is that the amnesty revenue will reduce current tax payment, especially if a taxpayer anticipates future amnesty with lax of penalty (alm & beck, 1990). meanwhile in the second paper, the finding is that tax amnesties will not have a significant effect on long-term compliance or tax revenue. even, the amnesties might cause lower or dropped tax revenue in subsequent years, unless it is followed with stronger penalty or enforcement. time series analysis is used in this paper with several reasons. first, the projection of future tax revenue in this paper is designed to make a conclusion whether tax amnesties will have a significant impact on medium to long-term tax compliance rather than to make accurate or precise future values of the revenue. therefore, past movements of a variable are enough to infer the future movements without considering other variables as causal factors (alm & beck, 1993). second, some research on tax amnesties in indonesia are designed using survey or experimental study to draw conclusions regarding level of compliance. however, in my view, this method is not suitable to measure the level of compliance due to reliability of the survey participant’s view including false information and comprehension of the participants and participants representativeness (herbert, 2013). arima model is a popular statistical method to analyse an interpret time-series data for making future prediction values. an arima model has three components which are autoregression (ar), integrated (i), and moving average (ma). the autoregression, denoted by “p”, means that the model shows that a changing variable is regressed on its prior values or lagged values. the integrated, denoted by “d” refers to the stationarity of the data which means that the time-series data has to be stationary by subtracting observed value and its previous values d times. the nonstationary data can be made stationary by differencing (box et al., 2016). moreover, the moving https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 389 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc average, denoted by “q”, indicates error of the model that uses previous forecast errors in regression-like model like model. the equation model of arima or sometimes referred as box-jenkins model as suggested by the components are as follows: 1) autoregressive model: 𝑌𝑡 = 𝛷0 + 𝛷 1𝑌𝑡−1 + 𝛷 2𝑌𝑡−2 + ⋯ + 𝛷 𝑝𝑌𝑡−𝑝 + 𝑒𝑡 where: 𝑌𝑡 = dependent variable 𝛷 = constant term 𝑌𝑡−1, 𝑌𝑡−2, 𝑌𝑡−𝑝 = the lag of y p = order of p 𝑒𝑡 = error term, which is assumed to be normally distributed with a mean of zero and constant variance. 2) moving average model: 𝑌𝑡 = 𝛼0 – 𝛼1𝑒𝑡−1 – 𝛼2𝑒𝑡−2 – 𝛼3𝑒𝑡−3 – ⋯ – 𝛼𝑞𝑒𝑡−𝑞 where: 𝑌𝑡 = dependent variable 𝛼 = constant term 𝑒𝑡−1, 𝑒𝑡−2, 𝑒𝑡−q = the lag of error q = order of q 𝑒𝑡 = error term, which is assumed to be normally distributed with a mean of zero and constant variance. 3) arima model: 𝑌𝑡 = 𝛷0 + 𝛷 1𝑌𝑡−1 + 𝛷 2𝑌𝑡−2 + ⋯ + 𝛷 𝑝𝑌𝑡−𝑝 + 𝑒𝑡 + 𝛼0 – 𝛼1𝑒𝑡−1 – 𝛼2𝑒𝑡−2 – 𝛼3𝑒𝑡−3 – ⋯ – 𝛼𝑞𝑒𝑡−𝑞 whereas “d” is order of differencing which is the number of differencing to make the data stationary (box et al., 2016). although, arima model can be highly accurate and reliable, but it has main drawback. the drawback is determining the parameters (p,d,q) can be a trial-and-error process and quite difficult. however, this disadvantage is no longer an exhaustion effort with the help of some statistical application, such as spss and rstudio. therefore, this study builds the arima model assisted with rstudio table 1 summarises some relevant previous studies other than study already mentioned concerning tax amnesty and tax compliance, especially in indonesia. table 1. previous reserach researcher year method conclusions james alm, michael mckee, william beck 1990 experimental study with 7 scenarios (sessions) and 9 hypotheses using various tests, such as mannoverall level of tax compliance drops after an amnesty, although the impact could be reduced with stiffer law enforcement. the combination of amnesty and enforcement is more effective in generating compliance https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 390 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc whitney non-parametric test than law enforcement alone (alm et al., 1990). hari sharan luitel, russel s. sobel 2007 regression analysis using a panel of quarterly data on tax revenue for the u.s. states over the 1980–2004 overall, when a state offers an amnesty for the first time, it significantly improves a short-run revenue during the amnesty period but then leads to a reduction in revenue in the long-run (luitel & sobel, 2007). ngadiman, daniel huslin 2015 perception survey, study at jakarta kembangan tax office, participant: 100 individual taxpayers, regression analysis sunset policy does not affect tax compliance, meanwhile tax amnesty and penalties affect tax compliance (ngadiman & huslin, 2015). miguel a. sanchez villalba 2017 analysis using expected utility theory (allingham & sandmo, 1972), data: sales tax revenue, gdp, and tax amnesties of tucuman province, argentina form may 1978 to september 1999 tax amnesties increase short-run revenue but do not affect long-term revenue (sanchez villalba, 2017). fany inasius, giri darijanto, engelwati gani, and gatot soepriyanto 2020 perception survey, participant: 410 selfemployed individual taxpayers (sme’s), regression analysis trust to the government significantly influences voluntary compliance but small negative effect to enforced compliance. government power is more important to voluntary than enforced compliance (inasius et al., 2020) ni putu riasning, anak agung bagus amlayasa, luh kade datrini 2021 experimental study, participant: 410 students, 2x2 factorial designs, involving two variables: knowledge of recurring amnesties and tax sanctions if taxpayers do not know that tax amnesty will be repeated, they tend to be more compliant. tax sanctions also play significant effect to the compliance level. these two joint variables affect tax compliance (riasning et al., 2021) bambang juanda, lukytawati anggraeni, puri mahestyanti, benny robby kurniawan 2022 experimental study uses factorial randomized block design (rakf) with five factors incorporating replication components: wealth, expectation, tariff periods, tax penalty, and audit wealthier taxpayer tends to not comply, tax penalties along with higher audit probabilities have significant impact on compliance. tax amnesty could reduce tax compliance, especially if it is repeated in the future.(juanda et al., 2022) source: author https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 391 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. tax amnesties in indonesia 2.1. tax amnesty 1964 indonesia government first introduced tax amnesty back in 1964, during president soekarno’s government. according to presidential decree no. 5 year 1966 concerning tax amnesty regulation, the background of this policy included the following: 1) tax regime during this period was viewed too burdensome and cumbersome for the taxpayers, which motivated them to avoid tax obligations; 2) tax authority did not have sufficient capacity to collect taxes and enforce the law simultaneously in order to curb tax avoidance and evasion. before implementing amnesty, indonesian government had already released some tax relaxation policies by issuing presidential instructions no. instr. 2/kotoe year 1962 and no. instr. 6/kotoe year 1962. the policy is somewhat similar to tax amnesty which, in brief, provided that any income invested or distributed to productive business activities would be free from legal prosecution or tax audits. however, these policies were less effective and were followed by the amnesty program(jatmiko, 2022). there is no detailed information regarding the effective date of this amnesty implementation. however, initially the programme was offered until 16 august 1965 and then extended until 30 november 1965 (setiyono, 2018) surprisingly, according to law no. 12 year 1966 concerning determination of the master budget and supplements and amendments of state budget of 1965, this amnesty was reported successfully collected more than 200% from the target revenue. the target was set at an amount of rp50.000.000.000,00 with an estimated unreported income from shadow economy of around rp500.000.000.000,00. meanwhile, the realised amnesty revenue was reported at rp121.562. 638.000,00 with estimated unreported income from shadow economy ranging from rp1.200.000.000.000,00 to rp1.600.000.000.000,00. from this experience, it can be concluded that the first amnesty boosted short-term revenue, meanwhile there is no further information or data related to post-amnesty revenue or tax compliance. 2.2. tax amnesty 1984 the second amnesty was held in 1984 during president soeharto's presidency and marked the first indonesian tax reform, which involved a shift from an official assessment to a self-assessment system. this amnesty was based on presidential decree no. 26 of 1984 concerning tax amnesty and was initiated on april 18, 1984, less than four months after the implementation of new tax laws as part of the tax reform. in the 1980s, revenue from oil resources served as the backbone of the state budget. however, after the decline in oil prices starting from 1982, the government realised that oil revenue alone was no longer sufficient to sustain the state's finances. this condition prompted the optimization of tax revenue as the new main source of state income. tax amnesty 1984 along with tax reform was a part of government’s effort to improve tax revenue. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 392 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to the decree, the main objective of the policy was to enhance the participation of society in the country's financing and development through a new tax system based on the integrity and transparency of taxpayers. consequently, the government expected that the amnesty would improve the long-term compliance of taxpayers. there is not much information or data available regarding this amnesty; however, some studies suggest that it was not successful in the short term, despite lasting for more than one year and ending on june 30, 1985 (jatmiko, 2022). it only raised 67.8 billion rupiah, consisting of 45,6 billion rupiah from 182.114 individual taxpayers and 22,2 billion rupiah from 22.748 corporate taxpayers (jatmiko, 2022). 2.3. tax amnesty (sunset policy) 2008 this policy cannot be fully compared to typical tax amnesty for two main reasons: 1) this policy is essentially an exemption of tax sanctions for unpaid or insufficient payment of income tax. therefore, there is no specific law or regulation serving as a basis for amnesty. this means that taxpayers did not have a chance to pay a lower tax amount, as is the case with typical amnesty programs that replace the regular income tax rate with a lower ransom tariff. 2) there is no protection from tax legal prosecution after this policy has been terminated, although there is a guarantee that tax audits will not be performed. however, the objectives of this policy are similar to tax amnesty in general. hence, this paper considers the policy as “partial tax amnesty”. initially, based on article 37a of law no. 28 year 2007 concerning third amendment of law no. 6 year 1983 concerning general provisions and tax procedures this programme was implemented from 1 january 2008 to 31 december 2008. nevertheless, it was extended until 28 february 2009 (government regulation in lieu of law of the republic of indonesia, 2008). table 2. results of sunset policy description sunset policy period total 1 jan to 31 dec. 2008 1 jan to 28 feb 2009 additional taxpayers 3.545.076 2.090.052 5.635.128 annual tax return submission 556.194 248.620 804.814 income tax revenue (in trillion rupiah) 5,56 1,9 7,46 source: dgt annual report 2009 (all figures using indonesian format) the achievement of sunset policy in 2008 also supported the achievement of tax revenue collected by dgt in 2008. it was recorded that the tax revenue realisation is 571,10 trillion rupiah, surplus around 37 trillion rupiah from the target. therefore, this policy is regarded as a successful effort to boost short-run revenue. however, after this triumphant, in 2009, the tax revenue experienced low growth which was merely 1,10% from 2008, with total amount 577,39 trillion rupiah tax amnesty 2016. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 393 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this fourth amnesty was another full tax amnesty program since 1984. aside from government need to collect higher revenue, the main driver of this amnesty was an indication that there were around 11.000 trillion rupiah offshore assets belong to or related to indonesian residents’ or entities’ (cabinet secretariat of the republic of indonesia, 2016). the government alleged that those assets have not been reported or even paid taxes and they have a plan to push this capital in order to spur indonesian economy. for this reason, the government set ransom tariffs for repatriated assets or funds same with domestic assets declaration. meanwhile, declaration of offshore assets without repatriation are imposed with twofold higher tariffs compared with repatriated assets or funds and domestic assets. nevertheless, there are special tariffs for taxpayers with maximum turnover 4,8 billion rupiah in one year (micro, small, and medium enterprises/msme) this programme was divided in three periods, which are from 1 july to 30 september 2016, 1 october to 31 december 2016, and lastly from 1 january to 31 march 2017. each period has different ransom tariff. ransom tariffs for repatriated assets or funds and declaration domestic assets are 2%, 3%, and 5% of the asset’s amount respectively. whereas, ransom tariffs for declaration of offshore assets are 4%, 6%, and 10% of the asset’s amount respectively. moreover, the tariff for msme are 0,5% for taxpayers with the declared assets not more than 10 billion rupiah and 2% for taxpayers with the declared asset above 10 billion rupiah. the forgiven period of this amnesty was from 1985 to 2015, therefore it did not protect the years after 2015. table 3. results of tax amnesty 2016 types of taxpayers participants ransom (trillion rp) declared assets (trillion rp) onshore repatriation offshore 1. individual msme 322.189 7,81 823,81 2,13 42,26 2. individual nonmsme 413.904 91,36 2.250,84 119,01 961,61 3. corporate msme 111.415 0,96 86,98 0,01 0,62 4. corporate nonmsme 125.918 14,68 539,17 25,56 32,27 total 973.426 114.54 3.700,80 146,70 1.036,76 grand total 4.884,26 source: dgt annual report 2017 (all figures using indonesian format) the achievement of this amnesty in short-run was remarkable, even it was claimed as tax amnesty with the highest revenue as well as declared assets (primadhyta, 2016). however, the achievement could not help dgt to attain tax revenue target in 2016 as well as 2017. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 394 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc notwithstanding, in my view, the achievement of this amnesty also reveals the weaknesses of tax administration and leniency of tax law enforcement in indonesia, hence there were massive tax avoidances and evasions that neither caught by the system nor received penalties. 2.4. tax amnesty (voluntary disclosure program) 2022 voluntary disclosure program (vdp) was implemented along with the enactment of new tax law regime, harmonisation of tax regulations. this amnesty was launched just after the effects of pandemic covid-19 had been declined. during pandemic, the government was in need of increase revenue to battle with the disease and its effect to the economy, in the meantime economic growth experienced contraction, even negative growth in 2020 (badan pusat statistik, 2022). therefore, it is understandable if indonesian government wanted to raise extra fund to finance expenditures and to boost economy post-pandemic. in theory, there is a different between vdp and tax amnesty which is typically vdp does not waive all tax liabilities in the past. nevertheless, in case of indonesia, the benefit received by the taxpayers are same with tax amnesty because vdp is basically the extension of tax amnesty in 2016 to 2017. tax amnesty in 2016 was designed to forgive tax avoidances and or evasions that were committed from 1985 to 2015, whereas vdp in 2022 was mainly designed to forgive tax avoidances and or evasions that were committed from 2016 to 2020. this programme was offered from 1 january 2022 to 30 june 2022 and it was classified in two policies, which were planned to target different participants. the first policy was offered only to ex-participants of tax amnesty 2016, hence this programme had captive participants. the limitation is explicable because it was designed to forgive tax burden from 1985 to 2015 in which the tax amnesty 2016 to 2017 applied. if this first policy offered to all taxpayers, it will even show weaknesses of tax law enforcement and hesitation of the government to take tougher action in tackling avoidance and evasion post-amnesty 2016. the second was offered only to individual taxpayers with forgiven period from 2016 to 2020, meaning that an individual taxpayer can participate in both policies. with these two designed policies, the tax authority wanted to distinguish this vdp to tax amnesty and refused this programme to be called tax amnesty second phase (anam, 2022). nevertheless, this study considers this programme is basically same with tax amnesty. first policy’s tariffs are offered with various schemes: 1) 6% of asset’s amount for onshore declared assets and or repatriated assets so long as they are invested in renewable energy business and state’s securities; 2) 8% of asset’s amount for onshore declared assets and or repatriated assets; and 3) 11% of asset’s amount for offshore declared assets. on the other side, tariffs for second policy are quite high with the detail as follows: 1) 12% of asset’s amount for onshore declared assets and or repatriated assets so long as they are invested in renewable energy business and state’s securities; 2) 14% of asset’s amount for onshore declared assets and or repatriated assets; and 3) 18% of asset’s amount for offshore declared assets this programme was also regarded as successful in terms of short-term objective which is to raise immediate fund with total ransom 61,01 trillion rupiah, 247.918 participants, and total declared asset 594,84 trillion rupiah. the detail result of this amnesty are as follows: https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 395 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. results of vdp 2022 description policy i policy ii (only individual) individual corporate participants 78.389 4.067 225.603 ransom (in trillion rp) 31,38 1,53 28,10 grand total 61,01 declared assets onshore & repatriation (in trillion rp) 327,43 17,17 167,97 invested assets onshore & repatriation (in trillion rp) 15,11 1,15 6,10 declared assets offshore (in trillion rp) 37,98 0,77 21,16 total 380,52 19,09 195,23 grand total 594,84 source: directorate general of taxes (all figures using indonesian format) 3. analysis of compliance 3.1. formal compliance in general, formal compliance is a compliance level related to non-payment obligation of taxpayers based on the tax law. this study discusses two key figures in formal compliance which are the number of taxpayers registered in the tax system and annual income tax return filing as main indicators of formal compliance, before and after amnesties. although, from my perspective, formal compliance is not the essence of tax compliance but at the least it delivers complement insight of material compliance as the center of this analysis. table 5. number of taxpayers and annual tax return filing 2002 to 2021 year registered taxpayers (rt) effective taxpayers (et) noneffective taxpayers (nt) annual tax returns filed (atrf) δ et (%) δ atrf (%) atrf ÷ rt (%) atrf ÷ et (%) 2002 3.053.934 2.781.559 272.375 967.613 n/a n/a 31,68 34,79 2003 3.457.734 3.145.745 311.989 1.070.192 13,09 10,60 30,95 34,02 2004 3.845.171 3.528.857 316.314 1.182.437 12,18 10,49 30,75 33,51 2005 4.206.762 3.883.378 323.384 1.240.571 10,05 4,92 29,49 31,95 2006 4.668.458 4.083.536 584.922 1.278.290 5,15 3,04 27,38 31,30 2007 6.694.236 4.478.032 2.216.204 1.113.694 9,66 -12,88 16,64 24,87 2008 10.682.099 6.776.241 3.905.858 2.097.849 51,32 88,37 19,64 30,96 2009 15.911.576 10.389.590 5.521.986 5.413.114 53,32 158,03 34,02 52,10 2010 19.112.590 14.101.933 5.010.657 8.202.309 35,73 51,53 42,92 58,16 2011 22.319.073 17.694.317 4.624.756 9.332.626 25,47 13,78 41,81 52,74 https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 396 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2012 24.812.569 17.659.278 7.153.291 9.237.948 -0,20 -1,01 37,23 52,31 2013 28.002.205 17.731.736 10.270.469 9.967.904 0,41 7,90 35,60 56,22 2014 30.574.428 18.357.833 12.216.595 10.854.819 3,53 8,90 35,50 59,13 2015 33.313.655 18.159.840 15.153.815 10.975.909 -1,08 1,12 32,95 60,44 2016 36.398.089 20.165.718 16.232.371 12.256.401 11,05 11,67 33,67 60,78 2017 39.781.620 16.598.887 23.182.733 12.047.967 -17,69 -1,70 30,29 72,58 2018 42.536.341 17.653.046 24.883.295 12.551.444 6,35 4,18 29,51 71,10 2019 45.927.569 18.334.683 27.592.886 13.394.502 3,86 6,72 29,16 73,06 2020 49.845.432 19.006.794 30.838.638 14.755.255 3,67 10,16 29,60 77,63 2021 66.351.573 19.002.585 47.348.988 15.976.387 -0,02 8,28 24,08 84,07 source: annual report directorate general of taxes 2007-2021 (all figures using indonesian format) table 6. processed data of number of taxpayers and annual tax return filing 2002 to 2021 description tax amnesty 2008 tax amnesty 2016 tax amnesty 2022 2002-2007 2008-2021 2002-2015 2016-2021 2002-2021 �̅� rt 4.321.049 33.254.916 15.046.749 46.806.771 24.574.756 �̅� et 3.650.185 16.545.177 10.197.991 18.460.286 12.676.679 �̅� nt 670.865 16.709.738 4.848.758 28.346.485 11.898.076 �̅� atrf 1.142.133 10.504.602 5.209.663 13.496.993 7.695.862 �̅� δ et (%) 10,03 12,55 16,82 1,20 11,89 �̅�δ atrf (%) 3,23 26,28 26,52 6,55 20,22 �̅�atrf/rt (%) 27,82 32,57 31,90 29,39 31,14 �̅� atrf/et (%) 31,74 61,52 43,75 73,20 52,59 source: author’s calculation (all figures using indonesian format) table 5 depicts the number of registered taxpayers, effective taxpayers, non-effective taxpayers, growth of effective taxpayers, growth of annual tax returns filed, ratio of annual tax returns filed to registered taxpayers, and ratio of annual tax returns filed to effective taxpayers. meanwhile, table 6 contains average values of each item in table 5. the calculations of average values are divided into two periods: before and after the implementation of the last three amnesties, except for tax amnesty 2022, which only contains data for the before period due to unavailable data. non-effective taxpayers are basically a group of taxpayers who are exempted from the obligation of filing annual income tax returns and are usually not monitored by the directorate general of taxes (dgt). this condition usually arises when taxpayers earn income below the taxable threshold, do not submit tax returns for two consecutive years, or cannot be located by the dgt. this group contradicts the increasing number of registered taxpayers, indicating that the actual increase in taxpayers cannot be accurately represented by that number. instead, it is better reflected by the increase in effective taxpayers, who actively fulfill their tax obligations. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 397 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in terms of the number of registered taxpayers, the indonesian government has succeeded in rapid multiplication over a span of twenty years. the highest increase was observed from 2020 to 2021, with an astonishing number of 16.50.141 in just one year. this additional number did not come from the implementation of the tax amnesty conducted in 2022, which suggests that the remarkable surge was likely triggered by government tax incentives during the pandemic, which "forced" people to register as taxpayers in order to benefit from the incentives. on the other hand, there is a significant number of non-effective taxpayers each year. despite the staggering increase in registered taxpayers, the number of non-effective taxpayers also rocketed in 2021, with an additional 16.510.350 taxpayers. this constant increase has led to an alarming number of non-effective taxpayers, reaching 47.348.988 in 2021. this group of taxpayers does not contribute to formal and material tax compliance. as a result, there has been negligible growth in the number of effective taxpayers between 2011 and 2021, with a notable increase occurring only in 2016 when the tax amnesty was implemented. unlike the number of registered taxpayer as well as non-effective taxpayers, the number of effective taxpayers relatively fluctuated, especially since 2011. the ups and downs of effective taxpayers are relatively small, except in 2016, when significant increase of 2.005.878 taxpayers was observed compared to 2015. the highest number of effective taxpayers was also recorded in 2016, reaching 20.165.718 but it collapsed to 16.598.887 taxpayers in 2017, representing a decrease of around 17,69% from 2016. according to table 6, it is perceived at a glance that three tax amnesties improved the quantity of registered and effective taxpayers based on the average numbers, before and after the programmes took place. although, as aforementioned, the average number of non-effective tax was also increased. however, the average number of non-effective taxpayers also increased. upon examining the detailed figures for each year, it can be argued that the only amnesty that significantly contributed to the increase in registered and effective taxpayers was the tax amnesty in 2008. the additional taxpayers in other years were not affected by the amnesties but by other uninvestigated variables, as demonstrated by the highest increase in 2021 as discussed earlier. this view is supported by the fact that just after the implementation of the tax amnesty in 2016, the number of effective taxpayers. from the perspective of effective taxpayers increase, it can be inferred that the last three amnesties do not contribute significantly to the increase. only the amnesty in 2008 has quite significant impact to the increase along with other uninvestigated variables. overall, the filing of annual tax returns has shown steady growth, although there have been some anomalies. the tax authority experienced three periods of negative growth in the quantity of annual tax returns filed: -12,88% in 2007, -1,01% in 2012, and -1,70% in 2017. on the other hand, there were three remarkable periods of growth: 158,03% in 2009, 88,37% in 2008, and 51,53% in 2010. considering the successful implementation of the tax amnesty in 2008, it is plausible to attribute these successes to the effect of the tax amnesty or sunset policy. however, this finding contradicts the previous fact that during the amnesty, there was a slight decline in the quantity of annual tax returns filed in 2017. this suggests that tax amnesty may be harmful to the level of compliance, especially if there is an expectation of repeated tax amnesty. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 398 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6 also shows that, based on the average number of growths in annual tax returns filed and the ratio of annual tax returns filed to registered taxpayers, the tax amnesty in 2008 can be viewed as successful in improving formal compliance. after the tax amnesty in 2008, the average increase in effective taxpayers and annual tax returns filed significantly improved, from 10.03% and 3.23% to 12.55% and 26.28%, respectively. on the contrary, when the tax amnesty was repeated in 2016 to 2017, it had a negative impact on formal compliance. this is evident from the sharp decline in the average percentage increase of effective taxpayers and annual tax returns filed after the tax amnesty in 2016 to 2017, from 16,82% and 26,52% to only 1,20% and 6,55%, respectively. moreover, the average percentage increase in annual tax returns filed after the tax amnesty in 2016 was even lower than the average before the tax amnesty in 2022. 3.2. material compliance 3.2.1. descriptive analysis material compliance refers to a level compliance relating to payment of tax liabilities. from my perspective, material compliance is the essence of tax compliance because it is the most burdensome obligation for taxpayers and the ultimate goal of tax imposition. tax payment can be particularly burdensome for taxpayers as it requires them to sacrifice a portion of their income or assets to fulfil this obligation. if taxpayers have already calculated their tax liabilities based on the law, there is little reason for them to ignore their formal compliance obligation. table 7. tax revenue and income tax revenue 2002 to 2022 (in billion rupiah) year income tax revenue (itr) income tax revenue – tax amnesty (itrta) δ itr (%) δ itrta (%) itr ÷ et δ itr ÷ et (%) 2002 101.873,50 101.873,50 n/a n/a 0,0366246 n/a 2003 115.015,60 115.015,60 12,90 12,90 0,0365623 -0,17 2004 134.903,80 134.903,80 17,29 17,29 0,0382288 4,56 2005 175.379,70 175.379,70 30,00 30,00 0,0451616 18,14 2006 208.833,99 208.833,99 19,08 19,08 0,0511405 13,24 2007 238.739,97 238.739,97 14,32 14,32 0,0533136 4,25 2008 327.498,00 321.938,00 37,18 34,85 0,0483303 -9,35 2009 317.615,00 315.715,00 -3,02 -1,93 0,0305705 -36,75 2010 357.045,00 357.045,00 12,41 13,09 0,0253189 -17,18 2011 431.122,00 431.122,00 20,75 20,75 0,0243650 -3,77 2012 465.069,60 465.069,60 7,87 7,87 0,0263357 8,09 2013 506.442,80 506.442,80 8,90 8,90 0,0285614 8,45 2014 546.180,90 546.180,90 7,85 7,85 0,0297519 4,17 2015 602.308,13 602.308,13 10,28 10,28 0,0331670 11,48 2016 666.212,40 562.555,04 10,61 -6,60 0,0330369 -0,39 2017 646.793,50 635.768,32 -2,91 13,01 0,0389661 17,95 2018 749.977,00 749.977,00 15,95 17,96 0,0424843 9,03 https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 399 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2019 772.265,70 772.265,70 2,97 2,97 0,0421205 -0,86 2020 594.033,33 594.033,33 -23,08 -23,08 0,0312537 -25,80 2021 696.676,60 696.676,60 17,28 17,28 0,0366622 17,31 2022 895.101,00 833.861,93 28,48 19,69 n/a n/a source: annual report directorate general of taxes 2007-2021 & central bureau of statistics (all figures using indonesian format) table 8. processed data of tax revenue and income tax revenue 2002 – 2022 description tax amnesty 2008 tax amnesty 2016 tax amnesty 2022 2002-2007 2008-2022 2002-2015 2016-2022 2002-2021 2022 𝒙 itr 162.457,76 571.622,73 323.430,57 717.294,22 432.699,33 895.101,00 𝒙 itr-ta 162.457,76 559.397,29 322.897,71 692.162,56 426.592,20 833.861,93 𝒙 δ itr (%) 18,72 10,10 15,06 7,04 11,40 28,48 𝒙 itr ÷ et 0,0435052 0,0313950 0,0362451 0,0320748 0,0365978 n/a 𝒙 δ itr ÷ et 8,00 -7,84 0,40 -11,82 1,18 n/a source: author’s calculation (all figures using indonesian format) i distinguished the term of income tax revenue into two terms which are income tax revenue with tax amnesty (itr) and income tax revenue without tax amnesty (itr-ta). the reason is to compare the results based on both concepts in order to conclude real impact of the amnesties to the revenue. besides, tax amnesty revenue in indonesia is considered as part of income tax revenue in the respective year. therefore, table 7 shows amount of income tax revenue and income tax revenue without amnesty revenue as a comparison. table 7 also contains income tax revenue per effective taxpayers and growth of the revenues. whereas, table 8 depicts the average values of each component in table 7 pre and post amnesty. table 7 shows that there are three periods experienced negative growth of itr which are -3,02% in 2009, -2,91% in 2017, and -23,08% in 2020. meanwhile, the negative growth of itr-ta was experienced in 2009, 2016, and 2020 account for -1,93%, -6,60%, and -23,08% respectively. surprisingly, 2009 and 2017 are the years when tax amnesties were being implemented. this fact aligns with the findings of alm and beck (1993) who noted that a decline in compliance can occur immediately after the amnesty takes place or in subsequent years. meanwhile, decline in 2020 happened due to covid-19 pandemic. the highest increase of itr as well as itr-ta, in terms of amount occurred in 2022, reaching almost 200 trillion rupiah. however, this remarkable increase did not come only from the amnesty but also from the soaring prices of some commodities and the implementation of other policies (ministry of finance, 2022). although, in terms of growth percentage, the highest growth occurred in 2008 when the third amnesty took place. although the trend of itr is upward, when we divide the revenue by the number of effective taxpayers as a rough illustration of income tax paid by each taxpayer, the results fluctuate significantly each year. some studies have found that tax amnesties adversely affect tax compliance levels in the future, and this study confirms those findings (alm et al., 1990) (alm & beck, 1993) (sanchez villalba, 2017). according to table 8, the average income tax paid by each taxpayer https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 400 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before tax amnesties in both 2008 and 2016 is higher than after amnesties. the average growth of income tax per taxpayer also shows a similar trend, with higher growth rates observed before amnesties compared to after amnesties. in fact, the average growth rates after amnesties in 2008 and 2016 are recorded as negative. overall, income tax revenue with amnesty (itr) and income tax revenue without amnesty (itrta) has shown that tax amnesties indeed contribute in short-term run revenue. however, the negative impact of tax amnesties on the compliance level has been proved immediately after the programme took place. this fact is based on the amount of itr and itr-ta in 2009, 2016, 2017, and 2020. the negative impact is also suspected to exist long after the amnesty. one of the pieces of evidence is that when the amnesty was repeated in 2022, participants still showed interest, and the amount collected through the program was still significant. in an ideal condition, when most taxpayers have already complied, the amnesty would not collect a huge amount of revenue because taxpayers would not be interested. furthermore, the amount of income tax revenue per effective taxpayer each year also supports that assumption, because until 2022, the numbers are very fluctuating and the highest amount was recorded in 2007 at 0,0533136 billion rupiah and followed in 2006 at 0,0511405 billion rupiah. 3.2.2. projection result in this study, the projection results are compared between income tax revenue with (itr) and without amnesties revenue (itr-ta) in order to draw conclusions regarding the effect of amnesties on material compliance. the first step involves determining whether the data is stationary and, if not, determining the order of differencing. from the graph plot, it is obvious that the data is not stationary and it is confirmed with the same results of augmented dickey-fuller (adf) test of both data as follows: table 9. adf test of itr and itr-ta description type 1: no drift no tre nd type 2: with drift no tre nd type 3: with drift and trend itr lag adf p.value [1,] 0 2.12 0.989 [2,] 1 1.87 0.981 [3,] 2 2.97 0.990 lag adf p.value [1,] 0 -0.142 0.931 [2,] 1 -0.258 0.915 [3,] 2 -1.117 0.642 lag adf p.value [1,] 0 -3.354 0.0841 [2,] 1 -4.249 0.0146 [3,] 2 -0.621 0.9652 itr-ta lag adf p.value [1,] 0 -0.2756 0.556 [2,] 1 -0.0573 0.619 [3,] 2 0.2630 0.711 lag adf p.value [1,] 0 -3.55 0.0171 [2,] 1 -3.37 0.0234 [3,] 2 -2.45 0.1682 lag adf p.value [1,] 0 -3.49 0.0653 [2,] 1 -3.22 0.1080 [3,] 2 -2.27 0.4511 source: rstudio calculation from the table, the results cannot reject null hypothesis that the data is non-stationary because pvalue greater than 0.05. therefore, the data should be differenced to make it stationary. to determine differencing number, again the adf test is applied in rstudio and the results are the second order differencing for income tax revenue data (itr) and the first order for income tax revenue without amnesties revenues (itr-ta). https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 401 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 10. adf test of itr and itr-ta after differencing description type 1: no drift no tre nd type 2: with drift no tre nd type 3: with drift and trend itr (2nd diff) lag adf p.value [1,] 0 -2.54 0.014 [2,] 1 -4.05 0.010 [3,] 2 -2.77 0.010 lag adf p.value [1,] 0 -2.40 0.1860 [2,] 1 -3.55 0.0173 [3,] 2 -14.31 0.0100 lag adf p.value [1,] 0 -2.63 0.324 [2,] 1 -2.78 0.268 [3,] 2 -9.93 0.010 itr-ta (1st diff) lag adf p.value [1,] 0 -5.78 0.01 [2,] 1 -5.21 0.01 [3,] 2 -3.13 0.01 lag adf p.value [1,] 0 -5.66 0.0100 [2,] 1 -5.13 0.0100 [3,] 2 -3.05 0.0455 lag adf p.value [1,] 0 -5.57 0.010 [2,] 1 -5.03 0.010 [3,] 2 -2.95 0.204 source: rstudio calculation after testing and determining the arima model based on the differencing results, the best model for itr is (0,2,1) and for itr-ta is (2,1,0). the results of standard normal distribution test (ztest), ljung-box test, and time series diagnostics of the residuals for both models are as follows: table 11. z-test of arima models description results of z-test coefficients arima (0,2,1) for itr estimate std. error z value pr(>|z|) ma1 -0.99999 0.14761 -6.7744 1.249e-11 *** -- signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 arima (2,1,0) for itrta estimate std. error z value pr(>|z|) ar1 -0.41619 0.19978 -2.0832 0.03723 * ar2 -0.41275 0.19689 -2.0963 0.03606 * -- signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 source: rstudio calculation from the results, it is evident that the coefficient of ma1, with an estimated value of -1.00000 in arima (0,2,1), is statistically significant at a significance level of 0.05. therefore, there is evidence to reject the null hypothesis. similarly, in arima (2,1,0), the coefficient of ar1 and ar2 with estimated values of -0.41619 and -0.41275, presents a strong argument to reject the null hypothesis. table 12. ljung-box test of arima models description results arima (0,2,1) for itr x-squared = 8.4672, df = 5, p-value = 0.1323 arima (2,1,0) for itr-ta x-squared = 0.66901, df = 5, p-value = 0.9846 source: rstudio calculation https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 402 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. tsdiag results arima (0,2,1) arima (2,1,0) source: rstudio from the results of time series diagnostics and ljung-box test for both models, it is clear that the models can be used to generate projection or prediction values. the p-value of the model which are 0.1323 for arima (0,2,1) and 0.9846 for arima (2,1,0) suggest that there is no strong evidence to reject the null hypothesis, indicating that the model's fit to the data is reasonable. moreover, the residual correlogram also shows that the model fit to be applied. the final step is to predict the values of itr as well as itr-ta for the next 20 years (2023-2042). table 13. prediction values of itr and itr-ta 2023 – 2042 (in billion rupiah) year itr itr-ta pred lo 95 hi 95 pred lo 95 hi 95 2023 934.762 794.517 1.075.008 727.540 430.513 1.024.566 2024 974.424 771.419 1.177.428 672.626 328.686 1.016.567 2025 1.014.085 759.869 1.268.302 682.676 323.856 1.041.496 2026 1.053.747 753.889 1.353.604 701.159 298.416 1.103.902 2027 1.093.408 751.244 1.435.572 689.319 248.710 1.129.928 2028 1.133.069 750.825 1.515.314 686.618 222.082 1.151.153 2029 1.172.731 751.994 1.593.467 692.629 200.649 1.184.608 2030 1.212.392 754.352 1.670.432 691.242 171.092 1.211.391 2031 1.252.053 757.630 1.746.477 689.338 145.172 1.233.504 2032 1.291.715 761.637 1.821.793 690.703 123.278 1.258.128 2033 1.331.376 766.236 1.896.517 690.921 100.239 1.281.603 2034 1.371.038 771.323 1.970.752 690.267 77.678 1.302.855 2035 1.410.699 776.818 2.044.580 690.449 56.874 1.324.024 2036 1.450.360 782.658 2.118.062 690.643 36.509 1.344.777 https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 403 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2037 1.490.022 788.794 2.191.249 690.487 16.457 1.364.518 2038 1.529.683 795.185 2.264.181 690.472 -2.803 1.383.747 2039 1.569.345 801.798 2.336.891 690.543 -21.504 1.402.589 2040 1.609.006 808.606 2.409.406 690.519 -39.829 1.420.868 2041 1.648.667 815.584 2.481.750 690.500 -57.679 1.438.679 2042 1.688.329 822.715 2.553.942 690.518 -75.082 1.456.117 source: rstudio figure 2. projection graph projection of itr projection of itr-ta source: rstudio based on the information presented in table 13 and figure 2, we can conclude that the itr-ta for the next twenty years is expected to level off, while the itr is projected to increase. these results suggest that tax amnesties may not play a significant role in the future compliance and even might be harmful for future voluntary compliance of taxpayers, these findings are consistent with previous research conducted by alm and beck (1993)as well as villalba(2017). they also align with the earlier discussion in the descriptive analysis, which indicated a downward trend in the average growth of income tax per taxpayer following the tax amnesties in 2008 and 2016. moreover, the increases of itr in the subsequent years after amnesties are likely influenced by other variables such as economic growth, commodities prices, or other policies as discussed earlier. however, it is still possible that amnesties could have a more positive impact on compliance if the government demonstrates that the amnesty will not be repeated in the near future, the tax administration effectively detects tax avoidance, and stricter and consistent punishment for such avoidance is applied. https://www.ilomata.org/index.php/ijtc repeated tax amnesties in indonesia: an evaluation of tax compliance indradi 404 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the indonesian experience, tax amnesty has proven to be an effective tool in generating immediate revenue needed by the government. out of the five amnesties implemented, almost all of them are considered successful from a short-run perspective. the only exception is the amnesty in 1984, which was not as effective as other amnesties in collecting the targeted additional revenue, although it still managed to raise some additional revenue for the government. nevertheless, from perspective of improving tax compliance in medium to long-term, tax amnesties may have an adverse impact on this objective. based on the discussion, both in terms of formal compliance and material compliance, tax amnesties are generally considered to make a minimal contribution to the overall level of compliance. in fact, they are often seen as playing a significant role in reducing voluntary compliance among taxpayers. the projection results of both itr and itr-ta support this argument. the projection of future itr-ta, which represents the pure amount of income tax revenue, indicates that tax amnesties could be detrimental to the future growth of income tax revenue by causing it to level off. these findings are not surprising, as they align with previous research findings. furthermore, the results indicate a consistent pattern in taxpayers' behaviour towards tax amnesty. they are more likely to comply when they do not expect a future amnesty to be repeated. in some cases, taxpayers may plan or engage in avoidance during the amnesty period, with the expectation of avoiding detection and punishment until the next amnesty. this observation is supported by the fact that in 2009 and 2016, the years when tax amnesties took place, the revenue experienced negative growth. if the government decides to implement another amnesty in the future, it is crucial for them to carefully consider and mitigate the potential impact or risks to the level of tax compliance. they need to conduct a cost-benefit evaluation of the amnesty, weighing the advantages of the immediate "fresh money" obtained through the amnesty against the potential decline in future tax compliance. in short, the key question is whether the immediate financial gains from the amnesty outweigh the potential negative impact on future tax compliance. this evaluation should take into account various factors such as the magnitude of the fresh money obtained, the effectiveness of 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(2018, november 7). pengampunan pajak masa sukarno. historia.id. https://historia.id/ekonomi/articles/pengampunan-pajak-masa-sukarno-p7j54/page/1 villalba, s. (2017). on the effects of repeated tax amnesties. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 236-249 236| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc covid-19 budget refocusing: evidence from indonesia wulan suci rachmadani1, djoko suhardjanto2, doddy setiawan3, samsul rosadi4 universitas negeri semarang, indonesia1 universitas sebelas maret, indonesia2,3 uin raden mas said surakarta, indonesia4 correspondent: wulansuci1986@mail.unnes.ac.id1, suhardjanto04@yahoo.com2 doddy.setiawan@gmail.com3, samsul.rosadi@gmail.com4 received : june 1, 2022 accepted : july 10, 2022 published : july 31, 2022 citation: rachmadani, w. s., suhardjanto, d., setiawan, d., rosadi, s. (2022). covid-19 budget refocusing: evidence from indonesia. ilomata international journal of tax and accounting, 3(3), 236-249 https://doi.org/10.52728/ijtc.v4i1.434 abstract: this study aims to know the factors that influence regional government budget re-focusing in indonesia because of covid-19. this study uses regression analysis with the samples of 119 regional governments in java. java is one of the islands in indonesia with the most significant population. it shows that the rate of patient recovery and economic impact influence the re-focusing regional government in indonesia. the implications of covid-19 push the indonesia government to re-focus rebudgeting. this study contributes to re-budgeting literature or regional government re-focusing in handling the covid-19 impact in indonesia. keywords: treatment rate, recovery rate, death rate, health expenditure, social expenditure, economic impact, refocusing, regional government. this is an open access article under the cc-by 4.0 license. introduction a budget is a statement of work estimation that will be achieved in a certain period, and it is stated in financial measurement (mardiasmo, 2018). the budget has a central role in a public sectoral organization. a country's most income will be managed and allocated in a general budget (moretti, 2021). specifically, the budget has become a process of deciding on expenditure, restricting expenditure, and preventing a government's exceeding cost. in a broader sense, the budget is a managerial responsibility that has function and accountability externally (annesi et al., 2015). there are many factors cause the government cannot predict the budget. the examples are annual perspective, problems in forecasting, and uncertain environment (caiden & wildavsky, 2014). an individual can predict a budget precisely to predict a plan accurately (duncan, 1972). in 2020, a dangerous virus appeared. it effectively contributes to the massive loss and socialeconomic panic. the negative effect occurs in health and socio-economic as it stopped the services business, retail, and industries. then, it impacts the unemployment increase significantly. (ceylan et al., 2020; dzigbede & pathak, 2020; andrew et al., 2020; maher et al., 2020). the crisis occurs in india because covid-19 motivates the government to allocate macroeconomic stimulus by issuing a policy that leads to regional financial stability such as monetized government assets. it is an effort for more effective restructuring (goyal, 2020). all the world countries have issued many policies related to handling covid-19, such as public health management and economic mailto:wulansuci1986@mail.unnes.ac.id mailto:suhardjanto04@yahoo.com mailto:doddy.setiawan@gmail.com mailto:samsul.rosadi@gmail.com https://doi.org/10.52728/ijtc.v4i1.434 covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 237 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc risk prevention. temporary policies become quick steps to face the impacts of covid-19. a budget burden to finance health contributes significantly to africa's worst recession (ozili, 2020). uncertain situations because of covid-19 triggers many countries have policies to reconstruct the budget and stimulate monetary policies and implement fiscal policies (ozili, 2020); andrew et al. (2020); maher et al. (2020); vakulenko et al. (2020). the pandemic of covid-19 enhances the indonesian government to issue a policy on rebudgeting by re-focusing the regional government budget in indonesia. the re-focusing starts after presidential instruction rate 4, the year 2000 regarding re-focusing of activities, reallocation of funding, and procurement of goods and services to accelerate the handling of coronavirus disease (covid-19). paddock et al. (1980) argued that re-focusing enables the manager to supervise and make a better decision when a company faces a difficult or critical situation. it occurs in a government too. the government can implement the re-focusing concept to guarantee the stability of state finance in a recession situation. the re-focusing is expected to be an alternative to minimize the economic recession to achieve national financial stability (junaidi et al., 2020). global economic shocks because of a crisis that impacts broad socio-economic such as covid-19 trigger the re-focusing budget. based on the ministry of home affairs data, the budget re-focusing to handle covid-19 in indonesia per july 2020 is allocated for three main targets, health, social safety net, and economic impact. generally, the following graph illustrates the budget allocation. picture 1. budget allocation to handle covid-19 in 2020 in indonesia graph 1: the budget allocation to handle covid-19 in 2020 in indonesia re-focusing, the regional government, encourages the regional government to carry out do and regional expenditure budget, fy 2020 to handle covid-19. it is in line with the new provision decided in the joint decree of the minister of home affairs and minister of finance rate 119/2813 / sj and 117 / kmk.07 / 2020 and minister of finance regulation rate 35/pmk.07/2020. health social economy province 11.355.502.700.184,70 15.728.998.613.715,70 9.463.985.519.176,01 regency 14.560.053.274.121,80 9.510.049.096.199,10 5.916.482.440.923,77 city 3.276.193.854.237,41 3.234.227.697.371,27 1.301.965.965.877,76 2.000.000.000.000,00 4.000.000.000.000,00 6.000.000.000.000,00 8.000.000.000.000,00 10.000.000.000.000,00 12.000.000.000.000,00 14.000.000.000.000,00 16.000.000.000.000,00 18.000.000.000.000,00 a llo ca ti o n ( r p ) graph of the 2020 covid-19 handling budget allocation province regency city covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 238 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the adjustment of the regional expenditure budget is stated in the adjustment report of the regional expenditure budget. a problem in the re-focusing budget implementation is that many regional governments have not reported budget re-focusing. they are provinces of jambi, bangka belitung, south kalimantan, north kalimantan, south sulawesi, bali, west nusa tenggara. then, 133 districts or cities have not allocated their budget to handle economic impacts because of covid-19. the regional governments that have not reported the budget refocusing to handle covid-19 based on pmk rate. 35/pmk.07/2020, will get a penalty, a postpone of dau, and, or their dbh. the study on budgeting was conducted by dougherty et al., (2003). they investigated a rebudgeting process in 15 cities located in west virginia. they argue that significant differences between original budgets and revised budgets. study of re-budgeting in 91 cities in the usa, proposed that the re-budgeting occurred because of the organizational needs and environmental pressure (raudla & douglas, 2022). that phenomena are somewhat different from the rebudgeting because of politics during the pre-general election. the differences are budget balance, total expenditure, investment expenditure, and administrative expenditure including donations, social assistance, and financial aid spending that significantly, affect budgeting (rakhman, 2019; setiawan & rizkiah, 2017; sjahrir et al., 2013). the re-budgeting study by using policies on re-focusing the regional government in indonesia contributes to budget literature and primarily to research on budget re-focusing because of covid-19 impacts. the investigations on the budget re-focusing are scarcely revealed. then, the economic effects because of a pandemic also come up in a country. this study discusses the uniqueness of indonesia's regional government policies in handling covid-19 by implementing budget re-focusing. review of literature and hypotheses development 1.1 re-budgeting a budget is dynamic. it should give an ability to manage unpredictable things, but it will not neglect or sacrifice control and accountability in the budget during pra execution . budgeting is a relationship between recurring expenditure and plans to achieve goals. the process involves three functions in the budgeting system; planning, activity management, and expenditure controlling. an example of budget implementation is that the stakeholders can develop budgets flexibly to effectively and efficiently achieve their goals (dougherty et al., (2003) the budget is the government's tool to carry out their duties, concrete and integrative plans, and commitment, issue, and implement their policies (forrester & mullins, 1992). in the process of developing the budget, re-budgeting is expected because of some essential factors. (forrester & mullins, 1992). dougherty et al., (2003) reveals that statistically significant differences appear in the process of re-budgeting for 15 cities in west virginia. anessi-pessina et al., (2016)spointed out that re-budgeting is a way to cope with social and economic problems. they also informed that politician also implements re-budgeting to increase their electabilities. however, based on a survey on 91 cities in the usa, organizational needs and environmental pressures encourage rebudgeting. cornia et al. (2004) wrote that stakeholders can have the flexibility to develop re-budgeting and re-allocating income when facing an unexpected situation. re-budgeting aims to reach the budget's goals, such as continuity, control, accountability, flexibility, and prediction (besides, rebudgeting is a budgeting process influenced by certain factors from the original budget (rubin, 1990). politics is not the basis of a re-budgeting process in the usa; it is because of management needs and environmental impacts. in other words, the environment can affect a budget in a country as well as covid-19. the fiscal coordination requirements between budget authority in a country, province, and regional area during the covid-19 pandemics become crucial in covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 239 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc developing countries' fiscal management (zhu et al., 2020). it is as well as the covid-19 pandemic that occurs in indonesia; financial accountability is a crucial problem in budget reformation, especially for people exposes to the covid outbreak 19 (lassa, 2020). 1.2 covid-19 impacts and budget refocusing researchers have conducted many research types on covid-19 (ceylan et al. (2020); dzigbede & pathak (2020); andrew et al., 2020; ozili, 2020). the covid-19 pushes the world's countries to have economic shocks, crisis, and fear as they will have recession financial collapse. the countries need a tough and firm leader. planning for the medium and long run should be a balanced strategy to handle the crisis because of covid-19. developing social and economic sectors should prioritize entrepreneurial sectors and create sustainable businesses (nicola et al., 2020). all world governments have various efforts as emergency measures, social restriction, and economic and social assistance to minimize the adverse economic impact (ashraf, 2020). the transmission prevention of covid-19 to cope with health problems significantly impacts the social and financial sectors. it leads to economic recession due to cutting the food chain caused by large-scale social restrictions (aldaco et al., 2020). indonesia's government accelerates the handling of covid-19 by issuing presidential instruction rate 4, the year 2000 regarding re-focusing activities, budget reallocation, and procurement of goods and services for accelerating the handling of covid-19. some points that need to be considered in presidential instruction rate 4, the year 2020 are: 1) prioritizing the use of budget allocation to accelerate the handling of covid-19 (re-focusing activities and budget reallocation concerning the handling of covid-19 at the ministries/ institutions/ government and the operational plan for the acceleration of handling covid-19 determined by the task force for the acceleration of handling covid-19; 2) accelerating the implementation of activities re-focusing and budget reallocation through the budget revision mechanism and immediately proposing a budget revision to the minister of finance; 3) accelerating the goods and services procurement by providing facilities and broad access in line with the law to support the acceleration of handling of covid-19 1.3 hypothesis development. budget is the government's tool to carry out their duties, concrete and integrative plans, and commitment, issue and implement their policies (dobell & ulrich, 2002). in the process of developing the budget, re-budgeting is common. it becomes the most critical factor in government (forrester & mullins, 1992). fiscal coordination between budgetary authorities at the central, provincial, and local governments during the covid-19 pandemic is necessary for financial management systems in many developing countries (maher et al., 2020). based on the presidential instruction rate. 4, the year 2020, re-focusing will prioritize budget allocations to accelerate the handling of covid-19. budgeting always has the impact of significant changes, revisions during the fiscal year due to unexpected changes (cornia et al., 2004). a budget policy should act as a counter-cyclical or against the direction of the cycle (hyman, 2010; mankiw et al., 2010; thurmaier & willoughby, 2014). counter-cyclical is very important to analyze then the effectiveness of changes in the expenditure structure of the government budget (lassa, 2020). shantz (2010) stated that health care due to sars in 2020 uses the budget from the provincial government and the federal government provides most of the funds. shantz, (2010) illustrated that financing for covid care patients is a full concern in the bosnian government, and the budget for handling covid and health gets the largest portion of the budget in the bosnian government. covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 240 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc battineni et al., (2020) stated that the data of covid-19 epidemics in the usa, brazil, india, and russia show the management of the health care aspect for covid-19 becomes the full concern of the local government so that patient care can be managed well following the allocated funds. toms et al. (2020) wrote that the health department in the uk publishes service guidelines by the handling of covid-19 patients care. many studies confirm that patient care becomes the main focus in dealing with the impact of a pandemic worldwide. the task force's public communication team to accelerate the handling of covid-19 in indonesia states that the treatment of covid-19 patients is more relatively expensive than prevention efforts (hakim, 2020). the high cost of caring for covid-19 patients, the government can certainly allocate with the high cost of caring for covid-19 patients, the government should allocate certainly budget re-focusing for covid-19 on the aspect of caring for covid-19 patients. the public budget should be able to control virus transmission levels and ensure overall health care so that the financial authorities can develop this aspect (lassa, 2020). the government expects that a refocusing effort can achieve targets correctly and flexibly. then, it will also meet the budget goals (cornia et al., 2004). h1: treatment rate influence regional government re-focusing positively budgeting and re-budgeting are inter-connected (anessi-pessina et al., 2020). addition and shortcomings in budgeting and budget revision are critical actions to a budget (robbins & baumol, 2014).according to lassa (2020), the positive cases of covid-19 was getting increased and increased. on august 9th, 2020, it reached 125,396 cases, 5,723 patients died, and 80,592 patients could be recovered. meanwhile, the reproductive index of transmission at a certain time (rt), especially in dki jakarta, was around 1.15 on august 5th, 2020. lassa (2020) revealed that even though the covid-19 cases increase, but many people are eager to open immediately the economic activity because the financial crisis reaches an alarming stage. knowing the relatively high impact of recovery, the government issues an economic policy with the term new normal. during the covid-19 pandemic, many people are exposed to covid-19, but the recovery rate has increased significantly (covid-19 handling group and economic recovery, 2020). the more the rate of recovered, the lower the re-focusing rate, this is because the budget nature is flexible. the essential characteristic of the budget is flexible so that the government can revise it based on the priority scale of changes (dougherty et al., 2003; forrester & mullins, 1992). the unexpected situation usually requires changes. h2: recovery rate influence regional government re-focusing negatively anessi-pessina et al. (2020) viewed that the variables of politics, organizational nature, financial condition, and socio-economic environment influence the re-budgeting. covid-19 is a virus that is detrimental to health and triggers widespread socio-economic panic (ceylan et al. (2020); dzigbede & pathak (2020); andrew et al., 2020; maher et al., 2020; ozili, 2020). gurumurthy & mukherjee (2020) argued that the bass calibration model can predict the death rate due to covid-19. this model can predict the death rate effectively and accurately due to covid-19 in the usa and west virginia. gurumurthy & mukherjee (2020) contributed to the death prediction. they suggest the government estimate the cost of financing the health sector and reduce the severe impacts on social and economic aspects alderman & harjoto (2020) argued that demographic characteristics such as the percentage of homeless people, family members, the individual percentage with insufficient health insurance, income inequality, unemployment rate, and gender significantly affect deaths due to covid-19. alderman & harjoto (2020) research has implications for the government regarding policies and efforts to decide effective handling of covid-19. covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 241 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc finally, the indonesian government issues a policy after witnessing virus transmission spread with a significant death rate lassa (2020). government regulations in lieu of laws number 1/2020 is a state financial policy and financial system stability to handle the covid-19 pandemics. this policy is the beginning of a series of procedures in various sectors related to the handling of covid-19 in indonesia. the death rate rises significantly in indonesia as on june 19th, 2020, dki jakarta reached 578 people who died due to covid-19 (covid.go.id). hence, the government carries out budget re-focusing as soon as possible. handling or overcoming the covid impact is regulated in statutory regulations, law rate 2, the year 2020, and presidential decree rate 7, the year 2020. those laws are to process the acceleration of re-focusing so that the death rate is decreasing and the allocation of handling the covid can meet the target. h3: death rate influences regional government re-focusing positively. all world's countries have implemented policies on health management. the nigerian government implements health management that has a climatic impact (ozili, 2020). the russian government's effort is to provide medical and health staff (vakulenko et al., 2020). wu & lin (2020) pointed out china government has re-budgeting to subsidy the drug procurement for covid-19 and allocate additional resources in the medical sector during the covid-19 pandemic. wu & lin (2020) stated that the chinese government spending is mostly on the health sector. the government provides free covid-19 treatment, investments in emergency hospitals, and preparations for an individual during a quarantine. according to moving data from the ministry of home affairs (2020) data as of july 7th, the government has allocated health expenditure of 39.26%. the allocation basis is on the joint decree of the minister of home affairs rate 1119/2813/sj and the ministry of finance rate kmk 177/kmk.07/2020. the regulation states that regional budget re-focusing results are to finance the spending in health sectors prevent the covid transmission and handle covid-19 pandemics. the examples are personal protective equipment (ppe) procurement for medical personnel, facilities, and service equipment for the community and covid-19 patients' handling. h4: health expenditure influence regional government re-focusing positively the lockdown phenomenon will trigger a panic buying in society, leading to the disruption of goods and services distribution, due to overconsumption or excessive shopping to store foodstuffs and daily necessities. this phenomenon is not in line with the restriction of buying and selling activities. lockdown has the potential to generate social conflicts related to the supply society's needs such as food, medicine, and so on. the disruption of society's income and hampered goods supply leads to chaos and panic (beirne et al., 2020). wu & lin (2020) wrote that the chinese government has executed re-budgeting to effectively and efficiently handle the covid-19 pandemic impacts that effectively and efficiently cover social stability and economic recovery. they also added that the chinese government strives to maintain socio-economic stability by providing welfare to the poor and individuals affected by covid-19. budget re-focusing in indonesia focuses on three main targets, spending on health, providing social safety nets, and handling economic impacts (ministry of home affairs, 2020). the government expects that the allocation of re-focusing can overcome the social problems that come up due to covid-19. h5: social expenditure influences regional government re-focusing positively. the negative effect of covid-19 is a high-speed transmission of the virus and the socioeconomy problems such as the stagnation in service businesses, retail, and industries, and the rise of the unemployment rate (ceylan et al., 2020). the crisis because of covid-19 stimulates the macroeconomics sectors. the government should issue policies that lead to financial stability, covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 242 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc such as government asses that are monetized to have effective and efficient restructure (goyal, 2020). the coronavirus impacts the stock market collapse and worsens africa's economic situation (ozili, 2020). wu & lin (2020) found that the chinese government has re-budgeting to handle the covid-19 pandemic impact, maintain social stability, and push an economic recovery on time. wu & lin (2020) viewed that the chinese government tries to sustain socio-economic stability by providing welfare for people with low income, education, pension funds, and housing. wu & lin (2020) stated re-budgeting in china aims to recover the economic impact because of covid-19 by providing assistance for small and medium enterprises and reducing tax costs for all companies in china. the indonesian government's role in handling the covid-19 pandemics supports the health sector and overcoming the economic impacts. based on the ministry of home affairs (2020), data as of july 7th illustrates that the government allocated 22.44% of the fund to handle the economic impact. regional budget re-focusing is an effort to cope with the financial problems for motivating the business world. the government empowers small and medium enterprises and encourages cooperatives to stimulate economic activities (ministry of home affairs, 2020). h6: economic impact influences regional government re-focusing positively. method 1.1 research model this study examines the factors that influence regional government re-focusing due to covid19, such as treatment rate, recovery rate, death rate, health expenditure, social expenditure, and economic impact. the dependent variable is recofusing local government budgets using the refocusing percentage that has been available in the 2020 regional government refocusing budget recapitulation. this calculation is under the research of beirne et al. (2020). the measurement of independent variables is by viewing the daily cases from the beginning of march to june 19th, 2020. the case rate then is compared to the total population or population. the independent variable measurement is in line with the research (beirne et al., 2020). the covid19 patients, treatment rate, recovery rate, the death rate can be accessed in covid19.go.id. regional government refocusing budget recapitulation, the year 2020 gives information on the health and social expenditure and handling of economic impact. the calculation is based on beirne et al. (2020). the following is the model: y = a + b1x1 + b2x2 + b3x3 + b4x4 +b5x5+b6x6+ a = is the regression constant. y is the regional government measured by the re-focusing percentage measured from the 2020 regional government's available data re-focusing budget recapitulation. x1 is the rate of covid19 patient treatments calculated from march 1st to june 19th, 2020. x2 is the rate of covid-19 patient recoveries, calculated from march 1st to june 19th, 2020. x3 is the rate of people who died due to covid-19, counted from march 1st to june 19th, 2020. the x1, x2, and x3 rates can be accessed through the covid.go.id website. x4 is the social expenditure that can be measured through 2020 regional government re-focusing budget recapitulation data. x5 is the social expenditure that can be measured through 2020 local government re-focusing budget recapitulation data. x6 is an economic impact that can be measured through regional government budget re-focusing recapitulation data in 2020. covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 243 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1.2 sample and data the samples were 119 regional governments of districts, cities, and provinces in java island. they involved central java, yogyakarta, banten, dki jakarta, east java, and west java. the java island was chosen as it has the densest population in indonesia. based on the central bureau of statistics (2019), java island had the densest population in 2018. it reached 149 million. the people spread out dominantly in six provinces. then, in 2020 the population was estimated to reach 152 million. java island has 128,297 square kilometers. its population density reaches 1,184 people per square km. then, it can be inferred that java island is the most densely populated island in indonesia in 2020 (mulya, 2020). in this case, people who live in java have a great potential to exposed covid-19 so that java has the most fund allocation and re-budgeting is demanded. this study uses the regional government re-focusing budget recapitulation data obtained from the financial audit board in 2020 and data regarding treatment rate, exposed people rate, death rate, and recovery rate that can be accessed in covid19.go.id as of july 19th, 2020. the simultaneous execution of re-focusing the regional government budget in indonesia was on june 20th, 2020 result and discussion 1.1 descriptive analysis the study variables were treatment rate, recovery rate, death rate health expenditure, social expenditure, and economic impact. table 4.1 illustrates the descriptive statistics table 1. descriptive statistics variables mean deviation standard n treatment 0.0041 0.01018 119 recovery 0.0055 0.00749 119 death 0.0006 0.00147 119 health expenditure 69.3288 94.11937 119 social expenditure 67.9069 117.72294 119 economic impact 36.7520 92.63361 119 source: processsed secondary data, 2021 table 1. illustrated the results of data analysis obtained on 119 variables that affect regional government re-focusing. the table shows that treatment has a mean value of 0.0041 and a standard deviation of 0.01018. the recovery variable has a mean value of 0.0055 and a deviation standard of 0.00749. the death variable has a mean value of 0.0006 and a standard deviation of 0.00147. the health expenditure variable has a mean value of 69.3288 with a standard deviation of 94.11937. the social expenditure has a mean value of 67.9069 with a standard deviation of covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 244 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 117.72294. the economic impact has a mean value of 36.7520 with a standard deviation of 92.63361. 1.2 normality test data the normality test involves the variables of treatment rate, recovery rate, death rate, health expenditure, social expenditure, and economic impact. the following table explains the result of the normality test with one sample kolmogorov smirnov test table 2. normality test data unstandardized residual asymp. sig. (2-tailed) 0.052 source: processsed secondary data, 2021 the result of the normality test on a sample of 119 using the one-sample kolmogorov smirnov test, with a confidence level of 95% and an alpha of 5%, with a significance result of 0.052% is that the data used are normally distributed. 1.3 regresion result table 3 illustrates the results of r square test, simultaneous f test and the t-test (partial) on a sample of 119 consisting of variables of treatment rate, recovery rate, deaths rate, health expenditure, social expenditure, and economic impact. tabel 3. regresion result source: processsed secondary data, 2021 the results of the r square test on a sample of 119 consisting of variables of the number of treatments, number of cures, number of deaths, health spending, social spending and economic impact. these results can be seen in the table 3. the results of the r square test are 0.229; this means that the effect of all x variables simultaneously on y is 22.9%. table 3 shows the simultaneous f test results on a sample of 119 consisting of variables of treatment rate, recovery rate, death rate, health expenditure, social expenditure, and economic model coefficients t sig. (constant) .094 11.192 .000 x1 -.921 -.728 .468 x2 3.159 2.496 .014* x3 7,640 .870 .386 x4 6.760e-5 .845 .400 x5 .000 -1.530 .129 x6 .094 2.693 .008* r square 0.229 prob f 5.544 regression* 0.000 covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 245 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc impact. the significance value test on the f test shows a significant value of 0.000 <0.05, which means that simultaneously all the variables x affect y (regional government re-focusing local). the significance value test on the f test shows a significant value of 0.000 <0.05, which means that simultaneously all the variables x affect y (regional government re-focusing local). the results of the t-test (partial) on a sample of 119 consisting of variables of treatment rate, recovery rate, death rate, health expenditure, social expenditure, and economic impact. the t-test (partial) with a significance level <0.05 shows that the rate of treatments has a significance level of 0.468> 0.05. the treatment rate does not significantly affect regional government re-focusing. the t-test (partial) with a significance level of <0.05, indicates that the recovery rate has a significant level of 0.014 <0.05 so that recoverys rate has a significant effect on regional government re-focusing. the t-test (partial) with a significance level <0.05 shows that the death rate has a significant level of 0.386> 0.05. the death rate does not significantly affect regional government re-focusing. the t-test (partial) with a significance level of <0.05 shows that health expenditure has a significant level of 0.400> 0.05. health expenditure does not significantly affect regional government re-focusing. the t-test (partial) with a significance level of <0.05, shows that social expenditure has a significant level of 0.129> 0.05. social expenditure does not have a significant effect on regional government re-focusing. the t-test (partial) with a significance level of <0.05, indicates that the economic impact has a significance level of 0.008> 0.05 so that the economic impact has a significant effect on regional government. 1.4 discussion the regional government implements regional budget re-focusing as soon as after the publication of presidential instruction rate 4, year 200 regarding re-focusing of activities, budget reallocation, goods, and services to accelerate the handling of covid-19. the measurement of dependent variables is the refocusing regional government budget using the re-focusing percentage that has been available in the 2020 regional government refocusing budget recapitulation. this calculation is in line with the research findings proposed by beirne et al. (2020), while the independent variable measurement is by viewing daily cases from early march to june 19th, 2020. the daily case rate is calculated into a percentage by comparing it with the total population. beirne et al. (2020) proposed this calculation. people can access covid.go.id for data of covid patient rate, treatment rate, recovery rate, and death rate. next, for regional government refocusing budget recapitulation informs health and social expenditure and economic impact. the calculation is in line with the research propose by beirne et al. (2020). the results show that h1, the treatment rate does not influence significantly regional government re-focusing. h2, the recovery rate has a significant effect on regional government re-focusing. h3, death rate does not influence considerably to the regional government refocusing. h4, health expenditure does not affect the regional government re-focusing significantly. h5, social expenditure does not influence regional government re-focusing significantly. h6, economic impact influence regional government re-focusing significantly. health expenditure, care, and mortality rate influence budget re-focusing significantly. this is because the budget items for handling health, care, and mortality are not only from budget refocusing but also from the ministry of health. an example is when one is sick, bpjs as an insurance agency also covers hospital care costs (dewata, 2020). health expenditure allocation focuses more on health sector activities, medical devices procurement, an incentive for medical staff, and vitamin supplement supply (audited financial report, 2020). the budget re-focusing does not focus on treatment rate, death rate, and health expenditure. social expenditure does not have a significant effect on regional government re-focusing. this is due to overlapping aspects between social expenditure and economic impact, and the government executes state expenditure budget re-focusing and relocation. the government can covid-19 budget refocusing: evidence from indonesia rachmadani, suhardjanto, setiawan, and rosadi 246 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc obtain rp 405.1 trillion to handle the effects of the covid-19 outbreak. 27% of the fund or rp 110 trillion is for providing social assistance (seiwald & polzer, 2020). the overlapping fund allocation enhances confusion. the budget between social expenditure and economic impact should be separated. the recovery rate has a significant effect on regional government re-focusing. this finding supports (lassa, 2020). the rate of positive cases in indonesia rises, and as of august 9th, 2020, it has reached 125,396 cases, 5,723 patients died, and 80,952 people are recovered. meanwhile, the reproductive index of transmission at a certain time (rt), especially in dki jakarta, was around 1.15 on august 5th, 2020. even though the covid-19 cases increase, many people are eager to immediately open economic activity because the financial crisis reaches an alarming stage (lassa, 2020). knowing the relatively high impact of recovery, the government issues an economic policy called new normal. during the covid-19 pandemic, many people were exposed to covid-19, but the recovery rate has increased significantly (covid-19 handle group, 2020). the more recovery rate rises, the lower the re-focusing rate, this is because the budget nature is flexible. the basic characteristic of the budget is flexible so that the government can revise it based on a priority scale of changes. the unexpected situation usually requires changes (dougherty et al., 2003; forrester & mullins, 1992). the economic impact also has a significant effect on regional government re-focusing in indonesia. this finding supports the research conducted by wu & lin (2020). they found that the china government has re-budgeting to handle the covid-19 pandemics, maintain socioeconomic stability and economic recovery by providing welfare for the individuals with low income, education, health, pension funds, and housing. they also informed that china implements re-budgeting for economic recovery. then, special supporting for small and medium enterprises and decreasing tax for all companies in china are facilities provided by the china government to handle the covid-19 impacts. conclusion the covid-19 pandemic encourages the indonesian government to have a re-budgeting policy through regional budget re-focusing. the regional government should develop re-focusing after having presidential instruction rate 4, the year 2000 regarding re-focusing activities, budget reallocation, and goods and services procurement to accelerate the covid-19. the study on regional budget re-focusing benefits the government to issue a valid policy on regional budget allocation re-focusing. the finding shows that the recovery rate and economic impact affect the regional budget re-focusing. in contrast, the treatment rate, death rate, health expenditure, and social expenditure do not influence the regional budget re-focusing. this study has limitations in sampling, which is only taken on java island. the suggestion for future research is that researchers should take samples throughout indonesia to generalize the findings accurately. reference aldaco, r., hoehn, d., laso, j., margallo, m., ruiz-salmón, j., cristobal, j., kahhat, r., villanueva-rey, p., bala, a., batlle-bayer, l., fullana-i-palmer, p., irabien, a., & vazquezrowe, i. 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(2020). successful recovery of covid‐19 pneumonia in a renal transplant recipient with long‐term immunosuppression. american journal of transplantation, 20(7), 1859–1863. https://doi.org/10.1111/ajt.15869 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 195-207 195 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district yunita eriyanti pakpahan1, wina theresia br naibaho2 12universitas quality berastagi, indonesia correspondent: yunitaeriyantipakpahan@gmail.com1 received : january 4, 2023 accepted : april 5, 2023 published : april 30, 2023 citation: pakpahan, y, e., naibaho, w, t, br.(2023). implementation of financial accounting standards for small and medium entities in berastagi smes, karo district. ilomata international journal of tax and accounting, 4(2), 195-207. https://doi.org/10.52728/ijtc.v4i2.685 abstract: the awareness of business actors in compiling financial reports for msme business actors is still very low so that it has a negative impact on the sustainability of their businesses. preparation of financial accounting standards for micro, small and medium entities (emkm) which have been compiled to become a reference for msmes to prepare financial reports in a systematic and regular manner. this study aims to determine the application of accounting in small, micro and medium enterprises (msmes) and explain the barriers to business actors in applying accounting. this research is a descriptive qualitative research with data collection conducted through questionnaires and interviews. object this research is msme actors located in berastagi district, karo regency. the data collected were 41 respondents using the purposive sampling technique. the results of the study show that most msme actors do not know what to account for. the obstacle faced by business actors is the lack of socialization or training regarding accounting and sak emkm. the next obstacle is the lack of time to prepare financial reports, the assumption that financial reports are difficult to understand, and the low awareness of business actors to improve the presentation of financial reports by sak emkm. keywords: application of accounting, micro, small and medium enterprises (msmes), emkm accounting standards (sak) this is an open access article under the cc-by 4.0 license. introduction the existence of msmes as one of the supports for the indonesian economy can be taken into account in improving economic balance. evidenced by the survival of msmes against the monetary crisis that hit indonesia in 1998. at that time imported raw materials increased drastically which caused large businesses to lay off workers and go bankrupt. the banking sector also slumped in terms of capital for the industrial sector due to the fluctuating exchange rate of the rupiah against the dollar. in contrast to the small and medium enterprises, most of which survived and did not bear a large burden due to the crisis. msmes have the main key as drivers of sustainable economic growth and job creation (diabate et al., 2019). (molina -garcía et al., 2022) states that interest in https://www.ilomata.org/index.php/ijtc mailto:yunitaeriyantipakpahan@gmail.com https://doi.org/10.52728/ijtc.v4i2.685 implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 196 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc entrepreneurship is currently growing rapidly and unevenly. this further confirms that the importance of msme performance is to strengthen the economy and welfare of the indonesian people (aritonang et al., 2022). innovation, creativity and trust in the team greatly affect the performance of msmes (afriyie et al., 2019; avermaete et al., 2003; chen et al., 2020; indarti, 2012). according to rohmad hadiwijoyo quoted from kompas economy (2021) there are three factors that make msmes able to survive amidst economic crisis conditions. first, in general, msmes produce consumer goods and services that are close to the needs of the community. second, msme actors generally utilize local resources such as human resources, capital, raw materials and equipment. the third factor, in general, msme businesses are not supported from bank loans but from their own funds. capital is the main problem for a business to develop(sisharini et al., 2019). to maintain and develop a business in a better direction, a financial strategy is needed which is an important factor (susanti et al., 2021). msmes that specifically receive guidance from certain agencies are proven to be able to prepare financial position reports, profit and loss reports, and notes on financial statements (ardila et al., 2019). the increase in the number of msmes in karo regency from various sectors is also supported because it is one of the highly developed tourist areas because it is surrounded by the beauty of lake toba. one of them is the management of the homestay business should also make adequate business records (accounting) even if in a simple form, so that the business development and finances of the homestay business can be orderly and accountable so that information about income and costs earned during the current year can be properly recorded, in order to compile business financial reports (ngatemin, 2019). management training related to financial records is one way to improve the quality and quantity of products produced, improve management, and expand marketing networks (prayitno et al., n.d.). in order to help msmes compile their financial reporting needs, the indonesian accounting association ( iai) in 2018 issued micro, small and medium entity financial accounting standards (sak emkm) to increase the transparency and accountability of entity financial reporting while at the same time encouraging the growth of developing msmes in indonesia. thus, msmes can obtain information that is important for the continuity of their business, including information on changes in business owner's capital, information on cash receipts and disbursements, and information on the financial position of the business (anisere-hameed, 2021). in managing finances in smes, good accounting skills are needed by small and medium business entrepreneurs (diana, n.d.). preparation of financial reports based on financial accounting standards can improve the quality of financial reports, which will boost the credibility of the relevant financial reports (mukoffi & sulistiyowati, 2019) however, the thing that has become an obstacle for emkm is that not many emkm are able to carry out records, bookkeeping and even financial reporting. even though the organization of records, bookkeeping and financial reporting is an important thing that needs to be done by every entity, so that the entity can evaluate the entity's performance every year. in addition, entities can also add to their business working capital from bank loans by attaching the entity's financial https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 197 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc statements (nina et al., 2018). there are only a small number of msmes that have managed to achieve extraordinary performance and sustainable growth (sidik, 2012). not having human resources who understand the preparation of financial reports in accordance with financial accounting standards is an obstacle experienced by many business actors (cenamor et al., n.d.; sholikin & setiawan, 2018). to support the implementation of sak emkm, training and assistance is needed for human resources so that they can prepare msme financial reports that must meet sak emkm standards so that it makes it easier to apply for business capital (wahyuni & sutomo, 2021). perceptions of the usefulness of sak emkm vary depending on the needs of business actors which are strongly influenced by the level of education (purwanti et al., n.d.). the low interest of msme actors in compiling financial reports and because of the small scope of the company so that msme actors consider it unnecessary to prepare financial reports are another factor that causes msme actors not to prepare financial reports in accordance with sak emkm entrepreneurs with an accounting background are believed to have a better perception of (barker & noonan, 1996; gumelar et al., 2022; rizky, 2019). sak emkm compared to entrepreneurs with non-accounting educational background. (arda, 2021). the level of information about sak emkm, educational background and educational level of msme entrepreneurs greatly influences the understanding of business owners on sak emkm (adhikara, 2018). on the other hand, msmes are not ready to implement sak emkm and do not understand the importance of issuing sak emkm (zulfikar et al., 2022). most msme business actors only record cash inflows, record sales, record expenses, record salaries, record debts, record purchases, record inventories, and record rents (puspita et al., n.d.). the objective of financial reports is to provide information on the financial position and financial performance of an entity that is useful to a wide range of users in making economic decisions by anyone who is not in a position to request specific financial reports to meet that information need. information on the entity's financial position consists of information about the entity's assets, liabilities and equity at a particular date, and is presented in the statement of financial position (ikatan akuntan indonesia, 2018). msme business actors who consistently implement sak emkm contribute to state revenues by complying with their tax obligations (kristiana et al., n.d.). from the explanation above, the problem of this research is how to apply accounting carried out by msmes in berastagi district and what are the obstacles that hinder the application of accounting to msmes in berastagi district. the purpose of this study was to determine the application of accounting for msmes in berastagi district in accordance with good and correct accounting principles and to find out the obstacles that hinder msmes in berastagi district and to provide solutions for msme actors in applying accounting according to good and correct accounting principles. method https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 198 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this study used descriptive qualitative method. research subjects are people who are asked to provide information about a fact. the research subjects used by researchers were micro, small and medium enterprises (msmes) in berastagi district. the research was conducted using structured direct interviews using an interview guide according to the questions contained in the questionnaire. informants who provide answers to questions are owners or managers of msmes in berastagi district. result and discussion the results of the research on 41 respondents are in accordance with the respondents' personal data on the questionnaire that msme actors have businesses engaged in various types of businesses such as food and beverages, handicrafts, and textiles. the ages of msme actors range from <20 years old to >41 years old and their final education level ranges from elementary school graduates to bachelor degrees. table 1. distribution of respondents' answers no statements criteria frequency percentage(%) 1 knowing accounting and accounting records yes 7 17.1 no 34 82.9 2 creating and collecting proof of transactions yes 8 19.5 no 33 80.5 3 recording sales and purchase transactions yes 7 17.1 no 34 82.9 4 making accounting records in journal form yes 8 19.5 no 33 80.5 5 making ledgers yes 6 14.6 no 35 85.4 6 separating business interests from personal interests yes 8 19.5 no 33 80.5 7 components of financial statements: 1. statement of financial position yes 8 19.5 no 33 80.5 2. income statement yes 9 21.9 no 32 78.1 3. calk yes 8 19.5 no 33 80.5 8 preparation of financial statements using accounting software yes 5 12.2 no 36 87.8 9 purpose of making financial reports: o internal needs o external needs o internal and external requirements 10 5 26 24.4 12.2 63.4 10 knowledge of sak emkm yes 7 17.1 https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 199 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no 34 82.9 11 media for obtaining information about sak emkm: o internet o newsletter/magazine o electronic media o no information from anywhere 11 0 3 27 26.8 0 7.3 65.9 12 obtaining socialization or training regarding sak emkm yes 3 7.3 no 38 92.7 13 understanding the contents of sak emkm yes 6 14.6 no 35 85.4 14 application of accounting in accordance with sak emkm yes 2 4.9 no 39 95.1 15 experiencing difficulties in preparing financial statements yes 35 85.4 no 6 14.6 source: primary data processed, 2023 the following is a discussion of the results of processing the questionnaire data which have been answered by research respondents through the following sub-chapters: knowledge of msme actors regarding accounting and accounting records the results of research on accounting knowledge by respondents showed that the majority of msme actors, namely 82.9% of respondents, did not know the basis of accounting and its recording. through interviews with one of the respondents stated that: "i don't understand accounting because i rarely take accounting training. so just record expenses and income sober." statements from these respondents indicate that the lack of socialization and training in accounting is the main reason why business actors do not have knowledge of accounting and its records. however, there are still a number of msme actors, a total of 17.1% of respondents, who have basic knowledge of accounting and recording. the results of interviews with one of the respondents who understand accounting suggest that: “ ….knowing accounting can help me in keeping daily records of sales and purchases of goods every day..:” this statement shows that basic knowledge of accounting and regular accounting records can assist business actors in managing their finances. they are assisted by employees who understand financial management. the employee's task is to assist business actors in carrying out accounting records for each transaction on a regular basis. knowledge of accounting and accounting records is needed by business actors because it can become the basis for understanding in recording all transactions. this can help business actors in making bookkeeping in a simple way. lack of understanding of accounting and recording by msme actors can cause problems. one of them is that it is difficult to know the current financial condition of the business being managed because there is no definite record of the income and https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 200 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc expenditure of funds for transactions related to the running of the business. when a business actor does not regularly record accounting, it will result in a great deal of financial information being disclosed incorrectly and improperly. bookkeeping activities carried out by smes according to the results of interviews, 80.5% of business actors acknowledged that business actors do not make or collect proof of transactions in their business. business actors who do not make and collect proof of transactions have various reasons such as the lack of time they have to make evidence for all transactions that occur. another reason is that business actors are not careful in storing transaction evidence so that many are lost, and business money is used as personal money to cover daily living expenses. it can be said that the process of bookkeeping activities carried out by msme actors does not apply much, starting from the activities of making and collecting all evidence of buying and selling transactions, up to the stage of making journals and ledgers. only 19.5% who make and collect proof of transactions reveal that it can help them monitor every transaction that occurs every day. making and collecting evidence of transactions that occur can assist business actors in making books. by collecting evidence for every transaction that occurs, business actors can monitor every transaction in their business activities. this can minimize employee and business manager fraud in managing business funds. referring to the activity of recording buying and selling transactions, it can be concluded that the majority of actors, namely 82.9% of respondents, did not make notes on their business by recording all buying and selling transactions. the results of an interview with one of the business actors argued that there was no recording of buying and selling transactions because the person selling was changing msmes who do not keep journals or ledgers think that making journals and ledgers is very complicated. lack of time and accounting knowledge from business actors to do this is also a strong reason. the collection and recording of evidence for all transactions on a regular basis is deemed sufficient to represent financial information on its business. this shows that there are still business actors who do not carry out the accounting cycle properly and correctly. in the opinion of msme actors who have regularly made journals and ledgers, through brief interviews stated that making journals and ledgers facilitates the process of preparing financial reports. even though business actors admit that they still make it not in accordance with existing accounting standards. msme actors who do not keep journals or ledgers think that making journals and ledgers is very complicated. lack of time and accounting knowledge from business actors to do this is also a strong reason. the collection and recording of evidence for all transactions on a regular basis is deemed sufficient to represent financial information on its business. this shows that there are still business actors who do not carry out the accounting cycle properly and correctly. business actors who do not separate their funds assume that the money obtained from business units is part of their funds. business actors assume that there is no difference between personal money and money for business results. this can lead to errors in the classification of funds which are the result of business with personal money, so that it will be difficult to know the amount of profit or loss experienced by the business. https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 201 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc some of the respondents who carried out the separation stated that in order to avoid financial recording errors, especially for managed businesses, business actors can clearly know the profits, income and expenses of the business. ownership of the financial statements presented by msme actors financial reports are the basis for decision-making and contain important financial information. based on table 6 it can be said that business actors have not presented their financial reports in full as required in sak emkm. according to the results of the interviews, the profit and loss report can make it easier for business actors to find out the income and expenses in their business regularly so that they can evaluate the merits of the business. business actors who have not fully implemented accounting have reasons, namely the lack of accounting knowledge by business actors and employees. they only make journals and ledgers in accounting records because they think these two things are enough to represent the financial condition of their business. for business actors who have made complete financial reports from the results of interviews, they say that it is very helpful to know the profits received each month. this shows that the majority of msme actors present income statements as a component of the main business financial statements because they only want to know the profit or turnover for each period of the business they manage. according to the results of processing the questionnaire data, the presentation of financial position reports and calk is still small among business actors. accounting information must be produced precisely, accurately, and relevantly as required by sak emkm so that msme actors must be able to present financial reports with the latest financial information. one of them is processing data using the software. based on table 7 regarding the use of accounting software, the majority of business actors still make accounting records and present financial reports manually. the results of interviews from msme actors who do not use software or present financial reports manually assume that the costs incurred to buy accounting software are very expensive and are not balanced with the benefits provided directly so that manual recording is sufficient and fulfills the purpose of making financial reports for their business. for business actors who have carried out computerized accounting activities following the results of interviews, said that in presenting financial reports, they think that the use of accounting software is very helpful in preparing financial reports easily and quickly. computerized recording can reduce the risk of calculation errors and can produce timely and relevant information. the use of software in business units is assisted through microsoft excel applications and accounting programs that have been specially made for these business units. this shows that msmes that have used accounting software can be said to have fulfilled the information quality characteristics of sak emkm. from the discussion of the use of accounting software in msmes, it shows that there is still low technological development used by business actors as a support for financial recording activities and chooses to keep financial records manually. the use of accounting software should have been implemented by msmes because it can make it easier for business actors to see the financial condition of the business at any time. through data that is always updated every time a transaction occurs, business managers can also be accountable for resources that have been used appropriately and can speed up the decision-making process for business continuity. the willingness and awareness of msme actors in making financial reports with various objectives can be seen in table 9 explaining that one business actor stated that the business actor only wanted to see how far the managed business had developed and financial reports to be used as a decisionhttps://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 202 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc making tool. respondents have chosen the purpose of making financial reports for internal and external purposes based on the results of interviews. it can be concluded that financial reports are used as a form of responsibility at the head office located outside the city of berastagi and as an evaluation in the business development stage. according to the interview results, one of the respondents gave reasons for external interests, namely to make it easier for investors and banks to read financial reports so that it is easy for business actors to get additional capital for business development and for tax reporting every year. knowledge of msme actors about sak emkm iai issues sak emkm to facilitate msme players in compiling financial reports to gain access to funding from various financial institutions. the results of processing the questionnaire data in table 10 are that the majority of msme actors, namely 82.9%, do not know sak emkm. following the results of the interviews, there was a lack of socialization and accounting seminars that discussed these standards, so business actors only applied simple accounting. 17.1% of respondents were aware of the sak emkm as an accounting standard for msmes. the media used by a handful of msme actors in obtaining information about sak emkm according to table 11 is from the internet and electronic media. the results of interviews with msme actors who already know said that business actors try to always keep abreast of developments in accounting standards. financial management socialization or training can assist business actors in realizing the correct presentation of financial reports. however, in table 12 of 92.7% of respondents, it can be seen that there is still low socialization or training regarding sak emkm. lack of socialization and training regarding sak emkm makes understanding of these standards among business actors very low, this is shown in table 12. in this table, the majority of respondents 85.4 % still do not understand the contents of sak emkm. according to the results of interviews with msme actors, they said that business actors were only given basic training in carrying out accounting books such as preparing and archiving evidence of transactions, recording finances following the accounting cycle, and basic knowledge regarding the preparation of financial reports. submission of socialization is only in the form of theory alone and lacks in terms of practice. this makes business actors still confused in realizing the presentation of financial reports for managed businesses. the low understanding of the contents of sak emkm also has an impact on the application of accounting in businesses according to the standards. table 13 shows that 95.1% of respondents still haven't implemented it. taken from the results of an interview with one of the business actors, in preparing their financial reports they are still limited to simple accounting knowledge without following the applicable standards. msme business actors are also still guided by sak etap as the accounting standard for making financial reports. judging from the results of the questionnaire regarding the understanding of sak emkm among msme actors it is still low. they hope that the training or outreach organized by the relevant government agencies, academics, and fostered institutions can provide theory and direct practice regarding accounting records and presentation of financial reports, not just basic accounting information but also following applicable accounting standards, namely sak emkm. difficulties or obstacles experienced by msme actors in the preparation of financial statements referring to table 15, 73.2% of respondents still experience difficulties in preparing financial reports. in addition to the lack of knowledge from business actors as well as training or outreach. according to the results of the interview, it can be seen that there is no further desire in managing finances based on micro, small, and medium entity accounting standards (sak emkm). https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 203 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc business actors believe that financial reports are not important in their business and there is no desire to know and improve the accounting recording system following sak emkm because it is considered difficult and a waste of time, so it can be seen that the level of awareness to improve financial reports according to standards is still low. presentation of financial reports following sak emkm, business actors can evaluate performance in each period for business development. another benefit in recording accounting correctly and presenting financial reports following sak emkm can help business actors to provide confidence to external parties in the process of investing and increasing business capital so that they can be monitored and accounted for all activities related to business management. from the results of this study, it can be seen that the application of accounting carried out by msmes in the berastagi district is still simple and low. the majority of msme actors still do not know and understand accounting presentations following sak emkm. less than optimal socialization and accounting training and lack of awareness by business actors on the importance of applying to account following sak emkm are the reasons. business actors hope that msme coaching institutions and the government can embrace their business to get intensive socialization and accounting training following sak emkm. this can make msme actors apply financial reports following standards so that they can help them to increase business capital from various financial institutions for business development and the products produced are of a higher quality. application of msme accounting the application of accounting to msmes in the berastagi district is very diverse because the accounting knowledge possessed by business actors is not evenly distributed and the willingness of business actors to present financial reports by standards. some businesses that already have many branches apply the accounting cycle starting from transactions making and collecting transaction evidence, making journals and ledgers, and making financial reports namely statements of financial position, income statements, and calk (use of software). however, most business actors only record cash receipts and disbursements. implementation of sak is very difficult because it requires additional costs such as training costs, salaries, and time. micro and small-scale businesses tend not to keep books by financial accounting standards because the profits from these businesses are directly used to cover their daily needs, in other words, there is no separation of personal money from business income. conclusion this study aims to determine the application of accounting carried out by smes in berastagi and to determine the obstacles faced by smes in applying to accounts. small, micro, and medium enterprises (msmes) in berastagi district, most msme actors do not know and apply to account, even though they do not have financial records or bookkeeping. the form of financial reports presented by msmes is still not by sak emkm because the financial reports presented are only dominated by profit and loss reports and the lack of knowledge of business actors regarding micro, small, and medium entity financial accounting standards (sak emkm). according to sak emkm, there are 3 (three) minimum financial reports that must be presented by msmes including a statement of financial position, profit, and loss statement, and notes to financial statements (calk). the use of accounting software for msmes is relatively low, business actors still use manual methods to manage their finances and present https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 204 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial reports for the businesses they manage. this is not to the requirements of sak emkm in presenting financial reports that must be produced precisely, accurately, and relevantly. the obstacles experienced by msme players in berastagi city in applying accounting and financial reports by sak emkm are very diverse. low awareness or willingness of business owners to improve the presentation of financial reports following sak emkm. this can make it difficult for business actors to obtain financial assistance from financial institutions because the financial reports prepared are not following applicable standards. business actors think that this is a waste of time in daily activities and it is difficult to understand the contents of these standards. the next obstacle is that business actors do not receive socialization and seminars regarding sak emkm. they only received basic training in accounting and lack of practice. this obstacle causes business actors to only carry out simple bookkeeping and accounting presentations and is confused about presenting financial reports correctly. reference adhikara, n. d. 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(2021). the effectiveness of implementation of sak emkm to increase access to banking capital on msmes in bogor regency. in riset : jurnal aplikasi ekonomi, akuntansi dan bisnis (vol. 3, issue 2). www.depkop.go.id/data https://www.ilomata.org/index.php/ijtc implementation of financial accounting standards for small and medium entities in berastagi smes, karo district pakpahan and naibaho, 207 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc zulfikar, r., astuti, k. d., & ismail, t. (2022). financial accounting standards for micro, small, and medium entities (sak emkm) in indonesia: factors, and implication. quality access to success, 23(189), 128–143. https://doi.org/10.47750/qas/23.189.15 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 451-469 451 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and firm size on the effects of tax aggressiveness on company value faisal ardhi1, arief wibisono lubis2 12university of indonesia, indonesia correspondent : faisal.ardhi11@ui.ac.id1 received : june 1, 2023 accepted : july 15, 2023 published : july 31, 2023 citation: ardhi, f., lubis, a, w. (2023). the moderation role of tax rate reduction and firm size in the effect of tax aggresiveness on company value. ilomata international journal tax and accounting, 4(3), 451-469. https://doi.org/10.52728/ijtc.v4i3.777 abstract: this study aims to examine the impacts of reducing tax rates and firm size on tax aggressiveness in regards to the company value in indonesia. this study used 302 samples of companies with 1,118 observation points within the period of 2017 2021. the proxy measurement of tax aggressiveness is with effective tax rate and the company value using tobins'q. the research analysis was carried out using multiple regression models of panel data employing fixed effects as the best research model. the results showed that there was no significant effect of aggressive tax on firm value. this study also found that a decrease in tax rates did not affect the relationship between tax aggressiveness and firm value, but firm size did impact on both tax aggressiveness and firm value. keywords: tax aggressiveness, firm value, tax rate reduction, firm size this is an open access article under the cc-by 4.0 license. introduction the efficiency of cash outflow for tax payments can be utilized by companies as a capital to increase the productivity and the performance of companies as well as the provision for the shareholders. if this policy can be implemented, a company value will increase considerably. managerial actions are designed in such a way and indirectly focus on minimizing tax liabilities from the company (marfiana et al., 2021). basically, an increase in company value is achieved if there is an alignment of goals between shareholders and company management (ramajo et al., 2020; wang et al., 2018). the interests of shareholders are on the value of the company and the distribution of profit after tax, whereas the interests of managers as the representatives of the company are compensation such as salaries and other financial and non-financial benefits (hantina, 2014). tax aggressiveness is a measure aimed at reducing tax exposure through legitimate means by not violating the rules through tax planning or by manipulating taxes or tax evasion. (frank et al., 2009; mashuri & ermaya, 2019). these policies are made to minimize the amount of tax, known as tax aggressiveness (drucker et al., 2020; jia et al., 2020; richardson & taylor, 2015). the previous researches on tax aggressiveness and corporate value indicated inconsistent output. https://www.ilomata.org/index.php/ijtc mailto:faisal.ardhi11@ui.ac.id https://doi.org/10.52728/ijtc.v4i3.777 the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 452 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (abdelfattaha & aboud, 2020; chen et al., 2014; mangoting et al., 2019) found that tax planning adopted by companies has a negative impact on company value. (sandy & lukviarman, 2015) suggest that tax aggressiveness has no influence on company value. moreover, (mulyani et al., 2018), added that long-term tax avoidance has a positive effect on company value. those who put forward the political cost hypothesis argue that larger scale companies with their assets and property are the victims of government regulations in which the provision of wealth is controlled. taxes, however, are one of several components of burdensome political costs. the concept of political costs emphasizes that the bigger effective tax rates contributed by large companies, the more aggressive the government will be in accessing the company resources, compared to small scale businesses (hantina, 2014). there are a number of tax aggressiveness practices in indonesia carried out by national and/or multinational companies that have been followed up by dgt. some of these companies include; pt. indosat that was indicated to have manipulated the notification letters in 2002 – 2003; pt. adaro energy in the period 2009 to 2017 which allegedly practiced tax aggressiveness through a transfer pricing scheme to affiliates located in singapore (detikfinance, 2019); as well as several other companies such as bumi resources, asian agriculture, and the list is exhaustive. clearly, it has been proven that there is a relationship between tax aggressiveness and companies with considerable assets (firm size). nevertheless, the facts are not in line with the concept proposed by both watts & zimmerman (1986) and (kurniawan 2015) in their former researches on company size and tax aggressiveness. the results of the study indicated that there is a negative effect between the size of the company and the tax aggressiveness. the covid-19 pandemic that hit indonesia in early 2020 had a severe impact on domestic economic conditions. the ministry of finance through the fiscal policy agency and dgt responded by lowering the corporate income tax rate to 22% from 25%. several studies related to reducing tax rates were conducted by guenther (1994) who found that the corporate profit management was carried out in response to the 1986 tax reform in the united states. in addition, guenther, yin & cheng (2004) conducted studies related to profit management and tariff reductions in the united states, the results of the study suggested that entities with profits are more interested in managing profits than entities that experience a loss. similarly, a study in indonesia conducted by wijaya & martani (2011) revealed that there is a tendency for aggressive profit management in companies that yield profits compared to companies with a considerable loss by delaying the recognition of income to the periods when tax rates were lower. the effect of decreasing tax rates and company size on the relationship between tax aggressiveness and corporate value is an interesting phenomenon to study. due to the decreasing tax rates, observations can be conducted by employing the listed public entities from 2017 to 2021 to determine the impact of this phenomenon. this research is a development of a study by desai &; dharmapala (2009) which examined the relationship between tax aggressiveness and corporate value in america, notifying that tax aggressiveness did not have any influence on company value. https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 453 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc previous domestic research relevant to the relationship between tax aggressiveness and changes in tax rates in indonesia was conducted by (frista, 2018) in indonesia-based public companies for the period 2007 -2010 stating that progressive changes in tax rates to fixed rates had an influence on decreasing tax aggressiveness. furthermore, (kurniawan, 2015) added that there was a negative influence on company size and tax aggressiveness. unlike the two previous studies, there are different moderation variables, namely the reduction in tax rates and the size of the companies to be included. tax aggressiveness according to (lietz, 2014) the measurement of tax avoidance generally divided into 3: tax sheltering; tax evasion; and tax aggressiveness. according to frank (2009), tax planning using methods that are classified legally through tax avoidance or illegally through tax evasion is a form of tax aggressiveness aimed at engineering corporate taxable income. the benefits of tax aggressiveness by making tax cost efficiency will have an impact on increasing the profit results obtained by shareholders which can be used to finance investments from companies with an impact on increasing company profits in the future (dewi & rahmianingsih, 2020). negative compensation from tax aggressiveness is the potential for sanctions through fines or interest from the viscus. this step can also affect in the decrease of the company credibility which indirectly impacts the value of the company through a decrease in the company's stock price as a consequence of decreasing trust from shareholders and potential investors after spotting the actions taken by the company. tax management actions must be measured because they have benefits and consequences. the consequences are sanctions/fines imposed if the tax management carried out by the company violates the limitations of applicable laws or regulations. in fact, the value of sanctions/fines imposed may be greater than the savings previously made. hanlon & heitzman (2010) argue that tax avoidance can not generally be defined which is then mutually agreed upon by researchers, so the definition of tax avoidance is still adjusted to the scope of research conducted by each researcher. hence, there are several proxies used to measure tax avoidance in hanlon & heitzman (2010). gaap etr proxies for tax aggressiveness measurement, in accordance to the majority of previous studies conducted by taylor & richardson (2012); huseynov & klamm (2012); dyreng et al. (2008); graham & tucker (2006); rego (2003); gupta & newberry (1996). agency theory the definition of agency relationship presented by jensen & meckling (1976) is a contract between owners and managers in managing the company resources and in determining the best operating strategies and decisions for the company when carrying out its activities. managers get full and controlled access to all information in the company, which triggers the emergence of information asymmetry between managers and company owners who are not directly involved in the company's operational activities. https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 454 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to desai & dharmapala (2009), the existence of information asymmetry can lead to agency problems related to corporate tax aggressiveness as it might facilitate managers to ignore shareholder interests and then act on personal interests. according to (hantina, 2014), the interests of company owners are on the value of the company and the distribution of profit after tax, while the interests of managers as agents are on the compensation, be it the salaries or other financial and non-financial benefits. this can incur agency costs due to the differences in interests that is ultimately burdensome for the company owners (chen et al., 2014). firm value according to weston & thomas (1996), the fair value of a company can be described through investor perception of the issuer concerned and can be defined as the value of the company. weston & copeland (2010) argue that the valuation ratio or market ratio can be used as a measurement of company value, which is the most comprehensive measure of performance for a company. there are several factors that can affect the value of a company, one of which is leverage; sari (2005) found that the leverage ratio is a factor that affects the value of the company. in the taxation context, the decision to use leverage can increase the value of the company since the concept of tax is a component in reducing taxable income. however, darsono (2006) stated that there is an increased risk of companies not being able to pay their obligations from a greater leverage, which will affect the decline in company value. the second factor is the firm size. sujoko & soebiantoro (2007) argue, a company value is positively influenced by a company size. there are benefits to the ease of obtaining internal or external funding, as a result of the increasing size of a company. companies with large scale benefit from being able to obtain economies of small scale (mule et al., 2015; osazuwa & cheahmad, 2016). profitability is the next factor affecting the value of the company. home & wachowicz (2005) stated that the bigger the impact on the company's profitability ratio is, the higher the company's value will be, and this stimulates investors’ interest in the company fundings. (agustia et al., 2019; murakami & otsuka, 2020; suwardika & mustanda, 2017). the firm size brigham &; houston (2010) stated that a firm size can be grouped based on various measurements, these include: total assets, total revenue, and total equity to determine the scale of the company. an increase in company size is achieved through an increase in company performance that is directly proportional to sales or revenues contributing to the company profit and adding equity through retained earnings (barly, 2018; dirman, 2020; seclen-luna et al., 2021; suryana & rahayu, 2018). (watts & zimmerman, 1986) stated that one of the major drives in managing corporate financial profits through positive accounting theory is the size of the company in a relation to political cost & political power. in particular, under political cost theory, larger, more affluent firms are https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 455 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc victims of greater regulatory action by governments through wealth transfer because they have higher visibility (watts & zimmerman, 1986). an alternative view through political power theory is that they can do tax planning, and can determine activities with the objective of achieving optimal cost savings through taxes because they have substantial resources to manipulate the political process (siegfried, 1972). tax aggressiveness and firm value the transfer of wealth by companies to the state through the payment of income tax is actually a cost for the company (sari, 2010), so that the company will optimize the tax paid in order to maximize the company's profit, and this has an impact on optimal returns to shareholders. the tendency of company management to carry out tax aggressiveness for efficiency will be favored by company owners (chen et al., 2014), but (kamila, 2017) stated that tax aggressiveness carried out by management can damage the company's reputation as perceived by both investors and creditors. additionally, previous observations found that corporate value is negatively affected by tax aggressiveness. desai & dharmapala (2009) state that the value of the company is not influenced by tax aggressiveness. meanwhile, (chasbiandani, 2012), emphasized that the company value is positively affected by long-term tax avoidance. based on these inconsistent results, the hypothesis the researchers believe is that corporate tax aggressiveness, measured through the etr level as a proxy in testing, will affect the value of the company. the hypotheses is seen as follows: h1: tax aggressiveness affects the company value of public companies in indonesia. tax aggressiveness, tax rate reduction and firm value guenther (1994) revealed that corporate profit management actions are in response to the 1986 tax reform in the united states. yin & cheng (2004) also conducted studies related to profit management and tariff reductions in the united states, and the results of the observations indicate that profitable companies are more interested in implementing profit management than companies with a considerable loss. another research related to tariff changes in indonesia conducted by wijaya & martani (2011) concluded that there is a growing trend in which profit management in companies generate more profit than companies with a considerable money lost by delaying recognition of company earnings to suit a lower tariff period. furthermore, a research by (frista: 2018) showed a shift in the flat tax rate from a progressive to a flat tax rate in 2009 affected the decline in corporate tax aggressiveness. therefore, it can be concluded that aggressiveness in financial reporting or profit management will be greater when there has been a change in tax rates. in contrast to the phenomenon of profit management, with the changes in the tax rates, tax aggressiveness proves to be smaller, because management has benefited from the changes in the tax obligations and should consider the impact of tax aggressiveness that may arise in the next periods. with the description given, the next hypotheses is: h2: the reduction in tax rates affects the relationship between tax aggressiveness https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 456 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and company value of public companies in indonesia. tax aggressiveness, firm size and firm value studies in america revealed the contradictory results on the relationship between etr and the company size. a positive relationship between etr and firm size was found by zimmerman (1983), while porcano (1986) highlighted a negative relationship between the two variables. ultimately, empirical evidence suggests that such inconsistent findings gave an effect on the firm size being a very specific sample and may not always emerge over time in the long history of the company (gupta & newberry, 1997). the conclusion drawn from the results is that there is a relationship between the size of the company and the effective rate of corporate tax. furthermore, according to sujoko & soebiantoro (2007), the value of the company is influenced by the size of the company. companies will find it easy to obtain funding sources both from internal and external in line with its size. large-scale companies also benefit from scaled economy. hence, the following hypotheses is: h3: firm size affects the relationship between tax aggressiveness and company value of public companies in indonesia. from the hypothesis made, this is the model of the research framework: figure 1. research framework source : data proceed methods in this study, tobin's q ratio is a proxy used to measure company value, as implemented by desai & dharmapala (2009). tobin's q is one of the measurements tested in various top management situations that is a variable measure of company performance from an investment perspective (liang & ye, 2021; sun et al., 2014). because the impact of tax aggressiveness on the value of new companies can be seen in the next period, this study follows the provisions of a study conducted by (chen et al., 2014) where the period used is t = t + 1. for the measurement of tax aggressiveness, researchers use measurement through etr. which become the majority of tax agresiveness firm value leverage size profitability (roa) tax rate reduction firm size https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 457 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc previous researches conducted by gupta & newberry (1997); rego (2003); graham & tucker (2006); dyreng et al. (2008); huseynov & klamm (2012); and richardson & taylor (2012) by dividing the total tax burden by accounting pretax income (ghozali, 2018). this quantitative research employs secondary data acquired from a variety of sources. (sugiyono, 2017) mentioned the use of purposive sampling techniques in his research sample through the selection of public companies listed on the indonesia stock exchange (idx) from 2017 to 2021. it is such conducted to see the differences due to tariff reductions in 2020. the final size of the research sample was 302 companies with 1,118 observation points due to the application of several relevant criteria from a total of 848 companies and 4240 years of observation. this final sample size represents 26.4% of the total public company data on the indonesia stock exchange as shown in table below. table 1. final sample selection source : data processing this study used panel data regression analysis techniques with eviews 12 econometric software. the data analysis of this study includes descriptive statistical tests (mean, median, maximum, minimum, and standard deviation), analysis and selection of regression panel data using chow and hausman tests. the next step is to carry out classical assumption tests, which include multicollinearity tests and heteroscedasticity tests, followed by hypothesis testing comprising simultaneous significance tests (f test), partial significance tests (t tests), and coefficients of determination (adjusted r-squared) at the level significance 0.01 (1%), 0.05 (5%) and 0.1 (10%). number of companies year of observation number of companies year of observation number of companies year of observation total year of observation initial sample 364 1820 453 2265 31 155 848 4240 100% excluded industries finance and insurance -55 -275 -51 -255 0 0 -106 -530 -12,5% energy and mining -45 -225 -49 -245 0 0 -94 -470 -11,1% property, construction and real estate -49 -245 -61 -305 -3 -15 -113 -565 -13,3% cruise and aviation -3 -15 -3 -15 0 0 -6 -30 -0,7% companies not listed since the initial period of the study -55 -275 -71 -355 -28 -140 -154 -770 -18,2% companies that lost money during the study period -11 -55 -23 -115 0 0 -34 -170 -4,0% missing value -2 -115 -37 -472 0 0 -39 -587 -13,8% final sample size 144 615 158 503 0 0 302 1118 26,4% description main board development board acceleration board total % https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 458 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results and discussions descriptive statistics using the minimum value, maximum value, average (mean), and standard deviation for each independent variable and the dependent variable, descriptive statistical analysis is utilized to provide an overview of the distribution and behavior of the research sample data. the descriptive test results are shown in the table below: table 1. statistical analysis test results source : data proceed the observation period after the tax rate reduction for 2020 and 2021 was 37.3% (417 companies), whereas the observation period before the tax rate reduction for 2017 to 2019 was 62.7% (701 companies). from the table, it can be seen that companies listed on the stock exchange during 2017 to 2021 have carried out company management properly, thus, a higher company market value is above their book value. the maximum value in the research period of 4.8732 is issuers engaged in the information technology sector, and the minimum value of 0.1834 is issuers involved in the automotive sector. both are companies listed on the development board. companies tend to make positive corrections, both temporary and permanent, from commercial pre-tax profits in accounting for taxable profits, resulting in a value increase of corporate tax seen at an average value of 29.85%. the maximum value in the research period is 0.8183 for fiscal year of 2020 which is the main board issuer engaged in the hospital administration business, and the minimum value of 0.010 is the development board issuer engaged in health service providers. the average use of debt in the sample of asset financing was 0.2148. the main board issuers in the food and beverage industry are issuers with the maximum value obtained in the research period of 0.9454. this shows that the use of debt for asset financing is considerably high in indonesia-based public companies . the average profitability value based on the observation of listed companies is 0.0580. the maximum value in the research period of 0.1967 is issuers engaged in the pharmaceutical industry, while the minimum value of 0.0001 is issuers engaged in telecommunications infrastructure. both issuers are development board issuers. variable n minimum maximum mean median std. deviation qi,t+1 1118 0,1834 4,8732 1,6213 1,1620 1,1500 etri,t 1118 0,0010 0,8183 0,2985 0,2535 0,1726 levi,t 1118 0,0000 0,9454 0,2148 0,2006 0,1846 roai,t 1118 0,0001 0,1967 0,0580 0,0435 0,0534 sizei,t 1118 3,0373 3,1820 13,6313 14,1615 19,7217 https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 459 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc there is a movement in the mean value of the main variables of the study every year starting from 2017 to 2021, as shown in table 2: table 2. mean movement of main variables source : data processing cumulatively, there was an average increase in the q variable even though it had fallen in the 2018-2019 period and then rose again up to the final period of the study in 2021. for the etr variable, there was a significant increase in the 2019 period of 0.0245 even though the time of the issuance of the regulation on reducing corporate income tax rates was in 2020, there was no significant change in the average value of the research sample. the following year after the rate reduction in 2021, there was a significant decrease in the average value of the etr and cumulatively in the study period there has been a decrease in the etr rate. based on the movement of the mean value of etr, it can be indicated that there was an increase in aggressiveness by the company during the observation period of the study. panel data regression model selection chow test in the chow test of the three models that have been carried out, both have a prob value. crosssection f and ci-square which is smaller than 0.05, from these results, the hypothesis is rejected. so it was concluded that the fixed effect model was the best and the data testing continued by implementing hausman test. hausman test based on the hausman test of the three models tested, the p value of the model is below 0.05, meaning that the fixed effect model is the best model so the lagrange multiplier (lm) test is not implemented. best panel data regression model the following table summarizes the results of the panel data regression model on selection test performed from all three models. table 3. panel data approach testing source : data processing 2017 2018 2019 2020 2021 total qi,t+1 1,609252 1,586791 1,569662 1,678343 1,675246 1,621300 etri,t 0,292148 0,296939 0,321531 0,326944 0,259696 0,298500 variable years description test probability f/chi 2 result pls vs fe chow 0,0000 fe fe vs re hausman 0,0000 fe https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 460 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results generated in the study emphasized that the best model for all equations is the fixed effect model. classic assumption test multicolinearity test as pearson correlation testing that has been done, there is no multicollinearity problem where the correlation coefficient of each independent variable does not exceed a value of 0.8. heteroscedasticity test based on the regression of residual absolute values with independent variables or the glejser test, there is a heteroscedasticity problem in the data for the size variable before the data transformation is performed. after the transformation, it can be seen that the heteroscedasticity problem has been resolved as evidenced by a p-value of > 5%. panel data regression analysis tax aggressiveness and firm value the findings of the panel data regression analysis test selected the equation model between variables, and they are formulated as follows: q = 8,2543 + 0,0635etr + 0,3062lev 2,6421size + 1,4095roa + ε the measurement of the increase or decrease in etr is inversely proportional to tax aggressiveness, the higher the tax aggressiveness, the lower the etr, and vice versa, the lower the tax aggressiveness, the higher the etr rate. based on the regression results, it is known that the coefficient between etr and q is positive, so tax aggressiveness negatively affects the value of the company. the f-stat test result shows a value of 18.03 and a probability of 0.0000%. based on these results, the regression model can describe the simultaneous influence of the independent variable and control on the dependent variable. the results also suggest the t-stat value be used to test research hypotheses. the adjusted r2 value of the regression model is 82.31%. from the adjusted value of r2 it can be said that about 82.32% of the variation of the variable q can be explained by the etr variable and the control variable (lev, roa, size) in the model simultaneously. 17.69% were not explained by research variables but other variables are not included in the model, as shown in table below: https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 461 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. regression output source : data processing the t-stat test showed a positive but not significant etr regression coefficient (0.3165). the findings indicate that tax aggressiveness has a negative effect on company value but is not considered significant. therefore hypothesis 1 is not accepted. this result is consistent with the study by desai & dharmapala (2009) which stated that tax aggressiveness does not affect the value of the company. all control variables also affect the dependent variable of company value. the lev variable exerts a positive influence on the variable value of the company. the findings indicate that public companies are able to manage their liabilities properly in which they use it to buy assets or to finance a productive investment which is expected to have a positive influence on increasing profitability , thus it ultimately affects the increase in company value. the relationship of the control variables of roa and the company value is both positive and significant. roa is the most important ratio among other profitability ratios and is a technique commonly used to measure the effectiveness of a company's overall operations. roa can measure management efficiency in using the assets, where a company has to earn income and profit. size has a negative influence on company value, thus, the findings do not match the initial prediction of the study stating that the size of the company will be directly proportional to the value of the company. this result indicates a negative response from investors or potential investors to issuers with a significant size as seen from the total amount of assets. (jensen &; meckling, 1976) implied that investors do not have the need to supervise operational activities and strategies by management if the companies are too big, as more serious conflicts triggered by the differences in interests between the managers and the company owners may occur. in addition, if the company has a relatively significant amount of total assets, there will be a https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 462 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc flexibility in the management’s utilizing the assets when the situation permits, consequently such conduct will ultimately reduce the value of the company. tax aggressiveness, tax rate reduction and firm value based on the findings of the panel data regression analysis test, the equation model between variables can be formed as follows: model 2 : q = 8,5103 + 0,0674etr + 0,0182trc_d + 0,0020(etr*trc_d) + 0,3116lev – 2,745size + 1,4339roa + ε by including the dummy variables of tax rate reduction (trc) and its interaction (etr*trc), the f-stat test results show a value of 17.88 and a probability of 0.0000%. based on these results, the regression model can describe the simultaneous influence of the independent variable and control on the dependent variable. the results also suggest the t-stat value to test a research hypotheses. the adjusted r2 value of the regression model was 82.27%. from the adjusted value of r2 it can be concluded that about 82.27% of the variation of the variable q can be explained by the etr variable and the control variable (lev, roa, size) in the model simultaneously. the remaining 17.73% was not explained by the research variables but other variables that did not fit the model as shown in table below: table 4. regression output source : data processing a number of previous studies outside indonesia did not specifically measure the relationship between the changes and the decrease in tax rates and tax aggressiveness, but guenther (1994) found that there were companies having carried out profit management in response to the 1986 tax reform in the united states. after 10 years, yin & cheng (2004) also conducted tests in the https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 463 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc united states related to profit management and tariff reduction. the results of the study found that entities with profits are more interested in carrying out profit management than entities with a considerable loss. the results of the regression model through the probability results of t-stat found that the decrease in tax rates had a significant effect (0.3072) on the relationship between tax aggressiveness and company value, therefore the second hypothesis was rejected. the research findings are not in line with the previous studies that examined the effect of tax rate changes on the relationship between tax aggressiveness and financial statement aggressiveness conducted by frista (2018), stating that a changing in the tax rate to a fixed rate from the previous progressive rate in 2009 affected the decrease in corporate tax aggressiveness. in moderation, the testing of tax rate reduction does not alter the consistency of the contribution of control variables that affect company value, namely lev, profitability level through roa and size. both roa and size variables remain a significant positive influence and size contributes through a significant negative influence on the value of the company. tax aggressiveness, firm size and firm value based on the findings of the panel data regression analysis test, the equation model between variables can be formed as follows: model 3 : q = α + 0,7668etr 0,1366size_d 0,2027(etr*size_d) + 0,1474lev + 0,0171size + 9,8823roa + ε in testing this typical hypothesis, all company samples are grouped into two categories based on size variables; if the average value of the company during the observation period is above the median value, the company is categorized as a large company. if a company has an average value over the observation period that is lower than the median value, it is categorized as a smaller company. by including dummy variable interactions (etr*size_d). the f-stat test results show a value of 42.66 and a probability of 0.0000%. based on these results, the regression model can describe the simultaneous influence of the independent variable and control on the dependent variable. the results also show that the t-stat value can be used to test the research hypothesis, and the adjusted r2 value of the regression model is 18.29%. from the adjusted value of r2 it can be concluded that about 18.29% of the variation of the variable q can be explained by the etr variable and the control variable (lev, roa, size) in the model simultaneously. 81.71% was not explained by research variables but other variables that did not fit the model as shown in table below: https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 464 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. regression output source : data proceed the results of the regression model through probability t-stat state that the size of the company has a significant positive influence with the level of significance α = 10% (after divided into two; two tailed test) on the variables etr and q. it can be concluded that there is an influence of tax aggressiveness on the value of the company due to moderation of the size of the company, therefore the third hypothesis is accepted. the interaction of firm size and etr exerts a different influence on the contribution of the lev and size control variables, which weakens the relationship with the dependent variable, while the roa variable remains to have a positive influence on the firm value. there is no evidence of a study that specifically examined the effect of tax aggressiveness and company value moderated by company size found, however, in 2022, a research conducted by (labunets.e. & i.a, 2022), stated that there was a significant negative influence on the relationship between company size and tax aggressiveness in companies engaged in forestry in russia. the findings are considered inconsistent with the output by lanis and richardson (2007), who stated that there is a negative influence between etr and company size. in other words, it can be said that there is a positive relationship between company size and tax aggressiveness in public companies at the time of tax reform in australia. in indonesia, a study conducted by kurniawan (2015) examined the relationship between the company size and the tax aggressiveness in 71 entities within the period of 3 years of observation (2012-2014). the results of the study revealed that there is a negative influence of company size on tax aggressiveness. in line with the results of previous studies related to company size and tax aggressiveness, a moderation of company size can affect the relationship between tax aggressiveness and company value. https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 465 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc additional testing of tax aggressiveness, firm size and firm value to get more convincing results for researchers in making decisions, this study conducted additional testing through regression based on the results of modifications to moderation variables size_d by selecting fifty (50) largest companies to be grouped into large companies, and the rest categorized into smaller companies. this grouping of the 50 largest companies is based on previous research conducted by zimmerman (1983) which has examined the relationship between taxes and company size in america. from a total of 1118 years of observation, 197 years of large companies (17.62%) and 921 years of other companies (82.38%) were obtained. the output of the regression is shown in the table below: table 5. regression output source : data processing based on the results of regression through t-stat probability, there are similarities with the results of the previous study that utilize the median value as a grouping of company size, where moderation of the 50 largest companies still has a significant positive influence between etr and q value with a higher level of significance with α = 5% (after divided into two; two tailed test). because etr proxies are the opposite of tax aggressiveness, it can be concluded that there is a negative influence between tax aggressiveness and company value. the two outputs of the company size moderation test prove that the sensitivity of the company size gives a difference in the effect of tax aggressiveness on company value. in conducting a test with 50 largest companies, the tax reduction practices carried out by company management have a more negative influence on company value , compared to other companies. https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 466 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consistent with previous tests, the contribution of roa as the main control variable always exerts a significant influence on the value of the company. the interaction of company size in the model that acts as a moderation variable affects the contribution of lev and size control variables that become weaker, to the value of the company. referring to the third and additional tests, the results obtained can state that the first hypothesis in this study is accepted, and tax aggressiveness has a negative effect on company value, thus it is consistent with the previous study by chen et al. (2014), wahab & holland. (2012), and hanlon & slemrod (2009) from which tax aggressiveness is considered to have a negative effect on company value. conclusion there is a negative but not significant effect of tax aggressiveness proxied through etr with company value in public companies in indonesia within the 2017-2021 period. this is due to the potential endogeneity of etr proxies, where companies can determine the amount of etr presented in the financial statements for certain reasons. the reduction in corporate income tax rates in 2020 as the government's response in handling economic stability due to the covid-19 pandemic did not make a difference in the effect of tax aggressiveness on company value. it is possible that there are other phenomena in the research period such as covid-19 as exogenous variables outside the study that will better explain changes in company value each year. grouping company size exerts a significant influence with the rate of α = 10% and α = 5% in the 50 largest companies, regarding the relationship between tax aggressiveness and company value. this negative influence is indirectly in line with the concept of political cost where the size of the company is in line with the amount of political costs (including taxes) incurred by the company. references abdelfattaha, t., & aboud, a. 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(2014). a comparison of innovative financing and general fiscal investment strategies for second-class highways: perspectives for building a sustainable financing strategy. transport policy, 35, 193–201. https://doi.org/10.1016/j.tranpol.2014.05.022 https://www.ilomata.org/index.php/ijtc the moderation role of tax rate reduction and state ownership status in the effect of tax aggresiveness on company value ardhi and lubis 469 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc suryana, f. n., & rahayu, s. (2018). the effect of leverage, profitability, and company size on firm value (empirical study of consumer goods industry companies in the pharmaceutical sub-sector listed on the indonesia stock exchange in 20122016).eproceedings of. management, 5(2). suwardika, i. n. a., & mustanda, i. k. (2017). of leverage, company size, company growth, and profitability on firm value in property companies. wang, k., zhang, h., tsai, s.-b., jiang, j., sun, y., & wang, j. (2018). an empirical study on effective tax rate and ceo promotion: evidence from local soes in china. sustainability (switzerland), 10(6). https://doi.org/10.3390/su10062007 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 508-523 508 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the tax revenue from agriculture and manufacturing sectors in lower middle-income countries with exchange rate as a moderating variable destiny wulandari1, suparna wijaya2 12politeknik keuangan negara stan, indonesia correspondent: sprnwijaya@gmail.com2 received : june 9, 2023 accepted : july 17, 2023 published : july 31, 2023 citation: wulandari, d., wijaya, s. (2023). agriculture and manufacturing for lower middle-income countries: exchange rate as a moderating variable. ilomata international journal of tax and accounting, 4(3), 508-523. https://doi.org/10.52728/ijtc.v4i3.798 abstract: middle-income trap triggers the middleincome countries to boost their economic growth. as tax revenue has causal relationship with economic growth, it is essential to conduct a study on how to improve tax revenue. considering the potential of agriculture and manufacturing sectors in lower middle-income countries, particularly in east asia and pacific regions one of which is indonesia, this study aims to determine the effects of both sectors on tax revenue in the respective regions. this study uses exchange rate as moderating variable and foreign direct investment (fdi) as control variable. the utilization of the two variables becomes the novelty of this study since researches that uses the two variables have never been conducted. in addition, no references of former studies concerning the effects of the two sectors on tax revenue in lower middle-income countries found. the research is conducted from 2002 to 2019 by using panel data multiple linear regression analysis method. by using fixed effect model and ridge regression model, it is indicated that before the moderation is carried out, agriculture has a negative effect and manufacture has a positive effect on tax revenue. however, after the variables are moderated with exchange rate, the interaction of agriculture and exchange rate has positive effect on tax revenue, while the interaction of manufacture and exchange rate has negative effect on tax revenue. this study implies that to optimize a country's tax revenue, apart from focusing on optimizing agriculture or manufacture, exchange rate condition needs to be considered. keywords: agriculture, exchange rate, fdi, manufacturing, tax revenue this is an open access article under the cc-by 4.0 license. introduction bulman et al. (2017) uses "middle-income trap" term to define a phenomenon in which a country could be trapped in middle-income status due to the differences in effective growth strategies implemented by low-income countries to achieve high-income status. it implies that a very strong driving force is needed to achieve high-income status so that there can be a shift from a lowincome country to a high-income country. the transition to a high-income status requires the https://www.ilomata.org/index.php/ijtc mailto:sprnwijaya@gmail.com https://doi.org/10.52728/ijtc.v4i3.798 agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 509 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policy makers and the society to focus on the fundamental determinants of the growth itself (eichengreen et al., 2017). world bank (2022) divides middle-income countries into two types. countries with a gross national income (gni) between usd1,036 and usd4,045 defined as lower-middle income economies, and countries with gni between usd4,046 and usd12,535 referred to as upper middle-income economies. in 2020, there are 36 lower-middle income countries and 57 uppermiddle income countries (oecd, 2021). in recent years, around 75 percent of the world's population and 62 percent of the world's poor population are considered middle-income countries (mics). furthermore, around one-third of global gross domestic product (gdp) comes from mics (world bank, 2022). clearly, high-income countries have different conditions from low-income countries. this condition can be seen from the proportion of low-income, lower middle-income, upper middleincome, and high-income countries’ tax revenues to the gdp of each type of country. this is in line with what was stated by oecd (2022) that tax revenues in middle-income countries are of a smaller percentage of gdp than those in high-income countries. chart 1 tax revenue percentage to gdp in each type of countries source: world bank (2023b) however, from 2002 until 2019, the trend in the tax revenue of lower middle-income countries (including indonesia) had increased (world bank, 2023b). chart 2 tax revenue growth in lower middle-income countries from 2002–2019 source: world bank (2023b) 0 5 10 15 20 25 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 high-income economies ($12,696 or more) upper-middle-income economies ($4,096 to $12,695) lower-middle income economies ($1,046 to $4,095) 0 5 10 15 20 25 30 35 40 angola bangladesh belize benin bhutan bolivia cabo verde cambodia cameroon comoros congo, rep. cote d'ivoire egypt, arab rep. el salvador ghana haiti honduras india indonesia iran, islamic rep. kyrgyz republic mauritania morocco nepal nicaragua nigeria pakistan philippines senegal sri lanka https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 510 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in his study, arvin et al. (2021) stated that in low-income and lower middle-income countries, tax revenue and economic growth (measured by gdp per capita) had a causal relationship both in short term and long term. high tax revenue is supported by high economic growth, and vice versa, high economic growth supports high tax revenue. in most low-income and middle-income countries, the economy depends on agriculture and other primary product activities, so that since 1990, the expansion of agricultural land has been increasing (barbier, 2020). middle-income countries contribute around 40 percent of global agricultural production and growth reaching more than 3.5 percent annually (economic study service, 2017). according to world bank (2023a), agriculture is a sector that has the potential to eradicate extreme poverty projected to provide welfare for around 9.7 billion people in 2050. the ability to increase the income of the poor from agriculture sector is considered two to four times more effective than the other sectors. agriculture contributes around 4 percent to global gdp and in some developing countries, and more than 25 percent to gdp (world bank, 2023a). furthermore, large agricultural output is one of the reasons for a country to have a large tax potential (mawejje & sebudde, 2019). besides agriculture, the manufacturing sector in lower middle-income countries also gets the attention. from 2002 until 2019, in lower middle-income countries, the average contribution of the manufacturing sector to gdp was greater than that of the agricultural sector to gdp (world bank, 2023b). chart 3 the growth of agriculture and manufacturing sectors’ contribution to gdp in lower middle-income countries from 2002–2019 source: world bank (2023b) in addition, eichengreen et al. (2017) revealed that the manufacturing sector in middle-income countries was superior to the service sector. followed by the findings of mazhar & rehman (2020) that an increase in the service sector reduces the growth rate of national income per capita both in low-income countries and middle-income countries. on the other hand, the manufacturing sector acts as a growth escalator. a study conducted in high-income countries in asia when entering and leaving middle-income countries, it was found that the value-added contribution of the manufacturing sector to gdp increases the income per capita in a sustainable manner. (huang et al., 2017). 0 5 10 15 20 25 30 35 agrikultur manufaktur https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 511 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc apart from the positive contribution and potential of agriculture to the country's economy, studies on examining the effect of the agricultural sector on tax revenues conducted by karagöz (2013), castro & camarillo (2014), gaalya (2015), alabede (2018), dan rodriguez (2018) indicated a significant negative effect. on the other hand, the researches by karagöz (2013), castro & camarillo (2014), gaalya (2015), dan minh ha et al. (2022) showed a significant positive effect from the manufacturing sector on tax revenues. however, these studies have not been carried out specifically for lower middle-income countries. furthermore, no study has been conducted using the exchange rate as a moderating variable and foreign direct investment (fdi) as a control variable. exchange rate can also affect tax revenue. seade (1990) in his fiscal policy of open developing economies stated that devaluation would increase tax revenue if import activities of a country were dominated by necessities when income is inelastic. however, devaluation will also tend to reduce tax revenue or will even cause losses if tax revenue is more dominantly dependent on taxes on wages (seade, 1990). in his study, gaalya (2015) concluded that the exchange rate had a significant positive effect on tax revenues, whereas ofori et al. (2018), rutto (2020), and tsaurai (2021) concluded the opposite i.e., the exchange rate had a significant negative effect on tax revenue. similar to the exchange rate, fdi affects tax revenue. a number of studies have been conducted to examine this effect. okey (2013), castro & camarillo (2014), pratomo (2020), tsaurai (2021), camara (2022), gaspareniene et al. (2022), dan minh ha et al. (2022) concluded that fdi had a significant effect on tax revenue. only castro & camarillo (2014) found a negative effect, while the others found a positive one. however, gaspareniene et al. (2022) indicated a positive effect from outward fdi and a negative effect from inward fdi on tax revenues. to describe further, the exchange rate and fdi also affect the tax revenue in addition to the agriculture and the manufacturing sectors. nevertheless, there haven’t been any researches conducted specifically to study those effects in lower middle-income countries. thus, this study will examine the effect of the agriculture and manufacturing sector on tax revenue in some lower middle-income countries for the last 18 years. the exchange rate as a moderating variable and fdi as a control variable employing panel data multiple linear regression analysis method were selected. the years 2020 to 2022 were excluded in this study due to the 2019 (covid-19) pandemic in which corona virus impacted the consistency of the observed data. the results of this study are to describe the strategies set by lower middle-income countries in optimizing their tax revenue, either from the agricultural sector or from the manufacturing sector by considering the exchange rate. method this is a quantitative study that analyzes the data by using multiple linear regression panel data. the quantitative study uses statistical procedures or other methods of quantification in analyzing the relationship between study variables (jaya, 2020). to support the research, the multiple linear https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 512 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc regression method is used to determine the linear relationship between the dependent variable and more than one independent variable (suyono, 2018). the data used is panel data since it is a combination of time series and cross section data (sihombing, 2022). panel data comprises agriculture, manufacturing, exchange rate, tax revenue, and the numeric data of several countries from 2002 to 2019. these items are categorized as panel data as these can only be studied by using the quantitative method. additionally, the secondary data were taken from world development indicators data of world bank (2023b). the observed countries are selected based on stratified sampling i.e., the samples selection which is done by dividing the population into subgroups (fink, 2005). firstly, the entire population i.e., all countries in the world, is categorized into high-income economies, upper middle-income economies, lower middle-income economies, and low-income economies based on world bank (2023b). after selecting the lower middle-income countries, the data are then filtered by the country region and chosen for the east asia and pacific region. there are five countries chosen for this study i.e., cambodia, indonesia, the philippines, timor leste, and vietnam. the dependent variable is the percentage of tax revenue to gross domestic product (gdp), while the independent variables are the percentage of agriculture to gdp and the percentage of manufacturing to gdp. it can be summed up that the dependent variable is a variable affected by the independent variable and vice versa.(mukhid, 2021). moreover, this study uses a moderating variable i.e., the exchange rate and control variable i.e., foreign direct investment (fdi). moderating variable is the variable that strengthen or weaken the relationship between the dependent variable and the independent variable, while the control variable is a variable determined by the researcher so that non-study variables do not affect the relationship between the dependent variable and the independent variable (duli, 2019). the details of the variables used in this study are as follows. table 1 study variables variables details units tax revenue (tax) (y) all mandatory transfers to the central government for public purposes excluding fines, penalties, and most social security contributions, minus refunds of over payments of taxes and corrections of tax revenues. %g d p agriculture, forestry, and fishing, value added (agri) (x1) value added (all outputs minus intermediate inputs) from agriculture, forestry, and fishery sectors. %g d p industry, including construction, value added (ind) (x2) value added from mining, manufacturing, construction, electricity, water, and gas sectors. %g d p official exchange rate (exch) (z) the official exchange rate set by the state authority or by the official exchange rate lcu p er https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 513 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc market. calculated on an annual or monthly average. u s d foreign direct investment, net inflows (fdi) (control variable) net inflows from investment which is the sum of equity capital, reinvestment income, other long-term capital, and short-term capital in the balance of payments. %g d p source: world bank (2023b) before carrying out the regression analysis, the classical assumptions tests are made to measure normality, heteroscedasticity, multicollinearity, and autocorrelation. this test was carried out to obtain a regression model that produces reliable and unbiased estimates (purnomo, 2017). the classic assumption tests performed are described in the table below. table 2 classic assumptions test classic assumption s details test tools normality performed to test whether the residual values in the model are distributed normally nor not. h0 : data is distributed normally (prob>chi2 > α) h1 : data is not distributed normally (prob>chi2 < α) skewness and kurtosis test heteroscedastici ty performed to detect whether there is a change in the variance of the residual over time. h0 : homogeneous data variants (prob>chi2 > α) h1 : heteroscedastic data variant (prob>chi2 < α) breuschpagan/co okweisberg test multicollinearity performed to determine whether there is a correlation between independent variables. h0 : there is no high multicollinearity between independent variables (vif < 10) h1 : there is high multicollinearity between independent variables (vif > 10) variance inflation factor (vif) autocorrelation performed to detect whether there is a relationship between the value at time t with the value at time t1 h0 : the model contains autocorrelation (prob>f > α) h1 : the model does not contain autocorrelation (prob>f < α) breuschgodfrey/l agrange multiplier test source: ghozali (2016), purnomo (2017), ismanto & pebruary (2021), and sihombing (2022) https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 514 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the panel data model used is the fixed effect model, the best model based on the selection in the tests conducted. these tests include the chow likelihood ratio test, breusch pagan's lagrange multiplier test, and the hausman test as suggested by sihombing (2021). the details are shown in the following table. table 3 the best model selection test tests details chow likelihood ratio performed to choose which model is better: the common effect model or the fixed effect by using f test. h0 : common effect model is better than fixed effect model (prob>f > α) h1 : fixed effect model is better than common effect model (prob>f < α) lagrange multiplier breucsh pagan performed to choose which model is better: the common effect model or random effect model by using chi square lm test. h0 : common effect model is better than random effect model (prob>chibar2 > α) h1 : random effect model is better than common effect model (prob>chibar2 < α) hausman performed by using chi square test to choose which model is better: the random effect model or the fixed effect model . h0 : random effect model is better than fixed effect model (prob>chi2 > α) h1 : fixed effect model is better than random effect model (prob>chibar2 < α) source: sihombing (2021) and sihombing (2022) in conducting the analysis, the ridge regression model is used. ridge regression is a regression model indicated whether the independent variables in the study are collinear or multicollinearity (chatterjee & hadi, 2006). this model demonstrates slight changes in the standard regression model is as follows: �̃� = 𝛽1�̃�1 + 𝛽2�̃�2 + ⋯ + 𝛽𝑝�̃�𝑝 + 𝜀′ (1) by estimating the equation for the coefficient to be: (1 + 𝑘)𝛽1 + 𝑟12 𝛽2 + ⋯ + 𝑟1𝑝 𝛽𝑝 = 𝑟1𝑦, 𝑟21 𝛽1 + (1 + 𝑘)𝛽2 + ⋯ + 𝑟2𝑝 𝛽𝑝 = 𝑟2𝑦, ⋮ ⋮ ⋮ ⋮ 𝑟𝑝1 𝛽1 + 𝑟𝑝2 𝛽2 + ⋯ + (1 + 𝑘)𝛽𝑝 = 𝑟𝑝𝑦, (2) where 𝑟𝑖𝑗 is the correlation between the ith independent variable and the jth independent variable and 𝑟𝑖𝑦 is the correlation between the ith independent variable and y dependent variable. the solution for equation (2), �̂� 1 , … , �̂�𝑝 is the estimated ridge regression coefficient (chatterjee & hadi, 2006). https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 515 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the study method used to test the hypothesis formulated are as follows: the effect of agriculture on tax revenue although asai & malgioglio (2019) stated that agriculture is more developed in countries with lowincome residents, all literature states that agriculture has a negative relationship with tax revenue. agriculture is mostly a selected sector only for subsistence purpose (subsistent agriculture). besides, agriculture is difficult to tax because it operates informally (alabede, 2018). it also has a small-scale production (castro & camarillo, 2014) so that there are only a small number of taxpayers who pay income tax from agricultural (gaalya, 2015). most agricultural products are exempt from indirect taxes due to their characteristics (rodriguez, 2018). in addition to that, there will be very high costs required to verify income from the agricultural sector to be taxed (gaalya, 2015). consequently, the first hypothesis in this study is: h1 : agriculture has a negative effect on tax revenue. the effect of manufacturing on tax revenue from the existing literature, there are two different views regarding the effect of manufacturing on tax revenue. however, most of the literature stated that this effect is positive. it is supported by the fact explained su & yao (2016) that the manufacturing sector is the main driver of economic growth in middle-income countries. the manufacturing sector allows businesses to generate a lot of profit (karagöz, 2013) in addition to the added value of the products (gaalya, 2015). these conditions make the manufacturing sector easier to tax than the agricultural sector (castro & camarillo, 2014; minh ha et al., 2022). therefore, the second hypothesis of this study is: h2 : manufacturing has a positive effect on tax revenue. the effect of exchange rate on tax revenue exchange rate plays an important role in economy because its changes can affect prices and costs in the foreign exchange market, thus it will have an impact on exports (zhao, 2020). in general, the existing literature state that the exchange rate has a negative effect on tax revenue. an increase or decrease in the exchange rate will affect the amount of goods exported which will ultimately cause the opposite impact to tax revenue (gaalya, 2015; ofori et al., 2018; rutto, 2020; tsaurai, 2021). therefore, the third hypothesis regarding the effect of the moderating variable in this study is: h3 : exchange rate has a negative effect on tax revenue. the effect of interaction of agriculture and the exchange rate on tax revenue by considering the effect of the exchange rate as a moderating variable, the interaction between agriculture and the exchange rate is expected to clarify the effect of the agricultural sector on tax revenues, before interacting with the moderating variable. in other words, the arising effect is similar to the previous one, thus the fourth hypothesis in this study is: h4 : the interaction of agriculture and exchange rate have a positive effect on tax revenue. the effect of interaction of manufacturing and the exchange rate on tax revenue from the fourth hypothesis, the fifth one is similar to the fourth one. h5 : the interaction of manufacturing and exchange rate have a positive effect on tax revenue. https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 516 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results and discussions based on the data collected in this study, tax revenue, agriculture, and manufacturing have higher average values than the standard deviation. it indicates that the distribution of independent variables and the dependent variable is even. in contrast, the moderating variable of the exchange rate -the interaction variable between agriculture and the exchange rateas well as the interaction variable between manufacturing and the exchange rate indicate higher standard deviation than the average value. it shows that the data distribution of the moderating variable and the interaction variable is not even. in addition, the analysis of the data distribution in all variables can also be seen from the range between the average value and the minimum value and the range between the average value and the maximum value. the independent variables and all dependent variables have balanced ranges between the average values and their minimum and maximum values. conversely, the moderating variable and all interaction variables have an unequal range between the average value and the minimum and maximum values. these results indicate that the independent variables and dependent variable used in this study show an adequate data distribution. table 4 descriptive statistics results variables mean std. dev. min. max. tax 11,94785 3,700713 3,992409 22,97874 agri 19,59085 7,14201 8,820324 34,55732 ind 29,988 11,02727 5,049626 48,06075 exch 6.759,704 7.457,763 1 23.050,24 agri*exch 122.590,3 128.883,5 14,18536 401.329,7 ind*exch 247.392,3 274.593,1 5,049626 794.995,1 fdi 4,251471 3,737957 -0,2542563 14,14573 source: processed by using stata application the classical assumptions tests demonstrates that the model passes the heteroscedasticity test and the autocorrelation test, but it fails to pass the normality test and the multicollinearity test. in other words, the variance of the data of the model is homogeneous (the model is free from the heteroscedasticity assumption) and the value of the variable at t-time is not correlated with the variable at t-1 time (the model is free from the autocorrelation assumption). however, the data are not normally distributed (the model is not free from the normality assumption) and there is a correlation between variables (the model is not free from the multicollinearity assumption). table 5 classical assumptions test results classic assumptions tests results interpretation normality prob>chi2 = 0,0000 < α = 5% h0 is rejected; data is not distributed normally heteroscedasticity prob>chi2 = 0,5914 > α = 5% h0≠ is not rejected; the model is free from heteroscedasticity assumption (homogeneous data variants) multicollinearity vif = 46,95 > 10 h0 is rejected; the model contains multicollinearity https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 517 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc autocorrelation prob>chi2 = 0,0545 > α = 5% h0 is not rejected; the model is free from autocorrelation assumption source: processed by using stata application hence, to determine the best regression model, the chow likelihood test, the lagrange multiplier breusch pagan test, and the hausman test are conducted. the results of the tests indicate that the best model is the fixed effect model with details as follows: table 6 the best model selection tests results tests hasil the chosen models chow likelihood test prob>f = 0,0000 < α = 5% fixed effect model lagrange multiplier breusch pagan test prob>chibar2 = 1,0000 > α = 5% common effect model hausman test prob>chi2 = 0,0001 < α = 5% fixed effect model source: processed by using stata application the fixed effect model shows the overall r-squared of 0.5293 which indicates that the independent variables of agriculture and manufacturing affect the dependent variable of tax revenue by 52.93%. other independent variables that are not included in the study model only affect the dependent variable by 47.07%. the data which are not distributed normally in accordance to the results of the normality assumption test are ignored because basically the normality assumption test on panel data can be taken away (kusumaningtyas et al., 2022). however, to overcome the multicollinearity in the data, the ridge regression model is used. this is in line with suyono (2018) who stated i.e., the multicollinearity can be overcome by using a ridge regression model. the table below shows the ridge regression results. table 7 ridge regression results variables coefficients p>|t| prob>f agri -0,4014813 0,000** 0,000** ind 0,0699612 0,004** exch -0,0002728 0,194 agri*exch 0,0000353 0,000** ind*exch -0,00000587 0,189 fdi 0,496454 0,000** constanta 14,57284 0,000** **significant at α = 5%; *significant at α = 10% source: processed by using stata application the regression model equation obtained is as follows: 𝑇𝐴𝑋𝑖𝑡 = 14,57284 − 0,4014813𝐴𝐺𝑅𝐼𝑖𝑡 + 0,0699612 𝐼𝑁𝐷𝑖𝑡 − 0,0002728 𝐸𝑋𝐶𝐻𝑖𝑡 + 0,0000353𝐴𝐺𝑅𝐼 ∗ 𝐸𝑋𝐶𝐻𝑖𝑡 − 0,00000587 𝐼𝑁𝐷 ∗ 𝐸𝑋𝐶𝐻𝑖𝑡 (3) https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 518 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the model implies that: 1) an increase in agriculture by 1 percent of gdp will reduce tax revenue by 0.4014813 percent of gdp and vice versa; 2) an increase in manufacturing by 1 percent of gdp will increase tax revenues by 0.0699612 percent of gdp and vice versa; 3) an increase in the exchange rate by 1 lcu per usd will decrease tax revenue by 0.0002728 percent of gdp and vice versa; 4) an increase in the interaction between agriculture and the exchange rate by 1 unit will increase tax revenue by 0.0000353 percent of gdp and vice versa; and 5) an increase in the interaction between manufacturing and the exchange rate by 1 unit will decrease tax revenue by 0.00000587 percent of gdp and vice versa. the p>|t| and prob>f values listed in the table have been adjusted by dividing p>|t| and prob>f from the stata application with two. it is such performed since the study conducted a one-tailed statistical test (one tail), illustrated by the study hypothesis used. the estimation shows whether or not the independent variables affect the dependent variable, and if the effect is positive or negative. this is in line with a statement by kasim (2008) i.e., a one-tailed statistical test occurred when the alternative hypothesis determine one thing is higher or lower than the others. the pvalue in one-tailed statistical test is twice the p-value in two-tailed statistical test (kasim, 2008). the above explanation summarizes, the t-test results before moderation show that all independent variables have a significant effect on tax revenue. in this case, agriculture has a negative effect on tax revenue, while manufacturing has a positive effect. however, after moderation with the exchange rate variable, the interaction between agriculture and the exchange rate has a positive effect on tax revenue, while the interaction between manufacturing and the exchange rate has a negative effect. furthermore, the f-test results show that all independent variables have a significant effect on the dependent variable of tax revenue simultaneously. the effect of agriculture on tax revenue the first hypothesis testing results indicate that before moderating the exchange rate variable, the agricultural sector has a negative effect on tax revenue. this is similar to the study conducted by alabede (2018), castro & camarillo (2014), gaalya (2015), and rodriguez (2018). the agricultural sector in lower middle-income countries is generally carried out only for livelihood purposes (subsistence agriculture) (alabede, 2018). this sector is difficult to tax because it generally operates informally (alabede, 2018) and tends to be a small-scale, resulting in a small number of taxpayers paying income tax on agricultural sector (castro & camarillo, 2014; gaalya, 2015). moreover, most agriculture products are exempt from value added tax due to their characteristics (rodriguez, 2018). as a result, the cost of verifying agricultural sector income to be taxed is very high (gaalya, 2015). despite the fact that the agricultural sector is the low-income countries’ icon due to its major contributions to the economies (asai & malgioglio, 2019; economic study service, 2017), the potential problems that can occur due to limited access to technology, high investment costs, lack of skills, knowledge, and a supportive environment (mccampbell, 2022) and the conditions mentioned, draw the conclusion that the agricultural sector has a negative effect on tax revenue. https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 519 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of manufacturing on tax revenue the second hypothesis testing results show that before moderating the exchange rate variables, the manufacturing sector has a positive effect on tax revenue. this is in line with the study conducted by castro & camarillo (2014), karagöz (2013), gaalya (2015), and minh ha et al. (2022). in contrast to the agricultural sector, the manufacturing sector is one of the sectors easier to tax. manufacturing allows businesses to generate a lot of profit besides adding value to the products they produce. even though this effect will depend on the conditions of the manufacturing sector in each country (hamdan & rana, 2021), manufacturing serves as the basic capital for a country to create added value to the raw materials. they are processed into finished products and profits generation is made possible. therefore, manufacturing can boost economic growth both from the sector itself and from its contribution to drive other sectors (huang et al., 2017; mital et al., 2014; okeyo, 2022; su & yao, 2016; wicaksono et al., 2023). the effect of exchange rate on tax revenue the third hypothesis testing results show that the exchange rate has no effect on tax revenue. this is not in line with the study conducted by gaalya (2015), rutto (2020), tsaurai (2021), and ofori et al. (2018) who stated that the exchange rate has a negative effect on tax revenue. apart from the statement that the exchange rate have an impact on the economy (gragnon & hinterschweiger, 2011; zhao, 2020), the study results indicate that this role does not make the exchange rate affect tax revenues. however, when the exchange rate moderates the effect between the agricultural sector and the manufacturing sector on tax revenues, there is a change in the direction of the effect of the two sectors. the effect of the interaction between agriculture and the exchange rate on tax revenue the fourth hypothesis testing results indicate that the interaction between the exchange rate and the agricultural sector has a positive effect on tax revenues. this is the inverse effect of the previous direction before the moderation. this condition can occur as stated by seade (1990) that if imports of a country rely on the income-inelastic goods i.e., the basic agricultural goods, imports of these goods will not undergo changes when a devaluation occurred. consequently, if devaluation strikes, the increase in the price of imported goods will boost the import duty revenue which in turn can enhance tax revenue. the underlying reason behind the changing of the effect of the agricultural sector on tax revenue is one condition, from negative to positive. the effect of the interaction between manufacturing and the exchange rate on tax revenue the fifth hypothesis testing results show that the interaction between the exchange rate and the manufacturing sector has a negative effect on tax revenue. this is also the inverse effect of the previous direction before the moderation. exchange rate volatility creates uncertainty and costs of the avoidance risks of the business actors (ofori et al., 2018). in this case, the overvaluation causes the price of goods to be more expensive. despite high manufacturing production, high raw material prices due to the overvaluation lower the profits. as a result, tax revenues will also be low. furthermore, the interaction between the manufacturing sector and the exchange rate changes the direction of the effect before the moderation i.e., from positive to negative. https://www.ilomata.org/index.php/ijtc agriculture and manufacturing for lower middle-income countries’ tax revenue: exchange rate as moderating variable wulandari and wijaya 520 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusions before moderating the exchange rate, agriculture has a negative effect on tax revenue and manufacturing has a positive effect. however, after being moderated by the exchange rate, agriculture has a positive effect on tax revenue and manufacturing has a negative effect. the results of this study imply that to optimize the tax revenue, besides focusing on optimizing the agricultural sector or the manufacturing sector, the exchange rate conditions need to be considered as well. a controlled exchange rate can avoid the effect of declining tax revenues due to the positive or negative effects of each sector on tax revenue. this study is limited to only one-way effect between one variable and the others. in fact, there is a two-way effect between variables. this effect can be identified by using panel vector autoregressive (pvar) method or panel vector error correction model (pvecm) method to identify the long-term and short-term effects. in addition, the manufacturing variable used in this study covers several sectors compared to the manufacturing sector itself such as mining, construction, electricity, water, and gas sectors. further study can be carried out by employing only manufacturing variable data to avoid bias in its results. references alabede, j. o. 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(2021). determinants of tax revenue in upper middle-income group of countries. journal of accounting and management, 11(2), 148–160. wicaksono, g., priyambodo, v. k., sukma, p., parju, nurchayati, ridhawati, r., hanani, t., rizki, n., fauzaan, r., lestari, b. a. h., & prasidya, t. c. i. t. (2023). akuntansi perusahaan manufaktur. pt global eksekutif teknologi. https://books.google.co.id/books?id=c3ateaaaqbaj&pg=pa49&dq=manufaktur+adal ah&hl=id&newbks=1&newbks_redir=0&sa=x&ved=2ahukewimgamg7er-ahwljgghcifbcmq6af6baggeai#v=onepage&q=manufaktur%20adalah&f=false world bank. (2022). middle income countries overview. the world bank. https://www.worldbank.org/en/country/mic/overview world bank. (2023a). agriculture overview. the world bank. https://www.worldbank.org/en/topic/agriculture/overview world bank. (2023b). world development indicators. https://databank.worldbank.org/source/world-development-indicators# zhao, y. (2020). the influence and impact of the exchange rate on the economy. e3s web of conferences, 214. https://doi.org/10.1051/e3sconf/202021403007 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 561-583 561 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia heriantonius silalahi directorate general of taxes, indonesia correspondent: heri.silalahi@gmail.com received : may 28, 2023 accepted : july 21, 2023 published : july 31, 2023 citation: silalahi, h. (2023). juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia. ilomata international journal of tax and accounting, 4(3), 561-583. https://doi.org/10.52728/ijtc.v4i3.778 abstract: the purpose of this research is to conduct a juridical analysis of criminal law enforcement in the field of taxation in indonesia. the focus of this study is to evaluate the effectiveness of legislation and its implementation in combating tax crimes. the research method used is a normative juridical approach by examining legislation related to tax crimes, including tax laws, government regulations, and relevant policies. additionally, an analysis of the legal practices and enforcement of tax crimes in indonesia is conducted. the research findings indicate that the legislation in the field of taxation has a strong foundation to address tax crimes. however, there are several challenges in its implementation, such as the complexity of tax regulations, lack of adequate human resources and technology, and corruption issues that can affect tax law enforcement. in this context, the research provides recommendations to strengthen the system of criminal law enforcement in tax matters. the recommendations include improving coordination among relevant institutions, enhancing the capacity of human resources in the field of taxation, utilizing information technology to support supervision and tax law enforcement, and increasing transparency and accountability in the process of tax law enforcement. this research is expected to provide a better understanding of the regulation of tax crimes and contribute to the policy and the legislative reforms related to tax law enforcement in indonesia? keywords: criminal law, law enforcement implementation, tax crimes this is an open access article under the cc-by 4.0 license. introduction taxation is a critical aspect of a country's economy since it provides an essential funding for government activities and public services. however, tax crimes pose a threat to the integrity and fairness of the tax system. the directorate general of taxes (dgt) in indonesia plays a significant role in enforcing criminal tax laws and addressing tax offenses. these offenses encompass various violations, such as tax evasion, false reporting, forgery, avoidance, and fraud, with severe implications for the state and the obedient taxpayers. effective enforcement of criminal law in taxation is essential to maintain the integrity of the tax system and to ensure fair compliance. https://www.ilomata.org/index.php/ijtc mailto:heri.silalahi@gmail.com https://doi.org/10.52728/ijtc.v4i3.778 juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 562 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, there are challenges in the enforcement of tax law, including the need for a comprehensive analysis of the legal framework, law enforcement processes, and oversight of tax compliance. the research in this area aims to improve understanding and to strengthen the taxation law enforcement system that will lead to an enhanced tax compliance, increased state revenues, and a fair environment for all stakeholders. therefore, it is crucial to address challenges such as complex regulations, limited resources, and coordination among law enforcement agencies to effectively handle criminal tax cases in indonesia(adi 2020). the performance of the directorate general of taxes (dgt) in law enforcement during the fiveyear period from 2017 to 2021, as reported by the direktorat jenderal pajak (2022), can be summarized as follows: tabel 1. investigation report 2017 2021 no description unit year 2021 2020 2019 2018 2017 1 issuance of investigation warrant letter 155 253 176 146 103 2 completion of investigation article 8 paragraph (3) kup law taxpayer 20 3 case files declared complete by the prosecutor's office (p-21) and its equivalent: file 127 134 4 taxation crimes file 92 95 130 5 money laundering crime file 1 2 4 6 article 44b of uu kup file 10 3 6 7 loss to state revenue billion idr 1.340 idr 314 idr 1.271 idr 1.785 8 the defendant has been convicted file 84 91 88 57 24 9 loss to state revenue billion idr 511 idr 671 idr 1.105 idr 1.727 idr 1.342 10 criminal fine billion idr 776 idr 1.337 idr 3.677 idr 3.511 idr 2.107 11 asset confiscation activity 46 12 value of seized assets billion idr 1.060 based on the provided data, several observations can be made regarding the effectiveness of law enforcement and tax compliance in indonesia. firstly, there has been a decrease in the number of investigation orders issued by the dgt which indicates efforts to improve taxpayer compliance. secondly, the completion of investigations under article 8(3) of the taxation law shows concrete https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 563 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc steps taken to effectively resolve tax cases. additionally, the declaration of completed case files by the prosecutor signifies attempts to gather evidence for legal prosecution against tax offenders. the existence of case files related to tax crimes and money laundering crimes demonstrates the enforcement of laws against tax violations and highlights attention to the connection between tax crimes and money laundering. the increasing number of case files related to article 44b of the taxation law reflects the dgt's focus on addressing tax violations under this provision. moreover, the data emphasizes substantial state revenue losses caused by tax violations, with harmonization of tax regulations aimed at improving compliance and creating a favorable business environment for investment and economic growth.(verma 2021). in 2021, the dgt achieved positive performance in the gross income received (pbp or penghasilan bruto penerimaan) . through law enforcement collaboration, 5,110 taxpayers made corrections to their tax return notices (surat pemberitahuan tahunan or spt) and/or made payments amounting to idr 1,618,071,341,906. furthermore, the dgt also successfully recovered state revenue losses amounting to idr 1.34 trillion, exceeding the target of idr 1.07 trillion. the recovery of losses came from the resolution of 434 preliminary evidence examination reports (lpbp) with the disclosure of wrongful acts under article 8 paragraph (3) of the general provisions and procedures of taxation law (uu kup). pbp serves as an initial step in criminal tax law enforcement. if there is sufficient initial evidence indicating alleged tax crimes, further investigation can be conducted by the state tax investigators (ppns) of the dgt. therefore, this research aims to conduct a juridical analysis of law enforcement in taxation sector, focusing on reviewing legislation and its implementation in indonesia. the findings of this study are expected not only to provide a deeper understanding of the issues and challenges faced in tax law enforcement but also to offer valuable recommendations for policy and legislative reforms.(sukandar 2021) problems formulation and research purposes based on the aforementioned background, several issues can be identified regarding tax law enforcement and the termination of tax criminal investigations. these include: 1) what is the regulatory framework governing criminal offenses in the field of taxation within the tax legislation? a) is the regulatory framework governing criminal offenses in taxation clear, comprehensive, and coherent? b) are there any weaknesses or shortcomings in the regulatory system concerning tax crimes? 2) how is the process of criminal law enforcement carried out in handling tax-related offenses and ensuring compliance with tax regulations? a) what are the procedures, practices, and mechanisms employed in enforcing criminal law in tax matters? b) what are the challenges and effectiveness of the current enforcement processes in taxrelated offenses? by addressing these problems, this research is conducted in order to provide valuable insights and recommendations for policy and legislative reforms in the field of tax law enforcement in indonesia. the research seeks to analyze the regulatory framework governing criminal offenses in https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 564 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxation, understand the process of criminal law enforcement in tax matters, assess tax compliance supervision, and identify issues affecting the termination of tax criminal investigations. in addition, the research aims to assess tax compliance supervision within the context of tax law enforcement. this involves evaluating existing supervisory mechanisms to ensure tax compliance and prevent tax crimes. the analysis will focus on supervisory institutions, monitoring procedures, and cooperation between relevant agencies. furthermore, the study is conducted to identify issues that can affect the cessation of tax criminal investigations. this includes identifying barriers or challenges that hinder the termination of such investigations, for instance lack of evidence, procedural issues, or weaknesses in regulations governing the cessation process. by identifying these issues, the research will contribute to the attempts aimed at enhancing the effectiveness and fairness of the cessation of tax criminal investigations. method the research methodology used is the normative juridical method. the juridical approach refers to a legal dogmatic approach that focuses on the analysis of legal norms and regulations that are applicable and relevant to the research object. the normative approach is used to connect legal norms within legislation with principles, doctrines, theories, history, and comparative law in order to draw conclusions in the research. to obtain legal materials, literature study is implemented as the research method. primary legal materials include existing binding legislation, such as the 1945 constitution, the criminal code (wetboek van strafrecht), the law on the formation of legislation, the law on judicial power, the law on limited liability companies, the general taxation law, the value added tax law for goods and services, and the luxury sales tax law. secondary legal materials are obtained from books and legal literature, scientific journals, and legal opinions accessible through the internet. additionally, tertiary legal materials, such as dictionaries and related news, are used to gather information about the disclosure of tax crime cases, both through internet sources and official releases from the tax authorities. these materials help provide an overview of the modus operandi, criminal subjects, accused perpetrators, and the criminal sanctions applied (rofiq 2021). conception of tax crimes criminal law in indonesia comprises substantive criminal law, which defines criminal offenses and penalties, and procedural criminal law, which governs the processes involved in handling criminal cases. tax crimes are justified by three main factors. firstly, tax offenses cause harm to state finances, resulting in financial losses that affect governance, development, and social welfare. secondly, tax crimes ill treat the society through the deprivation of funds needed for public interests such as infrastructure, education, healthcare, and social welfare. thirdly, non-payment of https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 565 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxes violates legal obligations established by the state, as taxes serve as a means to finance public expenditures (smith 2022). the definition of criminal acts in the field of taxation is not explicitly provided in tax law. however, tax crimes are defined as offenses related to taxation that fall under existing criminal law provisions, such as embezzlement, fraud, forgery, and theft. law number 25 of 2007 concerning investment and law number 8 of 2010 concerning the prevention and eradication of money laundering provide partial definitions of tax crimes. minister of finance regulation number 177/pmk.03/2022 offers the clearest definition, stating that criminal offenses in the field of taxation are acts subject to criminal sanctions under various tax laws. in the indonesian criminal code (kuhp), criminal acts are categorized into: crimes (misdrijven) and violations (overtredingen). crimes are perceived as unjust and contrary to the legal order, even if not explicitly designated as criminal acts, whereas violations are acts considered unlawful only after being defined as such by specific laws. in general, crimes carry more severe penalties than violations, involving imprisonment rather than fines or non-custodial penalties. crimes require proof of fault, such as intent or negligence, whereas violations do not necessitate such proof. attempting to commit a violation and aiding and abetting a violation are not punishable. moreover, the statute of limitations and methods of punishment differ the terms crimes from violations.(m. , & a. f. rahman 2020) in the sector of taxation, criminal acts are further divided into violations and crimes. violations are unintentional tax-related offenses resulting from negligence or mistakes, such as failing to submit an annual tax return (spt) or submitting it with incorrect or incomplete information. violations are punished with imprisonment and fines based on the amount of tax owed or underpaid. criminal acts in taxation encompass intentional or unintentional actions that violate tax legislation, including submitting inaccurate information, evading tax payment, or failing to fulfill tax obligations within the specified time frame. compliance with tax law relies on the fulfillment of legal duties and obligations by all stakeholders, including tax officials and taxpayers.(raharja 2019) consolidation of law of the republic of indonesia number 6 of 1983 concerning general provisions and tax procedures as amended by law of the republic of indonesia number 7 of 2021 criminal law can be divided into general criminal law and special criminal law. general criminal law applies to all citizens and encompasses the provisions in the criminal code and code of criminal procedure. special criminal law, on the other hand, is designed for specific legal subjects or is regulated in specific laws. special criminal law includes military criminal law for active military personnel and laws addressing corruption, terrorism, money laundering, and taxation. in taxation, the general provisions and procedures of taxation law serve as the basis, and provisions related to tax-related offenses can also be found in the criminal code and other legislative regulations. tax law is considered a special criminal law in the realm of taxation and plays a crucial role in addressing tax offenses while adhering to the principles of general criminal law. https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 566 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in indonesia, the principles of law enforcement have evolved to include changes in tax sanctions and the principle of tax law as ultimum remedium. tax law is now considered a last resort for resolving tax issues, with the primary purpose of generating state revenue and providing public services. before resorting to tax collection, alternative measures such as effective tax regulations, incentives, or voluntary agreements are considered. criminal sanctions in tax enforcement are used as a last resort for serious or organized tax violations, with milder enforcement measures initially employed, such as tax audits, warnings, fines, and administrative efforts. criminal prosecution or sanctions are only applied when these actions fail or in cases of severe violations that significantly impact state finances. the use of tax law as ultimum remedium should be exercised with caution and proportionality based on the level of tax violations committed. the taxation law encompasses both administrative and criminal provisions, with the latter establishing legal sanctions for tax violators who engage in activities such as tax evasion, tax avoidance, or the submission of false data or information in tax reporting.(m. , & a. f. (2020). rahman 2020) criminal acts in the field of taxation in indonesia as mentioned earlier, the definition of criminal offenses in the field of taxation is most explicitly stated in the minister of finance regulation number 177/pmk.03/2022 concerning the procedure for preliminary examination of criminal offenses in the field of taxation. article 1 number (6) of the minister of finance regulation stipulates: “(criminal offenses in the field of taxation are acts that are subject to criminal sanctions as regulated in the general provisions and tax procedures law, the land and building tax law, the stamp duty law, the tax collection by compulsory letter law, and the financial information access law for tax purposes.)" criminal acts in the field of taxation are regulated under the consolidation of law of the republic of indonesia number 6 of 1983 concerning general provisions and tax procedures, as amended by law of the republic of indonesia number 7 of 2021 in the general provisions and tax procedures law, criminal acts can be categorized as follows: criminal acts in the field of taxation according to article 38 of the kup law article 38 of the indonesian tax law (kup law) deals with criminal offenses in taxation that result from negligence by taxpayers in fulfilling their tax obligations. it is stated that due to their negligence, individuals who fail to submit tax returns, to submit incorrect or incomplete tax returns, or provide incorrect information that leads to losses in state revenue will be subject to penalties. the penalties include a minimum fine of one time the amount of unpaid or underpaid taxes and a maximum fine of two times the amount of unpaid or underpaid taxes, as well as imprisonment from a minimum of three months to a maximum of one year. the indonesian tax law (kup law) regulates criminal acts related to taxpayers' tax obligations. article 38 of the kup law specifically addresses negligence on the part of taxpayers, which refers to unintentional actions, carelessness, or lack of attention to tax responsibilities. one of the criminal acts specified in article 38 is the failure to file tax returns. taxpayers are required to submit notification letters that report their tax calculations, payments, taxable objects, assets, and liabilities. timely and accurate submission of these notification letters is crucial for fulfilling tax obligations and maintaining a transparent and effective tax system. https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 567 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc furthermore, submitting tax returns with incorrect or incomplete information, or attaching false information, is also considered a criminal act. the notification letter must be filled out accurately with complete and clear information in indonesian using latin letters and arabic numerals prior to being signed and submitted to the relevant tax authority office, unless exempted.(putra 2019) attachments accompanying the notification letter should contain truthful information, and failure to include required attachments renders the letter invalid. it is important to avoid attaching false information or providing incorrect or incomplete details in the notification letter. compliance with tax obligations, including the timely submission of accurate and complete notification letters, is crucial for maintaining tax transparency and effective tax administration under the kup law. criminal acts in the field of taxation according to article 39 of the kup law article 39 of the indonesian tax law (kup law) deals with intentional criminal offenses in taxation. while negligence is explicitly defined in article 38, the concept of intent is not specifically outlined in the kup law. article 39, paragraph (1) lists various deliberate offenses, such as failure to register for taxpayer identification numbers (tins) or vat registration, misuse of tins or vat registration, failure to file tax returns, submission of incorrect or incomplete tax returns or information, refusal to undergo an audit, presentation of false or forged documents, failure to maintain proper bookkeeping or provide required documents, and failure to remit withheld taxes. these offenses, which lead to state revenue losses, are subject to penalties that include six months to six years imprisonment and a minimum fine from two times the amount of unpaid or underpaid taxes, up to a maximum fine of four times the amount of unpaid or underpaid taxes. paragraph (2) states that if a person commits another tax crime within one year after completing a previous imprisonment sentence, the criminal penalties will be extended by one to two times. paragraph (3) addresses attempts to commit tax crimes related to misuse of tins or vat registration, and filing incorrect or incomplete tax returns or information in the context of applying for tax refunds, carryover of taxes, or tax crediting. the penalties for such attempts include imprisonment ranging from six months to two years, a minimum fine of two times the amount of the applied tax refunds and/or carryover of taxes and/or tax crediting, and a maximum fine of four times the amount of the applied tax refunds and/or carryover or crediting. in the determination of criminal offenses, the element of intention (opzet) is crucial. intention refers to the conscious will directed towards committing a specific crime. proving intentional acts requires demonstrating the desire and knowledge (willens en wetens) of the perpetrator, meaning they desired the act and were aware of its consequences. the presence of intention is often established based on the circumstances and actions of the perpetrator during the alleged unlawful act. compliance with tax obligations, such as registration, proper use of the taxpayer identification number (npwp), and not obstructing taxation, is vital for maintaining tax transparency, effective administration, and compliance under the kup law.(pratama 2022) criminal acts in the field of taxation according to article 39a of the kup law article 39a of the taxation law (uu kup) regulates criminal offenses in taxation, specifically pertaining to tax invoices, tax collection evidence, tax deduction evidence, and tax deposit https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 568 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evidence. this article stipulates that individuals who intentionally engage in the following actions will face imprisonment for a minimum of 2 years and a maximum of 6 years, as well as fines ranging from 2 times to 6 times the amount of taxes indicated in the relevant documents: issuing and/or using tax invoices, withholding receipts, or tax payment slips that do not correspond to actual transactions and issuing tax invoices prior to being registered as a taxable person for vat purposes (oktaviani 2022). such criminal offenses aim to combat fraudulent practices in relation to tax documentation, which can result in financial harm to both taxpayers and the state's tax revenue. tax invoices are essential administrative records issued by registered taxable entrepreneurs to document tax collection for taxable goods or services. offenses related to tax invoices, such as issuing or using invoices without actual transactions, can lead to fraudulent claims and substantial financial losses for the state. this not only impacts government revenue but also affects other taxpayers who rely on these invoices. withholding tax mechanisms play a crucial role in income tax collection by deducting or collecting taxes on various types of income. the misuse of tax invoices, tax deduction evidence, or tax collection evidence that lacks a basis in actual transactions is considered a tax offense, carrying legal consequences that include criminal sanctions. it is important to ensure that only officially recognized taxable entrepreneurs issue tax invoices to prevent illegal practices and ensure compliance with tax regulations, particularly the value added tax law (mustikasari 2022). criminal acts in the field of taxation according to article 41 of the kup law under article 41 of the taxation law (uu kup), criminal offenses related to taxation involve the enforcement of the obligation to maintain the confidentiality of taxpayer data known or possessed by tax officials, as stated in article 34 of the same law. breaching this obligation can result in legal consequences. negligence in maintaining confidentiality can lead to a maximum penalty of one year's imprisonment and a fine of up to idr 25,000,000. deliberate non-compliance or causing officials to breach their obligations can result in a maximum penalty of two years' imprisonment and a fine of up to idr 50,000,000. complaints from affected taxpayers are required to initiate investigation or prosecution in cases of breaching taxpayer confidentiality. exceptions to the obligation may arise in specific circumstances, such as court proceedings or with written authorization from the minister of finance. ultimately, it is the responsibility of tax officials to safeguard taxpayer information and any violation, whether intentional or due to negligence, can lead to appropriate penalties. criminal acts in the field of taxation according to article 41a of the kup law criminal offenses under article 41a of the taxation law pertain to the mishandling of data relevant to taxation, specifically information and evidence necessary for the implementation of tax laws and regulations. such offenses can be committed not only by taxpayers or tax officials but also by individuals who are connected to the taxpayer and engage in activities that can create rights and obligations in the context of taxation. according to article 41a, individuals who are required to provide requested information or evidence, as stated in article 35, but deliberately fail to do so or provide false information or evidence, can be subject to imprisonment for a maximum of one year and a maximum fine of idr 25,000,000.00 (twenty-five million rupiah). https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 569 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the provision in article 35 of the taxation law sets out the requirements for parties such as banks, public accountants, notaries, tax consultants, administrative offices, and other third parties to provide information or evidence when requested by the director general of taxes for tax audits, tax collection, or investigations into tax-related crimes. if these parties are bound by confidentiality obligations, those obligations are nullified specifically for the purpose of tax audits, tax collection, or tax crime investigations, except for banks which require a written request from the minister of finance to nullify the confidentiality obligation. article 41a of the taxation law defines two specific criminal offenses regarding testimony or evidence. the first offense involves intentionally refusing to provide testimony or evidence to the director general of taxes, while the second offense pertains to intentionally providing false testimony or evidence. parties such as banks, public accountants, notaries, tax consultants, administrative offices, and other third parties who have a legal relationship with the taxpayer in the context of tax audits, tax collection, or investigations of tax-related crimes are obligated to provide truthful testimony or evidence. failure to fulfill this obligation or providing false information can result in criminal charges in the field of taxation.. criminal acts in the field of taxation according to article 41b of the kup law the criminal offenses regulated under article 41b of the taxation law are offenses related to the process of investigating tax-related crimes. article 41b of the taxation law specifies that: “any persons that deliberately obstruct or hinder a tax crime investigation shall be sentenced to imprisonment for a maximum of 3 (three) years and a maximum fine of idr75,000,000.00 (seventy-five million rupiah).” the investigation process in tax law enforcement is of utmost importance and should not be impeded. article 44 of the taxation law emphasizes that individuals who obstruct or hinder the investigation of tax-related crimes, such as by obstructing searches or concealing evidence, will face criminal consequences. obstruction refers to intentionally preventing the investigation from uncovering the methods used in tax crimes, while hindrance refers to intentionally impeding the investigation's ability to uncover such methods. these actions, either physical or non-physical, lead to the failure of the investigation into tax-related crimes. criminal acts in the field of taxation according to article 41c of the kup law the taxation law, specifically article 41a and 41c, addresses criminal offenses related to data and information in the context of taxation. article 41a focuses on intentional refusal or provision of false testimony or evidence by individuals connected to the taxpayer. parties like banks, accountants, notaries, and tax consultants are obligated to provide truthful information. failure to do so can result in imprisonment and fines. on the other hand, article 41c addresses the deliberate failure to fulfill obligations to provide tax-related data and information. it covers various scenarios, including non-compliance, causing unfulfillment by officials or other parties, and misuse of tax data resulting in state revenue losses. the penalties include imprisonment and fines. these provisions emphasize the importance of fulfilling obligations and safeguarding tax-related information in order to maintain the integrity of the tax system and protect state interests https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 570 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc criminal acts in the field of taxation according to article 43 of the kup law in the field of taxation, not only taxpayers and tax officials can commit tax-related crimes, but other parties such as employees, representatives, legal counsel, tax consultants, and other professionals are prone to get involved in various illegal forms, highlighting the importance of understanding their roles and positions to prevent tax offenses and ensure compliance with tax laws. the involvement of these other parties does not place them in the position of the principal offender (dader) of the crime. their position is limited to participation in a tax-related crime, such as ordering (doenplegen), assisting (medeplegen), inciting (uitloking), and abetting (medeplichtigheid). thus, the involvement of these other parties in a tax-related crime always falls into one of these forms of participation. article 43 of the taxation law explicitly states that individuals who are not taxpayers or tax officials can still be classified as committing tax-related crimes. the provisions regarding the actions of these other parties are explicitly regulated in article 43, which states that the same provisions applicable to taxpayers and tax officials also apply to representatives, proxies, employees, or any other parties who order, participate in, recommend, or assist in tax crimes. this means that these parties can be held accountable for their involvement in tax offenses. the law recognizes various forms of participation in these offenses, aiming to prevent financial losses to the state. the directorate general of taxes is responsible for overseeing and investigating taxpayers and related parties to identify and take appropriate action against those involved in taxrelated crimes. 1) ordering to commit (doenplegen). "menyuruh melakukan" (doenplegen) is a form of participation mentioned in article 43 paragraph (1) of the taxation law (uu kup). in this context, lamintang states that within a doenplegen, there is a clear distinction between someone who orders another person to commit a criminal act and another person who carries out the instructed criminal act. doenplegen can be literally translated as "maker of the perpetrator" because every individual in indonesia uses the term "penyuruh" (the one who orders). if someone else orders the perpetrator to commit an act that would typically be a criminal offense, but for certain reasons the perpetrator cannot be held criminally liable, the perpetrator becomes a mere instrument controlled by the person who gives the order. such a perpetrator is referred to as "martus manistra" (controlled hand) in legal terminology, while the one giving the order is referred to as "manus domina" (dominant hand). lamintang, with a reference to simons' viewpoint, addressed several conditions that must be met by a person who is ordered to commit an act, including being deemed "ontoerekeningsvatbaar" (not accountable) under article 44 of the criminal code (kuhp). other conditions include having a mistaken belief or misunderstanding about an element of the offense, lacking culpability or intent required by the law, lacking the required intent despite being indicated in the offense formulation, being under irresistible coercion, fulfilling an official order with good intentions even if given by an unauthorized superior, or lacking a specific attribute or quality necessary for the perpetrator. https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 571 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these conditions outline situations where the person executing the offense may have mitigating circumstances or lack the necessary mental state, intention, or capacity. the explanation of article 43 paragraph (1) of the taxation law (uu kup) clarifies that those who are subject to punishment for committing tax-related offenses are not limited to taxpayers alone but also include tax agents, legal representatives of taxpayers, employees of taxpayers, public accountants, tax consultants, or other parties in their capacity as the ones who give orders to carry out criminal acts in the field of taxation. 2) assisting (medeplegen) "turut melakukan" (medeplegen) is a form of complicity. this is emphasized by lamintang, as within this form of complicity, there is always a main perpetrator and one or more accomplices who assist in the commission of the offense committed by the main perpetrator. therefore, this form of complicity is often referred to as "mededaderschap" (co-perpetratorship). thus, "medeplegen" is not only a form of complicity but also a form of perpetration. "medeplegen" (assisting) as a form of complicity does not require each person involved to fulfill all the elements of the offense as in the concept of "doenplegen" (ordering, perpetrator maker). all the elements of the offense can be divided among several individuals. however, it should also be possible for one participating offender to perform an act that constitutes the commission of the offense, while another participating offender performs an act that does not fall within the description of the offense but is crucial for the execution of the act committed by the first offender. for example, the second participating offender may only act as a lookout while their accomplice carries out the theft.(mustikasari 2022) tax law also recognizes "turut melakukan" (medeplegen) in relation to an offense. this means that not only the taxpayer is considered the perpetrator of a tax offense, but other individuals are also involved to ensure the commission of the offense. those who can be considered as "pihak lain" (other parties) in relation to "medeplegen" include tax representatives, authorized agents of the taxpayer, employees of the taxpayer, public accountants, tax consultants, notaries, doctors, or other professions related to tax law.(mitchell 2020) each person who jointly commits a tax offense is fully responsible for all consequences arising within the scope of their collaboration, and each individual is accountable for their actions. this reflects the consequences that arise from participating in an act that leads to a tax offense. 3) incitement (uitloking) uitloking, or incitement, refers to intentionally influencing another party who can be held accountable to commit an offense using methods prescribed by the law. once incited, that person deliberately commits the offense in question. incitement or instigation to commit an act is one of the forms of complicity. in the context of tax law, it relates to offenses committed by taxpayers due to the encouragement to engage in such actions. this encouragement can be the taxpayer, authorized agents of the taxpayer, employees of the taxpayer, public accountants, tax consultants, notaries, or other professions related to taxation.(mawardi 2020) https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 572 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the provision governing individuals who incite or encourage the commission of an act is regulated in article 43 of the taxation law (uu kup). the explanation of this article expands the understanding of individuals who incite or encourage others to commit an act, not only limited to representatives of taxpayers, authorized agents, taxpayer employees, and other parties, but also includes public accountants and tax consultants. the inclusion of public accountants and tax consultants as parties who incite or encourage others to commit an act is a preventive measure aimed at addressing tax offenses. it is undeniable that public accountants and/or tax consultants play a significant role for taxpayers, including activities that involve instigation or encouragement towards acts that may lead to tax offenses.(liu 2021) 4) abetting (medeplichtigheid) assisting in the commission of an act (medeplichtigheid) is also a form of complicity in relation to tax offenses. the nature of assistance in tax law can be active or passive. this differs from article 56 of the criminal code (kuhp), which categorizes two types of assistance: a) those who intentionally provide assistance at the time the crime is committed (actual assistance). b) those who intentionally provide means or information to facilitate the commission of the act. in tax offenses, individuals can provide active or passive assistance, such as an employee suggesting illegal tax bookkeeping or a tax consultant failing to provide proper advice. according to article 41(1) and (2) of the taxation law, these individuals are considered accomplices rather than perpetrators. although the taxpayer is the main perpetrator, both the taxpayer and accomplices face the same criminal sanctions under article 39, article 39a, article 41a, and article 41b. ideally, accomplices should receive more severe sanctions as they contribute to the offense, but the lack of specific sanctions for accomplices leads to the same penalties for both taxpayers and accomplices. the involvement of accomplices in tax offenses may not be readily apparent when imposing criminal sanctions related to offenses committed by taxpayers. criminal acts in the land and building tax law the land and building tax law, also known as law number 12 of 1985, serves as the legal framework for the taxation of land and buildings in specific jurisdictions. its primary objective is to contribute to national cooperation in state financing and development while ensuring fairness, simplicity, and legal certainty. the law encompasses provisions for criminal offenses related to non-compliance by taxpayers. one offense covered under the land and building tax law is the failure to submit a tax object notification to the directorate general of taxes. taxpayers are required to provide information about their land or buildings through a notification form, and intentionally failing to submit or doing so negligently can lead to criminal charges. additionally, submitting a notification with incorrect or incomplete content, including false information, is considered a violation under the law. the law also addresses the offense of deliberately refusing to be audited by tax officials, which hampers their ability to verify tax calculations and ensure compliance with regulations. https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 573 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the law also outlines penalties for non-payment or late payment of taxes. taxpayers must fulfill their obligations within specified timeframes, and failure to do so may result in fines or interest charges. in cases of prolonged non-payment, tax authorities have the authority to seize and auction the taxpayer's property to recover the unpaid taxes. the land and building tax law promotes transparency and accountability in the taxation system, providing guidelines for assessments, valuations, appeals, and dispute resolutions. tax authorities have the power to conduct inspections, investigations, and audits to verify compliance and collect taxes. it is important for taxpayers to familiarize themselves with the specific regulations and requirements applicable in their region. criminal acts in the stamp duty law in the republic of indonesia, citizen participation in national development is encouraged by fulfilling the payment obligation for stamp duty on specific documents. stamp duty is a tax managed by the central government through the directorate general of taxation and imposed on various written documents that contain information, facts, or statements affecting individuals or interested parties. the types of documents subject to stamp duty include agreements, notarial deeds, land deeds, letters involving monetary amounts exceeding idr 1,000,000, and financial instruments such as bills of exchange and checks with a nominal value surpassing idr 1,000,000. the stamp duty law in indonesia specifies criminal provisions related to stamp duty offenses, such as forging or counterfeiting adhesive stamps or signatures, possessing and circulating forged stamps, intentionally using or selling stamps with distinguishing marks removed, and storing materials used for forging stamp-related items. the criminal penalties for these offenses are determined by the indonesian penal code (kuhp) and can result in imprisonment. counterfeiting or forging stamps and falsifying necessary signatures can lead to a maximum imprisonment of seven years, while unauthorized use of stamps without permission from the minister of finance can also result in a maximum imprisonment of seven years. the imposition of criminal sanctions is aligned with the regulations concerning stamp duties and aims to ensure compliance with stamp duty obligations in the country. criminal acts in the tax collection law with forced collection letters the general provisions and tax procedures law includes provisions that classify certain actions as criminal acts with the aim of enhancing tax revenue, which serves as the primary source of national income for independent national development. ensuring taxpayer compliance and active participation in tax payment is crucial. tax arrears can occur, and to address this, the law emphasizes consistent and continuous tax collection as a means of improving compliance. the tax collection with forced collection letters law, enacted in 2000, governs tax collection and includes criminal provisions. article 41a of this law specifies criminal penalties for various taxrelated offenses. these offenses include violations by taxpayers, failure to fulfill obligations by specified parties, and intentional obstruction of tax enforcement actions. the law also prohibits taxpayers from engaging in actions such as transferring, concealing, damaging, or encumbering seized assets during the seizure process. if seized assets cannot be sold through auctions, they can be used to pay for tax collection costs and debts through various means. failure to comply with https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 574 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these provisions may result in imprisonment and fines. it is crucial for all parties involved to adhere to these provisions to avoid criminal penalties. criminal acts in the financial information access for tax purposes law the financial information access for tax purposes law includes criminal provisions outlined in article 7. these provisions target financial institutions, other entities, and their management or employees. failure to comply with reporting requirements, properly implement procedures for identifying financial accounts, or provide requested information, evidence, or testimony can lead to criminal penalties. under article 7(1), individuals who commit the aforementioned offenses may face imprisonment for up to one year or a fine of up to rp1,000,000,000.00. similarly, article 7(2) imposes fines of up to rp1,000,000,000.00 on financial institutions and other entities for non-compliance with reporting obligations or failure to implement proper procedures. additionally, article 7(3) specifies that anyone who provides false statements, conceals, or reduces information in the reports required under article 2(2) may be subject to imprisonment for up to one year or a fine of up to rp1,000,000,000.00. these criminal provisions are crucial for promoting taxpayer compliance and ensuring financial service providers' adherence to tax laws. by imposing penalties, including imprisonment and fines, the law aims to control and enforce tax regulations effectively. it is worth noting that indonesia has been classified as a country at risk of failing to meet its commitments under the automatic exchange of financial information (aeoi). the global forum has identified the absence of primary legislative regulations at the act level to implement aeoi in indonesia. failure to the establishment of these regulations by the deadline of june 30, 2017, would result in indonesia being publicly recognized as a country not fulfilling its commitment to implement aeoi. perpetrators of tax crimes in indonesia perpetrators of tax crimes can include various parties involved in the implementation of tax laws and regulations. tax officials, who encompass tax officers and experts appointed by the director general of taxation, play a crucial role in enforcing tax laws and regulations. they include the director general of taxation, officials appointed to enforce tax laws, and experts appointed to assist in tax implementation.(kusnandar 2020) taxpayers, as defined in article 1 number 2 of the general taxation law (kup), refer to individuals or entities with rights and obligations according to tax laws and regulations. taxpayers can be both individuals and entities, such as unincorporated entities and those with legal status, including companies, partnerships, cooperatives, associations, and other forms of entities. apart from tax officials and taxpayers, other parties can also participate in tax crimes. these parties, while not considered perpetrators, can be involved in tax offenses through actions such as instigation, aiding and abetting, abetting, and assistance. examples of such parties include employees of taxpayers, representatives, legal counsel, tax consultants, public accountants, notaries, and land deed officials. their involvement in tax crimes is limited to participation rather than being the primary offenders.(lee 2019) https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 575 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the law enforcement process for handling criminal offenses in the field of taxation preliminary evidence examination the preliminary evidence examination process is the initial step in handling tax-related criminal offenses in indonesia, aimed at gathering initial evidence or indications of potential tax-related crimes that could lead to state revenue losses. this process, conducted by the directorate general of taxes or assigned internal audit units, follows specific procedures outlined by the minister of finance. the examiner of preliminary evidence has both obligations and authorities, including delivering notices, maintaining confidentiality, securing evidence, accessing relevant places and electronic data, requesting statements and evidence, and using necessary force if required. if sufficient evidence is found, a full investigation is conducted by authorized agencies. this simplified procedure ensures efficiency, effectiveness, and respects the rights and privacy of individuals or entities under examination, contributing to the protection of state revenue.(kurniawan 2020) investigation of tax criminal offenses the investigation of tax criminal offenses is a crucial process conducted by civil servant investigators (ppns) of the directorate general of taxes in indonesia. it involves searching for and collecting evidence to clarify the tax crimes that have occurred and identify the suspects. the investigation focuses specifically on acts that violate tax laws and is conducted within the context of tax legislation. ppns has the authority to receive and examine information, request statements and evidence, examine documents, conduct searches, and seek assistance from other law enforcement agencies when necessary. the investigation results are reported to the public prosecutor through the indonesian national police investigators, ensuring compliance with the procedural requirements.(bhatti 2019) the use of criminal law in the taxation field is considered a last resort and is only employed for significant tax law violations that have the potential to cause substantial losses to state revenue (kim 2020). it is not automatically applied to all tax law violations but requires careful examination and analysis. the policy aims to balance the need for effective law enforcement with the preventive effects of criminal law in the tax domain. however, the bureaucratic process of notifying the public prosecutor through the police investigators can cause delays in the investigation. it is suggested that direct notification by ppns to the public prosecutor would streamline the process and facilitate prompt action in investigating tax criminal offenses. prosecution of tax criminal cases once the investigation of tax criminal offenses is completed, the tax investigation officer (ppns djp) transfers the case files to the public prosecutor through the indonesian national police investigator, marking a shift in jurisdiction. while the public prosecutor assumes responsibility for prosecuting the case in front of the district court, the ppns djp can still provide assistance until the prosecution stage. it is essential for the public prosecutor to possess a thorough understanding of tax laws and exercise their authority effectively to ensure a successful prosecution. compliance with legal provisions and accurate preparation of the indictment are crucial for a fair and just prosecution process based on the applicable laws. according to article 141 of the indonesian code of criminal procedure (kuhap), the public prosecutor has the authority to consolidate https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 576 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multiple tax criminal cases into a single indictment when they involve the same taxpayer or nontaxpayer committing multiple offenses or when multiple offenses are related to each other. the public prosecutor must ensure that the indictment meets specific requirements regarding the identity of the offender and a precise description of the offenses committed. copies of the referral and indictment are provided to the perpetrator, their representative or legal advisor, and the tax investigation officer (ppns djp) simultaneously to uphold human rights and notification time limits.(nahak 2014) termination of tax criminal investigation the termination of a criminal tax investigation in indonesia is not always followed by prosecution by the public prosecutor, as there are juridical reasons specified in tax law that allow the investigator, the tax office investigator (ppns djp), to discontinue the investigation against the offender. this is done to avoid violating human rights and ensure justice, usefulness, and legal certainty within the framework of legal protection. the termination of investigation is not initiated by the investigator but is based on the order from tax law, and failure to comply with the specified juridical reasons would constitute an unlawful act by the investigator. however, if there are no justifiable juridical reasons, the investigator is not allowed to terminate the investigation, as investigation is mandatory to conclusively uncover tax-related crimes. it is important to ensure that the termination of investigation is based on valid justifications, and the ppns djp must act in accordance with the law and not engage in arbitrary actions.(arief 1994) the termination of investigation carried out by the ppns djp must be based on the predetermined reasons stated in article 44a of the tax law, which states: "the investigator referred to in article 44 paragraph (1) shall terminate the investigation referred to in article 44 paragraph (2) letter j if there is insufficient evidence, or if the event does not constitute a tax crime, or if the investigation is terminated due to the event being time-barred, or if the suspect has passed away." when a criminal investigation in the field of taxation is terminated, a tax assessment letter may still be issued, except in cases where the event has expired. the termination can occur due to insufficient evidence, where the investigation lacks the required evidentiary elements to establish a tax offense. additionally, if the event does not qualify as a tax crime based on the loss to state revenue, the investigation must be terminated to prevent abuse of authority (green 2023). furthermore, if the event has expired, regardless of the actual loss to state revenue, investigating it would violate tax law. lastly, if a suspect dies during the investigation, the investigation must be terminated as the actions of the deceased cannot be inherited. the termination of investigations aims to ensure legal certainty and prevent violations of tax law by the tax authority.(johnson 2021) termination of investigation for the benefit of state revenue criminal provisions in the general taxation law (uu kup) are considered as a last resort and are based on the principle of ultimum remedium. these provisions aim to address tax offenses that harm state revenue, disrupt the national economy's stability, undermine its foundations, and hinder financing for national development and people's welfare. the law prioritizes the recovery of state losses and emphasizes imprisonment as a criminal penalty. however, there are limitations https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 577 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to the capability of criminal law in addressing crimes, as the causes of crime are complex and extend beyond criminal law's scope (hall 2022). criminal sanctions are seen as symptomatic treatment rather than a solution to eliminate the causes of crime. the functioning of criminal law requires diverse supporting means and entails higher costs. in the field of taxation, criminal sanctions are intended to ensure compliance and optimize state revenue rather than solely criminalizing taxpayers. the minister of finance can request the attorney general to halt tax crime investigations upon application from taxpayers who have settled their outstanding tax obligations and administrative sanctions. the focus of tax law is on the utility for state revenue rather than the criminalizing of the taxpayers. (haryanto 2021) results and discussions in order to achieve the optimal state revenue, the directorate general of taxes (dgt) implements law enforcement strategies focused on revenue-supporting activities. here are some strategies carried out by the dgt in 2021: 1) collaborative law enforcement activities: the dgt collaborates with various functions such as supervision, examination, intelligence, and other related units. in this cooperation, there is an exchange of information, coordination of actions, and effective resource utilization to identify potential tax violations. 2) synergy with law enforcement agencies: the dgt establishes synergy with law enforcement agencies such as the police and the prosecutor's office through coordination and joint investigations. the aim is to enhance the effectiveness of handling tax-related crimes by leveraging the expertise and authority of each party. 3) harmonization of regulations with law enforcement policies: the dgt harmonizes tax regulations with law enforcement policies. if there are weaknesses or legal loopholes that can be exploited by offenders, the dgt strives to improve and refine tax regulations to strengthen law enforcement efforts. 4) law enforcement that provides legal certainty: the dgt conducts law enforcement based on the principle of providing legal certainty to taxpayers. this involves the use of clear procedures, respect for taxpayers' rights, and protection of the legitimate interests of taxpayers. the implementation of comprehensive legal regulations in the field of taxation in indonesia aims to achieve optimal state revenue through effective and fair enforcement while protecting the rights and interests of taxpayers. these regulations provide clarity, consistency, and transparency, ensuring that taxpayers are aware of their rights and obligations. the directorate general of taxes (dgt) plays a crucial role in enforcing tax laws, conducting audits, investigations, and imposing penalties to ensure compliance and deter tax evasion. however, challenges such as limited resources and evolving tax evasion schemes persist, requiring continuous updates and adaptations. it is important to prioritize fairness, protect taxpayer rights, and engage in international cooperation to combat tax evasion and promote transparency. the positive performance of the dgt in 2021, including taxpayer corrections, revenue recovery, and collaboration in law https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 578 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc enforcement, reflects the progress made in enforcing tax regulations and combating tax crimes. (evans 2019) the performance of the preliminary evidence examination by the directorate general of taxes during 2021 can be summarized as follows: source:directorate of law enforcement, directorate general of taxes (dgt) in conducting tax crime investigations, the directorate general of taxes (dgt) in indonesia employs joint investigations with the directorate general of customs and excise and other relevant institutions. these collaborative efforts are required to uncover tax crimes, prosecute offenders, and maximize state revenue. in 2021, the dgt implemented various strategies, including integrated investigations with money laundering offenses, asset tracing, establishment of a task force, strengthening the role of the judiciary and law enforcement agencies, synergy with anti-corruption efforts, data synchronization, and publication of investigative activities. through such measures, the dgt strives to enhance law enforcement effectiveness, recover lost revenue, and prevent future tax crimes while promoting transparency and public trust.(davis 2020) the joint investigations conducted by the dgt have yielded significant results, including the completion of preliminary evidence examinations of taxpayers through multidoor investigations and the utilization of data from customs free trade zone notices. these collaborative efforts facilitate the sharing of resources, knowledge, and experiences among institutions, strengthening law enforcement and improving tax compliance. the dgt has also focused on tracing, blocking, and seizing assets related to tax crimes, aiming to recover losses to state revenue and deter potential offenders. furthermore, the establishment of a task force, synergy with anti-corruption efforts, and the synchronization of investigation information system data have enhanced coordination, effectiveness, and transparency in addressing tax crimes. by implementing these strategies, the https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 579 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dgt aims to prosecute tax offenders, prevent future tax crimes, and safeguard state revenue for the benefit of the indonesian society as a whole.(chen 2021) finally, effective criminal law enforcement in the field of taxation is crucial for maximizing state revenue and promoting tax compliance in indonesia. the application of criminal provisions after administrative law enforcement ensures that tax offenders are held accountable for their actions. the research on the juridical analysis of criminal law enforcement in taxation provides valuable insights for policy development, increasing public awareness, and improving the taxation system. the use of joint investigations, integration with money laundering offenses, asset tracing, and collaboration among relevant institutions has proven to be effective in uncovering tax crimes and prosecuting perpetrators. the efforts of the directorate general of taxes (dgt) to strengthen the role of the judiciary enhance coordination between law enforcement agencies, and promote transparency contribute to a more robust and comprehensive approach to combat tax offenses. by adopting these strategies, the dgt aims to enhance law enforcement, recover losses to state revenue, and foster a culture of tax compliance in indonesia by implementing these strategies, dgt could enhance the effectiveness of law enforcement in the field of taxation, prosecute tax offenders, recover losses to state revenue, and prevent future tax crimes. conclusions criminal offenses in the field of taxation are regulated by several tax laws and regulations, such as law no. 6 of 1983 on general provisions and tax procedures, law no. 12 of 1985 on land and building tax, law no. 13 of 1985 on stamp duty, and law no. 19 of 2000 on tax collection by force. perpetrators of tax crimes include taxpayers, tax officials, and other parties involved in tax rights and obligations, while the victims of tax crimes are the state and taxpayers. the application of criminal law in the field of taxation is done after administrative law enforcement has been completed, as criminal provisions in tax laws are considered as ultimum remedium. the enforcement of criminal law in taxation in indonesia plays a crucial role in maximizing state revenue. tax crimes are regulated by various tax laws, and criminal provisions are considered as a last resort after administrative law enforcement. the application of criminal law involves preliminary evidence examination, investigation, and prosecution, with the aim of holding perpetrators accountable and deterring tax evasion. the research on the juridical analysis of criminal law enforcement in taxation has important implications, among others are the development of more effective policies, increased awareness and understanding among taxpayers, and improvement of the taxation system. nevertheless, the research has limitations such as data availability, time constraints, legal complexity, and generalizability. by considering these implications and limitations, the research can contribute to enhancing the effectiveness of tax law enforcement in indonesia and optimizing state revenue collection. furthermore, the research helps raise public awareness and understanding of the consequences of tax violations (chandra 2019). by disseminating the findings and promoting a greater understanding of tax law enforcement, taxpayers can make more informed decisions and comply https://www.ilomata.org/index.php/ijtc juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia silalahi 580 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc with their tax obligations. this can lead to increased voluntary compliance and a reduction in tax evasion, ultimately contributing to higher state revenue. moreover, the identification of weaknesses and challenges in the implementation of tax law enforcement provides a basis for system improvements. policymakers can use the research findings to address gaps in regulations, streamline procedures, and invest in necessary infrastructure and resources. this can strengthen the overall tax administration system and enhance its capacity to effectively enforce tax laws. however, it is important to acknowledge the limitations of the research. the availability of comprehensive and accurate data, as well as the complexity of the taxation system, can pose challenges to conducting a comprehensive analysis. the generalizability of the research findings may be limited to specific contexts, therefore further studies are needed to validate and generalize the results.(brown 2022) in conclusion, the research on the juridical analysis of criminal law enforcement in the field of taxation provides 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e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 181-194 181 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qurrotal qolbiyah1, muhammad isa alamsyahbana2, rachmad chartady3, armansyah4, yerisma welly5 1234 stie pembangunan, tanjungpinang, indonesia 5stie sultan agung, pematangsiantar, indonesia correspondent: albanapengusahamuda@gmail.com2 received : january 21, 2023 accepted : april 4, 2023 published : april 30, 2023 citation: qolbiyah, q., alamsyahbana, m.i., chartady, r., armansyah., welly, y.(2023). book-tax differences and profit growth: evidence from indonesia. ilomata international journal of tax and accounting, 4(2), 181-194. https://doi.org/10.52728/ijtc.v4i2.708 abstract: this study aims to examine the effect of permanent and temporary differences as well as book-tax differences on profit growth in property and real estate firms listed on the indonesia stock exchange (idx). permanent differences refer to the differences between taxable income and accounting income that cannot be reversed in the future, while temporary differences are the differences that will reverse over time. the study focused on the sub-sector of property and real estate, which was selected because these companies are considered high-risk and often adopt strategies to legally minimize their tax burden in order to maximize profits.. purposive sampling was used to select a sample of 12 property and real estate firms that consistently published audited financial statements in indonesian rupiah from 2018 to 2021 and did not undergo delisting from the idx during that period. the results of the analysis reveal that profit growth is positively and significantly influenced by both permanent and temporary differences. however, there was no significant impact observed from book-tax differences. these findings may provide insights for policymakers and investors in the property and real estate sector. keywords: permanent difference, temporary difference, book-tax difference, profit growth this is an open access article under the cc-by 4.0 license. introduction the rapidly evolving business landscape necessitates an ever-growing demand for information. both internal and external stakeholders require access to information to fulfill their responsibilities. financial reports provide financial information, including details about profits, which can be found in the income statement (hery, 2022; mcvay & szerwo, 2021). a good and quality company depends on the availability of the necessary information, both financial and non-financial information (ramos et al., 2022). non-financial information, namely information that is not included in financial reports such as the percentage of shares offered, company age, company activities, government policies and company reputation (gazzola et al., 2020; sari & purwaningsih, 2016). https://www.ilomata.org/index.php/ijtc mailto:albanapengusahamuda@gmail.com https://doi.org/10.52728/ijtc.v4i2.708 book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 182 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial reports are generated as a result of the accounting process and serve as a valuable tool for communicating a company's financial data or activities to various stakeholders (ait novatiani et al., 2022). these stakeholders are typically divided into two groups: internal parties (such as management and employees) and external parties (such as shareholders, investors, creditors, government agencies, and the broader community) (al sarrah et al., 2020; alblooshi et al., 2022; brünahl et al., 2022; mubushar et al., 2021). ultimately, financial statements serve as a vital means of connecting companies with their stakeholders, offering a clear view of the company's financial position and overall performance (asyik et al., 2022; hanson & olson, n.d.; hery, 2016; mishchenko et al., 2021). management computes the company's profit annually for two distinct purposes: financial reporting based on generally accepted accounting principles and tax reporting based on tax regulations to ascertain the amount of taxable income or taxable profit (duçi, 2021; leoni et al., 2021) . the differences between profit after accounting (book income) and profit/income after tax (taxable income) are known as book tax differences. according to (sulistyowati & hendrawati, 2020), this differences arise from variances between income before tax and taxable income and can be categorized as permanent differences and temporary differences, also known as timing differences. this behavior is often observed in companies that try to report high book profits to satisfy their shareholders, but at the same time, implement strategies to minimize their tax burden. (purwantini, 2017). in commercial accounting, the preparation of commercial financial statements is based on assumptions (talha et al., 2022). commercial accounting regarding the basic concept of an entity so that it is clear which unit of activity is the objective of reporting. the tax regulations contain criteria for measuring and recognizing the components of financial statements. these measurements are not always consistent with commercial accounting principles, for reasons financial statements support the case for minimizing tax dilution and creating incentives to switch to other forms of investment. as per article 28 of law no. 28 of 2007 regarding general provisions and tax procedures, companies are required to maintain bookkeeping utilizing either the accrual or cash system. in contrast, the financial accounting standards guidelines (psak) no. 1 paragraph 24 (revised 2013) mandates that companies prepare their financial statements using the accrual basis, except for cash flow statements. the use of these different bases for preparing financial statements results in varying calculations of the profit or loss of an entity. when it comes to temporary and permanent differences, financial statements need to be adjusted before taxable income can be computed (dudley et al., 2022; gleißner et al., 2022; mazur et al., 2021; xie et al., 2021). this correction is known as a fiscal correction, which comprises positive and negative corrections. a positive correction increases taxable income, which results in a higher amount of income tax payable. conversely, a negative correction decreases taxable income, which in turn leads to a lower amount of income tax payable. the amount of income tax paid by a company affects the net profit earned by the company.(waluyo, 2019). https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 183 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1 proportion of profit growth in property and real estate firms in 2018-2021 company code year profit growth duties 2018 55.2% 2019 7.9% 2020 -44.7% 2021 7.2% skrn 2018 5.9% 2019 27.2% 2020 -69.2% 2021 -49.6% pwon 2018 39.6% 2019 14.6% 2020 -65.4% 2021 38.5% source: www.idx.co.id table 1 displays proportion of profit growth in property and real estate firms during the period of 2018-2021. based on the table, it is evident that duti showed a difference of 55.2% from the preceding year in 2018. however, it declined to 7.9% in 2019, and further decreased to -44.7% in 2020, but then improved to 7.2% in 2021. the profit growth of duti has fluctuated from year to year, indicating an unstable capital structure in this company. for skrn companies it was 5.9% in 2018, rising to 27.2% in 2019, then in 2020 there was a decrease of -69.2%, then in 2021 it was -49.6%. this indicates that profit growth on skrn has fluctuated quite a lot, so it is necessary to further examine what factors influence it. then the pwon company in 2018 experienced an increase of 39.6%, in 2019 there was a decrease of 14.6%, then in 2020 it decreased to -65.4%, and in the final year 2021 it experienced an increase of 38.5%. the fluctuation of a company's profit is directly linked to its tax burden. companies strive for minimal tax payments to maximize their net profit. however, there are various factors that can influence the fluctuation of profit, including differences between accounting and tax profits, which can be either permanent or temporary in nature. prior studies suggest that a company's profit https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 184 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc growth is positively correlated with the extent of its permanent and temporary differences (wahab & holland, 2014). in a study conducted by (windarti & sulistiani, 2015), they examined the relationship between book tax differences and cash flow on profit growth. they discovered that permanent differences resulting from book tax differences have a positive impact on a company's profit growth. this means that if the permanent difference increases, the company's growth also increases. in addition, temporary differences resulting from book tax differences also have a positive effect on the company's profit growth. this means that if the temporary difference increases, the company's growth also increases. it is not uncommon for different research studies to produce conflicting results or findings on a particular topic. the study conducted by (sari & purwaningsih, 2016) found that permanent differences had no effect on profit growth, while temporary differences had a positive effect. this is different from the results of (windarti & sulistiani, 2015) , which found that both permanent and temporary differences had a positive effect on profit growth. it should be emphasized that variations in research outcomes can be influenced by various factors, such as the size of the sample, research approach, and data analysis methods. therefore, more studies are required to reconcile these contradictory outcomes and to gain a deeper insight into the correlation between book tax differences and profit growth. it is important to note that legal tax minimization and tax evasion are two different things by (anesa, gillespie, spee, & sadiq, 2018). legal tax minimization involves taking advantage of tax regulations and incentives provided by the government to reduce the amount of taxes paid, while tax evasion involves illegal actions to avoid paying taxes. legal tax minimization practices should be ensured by companies as tax evasion can lead to serious legal consequences and damage the company's reputation. furthermore, it is also important to consider other factors that may affect profit growth in property and real estate firms, such as market conditions, competition, management strategies, and financial performance. by analyzing these factors, researchers can gain a better understanding of the overall performance of the firms and identify areas for improvement. property and real estate firms are a type of high-risk company that often seeks to maximize profits by legally minimizing their tax burden. high profit growth rates signal positive performance and can lead to increased input and output for companies. therefore, it is important to investigate the factors that influence profit growth in these companies, including permanent differences and temporary differences in book-tax differences. by understanding these factors, researchers can determine the level of success of the companies and identify areas for improvement in achieving their operational goals. it is important to note that while legal tax minimization is a legitimate strategy for companies to increase profits, tax evasion, which involves intentionally not paying taxes owed, is illegal and can have serious consequences for companies. additionally, it is important for companies to prioritize ethical and responsible practices in all aspects of their operations, including tax practices. given the information provided, the researcher conducted a study to investigate the impact of book tax differences on profit growth and titled it "book-tax differences and profit growth: evidence from indonesia”. https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 185 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research framework permanent differences (x1) profit growth (y) temporary differences (x2) the research framework puts forward three hypotheses for this study: h1: permanent differences are expected to impact the growth of company profits. h2: temporary differences are expected to impact the growth of company profits. h3: book-tax differences are expected to impact the growth of company profits. method the approach used in this research is quantitative and used secondary data, which refers to information that has already been collected from existing sources. as mentioned by (sugiyono, 2017), secondary data sources do not provide data directly to data collectors. the financial data utilized in this study was sourced from audited financial reports of property and real estate subsector firms listed on the indonesia stock exchange. the data pertains to the years 2018 to 2021 and was obtained from www.idx.co.id. the data was processed using electronic facilities, specifically spss, to simplify data processing and facilitate the analysis of the variables studied. this study's population consists of 54 companies within the property and real estate sub-sector, which are publicly listed on the indonesia stock exchange between 2018 and 2021. based to (sugiyono, 2018), a population refers to a broad group of individuals or objects that share common attributes or characteristics, and researchers utilize this group to make inferences and draw conclusions. to make the study more manageable, the researcher used purposive sampling to select a sample from the population. according to (sugiyono, 2018), a sample refers to a smaller group of individuals or objects selected from a larger population for research purposes. the research used a deliberate sampling technique, which involves specific criteria or considerations. the criteria chosen for this study included: https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 186 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. selecting companies that had consistently published audited financial reports from 2018 to 2021, 2. choosing property and real estate sector companies that had generated profits during the same period, 3. selecting companies that were not delisted from the indonesia stock exchange between 2018 and 2021, and 4. choosing companies that reported their financial statements in indonesian rupiah currency. based on the characteristics of purposive sampling method described above, 12 firms were selected as samples out of 54 firms that met the sampling criteria. result and discussion research data analysis 1. descriptive statistical analysis table 2 variable descriptive statistics test descriptive statistics source: author processed data, 2022 2. classic assumption test a) normality test table 3 kolmogorov-smirnov test results (ks) source: author processed data, 2022 the normality test results using the kolmogorov-smirnov (ks) test in table 3 indicate a value of 0.103 with a significance level of 0.200. to determine whether the residual data is normally distributed or not, the kolmogorov-smirnov test is used, where a significance level > 0.05 indicates normality, and a significance level < 0.05 indicates abnormality. in this case, the significance level obtained is > 0.05, indicating that the residual data is normally distributed. the https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 187 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc normality test results are further reinforced by the distribution chart, which depicts a normal distribution. figure 1 histogram graph source: results of spss 2.5 data processing based on the histogram of figure 1, it can be seen that the increase and decrease in the observed data is close to a curved line and does not deviate to the left or right which describes a normal distribution. b) multicollinearity test table 4 multicollinearity test results source: author processed data, 2022 based on the results of the multicollinearity test shown in table 4, it is observed that the variance inflation factor (vif) value of both the permanent difference variable (x1) and the temporary difference variable (x2) is 1.003 which is less than the threshold value of 10, and the tolerance value is 0.997 which is greater than the minimum acceptable value of 0.1. therefore, it can be concluded that the data does not have multicollinearity, and the regression model is free from multicollinearity between variables. c) autocorrelation test table 5 autocorrelation test results https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 188 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: author processed data, 2022 based on the results of the autocorrelation test in table 5, the durbin-watson (dw) value is 1.992. the dw value is then compared to the table value with a significance level of 5%, the number of samples is 48, and the number of independent variables is 2 (k = 2). the dw value of 1.992 is greater than the upper limit (du) of 1.6231 and less than (4-du) 2.3769, which means that 1.6231 < 1.992 < 2.3769. therefore, it can be concluded that there is no autocorrelation present in the data, according to the decision list. d) heteroscedasticity test figure 2 heteroscedasticity test results source: author processed data, 2022 it is important to note that a visual inspection of the scatterplot is not enough to conclude the presence or absence of heteroscedasticity. it is recommended to use statistical tests, such as the breusch-pagan test or the white test, to confirm the presence or absence of heteroscedasticity. 3. multiple linear regression analysis table 6 linear regression test results source: author processed data, 2022 based on table 4.7 above, the regression equation model can be obtained as follows: 𝑌 = 𝑎 + 𝑏1x1 + b2x2 𝑌 = −23,495 + 3,687 x1 + 4,131 x2 https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 189 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. hypothesis a) t test table 7 test results t source: author processed data, 2022 it is important to note that while a scatterplot can provide some indication of the presence or absence of heteroscedasticity, it is not sufficient to draw a conclusive determination. to confirm the presence or absence of heteroscedasticity, it is recommended to use statistical tests such as the breusch-pagan test or the white test. as for the results of the t-test on table 7, it shows that the p-value for the effect of temporary differences (x2) on profit growth (y) is 0.001, which is less than the significance level of 0.05. additionally, the calculated t-value of 3.546 is greater than the value of t-table which is 2.01410. this suggests that there is a significant effect of temporary differences (x2) on profit growth (y). b) f test table 8 simultaneous test results (ftest) source: author processed data, 2022 the analysis of table 8 indicates that the regression model is significant as shown by the low significance value of 0.000 < 0.05. this suggests that the independent variables, permanent differences (x1) and temporary differences (x2), have a significant effect on the dependent variable, profit growth. additionally, the f-count of 10.657 is greater than the f-table value of 3.20, further supporting the conclusion of a significant effect. therefore, it can be concluded that there is a significant effect of permanent differences (x1) and temporary differences (x2) on profit growth. c) determination coefficient test (r2) table 9 determination coefficient test results https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 190 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sourcedata : processed by the author, 2022 the r2 coefficient of 0.321 or 32.1% indicates that permanent differences and temporary differences have a significant influence on profit growth. however, the remaining 67.9% of the variation in profit growth is attributed to other factors, such as financial ratios, financial performance, liquidity, and solvency, which were not included in this study. discussion 1. the effect of permanent differences on profit growth the available information suggests that the statistical analysis carried out on the variable of permanent differences and its impact on profit growth has yielded a significant outcome. the pvalue of 0.008 is less than the commonly used significance level of 0.05, indicating that it is unlikely that the effect of permanent differences on profit growth occurred by chance. furthermore, the calculated t-value of 2.768 is also greater than the critical t-value of 2.01410 at a significance level of 0.05 and with the appropriate degrees of freedom, suggesting that the observed effect of x1 on y is larger than what would be expected by chance and is statistically significant. therefore, based on the information provided, we can conclude that there is a statistically significant effect of permanent differences (x1) on profit growth (y). based on the analysis and statistical processing conducted on property and real estate sector companies listed on the indonesia stock exchange, it was found that permanent differences have a significant relationship with company profit growth. this indicates that the company's efforts to legally reduce tax burdens can have a positive impact on profit growth. therefore, companies can consider continuing to optimize tax management legally to improve the company's financial performance. this suggests that companies with larger permanent differences are likely to have higher profit growth compared to those with smaller permanent differences. for examples, a property and real estate firm has a subsidiary located in a country with a lower corporate tax rate than its home country. the subsidiary's income is subject to the tax laws of the country it operates in, which differs from the tax laws in the parent company's home country. this creates a permanent difference in the income recognized by the subsidiary and the income recognized by the parent company. by taking advantage of this permanent difference, the parent company can reduce its overall tax burden and increase its profit growth. 2. effect of temporary differences on profit growth based on the available information, it appears that the analysis results support the hypothesis on the influence of temporary differences on profit growth. the t-value of 3.546 exceeds the critical t-value of 2.01410 at a significance level of 0.05, and the p-value of 0.001 is less than 0.05, https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 191 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc suggesting that the effect of temporary differences on profit growth is statistically significant. furthermore, the study suggests that temporary differences can have a negative fiscal correction on profit, resulting in a decrease in taxable income and potentially leading to a larger net profit. this indicates that temporary differences may have a complex and potentially important role in shaping a company's financial performance. based on the analysis and statistical processing conducted on property and real estate sector companies listed on the indonesia stock exchange, it was found that temporary differences have a significant relationship with company profit growth. this suggests that companies can utilize temporary tax burden management to improve their financial performance. however, companies need to pay attention to the risks associated with temporary tax management to avoid negative impacts on future company performance. therefore, companies need to carefully and professionally manage taxes to ensure a positive impact on profit growth. for example, a property and real estate firm may have significant amounts of depreciation and amortization expenses, which are deductible for tax purposes but may not be recognized for accounting purposes. this creates a temporary difference between the amount of income recognized for accounting purposes and the amount of income recognized for tax purposes. by recognizing these temporary differences and timing the recognition of income and expenses, the firm can reduce its current tax liability and increase its profit growth in the short term. however, it is important to note that these temporary differences will eventually reverse in the future and result in higher tax liabilities and lower profit growth in the long term. it is important to note, however, that the results of this study are based on a specific sample and may not be generalizable to other populations or contexts. further research may be needed to confirm the findings and explore the underlying mechanisms driving the relationship between temporary differences and profit growth. 3. effect of book-tax difference on profit growth meanwhile, temporary differences can have a negative fiscal correction on profit, resulting in a decrease in taxable income and potentially leading to a larger net profit, as mentioned earlier. the combination of these effects may explain the positive relationship between book-tax differences and profit growth observed in the study. it is important to note that while the results suggest a significant effect of book-tax differences on profit growth, further research may be needed to confirm the findings and explore the underlying mechanisms driving this relationship. additionally, it is important to consider that book-tax differences can be influenced by a variety of factors beyond just permanent and temporary differences, and thus it may be valuable to examine the effects of other factors on this relationship as well. conclusion drawing from the findings and discussions of the study conducted on property and real estate firms listed on the indonesia stock exchange (idx), the following conclusions can be made: https://www.ilomata.org/index.php/ijtc book-tax differences and profit growth: evidence from indonesia qolbiyah, alamsyahbana, chartady, armansyah, and welly 192 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. permanent differences are positively and significantly related to the growth of profits in property and real estate firms listed on the idx. 2. temporary differences also have a positive and significant effect on profit growth in property and real estate firms listed on the idx. 3. permanent and temporary differences, when considered together, have a significant impact on profit growth in property and real estate firms listed on the idx. suggestion suggestions that can be recommended for further research based on the limitations and reasons for the many hypotheses that were rejected and not significant in this study are as follows: 1. further research should focus on the importance of examining the variables of temporary and permanent differences in determining the quality and sustainability of a company's life through profit growth, and how this information can aid investors in making more informed investment decisions 2. future studies should consider expanding the sample to include companies other than banks, such as insurance and leasing companies listed on the idx, or even companies from different countries with different tax policies and regulations. 3. future research should consider using a longer observation period than the four 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(2021). research on financial support mechanism of creative enterprises. journal of global information management, 30(3). https://doi.org/10.4018/jgim.20220701.oa6 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 221-235 221 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects brenda tandayu1, lintje kalangi2, steven josia tangkuman3 123sam ratulangi university, indonesia correspondent: brendatandayuu12@gmail.com1 received : january 22, 2023 accepted : april 6, 2023 published : april 30, 2023 citation: tandayu, b., kalangi, l., tangkuman, s, j. (2023). uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects. ilomata international journal of tax and accounting, 4(2), 221-235. https://doi.org/10.52728/ijtc.v4i2.710 abstract: indonesia's low tax ratio compared to other asia-pacific nations may indicate the presence of tax avoidance. the tax justice network has revealed that corporations are the primary culprits of tax avoidance in indonesia, with mining companies being among the examples of such practices that have been exposed. related to this phenomenon, this study seeks to acquire factual evidence on how financial distress, thin capitalization and the disclosure of corporate social responsibility affect the tax avoidance among mining firms publicly listed on the idx during the period of 2019 to 2021. by utilizing purposive sampling technique, this study successfully selected 18 companies, generating a total of 54 observational data that were used for analysis. to obtain the required data, this study relied on secondary sources such as audited financial statements, annual reports and/or sustainable reports. the main approach employed for analyzing the data and testing hypotheses in this study was multiple linear regression analysis. the findings of the study demonstrate that financial distress has a significant negative impact on tax avoidance. however, the study did not find statistically significant evidence to support the impact of thin capitalization and corporate social responsibility disclosure on tax avoidance. keywords: corporate social responsibility, financial distress, tax avoidance, thin capitalization this is an open access article under the cc-by 4.0 license. introduction indonesia heavily relies on taxes as the primary source of income for the state budget. therefore, the government has implemented various strategies to optimize tax revenues. in indonesia, the tax collection system operates on a self-assessment basis, where individuals who have met the subjective and objective requirements are entrusted with the responsibility of voluntarily registering, calculating, paying and reporting their tax obligations. encouraging taxpayer education and improving their understanding of tax obligations can result in higher levels of taxpayer compliance, ultimately leading to the attainment of tax revenue targets (handayani & damayanti, 2018). the indication of taxpayer compliance can be reflected through the tax ratio. the tax ratio https://www.ilomata.org/index.php/ijtc mailto:brendatandayuu12@gmail.com https://doi.org/10.52728/ijtc.v4i2.710 uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 222 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in indonesia in 2019 was only 11.6% and decreased by 1.5% in 2020 to 10.1%, which is far below the average tax ratio of asia-pacific countries that reached 19.1% in 2020, even lower that african countries that reached 16.6% in 2019 (oecd, 2022). according to sri mulyani, the low tax ratio can be caused by the existence of gaps in tax regulations, which makes tax avoidance relatively easy to implement (kurniati, 2020). indonesia experienced an annual tax loss of us$4.86 billion, of which 98.4% was caused by corporate tax abuse (tax justice network, 2020). conflicting interests between taxpayers and the government can lead to aggressive tax planning by taxpayers. as taxpayers, companies aim to maximize their profits, but larger profits will result in a higher amount of taxes to be paid. therefore, companies will attempt to reduce their tax burden. the efforts of companies to reduce their tax obligations can be categorized as tax evasion or tax avoidance. tax evasion is an illegal manipulation done intentionally to reduce the taxes that should be paid according to the law (alm et al., 2019). meanwhile, tax avoidance is a legal action used to reduce tax liabilities by taking advantage of vulnerabilities in tax regulations (sritharan et al., 2022). tax avoidance presents a typical and complex problem because it is not always illegal, but it is still an undesirable practice by the government (rahma et al., 2022). mining companies often face challenges in maintaining their operational sustainability and generating stable profits. fluctuating commodity prices, strict tax regulations, and global economic crises are some of the factors that can affect the financial performance of mining companies. therefore, mining companies tend to try to reduce their tax liabilities. pricewaterhouse coopers reported that most mining companies in indonesia do not provide transparency in their taxes, with only 30% of 40 large mining companies adopting tax transparency reporting in 2020 (suwiknyo, 2021). additionally, the corruption eradication commission expressed concerns that corrupt practices, including tax avoidance, tend to occur in the mining sector, where there is a shortfall of mining tax payments of idr15.9 trillion per year in forest areas (redaksi ddtcnews, 2019). one example of tax avoidance exposed involves adaro energy, a mining company suspected of reducing its tax payments by us$125 million compared to what it should have paid in indonesia through transfer pricing schemes (global witness, 2019). mining companies often face issues such as price fluctuations that can impact their financial performance. when companies experience financial distress, which is when the company's financial performance declines, they often struggle to obtain external funding and their credit ratings may decline. this can make managers more likely to take risks and engage in tax avoidance (alhady et al., 2021). (dang & tran, 2021) study showed that companies with higher capital adequacy ratios tend to engage in lower tax avoidance, supporting the finding that financial distress can drive companies to engage in tax avoidance. however, (jaffar et al., 2021) research showed that companies experiencing financial distress actually reported higher tax burdens. on the other hand, (fauzan et al., 2021) stated that financial difficulties do not necessarily impact a company's tendency to avoid taxes, as companies experiencing financial difficulties may incur losses and receive compensation without considering tax burdens. tax avoidance strategies by companies in the mining industry can be done through thin capitalization, where they set a capital structure that relies more on debt than equity (istiqfarosita & abdani, 2022). according to (utami & irawan, 2022), thin capitalization is the main driver behind company efforts to avoid taxes by taking advantage of tax protection created by interest https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 223 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on debt, which generates lower taxable income. on the other hand, (natalia & widyadhana, 2021) argue that companies with higher levels of thin capitalization usually have lower levels of tax avoidance. this may be due to the incentives provided by performance-based contracts resulting from the use of debt to improve company performance and increase revenue. in the context of mining companies, csr becomes crucial because their operations often have significant impacts on the environment and surrounding communities. therefore, mining companies often promote their csr programs as part of their efforts to improve their image in the eyes of society and fulfill their social obligations. however, a study by (rahayu & suryarini, 2021) shows that mining companies can also use their csr disclosures to divert attention from their tax avoidance practices. in addition, some csr programs such as scholarship programs or environmental conservation programs can be used to reduce the tax burden of the company (rohyati & suripto, 2021). nevertheless, research by (hajawiyah et al., 2022) shows that companies with a strong commitment to disclosing their csr activities tend to be involved in less tax avoidance, as they seek to maintain their reputation in the eyes of society. based on the context mentioned above, this research focuses on tax avoidance practices and does not examine tax evasion practices. tax evasion practices often involve illegal activities that are not recorded in the company's financial statements. therefore, it is difficult to assess tax evasion practices by simply looking at a company's financial statements. the main objective of this study is to analyze how financial distress, thin capitalization, and corporate social responsibility disclosures affect tax avoidance among mining companies listed on the indonesia stock exchange during the period of 2019-2021. theoretical framework and hypothesis development agency theory the theory of agency aims to provide a conceptual framework to understand the economic conduct of two key players in an organization, the agent and the principal. the principal refers to an individual or a group that hires an agent to perform a particular task on their behalf. the agent, on the other hand, is responsible for carrying out the assigned task. the agency theory operates under the assumption that the principal and the agent may have diverse interest, which could lead to potential conflicts (pratama & murtin, 2020). these conflicts may arise due to differences in the information available to the agent or variations in their motivations compared to the principal, ultimately influencing their decision-making process. legitimacy theory legitimacy theory focuses on the role of legitimacy in influencing organizational behavior and stakeholders. legitimacy theory explains how organizations seek and maintain support and recognition from stakeholders through their efforts to meet the norms and expectations prevailing in society (lestari & solikhah, 2019). trade-off theory according to the trade-off theory, the decision on a company’s capital structure involves balancing the advantages of tax benefits from using debt and the costs of financial distress (ross et al., 2018). (minh ha et al., 2022) stated that the company aims to determine the ideal amount of debt and https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 224 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc equity for their capital structure by utilizing the balance principle in order to maximize their overall business value. the company will strive to raise its debt until the point where the added benefit of tax advantages resulting from debt are equal to the supplementary expenses associated with financial distress (brealey et al., 2020). financial distress and tax avoidance financial distress refers to a situation where a company experiences a decrease in its financial performance, which could indicate a potential bankruptcy or liquidation (ningsih & noviari, 2022). the condition of financial distress will trigger agents to seek quick sources of funding to meet the company’s obligations to maintain legitimacy in the eyes of stakeholders and to maintain good agent performance (swandewi & noviari, 2020). in the condition of financial distress, access to external funding sources is limited. therefore, to maintain its continuity, the company is required to make cost savings (sadjiarto et al., 2020), which will prompt agents to reduce expenses such as tax burden (alhady et al., 2021). research conducted by (dang & tran, 2021) found that companies with lower capital adequacy ratios tend to engage in more tax avoidance. h1: financial distress positively influences tax avoidance thin capitalization and tax avoidance thin capitalization is a technique utilized to decrease tax obligations by creating a capital structure primarily based on debt (istiqfarosita & abdani, 2022). in taxation, interest expense resulting from the use of debt is deductible, while dividens resulting from equity participation are non-deductible, so using debt will reduce taxtable income (natalia & widyadhana, 2021). therefore, companies are inclined to use interest-bearing debt to reduce their tax liabilities. in accordance with the findings of (utami & irawan, 2022) study, a high degree of thin capitalization indicates a more dominant use of debt by companies, suggesting a higher probability of engaging in tax avoidance. h2: thin capitalization negatively influences tax avoidance corporate social responsibility and tax avoidance one way for companies to legitimize their existence in the eyes of stakeholders is by disclosing their corporate social responsibility, as noted by (firmansyah & estutik, 2020). a company’s image is improved with greater exposure to corporate social responsibility, as indicated by (iwanty & surjandari, 2022). according to (lestari & solikhah, 2019), the government's management of the payment of taxes in an indirect manner can be considered as a type of corporate social responsibility that serves the public's best interest. companies that do not fulfill their tax obligations will be considered dishonest because taxes are used for public purposes that also benefit the company (firmansyah & estutik, 2020). therefore, companies with a high commitment to disclosing corporate social responsibility have a lower propensity to engage in tax avoidance (hajawiyah et al., 2022), which is intended to maintain the company’s already established image (herianti & ritnawati, 2021). h3: corporate social responsibility disclosure negatively influences tax avoidance https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 225 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this research employed a quantitative approach and relied on secondary data retrieved from www.idx.co.id and official websites of companies, which included annual reports, sustainability reports and audited financial statements. the study focused on mining companies that were registered on the idx during the time frame 2019 to 2021, and in order to obtain the sample, a purposive sampling method was utilized. the criteria for selecting the sample were based on several specific factors, including whether the companies were listed and did not experience delisting during 2019-2021, issued annual reports, sustainability reports, and audited financial statements, did not occur losses and had complete data related to the variables being studied. the final sample size consists of 18 companies that meet the inclusion criteria as shown in table 1, and the research was conducted over a period of 3 years, resulting in a total of 54 observations. the data that were gathered were subjected to analysis utilizing the tool for data analysis ibm spss 26, employing a method of multiple linear regression analysis. table 1. sample of the research no. code name of the company 1. adro pt. adaro energy indonesia tbk 2. antm pt. aneka tambang tbk 3. bipi pt. astrindo nusantara infrastruktur tbk 4. bssr pt. baramulti suksessarana tbk 5. byan pt. bayan resources tbk 6. cita pt. cita mineral investindo tbk 7. elsa pt. elnusa tbk 8. gems pt. golden energy mines tbk 9. hrum pt. harum energy tbk 10. inco pt. vale indonesia tbk 11. itmg pt. indo tambangraya megah tbk 12. mbap pt. mitrabara adiperdana tbk 13. mdka pt. merdeka copper gold tbk 14. myoh pt. samindo resources tbk 15. ptba pt. bukit asam tbk 16. ptro pt. petrosea tbk 17. toba pt. tbs energi utama tbk 18. zinc pt. kapuas prima coal tbk source: data processed (2022) operational definition and variable measurement this study focuses on tax avoidance as the dependent variable. tax avoidance pertains to the lawful approach of diminishing a corporation’s tax liability by taking advantage of loopholes or ambiguities present in tax regulations. the effective tax rate, measured using a ratio scale is utilized as an indicator to quantify the level of tax avoidance. etr = current tax expense earning before tax https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 226 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial distress refers to a state in which a company encounters challenges or is incapable of fulfilling its obligations to creditors (arnold & lewis, 2019). the measurement of financial distress in this research involves the application of the modified altman model, which was previously utilized by (ahdiyah & triyanto, 2021) and is represented as shown below. z-score = 6.56x1 + 3.26x2 + 6.72x3 + 1.05x4 x1 represents the working capital to total assets ratio, x2 is the ratio of retained earnings to total assets, x3 denotes the ratio of earnings before interest and taxes to total assets, and x4 indicates the ratio of book values of equity to total liabilities. the z-score value of a company can indicate the likelihood of bankruptcy. if a company’s z-score is less than 1.10, it is classified as being in a state of financial distress, whereas those with z-score raging between 1.10 and 2.60 fall into the grey area and may have the potential to experience financial distress. meanwhile, companies that have a z-score higher than 2.60 are deemed to be in good financial health. thin capitalization refers to a capital structure that favors the use of debt instead of equity, which is commonly referred to as being highly leveraged. the maximum allowable debt ratio, previously utilized by (fasita et al., 2022) was adopted in this study as the gauge for thin capitalization. mad ratio = average interest bearing debt shda shda = (average total assets – average non-ibl) * 80% in this study, the evaluation of corporate social responsibility disclosure was conducted by performing a content analysis of the social responsibility disclosures contained in the annual reports and/or sustainability reports of companies using the corporate social responsibility index featuring gri g4 indicators. this methodology is consistent with the approach taken in a previous study by (artini & setiawan, 2021). csrii = σxy i ni csri is and index used to measure company’s level of corporate social responsibility. σxy indicates the total number of items disclosed by the company, while n refers to the expected number of items which comprises 91 indicators. result and discussion descriptive statistical analysis to analyze the data and provide a summary of the observed values, descriptive statistical analysis is used. this entails computing statistics such as the average, highest, lowest and standard deviation of the data set. table 2. result of descriptive statistical analysis n minimum maximum mean std. deviation etr 54 .0305 .7315 .275061 .1194287 z–score 54 -.3117 15.9986 6.213548 4.0734271 https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 227 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tc 54 .0000 .8483 .294841 .2461753 csri 54 .0549 .6923 .322543 .1819309 valid n (listwise) 54 source: the secondary data processed using spss 26 (2022) the information from table 2 reveals that the minimum etr value is 0.0305 (pt. harum energy tbk 2020), while the maximum value is 0.7315 (pt. adaro energy indonesia tbk 2020). on average, the etr value of 0.275061 (27.5%) is higher than the statutory tax rate of corporate income tax, which was 25% in 2019 and 22% in 2020-2021. this indicates that, in general, mining companies do not engage in tax avoidance practices. the z-score value ranges from –0.3117 (pt. astrindo nusantara infrastuktur tbk 2020) to 15.9986 (pt. harum energy tbk 2019), with mean value of 6.213548. this mean value exceeds 2.6, which suggests that, on average, the financial condition of the companies is healthy. the tc varies from a minimum of 0.0000 (pt. harum energy tbk 2019) to a maximum of 0.8483 (pt. astrindo infrastruktur tbk 2020). the csri ranges from 0.0549 (pt. cita mineral investindo tbk 2019, 2020) to 0.6293 (pt. bukit asam tbk 2020), with a mean value of 0.322543. this suggests that mining companies’ disclosure of their social responsibility remains relatively low. notably, the standard deviation values of etr, z-score, tc and csri are all smaller than their respective mean values. this could indicate that the data is homogeneous or that the variability is low. classical assumption test 1. normality test table 3. result of normality test using 1-sample k-s test unstandardized residual n 54 asymp. sig. (2-tailed) .064c source: the secondary data processed using spss 26 (2022) the results in table 3 indicate that the normality assumption of the regression model is satisfied as the asymptotic significance (two-tailed) value of 0.064 > 0.050, suggesting that the residuals have a normal distribution. 2. multicollinearity test table 4. result of multicollinearity test model tolerance vif 1 (constant) z–score .303 3.304 tc .284 3.526 csri .875 1.143 a. dependent variable: etr source: the secondary data processed using spss 26 (2022) the data presented in table 4, which represents the multicollinearity test results, indicates that the regression model does not suffer from multicollinearity. this is supported by the fact that none of https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 228 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the independent variables exhibit a tolerance value of ≤ 0.1 or a vif value of ≥ 10, which suggests that there is no notable correlation among the independent variables. 3. heteroscedasticity test table 5. result of heteroscedasticity test using park test model t sig. 1 (constant) -3.917 .000 z–score -1.152 .255 tc -.308 .760 csri 1.397 .169 a. dependent variable: lnu2i source: the secondary data processed using spss 26 (2022) the park test, which involved regressing the logarithm of squared residuals agains the independent variable, found that none of the independent variables had a significant impact on the dependent variable, as shown by their significance values being > 0.050. hence, it can be inferred that heteroscedasticity is absent in the regression model since the residuals have a uniform variance across all observations. 4. autocorrelation test table 6. result of autocorrelation test using runs test unstandardized residual asymp. sig. (2-tailed) .169 source: the secondary data processed using spss 26 (2022) based on the outcomes demonstrated in table 6, it can be inferred that there is no autocorrelation and the residuals are distributed randomly. this conclusion is drawn based on the fact that the asymptotic significance (two-tailed) value of 0.169 is higher than the significance level of 0.050. multiple linear regression analysis and hypothesis testing table 7. result of multiple linear regression analysis and individual significance testing unstandardized coefficients standardized coefficients model b std. error beta t sig. 1 (constant) .418 .087 4.826 .000 z–score -.019 .007 -.651 -2.843 .006 tc -.226 .115 -.465 -1.968 .055 csri .130 .088 .198 1.470 .148 a. dependent variable: etr source: the secondary data processed using spss 26 (2022) according to table 6, the regression equation can be expressed as: https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 229 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc etr = 0.418 – 0.019 z-score – 0.226 tc + 0.130 csri the equation of regression and the outcomes of the significance test for individual parameters may be explicated in the following manner. 1. the constant of 0.418 can be interpreted as the baseline level of tax avoidance (etr) if financial distress, thin capitalization, and corporate social responsibility disclosure do not have any impact. 2. the z-score’s t-statistic value of 2.843 is greater than the t-table value of 2.00856, and its significance value of 0.006 is less than 0.050, signifying that financial distress has a significant impact on tax avoidance. the negative coefficient of –0.019 for the z-score suggests that as the z-score value declines, the etr value increases, and vice versa. a lower z-score value implies a higher likelihood of the company is in avoiding taxes. the regression analysis reveals that when the z-score decreases (indicating higher financial distress), the etr increases (indicating less tax avoidance by the company). therefore, it can be concluded that financial distress has a negative and significant effect on tax avoidance. 3. thin capitalization has a limited impact on tax avoidance, as indicated by a t-statistic value of 1.968, which is lower than the critical t-value of 2.00856, and significance level of 0.055, which is slightly above the customary threshold of 0.050. the negative coefficient of –0.226 suggests that the etr decreases as the mad ratio, a measure of a company’s reliance on debt financing increases, and vice versa. consequently, companies with higher mad ratios tend to exhibit more aggressive tax avoidance behavior, reflected in lower etr values. in other words, higher debt burdens create greater incentives to reduce the tax burden. thus, it can be inferred that thin capitalization has an insignificant positive impact on tax avoidance. 4. corporate social responsibility disclosure does not have a significant impact on tax avoidance, as evidenced by the t-statistic value of 1.470, which is lower than the critical t-value of 2.00856, and a significance level of 0.148, which exceeds the customary threshold of 0.050. the positive coefficient of. 0.130 implies that increasing csri leads to higher etr, indicating less tax avoidance. higher csri values correspond to greater disclosure of social responsibility, while higher etr values suggest lower likelihood of tax avoidance. as such, it can be deduced that corporate social responsibility has a negative influence on tax avoidance; however, this effect fails to attain statistical significance. coefficient of determination test (r2) table 8. result of coefficient of determination test (r2) model r r square adjusted r square std. error of the estimate 1 .456a .207 .160 .1094618 a. predictors: (constant), csri, z–score, tc b. dependent variable: etr source: the secondary data processed using spss 26 (2022) table 8 shows that the adjusted r –square value reveals financial distress, thin capitalization, and corporate social responsibility disclosure have a joint effect of explaining roughly 16% of the variation observed in tax avoidance data. the remaining 84% of the variation in tax avoidance data https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 230 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc could be due to other factors beyond the scope of this research model. this implies that the current regression model is inadequate in fully capturing the variation in tax avoidance data, and there may be other underlying factors influencing it. the influence of financial distress on tax avoidance this study failed to prove the positive influence of financial distress on tax avoidance, as empirical research results showed a significant negative impact. based on descriptive statistical analysis, the average z-score of mining companies was far above 2.6, indicating a healthy financial performance of the companies. in this condition, companies may tend to be more aggressive in tax avoidance because they have more resources and ability to carry out more complex tax planning strategies. on the contrary, the more severe financial distress that companies face, the less likely they are to try to reduce their tax liabilities. in agency theory, agents are entrusted with the responsibility to make assessments and decisions within a company, but ultimately they are accountable to the principal. therefore, agents should be careful about the consequences that may arise from every decision they make. engaging in tax avoidance when the company is experiencing financial distress can be very risky. such actions can damage the company's reputation and become a negative signal to stakeholders (hasanah & widiastuti, 2022). a damaged reputation can worsen the company's financial situation because it will be more difficult to obtain funding (monika & noviari, 2021). another study (mahardhika & surjandari, 2022) found that companies experiencing financial distress tend to report higher taxes, indicating that in such situations, companies will try to avoid tax avoidance activities. this finding is consistent with a study (jaffar et al., 2021) that shows a significant negative correlation between financial distress and tax avoidance. the influence of thin capitalization on tax avoidance this study suggests that thin capitalization has a less significant impact on tax avoidance. the mad ratio for mining companies, as revealed by descriptive statistical analysis, is below 1, which means that the companies do not use interest-bearing debt to reduce their tax liabilities through deducting interest expenses from taxable income. this can be explained by the trade-off theory, in which companies consider the potential risk of bankruptcy due to the use of debt in their capital structure. companies that use too much debt in their capital structure may face financial distress and bankruptcy, which negatively affect their performance. this is supported by the finding in this study that the low mad ratio has a correlation with the high z-score value. this means that the lower the financing using interest-bearing debt, the lower the risk of financial distress. therefore, companies may tend to avoid thin capitalization or the use of too much debt to reduce the risk of bankruptcy and maintain financial health. this finding is consistent with previous research conducted by (simamora & sari, 2021), which indicates that thin capitalization does not have a significant impact on tax payments, as it must be balanced with the appropriate amount of company capital. meanwhile, (nainggolan & sari, 2020) argued that the use of debt in indonesia does not lead to thin capitalization practices aimed at reducing tax burdens. this study's findings are consistent with those of (sianipar et al., 2020), which stated that thin capitalization has no significant impact on tax avoidance. the influence of corporate social responsibility disclosure on tax avoidance an empirical study has shown that corporate social responsibility disclosure has no significant effect on tax avoidance. the insignificant effect of csr disclosure may be due to the low level of https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 231 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc social responsibility disclosure by companies. the average value of csr disclosure by mining companies is 32%, which is less than half of the disclosure required by gri g4. mining companies are required to fulfill their social and environmental responsibilities as stipulated in regulations when conducting activities related to natural resources. therefore, the purpose of csr disclosure by companies is to fulfill their obligations in accordance with applicable regulations and does not substantially affect their decisions to avoid taxes (wijaya & mulya, 2020). (dewi & putri, 2021) argue that csr disclosure cannot guarantee that companies are not involved in tax avoidance because the disclosed information may not reflect the actual conditions. this research is in line with a previous study (pranata et al., 2021) which showed that csr disclosure has a negative but insignificant impact on tax avoidance. conclusion the main objective of this research is to present factual evidence on how financial distress, thin capitalization, and disclosure of corporate social responsibility affect tax avoidance among mining companies listed on the idx from 2019 to 2021. based on the findings and discussions, it can be concluded that financial distress has a significant negative impact on tax avoidance, while thin capitalization and csr disclosure have no significant effect on tax avoidance. the mining companies sampled in this study tend to choose not to use too much interest-bearing debt in their capital structure to avoid bankruptcy risk and maintain financial health. this is evident from the low value of the mad ratio and the high value of the z-score. companies that use too much debt are at risk of facing financial distress and bankruptcy, which negatively impacts their performance. therefore, companies do not consider thin capitalization as a strategy to avoid taxes. however, when the company's financial performance is healthy, they may tend to be more aggressive in tax avoidance by implementing more complex tax planning strategies. meanwhile, csr disclosure has not had a significant influence on tax avoidance due to the low level of disclosure by companies. the government needs to develop strict tax policies to address tax avoidance practices, especially by financially sound companies. investors and the public also need to consider tax avoidance practices and the implementation of csr disclosure by companies and the long-term implications that may affect their performance and reputation. the public can choose not to use products or services from companies suspected of engaging in tax avoidance or not meeting their csr responsibilities. meanwhile, companies need to consider financial factors that affect their tax policies and transparency in csr disclosure to maintain long-term financial health and build a good reputation. this study has limitations with a high level of subjectivity in assessing the value of csr disclosure. there may be a possibility of perception or impression bias that does not correspond to the actual reality since the assessment is based on assumptions from researchers analyzing csr disclosure items in annual/sustainability reports. furthermore, to enhance understanding of tax avoidance, future research may consider alternative indicators and additional variables outside those studied in this research, given the adjusted r-square value of only 16%. additionally, this study could expand its scope to different objects during a longer research period. https://www.ilomata.org/index.php/ijtc uncovering tax avoidance drivers in idx mining firms 2019-2021: financial distress, thin capitalization, and csr disclosure effects tandayu, kalangi and tangkuman 232 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference ahdiyah, a., & triyanto, d. n. 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(2020). the effect of corporate social responsibility on tax aggressiveness and impact on financial performance. saudi journal of business and management studies, 5(9), 498–505. https://doi.org/10.36348/sjbms.2020.v05i09.003 https://www.ilomata.org/index.php/ijtc https://ekonomi.bisnis.com/read/20210802/259/1424816/mayoritas-perusahaan-tambang-belum-transparan-soal-pajak https://ekonomi.bisnis.com/read/20210802/259/1424816/mayoritas-perusahaan-tambang-belum-transparan-soal-pajak https://doi.org/10.24843/eja.2020.v30.i07.p05 https://taxjustice.net/reports/the-state-of-tax-justice-2020/ https://doi.org/10.33395/owner.v6i1.607 https://doi.org/10.36348/sjbms.2020.v05i09.003 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 470-490 470 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effects of green innovation, eco-efficiency, business strategy, technology information investment, and profitability on firm value david hatigoran silaban1, r.rosiyana dewi2 12trisakti university, indonesia correspondent: rosiyana@trisakti.ac.id 2 received : june 6, 2023 accepted : july 15, 2023 published : july 31, 2023 citation: silaban, d, h., dewi, r, r. (2023). the infuluance of green innovation, ecoefficiency, strategic business, technology information investment, and profitability on firm value. ilomata international journal of tax and accounting, 4(3), 470-490. https://doi.org/10.52728/ijtc.v4i3.791 abstract: the current economic growth is in line with the increase in the number of business units and the growth in the number of business units is believed to not only have positive but also the negative effects on the environment and the earth. for this reason, current investment decisions by stakeholders are also seen from the company's effort and contribution to the environmental improvement. this study aims to determine the effects of green innovation, ecoefficiency, business strategy, information technology investment, and profitability on firm value in companies listed on the indonesia stock exchange. in this research, the sources are taken from the annual report, sustainability report and information on the company website. the research sample comprising 125 companies that met the criteria and are listed on the indonesia stock exchange in 2019-2021. the sampling technique used was purposive sampling and the hypothesis testing in this study is multiple linear regression analysis. the results of this study indicate that cost leadership strategy and profitability have a positive effect on firm value. while green innovation, eco-efficiency, differentiation strategy, and information technology investment have no effect on firm value. keywords: green innovation, eco-efficiency, strategic business, information technology investment, profitability, firm value this is an open access article under the cc-by 4.0 license. introduction the results review of the central bureau of statistics publication regarding the number of companies by province (unit) for the 2013-2020 period indicates that there has been an increase in the number of company units for the past eight years (www.bps.go.id). the increasing number of company units can have both a positive and a negative impact from the economic perspective. the presence of numerous companies will definitely create new job opportunities so as to minimize the unemployment rate and to reduce economic inequality. on the contrary, the growing number of the enterprises can affect negatively, one of which is a surge in pollution triggered by a significant waste generation as a result of production process. consequently, water, soil and air https://www.ilomata.org/index.php/ijtc mailto:rosiyana@trisakti.ac.id https://doi.org/10.52728/ijtc.v4i3.791 the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 471 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc will undergo serious damage, thus, pollution becomes a big problem for the environment around the companies and society. environmental issues have been a hot topic of discussion at the global economic level recently, and this is escalating since the world is currently facing crucial matter, an industrial hazardous waste. through greenpeace organization, leonard (2022) argued that deforestation caused by the palm oil industry, has converted 17 million hectares of indonesian forests. as a consequence, the climate crisis is getting worse since the conversion has replaced thousands of existing indigenous habitats. in addition, exploitation is carried out on a large scale against mineral resources on the islands of kalimantan and sumatra in which the commodity of coal for export causes ecological crisis in the surrounding areas. in addition, the issue of global warming is gradually worrying. the increase in global temperature every year is caused by the greenhouse gas effect (vistinasari et al., 2022). the very massive emission of toxic and dangerous gases originating from various human activities on earth is released into the atmosphere, causing solar energy to be trapped and damage the atmosphere (anggraeni, 2015; cossu et al., 2020; li et al., 2020). greenhouse gas emissions are seen as a major risk for both nature and human since an increase in emissions affect the ecosystems on earth (giannarakis et al., 2017; jo et al., 2020; mckercher et al., 2010). iqair, stated that in 2021 indonesia is one of the countries with highly-polluted air, and it ranked 17th out of 117 countries(www.iqair.com). the damage itself has reached a critical phase as an accumulation of failures in maintaining sustainable environment and good governance. moreover, it is in a very weak level of control over the use of resources both by the government as a regulator and by the companies as operators. it can be argued that in carrying out their business operations, the company orientation is solely focused on the fulfillment of the wealth for the shareholders and ignoring the environmental and social aspects. companies play a big role in creating environmental damage, thus attention and wisdom to care more about the environment should be nurtured. the legitimacy theory approach in this matter can be used to explain how important the role of the company is by considering the impacts of their operations on people's lives. this can be reflected by putting into consideration, that any activities are in line with the concerns for protecting the environment. as a matter of fact, various findings and data regarding the issues of environmental damage triggered by company operations has become the main concerns of the government as the regulator in taking necessary steps. this is evidenced by the issuance of a new regulation by the government of the republic of indonesia which regulates environmental issues, namely environmental law no. 46 of 2017 concerning environmental economic instruments. in addition, the government through its institution namely the financial services authority (ojk) issued ojk regulation no.51/pojk.03/2017 for the implementation of sustainable finance in various financial services institutions, with the goal to manage a financing system that are in line with the sustainable principles. for this reason, innovation is needed to provide a solution to the environmental problems from the company, yet maintaining a healthier business orientation. the innovations needed are the https://www.ilomata.org/index.php/ijtc http://www.iqair.com/ the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 472 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ones that can provide solutions to environmental problems currently occurring deteriorating. an environmentally friendly approach to all business operations can be illustrated through green innovation. (alnuaimi et al., 2020; benoit & patsias, 2017; ma et al., 2017) stated that green innovation is new or improved procedures, methods, systems and products made to avoid or minimize the impact of environmental damage. according to (lin et al., 2013; lu et al., 2022; moshood et al., 2022; sun et al., 2023) the concept of green innovation encourages companies to manage production waste and convert it into products that have added value and become an additional income for the company. in driving for the success of the green innovation concept which takes a relatively long time, a concept or strategy is also needed so as to make efficiency in terms of costs. (dewi & rahmianingsih, 2020) argued that environmental innovation has a positive effect on company value. on the other hand, different results are obtained form the research results by (yao et al., 2019) emphasizing that environmental innovation has a negative effect on the company value. however, with the innovation or concept of eco-efficiency (stands for "ecological economic efficiency”) an increased productivity but a reduced cost of production can help improve the environment quality through the company work processes. besides, eco-efficiency is a combination of environmental and economic pillars, intended to support economic activities and to function as a supervisor in reducing environmental impacts by introducing a more rational use of resources. a former research regarding eco-efficiency conducted by (osazuwa & che-ahmad, 2016) stated that eco-efficiency positively affect the firm value. nevertheless different results were obtained by (damas et al., 2021; yamasaki et al., 2021; zha et al., 2020) who argued that eco-efficiency negatively influence the firm value. the next indicator contributing to sustainable development is the information technology investment. advances in information technology that are so dynamic have a tremendous impact on the industry. the industrial era of 4.0 is a design for automation and digitization of work processes where the implementation is carried out one hundred percent by machines and does not involve human performance in its actualization. in addition, there are five types of technologies that support the progress of industry 4.0: internet of things (iot), artificial intelligence (ai), human machine interface, robot technology, and 3d printing technology. a good investment in information technology will result in an increase of production and financial performance. information technology not only serves as a medium for supporting work but also increases the value of a company's competitive advantage if it is optimized. referring to the previous research on information technology investment that has been carried out by (cheng et al., 2021; kohli et al., 2012; wang et al., 2021) it was found that the results of information technology investment has a positive effect on firm value. business strategy is the key to success in a business and in its actualization. without the synergy of the two, a business fails to run optimally. (porter, 1985) divides business strategy into two parts: cost leadership strategy and differentiation strategy. cost leadership strategy is defined as the process of creating goods at a lower cost than competitors but maintaining almost the same quality as competitors. whereas differentiation strategy is the process of introducing new products, improving them or continuing a product innovation. a business strategy approach that fits the company goals https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 473 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results in good financial performance and is able to signal what attracts the attention of investors, thereby increasing the value of the company. a study on business strategies implemented by technology & mukulu, 2015 revealed that cost leadership strategy positively affect the firm value. in addition, another research on differentiation strategy has been carried out by (chang et al., 2015) who revealed that there is a positive influence between the two differentiated strategies on the firm value. an indicator that can affect the value of the company is profitability. profitability is a ratio used to assess the level of efficiency in the utilization of company assets or in another sense, a method used to see the ability of a company in generating profits for a certain period from a number of assets owned by the company. in fact, issues regarding the environment need to be studied and observed further since the effects of damage to the environment in indonesia are mostly dominated by company activities where concerns to the environment are low and innovation is in dire need. this research is a combination of research by (dewi & rahmianingsih, 2020; osazuwa & che-ahmad, 2016) regarding green innovation and eco-efficiency on firm value. the difference between these two studies is that researchers add three independent variables, namely information technology investment variables, business strategy, and profitability. in addition, the samples and periods studied in this research serve as a differentiator. this study examines the samples of the energy and industrial sectors for the 20192021 period. it aims to see the effects of green innovation, eco-efficiency, business strategy, information technology investment, and profitability on company value. this research contributes not only to the improvement of theories related to environmental accounting, but also to companies in managing and carrying out their operations, since they play a crucial role in preventing environmental damage from recurring. in other words, companies are considered capable in minimizing the negative effects of their operations on the environment and in maximizing its potential for improving the value of the company. literature reviews legitimacy theory and signal theory anjani & astika (2018) stated that legitimacy is a way to regulate the activities of a company centering on its alignment with the community, government, community groups or individuals in certain places. legitimacy has an impact on the company's operational activities, thus, it needs to be in line with the goals of the community to creates a process or method, with community as its priority. furthermore, (suchman, 1995) added that legitimacy is linked to the activities of a company that are expected to be in line with the order of norms, beliefs, and values of the society. the idea of being ready to voluntarily report and present information on environmental and social issues becomes the basis ,why the legitimacy theory exists (anggraeni, 2015). in 1973 the emerging signal theory developed by jensen spence described that there were certain exclusive groups in a company who have more information about the company and provide https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 474 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc positive sentiment when information distribution occurs. signal theory is a concept that reveals the important relationship between the delivery of company information and the investment decisions made by potential investors. (suganda, 2018) stated that signal theory is used as a way of interpreting an action originating from company management to disclose information aimed at investors so as to be able to convert investors' decisions in view of the company's condition. signal theory is a way companies can minimize the impact of information asymmetrically by voluntarily providing good or bad information. information technology investment can be used by companies as a signal because with the hope that the company work processes will increase and encourage information disclosure. hypothesis formulation the effect of green innovation on corporate values referring to (agustia et al., 2019), the presence of a company is not only aimed at seeking profit or fulfilling value for shareholders, but the operation of a company is expected to be able to generate value for all stakeholders. to implement this, a leader who can boost the proportion of environmental performance, social performance, and environmental performance beneficial for the company’s future sustainability is required. in o'donovan's research (2002) the relationship between legitimacy theory becomes the concerns when the company is able to survive (sustainable) as long as it aligns its business operations with the norms adopted in society. innovation is a business strategy to enhance investors’ perceptions of companies and to encourage businesses to have a competitive advantage if conducted in a sustainable manner. one of the innovations companies can carry out is green innovation. green innovation is perceived to be able to provide added value through the improvement of company performance in creating proper processes and efficient use of resources. the application of green innovation requires companies to be able to reduce adverse environmental effects that arise and convert production waste into products that have added value. green innovation is an added value for the company because it is considered a way out of environmental issues. this is in line with the results of (dewi & rahmianingsih, 2020) which emphasized that green innovation have positive effect on the firm value. therefore, by looking at the analysis, a hypothesis is made as follows: h1: green innovation positively affects the firm value. the effects of eco-efficiency on firm value the idea formulation of eco-efficiency is intended to monitor business entities in carrying out its production and in controlling the environment. it encourages an increase in company work patterns to get better and the value of company stock prices to get higher (hansen & m, 2007). according to aulia & hadinata (2019) legitimacy theory is an effort to encourage companies to carry out business operations aligned with the rules or norms adopted in society as the implementation of eco-efficiency is a real form of environmental management system. based on a research conducted by (osazuwa & che-ahmad, 2016) eco-efficiency is a form of business strategy that drives the value of the company to a better direction. eco-efficiency focuses on the company's ability to innovate products and services without causing environmental damage. https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 475 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the implementation eco-efficiency concept serves as a competitive advantage for a company. this is considered a positive assessment for the company stakeholders as it is considered to have contributed to the efforts in preserving the environment. based on the results of previous research (osazuwa & che-ahmad, 2016) it can be concluded that eco-efficiency gives positive effects on the firm value. h2: eco-efficiency positively affects the firm value the effects of cost leadership strategy on company value according to (porter, 1985), companies adopting cost leadership strategy are considered to have a stronger character in a business competition as the advantages in terms of spending lower costs than competitors can be highlighted. consequently, a bigger profit in business can be generated. the business entity applying the pattern of cost leadership strategy will put such an effort to be an operating company with the lowest cost, compared to its competitors in the market. this is done to attract attention of the existing customers. applying cost leadership strategy for the sake of loyal customers by setting lower price to the products sold is another advantage for the company. customer loyalty triggers the company's financial performance to be better because it can help generate higher and more sustainable income from sales. additionally, the financial performance is followed by a positive sign on the stock market where investors will be more interested and tend to invest their capital in companies with good sales performance, thus, increasing the value of the company. moreover, a similar research result by (technology & mukulu, 2015) revealed that cost leadership strategy has a positive effect on the firm value. the next hypothesis is formulated as follows: h3: cost leadership strategy positively affects the firm value. the effect of differentiation strategy on firm value according to (porter, 1985), the application of differentiation strategy in companies refers to creating different products from its competitors by improving the product itself and by providing a better service. differentiation strategy focuses on the process of selling new products and services, creating innovation, building brand image, and substantial funding on r&d. this strategy allocates a generous amount of funds for the products and services, in order to obtain a significant income. with bigger profits published in the financial statements, it becomes a signal for investors because the company can prove that the results of its performance through the its profits generation affects the value of the company. similarly, the results of research by (chang et al., 2015) stated that there was a positive effect between differentiation strategy to company value. in regards to the above analysis, the formulation of the hypothesis is: h4: differentiation strategy positively affects the firm value. the effect of information technology investment on firm value (andriani, 2019) explains that the use of information technology is an advantage and a desired behavior by the users that implement this system. the emergence of the industrial 4.0 revolution https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 476 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in 2018 has proven to change the industrial work patterns which previously focused on the use of conventional power, to a work pattern that maximizes performance on the use of technology. information technology encompasses digitalization, artificial intelligent (ai), big data, and robotics employment. referring to andriani's research (2017), it is emphasized that a good investment in information technology must take into account its benefits for improving financial performance and organizational strategy. kohli et al., (2012) views that the aspects of information technology contributes to the company's future performance in terms of an enhanced capability, flexibility, and company growth. proper investment in information technology encourages companies to have a competitive advantage that fosters better competitiveness than competitors. below is the proposed hypothesis: h5: information technology investment has a positive effect on firm value. the effects of profitability on firm value one of the financial performance indicators in determining whether or not the goals of the company have been achieved is impacted from the level of company profitability. according to (mardiyati et al., 2015) profitability is the net result for various provisions that have been used by the company. in addition, profitability is useful to measure the company's ability in utilizing its assets to generate profits. a high profitability value indicates that the company is more efficient in utilizing company assets or in another sense by having the same amount of assets to create higher profits. increased profitability is a sign that the company has worked effectively and has performed well. potential investors are attracted to companies that are performing well and are able to generate an increased level of profitability, as the goal of investing is to gain a considerable amount of return on the invested capital. therefore, a good reaction from investors is knowing that the company receives positive response in the market response and that the company value is higher. referring to a study by nyoman et al., (2017) , it is stated that there is a positive influence concerning the profitability on the firm value. thus, the hypothesis is: h6: profitability has a positive effect on the firm value. method research design the population in this study are companies listed on the indonesia stock exchange within the 2019-2021 period. the sampling technique is purposive sampling, where the sample used meets the required criteria. the research sample covers 125 companies with a total sample of 375 observations. the secondary data sources, both the annual and the sustainability reports are quoted from the company websites www.idx.co.id. the hypothesis testing is used as the basis for https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 477 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evaluation in this research. the research hypothesis is refers to a form of temporary answer to each assumption. the aims is to test the hypothesis on the influences of green innovation, eco-efficiency, business strategy, investment in information technology, and profitability on firm value. the quantitative method is the selected method to test the hypothesis along with multiple regression tests using the eviews 9 test tool. variables and measurements the variables in this study include the independent variables, the dependent variable, the controlling variable. below is the explanation: independent variables green innovation environmental innovation (green innovation) is an innovation in which there are new ways, practices, methods and production mechanisms or transformations that are useful in suppressing the effects of environmental damage. green innovation is an idea that aims to provide a sustainable solution for an effective production process by making efficient use of raw materials and energy so as to reduce the amount of production costs incurred. referring to the research of febiola & khusnah (2022) green innovation ideas encourage companies to be able to process waste to be converted into feasible products of value so that they can serve as additional income for the company. the concept of green innovation in this study is assessed through four parameters, and is based on the research by (agustia et al., 2019). the parameters are: 1. the production process uses new technologies to reduce energy, water and waste generated. 2. products that are created using environmentally friendly materials or materials that have the least impact or potential hazard on the environment. 3. the composition of the materials used in the production process can be recycled. 4. packaging products used are environmentally friendly. each item stated in the company's annual report will be given a value of 1 and for items that are not informed is given a value of 0. furthermore, the overall value of the variables that can be informed is divided by the total of all disclosure items n : the number of items disclosed by the company k : the number of disclosure items in green product innovation eco-efficiency this strategy comes as a concept map to reduce the use of water, energy, and raw materials for producing goods at all stages. the measurement for eco-efficiency is done by looking at the level of company achievements in fulfilling the eight existing indicators, whether or not the company https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 478 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc has implemented the system of eco-efficiency , the measurement refers to study by (bandyopadhyay, 2015; moraes et al., 2019; subires et al., 2019; yuliansyah et al., 2021): 1. concerns for the environment have resulted in a significant reduction in company waste 2. concerns for the environment have resulted in an increased service quality 3. concerns for the environment have resulted in the changes of the work environment 4. the benefits of the environment-oriented business are the reduced costs of processes, products and services 5. concerns for the environments have contributed to the adoption of alternative technologies and processes 6. concerns for the environment have helped companies in developing products, services and processes 7. concerns for the environment have helped reduce carbon emission 8. concerns for the environment have helped reduce energy consumption each item described in the company's annual report will be given a value of 1 and for items that are not described is given a value of 0. furthermore, the overall value of the variables that can be informed is divided by the total of all disclosure items. ∑xj = number of items disclosed by the company n = number of disclosure items business strategy according to (wu et al., 2015), business strategy refers to cost leadership strategy and differentiation strategy. businesses that are run with a competitive strategy through a lower cost approach as a wider market absorption objective and are required to reduce prices, regulate fees and costs, reduce r&d costs, do not focus on customer marginal utility, high asset turnover, and maximize resources power to get the highest level of productivity is a hallmark of cost leadership strategy. whereas a business run with a focus on creating product innovation, maintaining customer loyalty to a brand, and producing good quality products, requires more funding for r&d to make a differentiated innovation. in addition, maximizing profits compared to the average competitor is another feature of differentiation strategy. both formulas are measured by: https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 479 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cost leadership strategy ato = asset turnover operating sales = (total sales) – (cash) – (short-term investment) operating assets = (total asset) – (cash) – (short-term investment) differentiation strategy pm = profit margin operating income = profit obtained after deducting direct and indirect operational costs r&d expenditure = r&d activities sales = total sales information technology investment based on a study conducted by (andriani, 2019), information technology (it) investment is defined as an investment decision to allocate all types of resources (hardware, software, and human resources) to manage information systems. the method used to measure information technology investment in a company is by looking at how much the company allocates to support investment activities related to information technology, both software and hardware. the measurement of technology investment value in this study is formulated as follows: profitability profitability is one of the media that is useful to describe the company's financial condition to investors within a certain period of time . the company's financial performance serves as a means for the company to boost its image, to share the value, and to set the future plans. in this study, the measurement of the profitability variable is measured through the ratio of profitability with proxies on return on assets (roa), where roa is able to measure a company's ability to generate profit from the assets used. this proxy is based on a research by (mahrani & soewarno, 2018) and described as follows: https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 480 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc bound variable (company value) firm value is the value embedded in the company and this can be used as a benchmark in assessing the level of company quality as well as the level of welfare of shareholders (sabrin, 2016). the measurement for firm value in this study uses the tobin's q ratio, as (damas et al., 2021) has formulated. the measurement is described below: tobin's q = firm value mve = number of shares outstanding x share price debt = book value of total liabilities (short term liabilities + long-term obligation) total assets = book value of total assets control variable (company size) the categorization of a small or large company can be analyzed through the level of ownership of a company's assets. companies with large scale tend to attract more investors' attention because they have better conditions in terms of stability. asset measurement can be carried out using the natural log of total assets because the total assets are considered more s\table and better in describing the company size. this proxy refers to a study by (suryana & rahayu, 2018) is : l (n) total assets regression models the regression model used in this study is multiple linear analysis with one dependent variable, five independent variables, and one controlling variable. the following are the regression models used in this study: q = a + b1 gi + β2 eco + β3 cls + b4 dfs+ b5 iti+ β6 length + size +e q = firm value a = constant b1-6 = regression coefficient gi = green innovation eco = eco-efficiency in = information technology investment cls = cost leadership strategy dfs = differentiation strategy long = profitability size = firm size it is = error https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 481 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc thinking framework the following below is the framework implemented in this study: results and discussions description of the research object this is a study conducted by using a number of hypotheses and aims to analyze the framework developed to obtain empirical evidences on the influences of green innovation, eco-efficiency, business strategy, information technology investment, and profitability on company value. the database used in this study is secondary data obtained from the companies’ annual reports listed on the indonesia stock exchange, among others are the energy, industrial, tobacco sub-sector, and non-durable household products sub-sectors within the periods of 2019-2021. the sampling technique used is purposive sampling. the following are the criteria of purposive sampling in sample selection. information amount energy sector companies for the 2019-2021 period listed on the idx. 71 industrial sector companies for the 2019-2021 period listed on the idx. 54 tobacco and non durable household products sub-sector companies listed on the idx for the 2019-2021 period. 14 companies in the energy, industry, tobacco sub-sector and non durable household products which did not publish complete financial reports for the 2019-2021 period. (14) total research sample 125 total final research sample used (3 years x 125) 375 https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 482 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis table 1 descriptive statistics n minimum maximum mean std. deviation np 375 0.28670 16.7527 1.723436 2.060444 gi 375 0.00000 1.00000 0.580000 0.329985 eco-f 375 0.00000 1.00000 0.638000 0.292719 cls 375 -1.77600 6.72440 0.803024 0.938208 dfs 375 -0.97430 0.93411 0.065530 0.234296 iti 375 0.00000 0.11640 0.002103 0.009556 prft 375 -1.53830 0.52020 0.037199 0.143502 size 375 22.44200 33.5372 28.67296 1.875088 source: secondary data processed, 2023 referring to the descriptive test results form the table, it indicates that n is the amount of data for each variable with the total of 375 data originating from energy, industrial, tobacco sub-sector, and nondurable household products sectors listed on the stock exchange indonesia for the 2019-2021 period. green innovation has an average value for the distribution of company values at 1.723436. a considerable tobin's q value is 1.0, which is interpreted as a successful market valuation of the company (asset market value = book value of assets). mark tobin's q < 1, means the company is relatively cheap(undervalued) as book value is higher than market value. this can attract interested parties to buy the company. tobin's q value > 1, the company is classified as expensive(overvalued). with an average company value of 1.723436, it indicates that the qualification of company value is categorized as a company with market value > book value of assets (overvalued). the green innovation variable has an average value (mean) in the gi variable of 0.580000 with a total of 375 data indicating that most of the research samples have four aspects of environmental innovation that are considered good, and the average value that has been obtained also reflects the sample data examined in the application of green innovation is proven to be better at implementing the production process of innovative items that relate to environmental protection. the cost leadership strategy variable has an average value. the average value (mean) for the variable cost leadership strategy is a value of 0.803024 which means that the company's ability to generate sales based on total assets owned is 80%. the average value obtained is considered to have a good category since the value is close to 1.00 or 100%. the higher the ato value, the more capable the company is to earn revenue through efficient business operations and effective use of resources. the differentiation strategy variable has an average (mean) value for measuring the variable differentiation strategy, and it gains a value of 0.065530 which means that the overall ability of the 375 samples is that there is an average company able to implement this to only 6% percent. the ideal average value of this dfs proxy is 1, so looking at the results of the descriptive table, companies that apply or focus on this differentiation strategy are few. the information technology investment variable has an average value of 0.002103, which means that based on the average obtained, it indicates that many companies haven’t implemented and or invested in information https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 483 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc technology. the profitability variable has an average value of 0.037199 with a total of 375 data, this value means that the average ability of company assets to generate profits is low. the company size variable in this study acts as a controlling variable and is proxied by the natural log of assets to show the company size. the average value of profitability is greater than the standard deviation value of 28.67296 > 1.875088 which indicates that the distribution of this variable value is considered good. model suitability test chow test it is concluded that if ho is rejected, the model used is fixed effect. when the selected model is a the model of fixed effect, what must be done further is a testing with the hausman test method, in which the purpose of this test is to measure whether or not the fixed effect or random effect models will be used. table 2-uji chow effect test prob cross-section chi-square 0.0000 source: data processed by eviews 9 the results of the chow test in table 2 demonstrates that the cross section probability value is 0.000 or <0.05, then ho is rejected. therefore, the selected model is fixed effect model. hausman test if ho is rejected, the model used is fixed effect. this test was carried out with the aim of being able to determine which model in the regression data panel is the more suitable to use, random effect model or fixed effect model. table 3-uji hausman test summary prob cross-section random 0.0188 source: data processed by eview 9 the results obtained from the hausman test shows that the probability value of cross-section random is 0.0188 <0.05, this means that ho is rejected and ha is accepted. thus, the appropriate model to be applied is fixed effect model. with final results stating that the model used is fixed effect model, classic assumption tests such as tests for normality, multicollinearity, heteroscedasticity, and autocorrelation are unnecessary, considering that the model results obtained are fixed effect model not common effect model. https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 484 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis testing the hypothesis testing consists of exposing the interpretation of the regression model and testing the regression coefficients. the purpose of this test is to see how influential the independent variable is on the dependent variable. below is a two-tailed test (significance value (sig) is divided by 2). table 4 hypothesis testing based on table 4 above, the regression model obtained is: ynp = α – 0.0213251β1gi + 0.119299β2eco + 0.409706β3cls – 0.500826β4dfs – 0.14233β5iti + 2.53383β6prft – 0.695424c1sizeit + e f-test after the f-test that has been carried out, it is found that the probability value of f-statistic is a value of 0.0000 <0.05. therefore, along with the independent variables namely green innovation, eco-efficiency, business strategy, investment information technology, it has an influence on the value of the company. for this reason, the regression model used is feasible model. r2-test from the results of the fit-test that has been carried out, a value of adjusted r-square (r2) is obtained, it is equal to 0.804685. this indicates that the ability of the independent variable to explain the behavior of the dependent variable is 80%. simultaneously, it can also be interpreted that there are other independent variables such as green innovation, eco-efficiency, business strategy, and investment in information technology that can explain something that affects the value of the company by 20%. t-test the following is a table of t test results which can be partially reflected in table 4. the effect of each independent variable on the dependent variable are as follows: the test results for probability https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 485 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variable of green innovation value is 0.6443/2, that 0.3222 > 0.05 (ha rejected). this means that green innovation has no effect on firm value at the 95% confidence level. probability variable on the test result of eco-efficiency value is 0.8340/2, that means 0.4170 > 0.05 (ha rejected), or in other words, eco-efficiency has no effect on the firm value at the 95% confidence level. the probability variable value concerning the test results of cost leadership strategy is 0.0093/2, meaning that 0.0047 <0.05 (ha accepted), thus the cost leadership strategy has a positive and significant influence on firm value at the 95% confidence level. the probability variable on the test results regarding the differentiation strategy is 0.1723/2, the 0.0862 <0.05 (ha rejected) means that differentiation strategy has no effect on firm value at the 95% confidence level. moreover, the test results for the probability value of the information technology investment variable are 0.9921/2, where 0.4961 > 0.05 (ha is rejected) meaning that technology investment has no effect on firm value at the 95% confidence level. finally, the test results for the probability value of the profitability variable are 0.0000/2, where 0.0000 <0.05 (ha is accepted) so it is concluded that profitability has a positive and significant influence on firm value at the 95% confidence level. discussion of research results green innovation has no effect on firm value this is evidenced by the probability value green innovation ie 0.3222 > 0.05. regression coefficient values on green innovation is -0.0213251, so with reference to the significance value and the regression coefficient value, it can be concluded that green innovation has no effect on firm value. the results of this study are in line with the research by yao et al., (2019) which revealed that environmental innovation statistically has no effect to company value. hence, it is concluded that if green innovation of the company increases, there will be a decrease in the value of the company and vice versa. eco-efficiency has no effect on firm value this is evidenced by the probability value eco-efficiency ie 0.4170 > 0.05. regression coefficient value of eco-efficiency is 0.119299. referring to the significance value and the regression coefficient value, it can be stated that eco-efficiency has no influence on firm value. the results of this study are in line with a study by hazudin et al., (2015) who found that eco-efficiency does not affect the value of the company. the underlying reason is that when running the process of ecoefficiency, the company will be faced with an arising negative effect due to the incurring costs for the environment. as a consequence, the level of profitability and return for investors is reduced. cost leadership strategy positively affects firm value from the probability value of cost leadership strategy where 0.0047 < 0.05, and with regression coefficient value concerning the cost leadership strategy, the result of 0.409706 refers to the significance value and the regression coefficient value. thus, it is concluded that cost leadership strategy has a positive influence on firm value. the results of this study are in line with a research https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 486 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conducted by atikiya (2018) which emphasized that cost leadership strategy positively affects firm value. it was found that the impact of cost leadership strategy is shown when a company is able to achieve its uniqueness by lowering costs and by being operationally superior through efficient operating actions, one of which is creating a streamlined cost structure. differentiation strategy has no effect on firm value from the probability value of differentiation strategy where 0.0862 > 0.05, and the regression coefficient value on differentiation strategy is -0.500826, it is concluded that differentiation strategy does not affect the value of the company. the results of this study are in line with a research by surono et al., (2019) which revealed that differentiation strategy in creating unique, new, and different in nature products will take quite a long time and the risk of selling failure is big. the price offered is relatively higher and only certain groups and product market segments who are interested in purchasing the items. information technology investment has no effect on firm value this is evidenced by the value of the probability of investment in information technology i.e. 0.4961 > 0.05. information technology investment coefficient regression value is -0.14233. the results obtained is similar to a study conducted by (ludipa et al., 2018) in which technology investment had no effect on firm value. nevertheless, this strategy can be implemented although the company is still making some reviews. in fact, the implementation of using information technology can not guarantee a 100% efficient, thus a delayed investment benefits might occur. once a new it investment is made, it takes 3 to 4 years or even longer for the company to generate a considerable profit. profitability influences firm value this is evidenced by the value of the profitability where 0.0000 < 0.05. and the regression coefficient is 2.53383. with reference to the significance value and the regression coefficient value, it can be concluded that profitability has a positive influence on firm value. the results of this study are in line with a research conducted by nyoman et al., (2017) which revealed a high profitability value, indicating that the company's ability to earn profits also increases, thus, the ability to distribute dividends to shareholders will also increase. conclusions this research was conducted to see whether or not there is an influence on green innnovation, eco-efficiency, business strategy, information technology investment, and profitability on company value. the samples used in this study are companies engaged in the energy, industrial, tobacco sub-sector, and the nondurable household products sub-sectors listed on the indonesia stock exchange in the 2019-2021 period. after going through the details of the total inspection process, the final samples used in this study is 375 sample data. this study implements a statistical analysis tool in the form of multiple regression analysis. based on the results of the research https://www.ilomata.org/index.php/ijtc the infuluance of green innovation, eco-efficiency, strategic business, technology information investment, and profitability on firm value silaban and dewi 487 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc described earlier, it can be concluded that the cost of leadership strategy and profitability have a positive effect on firm value, whereas the variables of green innovation, eco-efficiency, differentiation strategy, and information technology investment have no effect on firm value. in regards to the legitimacy theory, it was found that the results of the research do not support the legitimacy theory in which stakeholders' expectations for companies to provide satisfaction not only in terms of financial performance but also in other concerns for social and environment is unfulfilled. furthermore, this study failed to prove that matters related to the environment were required by stakeholders. legitimacy theory is not helpful in supporting firm value outcomes. this occurs because the awareness of both the company and the community hasn’t yet been shown. however, the signal theory in this research is proven to support the research results. lastly, it can be concluded that in fact, any related information will be beneficial for the company so that they 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(2023). the effects of audit firm size, audit tenure, and audit rotation on audit quality. ilomata international journal of tax and accounting, 4(1), 92-103. https://doi.org/10.52728/ijtc.v4i1.636 abstract: this study examines the effect of audit firm size, audit period, and audit rotation on audit quality. the data come from annual reports of infrastructure, utilities and transportation companies listed on the indonesia stock exchange (idx) from 2016 to 2020. the sampling method used is purposive sampling. a sample of 267 companies was obtained based on the purposive sampling method. the analysis technique used is logistic regression analysis with spss software. this study's results confirm agency theory's role in explaining the relationship between parties with different interests. the research findings reveal that the role of audit professional services performed by audit firms can minimize agency problems that arise. empirically, study findings show that the size of an audit firm and its audit period positively affect audit quality. conversely, audit rotation does not affect audit quality. the study results provide a practical contribution so that non-big-4 audit firms can improve audit quality as big-4. audit firms should also pay attention to sufficient audit tenure, short enough or too long, to produce good audit quality. keywords: audit firm size, audit tenure, audit rotation, audit quality this is an open access article under the cc-by 4.0 license. introduction audit quality using the specialization abilities of an auditor in detecting and reporting fraud in the client's financial system. audit quality is an auditor's opportunity, ability, and willingness to detect, find, report, and reveal an error or fraud that occurs in an accounting system (tandionting, 2016a, p. 80). according to(nuri, 2021), auditor specialization assesses audit quality because auditor specialization in particular industries will give auditors better knowledge, insight, and abilities when compared to auditors who do not have specialization. the auditor's specialization ability to detect errors and irregularities that occur in client financial statements more quickly and effectively because specialist auditors have more knowledge of specific industries (rinanda & nurbaiti, 2018a). however, auditor industry specialization does not significantly affect audit report lag (abdillah et al., 2019). https://www.ilomata.org/index.php/ijtc mailto:kautsar@perbanas.ac.id https://doi.org/10.52728/ijtc.v4i1.636 the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 93 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc significant cases cause user confidence in the quality of audits conducted by independent auditors to decrease. one of them was a case that occurred in early 2017 and involved partners from public accountant ernst and young (ey) in indonesia, namely public accountant purwanto, suherman and surja. this case occurred because public accountants purwanto, suherman, and surja failed to audit the financial statements of a telecommunication company (indosat). after all, they had provided an opinion based on insufficient evidence. this finding originated when the ernst and young (ey) partner accounting firm in the united states reviewed audit results from accounting firms in indonesia. as a result of this incident, public accountant partners, namely public accountant purwanto, suherman and surja, had to pay a fine of idr 13.3 billion to us regulators. this case is considered the latest incident that has befallen an audit firm, giving rise to speculation about whether an audit firm can carry out its duties in developing countries under the code of ethics (malik, 2017). the last case regarding audit quality occurred in 2018 involving a public accountant. one of them happened in indonesia was deloitte's partners, namely public accountants marlinna, kap merliyana samsul, and public accountants satrio, bing, eny & rekan. this case occurred because the financial statements of sunprima nusantara financing (snp) finance, audited by public accountants satrio, showed an unqualified opinion. it is different from the results of an examination from the financial services authority, which showed that snp finance failed to pay interest on medium-term notes which were not included in public accountants satrio's audit report (handoko & soepriyanto, 2018). some of these cases have caused a loss of public trust in an audit firm and poorly assessed the quality of the audit produced by the audit firm due to the lack of competence possessed by the auditor (palalangan et al., 2019a). (kalanjati et al., 2019) further found that the cumulative number of audit partner rotations is positively related to audit quality. conversely, the cumulative number of audit firm rotations is negatively associated with audit quality. on the other hand, an audit firm is an institution where a public accountant can provide professional services to client companies following applicable standards (syahputri, 2021a). research results regarding the effect of audit firm size on audit quality still need to be revised. (deangelo, 1981), (triani & yanthi, 2020), and (paputungan & kaluge, 2018) found the effect of the size of an audit firm on audit quality. (deangelo, 1981) initiated a study that examined the effect of audit firm size on audit quality. (deangelo, 1981) found that audit quality is independent of audit firm size, even when the auditors initially have identical technological capabilities. this collateral aspect improves the quality of audits by larger audit firms. (pham et al., 2017) also found that the size of an audit firm affects audit quality because, economically, the big 4 does not have a dependency on clients. the big 4 have demonstrated the ability to act professionally and independently towards clients compared to non-big 4's. in addition, the big 4 has pressured clients to refrain from producing substandard reporting. different results by (purwanto, 2021) and (palalangan et al., 2019a) stated that the size of an audit firm does not affect audit quality. tenure audit is the duration of the relationship between the audit firm and the client regarding the agreed audit services ((rinanda & nurbaiti, 2018). a long relationship between the auditor and the client is an essential factor in limiting fraudulent acts by the client resulting in better audit quality. although a long audit tenure will make an auditor better understand the business characteristics of his client, the audit tenure should be, at most, the period set by the public https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 94 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accounting profession association. conversely, a short engagement period will make an auditor need to understand his client's characteristics, which impacts low audit quality. this concept is confirmed by (jadiyappa et al., 2021), (agustini & siregar, 2020), and (paputungan & kaluge, 2018), who have found the effect of audit tenure on audit quality. however, (badewin & hujaimah, 2020) and (soares et al., 2021) obtained different results and found no effect of audit tenure on audit quality. (abedalqader al‐thuneibat et al., 2011) dan (gonzález-díaz et al., 2015) found different results from subsequent studies where audit tenure harmed audit quality. (jadiyappa et al., 2021), in their study in india, found that longer tenure audits generally improve audit quality among indian companies before mandatory rotation. however, for companies that pay very high compensation to auditors, (jadiyappa et al., 2021) found that longer tenure reduces audit quality, primarily if the company is affiliated with a business group or a company where the ceo also serves as chairman of the board. thus, the potential benefits of shorter-term mandates appear limited to high-cost companies with business group affiliations and ceos with multiple roles. the opposite results show that audit quality deteriorates when the audit office tenure is extended due to growth in discretionary accruals (abedalqader al‐thuneibat et al., 2011). in contrast to other studies, (gonzález-díaz et al., 2015) used non-profit organizations in spain. (gonzález-díaz et al., 2015) found that, although the quality of foundation audits declines with increasing tenure, this decline in quality is apparent in the sixth year of the foundation-auditor relationship, after the first five years of quality improvement. audit rotation replaces public accountants to provide services to clients to produce good audit quality and maintain independence (sitta, 2018a). (purwanto, 2021) empirically proves that audit rotation affects audit quality because rotation in a company will make the auditor more objective in auditing financial statements and produce a higher-quality audit process. audit rotation can affect audit quality because the longer the relationship that exists between the auditor and his client will have the opportunity to reduce audit quality which will interfere with the independence of an auditor and will have a tendency to side with the client (sitta, 2018b). furthermore, (firth et al., 2012) found that firms with mandatory audit partner rotation have a much higher likelihood of a modified audit opinion than firms without rotation. however, this effect is limited to companies located in less developed areas. in addition, it is also proven that voluntary audit rotation affects audit quality even though the significance level is much weaker than mandatory partner rotation. different results by (syahputri, 2021) and (paputungan & kaluge, 2018) revealed that audit rotation did not affect audit quality because the market needed to pay more attention to whether the auditor who expressed an opinion in the financial statements had rotated or not. (cassell et al., 2020) obtained interesting findings that tested the effect of audit rotation on audit quality. (cassell et al., 2020) found that audit quality was not lower for companies that hired a new auditor before the end of the third fiscal quarter than for companies that did not change auditors. however, companies that hired new auditors during or after the fourth fiscal quarter were more likely to misstate their audited financial statements than companies that hired new auditors earlier in the year and that did not change auditors. in additional testing, the reduction in audit quality associated with a late change of auditors is more pronounced for firms with complex operations (i.e., more operating segments). these results suggest that the degree to https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 95 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc which audit quality suffers in the first year of an audit engagement is influenced by the amount of time required to understand the client's business, assess risk, and perform the audit, as well as the amount of time available for the auditor to complete the task. agency theory by (jensen & meckling, 1976) explains the contractual model between two parties where one party is an agent, and the other is the principal. the principal (shareholder) gives authority to the agent (management) to carry out a particular task under the work contract agreed upon by both parties (tandionting, 2016). if both parties (principal and agent) try to maximize their utility, a conflict will likely arise where the agent will only sometimes act under the principal's wishes (n. andriani & nursiam, 2018). in agency theory, conflicts can arise due to differences in interests between principals and agents. the principal will tend to choose a large audit firm to audit its financial statements to improve audit quality. services from third parties who have sufficient ability and expertise to perform audit services can reduce agency conflict. the third party is a audit firm that provides audit services to clients by applying applicable accounting and auditing standards. method the population used in this study were infrastructure companies listed on the indonesia stock exchange (idx) from 2016 to 2020. the sampling used a purposive sampling technique and 267 research samples. the criteria used in this study are 1. companies listed on the indonesia stock exchange for the period 2016 to 2020; 2. infrastructure, utilities, and transportation sector service companies that publish financial reports for the period 2016 to 2020; and 3. infrastructure, utilities, and transportation companies attach a complete audit firm profile. audit quality in this study is measured using a dummy variable with a proxy for auditor industry specialization with a value of 1 if the auditor controls ≥ 10% market share and 0 if the auditor controls <10% market share. 𝐴𝑢𝑑𝑖𝑡𝑜𝑟 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑆𝑝𝑒𝑐𝑖𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = ∑ 𝐶𝑙𝑖𝑒𝑛𝑡𝑠 𝑜𝑓 𝑝𝑢𝑏𝑙𝑖𝑐 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑖𝑛𝑔 𝑓𝑖𝑟𝑚𝑠 𝑖𝑛 𝑜𝑛𝑒 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦 ∑ 𝐼𝑠𝑠𝑢𝑒𝑟𝑠 𝑖𝑛 𝑜𝑛𝑒 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦 × 100% the size of an audit firm in this study is the size of an audit firm categorized as a big-4 kap or not. firm size is measured using a dummy variable with a value of 1 if a big-4 kap and 0 audits the financial statements if a non-big-4 kap audits the financial statements. audit tenure in this study is the period or the length of the audit engagement with its client in providing audit services under a pre-agreed agreement. the tenure audit refers to (n. andriani & nursiam, 2018) using an interval scale to calculate the number of years of engagement. the same https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 96 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit firm conducts audit engagements on its clients. for companies that do not experience successive rotations, the tenure will increase every year, where the first year of the engagement starts with number 1 (one) and is added to number 1 (one) again for subsequent years. if there is an auditor rotation in year t, the tenure audit will return to number 1 (one). 𝐴𝑢𝑑𝑖𝑡 𝑇𝑒𝑛𝑢𝑟𝑒 = 𝑡1 + 𝑡2 + 𝑡3 + 𝑡4 + 𝑡 … audit rotation in this study is a change in an audit firm or an auditor assigned to audit a client's financial statements for a maximum period of 6 (six) consecutive financial years. the measurement of the audit rotation variable refers to (priyanti & uswati dewi, 2019), where the audit rotation variable is measured using a dummy variable with a value of 1 if there is an audit rotation and a value of 0 if there is no audit rotation. ln 𝐴𝑄 1 − 𝐴𝑄 = 𝛼 + 𝛽1𝐴𝐹𝑆 + 𝛽2𝑇𝐸𝑁 + 𝛽3𝑅𝑂𝑇 + 𝜀 aq : audit quality α : constant β1afs : audit firm size β2ten : audit tenure β3rot : audit rotation ε : error result and discussion descriptive analysis the characteristics of the sample during the study period were that more companies used the services of independent auditors who did not have industry specialization skills compared to auditors who had industry specialization expertise. another characteristic is that more companies use non-big-4 compared to companies that use big-4. other characteristics related to auditor turnover indicate that the research sample applies more not rotating independent auditors compared to those who do auditor rotation (table 1). table 1: 2x2 classification test frequency percent valid percent audit quality non-industry specialization 146 55 55 industry specialization 121 45 45 audit firm size non-big-4 195 73 73 https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 97 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc big-4 72 27 27 audit rotation no audit rotation 227 85 85 audit rotation 40 15 15 hosmer and lemeshow's test and nagelkerke r square based on the hosmer test results, hosmer and lemeshow's goodness of fit test is 1.645 with a significant probability of 0.977, where the significant value is greater than 0.05. it shows that h0 is accepted, meaning that the model formed can fit with the data and predict the observed value. the nagelkerke r square value is 0.220, which indicates the ability of the independent variables to explain the dependent variable is 22%, and the rest (78%) are other factors outside the model that can explain the dependent variable. the power of the regression model to predict companies that use non-industry specialist auditors is 76.7%, which means that with the regression model used, there are 112 samples of infrastructure, utility and transportation companies that use non-industry specialist auditors. the power of the regression model to predict companies that use industry specialization auditors is 61.2%, which means that with the regression model used, 74 samples of infrastructure, utility, and transportation companies use industry specialization auditors (table 3). table 3: 2x2 classification test observed predicted audit quality percentage correct auditor non industry specialization industry specialized auditor audit quality auditor non spesialisasi industri 112 34 76.7 auditor spesialisasi industri 47 74 61.2 overall percentage 69.7 wald test based on the results of the wald test, audit firm size and audit tenor affect audit quality, while audit rotation does not. the significance value of audit firm size and audit tenor is 0.000 (< 0.05), and the significance value of audit rotation is 0.956 (> 0.05) (table 4). https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 98 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4: wald test variables b wald sig. audit firm size 1.478 22.376 0.000 audit tenure 0.222 12.580 0.000 audit rotation -0.025 0.003 0.956 constant -1.538 20.013 0.000 the effect of audit firm size on audit quality the study results show that the size of an audit firm affects audit quality. big-4 public accountants have an excellent reputation for producing good audit quality. the big 4 has specialist auditors who have better integrity and ability. industry specialist auditors are capable of detecting and reporting fraud in client entities. so in, supervising its clients' management is also considered better and able to limit earnings management behavior. agency theory can explain the relationship between the size of an audit firm and audit quality. there is a conflict of interest between the principal and agent, so a third party is needed, namely a reliable and professional independent auditor. one of the considerations in choosing a public accountant is the size of the audit firm. the larger the size of an audit firm, the more reliable and professional it is in producing good-quality audits in order to minimize conflicts of interest between principals and agents. the results of this study are in line with previous research conducted by (deangelo, 1981), (syahputri, 2021), (triani & yanthi, 2020), (f. andriani et al., 2020), (paputungan & kaluge, 2018), and (pham et al., 2017), who have found the effect of audit firm size on audit quality. however, this study's findings differ from (purwanto, 2021) and (palalangan et al., 2019b), who found no effect of audit firm size on audit quality. the effect of audit tenors on audit quality based on the data processing results using logistic regression analysis, audit tenure variables positively influence audit quality. it indicates that the second hypothesis can be accepted. the reason for supporting the second hypothesis is that when the audit tenure or the audit engagement period between the kap and the client is long, the better the audit report produced will be. an audit tenure or a long engagement period can increase the specialization possessed by an auditor, especially in terms of knowledge, experience, and also the ability to understand better, supervise, and detect client management. it can minimize the occurrence of earnings management to improve audit quality. in accordance with the measurement of audit quality, namely industry specialization, auditors believe that if the auditor has a specialization, he will have a reliable ability to detect and report fraud that occurs. the auditor obtains this ability because of experience, understanding, and knowledge. agency theory can link tenure audits with audit quality because, in agency theory, there is a conflict of interest between the company owner and management, so a third party is needed, namely an independent auditor who is reliable and experienced in mediating the conflict. an https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 99 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit tenure or a long engagement period to minimize conflicts between agents and principals. a long audit tenure can improve the auditor's ability, knowledge, and experience in understanding the client company's conditions and problems or conflicts. the results of this study are in line with previous research conducted by (jadiyappa et al., 2021), (purwanto, 2021), (palalangan et al., 2019a), and (f. andriani et al., 2020), where the results of his research state that tenure audits affect audit quality. however, this is different from research conducted by (abedalqader al‐thuneibat et al., 2011), (gonzález-díaz et al., 2015), (cassell et al., 2020), (syahputri, 2021), (badewin & hujaimah, 2020) and (paputungan & kaluge, 2018), which state that audit tenure does not affect audit quality. the effect of audit rotation on audit quality based on the data processing results using logistic regression analysis, audit rotation variables affect audit quality. these findings indicate that audit rotation does not guarantee good audit quality. it is due to the lack of awareness of market players regarding the replacement of kap and auditors. the auditor must have an attitude of professionalism and independence. whether there is audit rotation or not, an auditor still upholds a high attitude of independence, which can affect the quality of the audit he produces. agency theory can explain the relationship between audit rotation and audit quality. conflict of interest in agency theory occurs between company owners as principals and management as agents. therefore, it is necessary to have a third party, an independent auditor who is reliable and experienced in mediating the conflict. the results of this study are in line with previous research conducted by (syahputri, 2021), (agustini & siregar, 2020)(palalangan et al., 2019a), and also (paputungan & kaluge, 2018). however, this is not in line with research conducted by (firth et al., 2012), (purwanto, 2021), (hai et al., 2019), (kalanjati et al., 2019), and (garcia-blandon & argiles-bosch, 2017), who have found the effect of audit rotation on audit quality. conclusion this research was conducted to analyze the effect of kap size, audit tenure, and audit rotation on audit quality in infrastructure, utilities and transportation service companies listed on the indonesia stock exchange from 2016 to 2020. the study succeeded in confirming the effect of company size on quality audits. the larger company size strongly indicates that the audit firm has more competent auditors, so the resulting audit quality is also improving. another finding is that tenure audits influence audit quality. the longer the audit tenure or the audit engagement period between the kap and the client, the more the auditor understands the condition of the client's company, so the quality of the resulting audit will also be better. conversely, audit rotation does not affect audit quality. the limitations of this study are related to the nagelkerke r square value of only 0.220 or 22%, which indicates that there are still 78% of other factors outside the model that can explain the dependent variable. suggestions for further research can add other independent variables such as audit committees, client importance, and audit fees. future research can use other proxies to measure audit quality, such as discretionary accruals. https://www.ilomata.org/index.php/ijtc the effects of audit firm size, audit tenure, and audit rotation on audit quality salman & setyaningrum 100 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference abdillah, m. r., mardijuwono, a. w., & habiburrochman, h. 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(2019). the effect of audit tenure, audit rotation, accounting firm size, and client’s company size on audit quality. the indonesian accounting review, 9(1), 1. https://doi.org/10.14414/tiar.v9i1.1528 purwanto, a. t. w. d. a. (2021a). pengaruh audit tenure, rotasi kap, ukuran kap, dan spesialisasi industri auditor terhadap kualitas audit. journal of chemical information and modeling, 53(9), 1689–1699. purwanto, a. t. w. d. a. (2021b). pengaruh audit tenure, rotasi kap, ukuran kap, dan spesialisasi industri auditor terhadap kualitas audit. journal of chemical information and modeling, 53(9), 1689–1699. rinanda, n., & nurbaiti, a. (2018a). pengaruh audit tenure, fee audit, ukuran kantor akuntan publik dan spesialisasi auditor terhadap kualitas audit (studi pada perusahaan manufaktur subsektor aneka industri yang terdaftar di bursa efek indonesia tahun periode 2012-2016). e-proceeding of management, 5(2), 2108–2116. rinanda, n., & nurbaiti, a. 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(2021). pengaruh independensi, audit fee, audit tenure, pengalaman auditor serta due professional care terhadap kualitas audit. kharisma, 3(1), 32–41. syahputri. (2021a). pengaruh audit tenure, rotasi audit, ukuran kap, dan komite audit terhadap kualitas audit (studi empiris perusahaan properti, real estate, dan konstruksi yang terdaftar di bursa efek indonesia periode 2015-2019). 4(1), 6. syahputri. (2021b). pengaruh audit tenure, rotasi audit, ukuran kap, dan komite audit terhadap kualitas audit (studi empiris perusahaan properti, real estate, dan konstruksi yang terdaftar di bursa efek indonesia periode 2015-2019). 4(1), 6. tandionting. (2016a). kualitas audit dan pengukurannya. alfabeta. tandionting. (2016b). kualitas audit dan pengukurannya. alfabeta. triani, n. n. a., & yanthi, m. d. (2020). the effect of audit firms size, leverage, going concern opinion, audit tenure, on audit quality in indonesia. 144(afbe 2019), 261–265. https://doi.org/10.2991/aebmr.k.200606.044 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 290-296 290 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc market risk disclosure: a study on systemic banks in indonesia hendri setyawan1, edy suprianto2 12universitas islam sultan agung (unissula), indonesia 1correspondent: hendri@unissula.ac.id received : june 7, 2022 accepted : july 19, 2022 published : july 31, 2022 citation: setyawan, h., & supriyanto, e. (2022). market risk disclosure: a study on systemic banks in indonesia. ilomata international journal of tax and accounting, 3(3), 290-296. https://doi.org/10.52728/ijtc.v3i3.507 abstract: this study was conducted to determine the extent to which the disclosure of market risk, especially the risk of the market carried out by banks in indonesia. observation of the disclosure in this study using method by scannella and polizzi (2018) which carried out quantitative and qualitative assessment. this study focuses on four banks in indonesia that have a systemic impact and have islamic subsidiaries. the year of observation is for three years from 2018 to 2020. the results showed that that in general using checklist provided by scannella and polizzi, (2018) the results show insufficient image of market risk disclosure among indonesian large banks. for instance, graphical information about value at risk (var), back testing, and also stress testing. furthermore, information about expected shortfall need to be more expanded. keywords: market risk disclosure, banking this is an open access article under the cc-by 4.0 license. introduction awareness on corporate risk disclosure began to grow when the institute of charted accountants in england and wales (icaew) through its paper in 1998 recommends that companies deliver information about corporate risk management through annual reports (chatzitheodorou et al., 2021; corbet et al., 2022; ellili & nobanee, 2017; kaifala et al., 2021; si & li, 2022; g.-j. wang et al., 2022; k. t. wang et al., 2021). the topic of risk disclosure then became a topic of scrutiny among researchers. they conducted their studies on companies both in developed and developing countries, for example in the uk and canada (linsley et al., 2006; linsley & shrives, 2005) saudi arabia (ahmad et al., 2017; al-maghzom et al., 2016; moumen et al., 2015) indonesia (aryani, 2017; mukhibad et al., 2020) pakistan (ashfaq et al., 2016), malaysia and bangladesh (kabir et al., 2019). with regards to disclosure in banking industry, the financial crisis that hit the world recently made people aware of the strategic role of correct and effective market risk information (boyle et al., 2022; jing et al., 2022; pierri & timmer, 2022). this is important for the achievement of an efficient and stable financial market (crimmel & elyasiani, 2021; godspower-akpomiemie & ojah, 2021). disclosure of banking risk needs serious attention because it plays an important role in building trust among stakeholders (fang et al., 2020; ouyang & wang, 2022). in addition, it also plays a role in strengthening market discipline (scannella and polizzi, 2018). https://www.ilomata.org/index.php/ijtc mailto:hendri@unissula.ac.id https://doi.org/10.52728/ijtc.v3i3.507 market risk disclosure: a study on systemic banks in indonesia setyawan and suprianto 291 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the complex banking business reduces the ability of stakeholders outside the bank to assess the business practices they carry out. the large information asymmetry makes it difficult for outsiders to evaluate the level of risk taken by banking management (healy & palepu, 2001; jorion, 2009). today's investors are more concerned with the complexity and lack of transparency related to banking risk profiles. thus, investors want more access to information about the risk profile of the banking industry (rajab & schachler, 2009). transparency of the banking risk profile will reduce uncertainty in the assessment thereby increasing trust in banks (acharya et al., 2009). given the importance of information on market risk exposure by banks, this matter should be a concern. however, research on market risk disclosure by banks is still very limited, especially in indonesia. in addition, the fact that indonesia has sharia banking industry makes this research interesting to do with banking settings in indonesia. this study focuses on 4 banks in indonesia that have a systemic impact and have sharia subsidiaries. this research use the quantitative assessments as proposed by scannella and polizzi, (2018). based on the knowledge gap above, there is a problem which relates to limited knowledge that explains the extent of market risk disclosure of banking with a systemic impact in indonesian context quantitatively. based on the research problem above, the research questions in this study were proposed as follows “to what extent does the level of market risk disclosure of banking that have systemic impact in indonesia quantitatively”? banks as financial intermediaries play an important role in the economy. in carrying out its business, banks face various risks ranging from legal risk, operational risk, financing risk, market risk, etc. for this reason, banks need to have an effective risk management. banking is one of the most regulated industries. one of the regulations related to risk management internationally is contained in the basel agreement starting from basel i, ii, iii. islamic banking as part of the banking industry also experiences risk exposure. however, there are some differences in risk exposure due to the uniqueness that underlies the islamic banking business model (setyawan, 2018). market risk is one of the most important risks in banking. by the basel committee on banking supervision (bcbs) market risk is defined as the risk of loss both “on balance sheet/in the balance sheet” and “off balance sheet/off balance sheet” due to movements in market prices. the meaning of this definition is that there are fluctuations in market prices of financial instruments or portfolios of financial instruments that pose a risk of loss. the main drivers of market risk include fluctuating commodity prices, equity prices, interest rates, credit spreads, foreign exchange rates (basel committee, 2019). market risk has become increasingly important with various developments such as securitization of financial assets, financial market volatility, internationalization of banking activities, market uncertainty etc. these things should be reflected in the disclosure of market risk. disclosure of market risk means publication by banks of timely and reliable information that enables users to accurately assess financial conditions, performance, business activities, risk profiles, and banking risk management practices. this situation will in turn make the financial markets carry out their market discipline functions effectively (scannella and polizzi, 2018). reliable and timely disclosure of market risk exposures experienced by banks will trigger the creation of conditions for the market to carry out its disciplinary function effectively. based on this perspective, there are two trades off problems that occur. the first trade off issue is between transparency and bank secrecy. there are always certain aspects of confidentiality that must be maintained by banks to guard against speculation and predatory behaviour by market https://www.ilomata.org/index.php/ijtc market risk disclosure: a study on systemic banks in indonesia setyawan and suprianto 292 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc participants/stakeholders. the second trade off problem is between the information needs of shareholders and the tendency of banks to hide information. in other words, the trade-off between the rights of shareholders to know whether the bank's market risk is still tolerable or not; with the interest of the bank to avoid disclosing detailed information regarding market risk exposure in order to maintain its competitive advantage. ifrs 7 financial instruments: disclosures was first published in 2005 and has been amended several times since. the standard replaces ias 30 and part of ias 32 by placing the entire regulation regarding disclosure of financial instruments into the new standard. in indonesia, most of the contents of ifrs 7 were adopted into psak 60 financial instruments: disclosures. ifrs 7 disclosures classify into two categories of information about the significance of financial instruments and information on the nature and extent of risks on the financial instrument. quantitative disclosure reveals the extent to which the entity is exposed to risk based on internal information for key management. they include a summary of quantitative data on the exposure of each risk at the reporting date; disclosure of credit, liquidity, market risks and how to manage these risks. market risk / market risk in ifrs 7 is defined as the risk that the fair value or cash flows of a financial instrument will fluctuated due to changes in market prices. market risk reflects interest rate risk, currency risk and other price risk ( www.iasplus.com ). method the research object selected in this study is a systemic impact bank in indonesia. four of them are selected from the list of systemic impact banks. the four banks also have islamic subsidiaries. the assessment is carried out on both the publication of the parent company and the islamic subsidiary. the research was conducted for 3 reporting periods, namely from 2017 to 2019. the data needed in this study is secondary data. secondary data is data obtained not from respondents directly but related to the object of research. in this study, data on banking annual reports and other relevant banking publications are used. the sources of data in this study are the ojk website, bi website, the website of each bank that is the sample of this study. the population in this study is the overall banking which is predicted to have systemic effects in indonesia (according to its size i.e total assets). the sample in this study are four banks with the largest asset size among systemic impact banks in indonesia. data were obtained from the websites of bank indonesia (indonesian central bank), indonesia financial services authorithy and each of the banks that were sampled for this research. this study uses an appropriate quantitative and qualitative assessment measure (scannella & polizzi, 2018). quantitatively, market risk disclosure is assessed using the following checklist: 1. market risk definitions 2. value at risk (var) definitions 3. expected shortfall (es) definitions 4. back testing definition 5. average var 6. average es 7. var at the end of the year https://www.ilomata.org/index.php/ijtc https://translate.google.com/translate?hl=en&prev=_t&sl=id&tl=en&u=http://www.iasplus.com market risk disclosure: a study on systemic banks in indonesia setyawan and suprianto 293 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 8. limitations of var 9. limitations of es 10. explanation of the var model used 11. explanation of back testing models used 12. presence of graph about annual var fluctuations 13. stress testing explanations 14. stress testing results 15. market risk level of aggregation reported result and discussion based on the size of commercial banks in indonesia, four banks have the potential to have a systemic impact (bank 1, 2, 3, and 4). in addition to having a potential systematic impact, the four banks also have islamic subsidiaries. in this part the disclosure will be analysed quantitatively. bank 1 bank 2 bank 3 bank 4 18 19 20 18 19 20 18 19 20 18 19 20 quantitative market risk definition 1 1 1 1 1 1 1 1 1 1 1 1 value at risk (var) definition 0 0 0 1 1 1 0 0 0 1 1 1 expected shortfall (es) definition 0 0 0 0 0 0 0 0 0 0 0 0 back testing definition 0 0 0 1 1 1 1 1 1 0 0 0 average var 1 1 1 1 1 1 0 0 0 1 1 1 average es 0 0 0 0 0 0 0 0 0 0 0 0 var at the end of the year 0 0 0 1 1 1 0 0 0 1 1 1 limitations of var 1 1 1 0 0 0 0 0 0 0 0 0 limitations of es 0 0 0 0 0 0 0 0 0 0 0 0 explanation of the var model used 0 0 0 1 1 1 1 1 1 1 1 1 explanation of back testing models used 1 1 1 1 1 1 1 1 1 1 1 1 presence of annual var fluctuations graph 0 0 0 0 0 0 0 0 0 0 0 0 stress testing explanations 1 1 1 1 1 1 1 1 1 1 1 1 stress testing results 0 0 0 0 0 0 0 0 0 0 0 0 market risk level of aggregation reported 1 1 1 1 1 1 1 1 1 1 1 1 total 6 6 6 9 9 9 6 6 6 8 8 8 table 1. disclosure items and score quantitatively, the first bank is quite lacking in making disclosures. with regard to value at risk, the bank provide explanation on the limitation of var as well as the calculation result of average var. however, there are weaknesses in the absence of value at risk definition and no adequate explanation on var model being utilised. it also doesn’t provide back testing definition. similarly, the third bank shows relatively weak disclosure. the positive things are that it gives back testing definition and explanation on the var model used. the negative side are that it lacks definition of var and numbers of average var as well as end of year var. both banks have got score 6 out of 15. on the other hand, the bank number 2 provides quite a lot with regard to var. those include var definition, calculation results of average var and end of year var. it also presents clarification on the method being used in the var calculation. in addition, it also makes back https://www.ilomata.org/index.php/ijtc market risk disclosure: a study on systemic banks in indonesia setyawan and suprianto 294 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc testing definition available. the bank has got score 9 out of 15. likewise, the bank number 4 also gives better impression. if compared to bank 2, it only fails to supply back testing definition. the bank’s score is 8 out of 15. graph 1. disclosure score for each bank from 2018 to 2020 overall, in respect of expected shortfall (es) all banks are deficient in coming up with its definitions, average number, and limitation. as for var, none of the banks’ disclosures examined is equipped with graph about annual var fluctuations. in addition, there is no presence of stress testing results for all the banks being studied. conclusion it can be concluded that in general using checklist provided by scannella and polizzi, (2018) the results show poor picture of market risk disclosure among indonesian large banks. there is a development in the disclosure of var. however more things need to be done to make a betterment to the situation. for instance, pictorial information about var, back testing, as well as stress testing. furthermore, information about expected shortfall need to be expanded even more. reference acharya, v., philippon, t., richardson, m., & roubini, n. 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(2021). corporate social activities and stock price crash risk in the banking industry: international evidence. journal of international financial markets, institutions and money, 74, 101416. https://doi.org/10.1016/j.intfin.2021.101416 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, april 2023 page no. 324-340 324 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) marlon manya orellana1, miryam c. gonzález-rabanal2 12universidad nacional de educación a distancia, spain correspondent: mmanya2@alumno.uned.es1 received : february 1, 2023 accepted : april 16, 2023 published : april 30, 2023 citation: orellana, m, m., rabanal, m, c, g.(2023). application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador). ilomata international journal of tax and accounting, 4(2), 324-340. https://doi.org/10.52728/ijtc.v4i2.723 abstract: the pandemic has caused many businesses to experience a significant decline in revenue and profitability, leading to a decrease in the value of their assets. as a result, companies may need to assess whether their assets have been impaired and take an impairment charge if necessary. this caused companies in general to modify the accounting treatment under the international standard ifrs 9 applicable from 2018. the objective of this article is to determine the portfolio risk that affects the calculation of these provisions, through a case study in ecuador. the research approach used was mixed (qualitative and quantitative), since various types of data collection tools were used to process the information. the data treatment in the qualitative approach consists of the analysis of the phenomenon related to the exploration for the understanding of the ifrs 9 accounting standard. on the other hand, the quantitative approach intends to analyze the research variables and measure them numerically with the use of statistical methods using binary logistic regression. to this end, a database of clients of a non-financial company was analyzed, and the composition of its portfolio segmented by day of delay, observing the component called probability of default (pd), which was determined by binary logistic regression. a model was obtained that allowed to obtain the desired probability, and consequently under the approach of ifrs 9, the calculation of the expected credit loss (ecl). the results obtained estimated a portfolio impairment of 23%, compared to the baseline scenario of 9%. keywords: ifrs 9, impairment, default, credit, regression this is an open access article under the cc-by 4.0 license. introduction the pandemic has caused an increase in the number of customers who are unable to pay their debts. as a result, companies may need to make provisions for bad debts to reflect the higher risk of non-payment. as a result, companies may need to disclose the risks and uncertainties related to their ability to continue operating and may need to adjust their financial statements accordingly. one of the key changes introduced by ifrs 9 is the shift from the incurred loss model to the expected credit loss (ecl) model for the impairment of financial assets. under the incurred loss model, impairment losses were recognized only when there was objective evidence of impairment, https://www.ilomata.org/index.php/ijtc mailto:mmanya2@alumno.uned.es1 https://doi.org/10.52728/ijtc.v4i2.723 application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 325 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc such as a default or bankruptcy of the debtor. in contrast, the ecl model requires companies to recognize expected credit losses based on a forward-looking assessment of the credit risk associated with a financial instrument, considering factors such as the debtor's creditworthiness, payment history, and economic conditions. overall, the objective of ifrs 9 is to improve the financial reporting of financial assets and financial liabilities, with the aim of providing users of financial statements with better information about an entity's financial position, performance, and cash flows. it should be recalled that companies used the loss methodology incurred in accordance with ias 39; that is, the recognition of losses at the time evidence of impairment is identified. the measurement of expected losses when evaluating the loan portfolio is now analyzed for the calculation of a reasonable provision. therefore, the provisions of accounts receivable or impairment of the portfolio are necessary due to the risk involved in addition to a correct valuation, because if they are overvalued or undervalued it would affect the financial situation of the company for future investments or loans. post-pandemic, many non-financial companies in the service sector have faced significant challenges in maintaining stable liquidity conditions. however, there are certain criteria that can indicate that a company is in a strong position in terms of liquidity. first, the company's ability to generate stable and predictable cash flows is key. a company that can maintain a stable cash flow through good management of its cash cycle, including control of its accounts receivable and payable, and efficient management of its inventory, will be better positioned to survive any negative impact on its revenues. second, diversification of revenue sources and the company's ability to adapt are also important factors. a company that has a broad and diversified customer and product base will be better equipped to deal with fluctuations in demand and disruptions in the supply chain. in addition, a company that can adapt quickly to changes in market and economic conditions, through good planning and strategy, will be better able to maintain a strong position in terms of post-pandemic liquidity. for (moreno et al., 2014) this situation "allows users of financial statements to obtain more useful information about the expected credit losses of an entity, about its financial assets to facilitate the evaluation of future amounts and cash flows". (casal, 2016) argues that "entities will have to document their business models and ensure that the financial investments they make are framed in them." (parrales choez & castillo llanos, 2018), ifrs 9 financial instruments seeks a new principlebased classification and valuation approach, depending on the business model and nature of cash flows. likewise, this standard analyzes the deterioration model with an approach to expected losses, and complements a hedge accounting more aligned with the reality of the company's risk management. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 326 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (gonzales cervan et al., 2015) when comparing these accounting standards highlight four main differences "the first is the implementation of the expected losses model in ifrs 9, which replaces the incurred loss model applied according to ias 39. the second is that ifrs 9 applies a new business model that helps determine the classification of financial assets as either amortized cost or fair value. the third creates a difference with ias 39, since the latter did not allow the decomposition of a non-financial asset to cover risks; however, hedge accounting can be applied under ifrs 9. the last is that it will have an impact on ifrs 7 by making the effectiveness of coverage accounting dependent on the organization's strategies, which will require broader disclosure of their implementation." (azúa álvarez et al., 2021), consider that the measurement of impairment in accounts receivable implies for companies that they must perform the estimated calculation of default for each client, through an expected credit loss (ecl) model under the international standard (ifrs 9), which is based on three components: probability of default (pd), loss given default (lgd), and portfolio exposure (ead). (neisen & schulte-mattler, 2021) warn that this pandemic will cause a deterioration in the solvency of customers in financial institutions and a possible massive increase in loan defaults. as a result, various regulatory bodies, including the basel committee on banking supervision (bcbs) and european union (eu) institutions such as the european banking authority (eba) and the european central bank (ecb), have taken measures to prevent a potential banking crisis. (porretta et al., 2020) describe the statement suggests that the new regulations and technical standards introduced in europe may not always align with the methodological criteria and operational implications of the iasb. the statement further indicates that a case study has shown that the rules established for stage 1 of ifrs 9 do not reduce excess coverage produced in a portfolio, which may be problematic for companies. the statement goes on to mention that for impaired loans that fall under stage 2 of ifrs 9, the expected credit loss (ecl) calculation may impose an excess of provisions because it does not consider the effect of expected premium coverage. additionally, for portfolios of loans with short repayment terms, the excess provisions of ifrs 9 may compensate for the lack of coverage of the capital requirement. for this reason, the new requirements of the international standard in relation to risk measurement emphasize the preparation of information. this has resulted in the development of statistical models that measure risk capacity, thus obtaining a concept extended to that traditionally proposed by risk rating agencies. (peter, 2006) in his banking experience highlights that the measurement and management of credit risk depends to a large extent on three key risk parameters: probability of default (pd), exposure at default (ead) and loss given default (lgd). for this author, probability of default describes the probability that the lender will face default on some obligor or transaction. the exposure at default provides an estimate of the exposure outstanding at the time of default, also indicating the maximum loss on the corresponding credit line. finally, loss given default measures the percentage https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 327 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of a defaulted exposure that the lending bank expects not to recover. this means that the lending bank expects to recover (1 lgd) percent of the defaulted exposure. (bushman & williams, 2012) investigated discretionary lending practices in banks in 27 countries, concluding that forward-looking provisions designed to smooth profits reduce risk-taking discipline, consistent with decreased transparency that inhibits external control. conversely, forward-looking provisions reflecting timely recognition of expected future credit losses (ecls) are associated with greater discipline on risk-taking. (novotny-farkas, 2016), concludes that the expected credit loss (ecl) model incorporates a significantly larger set of relevant information to identify future credit losses and leads to earlier recognition of these. consequently, it will require higher loan loss provisions, which will reduce the accumulation of excess losses and the overestimation of regulatory capital in boom periods. (chawla, 2016) mentioned that unlike basel ii rules, which require the use of through-the-cycle probabilities of default (pd) and loss given default (lgd) rates and recession default exposures (ead), ifrs 9 and the proposed current expected credit loss accounting standards require institutions to use point-in-time projections of pd, lgd and ead. by taking into account the current state of the credit cycle, these projections closely track changes in default and loss rates over time. (vaněk & hampel, 2017), proposed for the case of the czech republic, the calculation of the probability of default (pd) using the markov model, and the official macroeconomic data taken from the national bank, thus adjusting to the requirements of ifrs 9 to determine the calculation of expected credit losses (ecl) over the life of the financial instrument. (cohen. bedwards, 2017) in their post-financial crisis study (2007-2009) mentioned that accounting standards bodies have required banks and other companies to provision against loans based on expected credit losses (ecls) and determined that in the short term these provisions may increase, but the impact on regulatory capital is expected to be limited. (habachi & el haddad, 2018), outlined that the probability of default (pd) depends on the model used for the design of the internal rating system. for this purpose, they investigated the impact of model choice on expected credit loss (ecl) by calculating the probability of default (pd) for various types of models based on logistic regression and principal component analysis in morocco. (delgado-vaquero & morales-díaz, 2018) proposed the financial ratio scoring model and the merton kmv structural model, to estimate credit quality and obtain the corresponding probability of default (pd), where information was published on the client (basically information from financial statements and other market inputs) and comparable companies. (galárraga & lafferty, 2018) using a statistical-mathematical model determined the probability of default and a reasonable allocation for a company dedicated to the operation of shopping centers, which motivated management to change accounting policies and its credit and collection processes. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 328 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (costa et al., 2020) applied a logistic regression model to predict the credit risk of default in the consumer portfolio of a bank in portugal. according to the authors, the risk of default increases with the loan margin, the term of the loan and the age of the client, but decreases if the client has more credit cards. (santos, 2018) proposes a real approach to model the probability of default in the calculation of expected credit loss under ifrs 9. according to the author, financial institutions had to adjust their models to comply with this standard. based on this, model performance and calibration were analyzed using pearson's correlation, coefficient of determination and binomial test. the results suggest that this approach estimates the risk parameter well, as the coefficients are above the 0.7 threshold and the percentage of accepted periods is also above 70%. however, one of the curves needs to be adjusted, as it has a coefficient of determination of 0.45. (zizi et al., 2021) concluded that logistic regression models obtained by step selection outperform the other models with an overall accuracy of 93% two years before financial distress and 95% one year before the current context. the results also show that the models rank distressed small and medium-sized enterprises (smes) better than healthy smes with type i errors lower than type ii errors. (schutte, 2020) develop a methodology to calculate the expected credit loss on the portfolio of a guaranteed financial institution in an emerging country. first, the marginal probability of default is determined. second, they proceed to calculate the marginal recovery rates and the loss given the resulting default, and finally the portfolio exposure. these three components are combined to calculate the expected credit loss empirically. according to the authors, in markets where more sophisticated models are developed, the proposed methodology can be used in two scenarios: either as a benchmark to compare models under recently developed ifrs 9 or in markets where there are limited resources. (martinelli et al., 2020) show in their research that data mining techniques can significantly improve the risk assessment approaches of financial institutions by providing more accurate information on the assessment of credit quality deterioration before the actual loss occurs, without incurring disproportionate costs and efforts. according to these authors, the proposed model is useful especially for measuring the 12-month probability of default, and for assessing the potential shift of a credit from stage 1 to stage 2 over the entire term of the financial instrument. (oberson, 2021) in his study conducted on a sample of 69 banks from 24 countries, within a normal reference scenario, describes that the novelty in the expected credit loss (ecl) model is the prospective incorporation for the recognition of accounting provisions on bad loans, which provides a wide margin for managerial discretion. regarding (engelmann, 2021) assertion that the most widely applied formula in the literature to calculate ecl is inconsistent with the measurement of expected loss based on expected discounted cash flows, it would be necessary to review the specific formula and context to provide a more definitive response. however, it's worth noting that financial reporting standards such as ifrs 9 https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 329 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provide guidance on how to calculate ecl using a range of methodologies, including discounted cash flow approaches. the logistic distribution is a commonly used probability distribution in credit risk modeling, and the markov chain monte carlo (mcmc) method is a powerful statistical tool for estimating model parameters. by using these techniques, (zhao & cao, 2021) were able to develop a credit risk model that accurately classifies customers into different risk levels based on their credit history and compliance status. overall, the study highlights the importance of credit history and compliance status in assessing the credit risk of bank customers. these factors should be carefully considered by banks and other financial institutions when making lending decisions and managing credit risk. (habachi & el haddad, 2018), in their study on the impact of covid-19 in morocco on a portfolio of a financial institution, use accounting supports and qualitative variables related to the client as a source of information, and as part of the empirical evidence logistic regression and linear discriminant analysis. the authors have used expert opinion to adjust the ratings and probability of default assigned to each counterparty by the initial models. this approach can help to incorporate subjective factors that may not be captured by quantitative models alone. however, it is important to note that expert opinion may be subject to biases and may not always be reliable. therefore, it is crucial to carefully consider the qualifications and expertise of the experts involved and to take a cautious approach when relying on their opinions. (hung et al., 2021) conducted a study that compared the robustness of a probability of default (pd) estimation model with a deterministic gross domestic product (gdp) to a credit default model. the goal of the study was to assess whether the deterministic gdp model was more robust than the credit default model in predicting the likelihood of default of corporate borrowers. the study used data from publicly traded companies in the united states from 2001 to 2017. the credit default model was based on the merton model, which calculates the probability of default based on a firm's asset value, debt level, volatility, and the value of the debt. the deterministic gdp model, on the other hand, used the historical average gdp growth rate as a proxy for future economic growth. (achim et al., 2021) consider that ifrs 9 increases accounting value judgments as it incorporates forward-looking information in the estimation of credit losses which, theoretically should ensure timely recognition of provisions. however, as noted since its implementation in 2018, the standard is still at an early stage and more time needs to elapse before companies can build robust validation frameworks around the estimates made. in addition, the stochastic nature of ifrs 9 in shaping these assumptions raises questions about the effect of potential discretion and flexibility of decision makers in companies. (gubareva, 2021) demonstrates how to estimate credit impairment provisions in accordance with the ifrs 9 framework. in her study she concludes that for both investment grade and high yield exposures, the weight of the default component in credit spreads is always less than 33%. the https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 330 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research results contrast with several previous findings that the risk premium accounts for at least 40% of spreads in default hedges. (bank & eder, 2021) argue that for ifrs 9 a calibration of the probability of default at the account level is more appropriate than a calibration at the portfolio level, as highlighted in the basel accords. according to the authors to date no study has yet investigated empirically how the choice of model affects the assignment of stages (stage 1, for 12 months; stage 2, for the entire term of the financial instrument; stage 3, impairment). (chen et al., 2022) develop a model of the impairment of financial assets through the credit card data of a financial institution. according to these authors, the results obtained show that, compared with the previous accounting standard ias 39, under the implementation of the current ifrs 9 standard, both the scale of credit card business assets that need to be impaired and the provision for asset impairment improve significantly, but the impairment reserve ratio decreases. (pastiranová & witzany, 2022) expect ifrs 9 to change the flow of loan loss provisions, which is expected to be unstable, more volatile and more unpredictable than under the previous standard ias 39, empirically tested in a sample of the eight largest banks in the czech republic. the hypothesis that the implementation of ifrs 9 leads to higher volatility of loan loss provisions is confirmed in the case of five banks and within the entire sample of banks at a probability level of 5%. (lamaj, 2023) describes the key requirements of ifrs 9 on accounting for loan loss provisions. first, he interprets the main rationale for loan loss provisions. secondly, he goes on to give a brief history of the standard development and, finally, summarizes the main implications of the loss model for financial institutions. method composition of the portfolio the primary information of the case presented is composed of all the accounts receivable found in the accounting records of a non-financial company specialized in the services sector in ecuador, detailing the information on outstanding balances, days due, date on which the debt was contracted and maturity date. in addition, the portfolio was limited to companies that have outstanding accounts receivable (47 customers). the research approach was mixed (qualitative and quantitative) and data was collected using company data and ratings given to each client. the company's portfolio is classified into 5 groups according to the number of days past due for each client, as follows: category a: less than 30 days; category b: between 31 and 60 days; category c: between 61 and 90 days; category d: between 91 and 180 days; category e: more than 180 days. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 331 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to the company's policy, it is determined that the risk of inconvenience increases after 60 days of delinquency, which in this portfolio represents 33% of the total number of customers. note that 55% of the portfolio migrated from higher to lower ratings, or remained at low ratings, while the other 45% remained at high ratings or migrated from low to high ratings. definition of variables the dependent variable of this research that will be explained by the binary logistic regression model is the probability of default of the clients of the non-financial company; therefore, for the construction of the dependent variable, its accounting policies have been considered, where it has been defined that the maximum time for its clients to pay the outstanding amounts to be collected is 60 days. this means that all unpaid invoices above the established limit represent a greater risk for the company of uncollectability of accounts receivable, therefore, customers who have exceeded 60 days past due will be assigned a value of (1) and those under 60 days will be assigned a value of (0). the independent variables focus on the information obtained from the public financial statements presented by these companies, obtaining financial ratios such as: current liquidity, equity indebtedness, leverage, portfolio turnover, gross margin, size of the client company, participation according to client activities, as well as qualitative information on the state of tax compliance, the state of compliance with social security, the state of corporate compliance, the existence of audits and the current state of the company. the model the statistical model was performed using binary logistic regression, which is a mathematical technique that aims to model the relationship between a variable or dependent variable, depending on the independent variables (i),𝑌𝑋 therefore, it seeks to predict the probability of occurrence of knowing the values of (𝑌𝑋i), the starting equation of logistic regression is: 𝑃(𝑌 = 1|𝑋) = 𝑒𝑥𝑝(𝑏0+∑ 𝑏1𝑥𝑖 𝑛 𝑖=1 ) 1 + 𝑒𝑥𝑝(𝑏0+∑ 𝑏1𝑥𝑖 𝑛 𝑖=1 ) • 𝑃(𝑌 = 1|𝑋): is the probability that takes the value 1 (presence of the studied characteristic 𝑌). • 𝑋 is a set of n covariates x1.... xn that are part of the model • 𝑏0 is the constant model or independent term • 𝑏i represent the coefficients of the covariates we divide the expression by its complementarity, obtaining a much easier expression to handle mathematically: 𝑃(𝑌 = 1|𝑋) 1 − 𝑃(𝑌 = 1|𝑋) = 𝑒𝑥𝑝(𝑏0+∑ 𝑏1𝑥𝑖 𝑛 𝑖=1 ) https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 332 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, it is more difficult to interpret, so finally a transformation is made with the natural logarithm to obtain an equation of linear type. ln ( 𝑃(𝑌 = 1|𝑋) 1 − 𝑃(𝑌 = 1|𝑋) ) = 𝑏0 + ∑ 𝑏1𝑥𝑖 𝑛 𝑖=1 the estimate of the expected loss for a portfolio can be calculated using the following formula: 𝐸𝐶𝐿 = 𝑃𝐷 ∗ 𝐿𝐺𝐷 ∗ 𝐸𝐴𝐷 𝐸𝐶𝐿 : expected credit loss 𝑃𝐷: probability of default 𝐿𝐺𝐷: loss given default 𝐸𝐴𝐷: portfolio exposure the probability of default (pd) is the likelihood that a borrower or counterparty will default within a given time period. this is typically estimated using statistical models that take into account a range of factors such as the borrower's credit history, financial ratios, industry sector, macroeconomic conditions, etc. the loss given default (lgd) is the proportion of the outstanding balance that is lost in the event of a default. this can be estimated using historical data or through the use of models that take into account factors such as collateral, seniority, and recovery rates. the exposure at default (ead) is the amount of exposure to the borrower or counterparty at the time of default. this can be estimated based on the outstanding balance, or through the use of models that take into account factors such as future drawdowns, collateral, and other forms of credit enhancement. by multiplying these three factors together, we can estimate the expected loss for a portfolio. this is an important measure for banks and other financial institutions, as it helps to inform their capital planning and risk management activities. result and discussion the "enter" method was chosen for the binary logistic regression model where we decide which variables are entered or extracted from the model, through the spss statistical software. results in limiting financial expenses in each of the cases raised are shown below: table no. 1 omnibus testing of model coefficients chi-cuadrado gl herself. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 333 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc step 1 step 125,913 11 ,000 block 125,913 11 ,000 model 125,913 11 ,000 source: research data for step 1 of the model, the statistical efficiency score of the rao indicates that there is a significant improvement in predicting the probability of occurrence of the categories of the dependent variable (chi-squared: 125.913; gl: 11; p<0.001). table no. 2 model summary step logarithm of probability -2 cox and snell r-squared nagelkerke rsquared 1 63.973 ,598 ,801 source: research data there are two r-squares in logistic regression, and both are valid. it is customary to say that the part of the dependent variable explained by the model ranges from the r-squared cox and snell to the r-squared nagelkerke. the higher the r-squared, the more explanatory the model, consequently, the independent variables explain the dependent variable. the nagelkerke rsquared value indicates that the proposed model explains 80.1% of the variance of the dependent variable. table no. 3 model classification observed foresight default correct percentage ,00 1,00 defaul t ,00 76 0 100,0 1,00 12 50 80,6 overall percentage 91,3 source: research data although goodness-of-fit coefficients are not entirely reliable, the leaderboard is usually the criterion we must follow to indicate the goodness of fit of the model. based on the regression equation and the observed data, a prediction of the value of the dependent variable is made. this prediction is compared with the observed value. if correct, the case is correctly classified. the more cases you classify correctly, that is, the more the predicted value matches the observed value, the better the model, the more explanatory it will be; therefore, independent variables are good predictors of the event or dependent variable. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 334 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc for the logistic regression analysis, step 1 indicates that there is a 91.3% probability of being correct in the result of the dependent variable, when i know the financial information of the companies. overall, this is an acceptable model. table no. 4 hosmer and lemeshow test step chi-square gl herself. 1 9,021 8 ,340 source: research data the hosmer and lemeshow test is a distribution constant. the null hypothesis is that there is no difference between observed and predicted values (probabilities); the alternative hypothesis is that there is. therefore, rejection of this test indicates that the model is not well fitted. in our particular case, the significance of the model is 9.021 (chi-square) and we have a p-value greater than 0.05, so the model is relevant. table no. 5 variables in the model equation b standard error forest herself. exp(b) step 1 ep -12,54 5,26 5,68 ,017 ,000 ap 12,54 5,26 5,68 ,017 279458,31 rc -,014 ,007 4,65 ,031 ,986 mb -1,91 ,959 3,99 ,046 ,147 lc -3,87 1,35 8,14 ,004 ,021 status ,048 1,82 ,001 ,979 1,049 particip -10,29 8,15 1,59 ,207 ,000 age -,032 ,049 ,430 ,512 ,968 tipo_c -,505 1,31 ,147 ,701 ,604 super -4,80 1,44 10,99 ,001 ,008 audit -1,11 ,871 1,64 ,199 ,327 constant -2,07 4,70 ,195 ,659 ,125 source: research data in this table we can see the variables that intervene in the model, and that are significant for the model, those variables that have a sig. value < 0.05. the b sign of each of the significant variables indicates the relationship it has with the dependent variable. we can also consider the following: • if exp(b) < 1, if the value of the independent variable increases, the value of the dependent variable decreases. • if exp(b) > 1, if the value of the independent variable increases, the value of the dependent variable increases. https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 335 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the wald score is a statistical test that measures the significance of the coefficients of the independent variables in a regression model. a significant wald score indicates that the independent variable is a good predictor of the dependent variable. however, the significance of the wald score alone is not sufficient to determine whether the results can be generalized to the population. table no. 6 explanatory variables of the model variable meaning sign b explanation ep debt to equity the higher the indebtedness of the assets, the greater the risk that the client will default. ap leverage + the higher the level of leverage, the greater the risk of the client defaulting. rc portfolio rotation the higher the portfolio turnover, the lower the risk of the client defaulting. mb margen gross the higher the gross margin, the lower the client's risk of default. lc current liquidity the higher the client's current liquidity, the lower the risk of default. super corporate compliance status since it is classified as compliant or noncompliant, this indicates that companies that meet their corporate obligations have a lower risk of default. source: research data from the coefficients obtained in the binary logistic regression model, the regression line is calculated with the following expressions: pd = 12,541 ∗ ap − 12.542 ∗ ep − 0,014 ∗ rc − 1.917 ∗ mb − 3,873 ∗ lc − 5.806 ∗ super where: ps: probability of non-compliance ep: debt to own funds ap: leverage rc: portfolio turnover lc: current liquidity mb: gross margins super: corporate compliance status https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 336 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to calculate the pd for each client in a portfolio, a mathematical model is used. the specific model used can vary depending on the institution and the type of portfolio being analyzed. however, in general, the model will take into account various variables that are indicative of the likelihood of default, such as credit score, debt-to-income ratio, and loan-to-value ratio. once the model is developed, it can be used to calculate the pd for each client in the portfolio using the general mathematical formula of the model. the exact formula will depend on the specific model being used, but it will typically involve some combination of the input variables and model coefficients. it's important to note that the pd is just one component of credit risk assessment and management. other factors, such as recovery rate and exposure at default, also need to be considered to fully assess the risk of a loan portfolio. to obtain the loss given default (lgd) it is necessary to know the recovery rate (rr), which represents the probability of recovery of the portfolio. in this case, the recovery rate is the probability that a customer who has a loan portfolio will pay the outstanding amounts. therefore, lgd is equal to: (1rr). since ifrs 9 does not specify a detailed method for estimating this parameter, it was obtained from the portfolio analysis by category: table no. 7 loss given default (lgd) category recovery rate (rr) loss given default (lgd) category a 90,7% 9,3% category b 79,7% 20,3% category c 64,8% 35,2% category d 44,9% 55,1% category e 19,9% 80,1% source: research data below, we present the scheme for calculating the expected credit loss (ecl) for each of the clients that make up the portfolio of the non-financial company. table no. 8 calculation of expected credit loss (ecl) customer days late initial qualification final qualification ead lgd pd ecl 1 22 a a 87,76 9,3% 4,3% 0,35 2 23 a a 497,12 9,3% 3,0% 1,39 3 58 a b 4.184,00 20,3% 5,4% 45,46 https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 337 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4 875 e e 1.775,00 80,1% 99,5% 1.414,41 5 22 a a 3.814,33 9,3% 1,9% 6,89 6 1282 e e 20.737,52 80,1% 99,0% 16.431,95 7 22 a a 1.327,45 9,3% 2,9% 3,62 8 22 a a 445,28 9,3% 4,0% 1,64 n .. .. .. .. .. .. .. source: research data according to the results obtained, the study presents the situation of a non-financial company in the services sector that before the pandemic showed stable liquidity, since it was able to meet its short-term obligations, but depended on more than 50% of the financing of its creditors, so it would reach a point where it could not meet its obligations even though it has liquidity. this is not in great proportion, and in this way, he would manage to survive the payment of his debts. however, in the current economic context it would present a greater risk of default. through the binary logistic regression model used, it was determined that the variables that are capable of determining the probability of default for the company are: equity indebtedness, leverage, portfolio turnover, current liquidity, gross margin, corporate compliance status. the model obtained can predict the fulfillment of payments in a general way by 91.3%, that is, the model has an optimal predictive character. on the other hand, the application of ifrs 9 resulted in the recording of a provision representing 23% of the company's portfolio, compared to 9% recorded in the company's books before the pandemic. given these facts, it is necessary to improve credit granting policies because their portfolio is complex and requires observing different variables to meet their needs, such as the financial analysis of customers, the existence of guarantees, credit history, if they are recurring customers and if they have been in default for days on previous loans. conclusion the company in the service sector has used a binary logistic regression model to calculate the probability of default (pd) for its portfolio. this model is commonly used in credit risk. furthermore, the company has also used the international financial reporting standard 9 (ifrs 9) approach to estimate the expected credit loss (ecl) for its portfolio. this approach requires the calculation of two key parameters, namely the loss given default (lgd) and portfolio exposure at default (ead), for each client category in the portfolio. based on the information provided, it appears that the company has estimated a 23% deterioration in the portfolio in pandemic situations compared to a baseline scenario of 9% before the pandemic occurred. this suggests that the pandemic has had a significant impact on the credit quality of the portfolio, resulting in a higher expected credit loss. it is worth noting that the estimation of credit risk parameters and the calculation of expected credit losses are complex and involve various assumptions and inputs. therefore, it is important for the company to ensure that its modeling methodologies and data inputs are appropriate and https://www.ilomata.org/index.php/ijtc application of ifrs 9 financial instruments and the exposure to credit risk (case study in ecuador) orellana and rabanal 338 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc up-to-date, and that the results are regularly monitored and validated. this can help to improve the accuracy and reliability of the credit risk estimates and support sound credit risk management practices. 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(2021). an optimal model of financial distress prediction: a comparative study between neural networks and logistic regression. risks, 9, 200. https://doi.org/10.3390/risks9110200 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4 october 2022 page no. 386-396 386| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 mainita hidayati¹, robby irvawan2, dodi rahmat setiawan3, farahdiba rizqi4 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: mainita.h@gmail.com1 received : july 30, 2022 accepted : october 13, 2022 published : october 31, 2022 citation: hidayati, m., irvawan, r., setiawan, d, r., rizqi, f. (2022). analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 20182020. ilomata international journal of tax and accounting, 3(4), 386-396 https://doi.org/10.52728/ijtc.v3i4.583 abstract: the earmarking tax policy on street lighting tax is a policy of allocating funds from lighting tax revenues for the provision of public street lighting (pju). the phenomenon in this study is the lack of number of pju lamps in dki jakarta province and delays in payment of electricity bills for pju lamps due to budget refocusing to deal with the covid-19 outbreak in indonesia. the purpose of this study is to analyze the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 20182020, as well as obstacles and efforts related to the earmarking tax policy on street lighting tax. this study uses a descriptive qualitative approach. the results of this study indicate the effectiveness of the earmarking tax policy on street lighting tax in dki jakarta province in 2018-2020, based on riant nugroho's theory of effectiveness, namely the right policy, right implementation, right target, right environment, and right process has been running well and effectively. however, for society, the right target for installing pju lamps is considered not effective enough where there are still unequal distribution of pju lamps in dki jakarta province. then, based on the effectiveness of the allocation of street lighting tax funds for the provision of street lighting in 2018-2019, it is said to be effective where the allocation of these funds has exceeded 90%. however, in 2020 it is said to be ineffective because the allocation of these funds only reached 36%. keywords: the effectiveness, the earmarking tax policy. this is an open access article under the cc-by 4.0 license. introduction the state of indonesia is a country that adheres to a regional autonomy system with the implementation of decentralization, in which the rights, authority, and the obligation of autonomous regions to regulate and controlling the administration of government and the interests of society without interference from other parties (dewanti, 2021; mardiasmo, 2018; setiawan & alamsyah, 2015; widiani, 2021). in implementing regional autonomy and decentralization, regional government must be able to explore the tax potential in the region so mailto:mainita.h@gmail.com https://doi.org/10.52728/ijtc.v3i4.583 analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 387 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that it can be developed for the welfare of society (anugrahi et al., 2018; darwin, 2010; dewanti, 2021; kadir et al., 2019). in constitution of number 28 in 2009 concerning regional taxes and regional retribution mandated a policy of allocating a number of budget funds originating from a certain regional tax revenue used to finance development or public services in the tax sector concerned (bawazier, 2011; karo et al., 2019; lovianna & rahmi, 2022; pohan, 2021). tax allocation is the right policy to increase public trust as taxpayers to the government as the manager of tax revenue (nugraha & surochman, 2015; santya, 2015). this policy is called the earmarking tax policy (allyesa, 2018; mangirang et al., 2017; tumangke, 2015). the earmarking tax policy creates certainty in the budget allocation for the provision of public goods (deran, 1965; mccleary, 1991; pamuji, 2018). street lighting tax is one of three types of taxes that are devoted to allocating tax funds (kairupan et al., 2021; tambunan & rosdiana, 2020). in chapter 56 verses (3) constitution of number 28 in 2009 as well as in chapter 11 dki jakarta provincial regulations of number 15 in 2010 about street lighting tax it is explained that the proceeds of the street lighting tax revenue are partly allocated to provision street lighting. (https://djpk.kemenkeu.go.id/). the allocation of budget funds from street lighting tax revenues will ensure the availability of budget funds to meet various activities in the provision of street lighting. table 1 target and realization of street lighting tax dki jakarta province year 2018 2020 year target realization achievement (%) 2018 825.000.000.000 787.107.000.016 95,41% 2019 810.000.000.000 814.112.934.989 100,51% 2020 775.000.000.000 778.749.530.103 100,48% source: bappeda dki jakarta province based on table 1 above, it can be seen that the realization of street lighting tax revenues in 2018 did not reach the set target. however, for 2019-2020, the realization of street lighting tax revenue has succeeded in exceeding the set target with the amount of achievement of 100.51% and 100.48%. with this, it should the regional government of dki jakarta province is able to provide sufficient lighting for public roads in its area. the existence of street lighting in dki jakarta province is not only part of the beauty of the city, but also as part of city life. the existence of public street lighting for society is important thing in daily activities, especially at night. therefore, the regional government of dki jakarta province need to pay attention as well as maintaining the condition and existence of existing public street lighting in dki jakarta province. the phenomenon of problems that occur in dki jakarta province is the occurrence of delays in payment of electricity bills for public street lighting (pju). that must be paid by the regional government to state electricity company pt (ptpln) for the month of november 2020. this delay occurred because the budget funds available for payment of electricity bills for pju lamps https://djpk.kemenkeu.go.id/ analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 388 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc had to be refocused or budgeted for relocation in order to deal with the covid-19 outbreak that occurred in indonesia. this proves that there is no certainty from the earmarking tax policy on the street lighting tax related to guaranteeing the availability of budget funds for meet various activities in providing street lighting. another problem is the lack of pju lamps in residential areas in dki jakarta province. there should be a policy of earmarking tax can guarantee activities in the effort to provide street lighting. because the earmarking tax policy is actually an activity to use budget funds carried out by the government, both of which have been specifically regulated from sources of funding and expenditures to meet public needs. the purpose of this study is to analyze the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 2018-2020, as well as obstacles and efforts in the earmarking tax policy on street lighting tax. method the approach used in this study is a qualitative approach (creswell, 2017; creswell & creswell, 2018). qualitative research is a type of research whose findings are not obtained from statistical procedures or other forms of calculation, and aims to reveal symptoms in a holistic-contextual way through collecting data from natural settings using the researcher himself as a key instrument (sugiyono, 2019a). qualitative methods are research procedures that produce descriptive data in the form of written words from people or observable behavior (bogdan & taylor, 2015; bungin, 2017; moleong, 2018). the type of research used in this research is descriptive research. descriptive research is a form of research aimed at describing or describing existing phenomena, both natural and man-made phenomena (creswell, 2017; sugiyono, 2019b). the phenomena can be in the form of forms, activities, characteristics, changes, relationships, similarities, and differences between one phenomenon and another (kuswarno, 2009; sobur, 2013). in this study, the researcher uses the theory of effectiveness where there are "five right" that must be met in policy effectiveness (yuningsih, 2018). 1. right policy, reviewed based on whether the earmarking tax policy on the street lighting tax has been able to solve problems related to efforts to provide street lighting in the dki jakarta province, as well as the institution authorized to formulate the earmarking tax policy. 2. right implementation, reviewed based on the division of tasks and authorities in the implementation of the earmarking tax policy on the street lighting tax, as well as the implementation of the cooperation process between actors implementing the policy. 3. right on target, reviewed by looking at the targets that must be met from the earmarking tax policy on street lighting taxes, as well as ensuring that there are no conflicts between related regulations. 4. right environment, reviewed based on the interaction between the formulation agency and the implementing agency for the earmarking tax policy on street lighting tax, as well as public understanding. 5. right process, reviewed based on policy acceptance, policy adoption, and strategic readliness, both from actors implementing policies and from the community. analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 389 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the data collection techniques used in this study were through observation, interviews, and written documentation. data analysis was carried out using three stages, namely data reduction, data presentation,and conclusions (miles & huberman, 1994). based on the objectives, this study will provide an overview or description of the phenomena studied related to the effectiveness of the earmarking tax policy on street lighting taxes as an effort to provide street lighting in dki jakarta province in 2018-2020. result and discussion in analyzing the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 2018-2020, this study uses the effectiveness theory where there are "five right" that must be met. in policy effectiveness. the five points are the right policy, the right implementation, the right target, the right environment, and the right process. the "five right" is expected to be able to answer the obstacles and efforts in the earmarking tax policy on the street lighting tax in the provision of street lighting (yuningsih, 2018). based on the results of interviews that researchers have conducted with the tax authorities, policy implementing actors, academics, and the public regarding the effectiveness of the earmarking tax policy on street lighting taxes as an effort to provide street lighting in dki jakarta province in 2018-2020 based on the theory of effectiveness from riant nugroho, the results are as follows: following: a. right policy based on the research results, it is known that the earmarking tax policy on the street lighting tax is made as the basis for collecting the lighting tax. then the revenue will be used specifically to fund the construction of public facilities in the form of public street lighting (pju) on existing roads in the region of dki jakarta province. this is in accordance with constitution number 28 in 2009 article 56 verses (3) and regional regulation of dki jakarta province number 15 in 2010 concerning street lighting tax, and in accordance with the earmarking tax theory that earmarked tax is a tax whose expenditure is for special purposes (rosdiana & irianto, 2012). structurally, the earmarking tax policy in dki jakarta province is formulated by an authorized institution, namely bappeda (regional development planning agency), where bappeda dki jakarta province is an institution that has authority in policy formulation which includes planning for the development of facilities and infrastructure in dki jakarta province. therefore,the earmarking tax policy on street lighting tax in dki jakarta province is considered to have been appropriate and has been effectively implemented where the earmarking tax policy on street lighting tax has been made by an institution that authorized in the formulation of policies, and has been made to fund the need for providing public street lighting in dki jakarta province, so that it has been able to solve problems related to efforts to provide street lighting in dki jakarta province. b. right implementation analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 390 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the accuracy of implementation can be said to be effective if the process of cooperation is carried out between actors implementing policies, namely cooperation between governments, government and society, as well as with the private sector has been going well, and the division of tasks and authority given is appropriate. based on the results of interviews that researchers have conducted, it can be seen that the implementation of the earmarking tax policy on street lighting tax in dki jakarta province involves cooperation with various parties, namely cooperation between governments such as cooperation between bapenda, bpkd, bappeda, and dinas bina marga, as well as cooperation with private parties, that is, cooperation between bapenda and pt pln has been going well. the implementers of this policy also understand and know the respective roles, duties, functions, and authorities that have been given in the implementation of the earmarking tax policy on the street lighting tax. therefore, the earmarking tax policy on street lighting tax in dki jakarta province is considered appropriate and has been effectively implemented because it is in accordance with the main tasks and authorities of each agency that plays a role in the earmarking tax policy on street lighting tax in dki jakarta province. c. right on target constitution number 28 in 2009 article 56 verses (3) and regional regulation of dki jakarta province number 15 in 2010 article 11, is the legal basis of the earmarking tax policy on the street lighting tax in the dki jakarta province where the laws and regional regulations both explain that the proceeds from the street lighting tax revenue are partly allocated for the provision of street lighting. based on the results of interviews that researchers have conducted, it can be seen that the earmarking tax policy on street lighting tax in dki jakarta province is in accordance with the expected target, which is that it has been used to fund various activities in the provision of public street lighting, such as for the procurement of street lighting, activities maintenance, as well as bill payment activities for public street lighting, and there is no conflict between interrelated regulations. the target of the earmarking tax policy on street lighting tax in dki jakarta province is considered to be quite good, where the level of existing public street lighting is deemed to be bright enough, and there has been an increase in the quality of public street lighting using smart system led lamps. however, for the public, the target of the earmarking tax policy on street lighting tax in dki jakarta province is considered not to be effective enough. the community considers that good public street lighting is only found in urban areas, main roads, and tourist areas only. meanwhile, for densely populated/slum areas, public cemetery areas, as well as on small streets, the existing public street lighting is still considered inadequate, and there are even areas where public street lighting is not installed. therefore, the earmarking tax policy on street lighting tax in dki jakarta province is considered appropriate and has been effectively implemented because it is in accordance with the target of the earmarking tax policy on street lighting tax, namely to fund the provision of street lighting in dki jakarta province, and there are no conflicts between related regulations. that is constitution number 28 in 2009 article 56 verses (3) and regional regulation of dki jakarta province number 15 in 2010 article 11. analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 391 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc d. right environment in policy implementation, there are two most decisive environments, namely the internal policy environment and the external policy environment. a policy is said to be effective if the interaction in the coordination process is carried out between the policy's internal environment and the policy's external environment has been going well. based on the results of interviews that researchers have conducted, it is found that the interaction in the coordination process carried out by the internal policy environment is the interaction that is carried out between the policy-making institution, namely bappeda and the policy implementing agency, namely bapenda, bpkd, and the bina marga office in carrying out the earmarking tax policy on the road lighting tax in dki jakarta province has been running very well and effectively. then, when viewed from the external policy environment, the community also has a good influence in the implementation of the earmarking tax policy on the street lighting tax in dki jakarta province. role of people who are obedient in paying electricity bills which include paying street lighting taxes are a good factor in increasing street lighting tax revenues which are useful for providing street lighting in dki jakarta province. the majority of people who do not understand and do not know about the levy of the street lighting tax and the earmarking tax policy do not become an obstacle to the effectiveness of the earmarking tax policy on the street lighting tax. the implementation of the earmarking tax policy continues to run very well because it has been carried out well by the agencies in the internal policy environment. e. right process policy effectiveness is also measured by the accuracy of the process in policy implementation, that is: 1. policy acceptance, which is indicated by the actors implementing the policy, namely bapenda, bpkd, and the bina marga office who understand the earmarking tax policy on street lighting tax as a task that must be carried out. 2. policy adoption, which is indicated by the policy implementing actors, namely bapenda, bpkd, and the bina marga office which have accepted the earmarking tax policy on street lighting tax as a task that must be carried out 3. strategic readlines, which is shown by all actors implementing the policy, namely bapenda, bpkd, and the highways office, who have understood, accepted, and are ready to implement the earmarking tax policy on street lighting tax as a task that must be carried out in order to fulfill the provision of street lighting in dki jakarta province. earmarking tax on street lighting tax is closely related to the level of increase in street lighting tax revenue and the need for local governments to fund expenditures related to the provision of street lighting. with the earmarking tax policy, it is hoped that the activity of providing street lighting in dki jakarta province can be carried out properly so that it is able to meet various needs in the activity of providing street lighting. analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 392 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 allocation of street lighting tax funds for the provision of public street lighting in dki jakarta province in 2018-2020 year tax revenue street lighting shopping for street lighting allocation percentage (rp) (rp) ppj(%) 2018 787.107.000.016 943.486.861.696 119% 2019 814.112.934.989 737.660.727.569 90% 2020 778.749.530.103 283/165.847.202 36% source: bpkd dki jakarta province table 3 effectiveness value classification criteria percentage criteria ebove 100% very effective 90%-100% effective 80%–89% effective enough 60%-79% less effective below 60% ineffective source: (ramadhani et al., 2020) based on table 3 above, it can be seen that the effectiveness of the allocation of street lighting tax funds for the provision of public street lighting in dki jakarta province from 2018 to 2019 has been said to be effective, where the amount of the allocation of these funds has exceeded 90%, with an achievement of 119%. with a very effective category for 2018, and 90% with an effective category for 2019. however, for 2020 it is said to be ineffective because the amount of the allocation of street lighting tax funds for the provision of street lighting in dki jakarta province is only 36%. the obstacle in this research is that contextually the earmarking tax policy on street lighting tax in dki jakarta province does not run optimally, where the source of funding in the allocation of budget funds for the provision of public street lighting is not yet specific. then another obstacle analysis of the effectiveness of earmarking tax policies for street lighting taxes as an effort to provide street lighting in the province of the special capital region of jakarta in 2018-2020 hidayati, irvawan, setiawan, and rizqi 393 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is the lack of firmness of the earmarking tax policy related to guaranteeing the availability of budget funds. efforts must be made to overcome obstacles in the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 2018-2020, that is by improving the financial administration process and forming a supervisory team in the implementation of budgetary fund allocation activities for the provision of street lighting in dki jakarta. conclusion based on the results of the research, discussion and interpretation that have been carried out, and with reference to the theory used, the researcher can draw the conclusion that the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 2018-2020 is based on the theory of effectiveness of riant nugroho in the form of the right policy, the right implementation, the right target, the right environment, and the right process has been running well and effectively. however, for society the right target of the earmarking tax policy on street lighting tax in dki jakarta province is not yet effective enough because there is still a lack of street lighting due to the uneven installation of public street lighting in the dki jakarta province. then, the effectiveness of the earmarking tax policy on the street lighting tax as an effort to provide street lighting in the dki jakarta province in 2018-2020 when viewed based on the criteria for the effectiveness of the allocation of street lighting tax funds for the provision of public street lighting in the dki jakarta province in 2018 to 2019 has been determined. said to be effective where the amount of the allocation of funds has exceeded 90%, namely with an achievement of 119% in the very effective category for 2018 and 90% with an effective category for 2019. as for society, the right target of the earmarking tax policy on street lighting tax in dki jakarta province is not yet effective enough because there is still a lack of street lighting due to the uneven installation of public street lighting in the dki jakarta province. then, the effectiveness of the earmarking tax policy on the street lighting tax as an effort to provide street lighting in the dki jakarta province in 2018-2020 when viewed based on the criteria for the effectiveness of the allocation of street lighting tax funds for the provision of public street lighting in the dki jakarta province in 2018 to 2019 has been determined. said to be effective where the amount of the allocation of funds has exceeded 90%, namely with an achievement of 119% in the very effective category for 2018 and 90% with an effective category for 2019. however, for 2020 it is said to be ineffective due to the amount of the allocation of funds from the street lighting tax for the provision of public street lighting is only 36%. the obstacles that occur in the effectiveness of the earmarking tax policy on street lighting tax as an effort to provide street lighting in dki jakarta province in 2018-2020 are contextually the earmarking tax policy in dki jakarta province does not run optimally, where the source of funding in the allocation of budget funds for the provision of street lighting is not yet specific. then another obstacle is the lack of firmness of the earmarking tax policy related to guaranteeing the availability of budget funds. efforts that can be made to overcome obstacles in the earmarking tax policy on street lighting tax in dki jakarta province in 2018-2020 are by improving the financial administration process and analysis of the effectiveness of earmarking 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(2018). etika administrasi publik (1st ed.). program pascasarjana universitas diponegoro semarang. https://core.ac.uk/download/162026617.pdf the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 668-683 668 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? destiny wulandari politeknik keuangan negara stan, indonesia correspondent: dwulandari97@gmail.com received : august 3, 2023 accepted : october 10, 2023 published : october 31, 2023 citation: wulandari, d. (2023). input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? ilomata international journal of tax and accounting, 4(4), 668-683. https://doi.org/10.52728/ijtc.v4i4.833 abstract: indonesian government's policy to promote downstream natural resources leads to tax incentives policy intended to encourage the downstream. this study focuses on corporate income tax incentives in the form of net income reduction (tax allowance according to article 31a of the income tax law) by 30 percent for 6 years or corporate income tax reduction (tax holiday according to minister of finance regulation number 130/pmk.010 /2020) by 100 percent or 50 percent. despite the positive or negative impact of tax incentives enactment argued in the previous studies, this study will calculate the impact on the economy provided by the mentioned tax incentive schemes quantitatively and will analyze which tax incentive scheme gives the greater impact on the economy. the analysis was carried out by using input-output analysis method to calculate the impact from output approach on secondary data in the form of the latest input output table released by badan pusat statistik i.e., 2016 input output table. the result of the study shows that tax incentive in the form of tax holiday with income tax reduction by 100 percent provides greater impact on the economy than the others do. the total impact is getting greater and shows comparable results as the tax incentive rate increases. however, the result of this study implies that the implementation of tax incentives still needs the right tax incentive policy design to gain the expected results. keywords: downstream, economy, input-output analysis, tax allowance, tax holiday this is an open access article under the cc-by 4.0 license. introduction joko widodo stated that indonesia must encourage the natural resources downstream during his speech on august 16, 2022 (esti, 2022). the downstream can create the added value by processing the natural resources to increase the supply capacity of the economy and strengthen the resilience of the national economy (simanjuntak, 2023). national economic resilience due to the downstream will help indonesia to deal with global economic uncertainty due to falling commodity prices which is the main challenge if indonesia continues to rely on raw commodities (grahadyarini, 2022). the downstream allows indonesia not to export raw materials, but to export semi-finished or finished goods that already have added value (anam, 2022). https://www.ilomata.org/index.php/ijtc mailto:dwulandari97@gmail.com https://doi.org/10.52728/ijtc.v4i4.833 input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 669 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in short term, downstream can improve the trade balance which is currently dominated by imports of finished goods made from raw materials from the extractive natural resources exported by indonesia itself. in medium term, downstream can actualize the locomotive of economic growth by attracting investment, absorbing labor, and increasing income. in long term, downstream can develop indonesia's agricultural country status into an industrial country (tumimomor et al., 2023). as a real example of downstream, nickel downstream can push nickel prices in a positive direction to attract investors to indonesia. it can happen because nickel can be processed first so that it has added value and is valued at a higher price in the market (agung & adi, 2022). as reported by sukhyar (2018), downstream is not a new policy in indonesia. in 1985, the indonesian government began imposing a log export ban which resulted in investment of around 110 plywood factories from the initial 22 factories in just five years. then, there was also a ban on the export of raw minerals which was then emphasized in law number 4 of 2009 on mineral and coal mining. furthermore, with the enactment of law number 3 of 2014 on industry, there was a ban on the export of natural resources commodities. as a result, nickel production increased from the initial 90,000 tons which was achieved in more than 30 years to 280,000 tons in just five years. regardless of the fluctuations in industrial development in indonesia, in the last five years, the percentage of non-oil and gas exports from manufacturing sector was much higher than exports from the agricultural, mining, and other sectors. however, in the last three years, exports from manufacturing sector have declined, followed by a decline in exports from agricultural sector and an increase in exports from the mining sector (kementerian perdagangan, 2022). it indicates that the downstream of natural resources still needs to be encouraged so that exports of goods that already have added value instead of raw materials are maintained. figure 1 non-oil and gas exports development by sectors, 2018–2022 source: kementerian perdagangan (2022) it should be done considering the great impact provided by manufacturing sector to other sectors in the economy. manufacturing sector is highly required by other sectors both in downstream and in upstream directly or indirectly. it highly needs other sector’s output as its input and its output 2018 2019 2020 2021 2022 industri pengolahan 79.9050% 81.7080% 84.6046% 80.7817% 74.7757% pertanian 2.1070% 2.3172% 2.6584% 1.9338% 1.6992% pertambangan 17.9844% 15.9705% 12.7338% 17.2811% 23.5226% lainnya 0.0036% 0.0043% 0.0032% 0.0034% 0.0024% 0.0000% 10.0000% 20.0000% 30.0000% 40.0000% 50.0000% 60.0000% 70.0000% 80.0000% 90.0000% % n o n -o il an d g as e x p o rt s https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 670 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is highly required by other sector as the input (hilman & ester, 2018). it has the above average forward and backward linkage with other sectors (rahmah & widodo, 2019). besides, manufacturing sector becomes a leading sector due to its huge benefit to other sectors with its development. its high multiplier effect also makes it able to increase economic growth with its final demand increasing (pitaloka et al., 2022). in encouraging the downstream of natural resources, deputy minister of finance, suahasil nazara, stated that providing tax incentives was one of the efforts that could be made. he stated that there were two roles of tax policy in boosting the economy i.e., by collecting taxes as a source of revenue for state spending and by not collecting taxes by providing tax incentives. providing tax incentives can have an impact on the economy, including encouraging new sources of economic growth in the form of downstream of natural resources (kementerian keuangan, 2023). if tax incentive policy is designed and implemented well, it can attract the investments that cannot be obtained in the absence of tax incentives. increased investment can increase government revenue either directly from taxes paid by investors when the tax incentives period ends or indirectly from workers, suppliers, and consumers as the results of incentives given (united nations, 2018). liu & mao (2019) found that tax incentives increased investment rates by 38.4 percent and firm productivity by 8.9 percent. zwick & mahon (2017) also stated that tax incentives in the form of accelerated depreciation increased investment by over 10 percent. however, there are costs that must be borne i.e., revenue costs, resource allocation costs, and enforcement and compliance costs (united nations, 2018). oecd (2015) stated that the existence of tax incentives in low-income countries only created high costs and reduced state revenue that can be spent on infrastructure, public services, or social security since investment will still occur without tax incentives. most low-income countries use tax holidays and income tax exemptions (profit-based incentives) to attract investment, whereas investment tax credits and accelerated depreciation (cost-based incentives) can attract larger amounts of investment (meinzer et al., 2019; oecd, 2015). james (2013) explained further that tax incentives aimed to attract investment did not have much effect in developing countries compared to developed countries. furthermore, eichfelder et al. (2023) concluded that tax incentives in the form of depreciation bonuses significantly reduced investment quality by 15.2–23.8 percent in short term and by 31.8–41.4 percent in long term. sun et al. (2020) also stated the same result even though in terms of value added tax incentives for the renewable energy industry. these incentives reduce the return on equity (roe). furthermore, stausholm (2017) and kraal (2019) found no effect of tax incentives on foreign direct investment that occurred. despite the two different views about the impact of tax incentives, sebele-mpofu et al. (2022) presented a summary. tax incentives appear to be costless, but in practice they can incur substantial costs such as tax revenue loss, redundancies, compliance and administrative costs, increased tax evasion and evasion, and the complexity of tax system. all these negative impacts lead to economic inefficiency, stagnant economic growth, threatened domestic investment, and tax base erosion. the cases happened in each country are different. however, careful design of tax https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 671 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc incentive policies, continuous monitoring, reassessments, and changes if needed need to be considered (sebele-mpofu et al., 2022). the effectiveness of incentives depends on the investment climate in a country. low taxes do not give guarantee to overcome bad investment climate problem (james, 2013). zolt & schill (2015) suggested that setting clear incentive goals, adjusting incentive types to goals, estimating the costs and benefits of tax incentives, determining incentive time limits, and assessing the success and failure of incentives in setting tax incentive policies need to be done. the costs incurred due to tax incentive, especially regarding the downstream of natural resources, besides the benefits it provides according to previous studies cannot be ignored. however, there has not been any previous study calculating the impact quantitatively. this study will calculate the impact of tax incentives on the economy quantitatively by using input output analysis method. in indonesia, there are various types of tax incentives related to the downstream of natural resources. these incentives can be in the form of foreign tax credits, revaluation of fixed assets, tax holidays, tax allowances, special economic zones (kawasan ekonomi khusus/kek), integrated economic development zones (kawasan pengembangan ekonomi terpadu/kapet), bonded stockpiles (tempat penimbunan berikat/tpb), free trade zones (kawasan bebas), industrial estates (kawasan industri), reinvestment of branch profits, and dividends for venture capital companies’ treatment (pwc, 2022). however, this study focuses on incentives related to income tax, especially tax holidays and tax allowances since there are many variations of incentives related to value added tax or other types of taxes. tax holiday in indonesia takes the form in income tax reduction by 100 percent or 50 percent that is ruled in regulation of minister of finance number 130/pmk.010/2020 on income tax reduction incentive (pmk 130/2020). it is given to corporate taxpayers that invest their capital for the first time on qualified pioneer industry according to pmk 130/2020. on the other hand, tax allowance takes the form in net income reduction by 30 percent at maximum rate for 6 years that is ruled in article 31a of income tax law. by calculating the impact caused by tax incentives on the economy, this study will find out which tax incentive can give greater impact on the economy. method this study is a quantitative study using input output analysis to see the impact of tax incentives on the economy. input output (io) analysis is a technique used to analyze the mutual influence of several sectors or sub-sectors of the economy (yogi et al., 2018). this mutual influence departs from the concept that the output of each industry is needed to be used as input for other industries or even for the industry itself (chiang & wainwright, 2005). by using io analysis, the researcher can calculate the impact caused by tax incentives applied to the industrial sector on all economic sectors in the form of numbers. it can be done since io theory applies the concept of interdependence between one economic sector and other economic sectors. the type of data used in this study is secondary data in the form of the latest input output table for 2016 released by badan pusat statistik (2021). through io table, badan pusat statistik (2021) describes the interrelationships and reciprocal relationships between economic sectors so that they can help researcher to answer the research questions. the io table is like a matrix containing some rows describing the output of a sector which is allocated in fulfilling intermediate and final demand https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 672 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and some columns describing the intermediate and primary input used by a sector in its production. the economic sectors described in the table consist of 17 sectors which include: 1) agriculture, forestry and fisheries; 2) mining and quarrying; 3) manufacturing industry; 4) procurement of electricity and gas; 5) water supply, waste management, waste and recycling; 6) construction; 7) wholesale and retail trade, car and motorcycle repair; 8) transportation and warehousing; 9) provision of eating and drinking accommodation; 10) information and communication; 11) financial and insurance services; 12) real estate; 13) company services; 14) government administration, defense, and mandatory social security; 15) educational services; 16) health services and social activities; and 17) other services. the data in the io table contains a series of equations as follows. 𝑋1 = 𝑋1 1 + 𝑋1 2 + ⋯ + 𝑋1 𝑛 + 𝑌1 𝑋2 = 𝑋2 1 + 𝑋2 2 + ⋯ + 𝑋2 𝑛 + 𝑌2 ⋮ ⋮ 𝑋𝑛 = 𝑋𝑛 1 + 𝑋𝑛 2 + ⋯ + 𝑋𝑛 𝑚 + 𝑌𝑛(1) where: 𝑋1= total of intermediate i sector’s output (rows or columns total) 𝑋𝑖𝑗 = output of sector i bought by sector j 𝑌𝑖 = total of final demand sector i’s output all elements in each sector of io table can be divided by the total of each column to obtain coefficient representing purchase pattern of each sector. this coefficient is symbolized with 𝑎𝑖𝑗. then, a matrix can be formed with the formula below. 𝑋 = 𝐴𝑋 + 𝑌 (2) 𝑛𝑥1 𝑛𝑥𝑛 𝑛𝑥1 𝑛𝑥1 where 𝐴 = [𝑎𝑖𝑗], io matrix’ coefficient with transposition by creating the identity matrix which will be subtracted by a matrix, the equation becomes: 𝑋(𝐼 − 𝐴) = 𝑌 𝑋 = (𝐼 − 𝐴)−1𝑌 = 𝐿𝑌 (3) where 𝐿 = (𝐼 − 𝐴)−1 which is then called leontief’s inversion (jensen et al., 1979). this study will analyze the total impact caused by tax incentives imposed to encourage the downstream of natural resources on the economy from the output approach. the impacts are the total of direct impact and indirect impact. the direct impact is the external shock given to the economy, while the indirect impact is a multiplier effect on other sectors due to the shock (ariutama et al., 2021). in calculating the impact by using io analysis, the researcher will give a shock which equals the forgone tax revenue as the result of the tax incentive enactment. by doing https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 673 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc io calculation in microsoft excel or in stata 17.0 application, the calculation will show the result in the form of the number representing the impact in all economic sectors available. barbosa et al. (2020) defines this process in the form of this equation: y→y+∆y that represents that the external shock given will affect the final demand. due to the interdependence relationship between sectors, the external shock will affect the output of all sectors: x→x+∆x, so ∆x=l.∆y (barbosa et al., 2020). result and discussion at the first step, the researcher formed a matrix by calculating the coefficient aij and i matrix which is the identity matrix of a matrix. by forming (i – a) matrix, which was then inversed, leontief’s inversion matrix , (i – a)-1, was created. then, the impact given by tax incentives to the economy was calculated by giving a shock to manufacturing industry sector. the researcher chose the manufacturing industry sector as the targeted sector to be given the shock since the downstream policy aims to boost the industry sector. in other words, if tax incentive is given to encourage the downstream, the tax incentive will become the shock to the industry sector, which is called as the manufacturing industry sector in the io table from badan pusat statistik (bps). the researcher assumes that the shock equals the forgone tax revenue due to tax incentive enactment. in this case, the researcher calculated the impact three times i.e., the impact of providing tax incentives in the form of net income reduction by 5 percent (tax allowance), corporate income tax reduction by 100 percent (tax holiday), and corporate income tax reduction by 50 percent (tax holiday). the forgone tax revenue as the shock was calculated by multiplying: 1) 25 percent for corporate income tax rate; 2) 5 percent for net income reduction rate for tax allowance, 50 percent, or 100 percent for income tax reduction rate in tax holiday; 3) 14 percent multiplier for net income calculating norm; and 4) total output from the manufacturing industry sector from io table. the corporate income tax rate used is the rate in 2016 i.e., the rate ruled by law number 7 of 1983 as lastly amended by law number 36 of 2008 on income tax (uu pph) since the data used is the io table for 2016 which is the most up-to-date io table provided by bps. the net income reduction rate (tax allowance) is 5 percent instead of 30 percent since 30 percent is the rate for 6 years (according to article 31a of uu pph). therefore, 30 percent is divided by 6 to obtain the reduction rate for a year. the 14 percent multiplier is the lowest limit of the net income calculating norm (nppn) based on regulation of director general of taxes number per-17/pj/2015 on net income calculating norm. the 14 percent is the norm used to calculate the net income of corporate taxpayers who are audited for not carrying out bookkeeping obligations according to article 28 and article 29 of law number 6 of 1983 as lastly amended by law number 7 of 2021 on general provisions and tax procedures (uu kup). basically, income tax is imposed on net income, not on gross turnover which is assumed as total output in io table. however, the net income of each company varies depending on how much deductions it can make to reach the final amount of net income at the end. therefore, to simplify the calculation, the researcher used the lowest limit of nppn to obtain the net income. finally, the impact of tax incentive enactment on the economy comes from the sum of the shocks as a direct impact and the indirect impact caused. to find out how much the impact is, the difference between the total impact caused (after tax https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 674 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc incentives enactment) and the initial output (before tax incentives enactment) was then calculated and stated in percentage. the table below shows the results of the impact of tax allowance and tax holidays on the economy from output approach. table 1: tax allowance’s impact on the economy from output approach no. sectors shock (million rupiah) total impact (million rupiah) initial output (million rupiah) % of initial output 1 agriculture, forestry, and fisheries 3,265,010 2,005,849,462 0.1628% 2 mining and excavation 1,794,429 1,285,055,761 0.1396% 3 manufacturing industry 15,050,233 37,190,537 8,600,133,160 0.4324% 4 electricity and gas supply 532,791 663,270,868 0.0803% 5 water supply, waste management, waste, and recycling 20,036 56,601,385 0.0354% 6 construction 99,442 2,912,162,963 0.0034% 7 wholesale and retail trade, car repair, and motorcycles 1,433,595 2,411,401,412 0.0595% 8 transportation and warehousing 720,133 1,522,677,073 0.0473% 9 foods and drinks accommodation provision 94,639 969,548,920 0.0098% 10 information and communication 406,335 791,877,309 0.0513% 11 financial and insurance services 555,729 725,410,836 0.0766% 12 real estate 135,067 777,909,010 0.0174% 13 company services 448,653 737,185,790 0.0609% 14 government, defense, and mandatory social security administration 57,760 765,117,480 0.0075% 15 educational services 19,537 619,859,717 0.0032% 16 health and social activity services 17,588 295,234,062 0.0060% 17 other services 43,977 405,256,505 0.0109% total impact 15,050,233 46,835,258 25,544,551,713 0.1833% source: processed data https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 675 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2: the impact of tax holiday with reduction rate of 100 percent on the economy from output approach no. sectors shock (million rupiah) total impact (million rupiah) initial output (million rupiah) % of initial output 1 agriculture, forestry, and fisheries 65,300,197 2,005,849,462 3.2555% 2 mining and excavation 35,888,582 1,285,055,761 2.7928% 3 manufacturing industry 301,004,661 743,810,742 8,600,133,160 8.6488% 4 electricity and gas supply 10,655,820 663,270,868 1.6066% 5 water supply, waste management, waste, and recycling 400,728 56,601,385 0.7080% 6 construction 1,988,836 2,912,162,963 0.0683% 7 wholesale and retail trade, car repair, and motorcycles 28,671,890 2,411,401,412 1.1890% 8 transportation and warehousing 14,402,658 1,522,677,073 0.9459% 9 foods and drinks accommodation provision 1,892,789 969,548,920 0.1952% 10 information and communication 8,126,696 791,877,309 1.0263% 11 financial and insurance services 11,114,586 725,410,836 1.5322% 12 real estate 2,701,344 777,909,010 0.3473% 13 company services 8,973,055 737,185,790 1.2172% 14 government, defense, and mandatory social security administration 1,155,206 765,117,480 0.1510% 15 educational services 390,734 619,859,717 0.0630% 16 health and social activity services 351,756 295,234,062 0.1191% 17 other services 879,540 405,256,505 0.2170% total impact 301,004,661 936,705,158 25,544,551,713 3.6669% source: processed data https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 676 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3: the impact of tax holiday with reduction rate of 50 percent on the economy with output approach no. sectors shock (million rupiah) total impact (million rupiah) initial output (million rupiah) % of initial output 1 agriculture, forestry, and fisheries 32,650,099 2,005,849,462 1.6277% 2 mining and excavation 17,944,291 1,285,055,761 1.3964% 3 manufacturing industry 150,502,330 371,905,371 8,600,133,160 4.3244% 4 electricity and gas supply 5,327,910 663,270,868 0.8033% 5 water supply, waste management, waste, and recycling 200,364 56,601,385 0.3540% 6 construction 994,418 2,912,162,963 0.0341% 7 wholesale and retail trade, car repair, and motorcycles 14,335,945 2,411,401,412 0.5945% 8 transportation and warehousing 7,201,329 1,522,677,073 0.4729% 9 foods and drinks accommodation provision 946,395 969,548,920 0.0976% 10 information and communication 4,063,348 791,877,309 0.5131% 11 financial and insurance services 5,557,293 725,410,836 0.7661% 12 real estate 1,350,672 777,909,010 0.1736% 13 company services 4,486,528 737,185,790 0.6086% 14 government, defense, and mandatory social security administration 577,603 765,117,480 0.0755% 15 educational services 195,367 619,859,717 0.0315% 16 health and social activity services 175,878 295,234,062 0.0596% 17 other services 439,770 405,256,505 0.1085% total impact 468,352,579 25,544,551,713 1.8335% source: processed data the results show that the greater the tax incentives rate, the greater the impact on the economy. the tax allowance with 5 percent net income reduction gives 0.1833 percent impact on the https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 677 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc economy, while the tax holidays with 100 percent and 5 percent income tax reduction gives 3.6669 percent and 1.8335 percent impact on the economy respectively. to check these results, researcher varies the reduction rates to see the variety of the impact, ranging from 5 percent to 100 percent. table 4: the variations of reduction rate of tax incentives and its impact on the economy from output approach no. sectors % total impact of initial output 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 % 1 manufac turing industry 0.43 24% 0.86 49% 1.72 98% 2.59 46% 3.45 95% 4.32 44% 5.18 93% 6.05 42% 6.91 91% 7.78 39% 8.64 88% 2 agricultu re, forestry, and fisheries 0.16 28% 0.32 55% 0.65 11% 0.97 66% 1.30 22% 1.62 77% 1.95 33% 2.27 88% 2.60 44% 2.92 99% 3.25 55% 3 mining and excavatio n 0.13 96% 0.27 93% 0.55 86% 0.83 78% 1.11 71% 1.39 64% 1.67 57% 1.95 49% 2.23 42% 2.51 35% 2.79 28% 4 electricit y and gas supply 0.08 03% 0.16 07% 0.32 13% 0.48 20% 0.64 26% 0.80 33% 0.96 39% 1.12 46% 1.28 52% 1.44 59% 1.60 66% 5 financial and insuranc e services 0.07 66% 0.15 32% 0.30 64% 0.45 97% 0.61 29% 0.76 61% 0.91 93% 1.07 25% 1.22 57% 1.37 90% 1.53 22% 6 compan y services 0.06 09% 0.12 17% 0.24 34% 0.36 52% 0.48 69% 0.60 86% 0.73 03% 0.85 20% 0.97 38% 1.09 55% 1.21 72% 7 wholesal e and retail trade, car repair, and motorcy cles 0.05 95% 0.11 89% 0.23 78% 0.35 67% 0.47 56% 0.59 45% 0.71 34% 0.83 23% 0.95 12% 1.07 01% 1.18 90% 8 informat ion and 0.05 13% 0.10 26% 0.20 53% 0.30 79% 0.41 05% 0.51 31% 0.61 58% 0.71 84% 0.82 10% 0.92 36% 1.02 63% https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 678 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc commun ication 9 transpor tation and warehou sing 0.04 73% 0.09 46% 0.18 92% 0.28 38% 0.37 84% 0.47 29% 0.56 75% 0.66 21% 0.75 67% 0.85 13% 0.94 59% 10 water supply, waste manage ment, waste, and recycling 0.03 54% 0.07 08% 0.14 16% 0.21 24% 0.28 32% 0.35 40% 0.42 48% 0.49 56% 0.56 64% 0.63 72% 0.70 80% 11 real estate 0.01 74% 0.03 47% 0.06 95% 0.10 42% 0.13 89% 0.17 36% 0.20 84% 0.24 31% 0.27 78% 0.31 25% 0.34 73% 12 other services 0.01 09% 0.02 17% 0.04 34% 0.06 51% 0.08 68% 0.10 85% 0.13 02% 0.15 19% 0.17 36% 0.19 53% 0.21 70% 13 foods and drinks accomm odation provisio n 0.00 98% 0.01 95% 0.03 90% 0.05 86% 0.07 81% 0.09 76% 0.11 71% 0.13 67% 0.15 62% 0.17 57% 0.19 52% 14 govern ment, defense, and mandato ry social security administ ration 0.00 75% 0.01 51% 0.03 02% 0.04 53% 0.06 04% 0.07 55% 0.09 06% 0.10 57% 0.12 08% 0.13 59% 0.15 10% 15 health and social activity services 0.00 60% 0.01 19% 0.02 38% 0.03 57% 0.04 77% 0.05 96% 0.07 15% 0.08 34% 0.09 53% 0.10 72% 0.11 91% 16 construc tion 0.00 34% 0.00 68% 0.01 37% 0.02 05% 0.02 73% 0.03 41% 0.04 10% 0.04 78% 0.05 46% 0.06 15% 0.06 83% https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 679 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 17 educatio nal services 0.00 32% 0.00 63% 0.01 26% 0.01 89% 0.02 52% 0.03 15% 0.03 78% 0.04 41% 0.05 04% 0.05 67% 0.06 30% total impact 0.18 33% 0.36 67% 0.73 34% 1.10 01% 1.46 68% 1.83 35% 2.20 02% 2.56 69% 2.93 36% 3.30 03% 3.66 69% source: processed data from the variations, the total impact provided becomes greater along with the greater tax incentives’ rate. the impact provided is proportional with the reduction rate given. the table shows the impact on each sector from the greatest to the lowest. manufacturing industry is the sector in the highest rank followed by agriculture, forestry, and fisheries and mining and excavation in the three highest rank. the results of the input output analysis indicate that there is a positive impact caused by the provision of incentives to the manufacturing sector on the economy. this is indirectly in line with the results of research by hilman & ester (2018), pitaloka et al. (2022), and rahmah & widodo (2019) which state that the manufacturing sector is a leading sector that really needs and is needed by other sectors, both in terms of its linkages, the size of the distribution of benefits from its development, and the size of the multiplier effect. in other words, since the manufacturing sector is a leading sector that greatly influences other sectors, the shock given to it will automatically have an impact on other sectors that are affected. incentives in the form of reduced income tax that must be paid by companies in the manufacturing sector can increase the attractiveness of investors to invest in this sector when compared to conditions without these incentives. these investments can ultimately increase the number of workers, suppliers, and consumers (united nations, 2018). the economic activity of the manufacturing sector will increase. with the interdependence between economic sectors, increased activity in the manufacturing sector will also have an impact on increasing economic activity in other sectors according to the input-output concept. although there is the possibility of revenue costs, resource allocation costs, and enforcement and compliance costs due to the provision of tax incentives according to united nations (2018) and oecd (2015), the multiplier effect caused by incentives from an economic perspective can ultimately contribute benefits. reduced taxes owed, increased attractiveness to investors, and increased economic activity can eventually cover lost tax revenues potential and can even increase tax revenues themselves. if it is related to the results of study by meinzer et al. (2019), tax incentives in the form of income tax reductions imposed by indonesia are included in the type of profit based incentives. these incentives tend to be aimed at obtaining profits from investments made by investors. in other words, the attractiveness of investment is increased from tax reductions which are then expected to stimulate the economy which in turn can generate large business profits. the positive impact on the economy arising from the provision of incentives based on input output analysis are indirectly in line with the study of liu & mao (2019) and zwick & mahon (2017). although those two studies did not conduct specific study on corporate income tax reduction incentives, both studies demonstrated the positive impact of the tax incentives provided in the form of increased investment. conversely, the absence of the impact of tax incentives on foreign direct investment in the studies conducted by kraal (2019) and stausholm (2017) is not in https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 680 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc line with the results of this study. similarly, the results of the studies conducted by eichfelder et al. (2023) and sun et al. (2020) that found a reduction in investment quality and return on equity due to tax incentives are not in line with the results of this study. the results of this study tend to indicate a positive impact in the form of an increase in the economy of all existing sectors due to the provision of tax incentives to the manufacturing sector. regardless of whether tax incentives have a positive or negative impact, the design of incentive policies needs to be considered. this refers to what was stated by zolt & schill (2015) and sebelempofu et al. (2022). how much the benefits to be obtained and the costs to be borne will depend on the design of the policies to be implemented. it also considers the statement made by james (2013) that the amount of investment a country will get is not necessarily caused by low taxes, but it depends on the investment climate in the country. in other words, to guarantee the realization of an increase in the overall economy in accordance with the results of the input output analysis due to the incentives given to the manufacturing sector, several things need to be prepared. setting clear objectives and types of incentives, careful calculation of costs and benefits, setting clear time limits, and assessing the success and failure of tax incentives must be carried out by indonesian government in accordance with the guidelines provided by zolt & schill (2015). conclusion from the input output analysis that has been carried out by using the output approach, it can be concluded that the tax incentive in the form of a 100 percent income tax reduction (tax holiday) gives a greater impact on the economy. tax incentives in the form of net income reduction by 5 percent (tax allowance) gives the least impact on the economy. the results show that the total impact on the economy is getting bigger along with increasing tax incentive rates. the magnitude of the impact is proportional to the amount of the reduction rate given. however, since the amount of investment to be obtained in natural resources downstream is not necessarily caused by low taxes but depends on the investment climate, it implies that the design of tax incentive policies provided also needs to be considered. however, this study is still very limited to calculating the impact on the economy instead of providing a more detailed analysis of which manufacturing sectors can be the focus of providing tax incentives. in addition, this research is also limited to an analysis of incentives in the form of net income or income tax reduction in the form of tax holidays and tax allowances. an analysis of other types of incentives such as investment tax credits and accelerated depreciation that are assumed to have a more positive impact than income tax reductions has not been included in this study. further research containing those matters is needed to complete the comprehensiveness of this study in providing appropriate policy recommendations to be implemented, particularly regarding tax incentives to spur natural resources downstream. https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 681 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference agung, m., & adi, e. a. w. 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(2020). can value-added tax incentives of new energy industry increase firm’s profitability? evidence from financial data of china’s listed companies. energy economics, 86, 104654. https://doi.org/10.1016/j.eneco.2019.104654 tumimomor, a. d. m., kundhani, e. y., mardah, s., hasan, m., rajagukguk, t., suratini, hina, h. b., oppier, h., basmar, m. e., sangur, k., silalahi, s. p. r., dona, e., ferdinandus, s., https://www.ilomata.org/index.php/ijtc input-output analysis: which tax incentive for natural resources downstream is suitable for indonesian economy? wulandari 683 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sofyan, v. r. w., rewa, k. a., melianna, s., kasim, f. s., hasnin, h. r., & tamba, i. f. u. (2023). pengantar ekonomi makro (teori dan kebijakan) (hartini, ed.). bandung: media sains indonesia. https://books.google.co.id/books?id=h2weaaaqbaj&pg=pa303&dq=hilirisasi&hl=id&newbks=1&newbks_redir=0&sa=x&ve d=2ahukewjyjpnlr93ahvungmghs41b_kq6af6baggeai#v=onepage&q=hilirisasi&f=false united nations. (2018). design and assessment of tax incentives in developing countries. https://www.un.org/esa/ffd/wp-content/uploads/2018/02/tax-incentives_eng.pdf yogi, pradono, & aritonang, a. (2018). pengantar ekonomika wilayah: pendekatan analisis praktis (1st ed.). bandung: itb. https://books.google.co.id/books?id=nniaeaaaqbaj&pg=pa73&dq=metode+input +output&hl=id&newbks=1&newbks_redir=0&sa=x&ved=2ahukewiy1arp4vpahv5g2mghzn2azsq6af6bagjeai#v=onepage&q=metode%20input%20output&f=f alse zolt, e., & schill, m. h. (2015). tax incentives: protecting the tax base. http://www.un.org/esa/ffd/events/cd-2015-tibp-workshop.html zwick, e., & mahon, j. (2017). tax policy and heterogeneous investment behavior. american economic review, 107(1), 217–248. https://doi.org/10.1257/aer.20140855 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 26-37 26 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc restaurant accounting system studies in indonesia 2021-2022: a systematic literature review nelcie mussa1, yuliana 2, ika ismiyar 3, effendi tjahjadi 4, agus munandar5 12345universitas esa unggul jakarta, indonesia correspondent: agus.munandar@esaunggul.ac.id5 received : november 28, 2022 accepted : january 25, 2023 published :january 31, 2023 citation: mussa, n., yuliana., ismiyar, i., tjahjadi, e., munandar, a.(2023). restaurant accounting system studies in indonesia 20212022: a systematic literature review. ilomata international journal of tax and accounting, 4(1),26-37. https://doi.org/10.52728/ijtc.v4i1.668 abstract: the purpose of this study is to determine whether the design of an accounting system in a restaurant or franchise business can provide benefits in realizing the creation of accounting reporting that has a positive impact on management. in this study, the application of accounting system design using accounting information system applications was taken from the results of research conducted by previous researchers on restaurants and franchise businesses. the study was conducted based on the literature review of the ten previous studies by making a summary of the results and conclusions. some of the criteria used in selecting articles to be material in this study are as follows: the method used, trends and topics in related research, factors that influence financial reporting and the next best method used in writing financial reports.the design of an accounting information system using a php program and a mysql database can help companies make financial accounting reports which include the calculation of profit and loss from restaurant companies. php applications and mysql databases used by restaurant companies must comply with applicable accounting standards. technical competence of employees needs to be given support from the top management of the company to receive special training in the use of financial accounting programs, so that the performance of accounting information systems can be measured for success. the involvement of users of the financial accounting information system program in the company has a positive impact on the performance of the financial accounting system. keywords: accounting information systems, php and mysql programs, application user resources, and top management support. this is an open access article under the cc-by 4.0 license. introduction the background for writing this article relates to the application of accounting in restaurant service companies, which is based on the rapid growth of the restaurant business in almost all mailto:agus.munandar@esaunggul.ac.id https://doi.org/10.52728/ijtc.v4i1.668 restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 27 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc regions of indonesia, starting from mid-sized and even five-star restaurants in major shopping centers in the jakarta area. based on the acquisition of statistical data from bps from 2018 to 2020, the number of restaurants has continued to increase from 3,021, 3,182, 3,923 units, and revenue (millions of idr) 23,394,463; 26,954,566; 19,692,626. there has been a tendency to increase the number of restaurants over the past three years, but revenue has decreased in 2020 compared to the previous year (campos et al., 2020) (chiou et al., 2020) (filimonau, todorova, et al., 2020)(siering, 2021). this is an interesting anomaly to study whether accounting reporting at each restaurant is done honestly or not. generally, many people think that the most important thing in managing a restaurant is how to manage a menu of dishes that are appropriate and most liked by customers and how to provide good service, thus ignoring the factor of good financial management by applying correct accounting, because accounting is considered by for most people as a waste of time (hakim et al., 2022) (hennchen, 2019) (filimonau, matute, et al., 2020). the application of good and correct accounting in a restaurant is a process of how to estimate and analyze income, cash flow, inventory and financial reports so that restaurant owners can know with certainty and clearly the financial performance of the restaurant (laguecir et al., 2020) (jung et al., 2019)(de freitas & stedefeldt, 2020). the restaurant industry is different from industries in other fields because it is an important sector that contributes to national income. this is confirmed by data from the ministry of industry, that the restaurant industry has contributed around 34.95% in 2017 and will increase until 2021 post-pandemic to the gdp of the non-oil and gas industry. this industry has also become fertile ground for investors as a promising business in the culinary field, among the things that support this statement is the emergence of various foreign restaurants with innovative presentations and become attractive land for local people. in addition to this, the mobility of urban communities has also become a driving factor for the development of the massive restaurant industry in every major city. modern society tends to choose ready-to-eat food which is more practical than having to bother making it yourself. this has become a land of innovation for both culinary connoisseurs and investors in the restaurant industry. even more than that, the restaurant industry is no longer a food necessity for the community, now it has transformed into a new lifestyle as a standard of social status, for example for existence on social media. even this business owner gets a surge in turnover and has a good and stable cash flow. the application of good and correct accounting is an application that can use a trusted accounting information system and the system is able to manage information effectively and efficiently so that it can help the company's operations (kocsis, 2019) (jayanti et al., 2020). therefore, restaurants also need to use an accounting information system as a reliable system in company management. it was found that a phenomenon occurred in several restaurants, for example in making income reports there were still deficiencies in the system because there was an error in using the technique when the restaurant was busy and busy so there was no system that could regulate it (robson & ezzamel, 2022)(park & jang, 2021)(xu et al., 2020). restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 28 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the information process still uses a manual system and is continued with data entry. of course, restaurants, which are business entities in the culinary industry, need a reliable accounting information system (carter et al., 2020). it is necessary to have records that can assist management in making financial reports that are reliable, accurate and trustworthy as a goal in making the right decisions. restaurants with quality information, will have satisfaction in using existing information. in addition, the accounting information system that runs on the software makes it easier for restaurants to control revenue and quickly see how much profit or loss is generated and can also predict the survival of restaurants in the future (carmona-cabello et al., 2020). this study uses php and mysql applications which are collaborations between popular programming languages and database services which reach 78.9% of sites. php can also be understood as a server-side programming script that has been designed for web development which is used as the programming language for large websites. meanwhile, mysql is a multithreaded and multi-user sql database management system (dbms) software. the application of good accounting in a restaurant can provide interpretation and be able to analyze the restaurant's performance in the long term. the purpose of this writing is to implement and design a good ais so that companies can produce superior, reliable financial reports and can be used as a decision-making tool that has an impact on financial performance. literature review system the system is a collection of a network that contains several components that are related to each other, so that it will produce a good system and can be used (reisch et al., 2021). the company can be said to be a working system consisting of several departments in it and having various procedures related to each other (dillard & vinnari, 2019). definition of information information is data that has been owned and has been organized so that it can produce good and correct information and is useful for a company (suryawarman & widhiyani, 2012). information is a result of processing data and facts that are interrelated and can assist in decision making (damayanti et al., 2021). definition of accounting information systems sia is a performance that consists of some information that has been summarized or analyzed so that it becomes relevant information and can be used in decision making. (suryawarman & widhiyani, 2012). sia is a collection of recorded information whose contents cover all activities, functions and objectives that will have an impact on economic resources both external and internal within an organization, profit and loss financial statements an income statement report that has been prepared based on the psak standard which contains the results of operations for one period, will show the costs that have been incurred as a burden restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 29 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on the company (tazkia, 2019). in showing data on the income statement, you must choose the period that will be needed so that data will appear in accordance with the period (setiawan et al., 2022). accounting information users according to (kocaman, 2021), the use of a reliable sia is needed by companies, because it can help the process of storing data and its distribution (suryawarman & widhiyani, 2012). sia can be used as a meeting medium for processing daily transaction needs which is supported by operations that are managerial in nature and steps used by outsiders (sari et al., 2021). according to (kocsis, 2019) a restaurant is a place or building that is professionally organized to provide food and beverage serving services to all consumers (suryawarman & widhiyani, 2012). aside from being a place to provide processed food and beverage services, restaurants are also places of stop and rest for tourists visiting an area (setiawan et al., 2022)(liu et al., 2022). definition of franchise franchising is an alternative in business development, which entrusts the ability of prospective business partners to be able to operate the activities to be carried out (atmoko, 2019). franchising is a special right that has been owned by various business entities and individuals. franchising has specific criteria that can promote goods or services that have benefits and results that are used by the general public (suryawarman & widhiyani, 2012). method the research method used is the slr method (systematic literature review). according kitchenham dan charters (2007) said that this slr is a method that uses research from several literature reviews which is used as a method capable of interpreting problems, identifying problems and assessing every problem that exists in the research studied by tracing each problem to get answers to every question in the research. the stages of the systematic literature review include: figure 1. the stages of the method systematic literature review planning 1. formulate statements on research 2. setting the rules slr (systematic literature review). implementation the plans made will be carried out in accordance with the methods and steps that exist in the slr reporting the results of the research under study will be reported in the systematic literature review in the form of a journal and will be published. restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 30 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the picture above, it starts from the planning stage then the next stage is implementation and then at the end of the stage, namely reporting as the final stage of the slr into a report. the first step in compiling an slr is the planning stage, namely creating a research question (rq), which usually uses the pico (person-intervention-control-outcome) method. the next step is to search literature by utilizing various paid and free scientific portals. in this study, google scholar was used as the basis for research between the last 5-10 years to keep slr information up-to-date. next do the criticism and determine the logical structure. slr is prepared using the same structure as the publication text using the method written according to the prisma diagram. the implementation stage can be understood as the stage of implementing the slr itself, which begins with the determination of search keywords for literature (search strings), the selection and understanding of synonyms and alternative word substitutes will determine the accuracy of the literature search, besides that software tools are also needed to facilitate the management of our literature evidence, and also carry out the selected studies stage which will affect the inclusion criteria and exclusion criteria, and the last step in this stage is data extraction then carry out a synthesis of selected literature which has the aim of analyzing and evaluating various research results from various literatures. the last stage is reporting, this stage is writing the slr results in written form to be published in the form of scientific journal articles. the writing structure of slr usually consists of 3 major parts, namely: introduction, main body and conclusion. the introductory section will contain the background and basis for why slr on a topic is important and must be carried out. while the main section will contain the slr protocol, results of the analysis and synthesis of findings, and ends with a discussion discussing the implications of the slr results. the conclusion section will contain a summary of the findings that we got, in accordance with the rq that we set in advance. research question in this stage are questions that are appropriate to the problems and research topics. therefore the research question or used in the study are as follows: rq1 : is the research method used related to the restaurant accounting information system? rq2 : what things affect the accounting information system in restaurants in this study? rq3 : what are the latest topics used by researchers related to sia in restaurants in this study? rq4 : what is a highly qualified method that can be used to determine the quality of accounting information systems in restaurants in this study? research process in obtaining the cause of the problem with respect to the researcher, the search process can be used. so to be able to answer questions and references related to data and data sources, it can be processed using the website www.scholar.google.co.id which is secondary data that can be used. http://www.scholar.google.co.id/ restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 31 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc study selection in selecting studies, secondary data or primary data can be used, so the data that has been found is in line with what has been determined, and it is seen whether the data is suitable for use as a source of research data or not. the equivalent data parameters used are as follows: 1) the data used has a time range of 2021 and 2022, 2) data taken from the site: www.scholar.google.co.id, 3) data were obtained from previous research journals that had links with accounting information systems for restaurants in indonesia. data extraction the data that has contributed will be summarized to respond to research questions according to the topic and then the data will be extracted and arranged according to the extraction form. this aims to assist data collection in the main research according to the topic of the research problem so that it becomes the main data in answering research questions. data extraction can be arranged and carried out as in the table below: table 1. data extraction compiled for research questions. regarding research question (rq) accounting information systems for restaurant rq2 accounting information systems method rq4 research problem rq3 publication and problem identification rq1 assessment quality the results of the data obtained will be analyzed and assessed based on the questions below: qa1 : does the published journal have a timeframe from 2021-2022? qa2 : does the journal discuss accounting information systems of restaurant? qa3 : the journal interprets the restaurant's accounting information system? paper will be given a value based on the quality of the assessment above and will certainly be reanalyzed according to the existing value criteria. usage values are as follows: yes : journals that meet the criteria for quality assessment questions. no : if the journal found is not in accordance with the quality assessment. collection data the data set used is secondary data. secondary data in this study was found in several stages by using: 1. literature study using the systematic literature review (slr) method with data obtained from the web: www.google.com as well as www.scholar.google.co.id. 2. data in the form of documentation and has been stored in mendeley. data type this study uses qualitative data types by interpreting data so as to manage the data sources obtained and can be used as answers in answering research questions. http://www.scholar.google.co.id/ restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 32 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis research data that has been found and put together will be analyzed and formulated at this stage. therefore, the results of the research analysis will answer each predetermined research question. result and discussion the process of searching for journals and including journals and excluding articles in the search results for articles on accounting information systems in restaurants, 31,300 results were found. however, only 10 were taken because they met the criteria, which were published in 2021-2022 and only discussed the accounting information system used. table 2. classification according to the type of article no journal year total 1 scientific journal of accounting and finance 2021 1 2 indonesian accounting literacy journal 2021 1 3 journal of accounting and finance 2021 1 4 journal of accounting 2021 1 5 journal of entrepreneurship, accounting and management tri bisnis 2021 1 total 5 1 indonesia journal of network & security 2022 1 2 budapest internasional research and critics institute journal 2022 1 3 e-journal computer, technology and information system 2022 1 4 senmea 2022 1 5 soedirman accounting and public sector journal 2022 1 total 5 results of rq1: the method used from the results of rq1 (research question 1) get results based on journal categories with techniques in data collection. this can be interpreted in table 3 which proves that the research used a questionnaire as a data collection technique. this is because researchers want to see the effect of information systems on restaurants in indonesia and the number of respondents can be seen in the table below: table 3. data collection no method of collecting data total 1 observation 5 2 quesionnaire 3 3 quantitative 2 restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 33 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results of rq2: factors influencing sia against restaurants in indonesia results on research question 2 (rq2) regarding factors that influence sia for restaurants in indonesia. based on the categories of things that influence are accounting internal control systems, information systems, knowledge of information systems, utilization of information technology, and human resources. table 4 below describes the sia factors influencing restaurants in indonesia as follows: table 4. factors influencing sia against restaurants in indonesia no factors research total 1 system planning (rahmadani h, 2022), (saputra, 2021), (yustiana et.al., 2022), (katiandagho, 2021), (nurhani & samsudin, 2022), (pradana et.al., 2022), (jordy et.al., 2021) 7 2 internal control (yustiana et.al., 2022), (katiandagho, 2021), (darmasari & setiawan, 2021), (hidayat & darmawan, 2021), (jordy et.al., 2021) 5 3 system understanding (saputra, 2021), (yustiana et.al, 2022), (katiandagho, 2021), (nurhani & samsudin, 2022) 4 4 human resources (yustiana et.al., 2022), (rahmadani h, 2022) 2 results of rq3: research trends and topics results of rq3 (research question 3) regarding trending topics in significant research on restaurant accounting information systems in indonesia. in this research analysis, primary data is used and selected to answer related research on accounting information systems in indonesian restaurants with the following topic details: 1) presenting and analyzing sia problems in restaurants in indonesia; 2) state the causes and effects of problems in the ais of restaurants in indonesia, 3) presenting and choosing solutions to address problems that occur in sia in indonesian restaurants; 4) able to make conclusions to be a good solution from research on accounting information systems for restaurants in indonesia. the first thing that becomes the main topic is recognizing problems related to accounting information systems in restaurants. (saputra & puspaningrum, 2021) examine internal control in restaurants. whereas (rahamdani, 2022) examine the design of accounting information systems in restaurants in indonesia. on the second topic (katiandagho & trisyanto, 2021) explaining the internal control system and accounting information system design for restaurants in indonesia, (saputra & puspaningrum, 2021) discusses the design of accounting information systems and this is a very important factor to assist management in the internal control process for restaurants in indonesia. the third topic explains related to the understanding of accounting information systems in restaurants, the cause of problems often occurs because companies do not understand accounting systems and human resources are still not trained in understanding accounting systems. according (wu et al., 2021) and (de freitas & stedefeldt, 2020), explains that there are still restaurants in indonesia that do not understand the accounting system and this needs to be implemented so that the financial restaurant accounting system studies in indonesia 2021-2022: a systematic literature review mussa, yuliana, ismiyar, tjahjadi, and munandar, 34 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reports that are made can be organized and can be used for the common good and decision making. furthermore, after presenting causes and effects, the fourth topic is choosing a good way out or solution of a research problem related to accounting information systems for restaurants in indonesia. according (saputra & puspaningrum, 2021) and (ciftci et al., 2021) choosing the right solution is to make a design for an accounting system as an appropriate means of information for restaurants in indonesia. the last topic is the fifth topic as a topic in answering solutions from all research related to accounting information systems in restaurants in indonesia. an appropriate internal control system is needed so that it can control company operations, especially restaurants in indonesia, an accounting information system is also needed so that it can assist in company operations. results of rq4 : the method is good in performance research question in this case rq4 has a fairly good performance method and can be used for accounting information systems in restaurants. from the results of the studies, almost every study has used the observation method which has gone directly to identify problems that occur in the field, by conducting interviews and distributing questionnaires to obtain valid data and can be used as a source of data so that the literature study method is also able to get the right solutions in dealing with problems in research. from the results of research on several journals it is still found that sia has no and significant effect on restaurants, but in other studies in 2022 there has been a significant influence due to good internal control and has already designed an accounting information system (atmoko, 2019)(niederle & schubert, 2020). conclusion based on the research results, it can be concluded that the design of an accounting system in a restaurant must be carried out with an appropriate internal control system so that it can control company operations, especially restaurants in indonesia, it is also necessary to have an accounting information system so that it can assist in company operations, besides that it must developing an understanding of the system in restaurant organizations to find out the goals and objectives of the accounting system as well as developing the capabilities of human resources so that the application of the accounting information system can run correctly and in accordance with plans that have been prepared previously based on applicable accounting standards. reference atmoko, d. 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(2020). evaluation of glycerol core aldehydes formation in edible oils under restaurant deep frying. food research international, 137, 109696. the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 114-127 114 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies aziza chinhayu1, saiful2 university of bengkulu, indonesia correspondent: azizahchinhayu@gmail.com1 received : october 29, 2023 accepted : december 31, 2023 published : january 31, 2024 citation: chinhayu, a., saiful. (2024). financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies, 5(1), 114-127. https://doi.org/10.52728/ijtc.v5i1.1018 abstract: the purpose of this research is to determine the impact of financial statement quality and audit quality on companies in the transportation and logistics sector listed on the indonesia stock exchange during the period 2018 to 2022, especially in the transportation and logistics sector. based on the issues of investment inefficiency in the company, research is conducted to provide managers with insights to consider investment decisions based on several variables influencing investment efficiency. the purpose of this research is to determine the impact of financial reporting quality and audit quality on investment efficiency on companies in the transportation and logistics sector listed on the indonesia stock exchange during the period 2018 to 2022. by applying the purposive sampling method as a sampling technique, the data used in this research is 24 companies. the total data used in this research included 120 observations based on certain criteria. the analysis method applied is multiple linear regression analysis. and the results show that the quality of financial reporting and audit quality have a positive and significant influence on the company's investment efficiency decisions. keywords: investment efficiency, financial reporting quality, audit quality this is an open access article under the cc-by 4.0 license. introduction one of the objectives of establishing the company is to increase the wealth of owners through the achievement of high profits and equity as well as optimal share prices. in order for company goals to be achieved, the company must be managed by professional management. the professional management will make various policies that can make the company achieve company goals. according to (horne & wachowicz, 2001; silaban & dewi, 2023; wang & zhang, 2022) there are three main company policies that must be decided by management, namely investment policy, financing policy and asset management policy. (horne & wachowicz, 2001) states investment policy is the most important thing to create company value, starting with the determination of the total assets required by the company. (li et al., 2023; verawaty & anggraini, 2022) an investment can be categorized as efficient if the use of assets or company investment is carried out correctly and appropriately to avoid excessive use of resources by reducing company costs incurred and managing the company optimally, to https://www.ilomata.org/index.php/ijtc mailto:azizahchinhayu@gmail.com https://doi.org/10.52728/ijtc.v5i1.1018 financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 115 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc achieve profitable company goals. in order for investment decisions to be efficient, companies must avoid overinvestment problems and underinvestment problems. based (perdana, 2019a) found that under or over-investment conditions are indicators of investment inefficiencies by companies. the occurrence of overinvestment conditions, if the company invests excessively or in other words exceeds the predetermined target, while underinvestment occurs when the company knows that a project is profitable but chooses not to carry it out (andika, 2019). based on the conducted research (perdana, 2019b), the obtained results are described in the following table: company sector years results remarks infrastructure, utilities, and transport 2014-2018 64% underinvestment infrastructure, utilities, and transport 2014-2018 31% overinvestment the table indicates the ongoing presence of investment inefficiency problems (underinvestment and overinvestment) in companies, specifically within the transportation sector. hence, there is a need for this study to further investigate the factors that impact management's investment decisions. the condition of under and overinvestment is very dependent on the quality of information used in deciding on investment. one of the bases for making investment decisions comes from financial statement information, which is available in financial reporting. when the information used turns out to have weaknesses, the decisions made will not be appropriate, it can have an impact on inefficient investment decision making. (bzeouich et al., 2019) found a positive influence between the quality of financial reporting on investment efficiency. (firmansyah et al., 2022) found that the quality of financial reporting negatively affects investment efficiency. meanwhile (biddle, 2009a) states that the quality of financial reporting has a negative impact on one condition of less or more an investment. and (houcine, 2017) found a negative relationship between the quality of financial reporting to underinvestment but did not affect overinvestment. investment efficiency also depends on the quality of the audit, a quality audit can ensure that important and relevant information has been disclosed in the financial reporting. this can help companies make efficient investment decisions based on the information available in the financial reporting. according to (boubaker et al., 2018) and (shahzad et al., 2019) audit quality is positively related to investment efficiency. however, research from (andriani et al., 2020) found that audit quality has no effect on financial reporting. and (siregar & nuryanah, 2019) found that audit quality has no effect on investment efficiency. based on the discussion above, indications were found that the quality of financial reporting and audit quality affect investment efficiency decisions, but the results of the research are still inconclusive. based on the results that cannot be concluded above, this research will be conducted again to determine the relationship between the quality of financial reporting and audit quality on investment efficiency. https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 116 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agency theory proposed by (jensen & meckling, 1976) known as agency theory, is a theoretical foundation in the field of economics and management that focuses on the research of the relationship between owners (principals) and agents (management or executives) in companies. this theory addresses the agency conflict that arises between the owner and the agent. the presence of agency conflicts leads to inequality of information received by owners and managers (information asymmetry). information asymmetry causes an inequality of information received by managers and shareholders, this can have an impact on investment decision making, can make investment decisions inefficient and make company goals unattainable (sari &; suaryana, 2014). investment efficiency investment efficiency is an investment activity where the investment made is in accordance with the company's expectations. an investment can be said to be efficient if the level of investment expected by the company does not experience a deviation. in the sense that the investment made by the company is neither over investment nor under investment (andika, 2019). investment efficiency refers to the ability of a company or project to optimally allocate resources and capital so as to achieve the desired results. the process of investment efficiency involves the selection of suitable projects, efficient utilization of resources, and adequate assessment of investment returns. (biddle, 2009a) found that investment is derived from the total investment of the fixed assets of the company minus the total sales of fixed assets (machinery, equipment, vehicles, land and buildings) and divided by the total assets. (firawan & dewayanto, 2021a) measuring investment efficiency based on a measurement model, namely the total investment from the company in that year, can be calculated from the increase in tangible assets with intangible assets divided by lagged total assets. the dependent variable of this research is the residual value multiplied by -1, so if you get a high value it means that the investment efficiency is higher. financial reporting quality a corporation or other entity may provide information to consumers of financial reporting as a foundation for decision-making through the use of financial reporting (indella & husaini, 2021). the accuracy of the data included in the financial reporting is one aspect of their quality. reputable and pertinent financial accounts provide all important information regarding the company's operations (sari & suaryana, 2014a). making wise and effective investing decisions is based on having accurate information. in addition to agency problems like moral hazards or adverse selection, misjudgment in financial planning or judgment can also result in inefficient investment decisions (cherkasova & rasadi, 2017). (firawan & dewayanto, 2021a) measuring the quality of financial reporting (frq) measured by a discretionary accrual model. where total accruals (changes in non-current assets minus changes in current debt) are derived from the total change in income in year t plus ppe (seen in fixed assets) plus changes in cash flows from current year's operations with the previous year. (suranta et al., 2023) measure the quality of financial reporting with accrual total profit management proxies. the total value of the company's assets in the prior period, changes in the company's sales amount in year t, the total net value of the fixed assets the company owns in year t, and performance metrics derived from the rate of return on assets are added up to determine the quality of financial reporting (sari & suaryana, 2014a). https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 117 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit quality audit quality refers to the excellence of an auditor in carrying out his duties. audit quality is defined as an independent assessment of the effectiveness of an organization's quality system (sevtiandary & aziza, 2021). audit quality includes various things where it is ensured that the audit is carried out independently and professionally. auditors are needed to assess the quality of the company's financial reporting that will be used as a reference for efficient investment decision making. quality external audit (big-4) is also an important supervisory mechanism in the timeliness of financial reporting (ilyas, 2019) (firawan & dewayanto, 2021a; shahzad et al., 2019; wisesa & saiful, 2021) measure audit quality using dummy variables with a measurement model is if the code "1" then the financial reporting are audited by big 4, and code "0" then the financial reporting are not audited by big 4. in a prior research (shahzad et al., 2019), the impact of financial reporting quality and audit quality on investment efficiency was investigated in 190 publicly traded companies listed on the pakistan stock exchange. the findings revealed a positive correlation between the quality of financial reporting and audit quality with investment efficiency. another research effort by (cutillas gomariz & sánchez ballesta, 2014) focused on companies registered in spain from 1998 to 2008, analyzing the influence of financial reporting quality and debt maturity on investment efficiency. the results suggested that improved financial reporting quality contributes to mitigating the issue of overinvestment. meanwhile, (siregar & nuryanah, 2019) explored the relationship between financial reporting quality, audit quality, and investment efficiency in 435 listed companies in france. their findings indicated a positive association between the quality of financial reporting and investment efficiency, while audit quality did not demonstrate a significant impact on investment efficiency. in a research conducted by (firmansyah et al., 2022), the correlation between the quality of financial reporting and investment efficiency was investigated in 129 companies within the consumer goods sector that are listed on the indonesia stock exchange. the findings indicated a negative relationship between the quality of financial reporting and investment efficiency. (biddle, 2009a) explored the connection between the quality of financial reporting and investment efficiency across 34,791 companies. the research results revealed a negative association between the quality of financial reporting and the occurrence of underinvestment or overinvestment. additionally, (houcine, 2017) examined the relationship between the quality of financial reporting and investment efficiency in 25 companies registered in tunisia. the results showed a negative correlation between the quality of financial reporting and underinvestment, but there was no impact on overinvestment. the impact of audit quality on investment efficiency was examined by (boubaker et al., 2018) in 125 french registered companies. the results showed that investment efficiency and audit quality were positively correlated. a research was carried out in 2019 by (riska pertamalia, 2019) to evaluate the effects of the audit committee and audit quality on the financial reporting of eleven companies that had the codes asii, cpin, icbp, indf, intp, jpfa, klbf, smgr, unvr, wsbp, and wskt. the findings showed that the audit committee and audit quality had a favorable impact on the financial reporting. the effect of the audit committee and audit quality on the financial reporting of ninety-three trading companies listed on bursa malaysia was investigated https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 118 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by (hasan et al., 2019). the research discovered that while the audit committee had a positive impact on financial reporting, audit quality hypotheses financial reporting quality and investment efficiency based on agency theory where it is stated that agency conflicts arise due to information asymmetry problems between owners and agents. this is also in line with the problem of investment inefficiency that arises both under and overinvestment conditions due to information asymmetry problems between management (agents) and owners (principals). the problem of information asymmetry related to under and over investment can be reduced by the quality of good financial reporting, where the quality of these financial reporting will be the basis for management to make an efficient investment decision. (sari & suaryana, 2014a; shahzad et al., 2019) found that the quality of financial reporting can increase investment efficiency. thus, the first hypothesis is formulated as follows: h1: high quality of financial reporting in companies can have a positive effect on investment efficiency. the effect of audit quality on investment efficiency based on agency theory which states that there is a two-party relationship between the first party, namely the owner and the second party, namely the agent (management). the existence of information asymmetry between the owner and management results in the owner assessing management as knowing more information which results in opportunistic behavior of managers. conditions where managers have more information than owners and investors, leading to increased information asymmetry and agency problems, resulting in problems with low efficiency of resource allocation in the market (alsmady, 2023). for this reason, it is necessary to have a mechanism that can control the opportunistic behavior of managers and also help management to be able to make an investment efficiency decision based on quality financial reporting. good audit quality will improve the quality of a financial statement and will have an impact on efficient decision making. (boubaker et al., 2018; shahzad et al., 2019) found that audit quality can improve efficient investment decisions. thus, the second hypothesis is formulated as follows: h2: high audit quality can improve investment efficiency decisions in a company method population and sample the population for this research encompasses all transportation and logistics companies that are publicly listed on the indonesia stock exchange. the research sample consists of 24 transportation and logistics companies that were listed on the indonesia stock exchange during the period from 2018 to 2022. the sample selection was conducted using the purposive sampling method, adhering to specific criteria aligned with the research objectives. the selected criteria include: the population for this research encompasses all transportation and logistics companies that are publicly listed on the indonesia stock exchange during the period from 2018 to 2022. the research sample consists of 24 companies that met the criteria, selected during the 5-year observation https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 119 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc period, resulting in a total of 120 observations. the sample selection was conducted using the purposive sampling method, adhering to specific criteria aligned with the research objectives. the selected criteria include: 1. transportation and logistics sector companies listed on the indonesia stock exchange for the 2018-2022 2. oservation period financial reporting of transportation and logistics sector companies that have been reported and audited by independent parties for the 2018-2022 3. observation period financial reporting of transportation and logistics sector companies that have complete information about dependent and independent variables in accordance with research criteria. variable and measurement dependent variable the dependent variable in this research is investment efficiency. in this research investment efficiency is measured by measuring: the dependent variable in this research is investment efficiency. in this research, investment efficiency is measured using the measurement model employed by (biddle, 2009b) and (sari & suaryana, 2014b). the following is the measurement: investment ii,t= αi,t + β1sg i,t-1 + εi,t description: investment i ,t = total investment of the company (i) in year (t), can be calculated increase on tangible assets by intangible assets divided by lagged total assets. sgi,t = change in sales level in company i in the current year with the previous year. the dependent variable of this research is the residual value multiplied by -1, so if you get a high value it means that the investment efficiency is higher. independent variables quality of financial reporting in this research, the quality of financial reporting is calculated by measuring: the independent variables in this research are the quality of financial reporting and audit quality. financial reporting quality the quality of financial reporting in this research utilizes the measurement employed by (firawan & dewayanto, 2021b), and the following is the measurement model: ta i+t = β0+ β1δsalesi,t+ β2ppei+t+β3δcfoi,t +ɛi+t description: tai,t = net profit – cf δsales = changes in revenue in the year ppe = property, plant, and equipment that can be seen in fixed assets https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 120 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc δcfo = change in cash flows from operations in the current year with the previous year audit quality variability audit quality is measured using dummy variables with the measurement model is if the code "1" then the financial reporting are audited by big 4, and if code "0" then the financial reporting are not audited by big 4. control variables in this research refer to the previous literature to examine the relationship between the quality of financial reporting and investment efficiency, namely using company size (cs) measured by natural logarithms (ln) of total assets; leverage (lev) is measured by the ratio of total debt to total assets analysis model the analysis model used in this research is a multiple linear regression model because the independent variables used are more than one. the regression model in this research is as follows: y=α+β2frqi,t+β3aqi,t+β4csi,t+β5lev+ɛ remarks : y = investment efficiency frqi, t = quality of financial reporting aqi, t = quality audit csi, t = company size levi, t = leverage research result and discussion based on the purposive sampling method conducted, 24 transportation and logistics companies were found as samples in this research with the following description: table 1 details of the research sample sample criteria number of companies companies in the transportation and logistics sector listed on the indonesia stock exchange 2018-2022 observation period 36 manufacturing companies that did not meet the criteria for the variables required in this research in full 12 total samples used after outliers 24 source: secondary data, processed 2023 https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 121 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc descriptive statistical analysis in descriptive statistical analysis, there is a table that contains the mean, maximum, minimum, and standard deviation values used as an overview and description of a data in the research. table 2 descriptive statistics n minimum maximum mean std. deviation ei 119 -.81 5.06 .0000 .52066 frq 119 -3100.61 8.48 -61.3492 373.66931 aq 119 .00 1.00 .2521 .43605 cs 119 18.11 32.66 27.0267 2.49877 lev 119 .07 3.14 .6456 .50678 valid n (listwise) 119 source: secondary data, processed 2023 descriptive statistics n minimum maximum mean std. deviation ei 120 -.81 5.06 .0017 .51879 frq 120 -3100.61 8.48 -60.8455 372.13688 cs 120 18.11 32.66 27.0225 2.48867 lev 120 .07 3.14 .6448 .50474 valid n (listwise) 120 table 3. variable analysis x2 (dummy) audited big 4 unaudited big 4 transportation and logistics companies listed on the idx during the period 2018-2022 6 18 total 24 in this research, the dependent variable is investment efficiency. investment efficiency is quantified by taking the absolute value derived from the residual value of the regression of total investment with sales growth, multiplied by -1 to signify that a value is efficient, with a mean value of 0.0017. the standard deviation is calculated as 0.51879, indicating the degree of variability in investment efficiency scores. the maximum recorded value for investment efficiency is 5.06, while the minimum value is -.81, illustrating the range of efficiency values observed in the dataset https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 122 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the quality of financial reporting, as assessed in this research, is characterized by a standard deviation value of 372.13688. this assessment employs profit management proxies, where the quality value of financial reporting is determined through the regression results of net income minus changes in operating cash flows and all other relevant proxies. the mean value for the quality of financial reporting is recorded at -60.8455. the maximum observed value in this context is 8.48, while the minimum value is -3100.61, indicating the range of quality values for financial reporting in the dataset. audit quality is measured using dummy variables, if the company is audited by big4 it is given the code "1" and if then the company is audited other than big4 then it is given the code "0". the results of the audit quality value seen in table 3 show that in transportation and logistics companies during the 2018-2022 period audited by kap big 4 there were 6 companies (30 observations) and those audited other than kap big 4 amounted to 18 companies (90 observations). table 4 test results of dependent variables koefisien t sig (constant) 3,902 4,354 <0,001 frq 0,000 2,886 0,005 aq 0,680 4,091 <0,001 cs -0,150 -4,500 <0,001 lev 0,032 0,345 0,731 the effect of financial reporting quality on investment efficiency the presented table indicates a significant positive impact of the quality of financial reporting on investment efficiency. this is evident from the positively directed coefficient value of 0.000 and the corresponding significance level (sig.) of 0.005 (0.005 = 0.005). the findings of this research align with previous research conducted by (biddle, 2009a; mubyarto & zahara, 2022; shahzad et al., 2019), all of which also observed a positive correlation between the quality of financial reporting and investment efficiency. these studies concluded that a high-quality financial statement facilitates information equality between managers and owners, consequently influencing more efficient investment decision-making. contrastingly, these results differ from the findings of (firmansyah et al., 2022; houcine, 2017), who concluded that the quality of financial reporting does not necessarily lead to immediate implications for efficient investment decisions. their studies present an alternative perspective, suggesting that other factors or conditions may play a role in influencing the relationship between the quality of financial reporting and investment efficiency. source: secondary data, processed 2023 https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 123 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research found that a financial statement affects investment efficiency. quality financial reporting, presented on time and presenting accurate information can provide relevant information about a company's financial performance (k & nabeng, 2022). the interpretation draws on agency theory, positing the existence of an agency problem between managers and company owners. according to this theory, high-quality financial reporting play a pivotal role in enhancing investment efficiency. this is achieved by furnishing accurate and reliable information, thereby reducing information asymmetry between managers and company owners and facilitating sound investment decision-making, as highlighted in the work of (khoerulloh & janwari, 2021). consequently, companies are encouraged to prioritize the quality of their financial reporting to not only enhance investment efficiency but also to attract potential investors. (affan, 2019) further supports this perspective, asserting that, on a general scale, high-quality financial reporting exert a positive impact on investment efficiency within a company. the effect of audit quality on investment efficiency in testing the second hypothesis, namely independent variables, audit quality has a positive and significant influence on investment efficiency. this can be seen from the positive coefficient of 0.680 and the sig value of 0.001 (0.001<0.005). this is in line with research conducted (firawan & dewayanto, 2021a; hidayati, 2019; shahzad et al., 2019) which states that high audit quality can influence efficient investment decisions where high audit quality can provide positive competitive advantages to companies audited from big4 and generate positive economic consequences and lead to investment efficiency decisions. however, it is not in line with research conducted (siregar & nuryanah, 2019) which found that audit quality does not affect a company's investment efficiency decisions. from this research, it is proven that big 4 that are recognized as having a strong reputation will maintain their performance in conducting high-integrity audits. good big4 performance will be an efficient monitoring and will reduce information asymmetry and agency conflicts (agency theory) between owners and managers. with a quality audit, it will reduce the information gap between managers and owners and become a supervisory role for managers so that they can make efficient investment decisions. conclusion this research aims to determine the effect of financial reporting quality and audit quality on investment efficiency in transportation and logistics companies listed on the idx. the research used a sample of 24 companies with a span of five consecutive years from 2018 to 2022 so that the total sample obtained was 120. based on the analysis and testing of the results data in the research, it was concluded that: 1. the positive impact of the quality of financial reporting on investment efficiency is consistent with the findings of previous studies such as those conducted by shahzad et al. (2019) and biddle (2009). however, this aligns differently from the outcomes of studies by firmansyah et al. (2022) and houcine (2017), which did not observe a similar positive relationship. https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 124 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. the positive influence of audit quality on investment efficiency is congruent with the results of the research conducted by shahzad et al. (2019). however, this contrasts with the findings of the research conducted by (lai, 2009), which did not reveal a similar positive association. the research findings offer positive implications for business practices, audit institutions, regulations, and investor decisions in the indonesian transportation and logistics sector (20182022). companies are advised to enhance financial reporting processes for better stakeholder information. collaborating closely with audit institutions ensures optimal audit quality, with their specific recommendations serving as a basis for internal improvements. regulators should consistently review and update guidelines to align with business trends and international standards. investors can rely on these research findings to assess investment potential, emphasizing the importance of financial reporting and audit quality in decision-making. implementing these recommendations is expected to bring sustained improvements in investment efficiency and information transparency in the sector. this research has limitations in its implementation to examine the efficiency of investment in transportation and logistics companies in indonesia. below will be explained some of the limitations faced by researchers: 1. the research sample was made only referring to transportation and logistics sector companies that have been audited and listed on the idx. 2. the variables used are only the quality of financial reporting and the quality of audits to test their effect on investment. based on the limitations experienced when conducting this research, the researcher provides suggestions that can later be useful for further researchers to improve or develop in future research. suggestions that researchers can give for the success of further research, namely: 1. addition of the company sector studied so that the number of samples used is larger. 2. add variable factors if there are variables that affect investment efficiency and have not been added. reference affan, m. w. 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(2021). peranan kualitas audit dalam hubungan kepemilikan manajemen dan informatf laba perusahaan non-keuangan indonesia. jurnal fairness, 8(2), 111–124. https://doi.org/10.33369/fairness.v8i2.15200 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 2, issue 1 january 2021 page no. 351-358 351 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pentahelix collaboration in improving taxpayer compliance notika rahmi1, selvi2, agitta sofyan purwaningtyas3 123institut ilmu sosial dan manajemen stiami, indonesia correspondent: notika.rahmi@gmail.com1 received : august 19, 2022 accepted : october 15, 2022 published : october 31, 2022 citation: rahmi, n., selvi., purwaningtyas, a, s. (2022). pentahelix collaboration in improving taxpayer compliance. ilomata international journal of tax and accounting, 3(4), 351-358. https://doi.org/10.52728/ijtc.v3i4.562 abstract: the government has made various efforts to improve taxpayer compliance but the efforts that have been made have not been effective enough. collaboration between stakeholders is needed in harmonizing and synergizing all components of taxpayers. this study was conducted with the aim of analyzing pentahelix collaboration in improving taxpayer compliance at cimanggis tax office. the study used descriptive qualitative methods with data collection techniques through observation, interviews and literature study. the results of the study show that collaboration has been carried out by the government well by involving various parties who take an active role, namely the private sector, academia, the media and the community. each party has its own role in helping improve taxpayer compliance. in its implementation there are several obstacles, but coordination continues to be carried out together to carry out the commitments that have been made. keywords: pentahelix collaboration; taxpayer compliance this is an open access article under the cc-by 4.0 license. introduction tax ratio is still very low at 9.12% in 2021 (kurniati, 2022). tax ratio can be regarded as a reflection of the level of compliance of taxpayers in indonesia (lhoka & sukartha, 2020; rahmadhani et al., 2020; rahman, 2017). no wonder indonesia is ranked seventh in the southeast asian region (jeven, 2021). in fact, if this tax compliance continues to be explored, then tax revenue will automatically increase, which is currently the main source of state revenue (angraini et al., 2017; purwanto & safira, 2020; setiowati et al., 2020). tax compliance is a condition where taxpayers fulfill and carry out their tax obligations in accordance with regulations and laws (fang et al., 2022; menichini, 2020; rahayu, 2013; saad, 2014). there are several factors that cause taxpayer non-compliance. among them are the lack of understanding of tax regulations, the lack of maximum tax services provided to the low level of supervision due to the lack of taxation databases and the lack of knowledge and awareness of taxpayers (batrancea et al., 2019; damayanti et al., 2015; saad, 2014). public ignorance of the distribution of tax funds and some circulating information related to the practice of misuse of funds by the government are also widely circulated, thereby reducing public trust in the government (kasper & alm, 2022; klaser & mittone, 2022; natalia, 2020). mailto:notika.rahmi@gmail.com https://doi.org/10.52728/ijtc.v3i4.562 pentahelix collaboration in improving taxpayer compliance rahmi, selvi, and purwaningtyas 352 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc various efforts have been made by the government to improve taxpayer compliance, some of which are by improving the quality of fiscus services, audits to tax sanctions (masrullah et al., 2021; prabowo & indarto, 2018; wantasen et al., 2021). however, these efforts are not efficient enough to improve taxpayer compliance (cahyonowati & darsono, 2018). this increase in taxpayer compliance cannot only depend on the government, considering that many parties are involved and have an interest so that collaboration between relevant stakeholders is needed (latofah & harjo, 2020; rizkiyah et al., 2019; susanto, 2022). in short, governments should pursue a variety of approaches in their efforts to promote compliance. where good governance is needed that is able to harmonize and synergize all components of taxpayers, government, academics, entrepreneurs and the media with the aim of increasing taxpayer compliance or what is called the pentahelix model (nurmalia, 2018). the pentahelix collaboration is a model of economic development to pursue innovation through collaboration using five elements, namely academia, business, government, society or community and the media (subagyo, 2021; sudiana et al., 2020; wahida et al., 2020). the key to the success of this innovation is the synergy and strong commitment between stakeholders, besides the penta helix collaboration is considered very appropriate to manage the complexity of various actors (novianti, 2020; slamet et al., 2016). furthermore, according to (soemaryani, 2016) penta helix is defined as a reference in developing synergies between relevant agencies in supporting the achievement of a common goal and that penta helix plays a role in advancing regional socioeconomic development (hasid et al., 2022; purba & setiawan, 2022). the above statement is also supported by the understanding put forward by jann jidajat tjakraatmadja that penta helix is an integrated design between five sectors that are coordinated with each other (amrial et al., 2017). depok city is known as a buffer city for the state capital. included as one of the big cities located on the border of west java, depok city consists of 11 sub-districts namely, tapos, sukmajaya, beji, bojongsari, cimanggis, cilodong, cinere, pancoran mas, cipayung, limo and sawangan. in this study, researchers chose the sub-district under the cimanggis tax office as the research location. table i.1 level of taxpayer compliance cimanggis tax office year 2016-2021 years of registered taxpayers spt taxpayers reports spt compliance spt entities private total 2018 12.701 331.325 344.026 157.427 87.236 55,41% 2019 13.825 355.055 368.880 149.030 92.644 62.16% 2020 14.896 395.579 410.474 123.315 95.991 77,84% 2021 16.652 419.103 435.755 121.920 94.855 77,8% source: general sub division cimanggis tax office table i.2 income tax arrears collection section cimanggis tax office year 2019-2021 year outstanding taxdes receivable (rp.) accounts receivable % 2019 47.408.322.809 23.608.031.842 50% 2020 54.840.839.865 18.591.308.292 34% pentahelix collaboration in improving taxpayer compliance rahmi, selvi, and purwaningtyas 353 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2021 116.689.228.923 9.213.424.289 8% source: general sub division cimanggis tax office based on the above data, it can be seen that the percentage of tax compliance level in the cimanggis tax office area has not been fully realized. in addition, based on data on tax arrears receipts in 2019-2021, receipts from uncollected receivables have not yet been fully achieved, there has even been a decrease in the percentage of receivables collectible from 50% to 34% in 2020 and further decreased to 8% in 2021. in other words, there are still many taxpayers who have not complied with their tax obligations. in order to overcome this, cimanggis tax office has collaborated with several parties. some of them are with the involvement of academics, through programs that have been initiated by the directorate general of taxes, namely the cross-agency program or what is called the tax volunteer program. collaboration with the tax center and the depok city government in conducting education in the form of socialization to msme actors to the establishment of the msme corner. even collaboration with the kelurahan is also carried out to encourage the reporting of the annual spt and the establishment of the tax corner. although synergies through collaboration with various parties have been carried out, it turns out that this has not been able to support the compliance of taxpayers in depok city. therefore, the researcher wants to analyze the pentahelix collaboration in improving taxpayer compliance at cimanggis tax office. this study refers to research conducted by (sari & rosdianae, 2021) with the title evaluation of the implementation of collaborative governance in the optimization of dki jakarta regional tax revenues. the research relates collaborative governance to optimizing tax revenue and shows that as a leading institution in collaborative governance, bprd dki jakarta is considered less proactive and less confident in implementing policies and there are obstacles in the form of lack of trust in the cooperation that is built. however, this research is different from previous research which focuses on tax revenue, while the researcher focuses on tax compliance. method this research is a descriptive qualitative research (creswell, 2017; creswell & creswell, 2018), where this research is based on the philosophy of postpositivism which is commonly used to examine the condition of natural objects (sugiyono, 2019, 2022). research discusses regarding the pentahelix collaboration in improving taxpayer compliance at cimanggis tax office. the researchers used data collection techniques in the form of observation, interviews and literature study. informants in this study consisted of the head of supervision section vi of cimanggis tax office, decima msme community management, director of broadcasting radar depok and several private companies registered as taxpayers of cimanggis tax office. the research period starts from february to june 2022. in analyzing the results of the study, the researchers carried out data reduction, data presentation, and drawing conclusions (miles & huberman, 1994). result and discussion role of the government in carrying out its role properly, there are several indicators that need to be considered, namely the availability of regulations or policies governing tax compliance and the availability of financial support through the proposed apbn/apbd to improve taxpayer compliance. in addition, the pentahelix collaboration in improving taxpayer compliance rahmi, selvi, and purwaningtyas 354 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc government's role is also important in law enforcement on positive legal norms that have been issued and the availability of cooperation in order to improve tax compliance. based on the results of interviews conducted by the author, the role of the government in this case is cimanggis tax office as a regulator which has been regulated in the law on general provisions and tax procedures article 17 c paragraph 2 and regulation of the minister of finance no. 192/pmk.03/2007 where compliance this is assessed from the timeliness in submitting the annual spt and the amount of tax arrears. the role of the government with collaboration in conducting education, socialization and other collaborative programs with both the private sector, academics, media and the community affects the level of tax compliance at cimanggis tax office. role of the private the role of the private sector here is as a provider of employment. as a provider of employment opportunities, the private sector carries out its obligations in terms of withholding employee income tax, aka pph article 21. indirectly, the private sector forces its employees to fulfill their tax obligations by withholding income tax directly on the income earned. in addition, the private sector also provides education to its employees by sending their employees to participate in the socialization organized by cimanggis tax office. community role in carrying out its role properly, there are several indicators that need to be considered, namely the availability of active community participation in the agenda of increasing tax compliance. in addition, the creation of good collaboration between the community and other institutions, both the government and other parties in order to improve taxpayer compliance. the community has a role as an accelerator consisting of a collection of people with the same interests, as well as being an intermediary or liaison between stakeholders. based on interviews that have been conducted, the community has actively participated in collaborating with the government with the cimanggis tax office, the depok city cooperatives and msme service, to universities and the tax center through outreach activities to the msme corner. role of media in carrying out its role properly, there are several indicators that need to be considered, namely the availability of media in voicing the importance of tax compliance. in addition, it can also be seen from the active involvement of the press in order to voice the involvement of other parties who are also seeking tax compliance. media acts as an expander or supporter of publications in promoting and creating a brand image. depok media has participated through collaboration to voice taxpayer compliance, however the intensity of participation is still low. role of academics academics have a role as conceptors, namely sources of knowledge with relevant new concepts and theories. based on interviews that have been conducted, academics have participated in collaborations to improve tax compliance, through educational provision for students participating in internship programs and community service, including collaboration with the government to be involved in the educational process through socialization and other programs pentahelix collaboration in improving taxpayer compliance rahmi, selvi, and purwaningtyas 355 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc such as tax volunteers such as which has been regulated in the regulation of the director general of taxes no. per-12/pj/2021 article 1 point 9, which states that a tax volunteer is someone who voluntarily balances his time, energy, thoughts and expertise to play an active role in tax education activities. obstacles obstacles in implementing collaboration commitments to improve taxpayer compliance, some of which are meeting timings considering the ongoing pandemic. in addition, with the pandemic, several parties are also required to be open to technology, because some programs that were originally carried out offline shifted their implementation to online. the obstacle in building communication between parties lies in the communication media, where communication that was previously carried out directly by face to face has turned into communication through social media such as instagram and whatsapp. communication is considered less effective than direct communication. barriers to continuing to coordinate in carrying out commitments, including the absence of written agreements between parties such as between the private sector and the government. this will affect the equal distribution of the role of the private sector to participate in coordination. conclusion the pentahelix collaboration carried out by the government in order to improve taxpayer compliance has been carried out well, starting from the availability of regulations to financial support. collaboration has also been carried out with various parties, namely the private sector, academia, the media and the community. the private sector has played an active role by cutting income taxes for employees and involving employees in the socialization held by the kpp. the 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(2021). analisis penerimaan pajak sebelum dan sesudah adanya insentif pajak bagi wajib pajak yang terdampak covid-19 selama masa pandemi pada kpp pratama manado. going concern : jurnal riset akuntansi, 16(4), 387–397. https://doi.org/https://doi.org/10.32400/gc.16.4.37587.2021 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2 april 2023 page no. 265-282 265 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurul latifah nurdin1, haliah2, nirwana3 123universitas hasanuddin, makassar, indonesia corresspondent : nirwana_ni@yahoo.com1 received : january 25, 2023 accepted : april 12, 2023 published : april 30, 2023 citation: nurdin, n, l., haliah., nirwana (2023). application of accounting for medicines inventory based on psap. 05 at regional public hospital. ilomata international journal of tax and accounting, 4(2), 265-282. https://doi.org/10.52728/ijtc.v4i2.717 abstract: this study aims to analyze the application of inventory accounting to the applicable standard which are applied by the object of regional public hospital. the applicable standard referred to in this study is the statement of government accounting standards number 05 concerning inventory accounting, which is contained in government regulation number 71 of 2010. healthcare organizations need to efficiently use their available resources, improve their productivity, reduce operating costs, and provide high-quality services. the hospital which is the object of this research is rsud prov. jawa timur. this study uses a quantitative data analysis method and a literature study approach. sources of data use secondary data in the form performance report blud of the official hospital website. the result of this study indicates that the application of the medicines inventory accounting at regional public hospital has been applied in accordance with the government accounting standards statement (psap) number 05. from the analysis result, the researcher identifies that much appropriateness between the accounting treatment which has been arranged in psap 2010 with an accounting policy which has been applied in the element of financial report and accounting treatment of supply used. however, in some treatments, there is need maintanance and techology implementation on their medicines supply. keywords: inventory accounting, psap no. 05, medicines inventory, government accounting, accounting standards statement this is an open access article under the cc-by 4.0 license. introduction currently, health is one of the important things needed by everyone. this is evidenced by the increasing number of private hospitals or clinics being established. in indonesia, several international standard hospitals with various advanced facilities have been established (budiwan, and efendi, 2016). public sectors are closely related to public sustainability and have a wide area of coverage. public sector organizations have more to do with public life such as providing services and meeting public needs. hospitals are social service institutions that prioritize service to the community and always pay attention to service ethics. andy (2009) states that: https://www.ilomata.org/index.php/ijtc mailto:nirwana_ni@yahoo.com https://doi.org/10.52728/ijtc.v4i2.717 application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 266 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc there are important factors that dominantly influence the development and development and improvement of hospitals in indonesia, namely: 1. socio-economic development of the community; 2. the development of science and technology in the field of medicine 3. the development of various diseases; 4. availability of budget or funds for hospital development and improvement; 5. development and advancement of management including hospital management; 6. the existence of hospital competition; 7. changes in government policy, especially regarding services in the health sector health. healthcare institutions are responsible for planning, purchasing, managing, handling, tracking, and transporting stock (e.g., medications, medical equipment, and supplies). (balki, bandar., et al, 2022). in addition to these seven factors, the performance of the regional general hospital is also largely determined by the scale of economic activity of the region concerned. the regional general hospital as one of the government agencies must be able to provide both financial and nonfinancial accountability to the local government and the community as service users. aurora (2010) reveals that the regional general hospital is one of the local government agencies engaged in the public sector in terms of health services. the business activities of the regional general hospital are social and economic in nature which prioritize the best health services for the community. law of the republic of indonesia number 44 of 2009 concerning hospitals, hospitals are health service institutions that organize comprehensive individual health services that provide inpatient, outpatient, and emergency services. the increasing prominence of accounting in the public sector had important implications for engineering, teaching and other professions that had traditionally played a central role in defining and delivering public services (gebreiter, 2016). hospitals established by the government and regional governments must be in the form of technical implementation units of agencies in charge of the health sector, certain agencies, or regional technical institutions with the management of the public service agency (blu) or regional public service agency (blud) in accordance with statutory provisions. hospitals have the following functions: 1. organizing treatment and health recovery services in accordance with hospital service standards; 2. maintenance and improvement of individual health through comprehensive second and third level health services according to medical needs; 3. the organization of education and training of human resources in order to improve the ability to provide health services; and 4. organizing research and development as well as technology screening in the field of health in order to improve health services with due regard to the ethics of science in the field of health. statement of government accounting standards (psap) no. 05 no. 4 government regulation no. 71 of 2010 based on the accrual system inventories are liquid tools in the form of goods or https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 267 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc equipment designed to support government operations and are intended to provide services to the public. as a public institution that must provide public goods and services, government agencies such as hospitals must manage and perform inventory accounting properly. for inventory processing in government agencies, it must comply with established standards, namely government accounting standards statement number 05 concerning inventory accounting, in order to obtain relevant accounting information about inventory. handling inventory by referring to these standards clearly describes the process of identifying, measuring and presenting existing inventory (erlina, 2015). thei eiveiryday work of accountants involveis reicording transactions in thei classification systeim that is doublei-eintry bookkeieiping. thei financial stateimeints which reisult areialso classifications: for eixamplei, asseits arei classeid as non-curreint or curreint; thei formeir arei thein sub-classeid as tangiblei, intangiblei or financial (nobeis and stadleir, 2013). in thei application of goveirnmeint accounting standard no. 05 (psap 05) 2010, inveintory neieids to bei calculateid and planneid careifully so that inveintory reimains undeir control. this meians that inveintory should not bei insufficieint and surplus, as this will causei unfavorablei things. for eixamplei, a shortagei of supply will reisult in an inability to meieit deimand, and thus beiing unablei to meieit deimand. eixceissivei supply is also deitrimeintal to thei organization, such as a high risk of non-compliancei. theireiforei, thei institution should bei ablei to handlei its own supplieis as much as possiblei in accordancei with hospital manageimeint policieis and proceidureis. in ordeir to carry out inveintory counting work reigularly, seiveiral peirsonneil arei reisponsiblei for eiach part in accordancei with thei proceidureis in thei hospital accounting systeim. in addition, thei cleiarancei of reipreiseinteid information has impacts on thei seirviceis, such as inhibiting thei proceiss of providing information, thei difficulty of data proceissing, inhibiting administrativeireilateid activitieis, and hampeiring communication among heialth eimployeieis (rizki, fadila., eit all, 2020). thei cmeia also reiquireid reitail drugstoreis to providei propeir training to thosei storei-front eimployeieis who weirei reisponsiblei for direictly deialing with customeir purchaseis. drugstoreis weirei to einsurei that theisei eimployeieis undeirstood theisei leigal reiquireimeints and followeid propeir proceidureis. drugstoreis weirei also to seilf-ceirtify to reileivant authoritieis in theiir jurisdictions to deimonstratei that all storei-front eimployeieis had undeirgonei thei reiquireid training. (guo and eischeinbreinneir, 2017) whein inveintory quantitieis arei deiteirmineid soleilyby meians of a physical count, and all counts arei madei as of thei balancei-sheieit datei or as of a singlei datei within a reiasonablei timei beiforei or afteir thei balancei-sheieit datei, it is ordinarily neiceissary for thei indeipeindeint auditor to bei preiseint at thei timei of thei count and, by suitablei obseirvation, teists, and inquirieis, satisfy himseilf reispeicting thei eiffeictiveineiss of thei meithods of inveintory-taking and thei meiasurei of reiliancei which may bei placeid upon thei clieint’s reipreiseintations about thei quantitieis and physical condition of thei inveintorieis (apostolou, eit al, 2014) baseid on goveirnmeint accounting standard no. 05 paragraph 13 of goveirnmeint reigulation no. 71 of 2010, inveintorieis arei reicognizeid: 1) whein thei goveirnmeint obtains poteintial futurei eiconomic beineifits and theiir valuei or cost can bei meiasureid reiliably; and 2) upon reiceiipt or transfeir of https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 268 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc owneirship and/or posseission. at thei timei of preiparing thei budgeit reialization reiport, at thei timei of purchasei, it is only reicordeid as a commodity eixpeinditurei and affeicts thei eistimateid changei in thei sal, whilei at thei timei of preiparing thei opeirating reiport, thei purchasei of inveintory will bei reicordeid as inveintory eixpeinditurei and cash eixpeinditurei (eirlina, 2015). thei valuei of inveintory includeis all costs that must bei incurreid beiforei thei goods arei useid. in psap no. 05 goveirnmeint reigulation no. 71 of 2010 theirei arei threiei options for meiasuring and valuing inveintory, nameily acquisition cost baseid on purchasei. 2) cost of goods produceid by seilf-production. 3) pricei or fair valuei, obtaineid in otheir ways (eirlina, 2015). baseid on goveirnmeint accounting standard no. 05 paragraph 13 of goveirnmeint reigulation no. 71 of 2010, inveintorieis arei reicognizeid: 1) whein thei goveirnmeint obtains poteintial futurei eiconomic beineifits and theiir valuei or cost can bei meiasureid reiliably; and 2) upon reiceiipt or transfeir of owneirship and/or posseission. at thei timei of preiparing thei budgeit reialization reiport, at thei timei of purchasei, it is only reicordeid as a commodity eixpeinditurei and affeicts thei eistimateid changei in thei sal, whilei at thei timei of preiparing thei opeirating reiport, thei purchasei of inveintory will bei reicordeid as inveintory eixpeinditurei and cash eixpeinditurei. thei valuei of inveintory includeis all costs that must bei incurreid beiforei thei goods arei useid. in psap no. 05 goveirnmeint reigulation no. 71 of 2010 theirei arei threiei options for meiasuring and valuing inveintory, nameily acquisition cost baseid on purchasei. 2) cost of goods produceid by seilf-production. 3) pricei or fair valuei, obtaineid in otheir ways (eirlina, 2015). psap no. 05 paragraph 26 goveirnmeint reigulation stateis that someithing neieids to bei discloseid in thei financial stateimeints reilating to inveintory of goods is thei accounting policy systeim in thei valuation of inveintory figureis, furtheir eilaboration such as goods or eiquipmeint inteindeid for seirviceis to thei public, eiquipmeint inteindeid for thei production proceiss, storeid goods inteindeid for thei saleis proceiss or community grants, and goods in thei production proceiss inteindeid for thei saleis proceiss. thei purposei of a formulary systeim is to einsurei that meidicinei inveintory in patieint carei seittings is aligneid with availablei eivideincei, meidically appropriatei, safei, and cost-eiffeictivei, laying thei groundwork for improving thei quality of carei, reiducing cost and wastei, and practicing eivideincei-baseid meidicinei. (teipolt, eit al, 2021) pharmaceiutical supplieis in hospitals havei diffeireint characteiristics from thei typei of inveintory in geineiral whein compareid to otheir units, wheirei otheir supplieis havei theiir own treiatmeint for deipleition, which can bei donei with ceirtain discounts and offeirs. but consideiring that pharmaceiutical supplieis arei a supply that will not comei out of thei wareihousei unleiss it is adjusteid for thei typei of diseiasei complaint or patieint pain, thei supply will not comei out if it doeis not match thei condition of thei patieint's complaint. so this neieids to bei adjusteid with cleiar sops, so that theirei is no accumulation of ceirtain typeis of drugs duei to failurei to preidict most typeis of patieint diseiaseis or failurei to managei storagei meithods and storagei peiriods. beicausei drug abusei is thei consumption of somei drugs in a quantity that may bei seilf-damaging or addictivei (abbasi, eit al, 2023). in reiceint yeiars, somei companieis havei deiveilopeid inveintory controls or meithods of deiteirmining inveintorieis, including statistical sampling, which arei highly eiffeictivei in deiteirmining inveintory quantitieis and which arei sufficieintly reiliablei to makei unneiceissary an annual physical count of eiach https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 269 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc iteim of inveintory. in such circumstanceis, thei indeipeindeint auditor must satisfy himseilf that thei clieint’s proceidureis or meithods arei sufficieintly reiliablei to producei reisults substantially thei samei as thosei which would bei obtaineid by a count of all iteims eiach yeiar. (gross, andreiw,. eit al, 2020) baridwan (2004) eixplain that accounting has two kinds of inveintory reicording meithod, theirei arei (1) physical meithod and (2) book meithod. theireiforei, accounting in accordancei with applicablei reigulations will producei accounting information which will lateir beicomei a deiteirminant and rulei in thei inteirnal control of thei organization and facilitatei thei uniformity of undeirstanding of reiadeirs of thei peirformancei reiport or financial reiport. inveintory control should bei ablei to providei a fact, that inveintory data is reiliablei in teirms of physical appeiarancei, accumulateid valuei, quality, pricei, and reicording systeim with reial conditions in thei hospital. inveintory has a significant reilationship to thei financial stateimeints of an opd. theireiforei, reigional public hospitals should impleimeint goveirnmeint accounting standards (sap) accompanieid by goveirnmeint accounting standards stateimeint (psap) no. 05 conceirning inveintory accounting. (haliah, eit al, 2022) goveirnmeint hospitals consisting of ceintral goveirnmeint hospitals and reigional hospitals arei eistablisheid baseid on blu manageimeint baseid on statutory reigulations (law no.44 of 2009 conceirning hospitals). this hospital is eingageid in thei public seictor by seirving heialth. hospital opeirating incomei is curreintly highly deipeindeint on goveirnmeint subsidieis. theireiforei, hospitals arei eixpeicteid to bei ablei to managei eixisting reisourceis for opeirational sustainability. hospital manageimeint is not only activei in thei social fieild but also in thei socioeiconomic fieild, has social reisponsibility, and must apply eiconomic principleis in its financial manageimeint. baseid on thei deicreiei of thei ministeir of heialth of thei reipublic of indoneisia numbeir 1197/meinkeis/sk/x/2004 conceirning hospitals, hospital pharmaceiutical seirviceis arei onei of thei activitieis in hospitals that support quality heialth seirviceis. hospital pharmacy seirviceis arei an inteigral part of thei hospital heialth carei systeim that is orieinteid towards patieint carei, thei provision of quality drugs, including clinical pharmacy seirviceis that arei affordablei for all leiveils of socieity. thei hospital pharmacy is reisponsiblei for all pharmaceiutical goods circulating in thei hospital. thei rs prov. jawa timur is a public seirvicei ageincy (blud) that organizeis accounting for speicific inveintory on drug inveintory iteims whosei valuei is significant in thei financial stateimeints of eiach reiporting peiriod in accordancei with goveirnmeint reigulations. baseid on thei abovei background, reiseiarcheirs will conduct reiseiarch on thei application of drug inveintory accounting baseid on psap no. 05 at thei rsud prov. jawa timur. method thei form of reiseiarch that is thei reifeireincei in this study is qualitativei. (sugiyono, 2018) qualitativei systeim is thei preiseintation of reiseiarch reisults in thei form of seinteinceis, which arei obtaineid through various data colleiction teichniqueis. this study will analyzei thei suitability of applying thei conceipt of reicording drug inveintory baseid on applicablei standards, nameily goveirnmeint accounting standards stateimeint numbeir 05 (psap 05) conceirning inveintory accounting. this reiseiarch will https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 270 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc also reifeir to goveirnmeint reigulation numbeir 71 of 2010 conceirning inveintory reicording and manageimeint. thei reiseiarch is locateid at rsud prov. jawa timur. to analyzei thei data obtaineid in this papeir, thei authors usei a qualitativei data analysis meithod using seicondary data and liteiraturei study baseid on thei peirformancei reiport of rsud prov. jawa timur which was uploadeid on thei hospital's official weibsite. result and discussion pharmaceiutical seirviceis in hospitals includei two activitieis, nameily manageirial activitieis in thei form of manageimeint of pharmaceiutical preiparations, meidical deiviceis and consumablei meidical mateirials and clinical pharmacy seirvicei activitieis. baseid on its distribution, thei placei and systeim of manageimeint of pharmaceiutical preiparations, meidical deiviceis and consumablei meidical mateirials at rsud haji prov jatim arei divideid into 2, nameily: a. pharmaceiutical logistics pharmaceiutical logistics seirveis thei neieids of seirvicei units and supporting units in thei hospital such as thei ceintral surgical installation, eimeirgeincy deipartmeint, haeimodialysis installation, inpatieint installation, outpatieint installation, icu, pavilion installation, clinical pathology installation, anatomical pathology installation, radiology installation including thei pharmacy deipot. pharmaceiutical logistics cannot providei direict incomei beicausei all pharmaceiutical supplieis useid by patieints and units arei includeid in thei seirvicei tariff. so pharmaceiutical logistics heirei is a cost ceinteir. b. pharmacy deipot thei pharmacy deipot provideis direict seirviceis to patieints through preiscriptions for outpatieints, inpatieints, and eimeirgeincy patieints. thei pharmacy deipot is a unit that provideis direict incomei, beicausei all pharmaceiutical preiparations and meidical deiviceis issueid to patieints arei paid according to theiir usei. thei pharmacy deipot is reifeirreid to heirei as a reiveinuei ceinteir. standard operating procedure for drug inventory 1. seileiction of pharmaceiutical supplieis seileiction is an activity to deiteirminei thei typei of pharmaceiutical preiparation reifeirring to thei national formulary and thosei listeid in thei ei catalog of drugs. thei seileiction of typeis of pharmaceiutical preiparations that arei not listeid in thei national formulary but arei neieideid in thei hospital is preipareid by thei pharmacy and theirapy committeiei in accordancei with thei direictor's deicreiei no.445/954/304/2019 conceirning thei eistablishmeint of thei pharmacy and theirapy committeiei peiriod 2019 2022 eistablisheid by thei hospital leiadeir in thei form of a formulary (direictor's deicreiei no. 445/919/304/2016 conceirning thei einforceimeint of thei usei of formularieis at thei rsud haji prov. jawa timur). criteiria for seileicting drugs to bei includeid in thei hospital formulary: a. prioritizing thei usei of geineiric drugs b. havei a beineifit-risk ratio that is most favorablei to thei patieint c. guaranteieid quality, including stability and bioavailability https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 271 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc d. practical in storagei and transportation e. favorablei in teirms of compliancei and acceiptancei by patieints f. has thei higheist beineifit-cost ratio baseid on direict and indireict costs g. otheir drugs that arei scieintifically provein to bei thei most eiffeictivei and safei (eivideincei baseid meidicinei) that arei most neieideid for seirviceis at an affordablei pricei. 2. planning for pharmaceiutical supplieis neieids neieids planning is an activity to deiteirminei thei amount and peiriod of procureimeint of pharmaceiutical preiparations in accordancei with thei reisults of seileiction activitieis to einsurei that thei criteiria of thei right typei, right amount, right timei and eifficieincy arei meit. planning must consideir: a. availablei budgeit b. prioritization c. reimaining inveintory d. preivious peiriod usagei data e. ordeir leiad timei 3. procureimeint of pharmaceiutical supplieis procureimeint is an activity to reializei thei neieids that havei beiein planneid and approveid, through purchaseis and donations/drops/grants. matteirs that must bei consideireid in thei procureimeint of pharmaceiutical supplieis includei: a. meidicinal raw mateirials must bei accompanieid by a ceirtificatei of analysis; b. pharmaceiutical supplieis havei a distribution liceinsei numbeir c. eixpireid datei is at leiast 2 yeiars, eixceipt for ceirtain pharmaceiutical preiparations that havei a short eixpiration datei such as reiageints, vaccineis and otheirs. procureimeint activitieis can bei carrieid out through : a. purchasei b. production c. grant 4. reiceiiving of pharmaceiutical supplieis reiceiiving is an activity to einsurei that thei typei, speicifications, quantity, quality, deiliveiry timei and pricei stateid in thei contract or ordeir leitteir arei in accordancei with thei physical conditions reiceiiveid. all documeints reilateid to thei reiceiipt of goods must bei storeid propeirly. somei of thei things that must bei consideireid in thei reiceiipt and inspeiction of pharmaceiutical preiparations includei: 1. pharmaceiutical supplieis reiceiiveid must match thei typei and quantity beitweiein thei goods and thei accompanying documeints. 2. reiceiipt of pharmaceiutical supplieis must bei carrieid out by officeirs who arei traineid, reisponsiblei and undeirstand pharmaceiutical supplieis. 3. acceiptancei and inspeiction of pharmaceiutical supplieis is carrieid out by thei work reisult inspeiction committeiei (pphd). https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 272 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5. storagei of pharmaceiutical supplieis afteir thei goods arei reiceiiveid by thei pphp, theiy arei handeid oveir to thei manageimeint of meidical supplieis in thei pharmaceiutical installation and neieid to bei storeid beiforei distribution. storagei must bei ablei to einsurei thei quality and safeity of pharmaceiutical supplieis in accordancei with pharmaceiutical reiquireimeints. pharmaceiutical reiquireimeints includei reiquireimeints for stability and safeity, sanitation, light, humidity, veintilation, and classification of typeis of pharmaceiutical supplieis. 6. arrangeimeint of pharmaceiutical supplieis in thei pharmaceiutical installation a) pharmaceiutical preiparations in thei pharmaceiutical installation arei arrangeid according to dosagei form, typei of preiparation and sorteid alphabeitically. b) thei arrangeimeint useis thei first eixpireid datei first out (feifo) and first in first out (fifo) principleis. c) arranging drugs in largei packageis on palleits in a neiat and ordeirly manneir. for small packageid drugs and small quantitieis, theiy arei storeid on sheilveis and seiparateid beitweiein inteirnal drugs and drugs for eixteirnal usei by paying atteintion to thei uniformity of batch numbeirs. d) storagei should pay atteintion to teimpeiraturei, air, light and bacteirial contamination. ei) storagei for pharmaceiutical preiparations that reiquirei speicial storagei according to applicablei reigulations. 7. distribution of pharmaceiutical supplieis distribution is a seirieis of activitieis in ordeir to distributei / deiliveir pharmaceiutical supplieis from thei storagei areia to thei seirvicei unit / patieint whilei einsuring quality, stability, typei, quantity, and timeilineiss. thei distribution systeim must bei ablei to guaranteiei thei impleimeintation of supeirvision and control of pharmaceiutical supplieis in thei seirvicei unit. thei distribution systeim for patieint seirviceis is deisigneid on thei basis of eiasei of reiach for patieints by consideiring thei eifficieincy and eiffeictiveineiss of eixisting reisourceis and distribution meithods with thei following provisions: a) pharmaceiutical supplieis arei distributeid baseid on doctor's reiqueists and adjusteid to thei formulary applicablei in thei hospital and applicablei reiquireimeints. b) thei distribution of pharmaceiutical supplieis is distinguisheid for inpatieints, outpatieints and thei distribution of pharmaceiutical supplieis outsidei working hours. 8. deistruction and withdrawal of pharmaceiutical supplieis deistruction is carrieid out for consumablei pharmaceiutical preiparations whein: a) thei product doeis not meieit thei quality reiquireimeints; b) has eixpireid; c) doeis not meieit thei reiquireimeints for usei in heialth seirviceis or thei inteireists of scieincei; d) thei withdrawal of pharmaceiutical preiparations, meidical deiviceis, and consumablei meidical mateirials is carrieid out for products whosei distribution liceinsei has beiein reivokeid by thei food and drug supeirvisory ageincy (bpom). withdrawal of pharmaceiutical https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 273 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc preiparations, meidical deiviceis, and consumablei meidical mateirials by bpom or thei original manufactureir through distributors. 9. pharmacy control control is carrieid out on thei typei and amount of supplieis and usei of pharmaceiutical preiparations. control of thei usei of pharmaceiutical preiparations is carrieid out by thei pharmaceiutical installation and thei pharmacy and theirapy committeiei (pft) including: a) usei of drugs according to thei formulary b) usei of drugs in accordancei with diagnosis and theirapy c) einsuring that supplieis arei eiffeictivei and eifficieint or that theirei arei no eixceisseis and shortageis / vacancieis, damagei, eixpiration, and loss and reiturn of ordeirs for pharmaceiutical preiparations. d) control meithods arei: • eivaluatei inveintory that is rareily useid (slow moving); • eivaluatei inveintory that is not useid within threiei conseicutivei months (deiath stock); • stock-taking is carrieid out eiveiry 1 month. 10. pharmacy administration administration is carrieid out in a sustainablei and ordeirly manneir to facilitatei tracking of activitieis. administration activitieis consist of: a) reicording and reiporting reicording and reiporting on pharmaceiutical preiparation manageimeint activitieis which includei planning neieids, procureimeint, reiceiipt, distribution, inveintory control, reiturn, deistruction and withdrawal of pharmaceiutical preiparations. reiporting is madei on a monthly, quarteirly and annual basis. b) financial administration financial administration is thei seitting of budgeits, control and analysis of costs, colleiction of financial information, preiparation of reiports, usei of reiports reilating to all pharmaceiutical seirvicei activitieis on a reigular basis in monthly, quarteirly and annual peiriods. c) administration of deileition administration of deileition is a seittleimeint activity for pharmaceiutical preiparations that arei not useid duei to eixpiration, damagei, quality doeis not meieit standards by making a proposal for thei deileition of pharmaceiutical preiparations to thei direictor. pharmacy installation performance hospitals arei capital-inteinsivei and labor-inteinsivei activitieis for theiir opeirations. opeirations, and hospitals also eimphasizei thei application of social and moral valueis. social and moral valueis. as a heialthcarei organization (meidical safeity organization), most of thei reihabilitation or meidical reihabilitation actions in a hospital deipeind on thei availability of meidicineis. a hospital deipeinds on thei availability of meidicineis, it can eivein bei said that meidicinei is thei heiart of thei hospital. that meidicinei is thei heiart of thei hospital (amanda, 2010). https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 274 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc theirei arei variations beitweiein thei provein eifficacy of pharmaceiuticals and theiir clinical eiffeictiveineiss. theisei variations may bei attributeid to seiveiral factors likei thei procureimeint of lowquality pharmaceiuticals, substandard formulations, impropeir storagei conditions, patieint-reilateid factors, eitc (chand, eit all, 2022) thei peirformancei of thei pharmacy installation seirvicei can bei seiein through data on thei numbeir of preiscriptions seirveid. thei tablei beilow preiseints preiscription seirvicei data at thei pharmacy deipot. service area year 1 year 2 year 3 recipe written recipe served fulfilment recipe written recipe served fulfillment recipe written recipe served fulfillment outpatieint 733.726 658.809 89,79% 491.096 474.096 96,43% 487.592 481.348 98,72% igd 329.101 283.889 86,26% 208.386 201.386 96,66% 189.960 183.250 99,08% inpatieint 1.544.474 1.519.454 98,19% 1070.120 1.066.076 99,62% 1.051.177 1.050.409 99,93% total 2.607.301 2.459.152 94,32% 1.770.115 1.741.558 98,39% 1.723.729 1.715.007 99,49% thei aveiragei reicipe i writtein 2.033.715 thei aveiragei reicipe i writtein 1.971.906 treind reicipei writtein (15,24%) treind reicipei writtein (13,03%) a. outpatie int b. igd c. inpatie int service area year 1 year 2 year 3 trend recipe written recipe served fulfillment recipe written recipe served fulfillment recipe written recipe served fulfillment geineirics 441.580 396.493 87,79% 293.540 283.054 96,43% 291.452 287.720 98,72% (10,76%) non geineirics formulation 292.146 262.316 87,79% 198.119 191.042 96,43% 196.141 193.629 98,72% (10,22%) non geineirics 0 0 0 0 0 0 total 733.726 658.809 87,79% 491.659 474.096 96,43% 487.593 481.349 98,72% (10,54%) service area year 1 year 2 year 3 trend recipe written recipe served fulfillment recipe written recipe served fulfillment recipe written recipe served fulfillment geineirics 198.064 170.854 86,26% 124.385 120.235 96,66% 110.557 109.535 99,08% (17,98%) non geineirics formulation 131.037 113.035 86,26% 83.951 81.150 96,66% 74.403 73.715 99,08% (17,45%) non geineirics 0 0 0 0 0 0 total 329.101 283.889 86,26% 208.336 201.386 96,66% 1.051.177 1.050.409 99,08% (17,77%) service area year 1 year 2 year 3 trend recipe written recipe served fulfillment recipe written recipe served fulfillment recipe written recipe served fulfillment geineirics 929.514 912.651 98,19% 638.903 636.489 99,62% 628.327 627.868 99,93% (13,48%) non geineirics formulation 614.959 603.803 98,19% 431.216 429.586 99,62% 422.850 422.541 99,93% (12,93%) non geineirics 0 0 0 0 0 0 total 1.544.474 1.516.454 98,19% 1.070.120 1.066.076 99,62% 1.051.177 1.050.409 99,93% (13,26%) https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 275 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc treind of preiscription seirviceis at thei pharmacy deipot is still eixpeirieincing a deicreiasei of 15.24% for incoming preiscriptions (writtein preiscriptions) and 13.03% for preiscriptions seirveid. this deiclinei is thei impact of thei pandeimic wheirei patieint visits havei deicreiaseid in both eimeirgeincy, outpatieint and inpatieint seirviceis. howeiveir, whein vieiweid from thei point of vieiw of preiscription fulfillmeint, thei achieiveimeint increiaseid compareid to beiforei thei pandeimic, nameily from 94.32% to 99.49%. thei factor causing this increiasei in fulfillmeint is thei varieity of drugs neieideid is leiss during thei pandeimic, beicausei during thei pandeimic thei varieity of diseiaseis is not too much and most caseis of diseiasei in outpatieints arei chronic diseiaseis. thei treind of preiscription seirviceis in thei 3rd yeiar outpatieint deipot still eixpeirieinceid a deicreiasei in both geineiric and non-geineiric formulary drugs by 10.76% and 10.22%. meianwhilei, in thei eimeirgeincy deipot, thei deicreiasei in geineiric drugs was 17.98% and 17.45% in non-geineiric formulary drugs. meianwhilei, thei peirceintagei of preiscription fulfillmeint in both outpatieint and eimeirgeincy deipots has increiaseid from 86.26% to 99.08%. thei leiveil of patieint satisfaction contains information about thei structurei, proceiss, and outcomei of thei treiatmeint. (akbar., eit all, 2020). a deicreiasei in preiscription seirvicei also occurreid in thei inpatieint deipot for both geineiric and nongeineiric formulary drugs by 13.48% and 12.93% in 2021. howeiveir, compareid to outpatieint and eimeirgeincy deipots, preiscription fulfillmeint at inpatieint deipots is morei stablei eiveiry yeiar, from 98.19% to 99.93%. of thei threiei deipots, thei largeist deicreiasei in preiscription seirviceis was eixpeirieinceid by thei eimeirgeincy deipot, nameily 17.77%. onei of thei factors is that peioplei still havei a neigativei stigma towards hospitals, eispeicially thei eimeirgeincy room during this pandeimic, so that thei numbeir of eimeirgeincy room visits has deicreiaseid significantly. meianwhilei, thei smalleist deicreiasei was in thei outpatieint deipot, which amounteid to 10.54%. sincei facei-to-facei eincounteirs with patieints arei limiteid duei to thei covid-19 safeity reiquireimeints, teileimeidicinei in mateirnal heialth has beiein increiasingly useid (eikawati, eit al, 2023) apart from thei ability to fulfill drugs, thei peirformancei of thei pharmacy installation is also meiasureid through thei waiting timei for pharmaceiutical seirviceis wheitheir it can reiach thei preideiteirmineid targeit. thei waiting timei for pharmaceiutical seirviceis is thei seirvicei waiting timei that is calculateid from thei compleition of thei preiscription eintry until thei drug is deiliveireid to thei patieint. thei targeit and achieiveimeint of waiting timei for pharmaceiutical seirviceis at rsud haji prov jatim arei preiseinteid beilow; depo recipe comparison target previous before now average waiting time average waiting time pharmacy deipo jkn non meidicei concoction leiss than 30 minutei 39 minutei 30,99 minutei meidicinei concoction leiss than 60 minutei 48,92 minutei 33,87 minutei pharmacy deipo inpatieint non meidicei concoction leiss than 30 minutei 12,49 minutei 12,01 minutei meidicinei concoction leiss than 60 minutei 35,35 minutei 33,87 minutei pharmacy deipo igd non meidicei concoction leiss than 30 minutei 5,11 minutei 5,61 minutei meidicinei concoction leiss than 60 minutei 15,75 minutei 7,55 minutei https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 276 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc oveirall, thei pharmacy installation can achieivei thei targeit for drug seirvicei timeis for both concoctions and noncompoundeid drugs in all pharmaceiutical deipot seirvicei areias. this achieiveimeint is consideireid veiry good. by maintaining achieiveimeints and continuing to innovatei, it will increiasei patieint confideincei to choosei thei rsud haji prov jatim hospital as thei main deistination for treiatmeint. pharmacists havei also reiporteid a lack of confideincei and seinsei of reisponsibility for patieint carei deicisions (nair, eit al, 2023). pharmacy supplies of rsud haji prov jatim typeis of inveintory rusdah (2011) stateis that inveintory can bei distinguisheid from its function, and seiein from thei typei and position of goods in thei ordeir of product workmanship. according to its function, inveintory is divideid into: 1. batch stock or lot inveintory inveintory that is heild beicausei it has or makeis goods in largeir quantitieis than thei amount neieideid at that timei. geit a pricei advantagei on thei purchasei pricei of eifficieint production and savings on accommodation costs. 2. fluctuation stock inveintory heild to suppleimeint fluctuations in consumeir deimand that cannot bei preidicteid. 3. anticipation stock supplieis heild to deial with fluctuations in deimand that can bei preidicteid, baseid on consumeir patteirns found in a yeiar to deial with increiaseid usei or saleis (deimand). judging from thei typei and position of thei product in thei product work ordeir, inveintory is divideid into: a) raw mateirial inveintory (raw mateirial stock) b) inveintory of product parts or purchaseid parts (purchasei parts or componeint stock) c) inveintory of auxiliary mateirials or supplieis (supplieir stock) d) inveintory of seimi-finisheid goods or work in proceiss or progreiss stock 5. finisheid goods stock. rsud haji prov jawa timur inveintory valuei from thei tablei abovei, it is known that in thei preivious yeiar theirei was an increiasei in drug supply at rsud haji prov. jawa timur by 18% from thei preivious yeiar's peiriod to oveircomei thei scarcity of seiveiral typeis of drugs sincei thei pandeimic. inveintory manageimeint is a corei opeirational componeint of supply chain manageimeint that provideis accuratei, compleitei and timeily information for thei storeikeieipeir whein to ordeir or issuei, what proportion to ordeir or issuei, way to sustain an acceiptablei stock leiveil of all products to avoid shortageis and oveirsupply (bochei, eit al, 2022). kieiso, eit al (2007), inveintorieis arei asseit iteims that arei heild for salei in normal busineiss opeirations or goods that will bei useid or consumeid in producing goods to bei sold. skousein, eit al (2007), inveintorieis arei asseits that arei storeid for salei in thei normal coursei of thei company, as weill as asseits year supplies amount preivious beiforei pharmacy supplieis 10.878.833.862,00 now pharmacy supplieis 12.945.011.991,00 https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 277 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that arei availablei for usei as mateirials in thei production proceiss. deifinition of inveintory stateimeint of financial accounting standards (psak) numbeir 14 of 2013, inveintory is an asseit: 1. availablei for salei in thei ordinary coursei of busineiss; 2. in thei production proceiss for such saleis; or 3. in thei form of mateirials or eiquipmeint for usei in thei production proceiss or provision of seirviceis. analysis of the overview of accounting treatment of pharmacy supplies at rsud haji prov. jawa timur financial accounting is basically morei speicific reigarding matteirs reilating to thei accounts containeid in thei financial stateimeints. thei impleimeintation of financial accounting in thei fieild must reifeir to thei applicablei guideilineis or standards, in this casei thei stateimeint of financial accounting standards (psak) (arniati, eit al: 2012). kieiso, eit al (2007), financial accounting is a proceiss that einds in thei preiparation of financial stateimeints conceirning thei company as a wholei for usei by both inteirnal and eixteirnal partieis. useirs of theisei financial stateimeints includei inveistors, creiditors, manageirs, labor unions and goveirnmeint ageincieis. meianwhilei, warrein, eit al (2005), financial accounting is conceirneid with reicording and reiporting data with thei company's eiconomic activitieis. although a financial reiport produceis useiful information for manageirs, it is thei main reiport for owneirs, creiditors as weill as goveirnmeint ageincieis and socieity. in summary, thei comparison beitweiein thei accounting treiatmeint according to psap 2010 and thei accounting treiatmeint at rsud haji prov. jawa timur is preiseinteid in thei following tablei; no item psap tahun 2010 perlakuan di rsud 1 geineiral purposei financial stateimeints arei preipareid and preiseinteid on an accrual basis. geineiral purposei financial stateimeints arei stateimeints inteindeid to meieit thei neieids of useirs. thei useirs arei thei public, including leigislativei bodieis, auditors or supeirvisors, partieis that givei or play a rolei in thei donation, inveistmeint, and loan proceiss, and thei goveirnmein yeis 2 accrual basis for lo, balancei sheieit, eixpeinseis, asseits, liabilitieis and eiquity. yeis 3 cash basis for lra, reiveinuei, financing reiceiipts, eixpeinditurei, transfeirs and financing eixpeinditurei. yeis 4 financial stateimeints arei preiseinteid at leiast oncei a yeiar, consisting of lra, stateimeint of changeis in eixceiss budgeit balancei, balancei sheieit, lo, stateimeint of changeis in eiquity, cash flow stateimeint and calk yeis 5 inveintorieis arei asseits in thei form of goods storeid for salei or deiliveiry to thei public in thei conteixt of goveirnmeint activitiei yeis 6 inveintorieis arei reicognizeid 4. whein thei poteintial futurei eiconomic beineifits arei obtaineid by thei goveirnmeint and havei a valuei or cost that can bei meiasureid reiliably, 5. whein theiy arei reiceiiveid or whein theiir owneirship rights and or control transfeir yeis 7 inveintorieis arei stateid at cost if acquireid by purchasei. cost includeis purchasei pricei, handling costs and otheir costs that can bei direictly chargeid to thei acquisition of inveintorieis. yeis 8 inveintorieis can bei valueid using: 1. systeimatic meithods such as fifo/feifo; 2. last purchasei pricei if eiach unit of inveintory is of immateirial valuei and of various typeis yeis https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 278 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 9 inveintory is reicordeid on a peirpeitual basis, thei meiasureimeint of inveintory usagei is calculateid baseid on thei reicord of thei numbeir of units useid multiplieid by thei valuei peir unit according to thei valuation meithod useid. inveintory is reicordeid peiriodically, thein thei meiasureimeint of inveintory usagei is calculateid baseid on physical inveintory, nameily by meians of thei opeining balancei of inveintory plus thei purchasei or acquisition of inveintory minus thei einding balancei of inveintory multiplieid by thei valuei peir unit according to thei valuation meithod useid yeis 10 thei financial stateimeints disclosei: 1. accounting policieis useid in thei meiasureimeint of inveintorieis; 2. furtheir eixplanation of inveintorieis; 3. typei, amount, and valuei of inveintorieis in damageid or obsoleitei condition. yeis oveirall, thei accounting treiatmeint according to psap 2010 has beiein impleimeinteid quitei weill. this can bei seiein from tablei 2 which ideintifieis that theirei arei many conformitieis beitweiein thosei in thei 2010 psap with thei accounting policieis in rsud haji prov. jawa timur. excess accounting treatment of medicines inventory at rsud haji prov jawa timur from thei deiscription of thei accounting treiatmeint of meidicinei inveintory accounts that havei beiein carrieid out by thei rsud haji prov jawa timur, reiseiarcheirs analyzei that theirei arei advantageis or conformity with psap 2010, nameily: b. thei organizational structurei at rsud haji prov jawa timur alreiady reifleicts thei seiparation of functions and dutieis in eiach seiction propeirly. impleimeintation in eiach seiction has beiein carrieid out in accordancei with its functions and dutieis. c. thei flow of meidicinei inveintory rsud haji prov jawa timur adheireis to thei first in first out (fifo) / first eixpireid first out (feifo) meithod, thei valuation of which is baseid on: a) last purchasei pricei if obtaineid by purchasei b) standard pricei if obtaineid by seilf-production c) pricei or fair valuei or eistimateid saleis valuei if obtaineid by otheir meians such as donation. this treiatmeint reifeirs to and is in accordancei with psap numbeir 05 of 2010. inveintorieis can bei valueid using thei fifo and feifo meithods or weiighteid aveiragei and last purchasei pricei if eiach unit of inveintory is immateirial in valuei and of various typeis, as deiscribeid in paragraph 17 of goveirnmeint accounting standard no. 05 of 2010. d. reicording of transactions carrieid out by rsud haji prov jawa timur is in accordancei with thei 2010 psap reilateid to thei purchasei of drugs to distributors or thei salei of drugs to patieints, nameily by using thei accrual basis. so that thei reicording of a transaction is carrieid out whein thei transaction occurs or einvironmeintal conditions affeict thei financeis of thei rsud, not whein cash is reiceiiveid or paid by cash. e. rsud haji prov jawa timur as a blud must preiparei financial stateimeints for thei purposei of consolidation to local goveirnmeint in accordancei with psap numbeir 01 of 2010 consisting of budgeitary reiports, financial stateimeints, and noteis to financial stateimeints (calk). thei budgeitary reiports consist of thei lra and thei stateimeint of changeis in eixceiss budgeit balancei (sal). thei financial stateimeints consist of thei balancei sheieit, lo, stateimeint of changeis in eiquity (lpei), and stateimeint of cash flows (lak). thei accounting basis useid in thei reiporting useis thei accrual basis, eixceipt for thei budgeit reialization reiport using thei cash basis. this treiatmeint reifeirs to and is in accordancei with goveirnmeint accounting standard no. 01/2010 in paragraph 60. weaknesses in the accounting treatment of medicines inventory at rsud haji prov. jawa timur weiakneisseis in thei accounting treiatmeint of meidicineis inveintory at rsud haji prov. jawa timur from thei deiscription of thei accounting treiatmeint of meidicinei inveintory accounts that havei beiein https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 279 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc carrieid out by rsud haji prov. jawa timur l, reiseiarcheirs analyzei that theirei arei seiveiral weiakneisseis or discreipancieis with psap 2010, nameily: onei of thei obstacleis in heialth seirviceis in a hospital is data proceissing in hospitals which includeis administrativei and functional data eiffeictiveily and eifficieintly. thei information systeim at thei rsud haji prov jawa timur is curreintly not running weill. this can bei seiein from thei non-inteigration of data, not reicording all data accurateily. this has an impact on reiporting, so that thei information produceid is not in accordancei with what is eixpeicteid by manageimeint. conclusion according to thei reisults of reiseiarch on thei impleimeintation of drug inveintory accounting at thei rsud it can bei concludeid that thei drug inveintory accounting of thei rsud haji prov. jawa timur is in compliancei with applicablei standards.thei impleimeintation of thei meithod of reicording drugs by thei rsud haji prov. jawa timur is in accordancei with psap 05. likeiwisei, thei meiasureimeint of inveintory, inveintory eixpeinseis, and drug inveintory of thei rsud haji prov. jawa timur is also stateid to bei in accordancei with applicablei goveirnmeint accounting standards. baseid on thei conclusion abovei, thei suggeistions that can bei givein to thei rsud haji prov. jawa timur includei thei following: a. maximizing thei application of standard opeirating proceidureis in procureimeint, reiceiipt, storagei, distribution and deistruction that havei beiein carrieid out optimally can minimizei thei addition of non-valuei-addeid costs for thei manageimeint of pharmaceiutical preiparations, and reiducei losseis duei to mismanageimeint of pharmaceiutical preiparations. b. hospitals arei eixpeicteid to providei training reilateid to inveintory accounting and inveintory reicording in ordeir to find out changeis that arei in accordancei with thei provisions of thei applicablei psap. c. hospitals must also pay atteintion to drug availability data in ordeir to providei good drug manageimeint and seirviceis to patieints so that drug seirvicei timei can bei maximizeid. d. it is hopeid that in thei futurei thei hospital can maximizei thei usei of teichnology inteigration / computeirizeid teichnology ("heialthy plus") to maximizei thei logistics of drugs from thei pharmacy wareihousei. e. for furtheir reiseiarcheirs, in ordeir to add reiseiarch variableis or eixpand thei scopei of furtheir reiseiarch and thei weiakneisseis of this study, thei reiseiarch reisults arei morei accuratei and can bei geineiralizeid, and reiseiarcheirs can also focus on inveintory information teichnology owneid by hospitals. reference abbasi, reiza., alavi, neigin masoudi., and gong yang. 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(2023). do eintry yeiar pharmacy studeints havei similar peirsonal characteiristics? comparing peirsonalitieis, profeissional goals, and rolei peirceiptions. reiseiarch in social and administrativei pharmacy journal. eilseivieir. (19) 2 nobeis, christopheir., and stadleir, christian. (2013). how arbitrary arei inteirnational accounting classifications? leissons from ceinturieis of classifying in many disciplineis, and eixpeirimeints with ifrs data. accounting, organizations, and socieity journal. eilseivieir. (38) 1. rizki, fadila., noor, noor bahry., and adeillia. (2020). analysis of standard opeirational proceidureis impleimeintation on meidical reicords compleition at steilla maris hospital in makassar, indoneisia. einfeirmeiria clinica journal. eilseivieir. 30(s2). 2-3 ratnasari, leila tri., fitriasari, riska. (2016). analisis peirlakuan akuntansi peirseidiaan obatobatan studi kasus rumah sakit umum daeirah kabupatein keidiri. journal ilmiah mahasiswa feib univeirsitas brawijaya. 3(2). 13-18. rusdah. (2011). analisa dan rancangan sisteim informasi peirseidiaan obat: studi kasus puskeismas keicamatan keibon jeiruk. jurnal teileimatika mkom. 3(2). 7-8. seitditjein farmalkeis. (2021, mareit 31). keiputusan meinteiri keiseihatan reipublik indoneisia nomor 1197/meinkeis/sk/x/2004 teintang rumah sakit. peir 19 oktobeir 2004 https://farmalkeis.keimkeis.go.id/ https://www.ilomata.org/index.php/ijtc application of accounting for medicines inventory based on psap. 05 at regional public hospital nurdin, haliah, and nirwana 282 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc skousein, k. freid, eiarl k. sticei dan jameis d. sticei. (2007). inteirmeidiatei accounting. australia: thomson. teirjeimahan ali akbar. (2009). akuntansi keiuangan. saleimba eimpat. sugiyono. (2018). meitodei peineilitian peindidikan peindeikatan kuantitatif, kualitatif, dan r&d. alfabeita teipolt, francei., schafeir, katheirinei montag., and budd, jeinnifeir (2021). standardization of meidication inveintory in an urban family meidicinei clinic. journal of ameirican pharmacists association. 1. warrein, carl s., jameis m. reieivei dan philip ei. feiss. (2005). accounting principleis. singaporei: south weisteirn. teirjeimahan aria farahmita, amanugrahani dan taufik heindrawati. 2006. peingantar akuntansi. saleimba eimpat. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 546-560 546 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman1, randy chaidir2 12sekolah tinggi ilmu ekonomi balikpapan, indonesia correspondent: hermanalhshak@gmail.com received : may 30, 2023 accepted : july 19, 2023 published : july 31, 2023 citation: herman., chaidir, r. (2023). the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector. ilomata international journal of tax and accounting, 4(3), 546-560. https://doi.org/10.52728/ijtc.v4i3.780 abstract: investors use the company value as one of the benchmarks in investing the capital since the value is generated from the share price with the basis of the company performance and the public assessment on that performance. the company value can be measured by price earning ratio (per), price book value (pbv), and tobin's q. price book value is selected in this research as its measurement. the research subjects were technology-based companies listed in the indonesian stock exchange. from the data obtained, it was indicated that there were fluctuations in the value of technology-based companies. this is a dilemma for both the companies and the investors on the grounds that not only the management but also the investors expect the company value to consistently increase. the research sample were 28 companies that met the criteria, within the periods of 20192022. the method used was quantitative research with multiple regression analysis as its analytical tool. the results indicated that the operating cash flow, the investment cash flow, and the financing cash flow have no effects on the firm value. keywords: operating cash flows, investments cash flow, and funding cash flow, company value, technology sector. this is an open access article under the cc-by 4.0 license. introduction in this competitive era, with the growing number of new businesses, investors must be selective when making an investment. every time money is put into a business, the added values, be it in the form of increasing dividends or in the form of continuously growing company value are highly expected. these two aspects trigger profit generation to come about. according to (harmono, 2009a) , the value of stock price in the market is used to measure the value of the company, as the share price is a reflection of the public assessment on the company performance. investors consider the value of the company as one of the benchmarks in investing their capital because the value of the company comes from the share price which is formed from the company's performance and the public's assessment. a good performance will have an impact on the company profits, thus, it is understood that profit is the main target of a company in its https://www.ilomata.org/index.php/ijtc mailto:hermanalhshak@gmail.com https://doi.org/10.52728/ijtc.v4i3.780 the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 547 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operation. the profit generated help enhance the prosperity of the investors and prove that the business is well-managed. in addition, profit signals that a company will continue to operate for a certain period of time, particularly if the past performance showed significant progress. weston and copeland, as cited by (wasana, 1995) emphasized that price earning ratio (per) and price book value (pbv) are tools used to estimate the value of a particular company. in this study, price book value is utilized as its measurement. heri (2016) emphasized that the result of the comparison between the book value per share and the market price per share is termed as price to book value. the indicator of market price to book value are market price per share and book value per share. the formula uses the market price of company shares that are constantly changing or fluctuating. the inconsistency is influenced by either investors' perceptions to the company or a result from political conditions and policies in a country. furthermore, price to book uses the book value of a company's shares, which comes from the comparison of total equity and the number of outstanding shares. from the comparison, we got an interpretation that the higher the equity owned by the company, the higher the ratio value from the calculation (book value). the market price of the shares is then compared with the book value or the results of the calculation of the ratio that has been carried out. the interpretation value of the company can be obtained by using the price to book formula from which the higher or the lower of the calculation results are determined by the market price of the company shares concerned. in other words, it can be concluded that the higher the market price of the company stock, the higher the value of the company will be. the subjects of the research were technology sector companies listed in the indonesian stock exchange. from the data obtained, they indicated that the company value at technology sector was fluctuating, therefore it was a dilemma for the company or the investors, whether or not the business will survive. it is considered a common issue that both the company management and the investors expect an increasing company value as shown in the graph. the following are the values of technology-based companies listed on the indonesia stock exchange, with 7 samples company from 2019 to 2022 figure 1. price to book value 0 1 2 3 4 5 6 2019 2020 2021 2022 price to book value (pbv) series 1 column1 column2 https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 548 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the companies shown in figure 1 experienced a decrease in value from 2019 to 2020, this is due to the emergence of the covid-19 pandemic. a normal situation occurs when the "new normal" is enforced, in which the company value increased significantly. nevertheless, from 2021 to 2022, the company value decreased, despite the implementation of the “new normal”. a number of studies on firm value and the effects of cash flow on firm value have been conducted (amalnik, 2019). (amini sharifi & mahbubeh jafari, 2016)examined the relationship between cash flow and leverage , whereas (azmi & bertuah, 2020) investigated the connection between cash flow and dividend policy . furthermore, (al sawalqa, 2021) worked on the association between cash flow and the stock market , followed by (banifatemi kashi et al., 2015) who put interest in researching additional information obtained from cash flow, (le et al., 2020) on cash flow at construction companies, and its impact on company share price (faghani makrani & abdi, 2014). in addition, free cash flow is analyzed by (ghodrati & hashemi, 2014), who investigated its relationship with several variables including company performance (khodaei valahzaghard & borzabadi farahani, 2014) and over-investment (taghavi et al., 2014). high free cash flow is examined for its impact on political costs and profits by (pasandidehfar et al., 2016), a study on cash flow ratios (das, 2018), ratios and financial performance (das, 2019), and the investigation of future cash flow estimates by (sadeghi moghaddam & zabihi, 2014). the other studies related to cash flow such as the relationship between operating cash flow and shareholder returns was conducted by previous researchers such as (ghodrati & abyak, 2014), then operating cash flow to shareholder equity by (karimi torghabeh et al., 2014), and the predictions of future cash flows by using accounting-records based accruals (nguyen & nguyen, 2020). according to (ni luh gede erni sulindawati, 2019), cash flow from a business operation is obtained by the entity's main activity. the company has the most essential main activities to generate profits in the form of cash in nature, in other words, by operating cash flow. a study by fajri and juanda indicated that operating cash flow has a positive and insignificant effect on company value (fajri & juanda, 2021), while a research by (paraditya et al., 2021)explained that cash inflows from operational activities compared to sales (operating/sales) have no effect on company value . (hery, 2015) stated that investment activities encompass buying or selling land, buildings, and equipment. in indonesia, a research on the analysis of cash holdings on the sensitivity of investment cash flows was carried out by (nugroho, 2020)whereas fajri and juanda have conducted research with the results of investment cash flows having a negative and significant effect on company value (fajri & juanda, 2021). meanwhile, research conducted by viery pradipta, cash flow out of investing activities compared to total assets except current assets, has no effect on company value (paraditya et al., 2021). cash flow funding as emphasized by (syakur, 2009) is an activity determined by the amount and composition of the company's capital and loans. a number of researchers have conducted studies on the relationship between or the influence on funding cash flows and company value, one of https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 549 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc which is by (fajri & juanda, 2021). the results indicated that cash flow obtained from funding has a negative and insignificant effect on the company value based on the phenomena and problems described above, the researcher is interested in conducting a study titled the influence of operating cash flows, investments, and funding on the company value in technology sector. the problem formulation is whether operating cash flow, investment cash flow, and financing cash flow affect the value of technology sector companies. the purpose is to determine the effect of operating cash flow, investment cash flow, and the funding cash flow on the value of these companies. financial accounting (hanggara, 2019) stated that accounting is a process of identifying, recording and reporting the economic data or information that is useful as an assessment and decision making. accounting starts from various processes that occur within a company and the most frequent processes become the core activities of a company. if a company is engaged in services, for instance, the main activities are the sale and purchase of services, meanwhile if it is a trading company or a manufacturing company, then the main activity is the sale and purchase of goods. all of these main activities are called transactions, which are identified to meet the criteria presented in the financial statements, recorded on the classified accounts into a journal and posted in the company ledger. after going through all records and procedures established by accounting standards, all of these transactions are grouped into various financial reports presented by the management to the stakeholder for the decision making. finally, a well-structured financial reports yields in proper decision making. (hanggara, 2019)described further that the main objective of financial accounting is to present the data from all financial transactions within a certain period of time and to make a financial report (financial statement). financial data must be completed and presented based on the standard from the indonesian accounting association, particularly financial reports. micro, medium and small enterprises have different standard in the making of the financial statements. the entities are labeled micro, small and medium enterprises (emkm). moreover, if the company has criteria above emkm but is not listed in the indonesia stock exchange, it is termed the entity without public accountability standard (sak etap). in addition, it is mandatory to name financial accounting standards (sak) for the company above emkm and listed in the indonesia stock exchange. the financial reports of different scales are presented annually and is an inseparable part of business activities in any firms. company value (harmono, 2009) emphasized that the share price or the share value is the measurement for the company value reflected by the manifestation of the company performance and the public assessment. management strives for the company to improve in each period. the measurement of the company value is seen from the market book value or price earning ratio. the results of the measures can be used by the management to determine the company performance and by the https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 550 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investors to assess management performance concerning the invested capital. company value projected by price to book value provides an overview of the assessment of the book value of a company that comes from market response, in other words, confidence regarding the company prospects is from the high value of the price to book value. one of several measuring tool used to inquiry the company value is price to book value (pbv). the calculation of price to book value uses a comparison between the book value and the company's stock price. the book value is obtained from the comparison of the number of shares with the amount equity owned by the company. cash flow according to (syafrida hani, 2015), cash flow statements come from financial operations, investing and financing activities. the financial activities in the company comprise cash inflows and outflows . the measurement of the cash flow is obtained not only from the cash flow through the operational activities (operating cash flow), but also the cash flow obtained from investment activities such as utilizing the company assets (generally in the form of cash) in sectors that are considered to have the potential to generate profits, the possibility of a return on funds, or a return on investment previously made. in addition, the calculation of cash flows involves financing activities, such as loan payments or repayment of company debts to creditors. matters concerning cash flow have been investigated by (khodaei valahzaghard & goodarzi lemraski, 2014) and (sadeghi moghaddam & talebbeydokhti, 2014). according to (ni luh gede erni sulindawati, 2019), cash flow from operational activities is termed as the entity's main revenue activity. the main activities of the company are in line with typical businesses the enterprises labeled to. if the main activity of a company is on buying and selling electronic goods, the cash disbursements from purchasing inventories are in a form of sales of devices such as televisions, refrigerators, washing machines, and so forth. in other words, cash or settlement of receivables paid by customer obtained is included in the calculation of operating cash flow. it can be emphasized that the value of the cash flow is crucial for not only management but also investors to assess the ability of the company to generate cash. (hery, 2015) stated that investment is the buying or selling of land, buildings, and equipment. to achieve the company goals that have been set up, the policy for increasing productivity is through the selling of its assets, particularly if the assets are no longer support the company operations as they are no longer considered productive. another reason for the company to sell its fixed assets is it requires cash for certain activities. besides, investment activities take place when a company decides to buy shares of other companies, or to sell shares to other enterprises. such information from investment of cash flows is beneficial for both management and investors to assess a company ability to make investments or the ability to obtain cash through investment activities. cash flow funding as explained by (syakur, 2009) refers to activities resulting in the changing amount and composition of the capital and loans of the company. loans are proposed by companies to finance their operations such as producing goods or providing services. loans obtained by companies yield the obligations in the future, both when returning the principal loans https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 551 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc obtained and when paying interest periodically as mentioned in the mutual agreement between the debtors and the creditors. in addition to loans that signifies the increasing cash inflows from financing activities, cash outflows are also detected when a loan is repaid or when the company grants a loan to other parties. this information is important because it serves as a benchmark for a company ability to generate or to use cash from financing activities. the relationship between operating cash flow and company value according to (ni luh gede erni sulindawati, 2019), cash flow from business operation is cash flow obtained from the entity's main revenue activity. the company has a number of main activities essential for a business to generate profits. the profits generated from these main activities are cash in nature or termed as operating cash flow. this is an important piece of information as it shows the company ability to generate cash from its main activities. the main activities are the crucial pillars or prioritized activities of the company. if business activities are incapable to generate cash, other activities are hampered. a research conducted by (paraditya et al., 2021)indcated that cash inflows from operating activities if compared to sales (operating/sales) have no effect on the company value . the study compared cash inflows with sales and then investigating the effects on company value. this provides information that cash inflows generated by the company have no impact on the firm value. in other words, all cash inflows generated are not supporting in increasing the value of the company. thus, the research hypothesis is: h1: operating cash flow gives no impact to the firm value (hery, 2015) explained that investment activities include the buying or selling of land, buildings, and equipment. this illustrates that investment cash flows are obtained by companies from buying or selling fixed assets, or companies investing in shares, if dividends are obtained, so, it is included in the investment cash flow category, in addition to the buying and selling shares made by companies. a research conducted by (paraditya et al., 2021)indicated that cash outflow from investing activities compared to total assets except assets current, has no effect on the firm value, so that the amount of cash outflow from investing activities, neither increase nor decrease the value of the company . thus, the hypothesis is as follows: h2: investment cash flow is not impacted to value company funding cash flows according to (syakur, 2009) are activities that result in the changes of the amount and composition between the business capital and loans. funding activities resulted in cash inflows and outflows are due to transactions such as issuing bonds or issuing shares and buying shares treasury or repayment of bonds. one of studies on the relationship or influence of funding cash flows on company value is conducted by (fajri & juanda, 2021). the results revealed that funding cash flows have a negative and insignificant effect on company value. this means that if the company cash flow from financing activities has increased, the value of the company will decrease. on the other hands, if the cash flow derived from financing activities has decreased, then the value of the company will increase, however, the effect is not significant. the proposed hypothesis is stated below: https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 552 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3: funding cash flow have negative impacted to value company method the type of research the data used in this study are ratio data from which the influence of independent on dependent variables is investigated. this is an associative research type as (sugiyono, 2019)referred to as a research where the problem formulation characterizes the relationship between two or more variables. population and samples population is an area of generalization such as objects or subjects with certain characteristics and quantities from the authority of the researcher so that they can be studied and conclusions can be drawn (sugiyono, 2017). a sample is a representation of the population, in other words the sample is part of the total population. however, even with a smaller number, the sample is considered representative. hence, 28 companies from 2019 to 2022 registered on the indonesian capital market serve as the sample of the study . data sources and types data sources are categorized as primary and secondary data. the data obtained from the indonesia stock exchange and the company websites are primary data whereas the data obtained by collecting documents or information from other people referred to secondary data. the type of data used is taken from the companies’ financial statements which have been published and audited, thus the data presented include ratio data. data collection technique all the data collected from financial reports published in the indonesia stock exchange and those on the companies’ official websites, therefore, the data is the result of documentation. documentation study is a technique or activity of analyzing electronic documents, drawings, or written documents starting with the collection of the necessary data (syaodih sukmadinata, 2007). data analysis technique descriptive analysis descriptive analysis is part of statistics that describes the data collected through analysis, with no intention to apply, generalize or make conclusions (sugiyono, 2017). the researcher describes or interprets the research results in accordance with the data obtained from valid sources and then https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 553 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analyzes them with proper tools. the results are presented as they should be, without generalizing from all subjects. multiple linear analysis multiple linear analysis are all statistical methods used to determine the relationship between variable free and related (algifari, 2018). the software used in this study is spss 23 version 23. the multiple linear analysis demonstrates the following equation: y = α + β1 x1 + β2 x2 + βn xn + e where: y= dependent variable or response variable. x = independent variable or predictor variable. α = constanta. β = slope or estimated coefficient or multiple regression coefficient e = standard error correlation coefficient test (r) the correlation coefficient test is used to measure how big or how linear the relationship is between free and bound variables (kuncoro mudrajad, 2018). the correlation coefficient (r) has a value of -1.00 to 1.00. the closer the r is to 1.00 or -1.00, the stronger the bound, and it is limited to either positive or negative numbers. this provides the information whether the variables correlated positively or negative. the coefficient of determination (r2) test the coefficient of determination is a number between 0 and 1 used to measure how well a statistical model predicts an outcome. in a broader sense, it is a statistical measurement that examines how differences in one variable can be explained by the difference in a second variable when predicting the outcome of the given event. the coefficient is commonly known as an r-squared or r2. a small r2. value or close to zero refers to the ability of independent variables in explaining very limited dependencies variables (ghozali, 2018). results and discussions normality test the normality test is aimed at assessing the variables or the distribution of data in a group, and at investigating whether or not the data are normally distributed. https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 554 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2. normal p-p plot of regression standardized residual source: data proceed according to (ghozali, 2011), if the plotted data follow a diagonal line, then the regression model or data is normally distributed. the results of testing the data can be considered to be normally distributed since the data follows a diagonal line. multicollinearity test (ghozali, 2011) emphasized that there are no symptoms of multicollinearity if the tolerance value is > 0.100 and the vif value is < 10.00. a good model if there are no symptoms of multicollinearity table 1. coefficients table source: data proceed model unstandardized coefficients standardize d coefficients t sig. collinearity statistics b std. error beta tolerance vif 1 (cons tant) 3.848 .946 4.066 .000 x1 -8.811 7.546 -.248 -1.168 .254 .857 1.167 x2 4.120 7.307 .171 .564 .578 .422 2.368 x3 .090 3.980 .007 .023 .982 .387 2.586 https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 555 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the table above, all tolerance values of independent variables are at a number greater than 0.100 and an vif value is less than a value of 10.00. this emphasizes that there are no multicollinearity indications to the variables. heteroscedasticity test according to (ghozali, 2011), if there is no clear pattern on the scatter-plot, then there is no heteroscedasticity. in the y axis, the dots are distributed below or above zero. figure 3. scatterplots source: data proceed from the scatterplots, the data is spread above and below the number 0 on the y axis. it does not form a specific pattern, so it can be concluded that this study has no variance of heteroscedasticity. autocorrelation test autocorrelation is not detected if the durbin watson value lies between du to (4-du). the value du is obtained from the value table of durbin watson. based on the quantity variable three, and a sample of 28, the value of du is 1.6503 model r r square adjusted r square std. error of the estimate durbin-watson 1 .264a .070 -.047 4.66299 1.686 table 2. models summary source: data proceed from table 2, it can be explained that durbin watson's calculated value of 1.686 is between the value of 1.6503 and 4-du or 1.6503 < 1.686 < 2.3497. thus, the autocorrelation in these research data is not detected. https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 556 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multiple linear regression test to find out whether there is an influence between independent and dependent variables, the researcher used the calculation results of the spss application, as described in the following coefficients: table 3. coefficients source: data proceed from table 3, it can be inferred that the significance value of operating cash flow is 0.254 > 0.05 and the comparison between the calculated value and the table t is -1.168 <2.0639. therefore, it can be concluded that there is no effect and no significance between variable x1 (operating cash flow) against variable y (firm value). the effects of the investment cash flow on firm value can also be seen in the table. it is emphasized that the value of significance on investment cash flow 0.254 > 0.05 and the value of t count < value of t table (2.0639 > 0.578). the conclusion is that there is no influence between variable x2 (investment cash flow) and variable y (firm value). similarly, variable x3 (funding cash flow) bears no effect and there is no such significant variable y or company value, this is because the sig value is 0.982 > 0.05 and t count is < t table (0.023 < 2.0639). as for the f test (simultaneous), the results are shown in anova table below: model sum of squares df mean square f sig. 1 regression 39.013 3 13.004 .598 .622b residual 521.844 24 21.744 total 560.857 27 table 4. anova source: data proceed model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.848 .946 4.066 .000 x1 -8.811 7.546 -.248 -1.168 .254 x2 4.120 7.307 .171 .564 .578 x3 .090 3.980 .007 .023 .982 https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 557 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the table above shows that the significance value is 0.622 > 0.05, so it can be concluded that all independent variables have no influence and are not significant to the dependent variable. model r r square adjusted r square std. error of the estimate durbin-watson 1 .264a .070 -.047 4.66299 1.686 table 5. model summary source: data proceed the r-square value of the table above states that the information of x variable is only able to explain as much as 26% of variable y, the rest is explained by the other variable. from the research results, it can be summarized that the operational cash flow in technology companies has no effect on firm value. cash flow generated from the main activities of technology companies, although fluctuating, has no impact since the increase in cash value generation is considered small and insignificant to increase both the equity and the market value of the company. it is a challenge for companies in technology sector to increase cash flow from operating activities during the covid conditions and post-covid recovery. the obstacles such as the closures of businesses, the decrease in public purchasing power, as well as the stagnancy of product distribution flows undoubtedly contributed to the existing matters. further consequences, investment activities have no effect on the firm value of technology-based businesses due to the negative cash flow investment. from the samples used in this study, only one company indicated a positive cash flow of investment value in 2019, in which assets in the form of cash for investment activities such as buying fixed assets, purchase of shares, or purchase of other company debt securities are signified. similarly, the cash flow of funding is impactless where cash obtained from financing activities has no effect on the value of the company. the results of this study are not in line with the results of a research conducted by (fajri & juanda, 2021), but in accordance with the study by (paraditya et al., 2021) which stated that there is no effect of operating cash flow and investment cash flow on the company value. conclusions the study illustrates that cash flows, be it for operational, investment or financing, have no effect on the firm value of companies in technology sector listed on the indonesia stock exchange. it is obvious that cash flow is fluctuating, and even experiencing a decline, prior and after the pandemic. however, there has been an increase before and several years after the covid outbreak. as the samples are taken only from companies in technology sector with three indicators, future researchers are expected to add more independent variables to the dependent variable (firm value) in order to gain more significant results. https://www.ilomata.org/index.php/ijtc the influence of operating cash flows, investments cash flow, and funding cash flow on the company value in technology sector herman and chaidir 558 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc references algifari. 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(1995). manajemen keuangan (9th ed., vol. 1). binarupa aksara. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue, 4 october 2023 page no. 832-845 832 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati1, rusman irwansyah2 12politeknik negeri banjarmasin, indonesia correspondent : hikmahwati@poliban.ac.id1 received : august 6, 2023 accepted : october 20, 2023 published : october 31, 2023 citation: hikmahwati., irwansyah, r. (2023). the effect of management knowledge influences the preparation of msmes financial statements. ilomata international journal of tax and accounting, 4(4), 832-845. https://doi.org/10.52728/ijtc.v2i3.238 abstract: the rapid development of the msme sector shows that there is great potential if this can be managed and developed well which will certainly be able to create strong micro, small and medium enterprises. the main problem in developing msmes is related to presenting financial reports. the inability to present quality financial reports is one of the weaknesses of management. this condition also occurs among msme business actors in banjarmasin. this has an impact on the difficulty of msme actors in evaluating their operational performance. there is still not much research related to management knowledge in preparing financial reports for msme players. so the aim of this research is to analyze how management knowledge influences the preparation of msme financial reports in banjarmasin city. the population of this research is msmes registered with the banjarmasin city cooperative and industrial service. takes the form of a descriptive quantitative approach. the method used is linear regression, namely testing the goodness and fit model, the feasibility of this model can be seen in the determination test (r-square) and f test. the results of the hypothesis test state that management knowledge influences the preparation of msme financial reports in banjarmasin city with a significance value (sig ) is 0.000. the influence of management knowledge on the preparation of financial reports is 45.7%. keywords: knowledge management, preparation of financial statements, msmes. this is an open access article under the cc-by 4.0 license. introduction micro, small, and medium enterprises (msmes) are one of the sectors that are important to the economic recovery process. msmes have specific features that can be considered unique, as their numbers dominate the structure of indonesia's economy and continue to increase each year. https://www.ilomata.org/index.php/ijtc mailto:hikmahwati@poliban.ac.id https://doi.org/10.52728/ijtc.v2i3.238 the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 833 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc msmes make a substantial contribution, accounting for around 61% of the national gross domestic product (gdp) and employing 97% of the total workforce (www.ekon.go.id). the rapid development of the msme sector demonstrates the immense potential that can be harnessed and developed effectively to make up resilient micro, small, and medium enterprises. however, on the other side hand, msmes still face challenges, particularly in administrative processes. the primary issue in the development of msmes is related to financial management within their businesses. presenting financial statements becomes a distinct challenge for msmes (baihaqi, 2016). a similar situation is observed among msmes in banjarmasin city. the inability to present quality financial statements also constitutes a managerial weakness. the researcher's observations of several msmes in banjarmasin city reveal that some business owners do not utilize financial statements as decision-making considerations. these msme entrepreneurs often focus solely on operational activities, neglecting transaction recording and financial statements . however, without proper financial statements, evaluating operational performance becomes challenging for these entrepreneurs (ilarrahmah & susanti, 2021). the financial condition of a company, both present and future, can be indicated through financial statement data (kasmir, 2008). financial statements are essential to create, as they provide crucial information that aids business success. in essence, financial statements are a record of the operational results carried out over a specific period. the purpose of financial statements is to offer information for decision-makers within the company (rostikawati & pirmaningsih, 2019). harahap's study on msmes capable of preparing financial statements according to accounting standards indicates that those individuals are wiser in allocating funds to advance their business and in determining the required capital and expected profits (harahap, 2014). similarly, nurlaela (2015) discovered that msmes' capacity to create financial statements had no meaningful influence on their performance. at that time, awareness of financial statement preparation among msme entrepreneurs was limited and insufficient. winarso (2022) also states that the capacity for preparing financial statements among msmes remains low, with a lack of accounting knowledge being one of the contributing factors (mubarak et al., 2023; nurohmah, 2023). accounting knowledge involves systematically understanding how to record, classify, and summarize transactions while providing relevant and reliable information for enhancement (ballou et al., 2018). for management to compile financial statements, knowledge and understanding of financial statements are essential. knowledge management is a strategic capability for companies in effectively handling information and knowledge (rowley, 1999; tukamuhabwa & namagembe, 2023). knowledge management drives organizations to organize their efforts to achieve their goals and ensure long-term growth and business sustainability (setiyono et al., 2022). according to research by fadilah (2019), effective financial management is supported by competent human resources, encompassing educational backgrounds, financial expertise, and a commitment to continuous training. furthermore, accounting knowledge is crucial in financial statement preparation. in line with research carried out by devi et al., (2017) high level of accounting knowledge leads to the production of higher-quality financial statements. msme entrepreneurs' attitudes and https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 834 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc understanding of accounting have a considerable impact on the adoption of microentity accounting standards (sak emkm) (as’adi & chalimi, 2020). given the background presented, the research problem stems from the fact that management, in the process of financial statement preparation, requires knowledge and understanding related to financial statements. the research question formulated for this study is as follows: "how does management knowledge influence the preparation of financial statements for msmes in banjarmasin city?" behavioral accounting theory emerged around 1952, but gained widespread recognition around 1962. initially, this theory emphasized managerial accounting aspects, particularly budgeting. however, over time, it expanded to include accountability, financial information systems, accounting, and auditing (ardiansyah, 2009). this theory must meet the characteristics of human behavior to be considered scientific. this concept involves systematic observation of human behavior to form experimental hypotheses by illustrating observable behavior changes (arfan, 2010). one of the issues in smes development is the preparation of financial statements. the inability to present quality financial statements is a management weakness in smes. some smes in banjarmasin city even do not use financial statements for decision-making. they tend to focus on operational activities without involving transaction recording and financial statement preparation. however, financial statements play a vital role in evaluating operational performance (ilarrahmah & susanti, 2021). financial statements have a significant role in showing the company's financial condition. it is a tool used to understand profit and loss, be responsible for management, and make sound and accurate decisions. the preparation of financial statements is a very important performance measurement tool. without proper accounting recording and reporting, assessing msme performance will be difficult (zarefar et al., 2021). financial statements are not only a business communication tool, but also a basis for timely decision making and management responsibility (winarso & kurniawati, 2022). however, the characteristics of the information conveyed through the financial statements mechanism can affect the objectives of financial statements (nurlaela, 2015), and the ability of msmes to prepare financial statements also affects the quality of the information conveyed. management knowledge is an integral part of organizational activities to identify, create, explain, and distribute knowledge that can be reused within the organization (meylananda et al., 2021). knowledge management is the systematic capture, description, organization, and sharing of knowledge in order to make it valuable, reusable, and adaptable. (gao et al., 2018; torabi et al., 2016). in the context of accounting, accounting knowledge is the expertise possessed by sme actors in managing accounting (as’adi & chalimi, 2020). management and accounting knowledge influence financial statements preparation, and aspects such as broad financial statement comprehension, the benefits and functions of financial statements , financial statements skills acquired from education, and knowledge of types of financial statements (hernawati et al., 2019). play a part in applying managerial expertise to financial statements in msmes. in facing the challenges of preparing financial statements, understanding and knowledge of management are https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 835 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc key factors. accounting knowledge plays a crucial role in preparing accurate and relevant financial statements. it also provides tools for msmes actors to make better decisions and effectively manage their businesses (koswara, 2014). understanding accounting is also essential for applying accounting principles correctly within the company and can support accurate financial statements recording (risal, 2020). research hypothesis accounting is essential for micro, small, and medium enterprises (msmes) to efficiently manage their operations. the possession of accounting knowledge by msmes owners can facilitate the implementation of financial statements in each business unit (risal & kristiawati, 2020). furthermore, a significant positive correlation was found between accounting understanding and the implementation of financial statements in msmes (muslim & sufina, 2018). the study conducted by whetyningtyas & mulyani (2016) claimed that the capacity to compile financial statements can improve msmes' operational performance. these findings are consistent with satiya et al. (2020) research, which found that accounting expertise influences financial statement preparation in the context of micro and small enterprises financial accounting standards (sak emkm). preparing financial reports requires accounting knowledge possessed by management/managers, to produce financial reports to the authorities regarding company activities (putra a, 2018). if an owner/leader understands accounting knowledge, he will certainly be able to prepare a financial report (cahya et al., 2021). business actors' knowledge in applying accounting to companies is a motivation to learn about accounting (satiya et al., 2020). based on the theoretical basis of management knowledge in preparing msme financial reports, based on the description of the theoretical study above in accordance with the objectives and problems raised, the hypothesis proposed in this research is as follows: h0: management knowledge directly influences the preparation of financial statements in msmes in banjarmasin city. based on the hypothesis above, a conceptual framework for this research was prepared which is shown in figure 1: figure 1. conceptual framework for research the impact of management knowledge on msme financial statement preparation in banjarmasin city https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 836 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method research type this study used a quantitative descriptive research design. this study made use of both primary and secondary data sources. the population under research consists of micro, small, and medium enterprises (msmes) registered with the banjarmasin city department of cooperatives and industry. there are 74 registered msmes in total. the researcher used a census sampling approach, which included all eligible respondents in the sample. method of data collection data for this study were gathered via a google forms questionnaire or survey that used a likert scale. the google forms link was sent to the responders in order for them to participate. method of data analysis linear regression was used to analyze the data in this study, which was carried out using spss 23 software. there are various steps to the analytical process. to begin, the quality of study data is evaluated using validity and reliability tests. second, traditional assumption tests such as heteroskedasticity, multicollinearity, and normality are run. third, a basic regression equation analysis is performed to determine the "fit" or acceptability of the hypothesis. the t-test and the coefficient of determination (r-square) are the two major tests for determining model appropriateness. result and discussion validity test product occurrence the validity test of this study used the pearson correlation technique with a 5% significance level. where the test looks at the correlation coefficient (rxy), which expresses the link between the scores of the question items and the total score (item-total correlation). if the rcount findings are larger than the r-table and the value is positive, the questions in the research questionnaire are considered legitimate; otherwise, the questions are considered invalid. tabel 1. correlations question items management knowledge x1.1 x1.2 x1.3 x1.4 x1.5 x1.6 x1.7 x1.8 pearson correlation 0,578** 0,603** 0,814** 0,800** 0,635** 0,837** 0,790** 0,817** sig. (2-tailed) 0,000 0,000 0,000 0,000 0,000 0,000 0,000 0,000 n 74 74 74 74 74 74 74 74 question items ability to prepare financial statements y.1 y.2 y.3 y.4 y.5 y.6 y.7 y.8 pearson correlation 0,611** 0,810** 0,715** 0,685** 0,674** 0,834** 0,865** 0,812** sig. (2-tailed) 0,000 0,000 0,000 0,000 0,000 0,000 0,000 0,000 n 74 74 74 74 74 74 74 74 source : output spss ver 26 (2023) https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 837 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the validity test findings in the correlations table show that all 75 questions about management knowledge and financial statement preparation abilities are regarded valid or useable since the computed r-value is larger than the tabulated r-value. the fact that the significant value (2-tailed) for the variables utilized is 0.000, which is less than 0.05, supports this. for an n of 75 and a significance level of 5%, the tabulated r-value is found to be 0.2270. the calculated r-values for each variable based on pearson correlation, which were obtained as the average, are consistently larger than the tabulated r-value of 0.2270. reliability test the purpose of the reliability test is to assess whether the data collected in the research demonstrate adequate internal consistency. the cronbach's alpha coefficient was utilized to make this judgment. a cronbach's alpha score better than 0.60 is required for a questionnaire to be reliable (ghozali, 2016). table 2. reliability statistics cronbach's alpha n of items 0,927 17 source: spss output version 26 (2023) from the reliability statistics table, the cronbach's alpha value for the variables of is clearly positive management knowledge (x) and financial statements preparation skills (y) is 0.927, which is greater than 0.60. this signifies that the 17 questionnaire items related to the variables of management knowledge and financial statements preparation skills are reliable. therefore, these variables can be further analyzed using regression analysis to determine the influence of management knowledge and financial statements preparation skills. heteroskedasticity test a good regression model should not exhibit heteroskedasticity, so it's necessary to perform a heteroskedasticity test. the purpose of the heteroskedasticity test is to determine whether there is unequal variance of residual values across different observations in the formed regression model. if the variance of residual values remains constant from one observation to another, it is referred to as homoskedasticity. however, if the variance of residual values varies across observations, it is called heteroskedasticity. the results of the heteroskedasticity test using the glejser test are shown in table 3: table 3. heteroskedasticity test results coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 4,294 1,600 2,685 0,009 management knowledge -0,043 0,071 -0,071 -0,607 0,546 a. dependent variable: abs_res https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 838 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to the results in table 3's coefficients section, the significance value (sig.) for the management knowledge variable (x1) is 0.546, which is more than 0.05. as a result, we may infer that the regression model has no indication of heteroskedasticity. multicollinearity test the goal of a multicollinearity test in research is to see if there is a correlation (strong association) between the independent variables in a regression model. to detect the presence of multicollinearity in a regression model, examine the correlation values between the independent variables first, then the condition index and eigenvalue, and finally the tolerance and variance inflating factor (vif). table 4 shows the results of the multicollinearity test: table 4. multicollinearity test results coefficientsa model unstandardized coefficients standardized coefficients t sig. collinearity statistics b std. error beta tolerance vif 1 (constant) 3,809 2,825 1,348 0,182 management knowledge 0,976 0,125 0,676 7,781 0,000 1,000 1,000 a. dependent variable: ability to prepare financial statements the tolerance value for the managerial knowledge variable (x) is 1.000, which is more than 0.10, according to the "coefficients" table generated in the "collinearity statistics" section. furthermore, the vif value for the managerial knowledge variable (x) is less than 10.00. we may infer that there is no indication of multicollinearity in the regression model based on the decisionmaking criteria in the multicollinearity test. normality test the normality test determines whether or not the data utilized in the study follows a normal distribution. the significant value (sig.) serves as the foundation for understanding the kolmogorov-smirnov (k-s) normalcy test. if the significance value (sig.) is larger than 0.05, the study data is normal. if, on the other hand, the significance value (sig.) is less than 0.05, the study data is not regularly distributed. table 5 shows the results of the normalcy test: https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 839 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. normality test results one-sample kolmogorov-smirnov test unstandardized residual n 74 normal parametersa,b mean 0,0000000 std. deviation 4,08130138 most extreme differences absolute 0,089 positive 0,089 negative -0,070 test statistic 0,089 asymp. sig. (2-tailed) 0,200c,d a. test distribution is normal. b. calculated from data. c. lilliefors significance correction. d. this is a lower bound of the true significance. the asymptotic significance (2-tailed) value in table 5 is 0.200, which is larger than 0.05. following the above-mentioned decision-making criteria for the kolmogorov-smirnov normality test, it is possible to infer that the data has a normal distribution. descriptive statistics test this test is carried out to provide an overview or description of data seen from the average value (mean), standard deviation, maximum, minimum, sum and range. the data tested is based on indicators from the independent and dependent variables. the independent variable in this research is management knowledge, and the dependent variable is the preparation of financial reports. the assessment indicators for measuring management knowledge are seen from knowledge of financial reports in general, how to prepare them, types and contents of financial reports, having attended training or learned about preparing financial reports, benefits and functions of financial reports (as’adi & chalimi, 2020; baskara & afkar, 2021). assessment indicators in preparing financial reports are seen from the ability to collect transaction evidence, record transactions sourced from transaction evidence, calculate and group all financial transactions, compile and read financial reports (suhairi, 2006; sulistyowati, 2017; suryani et al., 2020). the two variable indicators in this research were compiled into questions in the questionnaire distributed to respondents. the results of the descriptive statistical test of the questionnaire distributed to msmes in the city of banjarmasin are shown in table 6: https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 840 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6. descriptive statistics n minimum maximum mean understanding the concept of financial statements (x1) 74 2 4 3,01 knowing how to prepare financial statements (x2) 74 2 4 2,93 understanding the benefits of financial statements (x3) 74 2 4 3,09 understanding the functions of financial statements (x4) 74 1 4 2,97 participated in financial statement preparation training (x5) 74 1 4 2,42 learned how to prepare financial statements in formal institutions (x6) 74 1 4 2,59 understanding the types of financial statements (x7) 74 1 4 2,47 understanding the content of financial statements (x8) 74 1 4 2,70 management knowledge (x) 2,8 able to collect transaction evidence (y.1) 74 1 4 2,88 able to record all transactions from transaction evidence (y.2) 74 1 4 2,92 able to calculate all financial transactions (y.3) 74 1 4 2,91 able to categorize transactions into financial record books (y.4) 74 1 4 2,58 capable of condensing transaction classifications into financial statements (y.5) 74 1 4 2,70 able to prepare financial statements (y.6) 74 1 4 2,93 able to read the content of financial statements (y.7) 74 1 4 2,81 able to analyze the content of financial statements and make decisions based on the analysis (y.8) 74 1 4 2,82 able to make decisions based on the analysis of financial statements (y.9) 74 1 4 2,92 preparation of financial statements (y) 74 2,8 table 6 of the descriptive statistics test indicates that for the management knowledge variable (x), consisting of 8 question items, the average response score across the 8 items is 2.8. this suggests that msmes in the city of banjarmasin have a reasonable level of management knowledge regarding financial statements. similarly, for the financial statements preparation variable (y), comprising 9 question items, the average response score across the 9 items is 2.8. this implies that msmes in the city of banjarmasin are adequately capable of preparing financial statements. regression analysis test the goal of regression analysis is to estimate the average value of the dependent variable based on the known values of the independent variables. this study employs two regression methods, multivariate linear regression and logistic regression. table 7. multiple linear regression variabel unstandardized coefficients standardized coefficients t sig. description b std. error beta (constant) 3,809 2,825 1,348 0,182 management knowledge 0,976 0,125 0,676 7,781 0,000 accepted r square 0,457 adjusted rsquare 0,449 source : spss output ver 26 (2023) https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 841 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table 7, the regression equation that can be formulated is as follows: y = α + β1x + e y = 3.809 + 0.976 x + e goodness of fit test this test is necessary to determine whether the regression equation used to test the hypothesis fits the data well. to assess the fit of a regression equation, the values of f, t, and r2 are considered: t-test the t-test statistic essentially reflects how far an individual explanatory/independent variable's effect extends in explaining variance in the dependent variable (ghozali, 2016). the t-test can be conducted by examining the significance probability (α) value for each variable. if the hypothesis for each independent variable is accepted when α < 0.05, conversely, if α > 0.05 for each independent variable, the hypothesis is rejected. the t-test findings shown in table 7 reveal a tvalue of 7.781 for the management knowledge variable, with a significance value of 0.000. this number is less than the specified significance threshold ( = 0.05), implying that managerial expertise has a positive impact on the ability to prepare financial statements for msmes in kota banjarmasin. coefficient of determination (r2) the coefficient of determination (r square) value of 0.457 suggests that managerial expertise explains 45.7% of msmes' performance, while the remaining 54.3% is explained by other unexplored variables. hypothesis testing results according to the hypothesis, management knowledge influences the ability to prepare msmes financial statements in the city of banjarmasin. the significance value (sig) and the comparison of t count and t table demonstrate hypothesis testing. the study's findings indicate that the significance (sig) of the knowledge management variable (x) is 0.000 t table 1.996, implying that the first hypothesis is correct. this indicates that management knowledge (x) has an effect on the ability to prepare financial statements (y). management knowledge influences the preparation of financial statements in msmes in banjarmasin. the results of hypothesis testing indicate that management knowledge significantly affects the preparation of financial statements in msmes in kota banjarmasin. this implies that a higher level of management knowledge corresponds to a greater impact on the preparation of financial statements for msmes in the city. management knowledge in this case is the accounting knowledge possessed by msmes (cahya et al., 2021).the management or owners of the msmes in banjarmasin generally possess basic and straightforward understanding regarding the preparation of financial statements . this encompasses knowledge of how to compile financial statements , the types and content of financial statements , as well as the purposes and functions of financial statements . this general understanding stems from the fact that the management or owners of https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 842 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc msmes have, on average, not undergone formal education or training in financial statements preparation. this is evident from the respondents' answers, which mainly hover around values of 2 and 3, indicating partial agreement and partial disagreement. the average value for the management knowledge variable is 2.8, suggesting that msmes in banjarmasin possess a reasonable level of management knowledge. the theory of behavioral accounting explains that this form of accounting emphasizes managerial aspects in decision-making, including those concerning financial statements . financial statements play a crucial role in determining the success or failure of business operations. thus, understanding and applying accounting practices are critical motivations for business owners to learn about accounting. in general, management knowledge directly influences financial statements preparation. this is evident from the respondents' average responses, with financial statements preparation generally scoring around 2.8 (with most answers falling in the 2 and 3 range). financial statements preparation entails the ability to gather transaction evidence, record transactions, calculate transactions, categorize transactions into financial records, summarize them, prepare financial statements , read and analyze financial statements , and make decisions based on this analysis. on average, respondents' answers to these questions indicate a moderate level of proficiency in financial statements preparation. the better the management knowledge possessed by msme owners, the higher the quality of their financial statements . management knowledge assists msme owners in effectively managing their finances. these research findings align with other studies that assert that a solid understanding of accounting among msme operators supports the successful implementation of financial statements recording in business units (risal & kristiawati, 2020). the significant influence of management knowledge on the preparation of financial statements in msmes has also been supported by other studies (muslim & sufina, 2018; satiya et al., 2020). accurate financial statements preparation necessitates management or owner understanding of accounting practices (putra a, 2018). conclusion the purpose of this study was to investigate and assess the impact of management expertise on the compilation of financial statements in msmes in banjarmasin city. the findings of hypothesis testing revealed that, in general, management expertise in financial statement preparation has a direct impact on financial statement preparation in msmes in banjarmasin city, with a significant value (sig) of 0.000. the influence of management knowledge is substantial, with a magnitude of 45.7%. this research's findings imply that a better understanding of management knowledge related to financial statements preparation significantly affects the quality of financial statements produced. accurate financial statements preparation contributes to assessing operational performance in msmes. however, measuring the use of financial statements for performance assessment requires further research. the current study is limited as it focuses on a single variable, leaving the possibility of other variables influencing financial statements preparation. the research https://www.ilomata.org/index.php/ijtc the effect of management knowledge influences the preparation of msmes financial statements hikmahwati and irwansyah 843 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc was conducted on a small-scale business with a small sample size, limiting the generalizability of the findings to a broader business scale. therefore, further research is needed to address these limitations. reference ardiansyah, m. 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(2021). pengaruh orientasi kewirausahaan, inovasi, kemampuan menyusun laporan keuangan dan literasi keuangan terhadap kinerja ukm. kajian akuntansi, 22(2), 148–161. https://doi.org/https://doi.org/10.29313/ka.v22i2.5877 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 3 july 2023 page no. 524-545 524 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation firda maharani anwar1, suparna wijaya2 12politeknik keuangan negara stan, indonesia correspondent: sprnwijaya@gmail.com2 received : june 10, 2023 accepted : july 17, 2023 published : july 31, 2023 citation: anwar, f, m. wijaya, s. (2023). tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation. ilomata international journal of tax and accounting, 4(3), 524-545. https://doi.org/10.52728/ijtc.v4i3.799 abstract: this study aims to analyze the effect of foreign direct investment (fdi), and share of agriculture on tax revenue in asean countries with regulatory quality as the moderating variable. the research method used is descriptive quantitative with panel data regression analysis and the econometric model is estimated by panel corrected standard errors (pcse). the result indicates that fdi, share of agriculture, regulatory-quality-moderated fdi and share of agriculture simultaneously have a significant effect on tax revenue. partially, the result shows that fdi has a positive and significant effect on tax revenue. regulatory quality and share of agriculture have no effect on tax revenue. furthermore, regulatory quality weakens the positive relationship of fdi and tax revenue, whereas regulatory quality strengthens the negative relationship between share of agriculture and tax revenue. based on the generated results, there will be a necessity for government to create a comprehensive economic and fiscal policy to increase tax revenue and to strengthen the tax base in the asean countries. keywords: asean, foreign direct investment, regulatory quality, share of agriculture, tax revenue this is an open access article under the cc-by 4.0 license. introduction the government of a country is inherently overwhelmed with the responsibilities to enhance the welfare and the living standards of its citizens, to protect lives and property, to provide social welfare services, to maintain law and order, and to promote sustainable economic development. in order to fulfil these functions, the government requires revenue from various sources. tax revenue is a significant source to fund government expenditures. saad (2014) described taxation as a social and economic reform instrument that penetrates every economic aspect, including individuals, companies, citizens, and foreigners. worlu & nkoro (2012) stated that the growth and the development of a country depends heavily on the ability of the government to generate sufficient tax revenue in order to fund the availability of infrastructures. the government's responsibility to promote economic growth and the well-being of its people continues to increase over time, especially in developing countries. this is due to a significant population growth and rapid technological advancements. while taxation serves as a crucial tool in fiscal policies aimed at https://www.ilomata.org/index.php/ijtc mailto:sprnwijaya@gmail.com https://doi.org/10.52728/ijtc.v4i3.799 tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 525 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc generating resources for economic growth within a nation, there exists a notable disparity between the ever-growing requirements of government spending and the insufficient amount of tax revenue collected to support developmental initiatives. (david a, 2000; ngotho & kerongo, 2014; oecd, 2008; saibu & olatunbosun, 2013). tax revenue pertains to compulsory payments remitted to the central government for public objectives, excluding specific items such as fines, penalties, and certain social security contributions (world bank, 2023). conversely, refunds and corrections resulting from tax collection errors are considered negative revenue. the magnitude of tax revenue can be measured in terms of currency or as a percentage of a country's total gdp. the percentage of tax revenue in relation to gdp indicates the proportion of a nation's economic output obtained by the government through taxation. there are three common theories underlying the study on tax revenue, namely the cost-of-service theory, the benefit theory, and the socio-political theory of taxation (ojong et al., 2016). the cost-of-service theory explained that the costs incurred by the government in providing specific services to the public should be shared by the individuals serving as the ultimate beneficiaries (jhingan, 2004). the goal of the state is to provide services to its people, but the application of this theory creates limitations on government services. this theory was subsequently expanded into the benefit theory of taxation, which proposes that individuals should contribute taxes in proportion to the benefits they derive. however, a research by ahuja (2012) argued that quantifying the precise number of benefits received by individuals is challenging, resulting in the declining application of this theory. the last theory, the socio-political theory, states that the primary purpose of a taxation system is for social and political objectives (ojong et al., 2016). this theory emphasizes that the tax system is designed not for personal interests but for the benefit of society as a whole. furthermore, tax revenue functions as a measure of the government's authority over a nation's economic resources (oecd, 2023). tax revenue is a pillar supporting the economic development of a country (myles, 2000). this is further supported by numerous previous studies from which it is claimed that tax revenue has a positive impact on a country's economic growth, such as the research conducted by ofoegbu et al., (2016), onakoya et al., (2017),. kusi (1998) suggests that many countries tend to rely on taxes to fulfil their financial necessity. this is because tax revenue offers not only a stable but also predictable income stream to fulfil the objectives of the state needs and the economic development (pfister, 2009). source: world bank, 2023 (data processed by author) picture 1. tax revenue data in asean member countries 2012-2019 0 5 10 15 20 25 2012 2013 2014 2015 2016 2017 2018 2019 https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 526 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the asean economy has demonstrated commendable progress and expansion in the last thirty years and so has in the majority of asian nations (nguyen & darsono, 2022). simultaneously, lowincome economies like cambodia, laos, myanmar, and vietnam have exhibited higher growth rates compared to their neighboring nations. it is then indicated that the degree of economic is convergent within the asean region (asean, 2021). however, this may not be fully reflected in the percentage of tax revenue to gdp (hereinafter referred to as tax revenue). in recent years, tax revenue in asean countries are fluctuating. the international monetary fund (imf) states that the development of a country can be optimally and sustainably implemented if the tax ratio reaches a minimum of 15%. there is a visible tax revenue gap from one country to another one where some asean nations such as malaysia, thailand, and cambodia have reached the 15% tax ratio in certain years, albeit with fluctuations. nevertheless, other asean members have not experienced this phenomenon yet. a country like brunei darussalam even demonstrates a significant gap compared to the other countries, where their tax revenue is mostly under 5%. to address the hindrance to the economic development capacity of a country , tax revenue generation should be maximized. quantitative research on taxation becomes crucial as to determine what factors may affect the research and identify approaches for enhancing tax revenue and funding public expenditures. additionally, tax revenue plays a valuable role in assessing whether or not a nation has effectively gathered an adequate amount of taxes based on its capacity for tax collection. asean members comprise of mostly developing countries rely on agricultural sector. agricultural sector is still viewed as a prime sector that contributes enormously towards gdp. people in developing countries work as a farmer to provide their daily necessities. being a reliable and impactful sector makes it important to examine whether or not this particular sector is also impactful on country’s tax revenue. the agricultural sector distinguishes itself from the industrial and service sectors based on its unique roles, which include providing food, fulfilling social needs, contributing to national economic growth, and serving environmental purposes. (besusparienė, 2018). the functions of the agricultural sector, which encompass economic, social, and environmental dimensions, are intricately linked to the concept of sustainable development. agricultural activities can be differentiated based on their singularity determined by seasonal work, government regulations, work involving biological assets, and dependence on environmental conditions (girdžiūtė & & slavickienė, 2011). the agricultural sector is an economic domain encompassing activities such as crop cultivation, animal production, agricultural engineering, manufacturing of agricultural machinery, fertilizers supply, and other related supports aimed at supporting agricultural practices (jean vasile et al., 2019). the role of the agricultural sector itself is significant in meeting society's needs and implementing government policies. in developing nations, the agricultural sector is typically characterized by the predominance of numerous small-scale farmers who engage in self-consumption, selling their produce in informal markets, or practicing the barter systems for the exchange of goods. according to matsuyama (1992), there is a positive link between the agricultural sector and industrial progress. the high income from the agricultural sector leads to the domestic demand for industrial products and increases domestic savings needed for industrialization. furthermore, chang et al., (2006) introduced the theory of revenue-generating effect, which means that higher productivity in the agricultural sector will lead to a higher tax base. this will result in an increase in tax revenue derived from the agricultural sector. it is also stated that an increase of output in the agricultural sector will https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 527 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc lead to an increased public spending on infrastructure. therefore, it is expected that there will be a positive relationship between the agricultural sector and the tax revenue. conversely, in recent years, foreign investment has gained popularity as a means of financing for countries, including those within the asean region. presently, foreign direct investment (fdi) stands as a crucial external funding source for developing nations (camara, 2022). united nations conference on trade and development (unctad) (2019) stated that in recent years, developing countries in asia have experienced a continuous increase in foreign investment inflows, accounting for 54% of total fdi. therefore, it is also important to point out whether or not this typical financing creates a stronger foundation for a country to generate more tax revenue. theoretically, the harrod-domar’s growth model proposes that economic growth can be attained by investing savings in a linear or parallel manner (drăgoi, 2019). in this theory, economic growth is expected to progress in line with the increase in linear or parallel savings. this theory was further developed by solow, who defined economic development (y) as a function of capital (k) and labor (l) (solow, 1956). based on this theory, it can be stated that the accumulation of capital plays a crucial role in achieving economic growth. this capital can be augmented through investments, while factors such as depreciation and population growth can lead to its decline. krugman as cited in sarwedi, (2002) defines foreign direct investment (fdi) as an international capital flow in which a company from a home country establishes a company in the host country for investment purposes and/or solely expands an existing company in the host country. dunning (2001) proposes the oli paradigm theory further, stating that there are three conditions a company should cater to channel its capital into a country in the form of foreign direct investment: o (ownership advantage), refers to the form of various business processes, intangible assets, knowhow, and so on; l (location advantage), includes advantages gained from the host country such as accessibility, market size, labor wages, and macroeconomic stability; and i (internalization advantage), is exclusive advantages that can only be obtained by a company if it prefers direct investment to other investment forms. on the other hand, the theory of economic regulation (posner, 1974; becker, 1983; stigler, 1971) implies that changes in economic regulations related to market entry, exit, products, prices, quantity, or market structure can impact investment choices (weber waller, 2006). fdi increases the amount of investment in the private sector of a country. hence, the increased capital serve as broader economic from which positive relationship between fdi and tax revenue can be made possible. it is important to note that the amount of tax revenue of a country cannot be separated from how the government forms a regulation. according to (teorell & rothstein, 2008), governance is a comprehensive concept that encompasses the exercise of authority, both formally and informally, in the management of a nation's resources. the quality of governance is assessed based on the influence of this exercise of power on the citizens' quality of life. kaufmann et al. (2010) then introduced the world governance indicator (wgi) as a tool to measure the quality of governance in a country. wgi consists of six indicators, one of which is regulatory quality that refers to both the perception of the government's competence in creating and implementing effective policies and legislation that facilitate and encourage the growth of the private sector. therefore, regulatory quality is expected to have a positive influence on a country's tax revenue. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 528 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a number of studies have been conducted to examine the determinants of tax revenue in a country. a previous study by camara (2022) states that fdi has a positive and significant influence on the size of tax revenue of a country. this finding is similar to the research done by amoh & adom (2017) who emphasizes that tax revenue in the economy sector can be generated by promoting greater formalization of economic activities and enhancing competitiveness. these findings are in line with the results presented by andrejovská & puliková (2018) and nath et al., (2022). contrary to these findings, gaspareniene et al., (2022) conducted a study suggesting that fdi has a negative and significant impact on tax revenue. on the other hand, a research by pratomo (2020) examines the influence of fdi on tax revenue in developing countries and finds that fdi inflows have no impact on tax revenue in a country. furthermore, ayenew (2016) conducted a study on the influence of the agricultural sector on tax revenue and concluded that the agricultural sector had no impact on tax revenue. this finding are in contrast with the research conducted by profeta & scabrosetti (2010) where the agricultural sector has a negative impact on tax revenue in latin american countries. on the other hand, both sets of findings differ from the results of a study by kitessa & jewaria (2018) who state that there is a positive and significant relationship between the agricultural sector and tax revenue in a country. moreover, governance is also a determining factor in taxpayer compliance, which ultimately affects the increase or decrease in tax revenue. syadullah (2015) states that the quality of regulations in a country's governance has a positive and significant influence on tax revenue in that country. however, on the opposite spectrum, a research by yaru & raji (2022) claimed that the regulatory quality has no influence on the size of tax revenue in a country. due to the diverse study findings regarding the impact of fdi and the agricultural sector on tax revenue in a country, this research aims to develop and complement the previous studies by adding a moderating variable, namely the regulatory quality, used to better understand the direction and/or strength of the relationship between the independent and dependent variables (saunders et al., 2016). the objective of this research is to analyze the simultaneous and partial effects of fdi and the agricultural sector on tax revenue while using the regulatory quality as a moderator. by selecting a sample of countries that share similarities in geographical location and development level, it is expected that this study yields more reliable and significant results. in addition, there is currently a lack of research conducted using the aforementioned combination of variables to investigate tax revenue in asean countries. therefore, this study is expected to contribute to the theory enrichment upon this subject and to provide additional references and perspectives for readers regarding the significance of these factors' influence on tax revenue in a country. thus, the hypotheses are as follows: h1: there is a positive influence of fdi on tax revenue. h2: there is a positive influence of the agricultural sector on tax revenue. h3: there is a positive influence of the regulatory quality on tax revenue. h4: the regulatory quality strengthens the relationship between fdi and tax revenue. h5: the regulatory quality strengthens the relationship between the agricultural sector and tax revenue. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 529 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method research type the research is conducted using a quantitative descriptive method. according to arikunto (2006), quantitative descriptive research is a method aimed at objectively describing a situation using numerical data, starting from data collection, interpretation of data, and presentation of data and its results. the research data is displayed in the form of panel data with a sample comprising 10 asean member countries, namely indonesia, malaysia, singapore, thailand, philippines, vietnam, myanmar, laos, brunei darussalam, and cambodia, covering the period from 2012 to 2019. the data used in this study are secondary data sourced from the world bank. variable identification this study uses tax revenue as the dependent variable, foreign direct investment (fdi) and share of agriculture (agricultural sector) as the independent variables, with regulatory quality as the moderator. additionally, this research also includes share of service (service sector), urbanization, and the control of corruption as control variables. table 1. research variables variable variable definition scale units tax revenue ratio of central tax revenue to country's gdp ratio percentage (%) foreign direct investment (fdi) the ratio of the amount of fdi inflow to the country's gdp ratio percentage (%) share of agriculture as % of gdp the ratio of income received from the agricultural sector to the country's gdp ratio percentage (%) regulatory quality index with a scale of -2.5 to 2.5 to assess the government's ability to create regulations that promote private sector development ratio without units share of services as % of gdp the ratio of income received from the service sector to the country's gdp ratio percentage (%) urbanization people living in urban areas which are defined as % of the total population ratio percentage (%) control of corruption index with a scale of -2.5 to 2.5 to capture perceptions about the occurrence of corruption phenomena in a country ratio without units https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 530 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis 1. model specification this research will be tested using three general types of regression models and one alternative regression model. the regression models include the common effect model (cem) or commonly known as pooled least squares (pls), fixed effect model (fem), and random effect model (rem), along with one alternative model, namely panel corrected standard error (pcse). in this study, three types of tests are employed to ascertain the most suitable model. they are the chow test, the lagrange multiplier test, and the hausman test. the chow test helps determine the preferred model between the common effect model (cem) and the fixed effect model (fem). the lagrange multiplier test (lm) examines whether panel data analysis is better suited to the random effect model (rem) or the common effect model (cem). on the other hand, the hausman test is a statistical evaluation used to select the most appropriate model between the fixed effect model (fem) and the random effect model (rem) for testing panel data. 2. gauss-markov test (classical assumption test) in the gauss-markov test, or commonly known as the classical assumption test, there are four types of tests that will be conducted, namely the normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. the purpose of the normality test is to assess whether or not the residual values follow a normal distribution. sujarweni (2015), states that this test aims to investigate if both the dependent and independent variables in the regression model exhibit a normal distribution. meanwhile, the multicollinearity test is performed to determine if there is a correlation among the independent variables utilized in the analysis. as mentioned by sujarweni (2015), the presence of multicollinearity suggests a perfect or definite linear relationship among one or more independent variables in the model. the heteroscedasticity test, on the other hand, aims to evaluate if there is unequal variance among the residuals across different observations in the regression model (ghozali, 2011). lastly, the autocorrelation test is conducted to explore whether there is a correlation between disturbance errors in period t and disturbance errors in period t-1 in the linear regression model. the purpose of this test is to ensure that there are no carryover errors from previous years that may affect the data analysis in the current year. 3. regression model the author utilized the assistance of stata 17 software in conducting the data analysis. the panel data regression models used in this study are as follows: tr = β0 + β1fdiit + β2agriit + β3regit + β4fdiregit + β5agriregit + β6serv + β7urban + β8corr + εit note: tr = ratio of central tax revenue to gdp β0 = constant parameter (intercept) β1 to β5 = regression coefficients fdi = foreign direct investment https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 531 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agri = share of gdp from the agricultural sector reg = regulatory quality fdireg = foreign direct investment moderated by regulatory quality agrireg = share of gdp from the agricultural sector moderated by regulatory quality serv = share of gdp from the service sector urban = urban population corr = corruption perception index in a country ε = error terms result and discussion a. descriptive analysis table 2. descriptive analysis variabel mean std. dev. min max tr 11.91136 4.362644 1.781 19.73206 fdi 6.517866 6.75909 -1.320522 32.16984 agri 12.97847 8.915805 0.0302096 33.5196 reg -0.3174903 0.972046 -2.348573 1.149036 fdireg -5.972091 16.00721 -71.87849 5.031719 agrireg -1.948509 8.772189 -25.82188 19.26933 serv 47.61523 10.53963 28.28036 70.7942 urban 51.94339 23.62413 21.037 100 corr -0.5108795 0.7410775 -1.672809 0.8577785 source: data processed using stata 17, 2023 the above test results indicate the descriptive analysis findings. on average, the tax revenue (as a percentage) in asean member countries is 11.91136%. the highest percentage of tax revenue is recorded in cambodia in 2019, with a value of 19.73206%, while the lowest percentage is shown by brunei darussalam in 2013, at 1.781%. the fdi variable has an average of 6.517866%. the highest fdi value, which is 32.16984% of the total gdp, is owned by singapore in 2019, while the lowest fdi value, -1.320522%, is recorded by brunei darussalam in 2016. on average, the agriculture sector variable falls at 12.97847%. the highest percentage of revenue from the agriculture sector is from cambodia in 2012, at 33.5196% of the total gdp. on the other hand, the lowest percentage is owned by singapore in 2018, with a share of 0.0302096% of the total gdp. on average, the regulatory quality has a scale of -0.3174903, with the highest scale belonging to brunei darussalam in 2013, at 1.149036, meanwhile the lowest scale is -2.348573, is recorded by singapore in 2014. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 532 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. model selection test results table 3. model selection test test test value prob. values conclusion chow test 49.98 0.0000 fixed effect model is better than common effect model / pooled least square lm bp test 69.80 0.0000 random effect model is better than common effect model / pooled least square hausman test 23.15 0.0032 fixed effect model is better than random effect model source: data processed using stata 17, 2023 the model selection tests conducted have determined that the fixed effect model is the most suitable choice for this study. following the selection of the panel data model, the testing will now proceed to examine the classical assumption tests. c. classical assumption tests results tabel 4. classical assumption test test prob. values conclusion uji normalitas 0.2424 data is normally distributed uji multikolinearitas 12.83 there are symptoms of multicollinearity uji heteroskedastisitas 0.0028 there are symptoms of heteroscedasticity uji autokorelasi 0.1205 there are no symptoms of autocorrelation source: data processed using stata 17, 2023 the finding from the classical assumption tests presented in the table 4 is an evidence that the data successfully meet the criteria for normality and lack of autocorrelation. this is supported by the probability values exceeding α=0.05. however, there is an indication of multicollinearity, as the variance inflation factor (vif) values surpass 10. multicollinearity is considered absent when the vif is below 10. this study uses panel data, which is a combination of cross-section and time series data, and it is a rule of thumb that multicollinearity issues can be ignored (gujarati, 2003). gujarati et al., (2012) also stated that classical assumption tests are not always necessary in panel data analysis as they naturally minimize biases that are likely to arise in the analysis results, and to provide more information, variation, as well as degree of freedom. on the other hand, the data indicate evidence of heteroscedasticity as the probability values are not greater than α=0.05. to https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 533 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc address this issue, the author uses the panel corrected standard error (pcse) method (greene, 2018). d. hypothesis test results table 5. panel corrected standard error (pcse) model regression analysis panel-corrected tr coefficient std. err. z p>|z| (twotailed) p>|z| (onetailed) [95% conf. interval] fdi 0.2455392 0.1287295 1.91 0.056 0.028 -0.006766 0.4978445 fdireg 0.1808459 0.0689645 2.62 0.009 0.0045 0.045678 0.3160137 agri -0.0031029 0.086385 -0.04 0.971 0.4855 -0.1724145 0.1662086 agrireg -0.1325244 0.0639509 -2.07 0.038 0.019 -0.2578658 -0.0071829 reg 0.3936803 0.8883719 0.44 0.658 0.329 -1.347497 2.134857 serv 0.3399658 0.0388351 8.75 0.000 0.000 0.2638504 0.4160811 urban -0.0771614 0.0303262 -2.54 0.011 0.0055 -0.1365997 -0.0177231 corr -2.617602 1.159781 -2.26 0.024 0.012 -4.890731 -0.3444733 _cons -2.218772 3.968364 -0.56 0.576 0.288 -9.996622 5.559078 source: data processed using stata 17, 2023 1. simultaneous test (f-test) from the test results, it is known that simultaneously the variables fdi, agricultural sector, regulatory quality and the interaction of fdi and the agricultural sector moderated by the regulatory quality have a significant influence on tax revenue in asean countries. this can be seen from the prob > chi2 value of 0.0000 (less than the 5 percent alpha level). 2. partial test (t-test) the partial test can be observed from the p>|z| values as seen in the above table. if the p>|z| value is less than the alpha level, then the variable is considered to have a significant influence on tax revenue in asean countries. since the research hypothesis is done in a one-tailed way, thus, the value used is the one in the p>|z| (one-tailed) column. in asean member countries, the variable of foreign direct investment (fdi) has a notable and positive effect on tax revenue, while the variable of the agricultural sector does not impact tax revenue. however, when regulatory quality is introduced as a moderating variable, the fdi variable demonstrates a positive and significant influence on tax revenue. conversely, the agricultural sector variable, when moderated by regulatory quality, shows a significant negative impact on tax revenue. it is crucial to note that the moderating variable, regulatory quality, does not have a direct influence on tax revenue in asean member countries. 3. coefficient of determination (r2) https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 534 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the coefficient of determination (r2) value is 0.7522 or 75.22 percent. this means that the fdi variable, agricultural sector variable, regulatory quality, fdi and agricultural sector variables moderated by the regulatory quality, as well as the control variables, collectively account for 75.22 percent of the variation in the dependent variable, which is a tax revenue in asean member countries. other variables not included in the analysis account for the remaining 24.78 percent of the influence. the regression results of the panel data are shown in the following model: y = -2.218772 + 0.2455392x1 – 0.0031029x2 + 0.3936803z + 0.1808459x1z – 0.1325244x2z + 0.3399658x3 – 0.0771614x4 – 2.617602x5 as described, the constant value of -2.218772 can be interpreted as the tax revenue ratio when there are no fdi, agricultural sector, and regulatory quality variables. the fdi variable has a coefficient of 0.2455392, with a positive sign indicating a positive relationship between fdi and tax revenue in asean member countries. this means that a 1% increase in fdi will result in a 0.2455392% increase in tax revenue. conversely, there exists a negative correlation between the agricultural sector and tax revenue. a 1% increase in gdp from the agricultural sector leads to a decrease of 0.0031029% in tax revenue. the regulatory quality variable has a positive coefficient, indicating that a 1% increase in the variable will result in a 0.3936803% increase in tax revenue. the interaction coefficient between fdi and regulatory quality is positively estimated at 0.1808459. this suggests that a 1% rise in the interaction between fdi and regulatory quality will result in a corresponding increase of 0.1808459% in tax revenue. conversely, the coefficient of the agricultural sector moderated by the regulatory quality is negative. this concludes that a 1% increase in the interaction between the agricultural sector and regulatory quality will decrease tax revenue by 0.1325244%. the impact of foreign direct investment (fdi) on tax revenue of asean countries prior research has investigated the correlation between fdi and tax revenue. for instance, camara (2022) found a positive and significant impact of fdi on a country's tax revenue. similar findings were reported by ade et al., (2018) dan mahmood & chaudhary (2013). the testing and data analysis in this study indicate that fdi has a significant positive effect on tax revenue in asean member countries. this supports the hypothesis developed by the author, leading to the conclusion that the hypothesis is accepted. these findings align with the harrod-domar theory, which emphasizes the importance of investment for regional economic growth. additionally, these findings are consistent with the research by camara & comaniciu (2014) but contradict the study conducted by gaspareniene et al., (2022), which suggested a negative and significant impact of fdi on tax revenue. in essence, foreign direct investment (fdi) has the potential to boost tax revenue by fostering productivity in the host country. a company receiving fdi inflows will experience an increase in its output, lead to higher profits. al-sadig (2013) argued that fdi has a crowd-in effect on private sector investment in the host country. increased investment levels provide more funding sources that can be utilized for a company's capital in conducting business. eze et al., (2019) stated that fdi has a positive impact on increasing output in the manufacturing sector. fdi also has a positive https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 535 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and significant effect on output in the service sector (dwivedi & badge, 2013). an increase in a company's profit will expand its tax base. assuming the tax rate remains unchanged, an expansion of the tax base will lead to a subsequent rise in tax revenue generated by the country. furthermore, fdi can contribute to a country's tax revenue by creating new job opportunities (zhang & song, 2001). fdi inflows have a ripple effect on productivity, creating a competitive environment that fosters the establishment of new businesses and the expansion of existing ones. as companies grow in size, they need more employees to run the business smoothly. the need for additional employees generates more job opportunities, which, therefore, leads to an expanded labor force. this, in turn, results in a larger tax base for individual income tax, which boosts a country's tax revenue. furthermore, foreign direct investment (fdi) affects both the economy of a country and the level of income of its residents, stimulating aggregate demand and driving an increase in consumer spending (mahmood & chaudhary, 2013). as consumer spending rises, the tax base for value-added tax expands accordingly, contributing further to the country's tax revenue. the impact of agricultural sector on tax revenue of asean countries based on the test results, it can be concluded that the agricultural sector does not influence tax revenue of a country, specifically asean member countries. this finding contradicts the hypothesis developed by the author, with a rejection in the hypothesis. moreover, the results of this research also contradict the findings of kitessa & jewaria (2018) who state that agricultural sector impacts tax revenue of a country positively. on the other hand, the results of this study align with the studies conducted by piancastelli (2001), chaudhry & munir (2010), ayenew (2016) dan ahmad et al., (2016). each sector has different levels of ease when it comes to taxation. one sector may be more easily taxed compared to the others. the agricultural sector is one of the sectors that is challenging to optimize in terms of tax imposition. ayenew (2016) mentioned that taxing the agricultural sector is not easy, especially in developing countries where agriculture dominates other sectors. according to agbeyegbe et al., (2006) some countries are hesitant to tax the agricultural sector due to its subsistence nature. additionally, the informal nature of sectors such as agriculture makes it more time-consuming and labor-intensive to enforce taxation. it is safe to say that the cost is incomparable to the potential benefits. whereas on the surface taxing informal sectors like agriculture may appear to be a crucial and substantial revenue source to bolster the country's economy, in reality, individuals within this sector earn relatively low income (f. schneider, 2005; f. schneider et al., 2010; f. g. schneider & klinglmair, 2004). the taxation system in the agricultural sector, which commonly relies on self-assessment, leads to insufficient data for government oversight. this makes government unable to fully dig the potential revenue, resulting in potential losses in the agricultural sector. in general, when income increases in a sector, taxable income derived from that sector will go up. this domino effect leads to increased tax revenue for the country as well. this concept forms the basis of the revenuegenerating effect theory proposed by chang et al. (2006). however, due to the self-assessment taxation system where taxpayers self-report and determine the amount they will pay, the government cannot effectively ensure and monitor tax payments from individuals working in the agricultural sector. furthermore, the self-assessment taxation system allows taxpayers to engage in fraudulent activities such as tax evasion (wahyuni, 2011). consequently, when the contribution in agricultural sector rises, the effect is not accompanied by an increase in the country's tax revenues. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 536 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc additionally, the limited knowledge among individuals involved in agriculture regarding taxation contributes to the low tax revenue generated from this sector. rahayu, (2017) revealed that taxpayers' knowledge of taxation regulations and provisions has a positive and significant impact on their compliance. when taxpayers have a good understanding of the taxation process, they tend to consciously pay and report their taxes to the government because they recognize the benefits derived from taxation (andiko et al., 2018). conversely, a lack of knowledge regarding taxation regulations can lead taxpayers to neglect their obligations. the impact of regulatory quality on tax revenue of asean countries regulatory quality does not have an influence on tax revenue. this is consistent with the research findings of phuong (2015) and yaru & raji (2022). on the other hand, there are contradictory results between the test results and the hypotheses presented in this study. the quality of regulation reflects the perceived capability of the government to establish and execute effective policies and regulations, thereby facilitating and encouraging the development of the private sector. a research conducted by asmah et al., (2020) implied that good quality regulations can weaken the effect of trade misinvoicing on tax revenue, which, although not significant, has a positive influence on tax revenue in sub-saharan african countries. on the contrary, the author's findings contrast with the research done by syadullah, (2015) which stated that regulatory quality has a positive influence on tax revenue. essentially, good quality regulations in a country can improve the country's economy, which ultimately can have an impact on increasing tax revenue. however, a regulation will take time to reap the desired effects.guasch & hahn (1999) stated that the implementation of regulations incurs substantial costs. this is in accordance with the research conducted by jalilian et al., (2007) in which two types of costs need to be met when the government implements a new regulation. first, the direct administrative costs of the regulatory system are absorbed within the government and become evident in the allocation of budgets for supervisory bodies. second, the compliance costs of a regulation implemented by the government. no matter how well the government formulates a regulation and/or policy, the regulation will not achieve the desired results if the public ignore the provisions or even seeks loopholes to gain personal benefits. this means that for a regulation to function optimally, optimal government supervision is required. on the other hand, not all regulations related to taxation will have an impact on tax revenue. the indonesian government issued “pmk nomor 59 tahun 2022 tentang perubahan atas pmk nomor 231/pmk.03/2019 tentang tata cara pendaftaran dan penghapusan npwp, pengukuhan dan pencabutan pengukuhan pkp, serta pemotongan dan/atau penyetoran, dan pelaporan pajak bagi instansi pemerintah” or regulation number 59 of 2022 concerning amendments to regulation number 231/pmk.03/2019 concerning the registration and cancellation procedures for taxpayer identification numbers (npwp), confirmation and revocation of value added taxable entrepreneurs (pkp), as well as tax deductions and/or deposits, and tax reporting for government agencies. one of the provisions in this regulation deals with the tax collection treatment for transactions using government village credit cards, making it similar to the treatment for transactions using government central credit cards. this regulation falls within the field of taxation, but it has no relevance to the amount of tax revenue in indonesia. another example is the change in the field verification policy, which was initially conducted during the application for the confirmation of taxable entrepreneurs but is now done during the application for taxable https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 537 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc entrepreneurs account activation, as stated in “per-04/pj/2020 tentang petunjuk teknis pelaksanaan administrasi nomor pokok wajib pajak, sertifikat elektronik, dan pengukuhan pengusaha kena pajak” or per-04/pj/2020 concerning the technical guidelines for the administration of taxpayer identification numbers, electronic certificates, and confirmation of taxable entrepreneurs. administrative regulations which aim to facilitate a business process do not target increasing tax revenue as their ultimate goal. therefore, the need to increase the amount of tax revenue in a country can not be fulfilled. the influence of the interaction between foreign direct investment (fdi) and regulatory quality on tax revenue in asean member countries the test results show that after moderating process, fdi still has a positive and significant influence on a country's tax revenue. however, prior to the moderation process, the moderating variable actually weakens the influence of fdi on tax revenue. fdi provides various benefits that can increase a country's tax revenue. bénassy-quéré et al., (2007) argued that the fdi effect driven by good governance policy formation becomes an important indicator for sustainable and comprehensive economic growth and development. amelia & sukadana (2019) stated that there is a strong and positive relationship between the quality of regulations and governance and the value of fdi received by a country. better regulations that support an investment climate will significantly encourage investors to invest their capital. for example, singapore offers a policy where the government does not require investors to purchase production factors from local sources or determine the percentage of output for export. in addition, singapore has a smart regulation committee acting not only as a regulator but also as a facilitator, thus developing business and investment-friendly regulatory regimes. on the other hand, vietnam, in its investment law no. 67/2014/qh13, has developed a regulation that simplifies licensing and business operations for foreign companies. the creation of regulations to facilitate the business and investment climate encourages investors to invest their capital in that country (wicaksono, 2021). however, despite the benefits offered by foreign investment, there is a possibility that these may not be realized under certain conditions. gaspareniene et al., 2022 stated that fdi has the potential to reduce tax revenue due to tax incentives such as tax-free zones, lower corporate tax rates, or other forms of incentives. each country competes to attract fdi into their country. this is in line with dunning's oli paradigm, where location advantage is a determinant for investors to inject their capital into a country. government regulations and policies, such as massive and aggressive tax incentives and the phenomenon of transfer pricing, can also reduce a country's tax revenue. the regulations of a country either hinder or facilitate the inflow and outflow of fdi, while market regulations such as price setting can affect the profitability of multinational companies. likewise, the enforcement of contracts and the presence of a robust legal framework in a country affect both the conduct and profitability of companies operating in the market, and their decision to enter the country in the first place. research conducted in ethiopia revealed that fdi has a detrimental effect on tax revenue due to extensive tax incentives (jeza et al., 2016). countries will compete to lower their tax rates to appear more attractive to foreign investors. in line with this, pratomo (2020) stated that fdi can also have a negative impact on a country's tax revenue if there is a phenomenon of transfer pricing by multinational companies. globalization and substantial https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 538 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variations in tax rates among nations provide multinational companies with opportunities to partake in profit shifting activities. as a result, the host country may not receive optimal tax revenue benefits from fdi if the profits of multinational companies are redirected to other countries with lower tax rates or countries referred to as tax havens. the influence of the interaction between agricultural sector and regulatory quality on tax revenue in asean member countries the agricultural sector variable shows a significant negative influence after being moderated by regulatory quality. it can be said that the moderating variable, namely regulatory quality, strengthens the negative effect of the agricultural sector on tax revenue. research conducted by gaalya et al., (2017) suggests that the regulatory quality in asean countries reduces tax revenue both directly and indirectly. furthermore, mohammed & sanusi (2020) obtained consistent research results, stating that the negative influence of regulatory quality reflects the weak regulatory structure's nature in revenue mobilization. taxing the agricultural sector is inherently challenging due to the prevalence of subsistence activities, many of which operate within the informal sector. febrio kacaribu, the head of fiscal policy agency at the ministry of finance (bkf kemenkeu), noted that despite the agricultural sector's substantial contribution to the country's gdp, it makes a minimal contribution to tax revenue (pejabat pengelola informasi dan dokumentasi (ppid) kementerian keuangan, 2021). one of the reasons is the numerous regulations that provide tax incentives to the agricultural sector. in 2019, the government issued “peraturan pemerintah nomor 78 tahun 2019 tentang fasilitas pajak penghasilan untuk penanaman modal di bidang-bidang usaha tertentu” or government regulation number 78 of 2019 concerning income tax facilities for investment in certain business fields. the regulations mention tax incentives in the form of a 30% reduction in net income from tangible fixed assets for parties willing to invest in the agricultural sector. furthermore, the government provides tax incentives for the agricultural sector and other sectors related to agriculture. construction services in the irrigation land for instance, use acceleration program (p3-tgai) generate a final income tax incentive borne by the government. not only in indonesia, but also other asean countries have their own tax incentives for the agricultural sector. the philippines implemented undang-undang 19-2021 tentang pembebasan dari pajak penghasilan bagi usaha tani dan nelayan terakreditasi (accredited farmers and fisherfolk enterprises) registered at barangay micro-business enterprises (bmbes) or republic act 19-2021 on income tax exemption for accredited farmers and fisherfolk enterprises registered at barangay micro-business enterprises (bmbes), also known as the sagip saka act (alburo, 2022). on the other hand, vietnam offers various types and layers of tax incentives for the agricultural sector, ranging from tariff percentage reductions to income tax exemptions (du & tai, 2020). the regulations made by these countries are intended to build and develop the existence and sustainability of the agricultural sector, as it is an important sector for a country. however, it cannot be denied that the numerous tax incentives provided will reduce the tax revenue of the country. tax incentives prevent the government from taxing what are considered taxable and/or from properly reducing what should not be taxed. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a dynamic interaction with regulatory quality as the moderation anwar and wijaya 539 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusions this study aims to determine the effects of foreign direct investment (fdi) and the agricultural sector on tax revenue in asean member countries, using regulatory quality as a moderator. the research results indicate that fdi has a significant positive effect on tax revenue in asean member countries. fdi increases tax revenue by contributing to the host country's productivity. additionally, fdi boosts a country's tax revenue by creating new employment opportunities and increasing consumer spending, thereby expanding the value-added tax-based. the agricultural sector does not affect tax revenue in asean member countries. the selfassessment taxation system in the agricultural sector makes it difficult to optimize tax collection. moreover, the limited knowledge of individuals involved in agriculture regarding taxation is a contributing factor to the sector's low tax revenue. as for regulatory quality, it does not have an impact on tax revenue in asean member countries. this is due to a considerable amount of time taken for a regulation to achieve the desired effects, thus government oversight efforts are required. furthermore, not all tax-related regulations have an impact on a country's tax revenue. administrative regulations aimed at facilitating business processes do not affect the amount of tax revenue gained in a country as it is not their objective in the first place. the moderating variable, regulatory quality, weakens the influence of fdi on tax revenue as a consequence of the existing government regulations and policies, such as extensive and aggressive tax incentives. countries compete to lower their tax rates to appear more attractive to foreign investors. additionally, the phenomenon of transfer pricing done by multinational companies can reduce a country's tax revenue. regulatory quality as a moderating variable strengthens the negative impact of the agricultural sector on tax revenue in asean member countries. this is due to the numerous regulations providing tax incentives for the agricultural sector. the regulations made by these countries aim to build and develop the existence and sustainability of the agricultural sector. however, at the same time, the abundance of tax incentives creates a trade-off by reducing the tax revenue derived from this sector. in addition to the variables used in this study, it is important to consider other factors that influence tax revenue in asean member countries. further research may include other variables such as the influence industrial and/or service sectors have on tax revenue to determine which sector has a more significant effect. from the government's perspective as a policy-maker, it is essential to actively highlight the issues related to regulations governing foreign direct investment in their country and to rigorously implement an effective taxation system across various sectors. this, most expectedly, will strengthen tax revenue of a nation in the future. https://www.ilomata.org/index.php/ijtc tax revenue, fdi, and agricultural sector: a 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(2001). promoting exports: the role of inward fdi in china. china economic review, 11(4), 385–396. https://doi.org/10.1016/s1043-951x(01)00033-5 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 3 july 2022 page no. 307-319 308 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 citra novlyani1, dinda annisa darmawan2 12institut ilmu sosial dan manajemen stiami, indonesia correspondent: citranovlyani@gmail.com1 , dindadarmawan01@gmail.com2 received : june 1, 2022 accepted : july 25, 2022 published : july 31, 2022 citation: novlyani, c., darmawan, d. a. (2022). effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 20192021. ilomata international journal of tax and accounting, 3(3), 307-319. https://doi.org/10.52728/ijtc.v3i3.531 abstract: local taxes are taxes collected and managed by local governments to fund all government functions and local development. the local revenue board is a local apparatus that functions to manage all types of revenue and local wealth income, one of which is land and building tax in the rural and urban sector (pbb-p2). the high amount of pbb p2 receivables in bekasi city is due to problems in the implementation of tax collection. this research was conducted to determine the effectiveness of the pbb-p2 receivable collection in bekasi city and the obstacles and efforts done in the collection of pbb-p2. the researcher used research methods descriptive qualitative. data collection from this research is by interview, observation, and documentation. the result of this research shows that the effectiveness of land and building tax in the rural and urban sector collection of receivables in increasing the realization of revenue is less effective when viewed from the non-achievement of the revenue target in 2021 with a percentage of 77.46% and the high number of pbb-p2 receivables which continues to increase every year. less effective collection of pbb-p2 receivables in the city bekasi is caused by several obstacles that occur such as lack of awareness of taxpayers, uneven socialization, lack of quality and quantity of human resources, and limited facilities and infrastructure. the efforts made by the local revenue board of bekasi city are to socialize along with banks to make it easier for taxpayers to make payments and cooperate with the executive unit for integrated service of sub-districts, villages, and neighborhood/hamlets. keywords: land and building tax in the rural and urban sector (pbb-p2), pbb-p2 receivable, pbb-p2 collection this is an open access article under the cc-by 4.0 license. introduction tax is a mandatory contribution to the state that is owed by an individual or entity (marlina & syahribulan, 2021; oktaviani et al., 2020; padyanoor, 2020) that is forced by law without obtaining an imbalance and is used for the purposes of the state for the greatest prosperity of the people according to law number 16 of 2009 (budiarso & karina, 2016; mardiasmo, https://www.ilomata.org/index.php/ijtc mailto:citranovlyani@gmail.com1 mailto:%20dindadarmawan01@gmail.com2 https://doi.org/10.52728/ijtc.v3i3.531 effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 309 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2018; pohan, 2021; widiastuti, 2017). tax is a very potential alternative (selvi & ramdhan, 2020; sitohang & sinabutar, 2020; tambunan, 2020). as one of the potential sources of state tax revenue, the sector is a very appropriate choice, besides that it is relatively a reflection of the active participation of the community in financing development (egbunike et al., 2018; lahiri & yang, 2021; matti et al., 2022). the number of sources of tax that can be collected will improve infrastructure and public facilities (aulawi, 2020; capistrano, 2020; ndoricimpa, 2021). likewise, local taxes are used to carry out all government activities and regional development. with local revenue, it will minimize the area to central assistance (benvenutti et al., 2016; huang et al., 2022; koethenbuerger, 2011). the rural and urban land and building tax (pbb-p2) is one type of regional tax with great potential for tax collection (fendrich et al., 2022; janoušková & sobotovičová, 2019; miyazaki & sato, 2022). rural and urban land and building tax is a tax on land and or buildings owned, controlled and or utilized by individuals or entities, except for areas used for forestry plantation and mining business activities (anwari & bandiyono, 2021; hapsari et al., 2018; prawitra & lutfi, 2021). the rural and urban land and building tax was originally a central tax which was converted into a regional tax . this transfer means that the overall management of the rural and urban land and building tax is handed over to regency/city governments throughout indonesia, including in the city of bekasi. based on data from the bekasi city regional revenue agency, the realization of pbb-p2 revenues in bekasi city from 2019 to 2021 is still fluctuating. in 2019, the pbb-p2 target was set at rp. 599,712,917,219 with the realization of pbb-p2 amounting to rp. 481,729,062,142, this indicates the achievement of the target and the highest realization, but the increase in realization is not balanced with the achievement of the targets that have been set. while in 2020 there was a significant decrease in the target and in 2021 there was an increase in realization from the previous year but the target was not achieved with a percentage of only 77.46%. land and building tax receipts p2 experienced a decrease in targets and realization, one factor due to the large number of pbb-p2 receivables in bekasi city. the number of pbb-p2 receivables in bekasi city continues to increase every year. the total uncollected pbb-p2 receivables until 2021 reached rp. 885,025,118,886 (bapenda bekasi city 2022). the high receivables were due to various problems in the implementation of tax collection. based on the results of the initial interview with mr. arul prestige of the operation section (opsir) of arenjaya village, there are still many obstacles in carrying out the process of collecting tax arrears or pbb-p2 receivables, including taxpayers who have tax arrears, but the taxpayer is reluctant to pay the tax arrears, the implementation of billing to taxpayers are not implemented optimally so that collections cannot be done and taxpayers whose whereabouts are not known. based on the explanation above, a common thread can be drawn that the implementation of billing is still not running optimally because of the lack of firm collection, tax identification that is not carried out properly and it can also be suspected that taxpayer compliance tends to be weak. therefore, the authors raised the theme of effectiveness with the following objectives: 1. to analyze the effectiveness of collecting rural and urban land and building tax receivables in bekasi city. 2. to analyze the obstacles faced in collecting rural and urban land and building tax receivables in bekasi city. 3. to analyze what efforts are being made to overcome obstacles in collecting rural and urban land and building tax receivables in bekasi city. https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 310 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc • literature review 1. basic tax theory : according to p.j.a. andriani in (rahayu, 2017) formulates: “taxes are contributions to the state (which can be enforced) owed by those who are obliged to pay them according to regulations without getting performance back, which can be directly appointed, and whose purpose is to finance general expenses related to the state's duty to run the government.” tax elements: (1) contributions from the people to the state. only the state has the right to collect taxes. the contribution is in the form of money (not goods). (2) based on the law. taxes are collected based on or with the force of the law and its implementing rules. (3) no reciprocal services or counter-achievements from countries that can be directly appointed. in the payment of taxes, it cannot be shown that there is an individual contra-achievement by the government. (4) used to finance state households, namely expenditures that are beneficial to the wider community. 2. local tax : according to dwikora harjo (2019, 16) define: “regional tax is a tax that the regional government stipulates and collects based on regional regulations (perda) to be ratified in the regional revenue and expenditure budget and used to finance regional families.” types of regional taxes based on law number 28 of 2009 concerning regional taxes and regional levies (in samudra 2015, 68) regional taxes are divided into 2 types, namely: (1) provincial taxes, consisting of: (a) vehicle tax; (b) duty on transfer of motor vehicle names; (c) motor vehicle fuel tax; (d) surface water tax; and (e) cigarette tax. (2) regency/city taxes consist of: (a) hotel tax; (b) restaurant tax; (c) entertainment tax; (d) advertisement tax; (e) street lighting tax; (f) non-metal and rock mineral tax; (g) parking tax; (h) groundwater tax; (i) swallow's nest tax; (j) rural and urban land and building tax; (k) fee for the acquisition of rights on land and buildings. 3. land and building tax in the rural and urban sector : according to the bekasi city regulation number 10 of 2019 concerning regional taxes, rural urban land and building tax is a tax on land and/or buildings owned, controlled, and/or utilized by an individual or entity, except for the area used for plantation, forestry, and mining business activities. earth is the surface of the earth which includes land and inland waters and territorial seas district/city. while what is meant by building is engineering construction that is planted or permanently located on land and/or inland waters and/or sea. according to darwin (2013, 8) rural and urban land and building tax subjects are individuals or entities that actually have a right to the land, and/or obtain benefits over the land, and/or own, control and/or obtain and/or benefit from the building. while the object of the land and building tax is the earth and/or building, the meaning of the earth is the surface of the earth and the body beneath it. the earth's surface includes land and inland waters as well as the seas of the indonesian territory. the basis for imposition of pbb-p2 uses the selling value of the tax object. in general, njop is obtained from buying and selling transactions that occur normally, but when there is no sale and purchase transaction, the njop will be determined by comparing the prices of tax objects. land and building tax rates that apply until 2021 refer to the law of the republic of indonesia number 28 of 2009 concerning regional taxes and regional levies, then the land and building tax rates are determined by regional regulations, where the highest rate is 0.3% (zero). point three percent). the calculation for pbb-p2 is based on the selling value for the building https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 311 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before the tax rate is applied, first reduced by the non-taxable selling value of rp. 10,000,000 (ten million rupiah). 4. land and building tax collection: definition of tax collection according to mardiasmo (2018, 141) namely: “a series of actions so that the tax insurer pays off the tax payable and the cost of tax collection by reprimanding or warning, carrying out instantaneous collection at once, notifying the forced letter, proposing prevention, carrying out confiscation, carrying out hostage taking, selling confiscated goods.” the right to collect taxes expires after exceeding 5 (five) years from the time the tax is due. taxes payable based on sppt, skpd, skpdkb, skpdkbt, stpd, correctional decision letter, objection decision letter, and appeal decision that are not or underpaid by the taxpayer on time can be collected by force letter. based on law no. 28 of 2009 concerning regional taxes and regional levies, the basis for collecting taxes must be paid within a maximum period of 1 (one) month from the date of issue. the amount of tax underpayment in the skpdkb will be subject to administrative sanctions in the form of interest of 2% (two percent) a month calculated from underpaid or late taxes for a maximum period of 24 (twenty four) months from the time the tax becomes due. 5. effectiveness: according to h. emerson as quoted by handayaningrat in his book entitled introduction to administration and management (1999, 16), namely: “effectiveness is a measuring in term of attaining prescribed goals or objectives” it is clear that if the goals and objectives have been achieved as previously planned, it is effective. so, if the goal or goal is not completed in accordance with the allotted time, the work cannot be said to be effective. factors that affect the organization must receive serious attention if you want to realize an effectiveness. according to h. emerson (handayaningrat 1999) said about the effectiveness measure, as follows: (1) achieving goals. objectives are the implementation of an organization's mission statement. the meaning of achieving goals, namely something that has been implemented and gets the desired results. (2) standard time. standard time is the time required to complete a cycle of work carried out according to work methods and normal speed with consideration of adjustment factors plus time allowances for personal and other unexpected needs that cannot be said to be effective. meanwhile, according to halim (2012) the formula used to measure the effectiveness of the implementation of tax audits is as follows: an organization can be said to be effective if it can achieve what has been expected. below is a table regarding the percentage of interpretation of effectiveness criteria: table i interpretation of effectiveness value percentage criteria >100% very effective effectiveness ratio = acceptance realization x 100% acceptance target https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 312 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: mahmudi (2016) method this study uses a qualitative approach with a descriptive type of research. the main purpose of using a qualitative approach is to uncover facts and phenomena on the effectiveness of collecting p2 land and building tax receivables in order to increase the realization of revenue at the bekasi city bapenda in 2019-2021. the data collection techniques used in this study were in the form of observation, documentation and interviews with several informants, including the head of the tax office in the sub-field of billing for the bekasi city regional revenue agency, academic lecturers from the stiami institute and three pbb-p2 taxpayers. in the process of data analysis carried out by the author in this study using the theory of miles and huberman (sugiyono, 2014, 2019) namely the activity of analyzing qualitative data is interactive and continuous until it is completed. the analysis process is carried out by researchers, namely doing data reduction, presenting data and drawing conclusions. the location of the study to determine the effectiveness of the collection of pbb-p2 receivables in the city of bekasi was carried out at the bekasi city regional revenue agency, which is located at jl. ir. h. juanda no. 100, margahayu, east bekasi, bekasi city. conceptual framework understanding the framework of thinking according to sapto haryoko (sugiyono, 2019), namely: “the framework of thinking is a synthesis of the relationship between variables compiled from various theories that have been described. based on the theories that have been described. furthermore, it is analyzed critically and systematically, so as to produce a synthesis of the relationship between the variables studied. the synthesis of the relationship between these variables is then used to formulate hypotheses.” the conceptual framework created by the author describes the effectiveness of collecting rural and urban land and building tax receivables in increasing the realization of revenue in bekasi city. the purpose of this research is to determine the effectiveness of collecting rural and urban land and building tax receivables in bekasi city. this research was conducted at the office of the regional revenue agency of bekasi city. the results of this study can show the effectiveness of the implementation of rural and urban land and building tax collections in increasing the realization of revenue at the bekasi city regional revenue agency as well as the obstacles and efforts. in this study, the author uses the theory put forward by h. emerson (handayaningrat 1999) in general, the criteria for effectiveness can be classified into 2 items, namely the achievement of goals and time standards. the following is a conceptual model created by the author: 90-100% effective 80-90% effective enough 60-80% less effective <60% ineffective https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 313 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure i conceptual model result and discussion in the research that has been done, the researcher uses research instruments in the form of interviews, observations and documentation. the following are data relating to the main problems in the research obtained from the bekasi city regional revenue agency. table ii target and realization of pbb-p2 revenue for bekasi city in 2019-2021 year target realization percentage 2019 599.712.917.219 481.729.062.142 80,32% 2020 420.000.000.000 434.325.888.805 103,41% 2021 579.533.417.588 448.920.284.130 77,46% source: bapenda bekasi city 2022 based on table ii above, it can be seen that the realization of pbb-p2 revenue in 2017 to 2021 has fluctuated. in 2019, the pbb-p2 target was set at idr 599,712,917,219 with the realization of pbb-p2 amounting to idr 481,729,062,142, this indicates the achievement of the target and the highest realization, but the increase in realization is not balanced with the achievement of the targets that have been set. while in 2020 there was a significant decrease in the target but the realization had exceeded the target with a percentage of 103.4% and in 2021 there was an increase in realization from the previous year but the target was not achieved with a percentage of only 77.46%. one of the factors for the low realization and not achieving the target was due to the unresolved pbb-p2 receivables due to the implementation of receivable collection that was not optimal. the author also collects data from the bekasi city bapenda regarding the amount of receivables of sppt pbb-p2 in bekasi city as follows: effectiveness of land and building tax collection in rural urban at the bekasi city regional revenue agency theori: harrington emerson goal achieved standard time obstacles efforts to increase the realization of rural urban land and building tax in bekasi city https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 314 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table iii final balance of sppt pbb-p2 accounts receivable in bekasi city for 2019-2021 tahun sppt jumlah (rp) 2019 3.971.843 664.220.691.917 2020 4.000.263 763.760.123.474 2021 4.117.623 885.025.118.886 source: bapenda bekasi city 2022 from the table described above, it can be seen that the pbb-p2 receivables in bekasi city continue to increase every year. the total uncollected pbb-p2 receivables until 2021 reached rp 885,025,118,886. the high pbb-p2 receivable caused the low realization of pbb-p2 revenue which is one of the sources of funding for regional development financing in bekasi city. this indicates that the bekasi city bapenda must try to be more assertive in collecting the pbb-p2 receivables. the pbb-p2 arrears in bekasi city have been going on for years so that they accumulate and are increasingly difficult to collect. so, if the data on the realization of pbb-p2 revenues for 2019-2021 is juxtaposed with data on the amount of pbb-p2 receivables. thus it can be concluded based on the effectiveness value table, pbb-p2 collection activities in bekasi city are less effective because an organization can be said to be effective if it can achieve what has been expected while pbb-p2 receipts in bekasi city in 2019 and 2021 do not reach the target with the percentage in 2021 is 77.46%. one of the causes of the ineffectiveness of collection is due to the high amount of pbb-p2 receivables which has continued to increase in the last three years. as stated above that in analyzing the problem in this study refers to the theory of effectiveness from h. emerson quoted by handayaningrat in his book entitled introduction to administration and management science (1999), according to h. emerson there are 2 dimensions in measuring effectiveness, namely the achievement of goals. and standard time. in addition, it will also analyze the obstacles faced by the pbb-p2 billing officer in carrying out their duties and what efforts must be made to deal with these obstacles. the analysis was carried out based on the results of observations in the field, conducted interviews with informants consisting of regulators, academics and taxpayers as well as activities to document the data needed to carry out this analysis. the following discussion is carried out by the author in accordance with the approach and reference to the theory as follows: 1. effectiveness of collection of land and building tax receivables p2 in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021. bekasi city regional regulation number 10 of 2019 concerning regional taxes which is the legal basis applied in the city of bekasi. this regulation is applied to the imposition of local taxes and services provided by the government, including collection. billing is a series of actions so that taxpayers pay off their tax debts by giving warnings, warnings, carrying out instant and simultaneous collections and notifying forced letters. https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 315 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pbb-p2 receivables occur when the right of the state/region to collect arises. the amount of pbb-p2 receivables consists of principal and/or administrative sanctions contained in the sppt/skp/stp. pbb-p2 receivables will continue to be recorded in the financial statements if in the following years the taxpayer has not paid/paid more than the due date. the expiry period of these receivables is up to 5 years, resulting in a high number of receivables and a fairly heavy burden for the bekasi city bapenda.. a. goal achieved the purpose of this collection is to make taxpayers pay their land and building tax debts, the target is taxpayers who have pbb-p2 arrears or do not pay off their tax debts until maturity in the last 5 years. so the strategies that can be carried out include carrying out side operations (opsir) and socialization as well as providing rewards and punishments for officers and taxpayers. has a tracking system to help officers trace pbb-p2 and increase payment points. facilities facilities and infrastructure are still limited in number and billing procedures have been carried out quite well and systematically, starting from recapitulating data, making letters of warning/reprimand, visiting taxpayers and submitting sppt/stpd and helping deposit pbb-p2. b. standard time in resolving pbb-p2 receivables through this billing system, socialization to taxpayers regarding pbb-p2 is needed because the level of awareness/compliance of taxpayers can be influenced by the socialization provided by the officer. there has been socialization to taxpayers from officers but it is felt that taxpayers are still not running optimally and unevenly because the information provided is limited. sanctions are also given to taxpayers in the form of a fine of 2% for 24 months and social sanctions in the form of placing a sign for taxpayers with debts above 100 million rupiah. the evaluation of the collection of pbb-p2 receivables is also routinely carried out by the collection team of the bekasi city bapenda to see how far the revenue target has been achieved. as for the number of human resources in the field of billing at the bekasi city bapenda, there are only 16 people, so it can be said that their performance is less effective considering the vast area of the city of bekasi. 2. obstacles in collecting rural and urban land and building tax receivables in bekasi city from the results of interviews with regulators, taxpayers and academics, it was found that several obstacles faced in the process of collecting receivables caused the implementation of collection of pbb-p2 receivables in bekasi city to be less than optimal, including: 1) the location of the taxpayer who is not known because he no longer occupies or inhabits the tax object he owns 2) the economic capacity of taxpayers is low due to the covid-19 pandemic 3) lack of socialization due to limited human resources 4) limited facilities and infrastructure provided and payment systems that are often offline. 3. efforts to overcome obstacles in collecting rural and urban land and building tax receivables in bekasi city based on the information processed by the author, it is necessary for the government's efforts to increase the realization of pbb-p2 revenue, namely to improve the things that are the obstacles to the non-optimal collection of receivables, in this case the obstacles or https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 316 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc obstacles in the implementation of the pbb-p2 collection in bekasi city must be found a solution so that implementation can run smoothly as planned, so that pbb-p2 revenue is obtained which is more maximal than the previous year. here are some of the efforts: 1) cooperate with uptd, sub-district and village apparatus as well as neighborhood/hamlets in carrying out the billing. 2) providing incentives in the form of reductions, reliefs, and exemptions in certain cases on the principal tax and/or sanctions. 3) thorough socialization to taxpayers with related banks to facilitate payments. conclusion based on research findings, discussions, and interpretations as well as theories and findings, the researchers can reach the following conclusions: 1. the effectiveness land and building tax in the rural and urban sector (pbb-p2) in the context of increasing revenue realization at the bekasi city regional revenue agency in 2019-2021 can be said to be less effective because the realization of pbbp2 revenue is still low and does not reach the target with a percentage of only 77.46%. this is due to the high amount of pbb-p2 receivables which is increasing from year to year. according to the results of the theory analysis of the effectiveness of the factors that cause the ineffective implementation of pbb-p2 receivables collection, the standard time indicators related to socialization to taxpayers are still not optimal and the quality and quantity of human resources are still very lacking. 2. obstacles in collecting rural and urban land and building tax receivables in bekasi city, namely from the lack of comprehensive socialization and education provided by the apparatus due to the limited number of personnel/hr, resulting in low taxpayer compliance in paying pbb-p2 arrears. the limited facilities and infrastructure provided by officers such as payment services by mobile bank cars and systems that are often offline have caused people to be reluctant to process and as a result they do not fulfill their obligations. the low economic capacity due to the covid-19 pandemic has also made taxpayers unable to meet pbb-p2 arrears. 3. efforts are being made to overcome obstacles in collecting rural and urban land and building tax receivables in bekasi city, namely intensively conducting socialization with banks to facilitate taxpayers in making their pbb-p2 payments, reminding taxpayers to make payments through prestige and payment points such as mobile bank cars, bjb banks, btn banks, indomaret, post offices, public service malls and digital services such as tokopedia or gopay, provide incentives and always synergize and collaborate with uptd, sub-districts and neighborhood/hamlets sub-district apparatus in carrying out the billing. https://www.ilomata.org/index.php/ijtc effectiveness of collection of land and building tax in the rural and urban sector (pbb-p2) receivables in increasing the realization of revenue in the revenue agency of bekasi city area in 2019-2021 novlyani and darmawan 317 | ilomata international journal of tax & accounting reference anwari, a., & bandiyono, a. 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(2017). pengaruh kualitas pelayanan terhadap kepatuhan wajib pajak orang pribadi dengan kepuasan sebagai variabel intervening kantor pelayanan pajak pratama cibitung. jurnal akuntansi bisnis pelita bangsa, 02(01), 1–15. https://journal.lppmpelitabangsa.id/index.php/akubis/article/view/110 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 38-54 38 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect of external audit opinions and audit committees on financial resource management in public sector entities frank mwombeki college of business education, tanzania. correspondent: frankmwombeki2010@gmail.com received : november 26, 2022 accepted : january 25, 2023 published :january 31, 2023 citation: mwombeki, f. (2023). effect of external audit opinions and audit committees on financial resource management in public sector entities. ilomata international journal of tax and accounting, 4(1), 38-54. https://doi.org/10.52728/ijtc.v4i1.647 abstract: external audit opinions (eao) and audit committees (ac) have been studied in different contexts, yet the link between them and the management of financial resources, especially in government entities in tanzania, has empirically not been captured. this paper examined the influence of eao and ac on managing financial resources taking tanzania government entities as a reference. it uses resources dependency theory to explain the main topic. data were collected on 230 government entities from controller and auditor general (cag) reports and audited financial statements for 2014/15 to 2019/20. descriptive statistics and the fixed effect technique were used to analyze data. the results show that unqualified audit opinion occurred most among public entities. specifically, the qualified audit opinion occurred most in lgas. also, a significant frequency of ac weaknesses appeared in lgas and public bica. moreover, the estimation results show that audit report positively and significantly influences financial resource management (frm), whereas ac weakness has a negative relationship with frm. therefore, the president‟s office and the parliament should emphasize the management of resources strategies in public entities, especially lgas. this paper will add knowledge on eao and ac as tools for financial resources management in government entities. keywords: external audit opinions, audit committee, financial resource management. this is an open access article under the cc-by 4.0 license. introduction this study explores the influence of external audit opinions and audit committees on financial resource management in government entities in tanzania. this topic is vital because, like other countries, tanzania adopted the sarbanes‐ oxley act that advocates good governance and financial controls issues of which external audit and audit committees are one of the controls (wilbanks et al., 2017; baker et al., 2006). financial resource management (frm) entails the procedures and regulations for managing public monies through budget formulation, execution and reporting of the results (dorotinsky, 2007). the management of financial resources is mailto:frankmwombeki2010@gmail.com https://doi.org/10.52728/ijtc.v4i1.647 effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 39 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc achieved through observing these procedures and regulations in terms of spending well the public monies, transparent and accountability. it is acknowledged by brignall & modell (2000) that frm is an essential area in which organizations especially public sector entities (pse), should take into consideration in performing their day-to-day activities. brignall & modell (2000) speculate that public finances must be managed well for the government entities to offer services to the public and achieve its policy objectives. frm is explained in many ways; for example, güleç & bektaş (2019), and giacomino & mielke (1993) elaborate on frm in terms of how an organization minimizes its expenses by using financial resources efficiently. it is evidenced from the literature that frm has become the proper area to consider in organizations. enron scandal occurred due to mismanagement of financial resources and the absence of corporate governance requirements (petra & spieler, 2020). in the public sector, frm has been a more challenging issue because of improper use of financial resources among government entities and officials; hence intensive management of these resources is unavoidable (hillman et al., 2009). factors influencing effective frm have been studied in several areas. attributes like technology (scarpellini et al., 2018; przychodzen, 2015), environment management (scarpellini et al., 2018), and financial condition (hasthoro et al., 2021) have been related to explain the importance of frm in an organization. scarpellini et al. (2018) exposed the positive influence of technology with frm in italian companies. also, hasthoro et al. (2021) tried to show the impact of financial conditions proxied by financial flexibility on financial resource performance in indonesia. the results reveal the positive effect of financial condition on resource management. however, there has been little coverage about the association of frm with audit opinions (ao) as well as audit committees (ac). researchers who considered ao and ac relate them with other variables such as friendship ties (bruynseels & cardinaels, 2014) and corruption levels (budiman, 2021). ao and ac have been theoretically proven to be crucial, especially concerning public money management in government entities. in tanzania, these two aspects have been insisted on and practiced in each financial year by government organs such as the national audit office, the parliament and the ministry of finance but the empirical evidence to prove the influence of ao issued to pse and ac on effective managing of public financial resources is lacking. the impact of an effective audit committee on strengthening financial resource management in public entities forms the question of study for several reasons. first, it has taken a long time for some public entities, such as local government authorities (lgas), to establish audit committees. moreover, even the established audit committees are not effectively playing a pivotal role in assisting the entities in fulfilling their responsibilities (urt, 2020). furthermore, the trend analysis on cag audit reports in public entities has not been sufficiently studied. also, many studies in tanzania have not highlighted the weakness of audit committees, especially in government corporations and higher learning institutions. therefore, this study will contribute to filling the empirical gap by assessing the audit opinions‟ trend. secondly, examine the influence of external audit opinions on financial resource management and determine the extent to which audit committees relate to financial resource management in government entities by assessing the weakness of audit committees. additionally, the results will improve people‟s knowledge on the importance of active audit committees in public entities that will achieve a sound resource management system and restore public confidence. effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 40 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this paper‟s remaining parts include the theoretical review and study hypotheses. then is followed by the methodology part; the last sections are results analysis and discussion and the conclusion. literature review and hypothesis development resource dependency theory the theory that underpins this study is resource dependency theory (rdt) which conceptualizes that organizations depend on each other or on their environment to survive. they usually demand resources for persistence (pugh & hickson, 1997; daft, 2001). the resources needed by entities include financial resources, physical resources, human resources, and information. the range of how they depend differs from one entity to another. for instance, public entities like rs, lgas and higher learning institutions (hlis) may depend more on the outside environment for money, personnel and reliable information, which will enable in making the right decisions (masud et al., 2018). in contrast, other firms like manufacturing will depend more on materials and the quality of personnel (nandi et al, 2020; uygun, 2017). many studies have used rdt to assess the audit committees (ac) and board sizes, composition and independence as an index of ac ability to effectively provide a resource to the entity (hillman et al., 2009). for example, pfeffer & salancik (1978) revealed that ac and advisory/ governing board size are related to the entity‟s environmental needs. those with more interdependence need more directors from outside. the study further highlighted that ac composition and size are not independent aspects but rather balanced entity replies to the situations of the outside environment (pfeffer & salancik, 1978). moreover, sanders & carpenter (1998) support these logical ideas by explaining that the board size within it has ac has to be related to the entity‟s level of internationalization. on top of that, several studies (dalton et al., 2007; daily & dalton, 1998; fiegener et al., 2000) relate the ac size, composition, effectiveness and independence with the entity‟s performance as a measure of successful resource dependence strategy. therefore, from these explanations, this study is using rdt to emphasize the importance of human resources (ac committees‟ members in our case) and reliable information from the cag report that will enable the public entities to manage the financial resources efficiently. audit opinions and financial resource management the audit report is an expression of opinion on the final accounts. the requirements on how to draw audit opinion is shown in cag reports in line with audit standards that are internationally recognized. the audit standards that explain audit opinions are isa 700: forming an opinion and reporting on financial statements, isa 705: modification of opinion in the independent auditor‟s report and isa 706: emphasis of matter and other matter paragraphs in the independent auditor‟s report. as per isas, audit opinions are classified into unqualified/unmodified/ clean opinion, qualified opinion, adverse opinion and disclaimer opinion. as shown in chapter two of the cag report 2019-2020 financial year, a clean opinion is drawn when the financial statements presented are free of material misstatement and are in conformity with applicable accounting framework, including compliance with laws and regulations (urt, 2020). it is the best audit opinion an audited entity may receive from an effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 41 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc external auditor. a qualified opinion is drawn when material misstatements (disagreements due to inadequate disclosure, inappropriate accounting treatment, or limitation of audit scope) exist in the audited financial statements. an adverse opinion is drawn when there are misstatements in the financial statements, and those misstatements are material but not pervasive, and a disclaimer opinion is expressed by the auditor when he is unable to find sufficient and appropriate audit evidence on which to base the opinion, and the auditor concludes that the undetected misstatements, if any, could be both material and pervasive (urt, 2020). it has been clarified that ao issued by auditor has relationship with financial resource management in a particular organization (ntim et al., 2017). when the entity receives a clean audit report, it comes to people‟s mind that such entity manages well the resource in that particular financial year (goddard & malangila, 2015; morin, 2008). from this argument, the vice versa is true that when the entity receives a qualified, adverse or disclaimer opinion, it indicates that it has not managed the financial resource well. it is further elaborated by mzenzi & gaspar (2015) that when a public entity in tanzania gets a disclaimer or adverse opinion, the people‟s representatives (members of parliament) react negatively. this is because they believe that the public financial resource in that particular entity might have been poorly used and that there is fraud. from this argument, the first hypothesis is developed that: h1: external audit opinion positively influence financial resource management audit committees and financial resource management regulation 30 of the public finance regulations, 2004 in tanzania requires each public entity to establish an ac (urt,2004; urt, 2019). regulation 31(1) of the public finance regulations (2004) requires an ac to consist of senior members of the entity who are to be selected by the entity's executive officers, and one or more members should be an officer from outside the entity. the nominated ac must be between three to five members, and at least one of the members should possess accounting and auditing knowledge. moreover, the committee‟s primary function is to oversee public resources, good governance, risks and internal controls issues. it is believed that the effectiveness and efficiency of these audit committees in public entities will reduce money fraud and maintain accountability in the financial resource management in public entities (hamid et al., 2015). another study by macgregor (2012) highlighted that the effective audit committee minimizes deficiencies and efficiently manages public resources in government entities. so, the study hypothesized that: h2: there is a significant relationship between audit committees and financial resource management method data source this study utilizes panel data extracted from the tanzania controller and auditor-general audit reports for six years spanning from the financial year 2014/15 to 2019/20 obtained from the national audit office. these reports were considered relevant because it contains data on trends effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 42 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of audit opinions issued to public entities, internal controls, corporate governance issues such as internal audit, audit committees, governing and advisory boards, budget issues and weaknesses of audit committees (cag, 2018). these reports have been used to assess whether public financial resources have been well utilized and managed (alcaide muñoz et al., 2017). to minimize the endogeneity problem, some data that were not available on the website and were found by researchers to be more valuable were provided by specific officers from the national audit and those from the respective public entities. however, the public entity that found it difficult to obtain some information on study variables was dropped from the study. study design and sampling descriptive design is used since the core intention of this study is grounded in describing the situation of resource management based on auditor‟s reports (affandi et al., 2020). the selection of public entities involved in this study followed a multi-stage sampling technique. at first, purposeful sampling was used (miloane, 2021) to select all audited public entities for 2014/15 to 2019/20 involving government corporations, government higher learning institutions and local government authorities. secondly, stratified sampling was used to determine the representative sample from each stratum (etikan & bala, 2017) in the three groups of government entities. thirdly, systematic random sampling was then applied to select individual public entities from the three identified strata for further analysis. sample size a total of 230 public entities were taken as a sample size for this study. these public entities include 106 public boards, institutions, corporations and agencies (public bica), 30 higher learning institutions (hlis) and 94 regional secretariat and local government authorities (rs and lgas). the sample size was determined following yamane (1967) formula given by equation1. where n is a sample size, n is the population size, e is the significance level. the population of public entities identified was 536 of which 247 were public bica, 70 were hlis and 219 were rs and lgas. using a 5% significance level, a sample size of 230 public entities was chosen. a sampling fraction was developed to get a representative sample from each stratum as indicated in table 1. table 1: sample size determination public entities population sample percent a public corporations, board, institutions and agencies 247 106 46.1 higher learning institutions 70 30 13.0 regional secretariats and local government authorities 219 94 40.9 total 536 230 100 source: author computation (2022) effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 43 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis pearson test was used to test multicollinearity between independent and unobservable variables to see whether there is autocorrelation. if there is multicollinearity, it means the results are biased (disatnik & sivan, 2016). also, the hausman test was done to decide the method of analysis between the fixed effect model (fem) and random effect model (rem). the null hypothesis was rem is appropriate, and the alternative hypothesis was that fem is appropriate (amini et al., 2012). after running the hausman test, the null hypothesis was rejected, and fem was found suitable for this study. the study‟s independent variables are external audit opinions (eao) and audit committees (ac). all these variables were used to test two developed hypotheses using fem. the following model was used to explore the influence of eao and ac on financial resource management in government entities in tanzania. where; frm is financial resource management proxied by operating expenses ratio, eao is external audit opinions measured by the kind of ao drawn in six financial years. ac audit committees measured by frequency of weaknesses reported in public entities appeared in six financial years, is a constant term, and are coefficients and ɛ is an error term. table 2 below summarizes the study variables, measurements and references adopted. table 2: variables and measurements variable measurement description references frm financial resource management oer-operating expenses ratio operating costs minus depreciation divided by gross revenue * 100 güleç and bektaş (2019); panno (2020), iskandar (2020); lee et al (2015); swarnapali (2014); giacomino and mielke (1993) eao external audit opinion type of audit opinion issued hui et al (2020); hasthoro et al (2021); nwanyanwu (2017); lin et al (2011); mzenzi and gaspar (2015) ac-audit committee frequency of weaknesses reported zhou et al. (2018); gramling et al. (2009); haonga (2020), and kyaruzi (2015) note: * is a multiplication sign. result and discussion the assessment of audit opinions on the use of public resources the first objective intended to evaluate the trend of audit opinions on the use of public resources in public entities. descriptive results covering the independent variable concerning the audit opinions and the use of public resources are presented in figure 1. according to the effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 44 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results, it shows that about 85.8% of audit opinions, unqualified opinions appeared most (1169 times) among total observations of 1362, followed by qualified opinions, which was 13.5% (appeared 184 times), and 0.5% (7 times) adverse opinion and lastly 0.1% (only two times) for disclaimer opinion. figure 1: trend on audit opinions source: author analysis (2022) external audit opinions on financial resource management among public entities the study also wanted to examine the correlation between eao and resource management performance among public entities. the results of this objective are shown in table 3. the findings show that public bica got 599 unqualified opinions, which is 51.2% of the total unqualified opinions in all public entities observed. the high number of unqualified opinions was followed by rs and lgas, who got 395 unqualified opinions, equal to 33.8% of the total unqualified opinions. lastly, higher learning institutions (hlis) got 175 unqualified opinions which is 15%. regarding qualified audit opinions, rs and lgas read by obtaining 153 qualified opinions, which are 83.2% of the total qualified opinions (184), followed by 26 (14.1%) opinions for public bica, and lastly, higher learning institutions obtain only 5 (2.7%) qualified opinions. on the side of adverse opinions, rs and lgas got four opinions out of a total of 7 adverse opinions obtained in all public entities. public bica got 3 (42.9%), and lastly, higher learning institutions got nil. disclaimer opinion was a bit better as only two disclaimer opinions were observed in public bica and nil for other categories of public entities. table 3: audit opinions and resource management among groups of public entities public entities type of audit opinion total unqualified qualified adverse disclaimer public bica 599 (51.2%) 26 (14.1%) 3 (42.9%) 2 (100%) 630 hlis 175 (15%) 5 (2.7%) 0 (0%) 0 (%) 180 rs and lgas 395 (33.8%) 153 (83.2%) 4 (57.1%) 0 (0%) 552 total 1169 (100%) 184 (100%) 7 (100%) 2 (100%) 1362 note: public b.i.c.a. = public boards, institutions, corporations and agencies, r.s. =regional secretariat, l.g.a.s = local government authorities, hlis= higher learning institutions source: author computation (2022) 1169 184 7 2 85,8 13,5 0,5 0,1 0 500 1000 1500 unqualified opinion qualified opinion adverse opinion disclaimer opinion frequency percent effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 45 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit committees on financial resource management in the respective entities finally, the study wanted to assess the extent of the weakness of the audit committees among public entities in the years under review. then, from this assessment to conclude whether audit committees in the public entities influence the management of public financial resources. to capture the main objective, the study firstly analyses the weakness of audit committees in general by combining all public entities to see which weakness (es) is really a problem; these results are shown in table 4. then from there to discover which weaknesses appeared mostly in each category of public entities; these results are indicated in table 5. as shown in table 4, the descriptive results exposed that, on average, the most five weaknesses of public entities‟ audit committees are that audit committees do not review financial statements; this appeared 342 (25.1%) times among observations. the second weakness is that the committees do not meet as required by law 232 (17%). another weakness is that audit committees do not have annual reports 150 (11%), which means they don‟t prepare annual reports as required by laws to assess their performance in that particular year. moreover, according to descriptive results, the independence of audit committees in executing their duties was questionable. lack of independence appeared 109 times (08%). similarly, management and governing boards do not evaluate the performance of audit committees. this had the same frequencies of occurring as that of independence; they occurred 109 (08%) among observations. table 4: the most weaknesses of ac in public entities weaknesses of audit committees frequency percent audit committees do not review financial statements 342 25.1 no required meetings as per acts 232 17 no annual audit committee reports 150 11 lack of independence in executing their duties 109 8 lack of evaluation of audit committee performances 109 8 source: author computation (2022) the descriptive results from table 5 below showed the weakness of audit committees among public entities categorically. it was revealed from the descriptive results that most of the weaknesses rely on public bica compared to hlis and lgas. the results indicate that audit committees from public bica do not discuss crucial aspects such as internal audit reports, internal control system and management information system compared to hlis and lgas audit committees. likewise, the other deficiencies that were found to appear most in public bica are the unavailability of audit committees (98%), the improper composition of the audit committee (90%), and lack of technical advice to accounting officers (75%). on the contrary, these results have a low percentage in hlis with 2%, 10%, 0% and lgas with 0%, 0%, 25% on the unavailability of ac, the improper structure of the audit committee and lack of technical advice to accounting officers respectively. besides, the descriptive results showed that audit committees from rs and lgas had a problem of not reviewing the annual audit plans by 85%, they didn‟t prepare annual audit committee reports (72.7%), they didn‟t meet as required by law (59.9%), they don‟t review financial effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 46 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc statement (58.8%) and cag reports (51%), and they don‟t have training (49%). these results had a higher percentage compared to hlis and public bica. table 5: weaknesses observed by the public entities in percentages weakness public entities total (%) public bica. hlis rs and lgas no required meetings as per acts 31.9 8.2 59.9 100 audit committees do not review financial statements 31.9 9.4 58.8 100 no annual audit committee reports 20.0 7.3 72.7 100 audit committees do not review the annual audit plan 13.4 1.5 85.1 100 no discussion of the internal auditors reports 94.9 0.0 5.1 100 no review and discussion of the cag report 49.0 0.0 51.0 100 no trainings for audit committee 31.4 19.6 49.0 100 no discussion on the area of internal control system 91.2 4.4 4.4 100 no discussion on management information system 96.0 2.0 2.0 100 lack of independence in executing their duties 53.2 45.0 1.8 100 lack of evaluation of audit committee performances 68.8 30.3 0.9 100 no mechanism to hold the audit committees responsible 54.1 45.9 0.0 100 no audit committee established 98.0 2.0 0.0 100 committees do not advice the accounting officer 75.0 0.0 25.0 100 improper composition of the audit committee 90.0 10.0 0.0 100 total 46.3 13.2 40.5 100 note: public b.i.c.a. = public boards, institutions, corporations and agencies, r.s. =regional secretariat, l.g.a.s = local government authorities, hlis= higher learning institutions source: author computation (2022) correlation result it is indicated in table 6 that the coefficient between the two variables is -0.170. tabachnick & fidell (1996) and bordens & abbott (2011) guided that a correlation coefficient below 0.9 indicates no multicollinearity between variables. therefore, it is concluded that the independent variables are lower correlated. this allows testing the hypotheses to examine the influence of each variable on frm. table 6: correlation matrix variables description 1 2 type of audit opinion (1) pearson correlation 1 -.170** sig. .000 weakness of audit committees (2) pearson correlation -.170** 1 sig. .000 source: author computation (2022) effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 47 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hausman test result from the guidance of hausman (1978), the fixed-effect model was a suitable model to use since prob>chi2 is 0.0000 lower than 5 per cent, as specified in table 7. table 7: hausman test summary variables coefficients (b) (b) (b-b) sqrt. (diag(v_b-v_b)) fixed random difference s.e type of audit opinion -.1223 -.0661 -.0562 .0000 ac weaknesses -.0031 -.0150 .0120 .0010 prob>chi2 = 0.0000 source: author computation (2022) therefore, from this result, the null hypothesis was rejected, meaning random effect was not an appropriate model to use. in addition, errors connected with each entity are unique, unsystematic and random, and show no correlation with frm (mwenda et al., 2021). hypotheses testing results this study had two hypotheses derived from ear and ac. the ear and ac are regressed to show the relationship between them with frm. a fixed-effect technique is used in the analysis, and the outcomes are well presented in table 8. the model results show that it is significant at 5%, and the r2 is 0.21. table 8: eao and ac on frm variables estimates on frm se p-values eao 0.1223 0.0402 0.0020 ac weaknesses -0.0031 0.0043 0.479 constant 2.3407 0.0540 0.0000 fixed effect regression: number of observations 1362 observations per group: number of groups group variable: public entities r-sq 230 min avg max 5.0 6.0 6.0 within 0.0085 prob>f 0.0080 between 0.0538 overall 0.2100 source: author computation (2022) the first hypothesis (h1) posited that there is a positive influence of eao on frm. the result of this hypothesis specifies that the coefficient is 0.1223 and the p-value is 0.0020, implying that the h1 is accepted and, therefore, the eao issued in public entities is positively influencing frm and statistically significant. the results indicate that the better the eao, the better resource management. in another way, when a clean audit opinion is issued, the public entity manages well financial resources. it means that the entity efficiently minimizes expenses over-collected revenues, has no problem paying its debts and uses assets to generate revenue. effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 48 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on the other hand, hypothesis two (h2) posited a significant relationship between audit committees and financial resource management. the results displayed that ac weakness is statistically insignificant and negatively related to frm, meaning that the more the reported deficiencies, the less the management of financial resources. this is evidenced by the negative regression coefficient -0.0031 with p-value=0.479 at 5% significance level. discussion the trend of audit opinions as elaborated in the literature review of this study, an unqualified report is a clean report, which means that the public resources are utilized and managed well, unlike other remaining audit opinions. from this point of view, results on the trend of audit opinions imply that, on average, most of the public entities used well the public resource in the six financial years reviewed. moreover, public resources were not managed well in some public entities. at the end of the period, cag reports showed qualified, adverse and disclaimer opinions to show some problems in the management of resources. these results concurred with that of (mzenzi & gaspar, 2015), who discovered that unqualified opinions in public entities in tanzania are increasing. similarly, the number of qualified, adverse and disclaimer opinions is decreasing year by year. thus, using the nature of audit opinions as a sign of efficient use of public resources, the results generally suggested that there is an improvement. however, the reports reviewed indicated that some public entities in our sample had a repetitive emphasis on matters to take action on to improve the management of resources. these matters emphasized by cag were not related to the fairness and truthness of respective public entities‟ final accounts, thus why the audit report ended up being clean. in fact, this appeared in other countries; for instance, baldacchino et al. (2014) in malta and (ngoepe & ngulube, 2013) revealed that the decreasing percentage of qualified opinions in south african government departments is attributed to an increase of unqualified opinions with the emphasis of matter. the influence of eao on frm. the second objective examined the influence of eao on the performance of resource management among public entities. the study generally observed that public bica is leading in obtaining unqualified opinions. this implies that public bica in tanzania are better at managing financial resources than rs, lgas and hlis. moreover, the results show a problem with using and managing public resources, specifically in rs and lgas. this is because rs and lgas got a huge number of qualified opinions of 153 (83.2%) out of 184 (100%) of the qualified opinions from the audit reports reviewed in this study. the reason for these results is posited by istrate (2018) to be a large number of functions that these rs and lgas are given by law. this study by istrate (2018) pointed out that qualified opinion is the most issued opinion in romania municipalities. the main bases for such opinion are non-observance of accounting principles and improper management of assets (maldonado et al., 2019). this needs a large number of qualified human resources, financial and physical resources which in most of the causes for such opinions the rs and lgas in 2014/15 to 2019/20 was a problem. furthermore, these results align with effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 49 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the rdt used in this study, which posits that public entities, like any other entities, need financial resources, physical resources, and human resources for their survival, resulting in effective and efficient managing of resources (daft, 2001). conversely, the first hypothesis (h1) results revealed that eao positively influences and is statistically significant to frm. the results from handoko et al. (2020) showed the same results that there is a positive effect of the audit report on resource management in public entities. another study by zhiwei et al (2011) assessed the relationship between modified audit opinions and economic consequences. this study‟s results align with mine in that it suggests that the modified opinions indicate the economic constraints in the organization. the relationship between ac and frm. in assessing the extent of the weakness of the audit committees among public entities, the descriptive results above show that most of the weaknesses are from the audit committees of pubic bica and rs/lgas. this interprets that, on average, the audit committees in these entities are weak; therefore, they do not contribute to the effective managing of public resources as expected and indicated by laws compared to hlis, which showed a very small percentage of weaknesses. this is to say, in general, that hlis manage their financial resources well due to effective audit committees. these results contrast with the study of braunstein & welch (2002) who show that public bica are in the front line in managing their resources well compared to any other entities in the public services. this appeared to be true even in the current work of thomas & purcell (2019), which revealed that audit committees in lgas are effective. this is because a huge number of resources are inverted into them. however, the idea of these results that hlis have effective ac is in line with that of soobaroyen (2014), who used the same descriptive analysis method to show the effectiveness of ac in higher learning institutions. his study finds well-composed functioned acs and, therefore, a positive relationship between audit committees with effective management of resources. moreover, the study by abdallah (2013) shows the same results that audit committees in lgas have many weaknesses, such as few meetings in a financial year, no review of the annual audit plan and no audit reports. soobaroyen (2014) notes that there is effective and efficient resource management in hlis because, in most cases, members of audit committees are well educated, know their duties indicated in the laws and have everything necessary to be members of the committees. that is why even the results of this study indicate that audit committees in hlis effectively discuss internal audit reports and cag reports. most importantly, they advise accounting officers on technical issues that will make the institution manage the resource well as perform well financially. regarding resource dependency theory, the results suggest a strong relationship with the theory. it is conceptualized from the results that ac, which contains human resources, are not independent. therefore, they need other resources like a financial and physical resources like computers to execute their duties (uygun, 2017). further, they depend on the external environment, which in our case is external audits and cag reports (masud et al., 2018). so, if all these resources are available in ac, the public money in public entities will be effectively and efficiently managed. effect of external audit opinions and audit committees on financial resource management in public sector entities mwombeki 50 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by combining descriptive results with the results from hypothesis two (h2) of this study which stated that there is a substantial association between ac weakness and frm, the result shows that ac weakness is statistically insignificant and negatively related to frm. this was also found in the earlier study by thomas & purcell (2019), who revealed that the ac with few weaknesses influences the effective management of financial resources in local government authorities. moreover, the results of soobaroyen (2014) were on effective ac in higher learning institutions; therefore, there is a positive influence on efficient resource management. conclusion this study intended to examine the trend of the audit opinions, examine the influence of external audit opinions on financial resource management and determine the extent to which audit committees influence financial resource management in government entities by assessing the weakness of audit committees in the public entities. this study generally found that unqualified audit reports occurred most among public entities. also, most ac weaknesses appeared in lgas. moreover, the hypotheses results indicate the significant positive influence of audit opinion on frm. on the other side, ac weakness has a negative relationship with frm. the findings imply that the government entities with modified opinions have lousy use of financial resources. also, if ac committees are weak (not effective) then it will lead to poor management of the public fund. this study improves knowledge of the relationship between audit reports, audit committees and resources management in public sector entities. furthermore, they may also be useful to some public organs in tanzania, such as the parliament, national audit office and public entities. on top of that, the study recommends that the government, especially the president‟s office, consider recruiting more employees to these lgas to increase efficiency in managing public resources. this is because lgas are charged with crucial roles in education, infrastructures, health etc. furthermore, the parliament of the united republic of tanzania should push the local government executive officers to make sure the management of financial resources in these entities is effective and efficient. reference abdallah m. m (2013). contribution of audit committees towards the local government authority’s performance in resources management: a case of bariadi district council. 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(2018). board of directors, audit committee, and firm performance: evidence from greece. journal of international accounting, auditing and taxation, 31, 20-36. http://www.mgt.ruh.ac.lk/pubs/pdf/icme2014_op_p247.pdf http://www.nao.go.tz/ http://www.nao.go.tz/ the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 44-59 44 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of concentrated ownership on tax avoidance: csr mediates or moderates syahfira putri kinanti1, pratana puspa midiastuty2, eddy suranta3 danang adi putra4 1234bengkulu university, indonesia correspondent : syahfirakinantiii@gmail.com1 received : october 25, 2023 accepted : december 27, 2023 published : december 31, 2024 citation: kinanti, s, p., midiastuty, p, p., suranta, e., putra, d, a. (2024). the effect of concentrated ownership on tax avoidance: csr mediates or moderates. ilomata international journal of tax and accounting, 5(1), 44-59. https://doi.org/10.52728/ijtc.v5i1.999 abstract: this study seeks to empirically demonstrate the relationship between concentrated ownership and tax avoidance, exploring the potential role of corporate social responsibility (csr) as either a mediating or moderating variable. from the aim of this research, the formulation of the problem in this research is whether concentrated ownership has an effect on tax avoidance and this research wants to further prove whether csr is more appropriate to use as a mediating or moderating variable in explaining the relationship between concentrated ownership and tax avoidance. the research focuses on a selection of manufacturing firms that uphold csr values during the period from 2019 to 2021, employing purposive sampling as the method for sample selection. concentrated ownership is defined as ownership exceeding 50%, while tax avoidance is measured using the effective tax rate (etr). the results prove that concentrated ownership encourages management to conduct tax avoidance as an effort to obtain additional capital for the firm's investment needs so that companies tend to shift current taxes to future taxes. this research proves the existence of agency problems where concentrated ownership expropriates minority interests. csr functions as a moderating factor in the correlation between concentrated ownership and tax avoidance. it serves to diminish managerial endeavors in evading taxes by establishing corporate legitimacy. with better implementation of csr, it is hoped that this will not be a motivation for companies to avoid taxes when companies are dominated by concentrated ownership and investors prefer to invest in companies that have concentrated shares. keywords: concentrated ownership, tax avoidance, corporate social responsibility (csr). this is an open access article under the cc-by 4.0 license. introduction tax is a mandatory responsibility for a firm, demanding obligatory payments. the imposition of taxes will be a burden for companies since they do not directly profit from the payments made. https://www.ilomata.org/index.php/ijtc mailto:syahfirakinantiii@gmail.com1 https://doi.org/10.52728/ijtc.v5i1.999 kinanti, midiastuty, suranta, and putra 45 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consequently, companies tend to engage in tax planning, aiming to navigate between legal tax avoidance and illegal tax evasion to alleviate this burden. tax avoidance is considered legal and does not violate tax regulations if the firm utilizes loopholes from differences in accounting methods and valuations permitted under the tax law and according to accounting standards. according to (khan et al., 2017), the challenge within tax avoidance lies in the agency problem, characterized by information imbalance and divergent interests between shareholders and corporate management. tax avoidance occurs in a firm due to differences in interests, firm managers tend to report profits in larger amounts to get compensation if the compensation received by managers is based on reported profit figures while firm owners tend to pay smaller amounts of tax and prefer maximum wealth. this is what causes agency problems, to solve these agency problems, strict supervision and regulation are needed to prevent tax avoidance practices that are detrimental to all parties involved. the agency problem raises agency costs which aim to regulate and supervise the actions of managers to continue to act based on the interests of the firm. in this case, concentrated ownership is one way to overcome agency problems on tax avoidance because concentrated ownership will limit the manager's intention to commit tax avoidance. several previous studies examining the impact of concentrated ownership on tax avoidance have yielded inconsistent empirical findings. researchers such as (ariawan & setiawan, 2017; khan et al., 2017; mita dewi, 2019; richardson et al., 2016); (cahyono et al., 2016; khan et al., 2017; leipala, 2017; lim & suparman, 2022; ngadiman & puspitasari, 2017; richardson et al., 2016) among others, suggest a positive relationship between concentrated or institutional ownership and tax avoidance. conversely, studies by (agustina et al., 2018; alkurdi & mardini, 2020; putranti & setiawanta, 2016); and (agustina et al., 2018) propose the opposite, indicating a negative impact of concentrated or institutional ownership on tax avoidance. they argue that highly concentrated or institutional ownership leads to increased tax avoidance practices. (putranti & setiawanta, 2016) even suggest that a notably concentrated or institutional ownership presence results in lower tax avoidance due to effective control over agency actions, preventing tax avoidance. (richardson et al., 2016) uncovered an inverted u-shaped relationship between tax management and ownership concentration. some studies focused on jordanian companies, such as (alkurdi & mardini, 2020), disclosed that concentrated or institutional ownership negatively affects tax avoidance, leading companies to curtail their tax avoidance strategies. similarly, (agustina et al., 2018; alkurdi & mardini, 2020; putranti & setiawanta, 2016; utthavi, 2015) dan (utthavi, 2015), employing indonesian samples, echoed these findings. however, contradictory research outcomes by (rusli, 2017; septiadi et al., 2017), and yelvita (2022) assert that concentrated or institutional ownership has no significant effect on tax avoidance. they argue that the absence of concentrated or institutional ownership tends to prompt institutional owners to oversee managerial performance, reducing the inclination toward tax avoidance. additionally, they propose that the degree of concentrated or institutional ownership does not notably influence tax avoidance practices. apart from tax payments, companies bear additional responsibilities, notably in executing corporate social responsibility (csr) initiatives. (agata et al., 2021) emphasize csr as a https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 46 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mandatory obligation for companies. csr activities wield a significant influence on a firm's reputation. to fulfill their societal responsibilities, businesses often utilize csr performance as a mechanism to minimize their engagement in tax avoidance, as highlighted by (dakhli, 2022). consequently, companies demonstrating strong csr practices tend to abstain from tax avoidance to safeguard their reputation within the community. there are differences in values or norms among the firm and the community that make the firm will be careful not to conflict over existing differences (legitimacy gap). with csr activities, the firm will carry out a strategy to legitimize itself by positioning itself in the middle of the regulations and values that follow in society. with legitimacy theory, the firm will encourage itself to maintain and improve its reputation through corporate social responsibility (csr) activities. this study serves as a replication of (dakhli, 2022) research, albeit with a distinctive focus on utilizing concentrated ownership as a variable influencing tax avoidance. dakhli's work incorporated csr as a moderating variable, revealing institutional ownership's positive and substantial impact on csr, while noting its negative and significant effect on tax avoidance. moreover, it highlighted csr's partial mediation between institutional ownership and tax avoidance. thus, utilizing the effective tax rate (etr) as a metric, this study aims to delve deeper into the role of csr as a mediator or moderator in the relationship between concentrated ownership and tax avoidance. given the scarcity of research exploring concentrated ownership's impact on tax avoidance with csr as a mediating or moderating factor, this study seeks to empirically establish the influence of concentrated ownership on tax avoidance. additionally, it aims to ascertain whether csr can mediate or moderate the connection between concentrated ownership and tax avoidance. the theoretical significance lies in the potential novelty this research can offer by contributing new knowledge, insights, and enriching the extensive literature on the correlation between concentrated ownership and tax avoidance, utilizing csr as a mediating or moderating factor within indonesian manufacturing companies. from a practical standpoint, this study is expected to offer valuable insights to various stakeholders by identifying and examining pertinent issues related to concentrated ownership and tax avoidance, as well as elucidating the role of csr in mediating or moderating these dynamics. agency theory jensen and meckling's (1976) agency theory elucidates the dynamic between owners or shareholders (referred to as principals) and managers (referred to as agents). shareholders (principals) have the authority to assign tasks and manage the firm to managers (agents) to realize the principal's wishes, namely to make a profit. management tries to reduce tax payments by using tax avoidance strategies to increase firm value, while shareholders do not want tax avoidance because it is considered manipulation of financial statements. after all, the information provided by management doesn’t reflect the actual condition of the firm (sutomo & djaddang, 1970). in agency theory, companies with concentrated ownership often have differences of interest between principals and agents. this conflict of interest arises due to differences in information received between shareholders and managers. this makes managers take action for their own https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 47 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc interests. majority shareholders also have full control over the firm, so they tend to take actions that benefit majority shareholders and potentially harm the position of minority shareholders (expropriation) which can lead to tax avoidance activities. legitimacy theory legitimacy theory is said to be a potential source for companies to survive with social agreements between companies and society. the firm will provide distribution both in the economic, social, and political fields to society to improve the firm's reputation (shocker & sethi, 1973). there is a difference between the values according to the firm and the values that exist in society, therefore the firm will feel threatened if this difference occurs (legitimacy gap) (shafirah et al., 2022). the legitimacy gap occurs because of the conflict that is not aligned between the firm and society due to the insensitivity of the firm's activities. in this way, legitimacy theory is able to encourage companies to maintain and improve their reputation through corporate social responsibility (csr). companies undertake corporate social responsibility (csr) initiatives to demonstrate the alignment of their corporate values with societal values. basically, the firm is not only responsible and concerned with itself, but the firm must be responsible and pay attention to the interests of various parties (consumers, employees, creditors, debtors, etc.). the more the firm conducts social activities that have a positive impact, the more beneficial and the better the firm's reputation in the eyes of the public. with this theory, companies implement csr to gain community legitimacy from both the investor lens and the public lens in various ways such as financial assistance, goods, expert assistance from the firm, and others. so with this theory, it can emphasize csr to develop companies in ethical and sustainable business practices economically, socially, and environmentally. for this reason, the firm will divert funds to pay its obligations (taxes) by carrying out csr activities in the firm. concentrated ownership and tax avoidance ownership concentration can be used as a firm measure of who controls most or all business activities in a firm. companies tend to use concentrated ownership where the majority shareholder has great control over the firm. the division between ownership and control within firms characterized by concentrated ownership can give rise to agency problems, where the interests of controlling shareholders may not be in line with the interests of majority shareholders (information asymmetry). although various regulations have been implemented to protect the interests of minority shareholders in indonesia, these efforts have not shown effectiveness in reducing ownership concentration in indonesian companies (hakim & fuad, 2015). companies with concentrated ownership can have an unfavorable influence on shareholders, so there will be conflicts between majority and minority shareholders that have a negative impact on business (yusuf et al., 2023). it will trigger majority shareholders to prioritize personal interests over the petty interests of investors. with the power of the majority shareholder in the firm, the decisions made may affect the course of a firm's business, especially those related to reducing corporate tax obligations. https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 48 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc prior research has extensively examined the impact of ownership concentration on tax avoidance, yet the empirical findings across diverse country samples have lacked consistency. (khan et al., 2017) suggested, based on the agency theory of tax avoidance, that institutional or concentrated ownership might correlate with increased tax avoidance through the utilization of tax shelters. (sunarto et al., 2021) revealed a positive relationship between institutional or concentrated ownership and tax avoidance, positing that a higher concentration of institutional investors in indonesian banking firms could prompt management to engage in tax avoidance. these findings align with previous research by (cahyono et al., 2016; khan et al., 2017; leipala, 2017; lim & suparman, 2022; ngadiman & puspitasari, 2017; richardson et al., 2016; sunarto et al., 2021) all indicating a positive association between concentrated or institutional ownership and tax avoidance. with previous research, can be assumed that the first hypothesis proposed is: h1 : concentrated ownership affects tax avoidance. ownership concentration and tax avoidance: exploring the role of corporate social responsibility (csr) as a mediator companies will use corporate social responsibility (csr) to raise the firm's reputation in external eyes. several studies have discussed the inst / concentrated relationship that can affect csr and tax avoidance (chabachib et al., 2019; chen et al., 2019; choi et al., 2020); (alkurdi & mardini, 2020). according to research by (davis et al., 2018; kovermann & velte, 2019) state that csr has a negative effect on tax avoidance. however, csr performance will cause companies to act in the interests of society through low-level tax avoidance (lanis & richardson, 2012; para-gonzález & mascaraque-ramírez, 2019; zeng, 2019) found that companies with good csr performance will tend to practice lower tax avoidance and tend not to get involved in aggressive tax activities. this is assumed because csr performance will act in the interests of society so that funds that should be used to make tax payments are diverted to csr activities. recent findings by (dakhli, 2022) indicate that corporate social responsibility (csr) plays a partial mediating role in the connection between institutional or concentrated ownership and corporate tax avoidance. conversely, (luo et al., 2015) suggest that concentrated ownership negatively impacts the quality of csr disclosure reports, as shareholders with concentrated ownership tend to shift the firm's wealth, contradicting the principles of csr disclosure. (sari & mulyani, 2020) assert that institutional or concentrated ownership influences decisions regarding tax avoidance policies, revealing that a lower percentage of institutional or concentrated ownership heightens the likelihood of tax avoidance. however, (dewi et al., 2022) analysis, incorporating csr as a moderator, suggests that while the relationship between capital intensity and institutional or concentrated ownership on tax avoidance may strengthen, csr does not enhance the relationship between firm size and tax avoidance. consequently, with regard to csr mediating or moderating the relationship between concentrated ownership and tax avoidance, the following hypotheses could be proposed: h2 : csr mediates the relationship between concentrated ownership and tax avoidance h3 : csr moderates the relationship between concentrated ownership and tax avoidance research framework https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 49 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method research model and design this study falls under empirical research, specifically adopting a descriptive quantitative approach. it aims to objectively expound upon numerical data obtained from an existing phenomenon. the research aims to uncover the impact of concentrated ownership on tax avoidance and examine whether corporate social responsibility (csr) mediates or moderates the association between concentrated ownership and tax avoidance within manufacturing firms that report csr scores and demonstrate profitability before tax. population and sample selection method this study selected its population from manufacturing firms enlisted on the indonesia stock exchange (idx) within the timeframe spanning from 2019 to 2021. this research does not use the year 2022 because csr data for 2022 is very limited to be obtained through gri-g4. accordingly, the observation year in this research is only up to 2021. employing a purposive sampling approach, the study specifically targeted companies that had implemented corporate social responsibility (csr) and maintained a csr score throughout the observation period defined by the researcher. data collection method this research uses secondary data from manufacturing companies listed on the indonesia stock exchange (bei) and collects annual reports from the site www.idx.co.id which has csr data and has a csr score for three years of observation (2019-2021). employing a documentation approach, the study gathered data from annual reports of manufacturing firms meeting the specified research criteria. the information was sourced from both the indonesia stock exchange (idx) website and the respective firm websites. data processing method this research employs multiple linear regression through the ibm spss statistics 22 software. multiple linear regression serves to examine and analyze the connection between an independent concentration ownership tax avoidance csr https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 50 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variable and a dependent variable. the purpose of this regression analysis within this study is to assess the effect of concentrated ownership on tax avoidance, while also investigating whether corporate social responsibility (csr) intervenes or regulates the association between concentrated ownership and tax avoidance. to prove the mediating variable, a sobel test is used with the following formula (ghozali, 2018) : 𝑠𝑎𝑏 = √𝑏2𝑎2 + 𝑎2𝑏2 + 𝑠𝑎2𝑠𝑏2 next, testing is carried out for the mediating variable with the following formula : 𝑍 = 𝑎𝑏 𝑠𝑎𝑏 operational definition and variable measurement this research aimed to explore the potential moderating or mediating role of corporate social responsibility (csr) scores observed over three years on the relationship between concentrated ownership and tax avoidance within companies. the study measures tax avoidance using the effective tax rate (etr) as a proxy variable. the identified independent variables in this research encompass concentrated ownership, while csr is regarded as the mediating or moderating variable. additionally, control variables such as return on asset (roa), leverage (lev), and firm size (size) were employed. table 1 measurement variable variables measurement source dependent variable tax avoidance etr = current tax expense total income before tax (salihu et al., 2015; suranta et al., 2020); (inanda et al., 2016) independe nt variable concentrate d ownership measured by percentage of share ownership ≥50% of total shares. (midiastuty et al., 2017) moderating or mediating variable csr 𝐶𝑆𝑅𝐼𝑗 = ∑ 𝑋𝑦𝑖 𝑛𝑖 (septiadi et al., 2017) control variable return on assets (roa) roa = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (salihu et al., 2015; suranta et al., 2020) https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 51 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc leverage (lev) lev = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (midiastuty et al., 2016) firm size (size) size = ln (total assets) (midiastuty et al., 2016) result and discussion descriptive statistic the findings derived from the descriptive statistical analysis conducted in this study are outlined and showcased in the following table 2. table 2 descriptive statistic variable minimu m maximum mean std. deviation etr .0354 7.3463 .430627 .9506025 conown .5011 .9996 .688574 .1415108 csr_score .5058 .9907 .694791 .1114815 lev .1335 .7986 .477384 .1798488 roa -.0187 .4163 .081646 .0978991 size 25.3444 33.5372 30.012955 1.7297398 source: secondary data processed, 2023 this research employs the effective tax rate (etr) as a proxy for tax avoidance, representing the current tax income divided by earnings before tax. the average etr value of 0.430627 indicates that 43% of the average company in the study pays higher tax costs than the tax rates set by regulations (etr = 25%). the maximum etr value of 73.46% indicates a scenario where the agency refrains from tax avoidance due to better etr costs, while the minimum value of 3.54% highlights instances of tax avoidance by certain companies. the standard deviation value is 0.9506025, which is higher than the average etr of 0.430627, indicating that there is quite a large variation in tax avoidance carried out by the companies sampled in this study. the independent variable, concentrated ownership (conown) has an average value of 0.688574, indicating that the concentration of ownership in the sample companies reaches 68.85% of the total shares outstanding. this aligns with the financial services authority regulation number 18 / pojk.03 / 2014, which defines ownership concentration as an individual or entity owning at least 50% of the firm. the range between the minimum conown value of 0.5011 (indicating companies with the lowest ownership concentration of 50.11%) and the maximum conown value https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 52 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of 0.9996 (reflecting companies with the highest ownership concentration of 99.96%) elucidates the extent of control exerted by concentrated shareholders. with a greater average value of 0.688574 compared to the standard deviation value of 0.1415108 there is limited variation in concentrated ownership in the sample companies in this study corporate social responsibility (csr) serves as the mediating or moderating variable in this research. the average csr value stands at 0.694791, denoting that, on average, companies disclosing csr (with csr scores) within the sample contribute 69.47% of the total disclosures based on gri-g4 (45 or 46 disclosures). the range from the minimum csr value of 0.5058 (depicting companies with the lowest csr score at 50.58% of all disclosures in the gri-g4 index) to the maximum csr value of 0.9907 (representing companies reporting disclosures totaling 99.07% of all disclosures in the gri-g4 index showcases the spectrum of csr disclosure levels among the sampled companies. the smaller standard deviation of 0.1114815 compared to the average value indicates smaller variations in csr carried out by the companies in this research sample. examining the total debt to equity ratio (lev), the average value of 0.477384 indicates that the average firm in the sample uses debt to fund 47.73% of its assets. the minimum lev value of 0.1335 indicates that there is a firm that has the lowest level of debt is 13% of the total assets owned by the firm, while the maximum lev value of 0.7986 indicates that there is a firm that has the highest level of 79.86% from total assets owned by the firm. the average value is 0.477384 and the standard deviation is 0.1798488 indicating that lev has a smaller variance and the sample companies utilize debt to fund 47.73% of their assets. additionally, the return on assets (roa) demonstrates a positive average value of 0.081646, illustrating that, on average, firms in the sample generate profits amounting to 8.16% of their total assets utilized. the minimum value of 0.0187 illustrates that there is a firm that reports the largest loss of 1.87% of the total assets owned by the company. the maximum roa value of 0.4163 illustrates that 41% of the firms sampled in this study have the largest profit capability from the total assets owned by the firm. with an roa standard deviation of 0.0978991 (greater than the average value), it shows that the roa variable varies. lastly, firm size (size), measured by the natural logarithm (ln) of total assets, shows an average size value of 30.012955, indicating that the average firm sampled in this study is a large firm with a total of over idr 100 billion. the smallest size in the sample of firm used has a minimum size value of 25.3444 and the largest size in the sample of firm used has a maximum value of 33.5372. indicating an average size value of 30.012955 and a standard deviation of 1.7297398 means that the variance of the size variable in all sample firms is very limited. hypothesis testing and discussion hypothesis testing is presented in table 3 below aims to test the impact between the variables used. panel a is aimed at testing the effect of csr on tax avoidance, panel b is aimed at testing the effect of concentrated ownership on csr, panel c is aimed at testing the effect of csr on tax avoidance, panel d is aimed at testing the effect of concentrated ownership on tax avoidance mediated by csr, and panel e is aimed at testing the influence of csr in moderating the https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 53 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc relationship between concentrated ownership and tax avoidance. the results are presented in table 3. table 3 hypothesis testing and discussion source: secondary data processed, 2023 first hypothesis testing and discussion the initial hypothesis testing aims to verify the influence of concentrated ownership on tax avoidance. the regression analysis demonstrates a statistically positive and significant correlation between concentrated ownership (conown) and the effective tax rate (etr). this is evident from table 3, where the resulting coefficient value stands at a statistically significant 0.003 (α ≤ 0.05), indicating that concentrated ownership exhibits a partially positive and significant impact on panel a panel b panel c panel d panel e etr coefficie nt t sig csr coefficient t sig etr coefficient t sig mediation coefficient t sig moderatio n coefficient t sig constant 0.224 0.832 0.410 0.173 1.134 0.264 1.261 2.421 0.019 0.405 1.194 0.238 0.261 0.445 0.658 conown 0.308 3.075 0.003 0.164 2.101 0.042 0.289 2.461 0.017 0.420 2.095 0.041 csr -0.644 -2.619 0.012 -0.270 -1.907 0.062 0.195 0.722 0.474 conowncs r -0.900 -2.615 0.012 lev -0.044 -0.577 0.566 -0.150 -2.568 0.014 0.237 1.538 0.130 -0.037 -0.412 0.682 -0.061 -0.398 0.692 roa -0.199 -1.456 0.152 0.058 0.581 0.564 -0.532 -1.934 0.059 -0.303 -1.902 0.063 -0568 -2.058 0.045 size -0.005 -0.615 0.541 0.013 2.006 0.052 -0.020 -1.258 0.214 -0.004 -0.402 0.689 -0.006 -0.349 0.729 r square 0.207 0.236 0.209 0.218 0.224 adjusted r square 0.142 0.158 0.148 0.138 0.130 f 3.191 3.016 3.433 2.734 2.399 sig. 0.021 0.029 0.015 0.030 0.041 https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 54 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax avoidance. the direction of the positive and significant regression coefficient confirms the acceptance of the first hypothesis (h1), suggesting that higher concentrated ownership correlates with a reduced likelihood of tax avoidance. this finding aligns with the principles of agency theory, suggesting that concentrated ownership acts as a monitoring mechanism to oversee managerial actions, thereby mitigating the occurrence of tax avoidance. these outcomes resonate with findings from studies conducted by (cahyono et al., 2016; khan et al., 2017; leipala, 2017; lim & suparman, 2022; ngadiman & puspitasari, 2017; richardson et al., 2016; sunarto et al., 2021). they emphasize that concentrated or institutional ownership involves shareholders playing a supervisory role within the firm. shareholders, in this context, possess the capacity to monitor managerial actions and access extensive information about their investment activities. then the shareholders have the authority to monitor management efficiently to avoid unilateral decisions from managers related to tax avoidance. second hypothesis testing and discussion from the regression results of hypothesis testing that has been carried out, it can be stated that the coefficient value of concentrated ownership (conown) on corporate social responsibility (csr) is 0.164 with a standard error of 0.078 and the csr coefficient value on effective tax rate (etr) is -0.644 with a standard error of 0.246. based on the test results above, it can be seen that the direct effect, indirect effect, and full effect of concentrated ownership (conown) on tax avoidance (etr) which is in table 4 below. table 4 mediated testing variable direct effect indirect effect full effect koefisien std. eror koefisien std. eror kt – etr 0.289 0.118 0.183384 kt csr 0.164 0.078 csr etr -0.644 0.246 kt csr etr -0.105616 0.019188 source: secondary data processed, 2023 after knowing the test results in table 4 above, a sobel test will then be carried out to ensure the significance of the csr variable in mediating the relationship between concentrated ownership and tax avoidance. this sobel test uses a formulation, namely 𝑠𝑎𝑏 = √𝑏2𝑎2 + 𝑎2𝑏2 + 𝑠𝑎2𝑠𝑏2 and these values can be seen in table 4 above. the calculation results show that z = -1.41026650 (z ≤ 1.96) which means csr doesn't serve as a mediating factor in the relationship between concentrated ownership and tax avoidance, leading to the rejection of the second hypothesis test (h2). hence, csr doesn't emerge as a strategy for companies to evade taxes. corporate social responsibility (csr), as described by (desai & dharmapala, 2006), is highlighted as a method employed by companies to enhance the welfare of stakeholders who hold an interest in the firm. companies will tend to give the most maximum and accurate information related to https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 55 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc csr so companies that are more willing to disclose csr information are companies that do not favor tax avoidance (desai & dharmapala, 2006; muller & kolk, 2015; para-gonzález & mascaraque-ramírez, 2019); mouakhar et al. (2020). from some of these research results, concentrated ownership and csr are complementary mechanisms in tax avoidance efforts. this study corroborates the findings of (krisnadayu et al., 2021; pratiwi, 2018; rudiatun & suryaningrum, 2023), which suggest that csr does not act as a mediating factor in the association between concentrated or institutional ownership and tax avoidance. however, this research doesn’t support the research of (dakhli, 2022; pratiwi, 2018) which reveals that institutional/concentrated ownership can influence tax avoidance both directly and indirectly through csr. the better the firm does csr, the firm will reduce tax avoidance. third hypothesis testing and discussion the third hypothesis aims to assess whether csr acts as a moderator in the connection between concentrated ownership and tax avoidance. this entails examining whether csr amplifies or diminishes the relationship between concentrated ownership and tax avoidance. the test outcomes reveal that the coefficient value of the csr moderating variable stands at -0.900 with sig. 0.012 (0.000 ≤ 0.050). the negative and significant regression indicates the acceptance of the third hypothesis (h3), signifying that csr reinforces the bond between concentrated ownership and tax avoidance. when concentrated ownership aligns with csr, companies tend to engage in tax avoidance. the presence of csr within a firm becomes an added obligation borne by the firm, thus reducing shareholder welfare. consequently, concentrated ownership leans towards pursuing tax avoidance, driven by csr's influence. this is because the funds allocated for tax avoidance are directed towards funding the firm's csr initiatives. therefore, as the firm's csr performance improves, the tendency to engage in tax avoidance decreases. conclusion this research aims to presents data and empirical evidence regarding the relationship between concentrated ownership and tax avoidance within indonesian manufacturing firms spanning the period from 2019 to 2021. additionally, it aims to explore the involvement of corporate social responsibility (csr) in either mediating or moderating the relationship between concentrated ownership and tax avoidance. the study's hypothesis testing reveals several key findings: firstly, concentrated ownership positively influences tax avoidance. secondly, csr does not mediate the relationship between concentrated ownership and tax avoidance. lastly, csr does serve as a moderator in the relationship between concentrated ownership and tax avoidance. this outcome suggests that when concentrated ownership aligns with csr, companies are inclined to engage in tax avoidance due to csr's impact, acting as a corporate burden that diminishes shareholder welfare. the results of this research provide implications for agency theory where brightness can be a mechanism for resolving agency problems in permits with tax avoidance carried out by companies. furthermore, the results of this research also do not support the legitimacy theory which states https://www.ilomata.org/index.php/ijtc kinanti, midiastuty, suranta, and putra 56 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that csr carried out by companies is with the aim of providing legitimacy to capital market players regarding firm performance, especially performance related to csr. in fact, csr is implemented in a firm which results in ownership preferring to avoid taxes. apart from that, this research also has several practical implications. companies are expected to continue to improve the quality of csr reporting in an effort to legitimize themselves as companies that are good at disclosing csr. with this disclosure, it is hoped that csr disclosure will not be an attempt by the company to avoid tax. it is hoped that investors when choosing their share investments, can consider choosing company shares that are not owned by concentrated ownership, where when concentrated ownership has the motivation to carry out good csr disclosures, the aim is as an effort to avoid tax. reference agata, a. c., suhartini, d., & widoretno, a. a. 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(2019). relationship between corporate social responsibility and tax avoidance: international evidence. social responsibility journal, 15(2), 244–257. https://doi.org/10.1108/srj-03-2018-0056 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 716-729 716 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability armel yentifa1, wiwik andriani2, syafira ramadhea jr3, dandi aprila4, gusmita sofia5 12345politeknik negeri padang, indonesia correspondent: armel@pnp.ac.id1 received : august 25, 2023 accepted : october 15, 2023 published : october 31, 2023 citation: yentifa, a., andriani, w., jr, s.r., aprila, d., & gusmita, s. (2023). village fund accounting model in realizing nagari financial accountability. ilomata international journal of tax and accounting, 4(4), 716-729. https://doi.org/10.52728/ijtc.v4i4.895 abstract: this study aims to create an accrual-based accounting model for the nagari government. the research method used in obtaining data is observation and interviews while analyzing data using qualitative analysis, namely analysis using an accrual-based accounting model based on minister of home affairs regulation number 20 of 2018 concerning the application of accrual-based government accounting standards in village financial management. the analysis results show that since issuing minister of home affairs regulation number 20 of 2018 concerning the application of accrual-based government accounting standards in village financial management until the end of 2022, it has not been optimal in preparing accrual-based nagari government financial reports. this happens because the apparatus resources must still be ready to implement accrualbased accounting. in addition, the formats used as tools in accrual-based accounting records are more complete, so it is necessary to design a model that the village apparatus can understand. it is hoped that through this research, the implementation of accrual-based accounting can be further improved so that accountability in managing village funds can be achieved as expected. keywords: accrual, nagari, model, accountabillity this is an open access article under the cc-by 4.0 license. introduction disclosure of information related to village finances to the public is something that must be considered by the nagari government as a form of implementing the principle of accountability for the use of village funds (meutia & liliana, 2017). financial reports are things that must be made by the nagari government as a means of conveying accountability for the government's performance in financial matters (nurhakim & yudianto, 2018). the presentation of financial reports is expected to be presented reliably and with quality so that it can make it easier for the public to understand these financial reports. government regulation number 71 concerning government accounting standards (2010), states that there are several characteristics of financial reports that must be met including (1) reliable, (2) relevant, (3) understandable, and (4) comparable. public sector accounting is a field of accounting used by the government in making https://www.ilomata.org/index.php/ijtc mailto:armel@pnp.ac.id1 https://doi.org/10.52728/ijtc.v4i4.895 village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 717 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial records and reporting. regional autonomy is the turning point for the development of public sector accounting in a much better direction (farida et al., 2018). the existence of regional autonomy allows local governments to carry out financial management with decisions in their own hands (cahyana & suprasto, 2023). regional autonomy and fiscal decentralization provide flexibility for the government to make decisions related to the management and arrangement of regional finances (fitriyani et al., 2018). through this, the implementation of accountability and transparency in regional financial management began to materialize (munawar, 2016). in 2020 the government issued government regulation instead of law (perpu) no. 1 of 2020, which later became law number 2 of 2020, concerning state financial policy and financial system stability for handling covid-19 (2020). however, in 2023 regulations related to state finances return to law number 17 of 2003 concerning state finance which requires government agencies to provide accountability in the form of financial reports related to the use of the apbn/apbd (2003). the central and regional governments, including the nagari government, must carry out this obligation. the financial reports that the government itself must make are (1) budget realization report (lra), (2) balance sheet, (3) operational report (lo), (4) changes in equity report (lpe), and notes on financial statements (calk) (widyanti, 2018). government regulation number 71 of 2010 concerning government accounting standards is a form of the government's seriousness in following up on provisions regarding the format of financial reports, which are guidelines for regional governments in preparing financial reports. in addition to regulating financial report formats, these regulations also cover information related to accounting treatment, accounting recognition, and various accounting policies in government finance. the issuance of this regulation has a substantial positive impact considering the need for uniformity in the presentation of financial reports to provide the same perception and understanding between users of financial reports and financial report supervisors (maryati et al., 2015). the indonesian government is committed to changing to a more advanced direction in the accounting field by applying accrual-based accounting following government regulation 71 of 2010 in every government agency from the center to the village level. various rules and laws related to government financial management have been drafted, but the implementation still needs to be improved. at the same time, applying accrual-based accounting in government is expected to be a preventive measure to reduce irregularities and leakages in managing state finances (hartati, 2020). the better management of state finances will have an impact on improving local government performance in a direction that is far more transparent and accountable (pratiwi et al., 2019). accrual basis accounting is an accounting basis where economic transactions or other events are recognized, recorded and presented in financial reports when the transaction occurs, without regard to the time cash or cash equivalents are received or paid (sofia et al., 2023). in accrual-based accounting, recording time corresponds to when resource flows occur, so it can provide the most comprehensive information because all resource flows are recorded (sukartini et al., 2016). this research will design an accrual-based government financial report format model. through this accrual basis, it is hoped that it will increase transparency and accountability in government financial management. the accrual-based financial reporting models designed in this research can later be used as a reference for local regional governments, considering the low level of understanding of human resources who manage village finances (maryati et al., 2015). https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 718 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the application of accrual-based accounting has yet to be maximized in its implementation. this occurs at the village-level government, which still needs to implement accrual-based accounting due to a lack of understanding of human resources in the village (arniwita et al., 2019). based on the researchers' observations, many village-level governments still need to implement accrualbased accounting to prepare their financial reports optimally (andriani et al., 2023). the villagelevel government is currently more focused on using the village financial system application launched by the bpkp. even though there has been an application for the village financial system, accrual-based accounting still needs to be implemented optimally. this is due to a limited understanding of human resources, who are responsible for inputting financial data and making accrual-based financial reports not as expected. based on the background described, researchers need to design a village fund accounting model to realize accountability for government financial management, especially at the village level. agency theory agency theory is a concept that provides an explanation of the relationship between principles and agents (nurlinda, 2021). the party that has the authority to give responsibility to other parties is called the principle and the party that accepts responsibility from the principle is the agent (raharjo, 2015). in public sector organizations, the community plays the role of principal and government, in this case the village head and village officials are agents who must carry out the mandate given by the community and are obliged to provide accountability for every activity and activity related to the mandate given by the community (chrisman, 2019). the village head and village officials are responsible for managing the resources owned by the village and entrusted by the community. therefore, the village government is obliged to provide transparent and accountable financial information to the community as a form of accountability in accordance with the laws in force in indonesia (hendriksen & van breda, 2000). village fund according to andriani et al (2021) village funds are sourced from the state revenue and expenditure budget (apbn). these funds are transferred through the district/city regional revenue and expenditure budget, which aims to fund the implementation of government activities for development and community empowerment and development (andriani, 2023). according to oktaviona et al. (2022), allocating village funds aims to improve the community's conditions and standard of living to achieve fair and equitable welfare. this goal is a concrete manifestation of the seriousness of the central government to the government at the village level. village fund management minister of home affairs regulation number 113 of 2014 states that the village head is the holder of village financial management authority and represents the village government in the ownership of separated village assets. managing village finances in one budget starts from january 1 to december 31 of the current year and is outlined in the village revenue and expenditure budget (2014). https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 719 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1) planning, administration, implementation, reporting, and accountability of village funds planning, administration, implementation, reporting, accountability, and supervision of village funds are guided by the regulation of the minister of home affairs of the republic of indonesia number 113 of 2014. a) planning the village government prepares village development plans following its authority which refers to district/city development plans. village planning includes the village village medium term development plan for 6 (six) years. as for the annual plan, namely village government work plan. this plan is prepared based on the results of a village meeting which is implemented no later than june of the current year. b) administration administration of village finances is a recording activity that the village treasurer carries explicitly out. the village treasurer must record all transactions in the form of receipts and expenditures. the treasurer only does the recording, not yet in the form of accounting journals but in bookkeeping. c) implementation 1) all village receipts and expenditures for exercising village authority are carried out through the village treasury account. 2) particularly for villages that do not yet have banking services in their area, the district/municipal government shall determine the arrangements. 3) all village receipts and expenditures, as referred to in paragraph (1), must be supported by complete and valid evidence. d) reporting the village government carries out its duties, authorities, rights, and obligations in managing village finances. the village head must submit periodic reports, namely semi-annual and annual, which will be submitted to the regent/mayor. e) accountability the village head submits the accountability report on the realization of the village apbdes implementation to the regent/mayor—accountability report on realization of apbdesa implementation consisting of income, expenditure, and financing. the accountability report on the realization of apbdesa implementation is submitted 1 (one) month after the end of the current budget year. https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 720 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) purpose of village funds based on law no. 6 of 2014 concerning villages states that the purpose of village funds is to improve public services, reduce poverty levels, improve the village economy, and increase sustainable development (2014). in addition, the village also has the opportunity to conduct training that can improve the quality of human resources in the village. accountability according to lan and bpkp ri, accountability is an obligation to provide accountability for performance that has been implemented to leaders or organizations that have the responsibility to hold accountable (2000). according to undp (2008), accountability is an evaluation carried out on the performance of an organization that must be accounted for and valuable as feedback for organizational leaders to be able to improve further the performance of the organization they manage in the future. in simple terms, accountability can be interpreted as accountability from an institution for the performance they have carried out (aprila et al., 2023). method this study uses a qualitative approach to explain how to design a village fund accounting model that the nagari government can use as a reference based on government regulation no. 71 concerning government accounting standards in 2010. the following is the design of this study: input journal process 1) general ledger 2) trial balance output 1) operational report 2) statement of changes in equity 3) budget realization report 4) balance sheet 5) notes to financial statements figure 1. research framework https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 721 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion village fund accounting model the design of the village fund accounting model aims to provide an overview of the preparation of village government financial reports by government accounting standards. through the design of this model, a more practical understanding of the application of accrual-based accounting will emerge (andriani et al., 2015). the following are the steps used to prepare village government financial reports: 1) journal format the journal is a means for recording the financial transactions of the nagari government, which are recorded based on the time the transaction occurred and displays debit and credit mutations and the number of funds used. the journal format can be seen in detail in figure 1 below: figure 2. general journal 2) general ledger the general ledger is a collection of accounts/accounts that are used in the bookkeeping of the nagari government and are arranged according to specific sequences, generally starting from the accounts on the balance sheet, then accounts for the budget realization report (lra), operational reports (lo), and statement of changes in equity (lpe). the process of transferring accounts contained in the journal to the general ledger is called posting. the following is an image of the general ledger format for preparing village financial reports: perk db jumlah perk kr jumlah 01/12/2022 pemerintah menerima pendapatan asli nagari kas di bendahara penerimaan 1.1.1.01 pendapatan retribusi lo 8.3 01/12/2022 bendahara penerimaan menyetor pendapatan asli sebesar xx.xxx.xxx ke kas nagari rk-ppkd 3.1.3 kas di bendahara penerimaan 1.1.1.01 debit pemerintah nagari abc jurnal lo bulan : december 2022 tanggal kode pembantu no bukti uraian kredit keterangan menu https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 722 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3. general ledger 3) trial balance the trial balance is a list that contains the balances of all accounts/estimates in the general ledger. preparing a trial balance tests the similarities of debit and credit mutations in the general ledger and simplifies the process of preparing financial reports (kasmir, 2008). the following is a trial balance model in the village government financial statements: figure 4. trial balance 4) adjusting journal entry in preparing financial reports, data discrepancies are often found in the trial balance, which hinders preparing financial reports. therefore, adjusting journals are needed so that each nominal account shows income and expenditure that must be recognized in an accounting period, and accurate no. perkiraan : 1.1.1.01 nama perkiraan : kas di bendahara penerimaan perkiraan d/k : debit no sumber jurnal saldo awal debit kredit saldo akhir 1 lo -rp -rp 2 lra -rp -rp 3 j.memo -rp -rp 1.1.1.01 jumlah -rp -rp -rp -rp pemerintah nagari abc buku besar bulan : december 2022 menu per 01/12/2022 1 aset 1.1 aset lancar 1.1.1 kas dan bank 1.1.1.01 kas di bendahara penerimaan 1.1.1.02 kas di bendahara pengeluaran -rp 1.1.1.03 rekening kas desa -rp no perkiraan nama perkiraan saldo pemerintah nagari abc neraca saldo https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 723 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accounts, especially assets and liabilities, show the actual amount in the accounting period. the format for the adjusting journal itself is generally similar to the general journal format. 5) worksheet the worksheet is a columnar paper designed to collect all the accounting data needed when the skpd prepares financial reports systematically. the worksheet is not part of the formal accounting records. because of its informal nature, the drafting can also be done using a pencil, making correcting if something goes wrong easier. the purpose of making a worksheet is to simplify financial reports, summarize information from the trial balance and adjustment data, and make it easier to find errors that might be made in making adjusting entries. the form of the worksheet is as follows: figure 5. worksheet 6) financial statement based on the regulation of the minister of home affairs number 20 of 2018 concerning the application of accrual-based government accounting standards for managing village finances it is stated that the regional work units (skpd) are required to prepare financial reports. the regional work unit (skpd) is an accounting entity, so the skpd is tasked with preparing 5 (five) types of financial reports, namely: (1) budget realization report (lra), (2) balance sheet, (3) operational report (lo), (4) report on changes in equity (lpe), and notes to financial statements (2018). debit kredit 1 aset d 1.1 aset lancar d 1.1.1 kas dan bank d 1.1.1.01 kas di bendahara penerimaan d 1.1.1.02 kas di bendahara pengeluaran d 1.1.1.03 rekening kas nagari d 1.1.3 persediaan 1.1.3.02 persediaan alat tulis kantor d 1.1.3.05 persediaan bahan/material d 1.1.3.06 persediaan alat-alat kebersihan/bahan pembersih d 1.1.3.08 persediaan barang untuk dihibahkan kepada masyarakat d pemerintah nagari abc neraca bulan : december 2022 no perkiraan nama perkiraan perkiraan d/k neraca saldo menu https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 724 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the following is a model of the nagari government's financial reports following the established rules: a. operational report model figure 6. operational report b. statement of changes in equity model figure 7. statement of changes in equity .. . . . . . . . . . . . . . . . https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 725 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c. balance sheet model figure 8. balance sheet d. budget realization report model figure 9. budget realization report …. . . . . . . . . . . . . . . . .. .. . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .. . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .. . . .. . . .. . . . . . ….. . . . . . . .. . . . . . .. . . . . . .. . . . .. . . . . .. . . . . . . . . .. . . . . .. . . . . . .. . . . . . . . .. . . . . . . . .. . . . . .. . . . . .. . . . . .. . . . .. . .. . . . .. . . . . .. . .. . . . . . . .. . . . . .. . . . .. . .. . . . .. . . .. . . .. . . . .. . . . . . .. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . no perkiraan nama perkiraan no perkiraan nama perkiraan 1 aset -rp 2 kewajiban -rp 1.1 aset lancar -rp 2.1 kewajiban jangka pendek -rp 1.1.1 kas dan bank -rp 2.1.3 hutang pajak -rp 1.1.1.01 kas di bendahara penerimaan -rp 1.1.1.02 kas di bendahara pengeluaran -rp 1.1.1.03 rekening kas nagari -rp 1.1.3 persediaan -rp 1.1.3.02 persediaan alat tulis kantor -rp 3 ekuitas -rp 1.1.3.05 persediaan bahan/material -rp 3.1.1 ekuitas -rp 1.1.3.06 persediaan alat-alat kebersihan/bahan pembersih -rp 3.1.2 ekuitas sal -rp 1.1.3.08 persediaan barang untuk dihibahkan kepada masyarakat -rp 1.3 aset tetap -rp 1.3.1 tanah -rp 1.3.2 peralatan dan mesin -rp 1.3.3 gedung dan bangunan -rp 1.3.8 akumulasi penyusutan aktiva tetap -rp total aset -rp total kewajiban + ekuitas -rp pemerintah nagari abc neraca per : december 2022 menu no perkiraan nama perkiraan anggaran setelah perubahan realisasi lebih/kurang 4 pendapatan lra 4.1 pendapatan asli nagari -lra total pendapatan 5 belanja 5.1 belanja pegawai 5.1.1 belanja gaji 5.1.2.02. tunjangan perangkat nagari 5.2.1.02 belanja perlengkapan alat-alat listrik 5.2.1.07 belanja bahan material 5.2.5.01 belanja jasa langganan listrik, air, telepon 5.2.6.02 belanja pemeliharaan kendaraan bermotor 5.3.2 belanja modal pengadaan peralatan, mesin dan alat 5.3.2.03 belanja modal peralatan komputer 5.3.2.09 belanja modal peralatan khusus pertanian/peternakan total belanja defisit/surplus untuk tahun yang berakhir bulan : december 2022 laporan realisasi anggaran pemerintah nagari abc menu https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 726 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 7) closing journal entries closing entries are made after the financial statements are prepared. closing entries are made to eliminate all nominal accounts or temporary accounts reported in the budget realization report and operational reports. this journal is made so that these temporary accounts appear as something other than the general ledger's opening balance the following year. cause these accounts are intended only to accumulate transactions during one accounting period. thus in the next period, all accounts in the budget realization report and operational reports (temporary accounts) will start with a zero balance. in this way, it will also be possible to separate the total temporary account balances for this period from the total temporary account balances in the following period. closing journals include the closing journal of the budget realization report to close the balances of the budget realization report accounts. the closing journal for the operational report is to close the balances of the operational report accounts. the journal form and format used in making closing journals are like the general journal format. 8) trial balance after closing in making closing journals and posting them to ledger accounts, the possibility of errors is quite large, especially in balancing (closing the final balance) real accounts. after closing the books, all accounts in the general ledger must balance. therefore, after closing the books, it is necessary to carry out tests to check the correctness and balance of the debit and credit amounts. the test is done by making a trial balance after closing the books and a list containing ledger balances after the skpd closes the books. the format of the trial balance after closing is the same as the format of the trial balance after closing, only the title is changed to the trial balance after closing, and the numbers in the trial balance after closing are the final balance after posting the closing journal. conclusion based on the results of the previous analysis, it can be concluded from the results of this study that the regulation of the minister of home affairs number 20 of 2018 concerning the application of accrual-based government accounting standards for village financial management has not been implemented optimally in the nagari government so that there are still many accounting entities that do not understand well about these regulations. based on the conclusions above, the nagari government can provide more understanding of the minister of home affairs regulation number 20 of 2018 concerning the application of accrual-based government accounting standards for village financial management. it is necessary to carry out regular socialization to improve the quality of human resources in preparing reports on government finances. https://www.ilomata.org/index.php/ijtc village fund accounting model in realizing nagari financial accountability yentifa, andriani, jr, aprila, and gusmita 727 | ilomata 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(2018). analisis akuntabilitas dan transparansi pengelolaan dana desa pada nagari ulakan kecamatab ulakan tapakis. menara ilmu, xii(11), 118–126. https://www.ilomata.org/index.php/ijtc the illomata international journal of management international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 1, january 2023 page no. 128-144 128| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria atinuke adebimpe orekan bells university of technology, ota, ogun state, nigeria correspondent : aaorekan@bellsuniversity.edu.ng received : november 15, 2022 accepted : january 29, 2023 published : january 31, 2023 citation: orekan, a, a.(2023). critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria. ilomata international journal of tax and accounting, 4(1), 128-144. https://doi.org/10.52728/ijtc.v4i1.658 abstract: the study examined the relationship between land tax and total igr as well as the proportion land taxes constitute in the total igr for a period of twelve years. data were collected through a well-structured questionnaire, personal interviews and review of government documents. questionnaires were administered to the 31 top management staff at the board of internal revenue services in kano state. at the bureau of land management in kano state, questionnaires were also administered to 25 senior cadre officers. personal interviews were also conducted. using the pearson correlation coefficient, the result of the study showed that there was a positive relationship between land taxes and total igr in kano states and the strength of association was strong i.e., (0.989) in kano state. by implication, land tax forms a major source of revenue in the two study areas. in view of this, the study concluded that for government to continue to provide the necessary infrastructure and also maintain them through revenue from land tax, government needs to take into consideration a good property statistics and information together with the property owners, tax laws need to be reviewe\d to tackle tax evasion and at the same time, government should be ready to give proper account of revenue realised through land taxation and this should be published accordingly. keywords: land tax, total internal revenue, property tax, kano state this is an open access article under the cc-by 4.0 license introduction taxes are generally being referred to as charges and levies paid by all taxable adult in a community. this is to be able to provide amenities, such as town halls, markets, roads and electricity (muhammad & ishiyaku, 2013). taxes described as a compulsory on all corporate services, individuals, partnership and goods (samuel & inyada, 2010). direct and indirect taxes are system by which government mobilise revenues (chaudhry & munir, 2010). examples of direct tax are commercial tax, personal income tax, capital gains tax, excise duty , vat and https://www.ilomata.org/index.php/ijtc mailto:aaorekan@bellsuniversity.edu.ng https://doi.org/10.52728/ijtc.v4i1.658 critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 129| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc service tax. the most populous country in africa is nigeria and is in west africa (world bank, 2022). this high population no doubt causes the social amenities and infrastructure to be overstretched. this infrastructure would require regular repairs and upgrade not to mention high costs of expansion and replacements (reed & mberu, 2014). if this is the case, taxation (direct or indirect) is an important element that cannot be underestimated in the mobilisation of revenue. property taxation is another form of taxation for mobilisation of revenue for the government. it is a fundamental instrument for effective land administration and a tool for generating government revenue (adefolake & omodero, 2022; egbunike et al., 2018) land tax is a recurrent tax on the ownership of undeveloped or developed land, excluding any development made on land. land taxes can be classified into two: property tax and land charges (franzsen & mccluskey, 2017). examples of land charges are ground rent, land use charges and fees such as: survey, registration and search, valuation, application, application, re-grant, change of purpose and occupancy permit. property tax is a charge levied compulsorily on interest in ownership and use of landed properties. this includes: tenement rate, probate tax, capital gains tax, capital transfer tax, stamp duties, withholding tax, severance tax, betterment/development tax and site-value tax. it is a major avenue for realising income for local and state authority. this revenue can be for government to bear the cost of providing and maintaining social services. the arms of government in charge of tax management are the federal board of internal revenue (fbir), state board of internal revenue (sbir) and the joint tax board (jtb). they have the authority to manage and see to the affairs of tax system in the country (olayode & omodero, 2021). tax operation majorly include getting of optimum return or collection of information, appraisal, appeals, collection and recovery of taxes. if these factors are under a proper tax administration system and effective legal framework, then property tax could be a successful domestic resource mobilisation (eneh, 2010; nwamuo, 2019). since the 70’s the nigerian government has depended on revenue generated from oil. with time, it became increasingly evident that the expenditure from the local, state and federal levels could no longer be met with the revenue generated from crude oil alone. the country’s reliance on petroleum as a main foreign exchange earners allows the economy to be vulnerable to external manipulations (ugoan, 2019). it has therefore been advised that government should generate revenue from other sources. there is need to underscore the enthusiasm in all the tiers of governments and even the federal government’s new sources of revenue and also improve the zeal in collecting revenue from existing sources especially taxation (kiabel & nwokah, 2009). the pressing need of infrastructure by people in the face of limited resources available in nigeria have made it necessary that government should promulgate laws on taxation as a means of mobilising internally generated revenue through from land tax (ogunleye, 2014). functional, performance and structural review of the kano board of internal revenue was undertaken in august 2013. the mandate guiding the laws of operation of kano state board of internal revenue (kbir) was extracted from personal income tax act 2004(as amended), personal income tax 2001 (as amended), edict no. 9 of 1982 and kano state revenue administration law 2010. this mandate enables kbir to generate income from tax for the state https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 130| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by the imposition of levies and charges on total income of taxable persons, collection of taxes and accounting of tax revenue among others (ajala & adegbie, 2020; stephen, 2018). kano state the board of internal revenue services, disclosed that land tax is a vital means of resources (revenue) for transitional countries and also stated that kano state government has realised =n=186billion as internal generated revenue from january 2016 (cummings et al., 2015). in summary, this study is tailored to assess all forms of land taxes in kano states in order to assess the relationship that exist between land taxes and revenue generation and also the proportion these taxes constitute in the total revenue generated to the government. the capability of land taxes as a veritable means of revenue in the study area shall be brought to the public and government domain. 1.1 role of taxation land taxation has a role to play in municipal or state effort in revenue generation. it forms an integral part of financing local government and a form of tool for decentralization. decentralisation has become an important theme in costa rica and throughout latin america. this inferred that municipals and local government has more powers to finance infrastructure with more fiscal responsibilities. in early 2005; nearly 76% of locally generated revenue in cities and towns in massachusetts came from property taxes. public works of a country that are traditionally and fundamental to the sustenance of a community include, {a.) transportation, such as highway and road system, railway, airline system and ports (b.) communication system such as telephone network and postal services (c.) governance systems, such as court system and d.) basic public services and facilities such as schools, sewages and water system (frischmann, 2007). government has been playing a continuous role in the provision of infrastructures. these infrastructures need continuous maintenance and proper management for durability, taxation has continually played a key role in this. we pay tolls to access highways, pay neighbourhood/betterment fees for maintenance of access roads, income tax, company profit tax and other corporate taxes to facilitate the growth and maintenance of these basic infrastructures. state for a period of years have put in place series of means to generate income in other to meet the needs of their people and these are majorly in three areas; taxation revenue, sales of goods and services and grants and subsides. evidence has shown that in africa, deficiency in infrastructure and basic amenities and this inhibits their progress in the continent. this has resorted to increase in poverty rate and poor health facilities (okorie & lin, 2022). most developing countries are still behind the developed countries (castro et al., 2022). in addition, 884 million people do not have access to good drinking water and 2.6 billion people lack access to the main sensations. in view of this, revenue mobilisation in developing country is expected to be a necessity for the actualisation of sufficient finance (ogwumike & ozughalu, 2018). https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 131| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in nigeria for example, the government has depended on agriculture until the discovery of oil. nigeria was primarily an agricultural economy whose main source of revenue is in agriculture but as a result of fluctuation in oil prices, globalisation and factors of demand and supply of oil, the nigerian government has been compelled to find other means of revenue and one of these sources is taxation (anyaduba & aronmwan, 2015). on the contrary, despite the income realised by government through tax revenue, development in nigeria seems impossible due to continuous high rate of poverty, unemployment, low standard of living and poor infrastructure facilities still exists at a high rate in nigeria (nwite, 2015). similarly, the world bank reports nigeria’s infrastructure rank’s appears to be low in terms of the standard when compared with the other parts of the world (world bank, 2022). the inadequate infrastructure in nigeria as listed are the pipe borne or portable drinking water, the road system, waste management and the delivery of electricity. the federal revenue board, washington dc also revealed that; the kemp commission opined that its general overview on the principle of tax reform would almost double u.s economic growth rates over the next five to ten years (kemp commission, 1996). to buttress all of these, an efficient and effective tax reforms in any country will go a long way. if tax laws and policies are reformed, it will provide a basis for effective state action that will lift society from underdevelopment, standard of living will be raised and necessary facilities for the achievement of developmental goals. tax has effect upon the growth rate of output. the impact of tax on the output rate of growth is considered based on two separate components (gale & samwick, 2016). the rate assumption is gy, and be defined by; gy = gy [ai (ti), a2(t2)] – (1) where a1 and a2 are two actions (e.g r&d expenditure and education) and the ti, i = 1,2 are the two taxes or the levels of some other policy instrument). then the effect of the tax is; dgy = gy dai (2) dti ai dti with the tax having a significant impact on the action, so that da1/dti is large, it may not necessary have a significant impact on growth if gy/ai is small. conversely, even if the effect on the action is small, the growth effect can still be large if gy/ai is large. conclusively, it is not necessary for countries to respond in the same way to taxation. for the fact that the economic gents reacts the way (i.e, all bring down their human capital investment in the same direction as the income tax is raised) the effect of growth may not be the same. perhaps the cause of the structural difference of countries are independence on human capital accumulation for growth and the amount of focus on r&d (research and development)then the same tax policy may have very different growth consequences. 1.2 models for tax structure and revenue gary robbins and tax foundation have developed tax and growth model (tag). they felt that tax policy needs economic model that can foretell how variation in the tax codes will https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 132| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc influence economic behaviour and tax revenue (robbins et al., 2014). in making policy in taxation, they believed that it has to be measured efficiently to determine its impact in the growth of an economy and revenue generation. several other models are currently used to score tax proposal. tax foundation fiscal fact mentioned that the joint committee on taxation (jct) uses two models and these are: macroeconomic equilibrium growth (meg) and overlapping generations lifecycle (olg) models. the meg model supposes that the federal reserved continuously responds to a change in process brought about by a modification in tax policy while olg model assumes that representative agent within a population are able to utilise perfect prediction in making economic decision to improve their welfare according to specialised utility function. the hitch about these models is that complexity injected into it may meddle with the capability to stimulate rational of real world tax changes. moreover, neither of these models has been discharged to the public and the actual mechanics of the models are not known to most of the profession. based on this the tax and growth model was developed (robbins et al., 2014). michael schuyler made it known that the tax and growth model (tag) has to main interactive components; the first part is known as a production function or a neoclassic economic model, the economic output and a tax –return stimulator. the function of production relates to the inputs of labour and capital to the output of the economy. the amount of quantities of labour and capital that people are willing to supply in a country depend on the motivations that are tax related (schuyler, 2014). for labour; cobb-douglas formula was applied in this, the yield of the production function is distributed to either labour or capital based on a steady share parameter calculated by each sector. the sum of the labour shares of production per labour hour from every sector gets the gross wage for all sectors in the economy. the net wage is gross wage less the effective averaged tax rate on labour, which is generated by the tax –return simulator. ᵂi = (1-tl) ∑ as ys, i ٭shr l li 1 the desired labour supply for the whole economy is decided by an elasticity of labour. the labour supply is distributed into each sector based on the original distribution between the sectors. li + 1= 0 wi∑ ls , i + 1 =as li + 1 capital the sector have two process for service, and these are; an observed service price (osp) and a minimum required (mrsp). the osp is the gross return to capital observed in the economy, is gotten by dividing the capital’s share of output by the stock of capital in the economy. ss, i = ys, i ٭ shrk https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 133| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ks, i 1 this model (tag) provides the size of the economy, number of jobs, wages can be affected by a tax change which can be shown by the tag model. if a tax change would expand investment, create new jobs and bolster the nation’s output, policy makers and voters should be informed of that. however, if there is a change in tax that affects the economy negatively, the public should be aware of that. another importance of the tag model is that its estimated revenue is more realistic than conventional revenue estimates when growth effects are large. conventional revenue estimates usually assume that while tax changes may cause shifts within the economy, they do not alter the economy’s total size and productivity. tag model produces dynamics revenue estimates free of that bias. 1.3 evaluation and methods of assessment of land taxation in assessing the methods used in evaluating land taxes for revenue mobilisation, tax base needs to be determined first. the determination of tax base is done at different levels of government in various countries. in czech republic and south africa, the decision of tax base is usually made at the central government level while countries like nigeria and united states in federal countries make their decision at the state and provincial level (franzsen & mccluskey, 2017). furthermore, most other countries stipulate different tax bases based on the types and categories of properties. bases on their own classifications, it known that there are three broad ways in which tax base can be determined and these are: as per unit tax, an area-based tax, and a valuebased tax. for fairness and equity amongst tax payers in any jurisdiction, property tax base should be assessed uniformly amongst property owners (franzsen & mccluskey, 2017). a) area-based system: this approach is mostly undertaken by countries where necessary information on property is to not available. the value of tax in this situation is mostly based on location and age of the structure. it is applicable to both land and other improvements on it. the tax base is charge per square meter of the area or worth rate per square meter multiply with the size of the building. the unit assessment is adjusted to reflect the location, age of the structure and use of the property. it can be delineated that area based assessment is a reflection of average values for group of properties within zones (bird & slack, 2013). country like dar es salaam made adjustment on the assessment on tax base to be hinged on size of properties and the location. in kinshasa, democratic republic of congo, taxes are classified by neighbourhood. b) capital value system: this system of assessment is practiced mainly in a developed country where experts are available. this system appraise the value that market put on properties. there are also elucidate various methods that can be employed to estimate market value (bird & slack, 2013) and these are: i.) by assessment of comparison sales approach with similar properties in the neighbourhood, ii.) the cost method approach. this is applicable mostly for properties that seldomly change hand, https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 134| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc iii.) the income approach in which the assessors appraise the potential of gross rental income the property can produce after all other outgoings have been deducted. namibia, the philippines and swaziland value and tax land and building separately. land assessment value is based on market transaction while other advancements are based on depreciated replacement cost (franzsen & mccluskey, 2017). capital value approach is common in a country where property market is formal and countries with informal property market and limited number of valuers do not work effectively. 1.4 practice of a good property tax the way and manner in which land tax is being practiced and implemented differ from one country to another. also, there are different factors that affect the functionality and productivity of property tax despite its popularity, most especially in the developing countries. taxation administration of any country is attached to the political philosophy of that state. this means that political will has a major effect on the smooth running and the administration of property tax in any country. it can also be observed that most tax policy do not continue its operation in most developing countries because they appear not to be relevant in tax system. nevertheless, there are various reasons to endorse property tax in any country. because property value most of the time appreciate in the market, the income is elastic. if this is the case property tax would be difficult to sponge as part of revenue source for any nation (bahl & vazquez, 2008). property tax is a principal choice for local government as a main source of revenue because a tax on immovable land and building distorts resource choices less than any other choice. one can further add that property tax is a form of progressive tax, so it is charged on those that are in the high income bracket (oates & schwab, 2009). it can be deduced from this that, one should expect property tax to be a veritable source of revenue to the state. the acceptance approval of property tax as government revenue source remains valid and the reforms of tax administration and management should continue. 1.5 nigeria’s key economic indicators and oil prices and taxtake since oil has been a major source of government revenue in nigeria, it appears that effort of government to divesify into another sector of the economy to mobilise revenue has been not been fruitful. a major challenge that is facing nigeria economy has been the lower price of crude oil in the international market and coupled with this is the recession experienced by the economy in 2016. from the central bank report, 2019. it revealed that the average price of crude oil fell from around $113 a barrel in 2012 to just over $54 in 2017. the report also made it known that nigeria being the largest oil producer in africa between the year 2012 to 2014 has 57% share of the total income realised. it dropped to 41% between 2016 to 2018. according to the un-report 2018, it showed that the value-added tax (vat) and company income tax have been rising since 2015and nigeria estimated vat gap (shortfall) berween potential and actual vat collections was one of the largest in africa. this is further revealed in figure 19 below. this has put nigeria tax to gdp ratio in 2016 lower at just 3,4%, in 2017, the ratio improved to 4,8% , whereas, typical advanced countries has a tax to gdp ratio of around 40% as revealed in figure 20. https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 135| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fig. 1 : vat gap in african countries. fig. 2: tax take in some selected african countries 2018. source: firs report, 2018. 1.6 land registration and taxation property rights and tenure system play a fundamental role in the pattern of land taxation system. it has a great influence on land property tax as regard revenue mobilisation. the style of land ownership in african countries affects the ability of property tax to generate revenue . in a developing country like nigeria, it is important that registration of land rights are made comprehensive, efficient and transparent, without these, the imposition of land tax will be difficult. this the more reason why land administration system in most african countries be made efficient and workable. the word bank policy paper, (2015) states that the problems of land administration in africa include (a.) the multiplicity of land tenure system, (b) a land administration system for the transfer of property held under formal tenure alongside an https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 136| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc informal land administration system managed by traditional authorities, (3) a deed registration system that runs parallel to a title registration system and (4) outdated and poorly maintained manual record system. multiplicity of land tenure system will definitely lead to problems for property taxation. different issues will arise on who the taxable person is, how the land will be valued and how local government structure and traditional leadership will co-exist. land valuation is difficult in rural land because the land is used for basic subsistence farming or low –value residents and the income of the taxpayers is very difficult. in this case, value of tax on this land will be difficult to appraise. communal rural land is typically exempted in kenya and nigeria, therefore large rural land are not part of tax base (franzsen & mccluskey, 2017). 1.7 study area: kano municipal kano municipal is a local government area within the kano urban area in kano state, also known as capital of kano state, nigeria. its headquarters is at kofa kudu (western entrance of emir’s place) in the south city of kano. it was created in may, 27th, 1967 with a total land area of 17km2 and 13 wards. it has a population density of 29,329/km2. it borders katsina state to the north-west, jigawa state to the north-east, bauchi state to the south-east and kaduna state to the south-west. kano state of the federal republic of nigeria lies between latitude 130 n in the north and 110n west in the south and longitude 80w in the 100e in the east. kano city has been the capital of kano state since the earliest recorded time. it is located on latitude 12.000n and longitude 8.300 e with the same arid sudan savannah zone of west africa about 840 kilometres from the edge of the sahara desert. kano has a mean height of about 472.45m above sea level. kano most enduring legacy, gidan rumfa (emir’s palace) the seat of kano’s prestigious serrate institution (kingship) built over five hundred years ago is located in the municipal local government house is located in tarauni local government area. the 2015 population projection for kano municipal estimates to be 1,412,255 in 1991. it has a per capita income of $1.288, with a gdp of $12.393b. over the years kano city has expanded to become the third largest conurbation in nigeria. they are predominately hausa. subsistence and commercial agriculture is mostly practiced in the outlying districts of the state. some of the food crops cultivated are millet, cowpeas, sorghum, maize and rice for local consumption while groundnut and cotton are produced for export and industrial purposes. during the colonial period and several years after country’s independence, the groundnuts produced in the state constituted one of the major sources of revenue of the country. kano state is a major producer of hides and skins, sesame, soybean, cotton, garlic, gum arabic and chill pepper. www.kano.gov.ng. the city of kano (kano municipal) gives a good opportunity for human settlement, and also provides a good chance for grazing, accessibility and mobility of people and materials. dala hill is the most significant feature around the ancient city which is a nucleus of temporal and spatial patterns of settlements are formed growing into notable modern areas as shown in fig.3. https://www.ilomata.org/index.php/ijtc http://www.kano.gov.ng/ critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 137| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fig. 3: kano metropolis source: gis lab, bayero university kano olofin (1987), made it known that the earlier settlers engaged in iron smelting culture, which was on at about 320-380ad. this implies that people have been in this area for more than a millennium with a major skill in iron smelting. development of settlement is said to be across centuries originating as isolated groups of hunters around the hills of dala, goron dutse, magwan, bompai and panisau. these hills forms the present day of kano metropolis. kano city had survived as far back as the 11th and 12th century during the period of sarki jusa, when the first phase of city wall construction project finished (kano year book, 2010). according to liman and adamu (2003), made it known that the time lord luggard took over the affairs of northern nigeria, he estimated forty walled towns within 30miles radius of kano city and a total of 170 walled towns in the whole province. as time went past, kano cosmopolitan nature improved remarkably due to the economic and political opportunity coming it ways. more ethnic and nationalities such as the fulani, yorubas, arabs (lebanese, egyptians, saudis, yemen and syrian), nupes, ghanaians, and senegalese etc increased. they preferred to reside at the government reserved areas. reserved areas, where they are entitled to the basic facilities. the yorubas and igbos settled in sabo gari area of the metropolis. in 2007-2011, during yaadua/jonathan administration, the development and maintenance of infrastructure across the country was one of the seven-point agenda. infrastructural development forms a vital part of government agenda for the up-liftment of the economy. infrastructural development is prominent to the total growth in the society and its inability to function well reveals it as a major obstacle to the authority since activities in various sectors is centered on some major infrastructure. https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 138| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method personal interview was conducted amongst government officials and likewise questionnaires were administered to them as well. at the kano state board of internal revenue services, 5 units are found relevant to this study; these are, (i) assessment (ii) other taxes (iii) research and statistics (iv)withholding taxes (v) collection. questionnaires were administered to all the senior cadres of the organisation. with kano state ministry of land and physical planning, 3 departments are relevant and these are (i) land (ii) survey and (iii) deeds departments. the table below provides details of questionnaire distribution to the various departments/units at the state board of internal revenue service and bureau/ministry of land and survey in kano state. table 1: questionnaire distribution and retrieval rate at the kano state board of internal revenue services. units/ departments number of staff response rate % response rates assessment other taxes research & statistics withholding taxes collection 5 13 4 3 6 5 13 4 3 6 100 100 100 100 100 total 31 31 100% source: author’s field survey, 2022. table 2: questionnaire distribution and retrieval rate at the kano state bureau of land management. units/departme nts number of staff respon se level % of response rate land deeds survey 9 7 9 9 7 9 100 100 100 total 25 25 100% source: author’s field survey, 2022. kano state https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 139| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tigrkan landtkan tigrkan 1.000000 0.989782 landtkan 0.989782 1.000000 r=0.989782 or 99% (there is positive relationship and a very strong strength of association between total igr and land taxes in kano state. table 3: relationship between revenue generated from land taxes and total igr in kano states. kano state variable dependent var.= ltigrkan coefficient t-statistic prob. c 2.799175 0.772916 0.456 landtkan 2.415822 21.95142 0.000 pearson corr.(r) 0.989782 r-square 0.979669 covariance 1079.016 f-statistic 481.8649 prob.(f-stat 0.000000 the results of regression and various test statistics on the nature of relationship between the revenue generated from land taxes and the total igr in the study areas; ogun and kano states was reported above. proportion of revenue generation from land taxes to total igr in kano state (2007-2018) fig 4. 0 10 20 30 40 50 60 70 200720082009201020112012201320142015201620172018 p e r c en t a g e s years % of landtax in tigr (ogun state) (kano state) https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 140| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4: kano state budgets 2007-2018 (figures are in billion naira) years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 kano state 60.0 0 71.48 108.70 110.30 157.6 9 221.7 0 235.3 0 219.2 0 210.7 6 275.0 0 209.8 0 233.0 0 source: states ministry of budget and planning’s document. 2019 the budget kano state has proposed for the period under review is shown above. it is a financial plan for the defined period with an estimation of the expenditure and expected income. it is pertinent to examine the proposed revenue and the revenue generated internally for the state. this will enable this work to make reasonable inferences from the analysis. the table below will detailed out the expected revenue and the total revenue generated by the state. results and discussion from table 3 above, the pearson correlation coefficient r=0.989782 implies that there is a positive relationship between the revenue generated from land taxes and the total igr in kano state. that is, if the revenue generated from land taxes increases, the total igr in kano state will also increase. on the other hand, if the revenue generated from land taxes decreases, the total igr in kano state will also decreases. considering the strength of association between the revenue generated from land taxes and the total igr in kano state, the result revealed that the strength of association is very strong. this means that to improve the total igr in the state, a very brilliant approach is to improve the revenue generated from land taxes in the state. in kano state, the value of the coefficient of determination (r-square=0.979669) implies that only 97.96 percent of variation in total igr is explained by revenue generated from land taxes, while the remaining 0.24 percent variation in the total igr is due to other factors not identified in this study. further implication from this result is that, revenue generated from land taxes in the main source of igr in kano state. this implies that the result of the model is; tigrkant = 2.799175 + 2.415822landkant; where t is 2007-2018 (kano state) furthermore, the result from the analysis on kano state (β=2.799175) shows that there is a positive effect of revenue generated from land taxes on total internally generated revenue (igr) over the study period in this work. also, the effect is statistically significant at 5 percent level of significance (t= 21.951, p=0.000). the study further revealed that a 1 percent increase in the revenue generated from land taxes will improve the igr by 2.4158 percent. in addition, the report from the f-statistic (f-stat= 481.8649, p=0.0000) reveals that the estimated example is highly statistically significant at 5 percent. also in fig. 4, in kano state, the proportion of revenue from land tax has been substantial and this has been on since 2007 to 2011. the proportion of land tax within this period is from 43% to 50%. there is a drop of yield from the year 2012 to 2016. a remarkable proportion is revealed in 2017. this is up to 58%. https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 141| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc for further understanding of the relationship between land taxes and revenue generation of the states, the study needs to scrutinize the fiscal policy of the study areas. this is necessary so that the effect of land taxation in solving the finances of government can be detailed out properly. the fiscal policy of government which implies using the revenue collected to solve some of the expenditure stipulated that that fiscal year will have effect on the nation’s economy. changes in taxation system and government expenditure will affect the total demand and government activity. in view of this, the budget, total internal revenue generated in the study areas and the budget frame for the period under review is detailed out in table 4 and figure 4 conclusion the study has attempted to examine the relationship between land taxation and revenue generation in kano states, nigeria. in this study, the major stakeholders are the states board of internal revenue services who are the authority to assess, administer and collect taxes from property owners. the bureau of lands and survey and bureau of land management are in charge of land registration and charging of ground rents. the analysis of the study shows that r = 0.989782, for kano state r = 0.989782; which reflect that there is a positive relationship between land taxes and revenue generation and the strength of association is very strong in kano state. it can also be shown that land taxes are reliable in terms of revenue mobilisation and is highly dependable in terms of financing the state. in kano state, the contribution of land tax to revenue generated in 2007 is 50%, in 2008, there was slight drop to 45% and 2009 to 42%. despite this the contribution of land tax to revenue generation in kano state has also been considerable. it has substantially contributed to revenue within this periods. this revealed that it is a potential of a veritable revenue source. nevertheless, from 2010 to 2016, the contribution of land taxes to the purse of government revenue dropped but still above 40% and in 2017, 58% of the land tax forms part of the total internal revenue generated and 16% forms 2018. from this study, it can also be deciphered that property tax is charged only on the income accruing from the property and not the property itself. in the case of withholding tax it is an advanced payment of income tax and it varies in tax rate depending on the type of transaction. so also, stamp-duty tax is only charged on the registration of conveyances of landed property, property itself do not attract this. in kano state, n60bn was budgeted for in 2007, n71.8bn was for 2008 and n108.7bn for 2009. the budget was continuously increasing over the periods under review. in 2007, the expenditure was placed on n53.84bn and the revenue generated for that year was n12.2bn. the expenditure increased to n71.53bn and the revenue realised was n11.66bn. over the years under review, the cost of expenditure outweighs the revenue realised to finance the state. it is also basic from this study that other charges on land matters have contributed to the revenue generation of government. these levies and fees are used in the strengthening of the overall property tax practice and mobilisation in the study area. the study revealed the trend of https://www.ilomata.org/index.php/ijtc critical examination of the relationship between land taxation and total internal revenue generated in kano state, nigeria orekan 142| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc revenue generation in the two study areas and it has shown the level of its contribution to the financing of the states. from the data analysed, it is obvious that it forms a reasonable proportion of revenue from generation to the state government. example of this is the ground rent, ratification fees etc, which are often reported alongside with property taxes. this study has assessed the revenue performance of land taxes as a key to identifying a good property tax administration and practice. the revenue yield is an important element in considering land taxes as a revenue source. the provision of urban infrastructure and maintenance of amenities as a result of good tax administration will contribute to the growth and development of a nation. for government to provide the basic amenities, revenue source should be greatly enhanced. it is therefore recommended that there should be; a. good property statistics and information of properties and property owners; b. tax law should be reviewed to tackle tax evasion and avoidance and; c. there should be proper accountability on the part of the government. reference adefolake, a. o., & omodero, c. o. 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(2022). nigeria at a glance. where we work. https://www.worldbank.org/en/country/nigeria/overview https://www.ilomata.org/index.php/ijtc introduction results and discussion conclusion the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 3, issue 4 october 2022 page no. 359-370 359| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effects of corporate governance disclosure on profitability of public listed firms in tanzania beny mwenda1, magwana ibrahim2 12college of business education, tanzania correspondent: benybnjmn@gmail.com1 received : july 28, 2022 accepted : october 10, 2022 published : october 31, 2022 citation: mwenda, b., ibrahim, m.(2022). effects of corporate governance disclosure on profitability of public listed firms in tanzania. ilomata international journal of tax and accounting, 3(4), 359-370 https://doi.org/10.52728/ijtc.v3i4.565 abstract: this study investigated the effect of corporate governance information (cgi) disclosure on profitability of firms listed in the dar es salaam stock exchange (dse). 21 listed companies were studied for a period ranging from 2006 to 2021 using a mixed research method with an explanatory sequential design. return on equity (roe) and return on assets (roa) were employed as dependent variables in the panel data analysis. cgi disclosure was an independent variable. geographical diversification, firm age, firm size, and sales growth were the control variables. secondary data was obtained from dse. qualitative data was gathered via semi-structured interviews. thematic analysis and a random effect model with two estimates (1 and 2) were utilized to analyze qualitative and quantitative data respectively. the findings suggested that there was a positive and significant effect of cgi disclosure on firm profitability. the findings adds to the body of knowledge by signifying stakeholder’s theory. the study concluded that disclosure of cgi may undeniably result in increased profitability. we recommended that firm managers should pay a closer look at cgi disclosure, enhance their disclosure practices, and invest in disclosure strategies that will benefit stakeholders. keywords: corporate governance information disclosure, firm profitability, roa, roe, listed firms. this is an open access article under the cc-by 4.0 license. introduction the accumulation of invaluable lessons from a string of business failures that occurred in different parts of the world gave rise to the continued relevance of corporate governance in a variety of countries and regions around the globe (unctad, 2006). due to the continued worldwide importance of corporate governance, listed companies have been subjected to a great amount of pressure in recent decades to disclose corporate governance information(cgi) (nobanee & ellili, 2022). cgi disclosure provide additional information to stakeholders and eliminate information gap between insiders and investors which is caused by managers' dominance for information access and control (nurfitriana & yadiati, 2018). the annual report is regarded as one of the main channel of information sharing through which management may disclose cgi (esther & henry, 2018). mailto:benybnjmn@gmail.com https://doi.org/10.52728/ijtc.v3i4.565 effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 360 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc even though annual financial reports might present a brighter financial future for the firm, there exist non-financial issues which causes big firms to fail (ooghe & de prijcker, 2008). such failures spurred governments all around the world to seriously probe alternative methods to improve their particular countries' corporate governance frameworks (haniffa & hudaib, 2006). different countries have distinct national traits as well as social and economic priorities (joshi, 2021). what is acceptable in one nation may not be desirable in another (ibiam & nwogo, 2017). similarly, each firm has its own history, culture, and commercial objectives (vieira, 2015). as a result, corporate governance cannot be static; there is a chance for it to vary unpredictably among countries and enterprises as it is driven by internal as well as external environmental dynamism (zuva & zuva, 2018). ultimately any effect on corporate governance might end up affecting firm profitability. profitability is the ability of a firm to generate more money than it spends. the majority of a firm's earnings comes from its operational activities. there will be no profit if the company is not operating efficiently and efficiently (oluwaseyi et al., 2021). profit and profitability are distinct concepts. profit is an absolute monetary unit, but profitability is a relative measure of how efficiently and effectively a company uses its resources to generate such profit as a whole. roa and roe are two of the most often used metrics of profitability, they assess profit relative to the resources used to achieve that profit (francis, 2020). since profitability largely depend on a firm’s operational efficiency and effectiveness then it is more likely for it to be influenced by corporate governance (hakimah et al., 2019). this mainly stems from the fact that individuals who are charged with governance have the right and duty to control and direct entire firm’s operations (iqbal & kakakhel, 2016). bestowing of rights and duty to control firm’s resources gave rise to the need for cgi disclosure. the disclosure of cgi is guided by the global reporting initiative standard no 102 – governance disclosure. gri standards offer firms with a flexible and future-proof reporting framework as processes and themes of cgi are always up to date and relevant when a firm employs the gri standards (global sustainability standard board, 2020). however, the presence of standards doesn’t negate the fact they might be interpreted and implemented differently based on cultural, economic and business variations across nations (muizzuddin et al., 2017). due to variations in interpretations and implementation of standards we argue that it is possible for the effect of corporate governance disclosure on profitability of businesses to vary across the globe. researchers across the globe have probed into establishing the effect of corporate governance on firm profitability. (harisa et al., 2019) concluded that the quality of cgi disclosure does not affect the profitability of indonesian and malaysian islamic banks, they further narrated that companies found it difficult to grasp the benefits of cgi disclosure and felt that it is an activity that simply strain the firm’s finances and believed that cgi transparency is not lucrative for the firm. buallay (2017) revealed that there was no direct effect of corporate governance on firm profitability in saudi arabia as firms with low implementation of corporate governance had higher operational performance measures (roa and roe). panchasara & bharadia (2013) results showed that the profitability of indian banks proxied by roa was greatly impacted by the financial and non-financial disclosures of corporate governance. kaur & vij (2017) established that the return on assets and return on equity of nairobi securities exchange (nse) companies were positively affected by cgi disclosure. in african context lishenga & mbaka (2008) concluded that better corporate governance disclosure does not significantly affect profitability of kenyan firms, as there was an inability to establish a significant relationship between compliance with cgi disclosure and roa and roe. study done by (adefemi et al., 2018) also failed to establish any significant effect of cgi disclosure on profitability of nigerian firms. herbert & agwor (2021) determined that the effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 361 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate governance disclosure of board of directors by nigerian banks had a considerable positive effect on roa, but it had no meaningful effect on roe. various studies in tanzania have looked at the relationship between corporate governance and firm profitability. masasi (2020) found that corporate governance had a positive effects on banks’ roa and roe. assenga, aly, & hussainey (2018) determined that roa and roe of tanzanian listed firms were negatively affected with ceo dualism, but are positively affected by board size, and board gender diversity. matemu, (2020) found that corporate governance had a positive impact roa and roe of financial institutions registered in dse. the results indicate there is a contradiction on the different aspects of corporate governance effects on firms’ profitability. apart from the contradiction the researchers considered only certain aspects of corporate governance and not in its all entirety as is required to be disclosed by the standards. masasi (2020) focused on controls and board independence and composition, assenga et al, (2018) focused on board’s characteristics and matemu, (2020) focused on board size, composition and characteristics. a glimpse view offered by other researchers in tanzania necessitates the need for studying further the effect of corporate governance disclosure on firm profitability by considering all the aspects of cgi disclosure. harbaugh & to (2020) argue that disclosure of information might sometimes backfire on the issuer. thus nondisclosure might bring an equilibrium if information standards are low or if previous expectations were positive. they further argued that full disclosure of information is a viable option if standards of information are high enough or expectations are low enough. sticking to the same vantage point we argue that cgi disclosure might affect firms profitability either positively or negatively and some firms might be reluctant to fully disclose cgi due to the information being of low standards and hence detrimental. in that light we sought to establish the effect of cgi disclosure on profitability of listed firms in tanzania. variations in interpretations and implementation of gri standards caused by cultural, economic and business environment differences. presence of conclusion dilemma among researchers and focus of tanzanian researchers on board compositions and characteristics when assessing the effect of corporate governance on firm’s profitability creates a gap in literature. thus the primary objective of this particular research is to fill in that gap by investigating as to whether cgi disclosure has an effect on the profitability of tanzania’s publicly listed firms. within the scope of our study, we looked at firms that were traded on the dar es salaam stock exchange between the years 2006 and 2021. hypothesis formulation consequently the hypothesis on which this study is based states; h1; corporate governance disclosure has a positive effect on firms’ profitability theoretical base stakeholder theory stakeholders’ theory states that the firm's effectiveness is measured by its ability to satisfy its stakeholders (freeman, 2010). firms’ stakeholders are all the parties impacted by its operations and the firms existence in the long run is based on their satisfaction (diamastuti et al., 2021). stakeholders are such as customers, workers, suppliers, political action organizations, environmental groups, local communities, the media, financial institutions, governmental bodies, and more (rintamäki, 2018). this concept portrays the firm’s environment as a biosphere of connected groups that must be satisfied to maintain the firm’s health and profitability (simon, 2016). this demonstrates that stakeholders have a vested interest in ensuring that the resources effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 362 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc are exploited to the fullest extent of their potential, which should ultimately be to the advantage of society as a whole (crifo et al., 2019). effective corporate governance is one of the key ingredients in satisfying the vested interests of the stakeholders as it is the management that overlooks the optimal exploitation of firms’ resources for the benefits of all the concerned parties. from that vantage point this study will put the stakeholders’ theory to the test by determining if the disclosure of cgi has any effect on firm profitability. method mixed explanatory sequential research design was used in the study to give a larger and more comprehensive view of the paper and to explain initial quantitative findings (almeida, 2018). with this approach it is easy to draw powerful and meaningful conclusions due to collaboration of the design's strong numeric emphasis and relevant qualitative explanations (almeida, 2018). sample and data 21 firms listed in the dar es salaam stock exchange (dse) made up the sampling population. the study used the census approach as all the firms in the dse were studied financial years 2006 to 2021 were included in the study's time frame. panel data on the dependent variable firm profitability (roa, roe), independent variables cgid, and control variables (firm size, firm age, geographical diversification and sales growth) were obtained from audited annual reports of firms listed on the dse. the research used panel data for the time period extending from 2006 to 2021. the choice to use panel data was based on its capability to offer reduced collinearity while also providing for greater information (roels, 2017). 2006 is also the year from which data began to be available in electrical format from the dse. the tanzania company ordinance 2002 also went into effect in 2006, and most of the listed companies began complying with the ordinance's criteria and ifrss in compiling their financial reports in the same year after it was institutionalized in 2004. as a result, this research opted to begin its investigation in 2006. interviews with a semi-structured format were carried out so the results of quantitative research could be supported. twelve key informants were interviewed for the study. one broker, four regulators from cmsa and dse and seven senior executives from various firms were chosen as key informants. respondents were chosen due to their knowledge of internal dealings and governance of dse firms and the tenure they have served in their organizations. use of interview with other research methods provides a significant source of greater insights from the viewpoints of many persons who have a grasp of the internal affairs, procedures, and interactions of the organizations analyzed in this study (almqvist, 2022). analytical model regression model was employed to establish the effect of cgi disclosure on firms’ profitability. other researchers such as (kaur & vij, 2017; panchasara & bharadia, 2013) have also used the similar model to determine the effect of cgi disclosure on firms’ profitability. appropriateness of the regression model stemmed from the continuous nature of the dependent variable. equation (i) and (ii) presents the models roait =β0+β1cgidit+β2 fsit+β3 fait + β4 geog diverit + β5 salgrowthit + fdi + tdt +eit ………..….. (1) roeit =β0+β1cgidit + β2 fsit + β3 fait + β4 georg diverit + β5 salgrowthit fdi + tdt +eit …………. (2) effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 363 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc where: roa and roe are dependent variables, β0 is constant, β1 to β5 were the estimates which included independent variables corporate governance information disclosure (cgid), firms size (fs), firm age (fa), geographical diversification (geog diver) and sales growth (sal growth) while vectors fd (firm dummy) represented firms time invariant specific effect and td (time dummy) represented time variant specific effect, e is the error term and i and t are firm and time elements respectively (mwenda et al., 2021). roa was chosen because of its ability as a tool to relate profits against operational efficiency. it measures a firm's long-term financial viability by considering its use of existing assets to generate profits (strouhal et al., 2018) . under corporate governance roa is a good measure of the agents’ utilization of available assets to generate profits for the principal. the value of roa was determined using the formula presented in equation (3) roe was used due to its ability to measure profit by focusing on profitability for shareholders (albuja et al., 2011) in this study shareholders are a group of interest since they are amongst the stakeholder as presented by the stakeholders theory. roe was determined using the formula presented in equations (4) lishenga & mbaka (2008) and buallay (2017) among others are examples of researchers who employed roa and roe as a performance measurement tool when assessing the effects of cgid on firms’ profitability. before beginning the data analysis process, the researcher made sure that the data satisfied all of the requirements for regression assumptions and then moved on to the next step. after conducting a hausman specification it was determined that random effects were likely to be more consistent and efficient. computation of corporate governance information disclosure (cgid) index in order to construct the corporate governance disclosure index, we used information extracted from the annual reports of the firms whose corporate governance disclosures were under scrutiny. the index was constructed based on a dichotomous scale in which an item that was disclosed was marked as 1 and the item of that was undisclosed was marked as 0. as the regulations requires a disclosure of 40 items related to corporate governance then the disclosure index was calculated as the cgid value varied from 0 to 100, with 0 being the worst disclosure and 100 representing the greatest possible disclosure by a firm. similar approach of measuring cgi information disclosure was adopted by (kaur & vij, 2018; willim et al., 2020). variables measurement are presented in table 1 effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 364 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1: variables measurement variables measurement expected sign dependent variable return on asset net profit before tax divided by total assets. +/ return on equity net profit after tax divided by shareholders’ equity +/ independent variable cgi disclosure it is dichotomous i.e. 1 for disclosure and 0 if otherwise + control variables firm size natural logarithm of the total assets +/ geographical diversification dichotomous i.e. 1 for diversification and 0 for otherwise + firm age number of years since incorporated till the period of study +/ sales growth current year’s sales minus previous year’s sales over the results of previous year’s sales +/ note that: + = positive and – = negative source; author result and discussion descriptive statistics linking cgi disclosure and firm profitability effects of cgi disclosure on firm profitability was examined in this research. descriptive statistics are presented in table 2 to give an overview of the mean, minimum, maximum and standard deviations of roa, roe, firm size, firm age, sales growth and geographical diversification. table 2 : descriptive results for dependent and independent variables variable obs mean std. dev. min max skewness kurtosis roa 265 12.377 25.214 -163.772 69.260 -0.739 2.603 roe 265 14.237 24.304 -143.832 62.460 -0.238 1.401 cgi 265 0.680 0.107 0.475 0.875 0.497 2.406 fa geog diver 265 265 23.568 0.619 17.160 0.385 0 0 69 1 0.990 -0.660 2.224 2.657 fs 265 7.696 1.105 4.674 10.138 -0.219 2.284 sal growth 265 0.826 8.848 -0.899 97.525 0.439 2.310 source; author analysis table 2 shows that the average roa was 12.38%, with a minimum loss of 163.7% and a maximum profit of 69.26%. roa's standard deviation was 25.21 indicating volatility in returns. on average roe was 14.2% with a minimum loss of 143.80% and a maximum return of 62.460%, roe standard deviation was 24.3 indicating volatility in returns. disclosure of cgi averaged at 68%, ranging from 47.5% to 87.5%. dse-listed enterprises satisfied 68% of cgi disclosure requirements on average. such findings imply that stakeholders didn't obtain the whole package of cgi information they wanted, according to cmsa (2002). inadequate cgi effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 365 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc disclosure may exacerbate agency problems and affect stakeholders' assessments of governance quality and capacity to drive the firm towards profitability (kemei, 2017) average company age since incorporation was 23 years, and average business size was 7.6 out of 10. data also showed that 61.9% of firms were geographically diverse. average sales growth of 82.6% shows that firms were stretching their selling and distribution over time. all variables have skewness values between 0 and 0.9 and kurtosis values between 1.4 and 2.6, suggesting normally distributed data with light tails (jaume et al, 2020). regression analysis for cgi disclosure and firm profitability. in order to assess the nature of the connection that exists between the dependent and independent variables, a random effect model was used. the regression was performed using two different estimates in order to assess whether or not the findings were consisten. the outcomes of the regression analysis are shown in tables 3 and 4, respectively. table 3: corporate governance disclosure and firm profitability (roa) variables (1) (2) roa roa corporate governance disclosure 161.8623*** 179.7050*** (58.611) (58.844) firm size 3.3019** (1.383) firm age 1.4024*** (0.393) geographical diversification 13.7440** (6.344) sales growth 1.0549*** 1.0554*** (0.125) (0.124) firm dummy time dummy yes yes yes yes constant -130.9321*** -119.2496*** (40.938) (41.144) observations 265 265 standard errors in parentheses key: * significant at 10%, ** significant at 5%, *** significant at 1% source; author analysis cgi disclosure had a positive and statistically significant effect on roa in all two estimations as seen in table 3. these findings are similar to those of (panchasara & bharadia, 2013) and (herbert & agwor, 2021) who also concluded that corporate governance disclosure positively affected roa of firms they studied. the results contradicts those of (harisa et al., 2019) and (lishenga & mbaka, 2008) who failed to establish any significant effect of cgi disclosure on roa. cgi disclosure proved to have significant positive effect on roa in all two models, even when specific control variables were removed, indicating that the results are robust. these results supports the stakeholders’ theory which proposes that firm’s effective existence is linked to its ability to satisfy the interest of stakeholders, by doing an activity that enhances firm’s roa that notion is reinforced as profitability is the main interest of investors and lenders (lado-sestayo & vivel-búa, 2019). interviews with some key informants (kis) were conducted in order to gain a more in-depth and crystal clear image of the connection between cgi disclosure and roa. the perceptions that were gathered from their point of view suggested that cgi disclosure makes stakeholders more effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 366 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc likely to have faith in the corporation's governance practices which enhances roa. through the disclosure of cgi, all parties concerned have the impression that those in charge of governance are acting appropriately and making sound judgments with regard to the appropriate use of available resources. during the course of the interviews, one of the managers of the company mentioned that; “cgi disclosure inspires confidence among stakeholders as it portrays a glimpse of atmosphere of the system of rules and standards that govern our company's operations and align the interests of our stakeholders. the disclosure also gives an indication of good corporate governance procedures and ethical business practices which contribute to financial viability. i remember receiving a phone call from a non-investor who was impressed by the fact that our top 10 disclosed shareholders were 75 percent tanzanians, and he clearly stated that he would continue to buy our products in order to support his fellow countrymen. you can only imagine the number of people who feel the same way. in the end, i am certain that cgi disclosure will have a positive impact on firm's roa” (firm manager) table: corporate governance disclosure and firm profitability (roe) (1) (2) variables roe roe corporate governance disclosure 50.3829** 47.1304** (21.801) (21.765) firm size 6.1361*** (1.564) firm age 1.8139*** (0.456) geographical diversification 14.1474*** (5.492) sales growth 1.1506*** 1.1460*** (0.213) (0.213) constant -45.5764** -42.0979** (18.705) (18.728) observations 265 265 standard errors in parentheses key: * significant at 10%, ** significant at 5%, *** significant at 1% source; author analysis cgi disclosure had a positive and statistically significant effect on roe in all two estimations as seen in table 3. these findings are similar to those of (kaur & vij, 2017; assenga et al, 2018) who also concluded that corporate governance disclosure positively affected roe of firms they studied. the results contradicts those of who failed to establish any significant effect of cgi disclosure on roe (buallay et al., 2017; khanifah et al., 2020). cgi disclosure proved to have significant positive effect on roe in all two models, even when specific control variables were removed, indicating that the results are robust. these results supports the stakeholders’ theory which proposes that firm’s effective existence is linked to its ability to satisfy the interest of stakeholders, when cgi disclosure is linked to positive roe enhancement it indicates that the firm has made effective use of the monies that has been invested by shareholders and is able to offer investors with considerable profits at the present time. by engaging in activities that improve the roe of the company, investors’ primary interest in profitability is reinforced. (lado-sestayo & vivel-búa, 2019). interviews with key informants (kis) were also carried out to obtain their perspective of the effects of cgi disclosure on roe. according to the opinions that were obtained from their perspective, cgi disclosure makes shareholders more to believe in the governance procedures of effects of corporate governance disclosure on profitability of public listed firms in tanzania mwenda and ibrahim 367 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the firm and consider their investments to be in safe hands. by disclosing cgi, all parties concerned have the assumption that the management is behaving appropriately and making sound judgments with regard to the appropriate use of the invested equity. this gives the impression that those in charge of governance are appropriately using available resources which ultimately enhances firm's roe. in the process of conducting the interviews, one of the employee from capital market regulatory authority stated that “our primary goal as a regulatory body is to safeguard the interests of the firm's shareholders. every firm that wants to go public on the stock market must comply with the disclosure requirements, which is an absolute must. shareholders may have a better understanding of a company's operational structure when the cgi is disclosed in the financial reports. shareholder satisfaction increases when they know which individuals have power to operate the organization on their behalf and which individuals are responsible for how an organization's personnel act and perform. in essence strong cgi framework provides for effective and efficient operations which contributes towards firm's roe, thus a disclosure is paramount” (cmsa representative) conclusion according to the findings of this research, a significant portion of companies who are listed on the dse make public disclosures of cgi information. disclosures of this kind are probably made with the intention of ensuring compliance with regulatory obligations and of boosting the trust of the firm's many different stakeholders. results also revealed that cgi disclosures had a positive and significant effect on the profitability of public listed firms. since the disclosures affect profitability then there is a need to develop necessary measures which will mandate that good corporate governance procedures and disclosures should be implemented in accordance with the gri standards and local legal requirements. we recommend that firm managers investigate the positive effects of cgi disclosure, improve their disclosure procedures, and make an investment into disclosure strategies that will bring even more value to stakeholders. the tanzanian government need to devise an efficient and effective method for rewarding those who disclose cgi and penalizing those who don't disclose cgi. better systems for cgi disclosure are to be created and strengthened, regulatory authorities like cmsa should work toward this goal. we propose that the area of potential future study may be narrowed by focusing on the disclosure practices of cgi across different sectors in tanzania. in addition, the importance of each of the disclosure elements was treated the same throughout this investigation. despite the fact that this helps to reduce biases, stakeholders may assign higher relevance on certain aspects of governance and less relevance on the other. there is a possibility that one facet of governance may be seen as a fundamental component and as such ought to be given greater weightage. future studies might consider developing a weighted cgi disclosure index. in similar view we also considered lack of weighted index as a limitation to this study. perharps the result would have been different if the items in the constructed cgi index were assigned weights in accordance to their relevance amongst stakeholders. reference adefemi, f., hassan, a., & fletcher, m. 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(2018). corporate governance and organisational performance. international. international journal of business and management studies, 10(1), 16–29. https://dergipark.org.tr/tr/download/article-file/440158 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 128-143 128 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of earning management, dividend policy, and free float ratio on stock returns alfin alifi 1, lestari kurniawati 2 1direktorat jenderal bea dan cukai, indonesia 2politeknik keuangan negara stan, indonesia correspondent: lestari.kurniawati@pknstan.ac.id2 received : october 31, 2023 accepted : december 31, 2023 published : january 31, 2024 citation: alifi, a., kurniawati, l. (2024). the influence of earning management, dividend policy, and free float ratio on stock returns, 5(1), 128-143. https://doi.org/10.52728/ijtc.v5i1.1022 abstract: analysis of company performance is one of the considerations for investors in making investment decisions. several issues related to earnings management arise due to the flexibility in accounting standards application becomes an investor’s special concern in analyzing financial statements. on the other side, investors’ attention to dividend distribution has various effects on several studies. another issue that also attracts the investors’ attention is the new rules of minimum free float ratio for companies listed on the idx to be 7.5% in 2019. based on this phenomenon, this study aims to examine the effect of earnings management, dividend policy, and the ratio of free float to returns stock. the sample used is the property and real estate sector companies. this study uses the fixed effect model with control variables in the form of profitability and firm value. the results show that earnings management significantly negatively affects returns, while dividend policy and free float have no significant effect on returns stock. simultaneous research results also show a significant effect on returns with a coefficient of determination of 36.5%. as an implication, the results can be a reference for early identification of earnings management using existing financial report data. in terms of dividend policy, this research shows that dividend policy does not have a significant influence. however, considering the data in the research, investors can consider the pattern of dividend distribution amounts for each sector in making their investment decisions. the free float ratio variables show an insignificant effect on stock returns. however, research on the free float ratio in indonesia is still limited. keywords: free float ratio, dividend policy, earnings management, stock returns, financial report this is an open access article under the cc-by 4.0 license. introduction to provide convenience and realize fairness in the preparation of financial reports, management has the flexibility to apply accounting. however, adiwibowo (2018) says that there is a risk of flexibility in the application of accounting in the form of opportunities for management to manipulate earnings better known as earnings management. this opportunity can become greater https://www.ilomata.org/index.php/ijtc mailto:lestari.kurniawati@pknstan.ac.id https://doi.org/10.52728/ijtc.v5i1.1022 financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 129 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc if the specified profit target cannot be met. this condition increases monitoring costs due to differences in interests between owners and management (berle & means, 1932) as research results by (weinstein, 2012) stated that agreements between shareholders and external parties such as policymakers and public opinion will control and direct management behavior. the property and real estate sector is one of the vulnerable sectors due to earnings management (abbas et al., 2018). this is because the property and real estate sector was rapidly changing, persistent, and had intense competition. the same thing was conveyed by (nurbaiti & suatkab, 2019) that the property and real estate sector had several fraudulent financial statement cases (financial statement fraud) which is the largest from year to year. several frauds in the property and real estate sector were reported by dwidinda et al. (2017) which stated that the chief executive officer (ceo) of cabot investment properties (cip) in the united states committed fraud against elderly investors and misused us$17 million of these investors' funds for his personal needs. apart from the cip case, securities law firm (edward & kantas, 2019) wrote that american realty capital property (arcp) in 2014 admitted to accounting errors amounting to us$23 million at the end of 2014 and made investors sell their shares. the shares received by investors can be influenced by the company's earnings management (istiqomah & adhariani, 2017). this phenomenon happened when the share price of pt hanson international tbk declined after news emerged that the company's main director was involved in the profit manipulation case of pt asuransi jiwasraya. in this case, the financial audit agency (bpk) projected that potential losses due to the pt jiwasraya insurance cases reached idr 16.8 trillion (putri, 2020). apart from the involvement of the main director, pt. hanson international tbk has a potential overstatement revenue of idr 613 billion over the sale and purchase agreement (ppjb) for ready-to-build plots which have not been disclosed in the financial statements. in this period, the share price of pt. hanson international tbk (myrx) continued to fall and touched the lowest share price permitted by the indonesian stock exchange (bei) at idr 50 in 2019. figure 1 shows the drastic decline in myrx share prices since 2018. figure 1. myrx share price source. processed data the influence of earnings management on stock returns has been analyzed in several studies. the research of (istiqomah & adhariani, 2017) and (salim & rusman, 2019) shows that earnings management has a significant negative influence on stock return. however, different results were https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 130 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc shown by other studies. (adiwibowo, 2018) in his research concluded that earnings management does not have a significant influence on stock return, while the research of (alami, 2021) shows that earnings management has a significant influence with a positive value on stock return. various results on stock return research allowed for carrying out similar research for several industrial sectors. apart from earnings management, in several studies, another factor that can influence stock return is a dividend policy. in his hypothesis, (gordon, 1959) states that the connection between profit strategy and stock costs can be affected by how much data is contained in profit circulation declarations. this is in line with (ouattara, 2017) that profit declarations on normal outcomes in a decrease in share costs during the occasion time frame, which is characterized as the exchanging a very long time when the declaration. investors were dissatisfied with the dividend yield, which led to a decline in share prices following the announcement of the dividend. if there is a lot of information contained in the dividend distribution announcement and the information is interesting to investors, the share price will increase. one of the information contained in dividend distribution is the amount of dividends distributed/dividend payout ratio (dpr). the dividend policy had a significant positive effect on stock return (astarina et al., 2019). however, these results have different conclusions from (sari, 2016) which dividend policy has a significant negative effect on stock return. on the other hand, the dividend policy of each company was different even in the same industry. the dividend policy for the property and real estate sector is shown in table 1. table 1. stock return and dpr for the property and real estate sector in 2020 company name share price at the beginning of the year end of year stock prices return stock dpr bumi serpong damai rp1.255 rp1.225 -2.39% 0% puradelta lestari rp238 rp242 1.68% 112,5% ciputra development rp1.040 rp985 -5.29% 11.22% alam sutera realty rp238 rp242 1.68% 0% metropolitan land rp576 rp430 -25.35% 17.71% source: data processed table 1 indicates that a large dpr value does not mean will produce a higher result on stock return. table 1 shows that alam sutera realty (asri) stock return increased by 1.68% even though they did not distribute dividends during 2020. meanwhile, metropolitan land (mtla), which distributed 17.71% of its profit, experienced a decline and resulted in a decrease of -25.35% in stock returns. these relationships open up research opportunities for dividend policy effect on stock return in the property and real estate sector. apart from earnings management and dividend policy, another variable thought to influence stock return is a free float ratio. (el-nader, 2018) in his research stated the free float ratio can attract investors referring to the concept that the larger free float ratio can minimize stock price games carried out by investors with large funds. however, research on free float ratios to stock return is https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 131 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc still limited. several studies, such as (bostanci & kilic, 2010; wang & xu, 2004), concluded that the free float ratio has a significant positive effect on stock return. however different results were presented by (çalişkan & keresteci ̇oğlu, 2013) that show the free float ratio does not have a significant effect on stock return. the changes in the minimum free float ratio limit for idx are shown in the decree of the board of directors of pt bursa efek indonesia number 59/bei/07-2019. regulation number i-v concerning special provisions for the listing of shares and equity securities states that the number of listed company shares owned by the public who are not controlling at least 7.5% of the number of shares that constitute the paid-up capital of the company. the relationship of dividend policy effects on stock return, the changes in free float ratio, and many cases of earnings management, especially in the property and real estate sectors, allowing conducting this research. this research seeks to examine the relationship between earnings management, dividend policy and free float ratios to stock returns in the property and real estate sector listed on the indonesian stock exchange (idx). hopefully, this research can provide additional literature for investors and companies in the property and real estate sector. to maintain the level of accuracy and control over the influence of variables not used in the research, control variables were used in this research. the control variables used in this research are the profitability ratio and firm value. the different interests of the company owner (ownership) and management as supervisors of company performance resulted in costs (berle & means, 1932). in the following period, berle and means’ research was refined by jensen and meckling (1976) born the agency theory. in agency theory, the company management (agent) will be given authority on behalf of the shareholders (principal) as a decision maker in running a company with compensation in the form of incentives received in the form of salaries, bonuses, and other incentives (jensen & meckling, 1976). the incentives given to agent performance based on financial reports will encourage agents to manipulate profits in financial reports (healy, 1985). the emergence of an agent authority in agency theory can cause limitations on the principal information add-on. in this situation, the principal doesn't know what the agents doing related to company performance. this is a form of information asymmetry known as moral hazard (scott, 2015). the indication of earnings management carried out by the company is a signal for investors to take future steps. the signals are an effort to provide information to other parties regarding an accurate picture of the company's performance and any problems they have so that other parties are willing to invest even under uncertainty (spence, 1973). a good signal from the company will be a consideration for investors when investing in a company. in brief, this will influence on stock return to be received. scott (2015) defines earnings management as the selection of accounting policies by management for certain purposes. furthermore, earnings management practices themselves are divided into two (2), namely efficient and opportunistic contract earnings management practices. earnings management practices that are efficient contracts can improve the quality of financial information presented, while opportunistic nature can cause losses to readers because they receive information that does not match reality (istiqomah & adhariani, 2017). https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 132 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information obtained from the presentation of financial reports will be a consideration for investors' decisions. opportunistic earnings management practices can lead to wrong decisions. in this case, investors are at risk of experiencing losses due to this decision. information about opportunistic earnings management practices can alienate investors from the company. thus, this research would hypothesize that earnings management has a significant negative influence on stock return. this hypothesis is in line with (adhariani, 2021; salim & rusman, 2019). the first hypothesis of this research is earnings management has a significant negative effect on stock returns (h1). apart from earnings management, (bhattacharya, 1979) stated dividend policy is also a signal for investors. many investors use certain preferences in assessing a company's dividend policy. (modigliani & miller, 1961) revealed the use of preferences in assessing dividend policy by investors, referred to as client effect theory. some of the investor preferences are the tax rates on dividend policy proposed by (litzenberger & ramaswamy, 1979), the different conditions for each investor proposed by (pettit, 1977), and the company sector proposed by (baker & powell, 1999). according to gup & agrrawal, (1996), the amount of dividends distributed from the company's profits will depend on the company's life cycle. the company life cycle period is divided into 4, namely pioneering, expansion, stabilization, and decline. in the pioneering stage, companies generally do not distribute dividends. then, in the expansion stage, the company will start distributing dividends in small amounts. and, lastly, getting closer to the cycle decline then the dividends distributed will be even greater. according to wijaya & tel (2017), the dividend policy is a company policy to use the company's net profits from both the previous year and the current year. the dividend is a return given by the company to shareholders so that dividends and their policies are taken into consideration by shareholders. this is approved by (astarina et al., 2019; retnaningrum & haryanto, 2018), who concluded that the dividend policy variable had a significant positive effect on stock returns. based on this, the second hypothesis in this research is dividend policy has a significant positive effect on stock returns (h2). apart from dividends, shareholders can also get returns on share ownership from the capital gain of share price differences. in practice, regulation of share prices can also occur. (biswal, 2003) reveals that companies with large market capitalization and do not comply with free float ratio regulation can lead to manipulation of stock prices by groups of investors with large funds. the free float is the number of shares traded on the stock market minus shares held by the parent company which is used to exercise control over subsidiaries (çalişkan & keresteci̇oğlu, 2013). in other words, (bostanci & kilic, 2010) stated that the free float ratio is the number of shares released by the company for buying and selling on the stock market. while the free float ratio is felt it can attract the attention of investors because the greater the free float ratio of a company, the public ownership of the company becomes greater (el-nader, 2018). according to (fitriani et al., 2020), the higher the free float ratio it has the potential to increase the company's market capitalization. this happens if the number of shares circulating in the public increases, the company will receive a greater amount of funds. thus the third hypothesis of this research is: the free float ratio has a significant positive effect on stock returns (h3). https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 133 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to obtain more solid results, this research uses profitability and company value as control variables. arifin & agustami, (2017) revealed that profitability ratios provide an overview of the company's ability to generate profits in a certain period based on the assets or capital owned by the company. the results of (dana & artini, 2021) show that the profitability ratio proxied by roe shows a significant influence with a positive value on stock return. apart from company performance, company value is also a concern for investors in making decisions. utami (2017) revealed that the public's assessment of companies that have good performance can be shown by the amount of company value. this can be seen when the public assesses the market price of a company's shares above its book value. in line with this, tobin's q is often as a measuring tool in assessing companies. (rahman & khairunnisa, 2016) stated that tobin's q indicator provides an overview of management performance in managing the assets owned by the company and can also illustrate the potential for company growth. previous research found that tobin's q, which proxies company value, has a significant positive influence on stock returns (kurniadi et al., 2022; rahman & khairunnisa, 2016). method this research uses panel data regression of property and real estate sector companies listed on the idx. the data used in this research are financial reports obtained from the official idx website (www.idx.co.id) as well as the company's official website. the data used is limited to the period 1 january 2016 to 31 december 2019. the selection of research samples was carried out by using purposive sampling on criteria: registered on the idx, published financial reports during the research period, and free float ratios greater and/or equal to 7.5%. the total sample used in this research was 172 samples. the data processing method used in this research includes outlier tests, descriptive statistical analyses, selection of panel data regression models, gaus markov theorem tests, and hypothesis tests. the outlier tests use data conversion for each variable into a score standardized (z-score) with a maximum limit of 2.58. descriptive statistical analysis uses the minimum, maximum, average, and standard deviation values of each variable. the selection of the regression model determines the best model between common effect model (cem), fixed effect model (fem) and random effect model (brake). gaus markov theorem tests include the normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. hypothesis tests are carried out by the feasibility tests of the model (f test) and partial significance test (t-test). the model developed in this research can be formulated as follows. rit = α + β1dait + β2dprit + β3ffit + β4roeit + β5tobinit + is information: rit : return shares of company i at the end of year t. α : constant. β : regression coefficient. dait : number of earnings management of company i at the end of year t. dprit : total dividends of company i at the end of year t. ffit : total free float of company i at the end of year t. https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 134 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc roeit : roe ratio of company i at the end of year t. tobinit : company value ratio i at the end of year t. e : error in this research, stock return refers to astarina et al. (2019) who define it stock return as the investors receive from the difference in stock prices at the close of the stock market during the observation and reduced by the previous year's closing market price divided by the previous year's closing market price. the closing market price used is the closing market price when the financial statements are published. the choice of market closing price refers to signal theory, that investors will respond to the condition of a company based on signals sent by the company shown by financial reports. rit = pit (pit-1) pit-1 information: rit : stock return companys’ pit : the closing price of shares when the financial statements are published pit-1 : the closing price of shares when the financial statements were published the previous year furthermore, earnings management in this research is proxied using discretionary accrual which is depicted through the modified jones model. this model uses the difference between the total accrual and non-discretionary accrual. according to dechow (1994), the modified jones model has the highest level of accuracy among other earnings management detection models. kusuma (2020) states that the modified jones model is used in calculating discretionary accrual carried out with the following steps: 1. total accrual (facingit) is calculated using: tat = nit – cfot 2. accrual value which is estimated using the ols regression equation (ordinary least square): tat/at-1 = 𝛽1(1/at-1) + 𝛽2 (δrevt/at-1) + 𝛽2 (ppet/at-1) + e 3. non discretionary accrual value which is calculated using the formulation: ndat = 𝛽1 (1/at-1) + 𝛽2 (δrevt/at-1-δrect/at-1) + 𝛽2 (ppet/at-1) 4. determine the value of accrual discretionary which is an indicator of earnings management with the equation: dat = tat/at-1 – ndat information: tat : total value of company accruals at the end of year t. tat-1 : total company accrual value at the end of year t-1. nit : the company's net profit at the end of year t. cfot : the company's operating cash flow at the end of year t. δrevt : changes in the company's net sales at the end of year t. δrect : changes in the company's receivables at the end of year t. at-1 : total company assets at the end of year t-1. ppet : company property, plant, and equipment at the end of year t. ndat : the value of non-discretionary accrual company at the end of year t. https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 135 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dat : the value of discretionary accrual company at the end of year t. β : parameters obtained from the regression equation. e : error in this research, the dividend policy variable refers to wijaya (2017), fitri (2018), retnaningrum and haryanto (2018) which uses a proxy dividend payout ratio (dpr) to describe the company's dividend policy. according to astarina et al. (2019), dpr is the ratio between the dividends to be distributed and the net profit owned by the company. the formula for calculating dpr is as follows: 𝐷𝑃𝑅 = 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑐𝑎𝑠ℎ 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑥 100% the free float ratio used in this research refers to suwandi (2020), namely the number of shares circulating in the community with ownership by the community below 5% per individual at the end of the year. however, in this research, modifications are taking into account idx provisions that the minimum number of shares circulating in the public reaches 7.5%. the calculation of the free float ratio used in this research, is as follows: 𝐹𝑓 = 𝑇ℎ𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑐𝑖𝑟𝑐𝑢𝑙𝑎𝑡𝑖𝑛𝑔 𝑖𝑛 𝑡ℎ𝑒 𝑐𝑜𝑚𝑚𝑢𝑛𝑖𝑡𝑦 𝑇ℎ𝑒 𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑤𝑛𝑒𝑑 𝑏𝑦 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑥 100% the profitability control variable in this study uses return on equity (roe). according to aryanti et al. (2016), roe is the level of profitability of a company by taking into account the level of profit generated based on the amount of equity owned by the company. roe measurement uses the following ratio: 𝑅𝑂𝐸 = 𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑎𝑠 𝑥 100% meanwhile, the company value in this research uses tobin's q ratio proxy. tobin's q looks at the company value by calculating a combination of market capitalization, liabilities, and assets owned by the company. according to rahman and khairunnisa (2016), tobin's q can be an indicator of a company's growth potential. tobin's q measurement uses the following ratio: 𝑇𝑜𝑏𝑖𝑛 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 𝑉𝑎𝑙𝑢𝑒 + 𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 result and discussion based on data, descriptive statistical analysis shows that on average companies in the property and real estate sector have a negative value of stock return or capital loss of -10.4%. meanwhile, earnings management has an average value of 0.0249, which indicates that companies in the property and real estate sectors are indicated to increase their company profits. in the dividend policy data, it was found that the sample data had negative values. this indicates that the companies in the property and real estate sector distribute dividends even though they experienced losses https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 136 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc during the period. the free float ratio variable has an average value of 33.81%, indicating that on average companies in the property and real estate sector own 33.81% of company shares traded in the public. as a test of the research model, this study uses the chow test, hausman test, and lagrange multiplier tests (lm test). based on the results, it was found that the chow test indicated fixed effect model was more precisely chosen than the common effect model. apart from that, the results of the hausman test also indicate that the fixed effect model is more precisely chosen than the random effect model. it shows that the fixed effect model is the best model that can be used in this research so the lagrange multiplier test (lm test) is not applied. the gauss-markov theorem test begins by carrying out a normality test. the normality test is carried out by comparing the probability values of jarque bera. in the results, the probability value of jarque bera is above 0.05. it means that the research does not have any normality problem for the research model used. the next test was carried out with a multicollinearity test. the multicollinearity test in this study used a correlation table pearson where observations are made through a correlation matrix between variables other than the dependent variable with a value limit of 0.90. based on the results, the correlation between variables other than the dependent variable was below 0.90. this shows that there is no multicollinearity problem between variables other than the dependent variable. the heteroscedasticity test in this study uses a glazes test by carrying out a regression on existing variables other than the dependent variable on the absolute value of the residual and comparing it with the existing alpha (α) value. the α value used is 0.05. based on the results, the residual absolute value of each variable was above 0.05 which indicates that there was no heteroscedasticity problem in the research model. according to ghozali (2017), the more appropriate autocorrelation test to use in research with sample sizes above 100 is the breusch – godfrey test (bg test). the autocorrelation test was carried out using the breusch-godfrey serial correlation method by comparing the probability value chi-square with the alpha value (α). the α value used is 0.05. based on the results, the probability value chi-square exceeds the α value means there is no autocorrelation problem. the next stage is the panel data regression test which consists of a simultaneous significance test and a partial significance test, then the test continues with the coefficient of determination. the research model used is the fixed effect model (fem). the results of the panel data regression tests are shown in table 2. table 2. panel data regression test results with the fem model variable coefficient std. error t-statistic prob. dait -1.3523 0.6344 -2.1315 0.0362 dpr -0.2215 0.1630 -1.3590 0.1780 freefloat -0.0033 0.3651 -0.0090 0.9929 roe 2.081839 0.664944 3.130852 0.0024 tobin 0.241416 0.046178 5.227965 0 https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 137 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc c -0.43666 0.15071 -2.897356 0.0049 r-squared 0.547999 adjusted r-squared 0.364909 f-statistic 2.99307 prob(f-statistic) 0.000042 source: data processed table 2 shows that the probability value of the research model is 0.000086 or below 5%. it means that earnings management, dividend policy, and free float ratios simultaneously have a significant effect on stock return in the property and real estate sector for the period 2016 to 2019. in addition, table 2 shows that the adjusted r-squared value was 0.364909 or around 36.5%. it means, the research model can explain 36.5% of the dependent variable, while the remaining 64.5% is explained by variables that are not included in the research variables. table 2 also shows that the regression equation model used in this research is as follows: rit = -0.43666 – 1.352279 dait – 0.221536 dprit – 0,003272 ffit + 2,081839 roeit + 0,241416 tobinit + error based on the partial significance test, table 2 shows that only earnings management (dait) has a significant effect on the dependent variable, whether the other two (2) independent variables are dividend policy (dprit) and free float ratio (ffit) has no significant effect on the dependent variable. the control variable is profitability (roeit) and company value (tobinit), the results of this study show that both variables have a significant effect on the dependent variable. significant results on the control variables indicate that the independent variables used in the research have constant values and are protected from the influence of external factors examined in the research. the results of this study show that earnings management has a significant negative effect on stock returns in the property and real estate sector from 2016 to 2019. the results prove that the indications of earnings management as proxied by the modified jones model are relevant to investor decision-making. these results are in line with agency theory. in agency theory, the agent's interest causes management to hide information from shareholders regarding the company's future performance and prospects (godfrey, 2010). healy (1985) states that differences in information held by management and shareholders cause information asymmetry. one of the information asymmetries is moral hazard, when shareholders do not comprehensively know the condition of the company, while company management can manipulate the company's financial reports (scott, 2015). jensen and meckling (1976) stated that agency theory could raise agency costs, including residual loss. referring to the result, earning management as an information asymmetry is a negative signal for investors. as spence (1973), found that the signals can be an illustration of providing information to investors regarding the company's future performance. in this research, the information in the form of an earnings management indication which is calculated using the modified jones model is a negative signal for investors. when a company's financial report is published and investors think there are indications of earnings management, investors will try to stay away from the company. https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 138 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this can cause a decline in stock return. the results of this research are in line with istiqomah and adhariani (2017) and salim and rusman (2019). in the dividend policy variable tests, the results do not support the research hypothesis. the results show that the dividend policy proxied by the dividend payout ratio (dpr) does not have a significant influence on stock return. thus, the results of this study are not in line with salim and rusman (2019), astarina et al. (2019), and zulfrida (2021). however, the results support effendi and hermanto's (2017) and (dewi & yudowati, 2020) results. there are several indications why the results of the research carried out differ from the initial research hypothesis. the first indication is the difference in sectors used in the research sample. astarina et al. (2019) and gunawan (2019) conducted research in the manufacturing sector which showed that dividend policy has a significant positive influence on stock returns. meanwhile, pratiwi (2015) and yuliana (2020) who conducted research in the consumer goods sector found that dividend policy had a significant negative effect on stock returns. however, research by luthfiyanto and isynuwardhana (2019), and dewi and yudowati (2020) in the mining sector shows the same results as the results of this study that dividend policy does not have a significant effect on stock return. the different effects of dividend policy in different business sectors are confirmed by the suitability of research results in the property and real estate sectors in the previous period. some studies on the property and real estate sector were conducted by effendi and hermanto (2017) from 2011 to 2014, and widiarini and dillak (2019) from 2013-2017 period. these two studies show that dividend policy as proxied by the dpr does not have a significant effect on stock return. different results indication to be due to differences in business sectors can be explained by the client effect theory. baker and powell (1999) show that one of investors' preferences regarding dividend policy is the sector that is the object of investment. in brief, the property and real estate sector in indonesia does not consider dividends for investors' decisions. it can be seen from the amount of net profit distributed in the form of dividends. based on descriptive statistical data, the average dpr value in this study was 14.01%. several studies show that differences in the amount of dividends distributed also influence the research results. (gunawan, 2019) and saputri (2018) conclude that a dividend policy with an average dpr value above 35% has a significant positive influence on stock return. in another study, widiarini and dillak (2019) concluded that dividend policy does not have a significant effect on stock returns. in this research, the average dpr used in the research was 22%. apart from the business sector, differences in the amount of dividends distributed are also influenced by the company's life cycle. gup and agrrawal (1996) stated that the company would distribute fewer dividends during the expansion period. the company will save its net profit to increase the company's value in the future. in this case, companies in the property and real estate sector are in the expansion phase. the company is in the stage of growth and development so it requires more assets in its operations. saving the current year's profits and the previous year's profits from being distributed as dividends is important to finance the company's operational development. https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 139 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the other results that do not support the research hypothesis are also found in the free float ratio. this study shows that the free float ratio of property and real estate sector companies in indonesia does not have a significant influence on stock. thus, the results of this study contradict the research results of wang and xu (2004) and bostanci and kilic (2010) which stated that the ratio free float has a significant influence on return share. however, the results of this study support çalişkan and keresteci's research (2013). the different results to the research hypothesis are thought to occur due to differences in the proxies used. wang and xu's (2004) show that the free float ratio proxy used monthly data, while in the research of bostanci and kilic (2010) and çalişkan and keresteci̇ oğlu (2013) uses a sample in the form of daily data. in this research, the sample used is annual data, is an indication of research results that are different from previous research. the different results on the free float ratio variable may arise due to the company's action. the free float ratio variables may respond to corporate actions. corporate actions that cause changes in free float ratios is the issuance of new shares (right issue) as well as share buybacks (buyback). these corporate actions generally only occur during certain periods or do not occur continuously in the long term. figure 2. changes in the company's free float ratio 2016-2019 source: data processed the proportion of changes in the free float ratio in the research period can be seen in figure 2. figure 2 shows that 50% of the samples do not have experienced in changes the free float ratio consecutively during the research period. this indicates that some companies do not carry out corporate actions every year. corporate actions can cause changes in the free float ratio. figure 2 also shows that there are 18% of companies that have not experienced a change in the free float ratio for 4 years. it may be an indication of the differences in research results compared to the research hypothesis. conclusion the results show, first, that the earnings management variable has a significant negative effect on stock return. these results fit istiqomah and adhariani (2017), and salim and rusman (2019) as well as several cases of earnings management such as cip, arcp and myrx. second, in this research, the dividend policy variable does not have a significant influence on stock return. the results support the client effect theory, in which the existence of investor preferences regarding sector and time in looking at the amount of dividends that will be received and considered in https://www.ilomata.org/index.php/ijtc financial reporting and audit quality impact on investment efficiency in indonesian transport and logistics companies chinhayu and saiful 140 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc making investment decisions. apart from that, the dpr size for property and real estate sector companies is also relatively small. in this case, it is suspected that property and real estate sector companies are in a phase expansion so the dividend distribution is relatively small. this result also supports the company life cycle theory. furthermore, in the third variable test, it is found that the free float ratio does not have a significant effect on stock return. in this case, there are differences between the research results and the research hypothesis. the discrepancy between the results and the research hypothesis is thought to be due to differences in time proxies and countries in the research sample. this research has several limitations, such as the sample size is limited to the property and real estate sector for the period 2016 to 2019 so it cannot be concluded about all companies listed on the indonesian stock exchange. apart from that, in this research, the free float ratio variable used is limited to using ratios and does not use further variables in the form of adjustment index free float ratio. thus, in future research, the analysis can be carried out on differences in sectors and data proxies selected in the research period. for investors, the results of this research can be a reference for early identification of earnings management using existing financial report data. in terms of dividend policy, this research shows that dividend policy does not have a significant influence. however, considering the data in the research, investors can consider the pattern of dividend distribution amounts for each sector in making their investment decisions. this also applies to the free float ratio variables test which shows an insignificant effect on stock returns. however, research on the free float ratio in indonesia is still limited. this is an opportunity for carrying out further research. reference adhariani, d. 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(2012). firm, property and governance: from berle and means to the agency theory, and beyond. accounting, economics and law, 2(2). https://doi.org/10.1515/2152-2820.1061 wijaya, r., & tel, z. : (2017). kinerja keuangan dan ukuran perusahaan terhadap harga saham dengan kebijakan dividen sebagai variabel intervening. in jurnal keuangan dan perbankan (vol. 21, issue 3). http://jurnal.unmer.ac.id/index.php/jkdp https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 2, july 2023 page no. 407-437 407 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office novianita rulandari1, salsabila rahmayani2 12stiami institute of social sciences and management, indonesia correspondent: novianitaruandari@gmail.com1 received : may 4, 2023 accepted : june 19, 2023 published : july 31, 2023 citation: rulandari, n., rahmayani, s. (2023). the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office. ilomata international journal of tax and accounting, 4(3), 407-437. https://doi.org/10.52728/ijtc.v4i3.861 abstract: this study aims to determine the magnitude of the influence of changes in layers of taxable income article 17 of the hpp act, reporting of individual tax returns and awareness of taxpayers simultaneously on income tax receipts at kpp pratama sawah besar one. this study used a quantitative method by distributing questionnaires to 145 respondents and using a purposive sampling technique. data analysis was carried out by validation test, reliability test, classic assumption test, then the data was tested by multiple linear regression analysis, t test, f test, correlation coefficient (r), and coefficient of determination (r2). the results of this study are based on testing the hypothesis by using the t test and f test, changes in layers of taxable income under article 17 of the hpp law, individual spt reporting and taxpayer awareness have a positive and significant effect on income tax receipts. the test results of the coefficient of determination (r2) of 0.883 can be stated that the effect of changes in layers of taxable income article 17 of the hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) on income tax receipts (y) is 88.3%, the remaining 11.7% is influenced by other variables not examined in this study. keywords: changes in layers of taxable income article 17 hpp law, individual spt reporting, taxpayer awareness, income tax receipt, law no.7 of 2021 this is an open access article under the cc-by 4.0 license. introduction one type of tax that contributes the most to tax revenue is income tax (pph). pph is a tax imposed on individuals or companies on income received, including salaries, honoraria, wages, and so on. income taxes have great potential for the government as a source of income for expenses https://www.ilomata.org/index.php/ijtc mailto:novianitaruandari@gmail.com https://doi.org/10.52728/ijtc.v4i3.86755 the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 408 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (cnossen, 2018; neisser, 2021; ordower, 2014), one of which is income tax article 21. income tax article 21, which is also known as tax deductions, is applied to employees who have sufficient income in tax calculations in that country (blickenstorfer & lichtsteiner, 2014; freebairn, 2012; xu, 2022). the spread of the covid-19 virus has had a significant impact on indonesia's economic activity, causing changes in the structure of the state revenue and expenditure budget (apbn) that has been passed, especially in terms of state revenues. in order to encourage the recovery of the national economy that has been affected by the covid-19 pandemic, the government of indonesia has established a bill on the harmonization of tax regulations (ruu hpp) no. 7 of 2021 concerning harmonization of tax regulations. this bill was approved at the dpr plenary session on 7 october 2021. the main objective of this bill, as emphasized in article 1 paragraph (2), is to increase indonesia's sustainable economic growth while supporting the acceleration of economic recovery through the creation of optimal fiscal conditions. the focus is on fixing the budget deficit and increasing the tax ratio. in addition, this bill also aims to reform indonesia's tax system to make it fairer and provide legal certainty (basten et al., 2017; k.p.m.g., 2019; kunze, 2012). with the passing of the hpp law, the government plans to set a higher revenue target than the previous year. one way to do this is to increase state revenues through taxes. this is because 2022 is the last year in which the state budget deficit is allowed to exceed 3 percent, while in 2023 the deficit must be below 3 percent (majcen et al., 2009; rogers & weller, 2014; ruggeri & vincent, 2018). in order to boost state revenue from taxes, the government has developed several strategies, including changing the rates of several types of taxes. as a result of this strategy, several tax rates will change in early 2022. one of the changes in the tax provisions through the hpp law is the introduction of a new tax rate for individuals. this new tax rate replaces the previous provisions stipulated in article 17 of the income tax law (pph) (gonzález canché, 2022; sölvi kristjánsson, 2013; zhan et al., 2019). the purpose of these changes is to protect people with lower middle incomes and at the same time provide opportunities for people with high incomes to contribute more. the government seeks to create a healthier and fairer tax system. this change also has an impact on the calculation of article 21 income tax (pph 21) for company employees. the table of changes to the layers of income tax rates based on the hpp law which renews article 17 paragraph (1) letter a of the pph law is as follows. table i. changes in layers of income tax rates uu pph uu hpp layer of taxable income rate s layer of taxable income rates 0 to idr 50,000,000 5% 0 to idr 60,000,000 5% above idr 50,000,000 up to idr 250,000,000 15% above idr 60,000,000 up to idr 250,000,000 15% above idr 250,000,000 up to idr 500,000,000 25% above idr 250,000,000 up to idr 500,000,000 25% https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 409 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc above rp.500.000.000,30% above idr 500,000,000 up to idr 5,000,0000,000 30% above idr 5,000,000,000 35% source: law number 7 of 2021 from table i, there are two changes in provisions in the income tax rate. first, in the first layer the government increases the taxable income in a year from 0 to rp. 50 million to 0 to rp. 60 million. second, there is the addition of a fifth layer in the tariff article 17 of the hpp law, which previously only consisted of 4 layers. the fifth layer has a rate of 35% and applies to taxable income in a year above 5 billion rupiah. as a result of the first change, if previously an employee with taxable income of rp. 60 million per year is subject to two layers of tax rates, namely 5% and 15%, so after the hpp law, employees with taxable income of rp. 60 million per year will only be subject to one layer of tax rates, namely 5%. this causes the amount of tax to be paid to be lower. thus, this change protects those with low incomes, while those with high incomes are subject to higher taxes. this change in tax rates is the government's effort to create a fairer and healthier tax system, taking into account the ability of the people to pay taxes according to the income they receive (creedy & sanz-sanz, 2010; richardson & taylor, 2015; samuel & simon, 2011). with changes in the layer of tax rates, will affect the basis for filling out the annual tax return (spt) of individual taxpayers. the current taxation system in indonesia is self assessment system, where the taxpayer is given full trust to calculate, deposit, and report the amount of tax owed through the spt. self assessment system enable taxpayers to have a better understanding of the amount of income generated and enable them to calculate the amount of tax to be paid independently. in other words, the taxpayer has the responsibility to calculate the amount of tax payable based on the applicable tax rate and report it through the spt. one indicator of increasing tax revenue is the level of compliance in submitting annual tax return (spt) reports. annual spt reporting can be done electronically through various channels provided by the ministry of finance and third parties, such ase-filling, e-form, e-spt, ande-filling of tax application service providers (pjap). table ii. wpop compliance ratio in submitting annual income tax returns (spt) 2018-2022 year number of wpop required to submit spt number of wpop reporting spt compliance ratio 2018 10.867 10.307 94,85% 2019 11.871 9.406 79,24% 2020 12.242 10.562 86,28% https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 410 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2021 13.143 10.285 78,25% 2022 12.543 9.731 77,58% source: kpp pratama sawah besar one (author processed, 2023) based on the data in table ii, it can be concluded that the ratio of individual taxpayer compliance in reporting spt at kpp pratama sawah besar one shows that from 2018-2022 it has not been able to reach the target based on the number of registered wpops who are required to report spt. this causes tax revenue to be less than optimal. another cause of sub-optimal revenue is the lack of awareness of taxpayers and understanding the importance of tax revenue as something that can help build infrastructure for the community. taxpayer awareness includes individual understanding which is reflected in their thoughts, attitudes, and behavior regarding taxation rights and obligations. this awareness involves understanding that taxes have an important role in state financing. people need to realize that as citizens, they have an obligation as taxpayers to report and pay taxes consciously, without coercion. the higher the level of awareness of the taxpayer, it will increase tax revenue. therefore, it is necessary to carry out counseling regarding tax knowledge to taxpayers so that they are obedient and obedient to their tax obligations (liu et al., 2011; rahmi et al., 2022; wijaya & sunaryo, 2020). because the change in the taxable income layer of article 17 of the law on harmonization of tax regulations is the latest and ongoing regulation, the researchers are interested in making individual taxpayers at kpp pratama sawah besar one the population in this study. researchers want to analyze the level of change in layers of taxable income article 17 of the hpp law, individual spt reporting and taxpayer awareness at kpp pratama sawah besar one. these issues and statements will affect the level of personal income tax receipts in 2023. the purpose of this research, firstly, is to analyze the effect of changes in layers of taxable income under article 17 of the hpp law on income tax receipts at kpp pratama sawah besar one, the second is to analyze the effect of reporting individual spts on income tax receipts at kpp pratama sawah besar one, the third analyzes the effect of taxpayer awareness on income tax receipt at kpp pratama sawah besar one, and the fourth analyzes the effect of changes in layers of taxable income article 17 of the hpp law, individual spt reporting and taxpayer awareness simultaneously on tax receipts income at kpp pratama sawah besar one. tax is an obligation to include a portion of the wealth of the state treasury caused by a condition, event, and action that gives a certain position, but not as a punishment, according to regulations set by the government and can be enforced, but there is no direct reciprocal service from the state, to maintain general well-being (basson, 2015; bird-pollan, 2016; bosman, 2020; brunner et al., 2013; muller, 2010). according to andriani (ramandey, 2020) states that taxes are contributions to the state (which can be forced) which are owed by those who are obliged to pay them according to the regulations, with no achievement back, which can be directly appointed, and whose use is to finance expenses – general expenditures related to the duty of the state to administer the government. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 411 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from this definition, it can be concluded that taxes are an obligation of the people that must be paid to the state treasury by government regulations and utilized for state purposes. pph article 21, which is also known as income tax article 21, is a type of tax that is imposed on income earned by individual domestic tax subjects in connection with the work, services and activities carried out. income that is included in the pph article 21 object includes salaries, wages, honorarium, allowances, and other payments in various names and forms, which are received by individuals as compensation for work, position, services, or activities carried out by the provisions of article 21 of the law. -income tax act. the latest progressive tax rate has been applied for the imposition of individual income tax as outlined in law number 7 of 2021 article 17, the tax rate applied to taxable income for domestic individual taxpayers is as follows: table iii. latest pph 21 tariff (hpp law no. 7 of 2021 article 17) layer of taxable income tax rates up to idr 60,000,000.00 (sixty million rupiah) 5 % (five percent) above idr 60,000,000.00 (sixty million rupiah) up to idr 250,000,000.00 (two hundred and fifty million rupiah) 15 % (fifteen percent) above idr 250,000,000.00 (two hundred and fifty million rupiah) up to idr 500,000,000.00 (five hundred million rupiah) 25 % (twenty five percent) above idr 500,000,000.00 (five hundred million rupiah) up to idr 5,000,000,000.00 (five billion rupiah) 30 % (thirty percent) above idr 5,000,000,000.00 (five billion rupiah) 35 % (thirty five percent) source: law number 7 of 2021 the latest tax law which regulates personal income tax rates or article 21 income tax rates is a revision of the income tax law that is uu no. 36 of 2008 in the hpp law, namely law number 7 of 2021. changes in pkp rates and layers of pkp on personal income tax in the hpp law can calculate personal income tax article 21 is lower compared to when it was still using calculations according to the personal income tax rate in the income tax law. judging from the latest tax law, there has been a change in the first layer, namely the previous provision was up to rp. 50,000,000.00 (fifty million rupiah) changed to rp. 60,000,000.00 (sixty million rupiah). that is, this is a relief given to the community. if people have a year's income, after deducting ptkp, less than rp. 60,000,000.00 (sixty million rupiahs), for example rp. 59,000,000.00, according to this new provision, a rate of only 5% is imposed. tax return (spt) is a letter used by taxpayers to report the calculation and/or payment of taxes, tax objects and/or non-tax objects and/or assets and obligations by the provisions of the tax laws and regulations (mardiasmo 2016). https://www.ilomata.org/index.php/ijtc https://www.pajakku.com/tax-guide/7654/uu/36%20tahun%202008 the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 412 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc notification letter (spt) is a letter used by taxpayers to report the calculation and payment of tax owed according to the provisions of the tax laws and regulations (lazarus ramandey: 2020). the deadline for submitting a notification letter (spt) in article 3 paragraph 3 of the kup law is set as follows: 1) periodic spt, no later than 20 (twenty) days after the endtax period, 2) annual spt pph individual taxpayers no later than 3 months after the end of the tax year, 3) annual spt pph corporate taxpayer, no later than 4 months after the end of the tax year. according to muliari in astana & merkusiwati (2017), "taxpayer awareness is a person's good faith to fulfill the obligation to pay taxes voluntarily." according to safri nurmantu quoted by ony and gartina (2015) states that "the definition of taxpayer awareness is the awareness of the taxpayer stating a positive assessment of the taxpayer community on the implementation of state functions by the government will move the public to fulfill their obligations to pay taxes." according to siti kurnia rahayu (2017) states that: "taxpayer awareness is a condition in which taxpayers understand and understand the meaning, function and purpose of paying taxes to the state. taxpayers are required to pay and report taxes related to taxpayer obligations according to law number 16 of 2009.” according to jatmiko in setiawan's research (2017), "taxpayer awareness of the function of tax as state financing is urgently needed to increase taxpayer compliance, so that the problem of taxpayer awareness is an issue that is quite important to pay attention to." from the two definitions above, the researcher concludes that taxpayer awareness includes a person's good intentions because he has a positive view of the implementation of state functions and has an understanding of the obligation to pay taxes. according to resa wandira (2017), "income tax receipt as stated in law no. 36 of 2008 is revenue sourced from tax installments in the current year which has been paid by the taxpayer and carried out every month". meanwhile, according to siti kurnia rahayu (2017), "tax revenue is a tax collected which is grouped into central taxes, customs and excise, regional taxes, as well as regional levies and other non-tax revenues." the sources of tax revenue include: 1) income tax (pph) 2) value added tax (vat) 3) sales tax on luxury goods (ppnbm) 4) property tax 5) international trade tax 6) stamp duty https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 413 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from the two definitions above, the researcher concludes that tax revenue is a collection of taxes collected from tax subjects on income received in one year and is a source of state finance for financing the state budget. judging from the type of variable. so here includes a causal relationship that is a variable can affect other variables. the government made changes, especially in tax regulations, to increase tax revenues. the tax rate is the percentage used as the basis for calculating the amount of tax to be paid. determination of a country's tax rate depends on the country's economic conditions and the ability of the people to pay taxes. high tax rates can have an impact on low tax compliance. according to andi nurmansyah ramdan (2017), one way for the government to improve tax compliance is to reduce the rates charged. in determining the amount of tax rates, government policy plays an important role. for the government, high tax rates make it easier to obtain tax revenue. however, for the community as taxpayers, high tax rates can reduce the ability of their budget to meet their needs. low tax rates can increase the utility of taxpayers and encourage their initiative to report income to the tax administration. conversely, high tax rates can reduce the level of utility of taxpayers and make them less compliant in paying taxes (andi, 2017). research conducted by zain angga pramana (2021) shows that there is a positive and insignificant effect of changes in article 21 pph rates on receipt of article 21 income tax, where the results show that article 21 pph rates cannot increase article 21 pph. carried out by yuni setyowati (2022) states that changes in op pph rates have no significant effect on taxpayer compliance. according to principle self assessment system adopted in indonesia, where taxpayers must calculate, deposit and report the taxes owed themselves to the tax service office (kpp) or self-report through the djponline web. spt reporting by taxpayers is the main support in implementation self assessment system and is a form of accountability for tax obligations that have been fulfilled by the taxpayer in a tax period, tax year or part of a tax year. by fulfilling the obligations of taxpayers in reporting the annual spt individuals can increase tax revenue so that targets that have been planned previously can be achieved. previous research conducted by ayu suharsiyah (2017) concluded that the submission of an individual's annual spt does not have a significant effect on individual income tax receipts. then reka afriani lubis's research (2018) also states that the submission of annual individual spts does not significantly affect individual income tax receipts at kpp pratama medan petisah. taxpayer awareness is a very important factor in increasing tax revenue because the more people realize the importance of paying taxes, the better participation will be created in supporting the country's development. to achieve maximum tax revenue, not only the role of the directorate general of taxes or tax officers is needed, but also the active role of the taxpayers themselves. previous research conducted by nafisa ischabita, hardiwinoto, & nurcahyono (2022) concluded that taxpayer awareness has a positive and significant effect on tax revenue. another study by jarkoni & irene septy hariansyah (2022) also shows that taxpayer awareness has a positive and significant influence on individual income tax receipts at kpp pratama cibitung, with a https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 414 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc correlation coefficient of 0.618. this proves that the higher the level of awareness held by taxpayers, the more positive their perception of taxes will be. changes in the layers of taxable income article 17 of the hpp law, reporting of spt individuals and taxpayer awareness can affect income tax receipts. the pph rate has an inseparable relationship with the annual tax return. the higher the income of the taxpayer, the higher the tax imposed by the taxpayer by the tax rates in the hpp law. taxpayers who are subject to deductions from pph 21 rates must report their spt as a form of their responsibility. likewise, an increase in the reported annual tax return (spt) will increase income tax receipts. this will also apply when a decrease in taxpayer reporting will result in a decrease in income tax revenue. one of the factors causing a decrease in taxpayer compliance in reporting spt is the lack of awareness of taxpayers. increasing taxpayer awareness of their tax obligations will also affect the realization of high tax revenues. the government implements changes, especially regulations related to taxation aiming to increase the amount of tax revenue. where the determination of the layer of taxable income, reporting of notification, and taxpayer awareness will determine the level of income tax revenue. method this study uses a quantitative approach to measure the effect of changes in layers of taxable income article 17 of the hpp law, individual spt reporting and taxpayer awareness on income tax receipts at kpp pratama sawah besar one. according to sugiyono (2018: 13), "quantitative data is a research method that is based on positivistic (concrete data), research data is in the form of numbers that will be measured using statistics as a counting test tool, related to the problem being researched to produce a conclusion." this approach adopts a positivistic philosophy that is used to study a particular population or sample. in this case, the type of research chosen is descriptive research. where this descriptive study aims to describe the effect of the independent variables on the dependent variable. testing this effect will use statistical functions as an analytical tool. there are two variables used in this study, namely: a. independent variable (free variable) according to tritjahjo danny soesilo, an independent variable is a variable that can affect or cause changes or the emergence of the dependent (bound) variable. the independent variables in this study are changes in layers of taxable income article 17 of the hpp law (x1), individual spt reporting (x2), and taxpayer awareness (x3). b. dependent variable according to tritjahjo danny soesilo, the dependent variable is a variable that is affected or becomes a result because of the independent variables. so that the existence of this dependent variable depends on the magnitude of the independent variable. the dependent variable used in this study is income tax revenue (y). https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 415 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the population in this study is all individual taxpayers who are registered at kpp pratama sawah besar one, totaling 39,208 individual taxpayers. the researcher used a sample taken from the population, namely individual taxpayers registered at kpp pratama sawah besar one with the obligation to report annual tax returns or e-filling users. for this reason, samples taken from the population must be truly representative. determining the number of representative samples according to hair et.al (2014) depends on the number of indicators multiplied by 5. the number of samples in this study is: n(sample) = σ indicator x 5 n = 29 x 5 = 145 where: n : sample σ indicator x 5 : the number of indicators in the variable grid so, based on the calculation above, the number of samples used in this study was obtained as many as 145 respondents. data analysis using statistical product and service solutions (spss) 27 for windows, which focuses on processing research data with quantitative analysis with descriptive data. the quantitative analysis method is a method of analyzing data collected in the form of numbers or score answers from the respondents who are the research sample. while descriptive analysis, to determine the effect of changes in layers of taxable income article 17 of the hpp law, individual spt reporting, and taxpayer awareness on income tax receipts at kpp pratama sawah besar one describes research indicators that use criteria that refer to the average questionnaire category scores obtained by respondents. result and discussion research on the effect of changes in layers of taxable income article 17 of the hpp law, individual spt reporting, and taxpayer awareness of income tax receipts, in obtaining research respondents, 145 questionnaires were distributed to individual taxpayers at kpp pratama sawah besar satu . changes in layers of taxable income article 17 hpp law (x1) changes to the layer levels of article 17 of the hpp law (pph 21) may involve several aspects, such as adjusting tax rates, adding or reducing the number of layers, or setting the amount of income imposed on each layer. the author has recapitulated the score of each statement on the variable layer of change of taxable income article 17 of the hpp law (x1) using the formula m = ∑f(x) / n. more details can be seen in the recapitulation table as follows: https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 416 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table iv. variable score recapitulation of changes in layers of taxable income article 17 hpp law (x1) no statement mean category 1 changes to the first layer of pph rates (5% rate with pkp 0-60 million) are determined fairly and fairly by adjusting the income of the taxpayer 4,44 very good 2 changes to the fifth layer of pph rates (35% rate with pkp above 5 billion) are determined fairly and fairly by adjusting the income of the taxpayer 4,15 good 3 taxpayers can pay taxes according to the new applicable rates 4,23 very good 4 the applicable tax change policy motivates taxpayers to pay taxes on time 4,30 very good 5 the new rate that applies it makes it easier for taxpayers to pay taxes 4,20 good 6 with the new tariff that applies, taxpayers do not feel burdened to pay taxes 4,20 good 7 the greater the value of income, the higher the tax that needs to be paid 4,31 very good 8 the size of my income is not a barrier to paying taxes 4,44 very good 9 the greater the value of income, the higher the value/percentage of the tax rate imposed 4,15 good 10 the amount of tax imposed is by the income level of the taxpayer 4,23 very good 11 low tax rates can increase the utility (usefulness) of the taxpayer to provide initiative in reporting income to the tax administration 4,30 very good 12 changes in tax rates greatly affect the level of utility (usefulness) of the taxpayer 4,20 good https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 417 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 13 high tax rates can reduce the level of utility (usefulness) of taxpayers so that non-compliance arises which affects the increase in tax revenue 4,20 good 14 increasing the utility (usability) of taxpayers has a major influence on tax revenues 4,31 very good mean score 59,66/14 = 4,26 very good source: data processed by the author, 2023 based on table iv above, the average score on the variable change of layer of taxable income article 17 of the hpp law is 4.26. this figure is included in the very good category. a. individual spt reporting (x2) reporting spt in a timely and correct manner is the obligation of the taxpayer to comply with tax regulations and maintain compliance with the applicable tax system. the author has recapitulated the score of each statement on the individual spt reporting variable (x2) using the formula m = ∑f(x) / n. more details can be seen in the recapitulation table as follows: table v recapitulation of individual spt reporting variable scores (x2) no statement mean category 1 by implementing its-filling, the spt reporting process becomes faster with an internet network without the need to come directly to the kpp 4,02 good 2 spt reporting speed through-filling faster than reporting spt manually 4,28 very good 3 implementing ite-filling makes it easier for me to fill in spt 4,28 very good 4 when filling out spt viae-filling often without interruption 4,20 good 5 by implementing ite-filling, i feel it is made easy without being confused about calculating the tax payable correctly 4,08 good 6 with an applied filling, the calculation of tax is done quickly because it uses a computer system 4,20 good 7 i always carry out the obligation to report taxes (spt) with statutory provisions 4,12 good 8 i always obediently report taxes as a form of obligation 4,22 very good 9 i always report the completed spt on time 4,25 very good 10 i have never delayed reporting taxes to avoid administrative sanctions 4,23 very good 11 i always report the annual spt correctly, honestly, and as it is 4,02 good 12 i always enter data in the spt correctly, honestly, and as is 4,28 very good https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 418 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 13 i believe that the spt reporting system maintains the security and confidentiality of taxpayer personal data 4,28 very good 14 i believe that the spt reporting system maintains the security and confidentiality of taxpayer information 4,20 good 15 taxpayer satisfaction can increase their confidence to report their taxes back 4,08 good 16 i have never been disappointed by the spt reporting system 4,20 good 17 technology readiness can increase the confidence of taxpayers to report their taxes 4,12 good 18 the tax reporting system is free from difficulties, constraints, and problems 4,22 very good mean score 75,28/18 = 4,18 good source: data processed by the author, 2023 based on table v above, the average score on the individual spt reporting variable is 4.18. this figure is included in the good category. b. taxpayer awareness (x3) taxpayer awareness refers to the level of awareness and obedience of taxpayers toward their obligations in paying taxes by applicable regulations. the author has recapitulated the score of each statement on the taxpayer awareness variable (x3) using the formula m = ∑f(x) / n. more details can be seen in the recapitulation table as follows: table vi recapitulation of taxpayer awareness variable scores (x3) no statement mean category 1 i know the function of taxes as state development. 4,17 good 2 i feel confident that the taxes i have paid are being used for development. 4,26 very good 3 i know the use of taxes in the provision of public goods. 4,31 very good 4 i feel the use of taxes in the real provision of public goods. 4,24 very good 5 i understand the tax provisions. 4,22 very good 6 i know that paying taxes is the obligation of every citizen, especially those who already have an npwp 4,25 very good 7 i understand the sanctions for neglecting tax obligations 4,28 very good 8 i fulfill my tax obligations on time without the influence of others 4,30 very good 9 i am still obedient in paying taxes by applicable regulations, regardless of financial condition 4,46 very good https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 419 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 10 i do not feel burdened in paying taxes 4,36 very good 11 i fill out the form according to the income i generate without reducing or exaggerating 4,15 good 12 i have never changed the income value on the form to reduce the tax charged. 4,16 good mean score 51,16/12 = 4,26 very good source: processed by the author, 2023 based on table vi above, the average score on the taxpayer awareness variable is 4.26. this figure is included in the very good category. c. income tax receipt (y) income tax revenue is a source of income for the government in carrying out its public functions and is used to finance various public programs and services, such as infrastructure, education, health, defense, and others. the writer has recapitulated the score of each statement on the variable income tax revenue (y) using the formula m = ∑f(x) / n. more details can be seen in the recapitulation table as follows: table vii. income tax receipt variable score recapitulation (y) no statement mean category 1 income tax individual taxpayers with employee status increase income tax revenue 4,13 good 2 taxpayers with employee status pay income tax 4,36 very good 3 income tax individual taxpayers with non-employee status increase income tax revenue 4,34 very good 4 taxpayers with non-employee status pay income tax 4,31 very good 5 the amount of income tax paid by the taxpayer will increase tax revenue 4,17 good 6 taxpayers deposit income tax by laws and regulations 4,22 very good 7 tax revenue will be achieved with public awareness as taxpayers 4,17 good 8 the higher the integrity of the tax authorities, the higher the tax revenue 4,29 very good 9 if there is a deficiency in paying taxes, the dgt issues an underpaid tax assessment letter (skpkb) so that the taxpayer pays it off immediately. 4,13 good https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 420 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 10 when there is an excess in tax payments, the taxpayer is given 2 choices, namely compensation (calculated in the next tax year) or refund (returned in the form of money). 4,36 very good 11 the role of tax revenue is very important for the development of a country 4,34 very good 12 the role of tax revenue is aimed at the welfare of infrastructure development and encouraging economic growth 4,31 very good 13 increasing tax revenue plays an important role in increasing the independence of government financing 4,17 good 14 the role of tax revenues in increasing self-sufficiency in government financing can spur the rate of economic growth to improve 4,22 very good mean score 59,52/14 = 4,25 very good source: processed by the author, 2023 based on table vii above, the average score on the income tax acceptance variable is 4.25. this figure is included in the very good category. instrument test the research instrument is the means used to collect data in a study and measure the phenomena associated with the variables being studied. to ensure that the data obtained is valid and reliable, the research instrument must go through a process of testing its validity and reliability. 1. validity test table viii. validity test results variable question items corrected item statement total correlation r table is. changes in layers of taxable income article 17 hpp law (x1) x1.1 0,503 0,163 valid x1.2 0,407 0,163 valid x1.3 0,377 0,163 valid x1.4 0,645 0,163 valid x1.5 0,646 0,163 valid x1.6 0,786 0,163 valid x1.7 0,657 0,163 valid x1.8 0,503 0,163 valid x1.9 0,407 0,163 valid https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 421 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc x1.10 0,377 0,163 valid x1.11 0,645 0,163 valid x1.12 0,646 0,163 valid x1.13 0,786 0,163 valid x1.14 0,657 0,163 valid individual spt reporting (x2) x2.1 0,422 0,163 valid x2.2 0,648 0,163 valid x2.3 0,666 0,163 valid x2.4 0,563 0,163 valid x2.5 0,626 0,163 valid x2.6 0,512 0,163 valid x2.7 0,614 0,163 valid x2.8 0,758 0,163 valid x2.9 0,693 0,163 valid x2.10 0,489 0,163 valid x2.11 0,422 0,163 valid x2.12 0,648 0,163 valid x2.13 0,666 0,163 valid x2.14 0,563 0,163 valid x2.15 0,626 0,163 valid x2.16 0,512 0,163 valid x2.17 0,614 0,163 valid x2.18 0,758 0,163 valid taxpayer awareness (x3) x3.1 0,383 0,163 valid x3.2 0,436 0,163 valid x3.3 0,399 0,163 valid x3.4 0,462 0,163 valid x3.5 0,507 0,163 valid x3.6 0,306 0,163 valid x3.7 0,480 0,163 valid x3.8 0,504 0,163 valid x3.9 0,507 0,163 valid x3.10 0,470 0,163 valid x3.11 0,585 0,163 valid x3.12 0,551 0,163 valid income tax receipt (y) y.1 0,637 0,163 valid y.2 0,841 0,163 valid y.3 0,861 0,163 valid y.4 0,862 0,163 valid y.5 0,776 0,163 valid y.6 0,502 0,163 valid https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 422 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc y.7 0,776 0,163 valid y.8 0,799 0,163 valid y.9 0,637 0,163 valid y.10 0,841 0,163 valid y.11 0,861 0,163 valid y.12 0,862 0,163 valid y.13 0,776 0,163 valid y.14 0,502 0,163 valid source: data processed with spss 27, 2023 based on table viii spss data analysis on the variable layer of change of taxable income article 17 of the hpp law (x1), individual spt reporting (x2), taxpayer awareness (x3), and income tax receipt (y) obtained a correlation value indicating that the value of r count is greater than r table, which is above 0.163. from these results, it can be concluded that all instrument statements on the variables above are declared valid. 2. reliability test table ix reliability test results variable alpha cronbach’s alpha is. changes in layers of taxable income article 17 hpp law (x1) 0,60 0,830 reliable individual spt reporting (x2) 0,60 0,891 reliable taxpayer awareness (x3) 0,60 0,659 reliable income tax receipt (y) 0,60 0,942 reliable source: data processed with spss 27, 2023 based on table ix, it can be seen that all variables, namely the variable layer of change of taxable income article 17 of the hpp law (x1), individual spt reporting (x2), taxpayer awareness (x3), and income tax receipt (y) have calculation resultscronbach’s alpha (α) >0.60. so it can be concluded that the variables in this study are declared reliable. classic assumption test the classical assumption test is a series of assumptions that must be met in certain statistical analyses, especially in the linear regression assumption model. models that meet the assumptions of linear regression are called models that are blue (blue linear unbiased estimator). to obtain a model thatblue in this study several assumptions must be met by the model, which can be seen in the following description: 1. normality test https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 423 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in using the spss 27 for windows program, the results of the normal probability plot will provide a visual picture that makes it easier to make decisions about whether the data is normally distributed or not. the following can be seen in the image below: figure i. normality test results source: data processed with spss 27, 2023 based on figure i, it can be seen that the data points spread around the diagonal line and follow the direction of the diagonal line. by following the basis of decision-making, it can be concluded that the data in this regression model meets the assumption of data normality. 2. multicollinearity test the multicollinearity test was carried out using spss 27 for windows, the following results were obtained: table x. multicollinearity test results coefficients model unstandardized coefficients standardize d coefficients t say. collinearity statistics b std. error beta toleranc e vif 1 (constant) 7.345 3.343 2.197 .030 changes to the pkp layer article 17 of the hpp law (x1) .171 .029 .201 5.955 .000 .730 1.369 https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 424 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc individual spt reporting (x2) .610 .026 .812 23.858 .000 .719 1.390 taxpayer awareness (x3) .176 .050 .144 3.514 .000 .977 1.023 a. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table x, it can be seen that the tolerance value in the change in layers of taxable income variable article 17 of the hpp law (x1) is 0.730 > 0.10 and the vif value is 1.369 < 10.00. the tolerance value for the individual spt reporting variable (x2) is 0.719 > 0.10 and the vif value is 1.390 <10.00. the tolerance value for the variable taxpayer awareness (x3) is 0.977 > 0.10 and the vif value is 1.023 <10.00. this shows that these variables do not have a strong linear dependence on one another so multicollinearity does not occur. 3. heteroscedasticity test the heteroscedasticity test was conducted to evaluate whether the variables used have uniform (homogeneous) or not (heterogeneous) variants. figure ii. heteroscedasticity test results source: data processed with spss 27, 2023 based on figure ii of the scatterplot graph, it can be seen that there is a pattern showing the data points are scattered and not consistently collected above or below. hypothesis testing the hypothesis testing process aims to test the validity of the hypothesis that has been proposed. the hypothesis itself is a temporary statement that can be tested through data collection and https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 425 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis or is an assumption about the relationship between two or more variables. hypothesis testing is carried out to prove whether or not there is a relationship between the independent variable and the dependent variable. in this study, there are several methods used to test hypotheses, such as multiple linear regression, t-test, f test, analysis of the correlation coefficient (r), and the coefficient of determination (r)2). the results of some of these tests can be explained as follows: a. first hypothesis test the first hypothesis states that there is a positive and significant effect between changes in the taxable income layer of article 17 of the hpp law on income tax receipts at kpp pratama sawah besar one. table xii t test results (partial) changes in layers of taxable income article 17 hpp law (x1) against income tax receipts (y) coefficients model unstandardized coefficients standardiz ed coefficient s t say. b std. error beta 1 (constant) 27.836 3.324 8.373 .000 changes to the pkp layer article 17 of the hpp law (x1) .532 .055 .626 9.604 .000 a. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table xii, it can be seen that the t count is 9.604 > t table 1.976 and the sig value is 0.000 <0.05, it can be concluded that the change in layers of taxable income article 17 of the hpp law (x1) has a positive and significant effect on income tax revenue (y ). so that the first hypothesis (h1) can be proven with ho being rejected and ha is accepted. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 426 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table xiii correlation coefficient analysis results (r) (partial) changes in layers of taxable income article 17 hpp law (x1) against income tax receipts (y) correlations income tax receipt (y) changes to the pkp layer article 17 of the hpp law (x1) pearson correlation income tax receipt (y) 1.000 .626 changes to the pkp layer article 17 of the hpp law (x1) .626 1.000 say. (1-tailed) income tax receipt (y) . .000 changes to the pkp layer article 17 of the hpp law (x1) .000 . n income tax receipt (y) 145 145 changes to the pkp layer article 17 of the hpp law (x1) 145 145 source: data processed with spss 27, 2023 based on table xiii, it can be seen that the sig value is 0.000 <0.05 and the correlation value is 0.626, which is included in the coefficient interval of 0.600-0.799, so it can be concluded that there is a correlated relationship between the variable changes in layers of taxable income article 17 of the hpp law (x1) to income tax receipt (y) with a strong relationship level. table xiv results of the coefficient of determination (r2) changes in layers of taxable income article 17 hpp law (x1) against income tax receipts (y) model summary model r r square adjusted r square std. the error of the estimate 1 .626a .392 .388 3.629 a. predictors: (constant), changes in pkp layers article 17 hpp law (x1) b. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 427 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table xiv, it can be seen that the r square value is 0.392, meaning that the effect of the variable changes in layers of taxable income article 17 of the hpp law (x1) on income tax receipts (y) is 0.392 x 100% = 39.2%. while the remaining 60.8% is influenced by other variables not examined in this study. b. second hypothesis test the second hypothesis states that there is a positive and significant effect between individual spt reporting on income tax receipts at kpp pratama sawah besar one. table xv t test results (partial) reporting of spt of individuals (x2) against income tax receipt (y) coefficients model unstandardized coefficients standardized coefficients t say. b std. error beta 1 (constant) 7.383 1.834 4.025 .000 individual spt reporting (x2) .693 .024 .923 28.583 .000 a. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table xv, it can be seen that the t count is 28.583 > t table 1.976 and the sig value is 0.000 <0.005, it can be concluded that the reporting of individual spt (x2) has a positive and significant effect on income tax receipts (y). so that the second hypothesis (h2) can be proven with ho being rejected and ha is accepted. table xvi. correlation coefficient analysis results (r) (partial) reporting of spt of individuals (x2) against income tax receipt (y) correlations income tax receipt (y) notification letter reporting (x2) pearson correlation income tax receipt (y) 1.000 .923 individual spt reporting (x2) .923 1.000 say. (1-tailed) income tax receipt (y) . .000 individual spt reporting (x2) .000 . n income tax receipt (y) 145 145 individual spt reporting (x2) 145 145 source: data processed with spss 27.2023 https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 428 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table xvi, it can be seen that the sig value is 0.000 <0.05 and the correlation value is 0.923, which is included in the coefficient interval of 0.800-1.000, so it can be concluded that there is a correlation between the individual spt reporting variable (x2) and income tax revenue (y). with a very strong relationship level. table xvii results of the coefficient of determination (r2) reporting of spt of individuals (x2) against income tax receipt (y) model summary model r r square adjusted r square std. the error in the estimate 1 .923a .851 .850 1.796 a. predictors: (constant), individual spt reporting (x2) b. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table xvii, it can be seen that the r square value is 0.851, meaning that the influence of the individual spt reporting variable (x2) on income tax receipts (y) is 0.851 x 100% = 85.1%. while the remaining 14.9% is influenced by other variables not examined in this study. c. third hypothesis test the third hypothesis states that there is a positive and significant effect between taxpayer awareness on income tax receipts at kpp pratama sawah besar one. table xviii. t test results (partial) taxpayer awareness (x3) of income tax receipt (y) coefficients model unstandardized coefficients standardized coefficients t say. b std. error beta 1 (constant) 75.824 7.232 10.485 .000 taxpayer awareness (x3) .516 .141 .684 6.242 .000 a. dependent variable: income tax receipt (y) source: data processed by spss 27, 2023 based on table xviii, it can be seen that the t count is 6.242 > t table 1.976 and the sig value is 0.000 <0.005, it can be concluded that taxpayer awareness (x3) has a positive and significant effect on income tax receipts (y). so that the third hypothesis (h3) can be proven with ho being rejected and ha is accepted. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 429 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table xix correlation coefficient analysis results (r) (partial) taxpayer awareness (x3) of income tax receipt (y) correlations income tax receipt (y) taxpayer awareness (x3) pearson correlation income tax receipt (y) 1.000 .684 taxpayer awareness (x3) .684 1.000 say. (1-tailed) income tax receipt (y) . .000 taxpayer awareness (x3) .000 . n income tax receipt (y) 145 145 taxpayer awareness (x3) 145 145 source: data processed with spss 27, 2023 based on table xix, it can be seen that the sig value is 0.000 <0.05 and the correlation value is 0.684, which is included in the coefficient interval 0.600-0.799, so it can be concluded that there is a correlation between the variable taxpayer awareness (x3) on income tax receipts (y) and strong relationship level. table xx. the results of the coefficient of determination (r2) taxpayer awareness (x3) of income tax receipt (y) model summary model r r square adjusted r square std. the error of the estimate 1 .684a .494 .427 4.575 a. predictors: (constant), taxpayer awareness (x3) b. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table xx, it can be seen that the r square value is 0.494, meaning that the effect of the taxpayer awareness variable (x3) on income tax receipts (y) is 0.494 x 100% = 49.4%. while the remaining 50.6% is influenced by other variables not examined in this study. b. fourth hypothesis test the fourth hypothesis states that there is a positive and significant effect between changes in the taxable income layer of article 17 of the hpp law, individual spt reporting, and awareness of taxpayers on income tax receipts at kpp pratama sawah besar one. the fourth hypothesis test uses multiple regression analysis obtained with the spss 27 software program which can be seen in the following table: https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 430 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table xxi. multiple linear regression results changes in layers of taxable income article 17 hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) of income tax receipts (y) coefficients model unstandardized coefficients standardized coefficients t say. b std. error beta 1 (constant) 7.345 3.343 2.197 .030 changes to the pkp layer article 17 of the hpp law (x1) .171 .029 .201 5.955 .000 individual spt reporting (x2) .610 .026 .812 23.858 .000 taxpayer awareness (x3) .176 .050 .144 3.514 .000 a. dependent variable: income tax receipt (y) source: data processed with spss 27, 2023 based on table xxi, it is known that the constant value is 7.345. the value of the regression coefficient on the variable layer of change of taxable income article 17 of the hpp law is 0.171 has a positive effect on income tax receipts. the regression coefficient value on the individual spt reporting variable is 0.610 which has a positive effect on income tax receipts and the regression coefficient value on the taxpayer awareness variable is 0.176 which has a positive effect on income tax receipts. can be arranged as a multiple regression equation as follows𝑌 = 𝛼 + 𝑏1𝑋1 + 𝑏2𝑋2 + 𝑏3𝑋3 𝑌 = 7,345 + 0,171𝑋1 + 0,610𝑋2 + 0,176𝑋3 the regression equation above has the following meaning: 1) the α value of 7.345 is a constant which means that if the variable changes in layers of taxable income article 17 of the hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) does not exist, the income tax revenue variable (y) will not change. 2) b1 (the value of the regression coefficient x1) of 0.171 indicates that the variable changes in layers of taxable income article 17 of the hpp law (x1) has a positive influence on income tax receipts (y), which means that each addition of one unit variable changes layer of taxable income article 17 of the hpp law (x1) will cause an increase of 0.171 in income tax revenue (y), assuming that other variables not examined in this study remain constant. 3) b2 (the value of the regression coefficient x2) of 0.610 indicates that the variable individual spt reporting (x2) has a positive influence on income tax receipts (y), which means that each addition of one unit variable of individual spt reporting (x2) will cause an increase of 0.610 in income tax revenue (y), assuming that other variables not examined in this study remain constant. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 431 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4) b3 (the value of the regression coefficient x3) of 0.176 indicates that the variable taxpayer awareness (x3) has a positive influence on income tax revenue (y), which means that each addition of one unit of taxpayer awareness variable (x3) will cause an increase of 0.176 in income tax revenue (y), assuming that other variables not examined in this study remain constant. table xxii f test results changes in layers of taxable income article 17 hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) of income tax receipts (y) anovaa model sum of squares df mean square f say. 1 regression 2734.108 3 911.369 353.497 .000b residual 363.520 141 2.578 total 3097.628 144 a. dependent variable: income tax receipt (y) b. predictors: (constant), taxpayer awareness (x3), changes in pkp layers article 17 hpp law (x1), individual spt reporting (x2) source: data processed with spss 27, 2023 based on table xxii, it can be seen that f count is 353.497 > f table is 2.670 and the sig. 0.000 <0.05 so it can be concluded that changes in layers of taxable income article 17 of the hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) simultaneously have a significant effect on income tax receipts (y). thus ho is rejected and ha is accepted. table xxiii results of the coefficient of determination (r2) changes in layers of taxable income article 17 hpp law (x1), reporting of spt individuals (x2) and taxpayer awareness (x3) of income tax receipt (y) model summary model r r square adjusted r square std. the error of the estimate 1 .939a .883 .880 1.606 a. predictors: (constant), taxpayer awareness (x3), changes in pkp layers article 17 hpp law (x1), individual spt reporting (x2) source: data processed with spss 27, 2023 based on table xxiii, it can be seen that the value of r square (coefficient of determination of r2) of 0.883 means that the effect of the variable layer of change of taxable income layer article 17 of the hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) on income tax receipts (y) is 0.883 x 100% = 88.3%. so the remaining 11.7% is influenced by other variables not examined in this study. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 432 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the results of the data analysis, it can be seen clearly that simultaneously the independent (free) variable influences the dependent (bound) variable. the influence given by the three independent variables is positive. this means that if there is a change in the layer of taxable income article 17 of the hpp law, higher compliance with the spt reporting of individuals and the awareness of the taxpayer will result in higher income tax revenue obtained. an explanation of the influence of each variable is explained as follows: the effect of changes in layers of taxable income article 17 of the hpp law (x1) on income tax receipts (y) based on the results of the data analysis carried out in this study, it shows that there is a positive and significant effect between the changes in the layer of taxable income article 17 of the hpp law (x1) on income tax receipt (y) for individual taxpayers registered at kpp pratama sawah besar one. this can be seen from the results of the coefficient of determination (r2) which shows that the variable change of layer of taxable income article 17 hpp law (x1) on income tax receipt (y) is 0.392 or 39.2%. thus, there is a strong relationship between changes in layers of taxable income article 17 of the hpp law and income tax receipts. in this case, it can be concluded that one of the factors affecting income tax receipts is the change in layers of taxable income article 17 of the hpp law. when there is a change in the level of taxable income layers article 17 of the hpp law that is subject to tax, such as adjusting tax rates, adding or reducing the number of layers, or setting the amount of income that is imposed on each layer, income tax revenue can increase. however, the error rate (error) of 60.8% is the influence of other factors not examined in this study. another factor that can influence this is the change in non-taxable income, as in previous research conducted by zain angga pramana (2021). the results of his research show that the results of testing the coefficient of determination (r2) changes in article 21 pph rates and non-taxable income have an effect of 47.7% on income tax article 21 receipts. effect of individual spt reporting (x2) on income tax receipt (y) based on the results of the data analysis conducted in this study, shows that there is a positive and significant influence between the reporting of individual spt (x2) on income tax receipts (y) for individual taxpayers registered at kpp pratama sawah besar one. this can be seen from the results of the coefficient of determination (r2) which shows that the variable individual spt reporting (x2) on income tax receipts (y) is 0.851 or 85.1%. thus, there is a close relationship between individual spt reporting and income tax receipts. in this case, it is concluded that one of the factors that influence income tax receipts is the individual spt reporting factor. through a high level of obedience and obedience to taxpayers regarding annual tax returns (spt) reporting each year will increase income tax receipts. in other words, proper and accurate reporting from taxpayers will contribute to an increase in income tax revenue. however, the error rate (error) of 14.9% is the influence of other factors not examined in this study. the results of data analysis in this study are different from previous research conducted by ayu suharsiyah (2017) and reka afriani lubis (2018). the research states that the submission of annual tax returns for individuals does not significantly affect individual income tax receipts. the difference in these results can be caused by different research contexts, different places and years of research, or different sample characteristics in each study. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 433 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect of taxpayer awareness (x3) on income tax receipt (y) based on the results of data analysis conducted in this study, shows that there is a positive and significant influence between taxpayer awareness (x3) on income tax receipt (y) for individual taxpayers registered at kpp pratama sawah besar one. this can be seen from the results of the coefficient of determination (r2) which shows that the variable taxpayer awareness (x3) on income tax receipt (y) is 0.494 or 49.4%. thus, there is a close and strong relationship between taxpayer awareness and income tax receipts. in this case, it is concluded that one of the factors that influence income tax receipt is the taxpayer awareness factor. the more people who realize the importance of paying taxes, the better participation will be created in supporting the country's development. so that the income tax receipt that is owned will be affected. however, the error rate (error) of 50.6% is the influence of other factors not examined in this study. the results of this study are supported by previous research conducted by jarkoni & irene septy hariansyah (2022). the results of his research show that taxpayer awareness has a positive and significant effect on individual income tax receipts at kpp pratama cibitung with a correlation coefficient value of 0.618. this means that increasing taxpayer awareness will make a positive contribution to tax revenue. in other words, if the taxpayer awareness variable increases, the kpp pratama sawah besar one income tax revenue variable will also increase. effect of changes in layers of taxable income article 17 hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) simultaneously on income tax receipt (y) based on the results of the data analysis carried out in this study, show that there is a positive and significant influence between changes in layers of taxable income under article 17 of the hpp law (x1), individual spt reporting (x2), and taxpayer awareness (x3) simultaneously on income income tax (y) for individual taxpayers registered at kpp pratama sawah besar one. this can be seen from the results of the coefficient of determination (r2) which shows that the variable layer of change of taxable income article 17 of the hpp law (x1), individual spt reporting (x2), and taxpayer awareness (x3) on income tax receipts (y) is 0.883 or 88.3%. thus, there is a strong relationship between changes in layers of taxable income article 17 of the hpp law, individual spt reporting, and taxpayer awareness of income tax receipts. the conclusion in this case is that one of the factors that influence income tax receipts simultaneously is the factor of changes in layers of taxable income article 17 of the hpp law, reporting of individual spt and taxpayer awareness. when there is a change in income tax or progressive rates that are subject to tax, such as adjusting tax rates, adding or reducing the number of layers, or setting the amount of income that is imposed on each layer, and when the awareness of taxpayers in paying taxes and reporting their tax returns increases, income tax revenues owned by kpp pratama sawah besar one will be affected. however, the error rate (error) of 11.7% is the influence of other factors not examined in this study conclusion based on the results of the research and discussion that have been described and explained in the previous chapter, regarding changes in layers of taxable income article 17 of the hpp law, https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 434 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reporting of spt individuals and taxpayer awareness of income tax receipt at kpp pratama sawah besar one it can be concluded that: 1. changes in layers of taxable income article 17 of the hpp law (x1) have a positive and significant effect on income tax revenue (y) with the result of the coefficient of determination (r2) of 0.392 or 39.2%. 2. reporting of individual spt (x2) has a positive and significant effect on income tax receipts (y) with the result of the coefficient of determination (r2) of 0.851 or 85.1%. 3. taxpayer awareness (x3) has a positive and significant effect on income tax revenue (y) with the result of the coefficient of determination (r2) of 0.494 or 49.4%. 4. changes in layers of taxable income article 17 of the hpp law (x1), individual spt reporting (x2) and taxpayer awareness (x3) simultaneously have a positive and significant effect on income tax receipts (y) with the result of the coefficient of determination (r2) of 0.883 or 88.3%, while the remaining 11.7% is influenced by other variables not examined in this study. based on the results of the analysis and conclusions that have been described by researchers for the problem of changes in layers of taxable income article 17 of the hpp law, individual spt reporting and taxpayer awareness of income tax receipts are quite good. however, it can be seen again from some of the respondents' answers that there are still some who are dissatisfied with the changes in the layers of taxable income article 17 of the hpp law, reporting of individual spt and taxpayer awareness so that it still needs attention and improvement. thus, the researcher provides several suggestions, including: 1. the government or related institutions should be able to carry out periodic evaluations of the income layer that is subject to tax. this is important to ensure the relevance of the income layer in creating justice in the tax system. 2. kpp pratama sawah besar one is advised to hold direct tax socialization either through seminars or workshops to registered individual taxpayers regarding changes to the taxable income layer in article 17 of the hpp law to increase understanding and insight as well as individual taxpayer compliance to avoid from delays in paying taxes and reporting taxes which can be detrimental to the state. 3. more intensive efforts are needed to increase the understanding and awareness of taxpayers regarding the importance of reporting annual tax returns (spt) properly and accurately. educational and outreach campaigns through social media, seminars, or collaboration with companies or financial institutions can be an alternative to increasing taxpayer understanding. 4. the researcher suggests that future studies involve a more representative sample or involve a wider area, such as other kpp locations or kanwil so that the results can be more general and can be generalized better. in addition, research can also explore other factors that can contribute to income tax revenue, such as changes in tax rates, tax avoidance policies, or macroeconomic factors. by implementing these suggestions, it is expected to increase effectiveness and efficiency in taxation, as well as to have a positive impact on income tax revenue as a whole. https://www.ilomata.org/index.php/ijtc the effect of changes in layers of taxable income article 17 of the law on cost of goods sold, reporting of individual tax returns and taxpayer awareness of income tax receipt at the pratama sawah besar one tax service office rulandari & rahmayani 435 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference astana, & merkusiwati. 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(2019). personal income tax reform in china in 2018 and its impact on income distribution. china and world economy, 27(3), 25–48. https://doi.org/10.1111/cwe.12279 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 367-385 367 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effects of tax sanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference sinsin putri yuliani1, tri ayu sistalia2, agung yulianto3 123universitas swadaya gunung jati, indonesia correspondent: agung.yulianto@ugj.ac.id3 received : january 17, 2024 accepted : april 3, 2024 published : april 30, 2024 citation: yuliani, s, p., sistalia, t, a., yulianto, a. (2024). the effects of tax sanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference. ilomata international journal of tax and accounting, 5(2), 367-385. https://doi.org/10.61194/ijtc.v5i2.1108 abstract: the decrease in tax revenue is due to the large number of msme actors who ignore tax payments. so, this study aims to assess and test the effect of tax sanctions, taxpayer awareness, and understanding of taxation on tax compliance of micro, small, and medium enterprises (msmes) in cirebon city, with the moderating variable of risk preference. the method used in this research is quantitative, and the type of data used is primary data obtained from 250 respondents. this research data was tested using the structural equation model (sem-pls). the results of this study indicate that tax sanctions, taxpayer awareness, increased taxpayer compliance, and understanding of taxation affect taxpayer compliance. risk preferences do not strengthen the relationship between tax sanctions and taxpayer compliance, risk preferences do not strengthen the relationship between taxpayer awareness and taxpayer compliance, and risk preferences do not moderate tax understanding with taxpayer compliance. the directorate general of taxes can use this research to encourage a more assertive approach to taxation and knowledge of taxation, especially for micro, small, and medium enterprises (msmes) in cirebon city. keywords: tax sanctions, tax understanding, tax compliance, risk preference, tax awareness this is an open-access article under the cc-by 4.0 license. introduction taxes are a crucial aspect of a country's financial ecosystem, generating an important source of revenue for the government to support development and public services. tax obligations are important for msmes in maintaining business continuity while contributing to economic growth. one of the difficulties small and medium enterprises often need to improve is compliance with tax obligations. this compliance is influenced by various factors, including tax sanctions implemented by the government, the level of awareness of taxpayers, and the policy of reducing tax rates specifically for msmes. it is now evident that taxes play a significant role in funding public infrastructure, public service provision, and infrastructure improvement, all of which support developed and developing countries' economies. because of this, countries all over the world are quite concerned about tax compliance. however, tax compliance is only sometimes https://www.ilomata.org/index.php/ijtc mailto:agung.yulianto@ugj.ac.id3 https://doi.org/10.61194/ijtc.v5i2.1106 the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 368 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 100%, even in developed countries with 'hard to tax' groups that simply avoid paying taxes or underreporting income to reduce their tax payments. based on data from the department of cooperatives and smes in 2021, the number of msmes in indonesia reached 64.2 million, with a gdp commitment of 61.07%, or idr 8,573.89 trillion, and the ability to absorb 97% of the existing workforce and collect up to 60.4% of total capital (https://komwasjak.kemenkeu.go.id/in/post/pajak). tax revenue data: at the end of december 2022, the realization of tax earned financial revenues rp2,034.5 trillion (114.0 percent of the target in apbn perpress98/2022), while up to the end of june 2023, the realization of tax revenue reached rp1,105.63 trillion (54.70 percent of the target in apbn 2023) (https://www.kemenkeu.go.id/). based on data from the cirebon one primary tax office, the number of individual msme taxpayers in cirebon city reached 19,391, taxpayers with details of non-effective individual taxpayers status of 17,975, while the status of individual msme taxpayers was only 1,416. data on msme tax revenue in cirebon city obtained from the cirebon one pratama tax office in 2021 reached idr 11,049,307,621, while msme tax revenue in 2022 was idr 9,889,939,650. based on data on the number and tax revenue on micro, small, and medium enterprises, this is due to msem actors' need for knowledge and understanding of taxation (faisal & yulianto, 2019) so many msem actors ignore this tax payment, which shows that some of them need to gain the knowledge to calculate the tax and learn that their capital is depleted to pay late tax penalties; msme players can experience bankruptcy, one of the worst consequences they experience. the mistake often made by msme players is usually concentrating on the business rather than tax matters. because msme players need clarification on how to manage their taxes, tax authorities consider the tax potential of the msme business after the business has grown, such as by opening many branches. micro, small, and medium enterprises (msmes) must have bookkeeping that details how their funds come and go. this is an essential action in financial management. hence, msme players are poised to scale up to increase the size and profitability of their businesses. due to complicated reasons, most small and medium enterprises (msmes) do not do financial bookkeeping. business owners also often need more time to complete bookkeeping. however, you can avoid this technique by installing it every time a transaction is completed. these records must be tidied up and entered into the ledger after peak hours. small and medium enterprises (smes) often need clarification about distinguishing business finances from personal finances. this may result in financial problems. as a result, financial bookkeeping should be done indefinitely. the fact is that sme taxpayers in cirebon city still need to be tax-compliant, especially small and medium enterprises (smes). as a result, the phenomena examined in this study are increased tax sanctions, a need for understanding tax regulations, and a need for more taxpayer awareness, which impact the degree of compliance of msme taxpayers with their tax obligations. in addition, risk preference is used as a moderator of the relationship between these factors. https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 369 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc low tax knowledge is one of the variables influencing the msme sector's contribution to tax income that has yet to be dominant (astuti & yushita, 2019). taxpayer awareness is the state in which an individual understands, acknowledges, values, and complies with applicable tax laws and truly wants to pay their taxes (yunia et al., 2021)) prior studies (fatah & oktaviani, 2021); ((setia ningsih et al., 2021), (abdi pradnyani et al., 2022), (sari et al., 2021) discovered that taxpayer knowledge significantly and favourably influences msme taxpayer compliance. however, research indicates that taxpayer awareness has little effect on compliance (arlita bhakti faidani, dwi soegiarto, 2022) (lidya rikayana et al., 2023). the association between taxpayer compliance and the taxpayer awareness variable may be strengthened by risk preference (fatah & oktaviani, 2021). contrary to research, risk preferences do not increase taxpayer tax compliance knowledge (yunia et al., 2021). sanctions are now used to increase consistency due to a better framework. a taxpayer will comply with the tax if sanctions or regulations are specified. sanctions will make people obey more rules (wulandari, 2020a). according to (lestari, 2023) and (marcel kusuma et al., 2023), tax sanctions positively impact taxpayer compliance. however, according to other research (lidya rikayana et al., 2023), risk preference moderates the correlation between tax amendments and tax compliance (fatah & oktaviani, 2021). this is different from previous research (yunia et al., 2021). the connection between compliance and taxpayer understanding a thorough awareness of tax laws, regulations, and processes will help taxpayers better comply with tax requirements and make them more aware of their responsibilities. (wardani & nistiana, 2022)it is possible that taxpayers who are in disobedience need to be sufficiently aware of the relevant tax laws. past studies (yunia et al., 2021) (arlita bhakti faidani, dwi soegiarto, 2022); (permata sari et al., 2019)msme actors' comprehension of taxation influences their compliance with tax laws. complying with tax laws while considering risk preference as a mitigating factor improves msme taxpayer compliance (yunia et al., 2021). complying with applicable laws, rules, and tax implementation procedures to fulfilling tax responsibilities is known as tax compliance. tax compliance is key in deciding whether a region receives more or less taxation (fatah & oktaviani, 2021). the level of compliance is low because risk preferences and taxpayer compliance are strongly correlated. according to (fatah & oktaviani, 2021), this implies that taxpayers who face various high risks can lower their level of taxpayer compliance. therefore, this study aims to examine the direct impact caused by tax sanctions, taxpayer awareness, and understanding of taxation on msme taxpayer compliance in the city of cirebon and the indirect impact caused by risk preference as a moderator between the relationship in the city of cirebon between tax penalties, taxpayer awareness, and taxation understanding with regard to msme taxpayer compliance. when the independent variable is compared with the dependent variable, risk preference tendencies are used as strengthening or weakening variables (moderation). this research is anticipated to make a scholarly contribution to the field of accounting and taxation through its investigation of monetary accountancy. this research will help dgt improve the understanding of taxation for msme taxpayers. this will increase taxpayer confidence in the https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 370 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dgt's ability to fulfilling its tax obligations. e-filling as an innovation provide services for taxpayers in reporting their tax report (sulistyowati et al., 2020). the phenomenon that occurs among smes still needs to be tax-compliant. this study found that there is an increase in tax sanctions, a need for knowledge about tax regulations, and a lack of taxpayer awareness, which impacts the degree of compliance of msme taxpayers with their tax obligations. in addition, risk preference is used to regulate the relationship between these components. based on tax revenue data and tax compliance data on msmes that have decreased and the inconsistent results of previous research, this research will reevaluate "the effects of tax sanctions, taxpayer awareness, and tax understanding on msme tax compliance: the moderating role of risk preference.". prospect theory this theory explains how a person acts when analyzing risk decisions. this theory shows that when individuals are productive, they avoid risk (risk aversion) and take risks (risk seeking). in this theory, one of the relevances to the consistency of tax compliance is that the risks taken by taxpayers will affect their decision to comply with the applicable tax provisions. prospect theory provides an appropriate theoretical basis for moderating risk preferences in the relationship between tax compliance and understanding tax of regulations. this theory explains that when taxpayers have a high level of risk, this will affect taxpayer compliance. as a result, the low level of tax compliance is caused by a strong relationship between tax compliance and risk preferences, so that taxpayers bear a greater burden. theory of attribution according to the theory of attribution, a person’s unique method of assessing the behavior of others depends on their understanding of that person’s behavior. observing someone can reveal if their behavior stems from an external or internal source. the attribution hypothesis states that both internal and external factors, such as risk preferences, taxpayer awareness, tax sanctions, and tax comprehension, can have an impact on an individual. the concept of attribution clarifies how a person’s risk preferences may influence their actions with regard to things like tax fines, taxpayer awareness, and tax understanding. people who make hight-risk decisions may act differently from those who have low-risk preferences. tax sanctions' impact on taxpayer compliance in other words, tax sanctions are tools to stop taxpayers from breaking tax norms. they act as a safety net to ensure that judgments made by tax rules and regulations, also known as tax norms, are surely followed, obeyed, and obeyed (mandowally et al., 2020). according to attribution theory, attributions made by people to outside forces may promote compliance if tax consequences are seen as a serious threat. tax goal of tax sanctions is to increase taxpayer adherence to their tax commitments. the severity or amount of tax penalties enhances the degree of compliance. sanctions have been incorporated into the tax system to encourage taxpayer compliance https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 371 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc concerning their tax obligations. research supports the study's findings (afif & yulianti, 2019); (maghriby & ramdani, 2020). h1: tax sanctions have an impact on taxpayer compliance. the influence of taxpayer awareness on taxpayer compliance the degree of someone's understanding of their tax responsibilities, including their desire to make contributions to fulfilling their tax payment requirements, is known as their tax awareness. understanding how people attribute things according to their degree of taxpayer awareness is possible with the aid of attribution theory. people's perceptions of the significance of compliance may change if awareness is understood to be the outcome of individual knowledge and consciousness. taxpayers are more obedient in meeting their duties when they are better conscious of their commitments (andaningsih et al., 2022). the results of (aprilianti, 2021) and (zuli alfina, 2021) are corroborated by this study. h2: taxpayer awareness has positive effects on taxpayer compliance. the effects of understanding taxation on taxpayer compliance the attribution theory states that how one interprets one's understanding of taxes to internal elements, such as knowledge and individual effort, can impact that understanding when it comes to tax compliance. understanding taxes is one approach for msmes to learn about tax laws and processes and apply them to tax-related tasks like filing tax returns and making payments (wardani & nistiana, 2022). a taxpayer more knowledgeable about taxes will also be more aware of the repercussions of failing to file their taxes on time. they will be more capable of adhering to tax laws if they understand them better. on the other hand, they will only be compliant if they know more about tax laws. research by putra et al. (2020), khadijah (2021), (zuli alfina, 2021), and (wulandari, 2020a) corroborates the findings of this investigation. h3: understanding mandatory taxation affects mandatory tax compliance. the effects of tax sanctions moderate risk preference on taxpayer compliance. prospect theory explains how tax compliance may be influenced by a fear of losing money due to a tax penalty. when tax penalties are viewed as possible losses, there may be a spike in tax compliance to prevent these losses. high-risk taxpayers typically comply with tax responsibilities because risk preferences can boost the implementation of tax punishments seen negatively by taxpayers. research from (san et al., 2023), (tri wahyuningsih, 2019), srimindartii (2017), and (septarini, 2015) supports this study. h4: risk preference moderates the relationship between tax sanctions and taxpayer compliance. the effects of taxpayer awareness moderates risk preference on taxpayer compliance https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 372 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to theory of prospect, a taxpayer’s level of compliance may have an impact on their knowledge of the potential consequences of tax violations or fines. when it comes to risk perception, a taxpayer’s awareness of the risk associated with tax infraction can be quite important. sensitivity to loss can spur attempts to prevent unfavourable outcomes; knowledge of this risk can influence compliance. a feeling or emotion involves being aware of the advantages and disadvantages of one’s tax obligations, including the willingness to pay taxes. risk preferences may strengthen taxpayers' obligations in 2022 (andaningsih et al., 2022), to accurately, voluntarily, and truly understand and apply applicable tax laws in order to satisfy their tax obligations. as a result, taxpayers who have a tendency to take significant risks will usually choose to pay their taxes h5: risk preference moderates the relationship between taxpayer awareness and tax compliance. the effects of taxpayer understanding moderates risk preference on taxpayer compliance prospect theory can provide insight into how individuals and groups can adjust to uncertainty, particularly in the event of changes to tax laws. taxpayers with high-risk preferences are more likely to comply with tax duties because risk preferences can help them better grasp tax legislation. the reaction to uncertainty can be moderated by being aware of the tax obligations under the tax laws. the research findings are corroborated by the investigations of sulistiyani (2017), azizz (2018), and damayanti, mahsuni, and afifudin (2020). h6: risk preference moderates the relationship between taxpayer understanding and taxpayer compliance. research framework table 1. research framework method participants in this quantitative and descriptive study complete google forms to provide main data for the study. respondents opinions are measured using a 5-point likert scale. tax sanctions (x1), taxpayer awareness (x2), tax knowledge (x3), tax compliance-dependent variable (y), and https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 373 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc moderating variable risk preference (z) are the independent factors in this study. the study’s sample consists of individual taxpayers who are registered as msme actors at kpp pratama cirebon satu cirebon. 1,416 msme individual taxpayers are enrolled with kpp pratama cirebon satu. there were 250 msme taxpayers in the sample. probability sampling is the method of sampling that is employed. sugiyono (2018) probability sampling is a method of selecting members of a sample in which each element (or constituent) of the population has an equivalent opportunity of being selected. sampling, data collection, and measures (or measurements) are the customary sub-sections comprising this section. sampling comprises the subsequent sections: units of analysis, research context, and target population; the sampling procedure; and profiles of the respondents. operational variables independent variables according to sugiyono (2016), independent variables, sometimes referred to as free variables, are those that have an impact on or cause changes in the dependent variable. • variable tax sanctions (x1) three indicators are present in the tool that as'ari (2018) utilized to calculate the tax sanction variable, namely: 1 broken tax laws are punishable by harsh financial penalties. 2 imposing sufficiently harsh tax penalties is one way to educate taxpayers. 3 tax offenders must be subject to severe penalties without exception. • variable (x2): taxpayer awareness when taxpayers recognize that they must pay taxes, comprehend how taxes support state funding, and comply with relevant laws, they are said to be taxpayer-aware (kholis, 2020). as'ari (2018) states that there are three (three) indicators in the instrument used to measure the taxpayer awareness variable: 1. how taxpayers view how their taxes are used. 2. level of awareness of tax payments. 3. the financial standing of the taxpayer. • variable (x3): tax understanding tax understanding is how taxpayers comprehend laws, rules, and processes to satisfy their tax obligations (kholis, 2020). according to as'ari (2018), three indicators are used to measure tax comprehension variables: 1 knowledge of extensive tax laws and regulations 2 knowledge of tax laws 3 complying with tax computation and payment protocols dependent variable as the name suggests, dependent variables are those that are affected by or result from the presence of independent variables, according to sugiyono (2016). • tax compliance (y) according to halimatusyadiah (2018), taxpayer compliance is when people pay their taxes on time in order to fund governmental development. this can be done voluntary by https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 374 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accurately and completely filling out an annual notification letter. according to as'ari (2018), tax compliance is evaluated using the following four metrics: 1 one registration at the tax office in conformity. 2 complying with the deadline for filing tax returns. 3 accurate tax calculation and payment compliance 4 paying the arrears on time moderating variable moderating factors influence the connection between the independent variable and the dependent variable. (sugiyono, 2016). • risk preferences a person's inclination for risk may be one of their characteristics, and this might affect how they behave. (aryobimo, 2012). five indicators make up the instrument used to measure the risk preference variable, according to jatmiko (2006): • risk to finances • risk to health • risk danger to society • risk to a work environment • risk to safety use the following pattern to calculate each question's likert scale: • strongly agree, scored 5 • agree; scored 4 • neutral, scored 3 • disagree; scored 2 • strongly disagree, scored 1 data analysis techniques the primary date used in this inquiry was gathered directly from cirebon city taxpayers throught a technique called a survey. every taxpayer involved in the study is required to complete this survey. result and discussion description of respondents table 1 shows this study's respondents' orientation, age, and final instructions. table 2. characteristics of respondent characteristics of respondents characteristics amount percentages (%) gender male 113 45,2% female 139 55,65% latest education https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 375 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc primary school 14 5,6% junior high school 21 8,4% senior high school/vocational school 112 44,8% d1-d3 26 10,4% bachelor 53 21,2% master 5 2% other 20 8% age <20 9 3,6% 20-35 151 60,4% 35-50 60 24% >50 32 12,8% source: processed primary data (2024) the data above shows 139 female respondents (55.65%) and 113 male respondents (45.2%). because women comprise the majority of respondents, women's rights can be associated with the study's findings, which may differ for male respondents. most respondents who answered this questionnaire were senior high school and vocational school graduates, taking into account their most recent educational level. of the respondents, 14 (5.6%) had completed elementary school; 21 (8.4%) had completed junior high school; 112 (44.8%) had completed senior high school/vocational school; 26 (10.4%) had completed d1–d3; 53 (21.2%) had completed d4; 5 (2%), and 20 (8%) had completed additional education. nine respondents (3.6%) were under 20 years old, 151 respondents (60.4%) were between 20 and 35 years old, 60 respondents (24%) were between 35 and 5 years old, and 32 respondents (12.8%) were over 50 years old. based on this data, it can be inferred that most respondents are in their 20s to 35s and are still largely in the prime of their lives. to focus more on most respondents at this age while examining task innovations, useful age is distinguished from regularly utilized innovations. two hundred fifty electronically disseminated surveys using google forms were gathered for this study, and all 250 pieces of data were processed. table 3. external loading tax sanct ion (sp) tax aware ness (kwp) tax understandi ng(pp) tax compli ance (kp) risk prefere nce (pr) moder ated (m pr x sp) moderat ed(m pr x pp) moder ated (m pr x kp) sp1 0,774 sp2 0,830 sp3 0,760 sp4 0,766 sp5 0,801 https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 376 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc kw p1 0,759 kw p2 0,788 kw p3 0,791 kw p4 0,773 kw p5 0,799 kw p6 0,764 pp1 0,747 pp2 0,732 pp3 0,752 pp4 0,752 pp5 0,808 pp6 0,767 pp7 0,804 pp8 0,767 kp1 0,722 kp2 0,641 kp3 0,727 kp4 0,794 kp5 0,811 kp6 0,770 kp7 0,779 kp8 0,737 kp9 0,720 pr1 0,708 pr2 0,723 pr3 0,764 pr4 0,752 pr5 0,772 pr6 0,719 pr7 0,757 pr8 0,761 pr9 0,736 m pr x sp 1,000 https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 377 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc m pr x pp 1,000 m pr x kp 1,000 source: smartpls 4 output in 2024 table 3's outer loading test findings indicate that this study is deemed genuine because the outer loading has a value greater than 0.70. average variances extracted (ave) table 4. average variance extracted (ave) sp kwp pp kp pr 0,619 0,607 0,588 0,560 0,553 source: smartpls 4 output in 2024 table 4 shows that the ave values for the following variables are as follows: 0.619 for the tax sanctions variable, 0.607 for the taxpayer awareness variable, 0.588 for the tax understanding variable, 0.553 for the risk preference variable, and 0.560 for the tax compliance variable. now that this is clear, every ave value for these variables is valid at the same time. composite reliability coefficient table 5. composite reliability sp kwp pp kp pr 0,890 0,903 0,919 0,927 0,918 source: smartpls 4 output in 2024 given that the composite reliability values for the entire structure are more significant than 0.7, table 5 demonstrates that the research instruments' internal consistency and reliability requirements have been met. cronbach’s alpha table 6. cronbach’s alpha sp kwp pp kp pr 0,846 0,871 0,899 0,912 0,846 source: smartpls 4 output in 2024 https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 378 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6 above shows that the internal consistency and reliabillity requirements of the research instrument have been met for all constructs based on cronbach’s alpha parameters; the cronbach's alpha value more significant than 0.7. r-square (𝑅2) table 7. r squared (𝑅2) r squared r-square modified tax compliance 0,787 0,781 source: smartpls 4 output in 2024 table 7 presents the study results. it indicates that 78.1% of the taxpayer compliance variable can be described by tax sanctions, taxpayer knowledge, comprehension of taxation, and risk preference; these variables cannot explain the remaining 21.9%. differential validity ratio of heteroit monotrait (htmt) table 8. ratio of heteroit monotrait (htmt) kp kepatuhan wp m pr pp sp m pr x pp m pr x kp m pr x sp kp compliance wp 0,934 m pr 0,870 0,830 pp 0,960 0,931 0,920 sp 0,985 0,940 0,925 0,977 m pr x pp 0,488 0,470 0,327 0,411 0,466 m pr x kp 0,576 0,522 0,384 0,465 0,531 0,934 m pr x sp 0,553 0,538 0,404 0,463 0,551 0,941 0,941 source: smartpls 4 output in 2024 considering that table 8 shows that the heterotrait-monotrait ratio is less than 1, the study model that includes the four variables mentioned above can be considered valid. testing of hypotheses this test looks at the border coefficients and the directional coefficients that display the t-measure result. the interpretation of the studied boundaries provides insight into the link beetween the concentrate’s constituent parts after a comparison of the t-measure price and the necessary t-table value at 5%. here’s how to do hypothesis testing with smartpls 4. https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 379 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 9. path coefficients variable original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/std ev|) p values significa nce kp -> compliance wp 0,282 0,279 0,084 3,371 0,001 significan ce m risk preference -> compliance wp 0,024 0,023 0,06 0,404 0,686 not significan t pp -> comliance wp 0,356 0,362 0,067 5,287 0,00 significan ce sp -> compliance wp 0,226 0,226 0,089 2,529 0,011 significan ce m risk preference x pp -> compliance wp 0,007 0,006 0,067 0,111 0,912 not significan t m risk preference x kp -> compliance wp 0,064 0,063 0,077 0,832 0,405 not significan t m risk preference x sp -> compliance wp -0,132 -0,128 0,083 1,584 0,113 not significan t source: processed primary data, 2024 table 9 shows that the first hypothesis was tested, yielding a t-statistic value of 2.529 (>1.65) and a p-value of 0.011 (<0.05). this demonstrates that tax penalties significantly impact taxpayer compliance, supporting the acceptance of premise 1. the t-statistic value of 3.371 (>1.65) and the p-value of 0.001 (<0.05) after testing hypothesis 2 demonstrate that taxpayer compliance is positively impacted by taxpayer awareness; as a result, hypothesis 2 is accepted. the results of the third hypothesis test indicate that tax understanding positively impacts taxpayer compliance. assumption 3 is received with a p-value of 0.00 (less than 0.05) and a t-statistics value of 5.287 (greater than 1.65). the t-statistics value of 1.584 (greater than 1.65) and the p-value of 0.113 (less than 0.05) indicate that risk preference does not reinforce tax sanctions with taxpayer compliance, which leads to the rejection of hypothesis 4. the findings of the test for hypothesis 5 indicate that risk preferences do not enhance the correlation between taxpayer knowledge and taxpayer compliance. this is supported by the t-statistics value of 0.832 (<1.65) and the p-value of 0.405 (>0.05), indicating the rejection of hypothesis 5. following testing, hypothesis 6 is deemed false https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 380 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc since risk preference does not appear to modify taxpayer comprehension of taxpayer compliance, as indicated by the t-statistic value of 0.111 (less than 1.65) and the p-value of 0.912 (greater than 0.05). tax sanctions increase the compliance of taxpayers. the results of the hypothesis 1 test revealed a t-statistic value of 2.529 (>1.65) and a p-value of 0.011 (<0.05), indicating that tax sanctions greatly improve msme taxpayer compliance. the first hypothesis, which hold tax penalties may force msme taxpayers to fulfill their obligations, is accepted: the degree of compliance rises with the severity or strictness of the tax penalties. this is in line with previous research (hantono & sianturi, 2021) (muhammad rizki, 2022) (darmayasa et al., 2021). according to the study's goals, the findings support the notion that tax penalties have a significant impact on msme taxpayers’ ability to comply with tax laws. according to attribution theory, this result can be explained by external forces, with taxation acting as the primary motivator for an increase in msme taxpayer compliance with the law. this implies that msme taxpayers are more likely to believe that their compliance is the result of their activities, especially the government's imposed tax penalties. taxpayer awareness has a positive effect on taxpayer compliance. hypothesis 2 is accepted because taxpayer awareness positively affects taxpayer compliance. a tstatistics value of 3.371 (>1.65) and a p-value of 0.001 (<0.05) are the findings of testing hypothesis 2. according to this theory, taxpayers are more conscious of how they complete their tax duties. the results of this investigation are corroborated by (elsani & tanno, 2023)(abdi pradnyani et al., 2022)(setia ningsih et al., 2021). additional research corroborated these findings and established a direct relationship between taxpayer knowledge and tax compliance. the findings support the assertion that enhancing taxpayer awareness can serve as a viable approach to enhancing tax compliance, which constitutes the primary objective of this research. the findings derived from attribution theory indicate that taxpayers have a tendency to attribute their degree of compliance to their level of awareness regarding their tax responsibilities. hence, the enhancement of taxpayer knowledge is regarded as a crucial element in the enhancement of tax compliance. understanding taxation has a positive effect on taxpayer compliance. the hypothesis 3 test yielded a p-value of 0.00 (<0.05) and a t-statistics value of 5.287 (>1.65). put otherwise, knowledge of taxes leads to greater taxpayer compliance. the third hypothesis is recognized, which holds that taxpayers who comprehend taxes better would also understand the repercussions of failing to execute their obligations. the taxpayer compliance degree correlates with one's understanding of tax regulations. this study supports earlier conclusions. (elsani & tanno, 2023) (wulandari, 2020b)(riswanto et al., 2017). this corroborates this conclusion and establishes that there is a direct relationship between tax understanding and compliance with tax regulations by taxpayers. consistent with the leading research topic, the above findings indicate that improving tax understanding is critical to improving taxpayer compliance, thus in line with the research objectives. findings derived from attribution theory suggest that taxpayers have a tendency to attribute their level of compliance to their expertise in tax regulations. therefore, improving taxpayers' understanding of tax regulations is considered an essential aspect of improving tax compliance. https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 381 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effects of tax sanctions moderates risk preference on taxpayer compliance a t-statistics value of 1.584 (<1.65) and a p-value of 0.113 (>0.05) were obtained from the hypothesis 4 test. since risk preference does not reduce tax penalties with taxpayer compliences, hypothesis 4 is rejected. this prospect theory, which maintains that people make decisions based on the risk they are currently confronting, is to blame for this. in this case, the tax-paying entity is aware of the possible repercussions of failing to fulfill its obligations. the results of the study are supported by (elsani & tanno, 2023), (daryatno, 2021). the findings of this study have been corroborated, indicating no significant impact of risk preference on the association between taxpayer compliance and tax punishments. the findings suggest that while there may be variations in individual risk choices, taxes continue to play a significant role in enhancing taxpayer compliance. the effects of taxpayer awareness moderates risk preference on taxpayer compliance test 5 results indicate that the p-value is 0.405 (>0.05), and the t-statistics value is 0.832 (<1.65). as a result, taxpayer awareness of taxpayer compliance is unaffected by risk preference. since there is a negative correlation between taxpayer knowledge and risk preference, hypothesis 5 is rejected since taxpayers do not take risks. the findings indicate that, while there may be variations in individual risk choices, taxes play a significant role in enhancing taxpayer compliance, studies that bolster (elsani & tanno, 2023). additionally, the study revealed that risk preference has no significant impact on the association between taxpayer knowledge and taxpayer compliance. the conclusion above, within the framework of the research aims, posits that individual risk preferences should not influence endeavors to enhance taxpayer awareness. to improve taxpayer compliance, a consistent emphasis on augmenting awareness and comprehension of tax responsibilities is a practical approach. the effects of understanding taxation moderates risk preference on taxpayer compliance. the t-statistic value is 0.111 (<1.65), and the p-value is 0.912 (>0.05) according to the findings of the hypothesis 6 test. this demonstrates how taxpayers' risk choices do not aid in their understanding of taxpayer compliance. since risk preferences do not assist taxpayers in understanding tax rules, they are likely to be disobedient when paying taxes, which leads to the rejection of hypothesis 6. the findings suggest no moderating effect of risk preference on the association between taxpayer understanding and compliance. based on the principles of prospect theory, the study above implies that the individual risk preferences of taxpayers do not contribute to their comprehension of tax regulations and the resulting implications for compliance. taxpayers have a reduced inclination to consider their risk preferences while making tax payments, potentially resulting in non-compliance conduct. the study's findings are consistent (elsani & tanno, 2023). additionally, the findings indicate no significant impact of risk preference on the association between taxpayers' comprehension of tax regulations and their adherence to tax obligations. in light of the research aims, this conclusion implies that endeavors to enhance taxpayers' comprehension of tax regulations should be grounded in issues beyond individual risk preferences. emphasis should be placed on promoting education and fostering knowledge regarding tax responsibilities. https://www.ilomata.org/index.php/ijtc the effects of taxxsanctions, taxpayer awareness, and tax understanding msme on tax compliance: the moderating role of risk preference yuliani, sistalia, and yulianto 382 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion according to the study after examining the hypothesis testing results, it is possible to draw conclusions about this study. the first hypothesis, which asserts that tax sanctions have a significant impact on taxpayer compliance, is accepted. the second hypothesis, which is supported, asserts that taxpayer awareness significantly influences taxpayer compliance. upon evaluating the third hypothesis, it is determined that taxpayer compliance is significantly impacted by tax understanding, which is accepted. the fourth theory, which is unsupported, claims that risk preference can mitigate the link between taxpayer compliance and tax punishments. the relationship between taxpayer knowledge and taxpayer compliance can be moderated by risk preference, according to the fifth hypothesis, which is rejected. the sixth hypothesis, which suggests that risk preference influences the correlation between taxpayer compliance and tax understanding, is ultimately disproved. the findings of this study indicate that various factors, such as tax fines, taxpayer knowledge, and comprehension of taxation, influence taxpayer compliance. furthermore, the influence of risk preference in moderating this association implies that a comprehensive strategy customized to the specific circumstances and personal inclinations is required. to improve outcomes, researchers should consider some of the limitations of this study in the future. this study only focuses on taxpayers in cirebon city. additionally, three endogenous components and one steering variable are employed to measure taxpayer compliance. future analysts are also anticipated to expand test locations and sample sizes to improve outcomes. the steering variables that can direct the aspects affecting taxpayer compliance can be expanded to achieve this. based on the findings of this study, tax penalties have a substantial impact on msme compliance. consequently, the directorate general of taxation ought to advocate for a more aggressive tax policy, particularly with regard to msmes. the 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(2021). pengaruh insentif perpajakan akibat covid-19, pemahaman perpajakan, kesadaran wajib pajak terhadap kepatuhan wajib pajak dalam menyampaikan surat pemberitahuan tahunan (studi pada wajib pajak yang terdaftar di kpp pratama malang utara). e-jra, 10(04), 11. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 703-715 703 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx sindy astuti1, aminah2 12universitas bandar lampung, indonesia correspondent: sindy.19021071@student.ubl.ac.id1 received : august 17, 2023 accepted : october 13, 2023 published : october 31, 2023 citation: astuti, s., & aminah (2023). determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx). ilomata international journal of tax and accounting, 4(4), 703-715. https://doi.org/10.52728/ijtc.v4i4.884 abstract: occupational health and safety disclosure (ohsd) is essential to provide the public and stakeholders with more information about a company. in particular, ohsd still needs further research because the work accidents in indonesia are currently excessive, but not all companies disclose it. ohsd is also crucial for corporate sustainability. the primary objective of this study is to conduct an empirical study of the impact of profitability, leverage, and the size of the board of commissioners on ohsd. the research method used in this study is quantitative and secondary data obtained from the annual reports and sustainability reports of the property, real estate, and building construction companies listed on the indonesia stock exchange (idx) from 2019 to 2021. the sampling technique used is purposive sampling, with 81 samples. data analysis used panel data regression with a random effect model (rem). the study concluded that profitability and leverage (der) significantly and positively affect ohsd. however, the size of the board of commissioners has a negative and significant effect on ohsd. the research results imply the occupational health and safety disclosure as material for preparing company policies. for academics, this research is expected to expand the financial accounting literature on ohsd from the stakeholder theory perspective. keywords: stakeholder theory, occupational health and safety disclosure, profitability, leverage, the size of the board of commissioners. this is an open-access article under the cc-by 4.0 license. introduction corporate social responsibility (csr) has been officially regulated in indonesia through several regulations. indonesian law (undang-undang) confirms the obligation of perseroan terbatas (pt) companies to carry out csr programs. undang-undang nomor 13 tahun 2003 tentang ketenagakerjaan emphasizes that workers' rights are related to protection for the health and safety of workers in indonesia. according to the global reporting initiative (gri), workers’ https://www.ilomata.org/index.php/ijtc mailto:sindy.19021071@student.ubl.ac.id https://doi.org/10.52728/ijtc.v4i4.884 determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 704 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc occupational health and safety can reflect a good or bad csr level. reports prepared according to gri standards can provide a comprehensive (inclusive) overview of an organization's material topics, their related impacts, and how they are managed (global reporting initiative, 2018). occupational health and safety disclosure (ohsd) is integral to the financial report (bataineh et al., 2018; brown & butcher, 2004; cahaya et al., 2015; cahaya et al., 2017). occupational health and safety disclosure is a form of company transparency. company transparency positively impacts the companies’ and stakeholders’ relationship (schnackenberg & tomlinson, 2016). corporate social responsibility disclosure (csrd) helps maintain transparency to improve organizational performance (font et al., 2012). it means stakeholders’ pressure to disclose occupational health and safety (ohs) practices is also helpful in improving company performance. primarily, reporting csr focuses on the whole work continuum, human rights, society, product responsibility, and environmental information (belal & owen, 2007; islam & deegan, 2010). companies endeavor to minimize high rates of workplace accidents that have the potential to harm their reputation and lead to fines or regulatory actions (nikolaou, 2016). the significant risk associated with work accidents raises high operational costs (tsalis et al., 2018). a company's efforts to protect employee welfare (dixon et al., 2019; freeman, 1984) can increase productivity, corporate image, and build public trust, and is expected to have an impact on improving brand image and competitiveness (aguilera et al., 2007; che abdul rahman et al., 2018; neumann et al., 2014). this research is expected to broaden the scope of research on occupational health and safety disclosure (ohsd); the gri standard on ohsd in indonesia is identified using the gri 403 standard: occupational health and safety 2018 (global reporting initiative, 2018). source: data processed by the author, 2022 the figure above indicates that ohsd in that sector still needs to be fully disclosed by the applicable gri 403 standard. an increase in ohsd of 44.44% occurred in 2020, but this percentage decreased by 5.8% to 38.46% in 2021. it shows that ohsd in this sector in the last 83 97 102 9 13 18 44.44% 38.46% 0% 20% 40% 60% 80% 100% 120% 0 20 40 60 80 100 120 p e r c e n t a g e a m o u n t years occupational health and safety disclosure property, real estate, and building construction companies listed on idx using the gri 403 standard company population ohsd https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 705 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc three years still needs to be improved. one of the ohsd indicators by the gri 403 standard is the 403-9 disclosure index about work accidents (global reporting initiative, 2018). badan penyelenggara jaminan sosial (bpjs) ketenagakerjaan revealed that the reported cases of work accidents in 2021 increased by 5.65% compared to the previous year (2020), with a total of 234,270 cases. this data indicates a concerning trend and highlights the need for continued efforts toward improving workplace safety. as a result of work accident cases in indonesia, bpjs ketenagakerjaan paid claims in 2021 for idr 1,790,006,000,000. this amount increased by 14.97% compared to the previous year, with a nominal idr 1,556,943,000,000 (bpjs ketenagakerjaan, 2021). cases of work accidents occur in many corporate sectors in indonesia. the following diagram shows the percentage related to workplace accident cases in indonesia based on the company sectors. source: konstruksimedia.com the diagram above shows the percentage of work accidents in indonesia that mainly occur in the construction sector, which is 32%. it indicates that the construction industry is the leading contributor to the overall incidence of work accidents in the country. the manufacturing sector is the next most significant contributor, responsible for 31.6% of work accidents in indonesia. many other corporate industries, including transportation (5.3%), forestry (3.8%), mining (2.6%), and other sectors (24.7%), also contribute to the occurrence of work accidents in the country (hasanuddin, 2022). differences in csr disclosure (csrd) in a country are caused by political, social, cultural, environmental, and macroeconomic factors (mayorova, 2019). previous research on csr disclosure examines various factors and parameters of company characteristics in implementing csr. elements characteristic of the company include managerial ownership, leverage, liquidity, profitability, solvency, company size, the size of the board of commissioners, and company age (suprasto & haryanti, 2019). the company’s characteristics, which are the independent variables in this research, are profitability, leverage, and the size of the board of commissioners. 32.0% 31.6% 5.3% 3.8% 2.6% 24.7% workplace accident cases in the corporate sectors in indonesia construction manufacture transportation forestry mining others https://www.ilomata.org/index.php/ijtc https://konstruksimedia.com/konstruksi-penyumbang-terbesar-kecelakaan-kerja-di-indonesia/ determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 706 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc stakeholder theory a literature review, which nigel de bussy did in 2008, demonstrated that the stakeholder concept had long emerged in the 1930s when management academics considered communication strategy to stakeholders as a crucial driver to achieve a corporate reputation. from this point, the concept of stakeholders became the realm of public relations. stakeholder theory provides theoretical knowledge to public relations practitioners to understand external individuals, groups, and organizations influencing the organization’s activities. the scope of stakeholders is broader than the public because it explains the process of building relationships carried out by the organization with surrounding actors related to its daily operations (kriyantono, 2017, p. 57). edward freeman developed the stakeholder theory in 1984 to offer a pragmatic approach to encourage organizations to understand their stakeholders to achieve the best conditions (superior performance). freeman argues that corporate social responsibility (csr) is related to stakeholders. the organization can gain profit by carrying out its social responsibility (kriyantono, 2017, pp. 5758). occupational health and safety disclosure (ohsd) occupational health and safety (ohs) is a series of efforts to create a safe work atmosphere, including physical, mental, and emotional, so that it is free from the risk of accidents and protects the workforce in terms of health, safety, humane treatment, maintenance of work ethics, and religious morality (widodo, 2021, p. 5). therefore, a company needs to make disclosures related to ohs. based on gri indicator 403, there are 10 ohsd items, so the ohsd index is calculated using the following formula. (source: singal and putra, 2019) ohsd( j ) = indicators of ohsd ∑ xij = total gri 403 items disclosed nj = total of all gri 403 disclosure items, nj ≤ 10 profitability the ratio that can evaluate a company's capability to earn profits is called the profitability ratio (kasmir, 2019, p. 198). roa (return on assets) can describe the company's ability to generate profits sourced from available assets (sirait, 2019, p. 142) so that it can be formulated: ohsd( j )= ∑ xij nj return on assets = net profit after tax total assets https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 707 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc when interpreted in stakeholder theory, a company’s high profitability level will increase csr disclosures (csrd). high profitability can also ensure that company activities are carried out by social values that apply in society and evidence of corporate accountability to stakeholders (irmayanti & mimba, 2018). high profitability reflects the increasing availability of funds to fulfill its social responsibilities, especially in disclosing ohs in the company's annual and sustainability reports. previous researchers revealed a positive influence on profitability variables csr disclosure (hamdani et al., 2017; hermawan & gunardi, 2019; oktavianawati & wahyuningrum, 2019; zulhaimi & nuraprianti, 2019). however, profitability does not affect csrd, as suprasto & haryanti (2019) stated. based on the description above, the hypothesis is formulated as follows: h1: profitability has a positive effect on ohsd leverage the effectiveness of the utilization of resources, such as receivables, capital, or company assets, can be measured by leverage ratio (sujarweni, 2019, p. 61). one of many leverage ratios is the debt to equity ratio (der), which confirms a company's debt security level against available capital. the subsequent equation is used for measuring der. when linked to the stakeholder theory, a high level of leverage will make the company obliged to convey more extensive information (dewi & sari, 2019). widespread disclosure means that investors will obtain more information to convince and guarantee investors’ rights as lenders (creditors). thus, the company can minimize the doubts of creditors and make it easier for companies related to their business capital (irmayanti & mimba, 2018). research that can prove the positive effect of leverage on csrd was carried out by dewi & budiasih (2021) and irmayanti & mimba (2018). other research informs that leverage has a negative and significant influence on csrd (yusra & hadya, 2021; utamie et al., 2020; hermawan & gunardi, 2019). however, research by dewi & sari (2019) suggests that leverage does not affect csrd. based on the preceding description, the following hypothesis is formulated: h2: leverage has a positive effect on ohsd size of the board of commissioners the board of commissioners, comprised of principal and independent commissioners, is tasked with controlling, supervising, and advising the board of directors. the formulation of the size of the board of commissioners is as follows (zulhaimi & nuraprianti, 2019). debt to equity ratio = total liabilities total equity the size of the board of commissioners = number of board of commissioners’ members https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 708 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as the shareholders' representative, the board of commissioners of a perseroan terbatas (pt) company has the authority to supervise the directors. the board of commissioners has enough power to pressure management to make various disclosures required by the company. if the composition of the board of commissioners is prominent, the company will inclusively convey information to stakeholders, including information related to csr activities (suprasto & haryanti, 2019). the enormous number of the board of commissioners will distribute a lot of advice and contributions in determining a more comprehensive company csrd policy, including ohsd practices. the research results of previous researchers can prove the positive influence of the size of the board of commissioners variable on csrd (hermawan & gunardi, 2019; oktavianawati & wahyuningrum, 2019). the size of the board of commissioners has a negative impact on csrd, as proven by zulhaimi & nuraprianti (2019) in their research, but it does not affect csrd (santo, 2022). the following hypothesis is derived from the preceding description. h3: the size of the board of commissioners has a positive effect on ohsd method this study used a quantitative approach with quantitative data for property, real estate, and building construction companies listed on the indonesia stock exchange (idx) in 2019−2021. a total of 102 companies are used as the study population. the sample was selected using the purposive sampling method, with 27 companies over the three years, so 81 observation samples were obtained. data collection from secondary data is obtained through documentation techniques in the form of annual reports, sustainability reports, and financial reports downloaded through the official idx website and each company's web page. this research adopted the panel data linear regression analysis technique. it was assisted by a data processing program, namely eviews 12, with the panel data regression equation model formulated as follows. description: yit = ohsd (for entity i at time t) α = constant 𝜷𝟏 − 𝜷𝟐= slope or regression coefficient of independent variable i = entities t = time x1 it = profitability (roa) yit = α + β 1 x1 it + β 2 x2 it + β 3 x3 it + eit https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 709 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc x2 it = leverage (der) x3 it = size of the board of commissioners (sbc) e = standard error result and discussion the combination of data characteristics that are historical or time series with cross section is called panel data (ghozali, 2018, p. 95). the following is a statistical test for estimating the parameters of the panel data model. table 1. chow test results effects test statistic d.f. prob. cross-section f 8.882986 (26,51) 0.0000 cross-section chi-square 138.504428 26 0.0000 source: eviews 12, 2022 panel data estimation with the chow test in table 1. obtains the value of prob as 0.0000, less than 0.05, so the fixed effect model is more correctly used than the common effect model. table 2. hausman test results test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 5.995405 3 0.1118 source: eviews 12, 2022 the hausman test is a statistical test to determine the model’s accuracy. table 2. displays the values of prob as 0.1118, which means > 0.05, so the random effect model was selected as a more accurate model than the fixed effect model. https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 710 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. lagrange multiplier (lm) test results test hypothesis cross-section time both breusch-pagan 38.70620 0.087166 38.79336 (0.0000) (0.7678) (0.0000) (source: eviews 12, 2022) finally, the researcher conducted the lm test (lagrange multiplier) to select the proper panel data model. table 3. above displays the values of the cross section on breusch-pagan of 0.0000, which is <0.05. hence, the random effect model is more appropriate than the common effect model. panel data regression model analysis the results of the estimation testing technique for the panel data regression model in the three tables above aim to confirm the conclusions related to the model to be used. based on those results, the most appropriate model chosen to project panel data regression is the random effect model (rem). table 4. panel data regression results variable coefficient std. error t-statistic prob. c 0.365218 0.092512 3.947786 0.0002 roa 0.166763 0.059716 2.796016 0.0048 der 0.125062 0.032612 3.834876 0.0002 sbc -0.221948 0.015945 -13.91959 0.0000 effects specification s.d. rho cross-section random 0.215774 0.7443 idiosyncratic random 0.126475 0.2557 weighted statistics root mse 0.125750 r-squared 0.553982 mean dependent var 0.121889 adjusted r-squared 0.326972 s.d. dependent var 0.127270 s.e. of regression 0.128975 sum squared resid 1.280852 f-statistic 7.299627 durbin-watson stat 1.972576 prob(f-statistic) 0.000000 source: eviews 12, 2022 https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 711 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the result of the panel data regression model equation is: a constant value of 0.365218 indicates that if the independent variable is zero, the ohsd value remains at 0.365218. the profitability coefficient (roa) has a positive value of 0.166763; if the profitability value increases by one rupiah (1 idr), then the ohsd value increases by 0.014927, and vice versa. leverage coefficient (der) of 0.125062 means that for every increase of one der unit, ohsd will also increase by 0.125062 under the assumption of other factors remaining constant. the size of the board of commissioners variable (sbc) has a negative coefficient of 0.221948, which means that if the sbc value increases by one, the ohsd value decreases by 0.221948. the effect of profitability on ohsd the results of the partial test table 4. shows the coefficient value of the profitability variable (roa), which is 0.166763 with a significance level of 0.0048 (<0.05), so the first hypothesis (h1) is supported. the conclusion is that profitability has a positive and significant effect on ohsd. the findings of this study provide empirical evidence for the stakeholder theory, which posits a positive relationship between a company's profitability and the potential for shareholders to gain higher profits. profitability is one of the factors that can motivate management to carry out broader csr programs and communicate them to shareholders. companies with high profits have a more comprehensive range of stakeholders, so they are responsible for csr disclosures, including more extensive ohsd. the disclosure of corporate social activities in high-profit corporations might convince investors that the corporation not only considers profit as a short-term goal but also considers the company's sustainability as a long-term goal. the results of this partial test research are in line with oktavianawati & wahyuningrum (2019), yusra & hadya (2021), utamie et al. (2020), and hermawan & gunardi (2019). however, contrary to suprasto & haryanti (2019), who could not find an effect between profitability and csr disclosure (csrd). the effect of leverage on ohsd significance values in table 4. for the leverage variable (der) is 0.0002 (<0.05), and the regression coefficient is 0.125062. the results support the second hypothesis (h2): leverage significant positive and significant effects on ohsd. aligned with the stakeholder theory, the high leverage ratio makes the information disclosed by the company more extensive because the company's responsibility to creditors and investors as the company’s stakeholders will be more significant. additional information in the form of ohsd can also minimize doubts by bondholders about their rights as creditors. it helps increase trust and makes it easier for companies to maintain their capital continuity. ohsd = 0,365218 + 0,166763 roa + 0,125062 der − 0,221948 sbc + e https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 712 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results of this partial test research are coherent with dewi & budiasih (2021) and zulhaimi & nuraprianti (2019), who suggest that leverage positively affects csrd. the results contradict utamie et al. (2020), arguing that leverage has no significant negative impact on csrd. the effect of the size of the board of commissioners on ohsd table 4. shows the negative regression coefficient on the sbc variable, which has a value of 0.221948 with a significance level of 0.0000, so this does not support the h3 hypothesis. those results of partial testing contradict the stakeholder theory. this research can prove that there is a negative effect of the size of the board of commissioners on ohsd. the results of this study cannot prove the stakeholder theory, which explains that the larger the composition (size) of the board of commissioners can increase the objectivity of the actions of the board of commissioners to protect all stakeholders. the board of commissioners for companies has a supervisory role, including determining csr programs to be implemented. however, it is the director’s authority to make all operational decisions within the company. supervision by the board of commissioners is not solely measured based on the size of the board of commissioners. still, it is more concerned with the values and trust earned by the company, along with the competence and integrity of the board of commissioners. the results of this partial test research are coherent with research by zulhaimi & nuraprianti (2019) and sunarsih & nurhikmah (2017), which proves that the size of the board of commissioners has a negative effect on csrd. however, contrary to hermawan & gunardi (2019) and oktavianawati & wahyuningrum (2019), they can prove that there is a positive effect on the size of the board of commissioners on csrd. conclusion this study aims to empirically examine the effect of profitability, leverage, and the size of the board of commissioners on the occupational health and safety disclosure. empirical testing uses stakeholder theory. profitability has a positive and significant effect on ohsd. the higher the company’s profitability ratio, the more comprehensive the ohsd is because it has more funds to fulfill its social responsibilities and disclose occupational health and safety information. the findings of this study are consistent with the stakeholder theory; the more significant the company's profits, the greater the stakeholder returns. profitability is one of the factors that can motivate management to carry out broader csr programs and communicate them to their stakeholders. leverage has a positive and significant effect on ohsd. in line with the stakeholder theory, the high leverage ratio makes the information disclosed by the company more extensive because the company's responsibility to creditors and investors as company stakeholders will be greater. additional information in the form of ohsd can also minimize doubts by bondholders about their rights as creditors. it helps increase trust and facilitate the company in terms of capital. https://www.ilomata.org/index.php/ijtc determinants of occupational health and safety disclosure: an empirical study of property, real estate, and building construction companies on idx) astuti and aminah 713 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results of this study cannot prove the stakeholder theory, which explains that the greater the composition (size) of the board of commissioners can increase the objectivity of the actions of the board of commissioners to protect all stakeholders. the board of commissioners for companies has a supervisory role, including determining csr programs to be implemented by the company. however, it is essential to note that the director has sole jurisdiction over all operational determinations. further researchers are suggested to choose different types of companies because they can obtain different research results. other factors regarding company characteristics, such as company age, company size, liquidity, managerial ownership, and institutional ownership, can enrich the following research variables. references aguilera, r. v., rupp, d. e., williams, c. a., & ganapathi, j. 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(2019). pengaruh profitabilitas, ukuran dewan komisaris, dan ukuran perusahaan terhadap corporate social responsibility disclosure. jurnal riset akuntansi dan keuangan, 7(3), 555–566. https://doi.org/10.17509/jrak.v7i3.17729 https://www.ilomata.org/index.php/ijtc https://doi.org/10.1080/00140139.2014.917203 https://doi.org/10.1504/ijdss.2016.10002685 https://doi.org/10.15294/aaj.v8i2.22745 https://doi.org/10.34208/jba.v24i1.1166 https://doi.org/10.1177/0149206314525202 https://doi.org/10.15408/etk.v16i2.5236 https://doi.org/10.24843/jiab.2019.v14.i02.p07 https://doi.org/10.1016/j.ssci.2018.06.015 https://doi.org/10.24843/eja.2020.v30.i01.p20 https://doi.org/10.22202/economica.2020.v9.i2.4626 https://doi.org/10.17509/jrak.v7i3.17729 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 60-76 60 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange widia dwi syahputri1, pratana puspa midiastuty2, eddy suranta3, danang adi putra4 1234bengkulu university, indonesia correspondent : widiadwi536@gmail.com1 received : october 30, 2023 accepted : december 29, 2023 published : january 31, 2023 citation: syahputri, w, d., midiastuty, p, p., suranta, e., putra, d, a. (2024). earnings management before, during and after covid19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange. ilomata international journal of tax and accounting, 5(1), 60-76. https://doi.org/10.52728/ijtc.v5i1.1000 abstract: covid-19 has an impact on the decline in firms performance. several previous studies have found that companies strive to sustain performance through earnings management practices. earnings management that can be performed in a company includes accrued earnings management and real earnings management. previous studies have only focused on the differences in earnings management during the pandemic using accrual earnings management. so that in this study, apart from using accrual earnings management, it also adds real earnings management. this study aims to offer empirical insight into variations in earnings management during the covid-19 period. this duration is divided into three distinct phases: pre, during, and post-covid. focusing on the 2017-2022 timeframe, this study specifically examines companies in the hotels and tourism subsector. the hypothesis was tested with a paired sample ttest. the findings showed no disparity in accruals earnings management in the pre, during, and post-covid periods. however, the analysis showed significant differences in abnormal real earnings management related to production and discretionary factors before, during, and after the covid19 outbreak. notably, abnormal real earnings management in production remains consistent before and after, as well as during and after the pandemic. in addition, discretionary abnormal real earnings management shows no difference before and during covid-19 or during and after the pandemic. the practical implication is that post-covid-19 pandemic firms actually carry out higher real earnings management as an effort to maintain or as a result of the decline in firms performance during the covid-19 pandemic. keywords: accrual earnings management, real earnings management, covid-19 pandemic. this is an open access article under the cc-by 4.0 license. introduction the global impact of the covid-19 pandemic, coupled with the ensuing economic downturn, presents a significant challenge to businesses worldwide, threatening the very existence of many enterprises (barai & dhar, 2021). since late 2019, the outbreak of covid-19 has instilled fear and https://www.ilomata.org/index.php/ijtc mailto:widiadwi536@gmail.com https://doi.org/10.52728/ijtc.v5i1.1000 earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 61 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc apprehension globally, particularly among financial market investors (marietza et al., 2023). this crisis has led to substantial adverse effects on employment, causing high unemployment rates, reducing economic activities, and instigating uncertainty across financial markets (zhang et al., 2020). consequently, numerous companies have grappled with financial hardships and even faced bankruptcy due to disruptions in operations (lassoued & khanchel, 2021a). the covid-19 outbreak is significantly reshaping business operations, based on current assessments. recent research primarily explores how market dynamics influence practical challenges faced by businesses. for instance, (hassan et al., 2020) observed that covid-19-related shocks led to abrupt disruptions in supply chains and a decreased demand for most enterprises. businesses are confronted with considerable uncertainty regarding their sustainability and growth prospects. especially concerning supply, sudden public health crises make it challenging to maintain the regular flow of production elements like labor and raw materials (ma et al., 2019). consequently, these challenges rapidly propagate throughout the supply chain, affecting numerous businesses from upstream to downstream. many companies face the risk of capital chain disruptions due to supply chain issues, which hampers their ability to sustain production (de vito & gómez, 2020). one of the industries most affected by the epidemic is the tourism industry. the indonesian government imposed social restrictions during the epidemic, which led to fewer tourists visiting the country and the closure of several businesses including hotels and restaurants (wijay & darmanto, 2023). the covid-19 outbreak has significantly impacted global demand, leading to substantial negative effects on employment and consumption due to lockdowns and restrictions (baker et al., 2020; baldwin & weder, 2020). this situation has greatly affected the need for investments, causing interruptions in industrial and infrastructure projects (dai et al., 2021). the reduced demand for goods and services has emerged as a critical issue for businesses during the pandemic, significantly undermining their profitability (carletti et al., 2020). this decline in profits has led to liquidity shortages, complicating loan repayments and elevating financing needs (park & shin, 2021). to sustain operations amid the covid-19 crisis, companies must devise strategies, including efforts to maintain profitability. notably, earnings management practices, as suggested by (sulistyanto 2018, n.d.), have been employed during this period. previous empirical studies, such as (lizińska & czapiewski, 2023), demonstrate that management has become more aggressive in utilizing accrual and real earnings management policies in preparing financial statements. this has led to notable differences in discretionary accruals and real earnings management during the covid-19 pandemic compared to the pre-pandemic period, resulting in diminished financial statement reliability (lassoued & khanchel, 2021b) several studies have delved into earnings management practices, including (al-begali & phua, 2023; garfatta et al., 2023; liu & sun, 2022; rahman et al., 2023; silva flores et al., 2023). the findings reveal various patterns, such as larger reported losses, increased discretionary accruals, and alterations in real earnings management practices during the pandemic. for instance, (liu & https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 62 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sun, 2022) highlighted increased loss reporting during 2019 and 2020, while (silva flores et al., 2023) observed higher discretionary accruals in brazilian companies amid the pandemic. (garfatta et al., 2023) identified income-decreasing real earnings management patterns during the covid-19 period. (rahman et al., 2023) showcased increased real earnings management in family-owned chinese companies during the pandemic. additionally, (al-begali & phua, 2023) discovered limitations in accrual discretion but a positive association with real earnings management in jordanian firms during covid-19. studies in indonesia have also scrutinized earnings management during the pandemic. (firmansyah & ardiansyah, 2020) found no differences in accrual and real earnings management levels between the pandemic and pre-pandemic periods. (prihatni et al., 2023) examined real earnings management in specific sectors, revealing differences in certain proxies but not others between companies. (pernamasari & tanjung, 2023) noted differences in abnormal discretionary expenses before and during the covid-19 pandemic, suggesting a preference for real earnings management over accrual-based methods. previous research by (suranta et al., 2010, 2014) highlighted the stronger tendency for earnings management behavior during crises, emphasizing the influence of agency theory on management practices during turbulent periods. this study replicates and extends the work of (angelina & lindrawati, 2022) by including real earnings management variables. it identifies a significant disparity in accrual earnings management before and after the covid-19 pandemic this approach aligns with (zhu et al., 2022) suggestion to measure real earnings management using three proxies: the abnormal operating cash flow (abncfo), abnormal production cost (abnprod) and abnormal discretionary expense (abndisexp) these include advertising, research and development, selling, general and administrative expenses. it is used as three aspects to measure actual earnings management. next, he created the rem index to measure real earnings management. from research conducted by angelina & lindrawati (2022), the formulation of the problem in this study is whether there are differences in accrual earnings management before, during and after the covid-19 pandemic and whether there are differences in real earnings management before, during and after the covid-19 pandemic. agency theory (jensen & meckling, 1976) agency theory highlights inherent conflicts known as agency problems between capital owners (principals) and managers (agents), stemming from differing interests. these disparities often result in managerial misconduct. agency problems arise when the owner of the company is unable to implement a direct supervision mechanism over the actions taken by managers in managing the company. this can cause managers to act opportunistically, which has the potential to harm company owners (husaini et al., 2021). the second agency issue pertains to managers, being internal members of the company, possessing more comprehensive insights and future prospects compared to external capital owners and stakeholders. this information asymmetry between managers and owners often leads to conflicts, as highlighted by (angelina & lindrawati, 2022). this disparity in information encourages agents to potentially misrepresent or manipulate information, particularly when it influences the https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 63 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc assessment of their performance. this dynamic urges agents to strategize on utilizing accounting figures to optimize their gains, commonly known as earnings management (amaliah, 2009). earnings management as per (scott, 2015), earnings management denotes the managerial practice of manipulating financial reports to optimize personal or corporate advantages through accounting policies. this approach represents an opportunistic strategy employed by management to enhance their benefit and well-being while fulfilling contractual obligations with the principal. in the research of (healy & wahlen, 1999), earnings management is the practice of misleading multiple stakeholders, which occurs when managers change or manipulate accounting numbers reported in financial statements during financial reporting and transaction preparationearnings management is negative since it covers the genuine data almost the company's execution. by giving insufficient and wrong information, profit control can unfavorably influence asset assignment, as speculators may provide funds to less creditworthy companies (trung et al., 2020). adequate company information owned by managers is utilized so that earnings management actions can be carried out (henny, 2019). according to agency theory, management performs earnings management opportunistically by prioritizing its own interests and ignoring the interests of other stakeholders (liu & sun, 2022). earnings management refers to the deliberate alteration of accounting entries and financial data within financial statements to mislead users, as noted by (healy & wahlen, 1999). this practice, from the perspective of financial reporting, allows managers to steer clear of losses or deviations from analysts' profit projections, aiming to sidestep damage to corporate reputation, failure to meet investor expectations, and adverse reactions in stock prices, as highlighted by (sekaranti & juliarto, 2022). earnings management can be executed through various methods. (scott, 2015) identifies strategies employed by managers such as taking a big bath, minimizing income, maximizing income, and income smoothing, which are applicable to both accrual earnings management and real earnings management. the assessment of earnings management can be conducted using diverse empirical models including the aggregate accruals model, the specific accruals model, and the distribution of earnings approach, as outlined by (sulistyanto 2018, n.d.). accrual earnings management one method employed for earnings management involves utilizing the accrual method. accruals signify the variance between a company's generated net cash flow from operational outcomes and the reported profit in its income statement, encompassing discretionary and non-discretionary accruals (asni & mayasari, 2018). accrual earnings management denotes the alteration of accounting techniques or the strategic utilization of estimations to boost profits (nagar & sen, 2016). this practice of accrual earnings management is evident when managers manipulate accrued earnings, which aren't linked to cash flow. this manipulation technique itself is the result of the application of the accrual accounting system. accrual accounting basically requires estimation and judgment, which gives managers the freedom to determine and set accounting policies. this freedom also allows managers to embellish financial statements and manage income (lisnawati & sebrina, 2019). real earnings management https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 64 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (roychowdhury, 2006) defines real earnings management (rem) as a manipulation of a company's operational activities, measured by a deviation from its standard operational practices. this form of management involves altering daily activities within a company during an accounting period. rem is typically motivated by timing, allowing for manipulation at any point during the accounting period to achieve specific goals such as meeting profit targets, averting losses, and aligning with analysts' projections (zurriah & sembiring, 2020). according to (sulistiawan et al., 2011), earnings management through real activities involves manipulating earnings figures via actions arising from normal or operational business activities. for instance, tactics might include delaying product promotions or hastening sales through significant discounts. (ratmono, 2010) elaborates that real earnings management practices may utilize three techniques: sales manipulation, excessive production, and discretionary expense reduction. companies suspected of engaging in these activities typically exhibit higher abnormal cash flow operations (cfo) and abnormal production costs compared to others, alongside lower abnormal discretionary expenses (ningsih, 2017). hypothesis development according to agency theory, managers might engage in earnings management for opportunistic reasons (jensen & meckling, 1976). this behavior becomes particularly significant during challenging periods for companies, such as crises or disasters (lisboa & kacharava, 2018). specifically, during a pandemic or natural calamity, managers with moral hazard intentions possess substantial control to strategically alter financial statements in their favor, potentially risking these benefits in such circumstances. earnings management typically takes two forms: accrual earnings management and real earnings management. (badertscher, 2011) asserts that accrual earnings management involves modifying financial reporting by altering accumulated income or expenses. in contrast, real earnings management involves manipulating displayed earnings in financial statements, presenting an advantage over accruals due to its difficulty in detection by auditors or regulators. empirically, earnings management has been scrutinized in various crisis periods, including the asian crisis in 1997 (chia et al., 2007), the subprime crisis in 2007-2009, the oil crisis in 2014(bugshan et al., 2022; kjærland et al., 2020) and most recently, the 2020 covid-19 pandemic (ali et al., 2021; aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021a; yan et al., 2022) for instance, (ali et al., 2021) investigated the impact of the covid-19 pandemic and investor protection on developing countries, finding reduced earnings management during this period. conversely, (azizah, 2021) observed an increase in earnings management of manufacturing companies listed on the indonesia stock exchange during the pandemic. similarly, (lassoued & khanchel, 2021b) documented a considerable surge in earnings management practices among listed companies in europe in 2020 due to the pandemic. (aljughaiman et al., 2023; yan et al., 2022) also noted heightened earnings management behaviors during the covid-19 period. in light of these observations, the following hypotheses are proposed: h1: differences exist in accrual earnings management before and during the covid-19 pandemic. h2: differences exist in accrual earnings management before and after the covid-19 pandemic. https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 65 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3: differences exist in accrual earnings management during and after the covid-19 pandemic. h4: differences exist in real earnings management before, during, and after the covid-19 pandemic. method research type and design this study adopts a quantitative methodology involving descriptive secondary data analysis alongside descriptive statistical examinations and paired sample t-tests. employing a quantitative approach, this research investigates the impact of the covid-19 pandemic on corporate earnings management practices of companies operating in the hotels and tourism subsector and listed on the indonesia stock exchange (idx), with particular emphasis on accrued and real earnings. during the research period from 2017 to 2022. this examination constitutes a covid-19 pandemic event study aiming to discern variations in accrual and real earnings values before, during, and after the pandemic period. population and sample within the hotels and restaurant sub-sector, 47 firms were included in the investigation. the research sample comprised 17 businesses that were listed on the indonesia stock exchange (idx) and were monitored over a period of six years, from 2017 to 2022. purposive sampling was the sample technique used, and it was determined by the following criteria: (1) hotels and tourism subsector companies recorded on the indonesia stock trade from 2017 to 2022; (2) companies that recorded yearly monetary reports in indonesian rupiah (rp) on a regular basis between december 31, 2017, and december 31, 2022; and (3) companies that provided extensive data for the evaluation of accrual management and real earnings management between december 31, 2017, and december 31, 2022. definition of operations and variable measurement variable measurement source variable dependen period before, during and after period before, during and after covid 19 (angelina & lindrawati, 2022; firmansyah & ardiansyah, https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 66 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc covid 19 2020; pernamasari & tanjung, 2023; prihatni et al., 2023; syabilla & andi, 2021) variable independe n accrual earnings manage ment a. tacit = niit – cfoit b. tacit tait−1 = 𝛽1 [ 1 tait−1 ] + β2 [ δsalesit tait−1 ] + β3 [ ppeit tait−1 ] c. ndacit=𝛽1 [ 1 tait−1 ] + β2 [ δsalesit−δrecit tait−1 ] + β3 [ ppeit tait−1 ] d. dacit = tacit tait−1 − ndacit (midiastuty et al., 2020) real earnings manage ment cfoit tait − 1 = k1 [ 1 tait − 1 ] + k2 [ salesit tait − 1 ] + k3 [ 𝛥salesit tait − 1 ] 𝐀𝐁𝐍_𝐂𝐅𝐎 = cfoit − cfoit tait−1 prodit tait − 1 = k1 [ 1 tait − 1 ] + k2 [ salesit tait − 1 ] + k3 [ 𝛥salesit tait − 1 ] + k4 ∆salesit − 1 tait − 1 𝐀𝐁𝐍_𝐏𝐑𝐎𝐃 = prodit − prodit tait − 1 disexpit tait − 1 = k1 [ 1 tait − 1 ] + k2 ∆salesit − 1 tait − 1 𝐀𝐁𝐍_𝐃𝐈𝐒𝐄𝐗𝐏 = disexptit − disexptit tait−1 (roychowdhury , 2006) data collection method this study uses secondary data that was obtained from fully disclosed audited annual financial reports that were posted on the indonesia stock exchange (idx) between 2017 and 2022. the indonesia stock exchange's official website (www.idx.co.id) and the individual firms' official websites served as the main sources of the data. https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 67 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data analysis the paired sample t-test and descriptive statistical analysis are the main analytical techniques used in this study to evaluate the impact of the covid-19 epidemic on accrual and actual earnings values. each variable is represented by the descriptive statistical analysis, and possible differences between accrued earnings management and real earnings management that is in abnormal cash flow operations (abncfo), abnormal production costs (abnprod), and abnormal discretionary expenses (abndisexp) prior to, during, and following the covid-19 pandemic are determined by means of the paired sample t-test. result and discussion descriptive statistical analysis descriptive statistics of research variables are presented in table 1 below. table 1. descriptive statistics descriptive statistics all observations variable n minimu m maximum mean std. deviation dac 102 -0.87 0.28 -0.0095 0.11429 abncfo 102 -0.55 0.18 -0.0099 0.07367 abnprod 102 -0.34 0.54 0.0325 0.10188 abndisexp 102 -0.20 0.10 -0.0268 0.05796 before variable n minimu m maximum mean std. deviation dac 34 -0.08 0.18 0.0070 0.04862 abncfo 34 -0.09 0.17 -0.0131 0.05095 abnprod 34 -0.14 0.23 0.0486 0.09135 abndisexp 34 -0.19 0.08 -0.0487 0.06374 during variable n minimu m maximum mean std. deviation dac 34 -0.87 0.28 -0.0131 0.17122 abncfo 34 -0.06 0.06 0.0001 0.02738 abnprod 34 -0.13 0.20 0.0155 0.06243 abndisexp 34 -0.21 0.06 -0.0406 0.06293 after variable n minimu m maximum mean std. deviation dac 34 -0.32 0.10 -0.0224 0.08849 https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 68 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc abncfo 34 -0.55 0.18 -0.0168 -0.11448 abnprod 34 -0.34 0.54 0.0335 0.13770 abndisexp 34 -0.17 0.09 -0.0247 0.05227 source: secondary data processed 2023 based on table 1, it can be explained as follows: the descriptive statistics pertaining to the discretionary accrual (dac) proxy, an indicator of accrual earnings management, showcase minimum values of -0.08, -0.87, and -0.32 respectively for the periods preceding, during, and following the covid-19 pandemic. the negative figures in discretionary accrual (dac) signify a trend among companies towards minimizing income or reducing income when engaging in accrual earnings management practices. the maximum value of discretionary accruals (dac) before, during and after the covid-19 pandemic is positive at 0.18, 0.28, 0.10. this illustrates that companies carry out accrual earnings management with income maximization/income increasing patterns. the average value of discretionary accrual (dac) before covid 19 is positive 0.0070. the positive discretionary accrual (dac) value illustrates that companies carry out earnings management with an income maximization/income increasing pattern. while during and after the covid-19 pandemic is negative -0.0131, -0.0224. the negative value of discretionary accrual (dac) illustrates that companies carry out earnings management with income minimization/income decreasing patterns. the descriptive statistics for real earnings management variables, observed through the abnormal cash flow operations (abncfo) proxy, indicate a range of values across different periods before, during, and after the covid-19 pandemic. the minimum values for these periods, -0.09, -0.06, and -0.55 respectively, depict that companies struggled to enhance profits by merely augmenting sales volume. conversely, the maximum values of 0.17, 0.06, and 0.18 signify that companies engaged in earnings management practices during these periods by manipulating transactions to boost profit figures through increased sales volume facilitated by sales discounts. the average value during covid-19 stands at a positive 0.001, suggesting similar strategies of profit augmentation via increased sales volume with discounts. however, the average values before and after the pandemic, at -0.0131 and -0.0168 respectively, illustrate an inability to amplify profits by increasing sales volume. in terms of real earnings management variables using the abnormal production cost (abnprod) proxy, the descriptive statistics reveal a range of values before, during, and after the covid-19 period. the minimum values, -0.14, -0.13, and -0.34 respectively, suggest that companies found it challenging to bolster profits through high-volume production methods. conversely, the maximum values of 0.23, 0.20, and 0.54 indicate that companies engaged in real earnings management by manipulating production to increase profit figures by reducing production costs. the averages, 0.0486, 0.0155, and 0.0335, highlight the tendency of companies to manage earnings by minimizing production costs to augment reported profits. the standard deviation value of discretionary accrual (dac) for all observations is greater than the average value, as well as for the periods before, during and after. this illustrates that earnings management carried out by companies for all observations as well as before, during and after the covid period varies. https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 69 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc regarding real earnings management variables using the abnormal discretionary expenses (abndisexp) proxy, the descriptive statistics reveal a range of values before, during, and after the covid-19 pandemic. the minimum values, -0.19, -0.21, and -0.17 respectively, suggest that companies encountered challenges in enhancing profits by curbing expenses. on the contrary, the maximum values of 0.08, 0.06, and 0.09 illustrate that companies managed earnings by reducing various costs like general administrative expenses and research development expenses to bolster profit figures. the averages, -0.0487, -0.0406, and -0.0247, indicate a tendency among companies to maintain or increase profit figures by not reducing expenses related to sales and research development. in the period after covid-19, the standard deviation of real earnings management proxy abnormal discretionary expenses (abndisexp) is smaller than the average, this illustrates that in the period after covid-19 even during the covid-19 pandemic, there are no significant variation differences in the real profit management practices implemented by companies. hypothesis testing this research intends to present empirical findings pertaining to the variations in earnings management before, during, and after the covid-19 outbreak. it examines both accrual and real earnings management using three metrics: abnormal cash flow operations (abncfo), abnormal production costs (abnprod), and abnormal discretionary expenses (abndisexp) to do. all hypotheses underwent examination using the paired sample t-test. the diverse outcomes of these tests are outlined in the following table: table 2. paired sample t-test results mean t sig. (2tailed) dac_before dac_during 0.02013 0.581 0.565 dac_before dac_after 0.02940 1.606 0.118 dac_during dac_after 0.00927 0.304 0.763 abncfo_ before abncfo_ during -0.01316 -1.274 0.212 abncfo_ before abncfo_after 0.00376 0.181 0.857 abncfo_during abncfo_after 0.01691 0.864 0.394 abnprod_before abnprod_during 0.03306 2.466 0.019 abnprod_before abnprod_after 0.01514 0.654 0.517 abnprod_during abnprod_after -0.01791 -0.685 0.498 abndisexp_before abndisexp_during -0.00817 -0.959 0.345 https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 70 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc abndisexp_before abndisexp_after -0.02407 -2.532 0.016 abndisexp_during abndisexp_after -0.01589 -1.908 0.065 source: secondary data processed 2023 the purpose of this study is to examine deviations in the management of accrual and real revenues before, during, and after the covid-19 outbreak. the paired sample t-tests were applied to test these hypotheses, and the results are outlined below: hypothesis 1: variations in accrual earnings management before and during the covid-19 pandemic the first hypothesis aimed to establish disparities in accrual earnings management pre and during the covid-19 period. however, the paired sample t-test indicated no substantial difference between earnings management practices before and during covid-19. this outcome contradicts several studies (aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021b; pernamasari & tanjung, 2023; rahman et al., 2023; silva flores et al., 2023; yan et al., 2022) and aligns with others (al-begali & phua, 2023; firmansyah & ardiansyah, 2020; garfatta et al., 2023) hypothesis 2: differences in accrual earnings management before and after the covid-19 pandemic this hypothesis aimed to demonstrate discrepancies in accrual earnings management before and after the covid-19 outbreak. however, the paired sample t-test revealed no substantial difference in earnings management between these periods. similarly, this outcome contradicts previous studies (aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021b; pernamasari & tanjung, 2023; rahman et al., 2023; silva flores et al., 2023; yan et al., 2022) and concurs with others (al-begali & phua, 2023; firmansyah & ardiansyah, 2020; garfatta et al., 2023). hypothesis 3: disparities in accrual earnings management during and after the covid-19 pandemic the third hypothesis aimed to identify differences in accrual earnings management during and after covid-19. however, the analysis found no significant variance between earnings management practices during and after the covid-19 pandemic. this result contrasts with several studies (aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021b; pernamasari & tanjung, 2023; rahman et al., 2023; silva flores et al., 2023; yan et al., 2022) and aligns with others (albegali & phua, 2023; firmansyah & ardiansyah, 2020; garfatta et al., 2023). hypothesis 4: variations in real earnings management before, during, and after covid-19 this hypothesis aimed to highlight differences in real earnings management before, during, and after the covid-19 outbreak. the analysis revealed significant disparities in real earnings management concerning abnormal production (abnprod) during and before the covid-19 pandemic, as well as abnormal discretionary expenses (abndisexp) before and after the covid19 period. this result supports the findings of some studies (al-begali & phua, 2023; aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021b; pernamasari & tanjung, 2023; rahman https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 71 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc et al., 2023; yan et al., 2022) and contrasts with others (firmansyah & ardiansyah, 2020; garfatta et al., 2023; prihatni et al., 2023). moreover, the study found no significant differences in real earnings management practices concerning abnormal cash flow operations (abncfo) before, during, and after the covid-19 pandemic. this outcome aligns with certain research (firmansyah & ardiansyah, 2020; garfatta et al., 2023; prihatni et al., 2023) and contradicts others (al-begali & phua, 2023; aljughaiman et al., 2023; azizah, 2021; lassoued & khanchel, 2021b; pernamasari & tanjung, 2023; rahman et al., 2023; yan et al., 2022) conclusion this research aimed to delineate differences in accrual earnings management pre, during, and post the covid-19 pandemic, alongside real earnings management within the same time frames. results suggest no variance in accrual earnings management across these periods. during the pandemic, companies demonstrated accrual earnings management with a pattern emphasizing income minimization, contrasting with the pre-pandemic period, where the focus was on income maximization. amid the pandemic, companies tended to report immediate losses through income minimization to mitigate their impact in subsequent periods. post-pandemic, the accrual earnings management aimed to bolster reported profits, following an income maximization pattern. contrarily, substantial disparities in real earnings management were observed in abnormal production (abnprod) before and during the pandemic, and abnormal discretionary (abndisexp) before and after the covid-19 period. these practices involved reducing production costs and cutting selling and research development expenses. however, no significant differences were found in abnormal cash flow operations (abncfo) regarding the periods before, during, and after covid-19. additionally, there were no differences in abnormal real earnings management in production (abnprod) before and after, and during and after, nor in abnormal discretionary real earnings management (abndisexp) before and during, and during and after the covid-19 pandemic. theoretical implications for earnings management during the pandemic highlights the decrease in profit figures, indicating information asymmetry. this suggests deliberate reduction in profit figures during the pandemic to minimize future repercussions, illustrating an information asymmetry scenario. the practical implications of this study are as follows companies after the covid-19 pandemic actually carry out higher real earnings management as an effort to maintain or as a result of a decline in companies performance during the covid-19 pandemic. reference al-begali, s. a. a., & phua, l. k. 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(2022). how does the covid-19 affect earnings management: empirical evidence from china. research in international business and finance, 63(september), 101772. https://doi.org/10.1016/j.ribaf.2022.101772 zhang, d., hu, m., & ji, q. (2020). financial markets under the global pandemic of covid-19. finance research letters, 36(march), 101528. https://doi.org/10.1016/j.frl.2020.101528 zhu, l., chen, w., & zheng, q. (2022). competitive or collaborative? customer concentration and real earnings management. international journal of emerging markets, 72102139. https://doi.org/10.1108/ijoem-09-2021-1493 https://www.ilomata.org/index.php/ijtc earnings management before, during and after covid-19 period in the hotels and tourism subsector subsector listed on the indonesian stock exchange syahputri, midiastuty, suranta, and putra 76 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc zurriah, r., & sembiring, m. (2020). pengaruh ukuran perusahaan dan leverage terhadap nilai perusahaan melalui praktek manajemen laba rill. jurnal akuntansi dan bisnis, 6(2), 174–183. https://doi.org/10.31289/jab.v6i2.3882 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 162-179 162 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors heriantonius silalahi directorate general of taxes, indonesia correspondent: heri.silalahi@gmail.com received : october 1, 2023 accepted : january 4, 2024 published : january 31, 2024 citation: silalahi, h. (2024). enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors. ilomata international journal of tax and accounting, 5(1), 162-179. https://doi.org/10.52728/ijtc.v5i1.783 abstract: tax compliance in indonesian government institutions significantly affects national revenue and resource allocation. this study addresses tax non-compliance by identifying its causes and proposing mitigation strategies. the research aims to understand why government institutions in indonesia struggle with tax compliance, with objectives including identifying inhibiting factors, assessing their impact, and proposing mitigation strategies. this integrated approach encompasses various elements, including a descriptive analysis approach, comprehensive literature research, comparative analysis, a qualitative research approach, and secondary data collection. findings highlight complex regulations, inadequate tax education, and inconsistent enforcement as compliance hindrances. the study quantifies their impact. proposed solutions include simplifying tax rules, enhancing tax education, and enforcing tax laws. in conclusion, this research informs policymakers, tax authorities, and government officials about tax compliance challenges, offering insights to improve tax collection and resource allocation, potentially increasing government revenue and promoting sustainable development. keywords: tax compliance factors, government institutions, mitigation strategies, indonesian taxation, revenue enhancement this is an open access article under the cc-by 4.0 license. introduction the state budget (apbn) comprises five key components: state revenue, state expenditure, primary balance, budget surplus/deficit, and budget financing. among these components, state revenue plays a pivotal role in maintaining economic stability. according to data from the official website of the ministry of finance (kemenkeu.go.id), the realization of tax revenue in the 2022 apbn reached rp2.034.5 trillion, surpassing the target set in presidential regulation 98/2022, which was rp1.784 trillion. this represents a substantial growth of 31.4% compared to the 2021 https://www.ilomata.org/index.php/ijtc mailto:heri.silalahi@gmail.com https://doi.org/10.52728/ijtc.v5i1.783 enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 163 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc realization of rp1.547.8 trillion. these figures underscore the significance of tax revenue as the largest pillar of the apbn. tax revenue is collected through two mechanisms: the self-assessment system, where taxpayers calculate, pay, and report taxes themselves, and the withholding system, where taxes are deducted/collected by third parties such as marketplaces or government institutions (ministry of finance, 2022). government institutions play a critical role in tax deduction and collection, particularly when transactions involve business partners, both micro, small, and medium-sized enterprises (msmes) and non-msmes. hence, it is imperative for government treasury officials to accurately, comprehensively, and clearly perform tax calculations, deductions/collections, and reporting. there are still instances of inaccuracies in the practices of tax deduction, collection, and reporting by government treasury officials. these instances highlight the necessity for improved understanding and adherence to tax processes by government institutions to ensure that tax revenues are collected optimally. this, in turn, supports economic stability and the country's ongoing development. indonesia's tax-to-gdp ratio in 2021 stood at 10.9%, which is below the asia and pacific (29) regional average of 19.8% by a significant margin of 8.9 percentage points. additionally, it falls short of the oecd (organization for economic co-operation and development) average of 34.1% by a substantial 23.2 percentage points. this ratio in indonesia increased by 0.8 percentage points from 10.1% in 2020 to 10.9% in 2021 (ministry of finance, 2022). over the period from 2007 to 2021, indonesia's tax-to-gdp ratio witnessed a decrease of 1.4 percentage points, declining from 12.2% to 10.9%. the highest recorded tax-to-gdp ratio during this period was 13.0% in 2008, while the lowest was 10.1% in 2020 (ministry of finance, 2022). https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 164 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these figures highlight the need for indonesia to further enhance its tax collection efforts to align with regional and global standards. increasing the tax-to-gdp ratio can play a crucial role in generating government revenue, supporting economic development, and maintaining fiscal stability. government revenues in indonesia experienced a significant growth of 30.6%. this growth was underpinned by increased economic activity, the positive effects of implementing tax reforms (hpp law), and the rising prices of commodities. on the expenditure side, the government carefully optimized spending, reaching 99.5% utilization. this approach acted as a shock absorber to safeguard the economy and promote economic growth. the government has achieved significant milestones in its budget functions. it has successfully maintained moderate inflation rates and achieved robust economic growth, resulting in the https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 165 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc creation of 4.2 million new job opportunities. progress has been made in reducing the poverty rate, nearing single-digit figures by september 2022. despite the challenges posed by the covid19 pandemic, income inequality, as measured by the gini ratio, has been effectively managed. the country has sustained its human development index (hdi), reflecting ongoing development, and has seen a decrease in child stunting rates. furthermore, farmers have experienced improved terms of trade, enhancing their livelihoods (downs & stetson, 2014a). these accomplishments underscore the government's adept fiscal management in balancing economic stability, societal well-being, and development goals. notably, both the deficit and primary balance have decreased substantially, returning to prepandemic levels. this positive shift was accompanied by more efficient budget financing mechanisms. it's worth noting that tax revenue includes receipts for all levels of government, and the "other taxes" category encompasses various taxes not directly related to income, profits, capital gains, social security contributions, or goods and services (pu & syu, 2023). in the context of the role of tax compliance by government institutions in development, the research "enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors" should outline the research questions as follows: 1) what are the primary factors inhibiting tax compliance in indonesian government institutions, and how do these factors affect the government's ability to support sustainable economic growth and reduce poverty levels? 2) to what extent do the impacts of these factors inhibiting tax compliance affect significant state revenue, effective income inequality management, and the achievement of other national development goals already attained by the indonesian government? 3) what effective mitigation strategies can be proposed to address the factors hindering tax compliance within government institutions, with the aim of enhancing the government's role in supporting sustainable development, including improving social welfare, reducing poverty, and managing income inequality? method the research will employ a comprehensive and multi-faceted research methodology to address the objectives of the study effectively. this integrated approach encompasses various elements, including a descriptive analysis approach, comprehensive literature research, comparative analysis, a qualitative research approach, and secondary data collection (downs & stetson, 2014b). these methodological components have been carefully selected to provide a holistic understanding of tax compliance issues within indonesian government institutions and to facilitate the identification and mitigation of inhibiting factors. 1) descriptive analysis approach: this aspect of the methodology will serve as the foundation for presenting information systematically. it will provide a structured framework for organizing https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 166 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and communicating key findings related to tax compliance within indonesian government institutions. 2) comprehensive literature research: a thorough review of existing literature will be conducted to establish a solid understanding of tax compliance issues, both at the global level and within the indonesian context. this literature review will inform the research and ensure that it is grounded in relevant theoretical and empirical perspectives. 3) comparative analysis: the research will incorporate comparative analysis, which involves benchmarking tax compliance practices within indonesian government institutions against those in other relevant contexts or regions. this comparative approach will enable the identification of best practices and lessons learned from similar situations. 4) qualitative approach: the study will employ a qualitative research approach to gain nuanced insights into the inhibiting factors affecting tax compliance. qualitative data collection techniques, such as interviews and surveys, will be utilized to capture in-depth perspectives and experiences related to tax compliance within government institutions. 5) secondary data collection: historical data related to tax compliance within indonesian government institutions will be collected as part of the research. this secondary data will include tax records, legislative changes, compliance rates, and historical events that have shaped tax compliance practices over time. 6) historical data analysis: within the qualitative approach, there will be a specific emphasis on historical data analysis. this entails a detailed examination of past tax records and historical context to uncover patterns and trends in tax compliance behavior and its evolution. by combining these research methods, the study can provide a comprehensive and nuanced analysis of tax compliance issues within indonesian government institutions. it allows for a holistic exploration of the inhibiting factors and their impact on government revenue, income inequality management, and broader development goals (eichner & pethig, 2018). additionally, the qualitative and historical data components offer a rich qualitative context that complements quantitative analysis, providing a well-rounded understanding of the subject matter (hsu & liu, 2023a). ultimately, this research methodology is designed to produce valuable insights and recommendations that can inform policymakers, tax authorities, and government officials in their efforts to enhance tax compliance and support sustainable economic development in indonesia. result and discussion 1. theoretical framework the theoretical framework for this research on "enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors" draws from various economic, behavioral, and institutional theories to provide a comprehensive lens for understanding tax compliance issues within government institutions (hsu & liu, 2023b). here are the key components of the theoretical framework: https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 167 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no theoretical framework components description and relevance 1 tax compliance theories a. rational choice theory individuals, including government officials, make decisions based on cost-benefit analysis. relevant for understanding how costbenefit perceptions influence tax compliance among government treasury officials. b. social norms theory social norms shape behavior. investigates the impact of societal expectations and peer pressure on tax compliance practices within government institutions. c. psychological theories examines cognitive and emotional factors (e.g., attitudes and motivations) that influence tax compliance decisions of government treasury officials. 2 institutional theories a. new institutional economics (nie) focuses on how institutions, including government structures and regulations, impact economic behavior. relevant for understanding the institutional factors affecting tax compliance in government institutions. b. principal-agent theory explores the relationship between principals (government) and agents (government officials) and its impact on tax compliance behavior. addresses information asymmetry and incentives. 3 behavioral economics a. nudge theory behavioral interventions, like nudging, can improve tax compliance. investigates the potential of behavioral strategies to enhance compliance among government officials. b. anchoring and framing effects how tax compliance issues are presented and framed influences decision-making. examines the role of cognitive biases in tax compliance. 4 historical perspective a. historical analysis incorporates historical events and policy changes to understand the evolution of tax compliance practices within indonesian government institutions over time. https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 168 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions tax obligations in indonesian government institutions tax compliance in indonesia the contribution of tax obligations by government institutions mitigation strategies inhibiting tax compliance in government institutions this research will elucidate the theoretical framework, which can be outlined as follows: 2. tax obligations in indonesian government institutions tax obligations within indonesian government institutions encompass a set of crucial financial responsibilities that must be fulfilled by these government entities to support governmental functions and contribute to the country's development (kraemer & lehtimäki, 2023). here is a summary of the provisions related to tax obligations within indonesian government institutions: 1) the law number 6 of 1983 concerning general provisions and taxation procedures as well as law number 7 of 2021 concerning tax regulation harmonization regulate several crucial aspects related to the taxation system in indonesia. article 1 number 2 of these laws defines taxpayer as including individuals or entities, including tax payers, tax with holders, and tax collectors, who have rights and obligations in accordance with tax regulations. in this context, taxpayers play a vital role in the taxation process. 2) article 4 stipulates that taxpayers must correctly, completely, clearly, and sign the notification letter. this underscores the importance of accurate completion and submission of tax documents to ensure proper tax compliance. 3) article 3 paragraph (3c) grants the minister of finance the authority to set the deadlines and procedures for reporting, withholding, and collecting taxes by government treasurers and certain entities. this reflects efforts to ensure that tax reporting and collection are conducted regularly and in accordance with the rules. https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 169 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4) in the context of administrative sanctions, article 7 paragraph (1) imposes fines if the notification letter is not submitted within the specified timeframe or extended deadline. these fines vary depending on the type of notification letter and serve as a means to encourage tax compliance. 5) article 12 paragraphs (1), (2), and (3) explain the obligation of taxpayers to pay the owed taxes in accordance with tax regulations, without having to wait for a tax assessment letter. however, if there is a discrepancy between the amount of tax owed according to the notification letter and the actual situation, the director general of taxation has the authority to determine the correct amount of tax owed. 6) according to article 9, paragraph (1), the minister of finance has the authority to determine the due date for the payment and deposit of outstanding taxes for a specific tax period. this deadline is no later than 15 (fifteen) days after the tax should have been paid or after the end of the respective tax period. 7) article 9, paragraph (2a), explains that if the payment or deposit of taxes is made after the predetermined due date, the party involved will incur an administrative penalty in the form of interest. the interest rate per month is determined by the minister of finance and is calculated from the due date of payment until the actual payment date. this penalty can be imposed for a maximum period of 24 (twenty-four) months, with any portion of a month counted as a full month. 8) article 10, paragraph (1), stipulates that taxpayers are obligated to pay or deposit the outstanding taxes using a tax payment letter to the state treasury through the designated payment location as specified by the ministry of finance. 9) the minister of finance regulation number pmk-231/pmk.03/2019 concerning the procedures for registration and removal of taxpayer identification numbers, confirmation and revocation of confirmation of taxable entrepreneurs, as well as the withholding and/or collection, deposit, and reporting of taxes for government institutions, and pmk number pmk-59/pmk.03/2022 stipulate several key aspects regarding tax-related procedures for government institutions, article 23 paragraph (1) mandates that both central and regional government institutions are required to remit income tax (pph) and value added tax (ppn) or value added tax and luxury goods sales tax (ppnbm) that have been withheld and/or collected within a specified period following the payment, either through the cash account mechanism in accordance with tax regulations or on the same day as the payment through the direct mechanism as per tax regulations. 10) article 25 paragraph (1) requires government institutions to report the withholding and/or collection of taxes carried out during a tax period to the tax office where the government institution is registered. 11) as detailed in article 25 paragraph (2), this reporting should be done using the periodic notice of pph article 21 and/or pph article 26 for the withholding of pph from individual taxpayers, or by utilizing a unified periodic notice for government institutions, covering the withholding and/or collection of pph and ppn related to government expenditures. 12) lastly, article 25 paragraph (3) specifies that the reporting of the periodic notice, as mentioned in (2) a) and b), must be completed within a maximum of 20 (twenty) days after the end of the tax period. https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 170 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the aforementioned provisions, we hereby provide a summary of the deposit and reporting regulations for government institutions: types of taxes types of tax forms penalty for late submission of periodic tax returns withholding and remittance date penalty for late payment reportin g deadline cash disburseme nt mechanism direct payment mechanis m income tax article 21 monthly income tax return article 21 idr100.000 within 7 (seven) days from the date of payment on the same day as the payment is made administrativ e sanctions in the form of interest at the monthly interest rate determined by the minister of finance, calculated from the due date of payment until the payment date within a maximu m of 20 days after the end of the tax period income tax article 22 unified governm ent institution monthly tax return idr100.000 income tax article 23 idr100.000 income tax article 4 (2) idr100.000 income tax article 15 idr100.000 vat idr500.000 https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 171 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. tax compliance in indonesia tax compliance in indonesia refers to the degree to which individuals and businesses in the country adhere to tax laws and regulations by accurately reporting their income, expenses, and financial activities and paying the required taxes in a timely manner (firmansyah & wijaya, 2022). it is a critical aspect of the country's tax system and plays a vital role in generating government revenue, supporting public services and infrastructure, and ensuring economic stability. in mid-january 2023, the director general of taxation at the ministry of finance, suryo utomo, announced that the compliance rate of the public or taxpayers in reporting annual tax returns (spt) and paying taxes throughout 2022 had reached 83.2%. although this figure decreased compared to the 84.07% achieved in 2021, it still exceeded the set target of 80% (rosadi, 2015). the target for annual spt in 2022 was set at 19 million taxpayers, consisting of 1.65 million corporate taxpayers and 17.35 million individual taxpayers (direktorat jenderal pajak, 2022). with a compliance rate of 83.2%, this means that approximately 15.8 million tax returns were filed in 2022. the compliance ratio is calculated by comparing the number of annual income tax (pph) returns received in a specific tax year with the number of registered taxpayers required to submit spt at the beginning of the year. tax compliance is of utmost importance in indonesia for various compelling reasons. firstly, it serves as a primary source of revenue for the government, funding an array of critical public services, development projects, and essential social welfare programs (iswahyudi, 2021). this https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 172 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial inflow is indispensable to maintain the government's fiscal health, ensuring that it can meet its financial commitments, service debts, and effectively manage budget deficits, thereby contributing to fiscal stability (diamond & saez, 2011). furthermore, robust tax compliance plays a pivotal role in fostering a conducive business environment, which is essential for economic growth. when individuals and businesses have confidence that tax laws are administered fairly and transparently, it encourages investment, stimulates economic expansion, and promotes overall prosperity (irawan, 2019; republik indonesia. 2021. peraturan menteri keuangan republik indonesia nomor 59/pmk.03/2022 tentang perubahan atas peraturan menteri keuangan nomor 231/pmk.03/2019 tentang tata cara pendaftaran dan penghapusan nomor pokok wajib pajak, pengukuhan dan pencabutan pengukuhan pengusaha kena pajak, serta pemotongan dan/atau pemungutan, penyetoran. dan pelaporan pajak bagi instansi pemerintah., n.d.). additionally, taxation can be leveraged as a tool for wealth redistribution, aiming to reduce income inequality by collecting a larger share of revenue from those with higher incomes. this equitable distribution of the tax burden is a crucial aspect of social and economic justice (puspitasari, 2017). moreover, tax revenue is the lifeblood of public services, encompassing vital areas such as healthcare, education, infrastructure development, and social safety nets (nursalam, 2017). these services collectively enhance the well-being and quality of life for indonesian citizens, underlining the significance of tax compliance in sustaining them (adi, 2020). lastly, in an increasingly interconnected global economy, adhering to international tax compliance standards is essential for indonesia's international economic relations and maintaining a positive reputation on the world stage. in summary, tax compliance in indonesia is not merely a legal obligation but a cornerstone of economic stability, social welfare, and international credibility (mitchell, 2020). efforts to enhance tax compliance in indonesia include simplifying tax regulations, improving tax collection processes, raising awareness about tax obligations, and implementing penalties for noncompliance. these measures aim to ensure that individuals and businesses fulfill their tax responsibilities accurately and on time, ultimately benefiting the nation's development and welfare (ngwaba & azizi, 2020). 4. the contribution of tax obligations by government institutions government treasurers play a vital role in managing the finances of both the central government, responsible for the state budget (apbn), and local government treasurers, responsible for regional revenue and expenditure budgets (apbd). these treasurers are obligated to adhere to taxation laws. taxes collected by government treasurers from both apbn and apbd expenditures constitute a crucial component of strategic tax revenue supporting national development. https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 173 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to drive an increase in tax realization from government expenditures and enhance tax compliance among government treasurers, the ministry of finance issued regulation of the minister of finance of the republic of indonesia number 231/pmk.03/2019 concerning procedures for registration and cancellation of taxpayer identification numbers (npwp), confirmation and revocation of taxable entrepreneurs (pkp), as well as tax deduction and/or collection, deposit, and tax reporting for government institutions. this regulation came into effect on may 1, 2022. the minister of finance's regulation also includes guidelines on tax deduction and/or collection by government institutions related to government expenditures and revenue, along with procedures for tax deposit and reporting by government institutions (republik indonesia. 2021. peraturan menteri keuangan republik indonesia nomor 59/pmk.03/2022 tentang perubahan atas peraturan menteri keuangan nomor 231/pmk.03/2019 tentang tata cara pendaftaran dan penghapusan nomor pokok wajib pajak, pengukuhan dan pencabutan pengukuhan pengusaha kena pajak, serta pemotongan dan/atau pemungutan, penyetoran. dan pelaporan pajak bagi instansi pemerintah., n.d.). the implementation of this regulation has streamlined the administration of taxpayer identification numbers (npwp) managed by government treasurers, limiting opportunities for government treasurers to evade tax obligations. furthermore, increasing tax revenue originating from government treasurers can also be achieved by improving their tax compliance. according to harjowiryono (2019), the tax compliance of government treasurers is influenced by four main factors: knowledge of taxation, attitudes towards tax obligations, the quality of tax services, and the ease of using tax applications (suranta, 2018). if these factors continue to be enhanced and receive attention from the directorate general of taxes (djp) and other relevant parties, it will promote increased tax compliance among government treasurers in fulfilling their tax obligations (lee, 2019). in an ideal scenario, the process of tax collection from government treasurers, who hold prominent roles as public servants, should ideally be executed with ease, resulting in maximum outcomes. however, practical implementation often presents a range of challenges that impede the realization of optimal tax revenues from government treasurers. examining tax revenue data spanning the years 2021 to 2023, we can observe the following regarding the realization of tax revenue in apbn report: revenue sources finance realized state revenue (billion rupiah) 2021 2022 2023 (outlook) i. revenue 2,006,334 2,435,867 2,443,183 tax revenue 1,547,841 1,924,938 2,016,924 domestic taxes 1,474,146 1,832,328 1,960,583 income tax 696,677 895,101 935,069 value added tax and luxury goods sales tax 551,901 680,741 740,054 land and building tax 18,925 20,904 31,311 https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 174 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc acquisition of rights to land and building tax excise tax 195,518 224,2 245,45 other taxes 11,126 11,381 8,7 international trade taxes 73,695 92,61 56,341 import duties 39,123 43,7 47,529 export tax 34,573 48,91 9,013 non-tax revenue 458,493 510,93 426,259 natural resource revenue 149,489 218,493 188,745 revenue from separated state wealth 30,497 40,405 44,068 other non-tax revenue 152,504 149,013 110,43 revenue from public service agencies 126,003 103,018 83,016 ii. grants 5,013 1,011 409 total 2,011,347 2,436,878 2,443,592 5. mitigation strategies inhibiting tax compliance in government institutions the factors influencing tax revenue collection by government treasurers, both at the central and regional levels, are highly relevant to current taxation issues in indonesia (anderson, 2023). some recent issues that can be linked to these factors include: 1) tax compliance improvement: in an effort to address budget deficits and fund various national development programs, the indonesian government is increasingly focused on enhancing tax revenue collection. hence, issues related to tax compliance among government treasurers become crucial (satyadini et al., n.d.). factors such as a poor understanding of tax regulations and challenges in using tax-related applications can impede the government's efforts to boost tax revenue. 2) technology adoption in taxation: the indonesian government continues to develop information technology-based tax systems. issues related to the information technology proficiency of government treasurers necessitate training and skill development in effectively managing tax applications. this relates to the modernization of taxation and the drive for efficiency in tax collection (saragih et al., 2022). 3) integration of central and regional tax systems: issues regarding the integration of tax systems between the central and regional governments are also critical. poor integration can lead to potential tax revenue losses, especially in regional budget expenditure (rahman, 2020). 4) education and training for government treasurers: this issue pertains to improving the quality and competence of government treasurers regarding tax regulations (eichner & pethig, 2018). enhanced training and relevant educational programs can help improve their understanding of ever-evolving tax regulations. by identifying and addressing these factors, the government can enhance tax collection efficiency, reduce potential tax revenue losses, and support sustainable national development. here is a table https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 175 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc depicting the cause-and-effect relationships between factors influencing tax compliance in government institutions and the corresponding mitigation strategies: factors influencing tax compliance cause-and-effect relationship mitigation strategies knowledge of government treasurers inadequate knowledge may reduce tax compliance. tax education and training to enhance tax understanding. application systems difficulty in using tax applications can lead to errors. efficient technology use and training in application usage. supervision and auditing stringent supervision and auditing can encourage compliance. regular supervision and auditing. penalties strict penalties can serve as additional incentives. appropriate penalties for tax violations. technology use of information technology can simplify tax reporting. leveraging information technology for more efficient tax processes. transparency and accountability a culture of transparency can enhance tax obligation fulfillment. cultivating a culture of transparency and accountability within the institution. management support management support can prioritize tax compliance. engaging active support from top-level management. tax consultation tax consultation can prevent errors or tax mismatches. providing access to consult with tax authorities. this table illustrates how each factor affecting tax compliance in government institutions is linked to compliance levels and the appropriate mitigation strategies for each factor. conclusion in order to enhance tax compliance in indonesian government institutions, this study has identified several inhibiting factors and formulated appropriate mitigation strategies. these factors include a lack of understanding of tax regulations, difficulties in using tax applications, and challenges related to information technology proficiency (crocker et al., 2022). to address these barriers, mitigation https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 176 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc efforts such as tax education and training, efficient use of information technology, strict supervision and auditing, appropriate penalties for tax violations, increased transparency and accountability, top-level management support, and access to tax consultation are needed. in conclusion, tax compliance in indonesian government institutions is of paramount importance for the country's economic stability, development, and overall welfare. this article has highlighted several key points: 1) tax compliance is crucial for generating government revenue, supporting public services, and ensuring fiscal stability. 2) enhancing tax compliance among government treasurers is essential, as they play a pivotal role in managing the finances of both the central government and local governments. 3) recent efforts to improve tax compliance include streamlining tax regulations, improving tax collection processes, raising awareness about tax obligations, and implementing penalties for non-compliance. 4) factors influencing tax compliance among government treasurers include knowledge gaps, challenges in using tax applications, issues related to information technology proficiency, integration of tax systems, and the need for education and training. 5) mitigation strategies for these factors include tax education and training, efficient technology use, regular supervision and auditing, appropriate penalties, leveraging information technology, fostering transparency and accountability, engaging top-level management support, and providing access to tax consultation. addressing the inhibiting factors of tax compliance in government institutions is essential to maximize tax revenue collection, support sustainable economic development, and ensure the efficient allocation of resources in indonesia. implementing these mitigation strategies can contribute to achieving these goals and promoting a culture of tax compliance within government entities (herawaty, 2021). improving tax compliance in indonesian government institutions is a crucial step in supporting economic stability, national development, and the general welfare. by identifying inhibiting factors and implementing suitable mitigation strategies, it is hoped that government institutions can be more effective in fulfilling their tax obligations (rosadi, 2015). these efforts will have a positive impact on tax revenue, sustainable economic development, and efficient resource allocation in indonesia. thus, the role of tax compliance in government institutions is not only a legal obligation but also a foundation for economic stability, social welfare, and international credibility. regarding the research titled "enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors," here are the answers to the three research questions posed: 1) research question 1: what are the primary factors inhibiting tax compliance in indonesian government institutions, and how do these factors affect the government's ability to support sustainable economic growth and reduce poverty levels? https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 177 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the primary factors inhibiting tax compliance in indonesian government institutions include a lack of understanding of tax regulations, difficulties in using tax applications, corrupt practices, and challenges related to information technology proficiency (hadipryanto et al., 2023). the impact of these factors is a reduction in state revenue, which can directly affect the government's capacity to support sustainable economic growth and reduce poverty levels. additionally, the decrease in revenue can hinder the government's ability to provide essential public services to address poverty-related issues. 2) research question 2: to what extent do the impacts of these factors inhibiting tax compliance affect significant state revenue, effective income inequality management, and the achievement of other national development goals already attained by the indonesian government? the impacts of the factors inhibiting tax compliance have a significant effect on state revenue. non-compliance with tax obligations can lead to a substantial loss of revenue, directly impacting the government's ability to fund various national development programs and effectively manage income inequality (rosadi, 2015). the reduction in revenue can also impede the achievement of national development goals that the indonesian government has already attained, including improving social welfare, reducing poverty, and managing income inequality (indradi, 2023). 3) research question 3: what effective mitigation strategies can be proposed to address the factors hindering tax compliance within government institutions, with the aim of enhancing the government's role in supporting sustainable development, including improving social welfare, reducing poverty, and managing income inequality? to address the factors hindering tax compliance within government institutions, several effective mitigation strategies can be proposed: a) tax education and training: providing tax education and training to government employees to enhance their understanding of tax regulations. b) efficient technology use: encouraging the efficient use of information technology in tax administration to streamline tax reporting and payment processes. c) stringent supervision and auditing: conducting rigorous tax supervision and auditing to ensure compliance and penalize tax violations. d) appropriate penalties: imposing suitable and effective penalties for tax violations to incentivize compliance. e) transparency and accountability: increasing transparency in the tax system and ensuring accountability in the use of tax funds. f) top-level management support: garnering full support from top-level management in efforts to improve tax compliance. g) access to tax consultation: providing easy access to tax consultation services for taxpayers. https://www.ilomata.org/index.php/ijtc enhancing tax compliance in indonesian government institutions: identifying and mitigating inhibiting factors silalahi 178 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by implementing these strategies, it is anticipated that the government can enhance tax compliance within its institutions, thereby supporting sustainable development, improving social welfare, reducing poverty, and effectively managing income inequality in indonesia.(artz, 2010) reference adi, a. , & n. d. 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(2018). tax compliance of government institutions: a study on tax compliance factors and their impact on tax revenues. international journal of scientific and research publications, 8(10), 399–404. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 519-534 519 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes metyria imelda hutabarat1, tetty widiyastuti2, duffin3, nelly ervina4 1politeknik unggulan cipta mandiri, indonesia 2stie kesuma negara blitar, indonesia 3institut bisnis informasi teknologi dan bisnis, indonesia 4sekolah tinggi ilmu ekonomi sultan agung, indonesia correspondent: metyriaimelda@gmail.com1 received : march 2, 2024 accepted : april 19, 2024 published : april 30, 2024 citation: hutabarat, m, i., widiyastuti, t., duffin., ervina, n. (2024). analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes. ilomata international journal of tax and accounting, 5(2), 519-534. https://doi.org/10.61194/ijtc.v5i2.1170 abstract: improving community welfare can be achieved by improving the performance of small and medium scale businesses because msmes can be a forum for the majority of society to meet their needs. this research aims to analyze the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes. this research was descriptive research. this research is classified as quantitative research by utilizing data obtained from 100 respondents consisting of msme units. the data collection stage was carried out with instruments in the form of questionnaires and tests. the results of the analysis show that the ability to prepare financial reports, financial literacy, and financial inclusion partially have a positive and significant influence on the financial performance of msmes. another interesting finding is that the analysis carried out simultaneously shows that the ability to prepare financial reports, financial literacy, and financial inclusion have simultaneously significant positive influence on the financial performance of msmes in medan city. the results of this research are very important for assessing the situation and future prospects of msmes in this country. the implications of this research encourage the development of strategies and policies that can improve the ability to prepare financial reports, optimize financial literacy, financial inclusion and encourage msme financial management behavior so that it can improve the financial performance of msmes, which in turn will improve the welfare and sustainable growth of the msme sector. keywords: financial reports, inclusion, literacy, performance this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:metyriaimelda@gmail.com https://doi.org/10.61194/ijtc.v5i2.1170 analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 520 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction improving the economic welfare of society can be achieved through various efforts. one way is to improve the performance of small and medium scale businesses or better known as msmes which can be a forum for the majority of society to meet their needs. improving the economic welfare of society can be achieved through various efforts. one way is to improve the performance of small and medium scale businesses or better known as msmes which can be a forum for the majority of society to meet their needs. the msme sector has a fairly large role, strongly supporting economic development (saskia & yulhendri, 2020). the ministry of cooperatives and smes (kemenkop ukm) recorded complete data on msmes in 2022, there were 9.09 million micro, small and medium enterprises (msmes) in this country. during the c19 pandemic, many people around the world, including indonesia, experienced economic difficulties, including experiencing unemployment and layoffs, people's income decreased drastically, as well as difficulties in accessing finance, etc. until now, the government continues to make efforts to overcome employment problems. one medium that can be used as a solution to deal with this is creating jobs independently by forming new entrepreneurs through the msme program (ilarrahmah & susanti, 2021; meiwanto doktoralina et al., 2018; sujana et al., 2020). although in general, msmes often experience delays in their development because msmes tend to have a short-term orientation (hilmawati, 2021). the ministry of cooperatives and smes noted that the contribution of msmes reached 61% of indonesia's gdp, with labor absorption 97% of the total national labor absorption in 2023. the number of business actors in the msme sector was recorded at 67 million. this research aims to get an overview of the situation of msmes after the c19 pandemic specifically in medan city. medan city was chosen with the consideration that medan city experienced quite significant growth in msmes before the pandemic. the city of medan experienced quite a big impact due to the economic crisis of the c19 pandemic, the increase in msmes is increasing very quickly in the city of medan (damayanti et al., 2022). to encourage economic improvement and growth, it is necessary to promote and develop msmes (hutabarat, judijanto, et al., 2023) and optimize the existence of msmes (pardede & trimurni, 2023). before the c19 pandemic, the number of micro, small and medium enterprises (msmes) in medan city was quite significant. based on data from the medan city cooperatives and smes service, in 2019, there were around 41,000 msmes spread across various sectors such as trade, processing industry, services and others. the important role of msmes in medan in the local economy can provide employment opportunities and contribute to regional income. during the c19 pandemic, many msmes in medan city experienced difficulties, and some were even forced to close temporarily or permanently, resulting in a decline in msmes. this brings big challenges. however, not all msmes experienced a decline. however, not all msmes experienced a decline. several msmes demonstrated resilience and adaptability in facing crisis situations, and succeeded in adapting to new situations through innovation and digitalization. so there are 38,343 msmes registered in the medan city msme cooperative and msme data collection system (simdakop) application based on final data for 2022. https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 521 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research aims to analyze the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes. the results of this research are very important for assessing the situation and prospects of msmes in medan city. this research was descriptive research. this research is classified as quantitative research by utilizing data obtained from 100 respondents consisting of msme entrepreneurs. the data collection stage was carried out with instruments in the form of questionnaires and tests (kim et al., 2022; umar et al., 2018). the financial performance of msmes still needs to be considered due to the many challenges. this needs to be considered so that the financial performance of msmes increases in the city of medan. most msmes also feel that their business is running well and normally. in reality, many msmes are not developing well (munthay & sembiring, 2024). lack of training and skills development for msme workers results in low productivity and service quality. some msme entrepreneurs only prioritize operational activities, and focus on ways to increase sales by increasing sales inventory without the ability to prepare financial reports. the ability to prepare financial reports is very important for micro, small and medium enterprises (msmes). with good financial reports, msmes can evaluate the financial performance of an msme, make more appropriate business decisions, and ensure business sustainability. some of the main benefits of preparing financial reports for msmes are monitoring financial performance through profit and loss reports, balance sheets, better decision making, measuring business growth, and measuring business growth. financial knowledge is still minimal. so many msmes in medan city still operate with thin profit margins due to high operational costs and competition. whether we realize it or not, there is intense competition in competition with large companies and other msmes. this was discovered by finding that the educational background of several msme employees was not optimal. there are msme owners who do not realize the importance of investing in employee self-development as human resources. financial performance requires msmes to continue to innovate and improve the quality of products and services. without the right strategy, msmes will be unable to compete. however, in terms of market share percentage, many msmes have succeeded in controlling certain industries. increasing market share shows good performance in facing competition. msmes that have good access to external financing such as bank loans or venture capital usually have more stable financial performance. the financial performance of msmes has several indicators such as net profit, liquidity,solvency, operational efficiency and profitability (putri et al., 2023). improving the performance of msmes can be hampered by problems in accounting and management, forgetting to record transactions, especially at the stage of preparing financial reports, because they often focus on business operational activities (ilarrahmah & susanti, 2021). the financial performance in question is the sum total of the work carried out and how it compares with the work results, targets, targets or criteria for changing business entities and other assets that have been determined and mutually agreed upon (ahmad et al., 2023). developing the performance of msmes is not an easy thing to do, the difficulty in measuring performance is a problem for entrepreneurs in evaluating https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 522 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance. this is because msme entrepreneurs focus a lot on their operational activities so that accounting records and financial reporting are often neglected (whetyaningtyas & mulyani, 2016). the performance achieved will certainly support the company's financial development and national economic growth (hutabarat, 2021). business performance can be known periodically, making it easier to evaluate and make business decisions (piter et al., 2024). good financial performance shows that msmes are able to generate stable profits, manage debt well, and have a strong financial position (sofyan, 2017). the ability to prepare financial reports possessed by msme actors in this research is more emphasized on intellectual ability (whetyaningtyas & mulyani, 2016). the ability to prepare financial reports referred to in this research is intellectual ability, with the level of intelligence differentiates a person's way of solving work problems, which can best be demonstrated by his intellectual abilities, because he has the agility to develop his own skills. therefore, an entrepreneur who is able to make financial reports correctly will ultimately result in increasing business achievements (ilarrahmah & susanti, 2021). msme financial literacy is the understanding and skills needed by msme owners or managers to manage the financial aspects of their business well. msme financial literacy is very important because it can help them in making wise decisions, managing financial resources and sustainable business growth (putri et al., 2023). financial literacy is knowledge in applying understanding, a person's ability to measure financial concepts and risks, skills to be able to make effective decisions in a financial context so that financial management is carried out in accordance with good accountability principles and has an influence on improving financial well-being, both individual and social, and can participate in the community environment. financial literacy is an important part of a person's life because it allows a person to make the right financial decisions (hartina et al., 2023). financial literacy is knowledge in applying one's understanding and abilities who can measure financial concepts and risks, skills to be able to take effective decisions in a financial context so financial management is carried out in accordance with the principles of good accountability and has influence in increasing financial well-being, both individual and social, and being able to participate in the community environment (triana & syera, 2023). the financial literacy index in 2022 is projected to be only 49.68%, according to the findings snlik (2022) (national survey of financial literacy and inclusion) means the low level of public understanding of using financial services or services which causes unstable and undeveloped business conditions. this is a current phenomenon, business people are often faced with various problems (ahmad et al., 2023). even though it has a larger number of msmes than several other countries, indonesia is a country with a relatively low level of financial literacy. financial literacy is knowledge and understanding of various financial fields. lack of financial literacy can cause a person to make inappropriate decisions and can even have negative consequences on a person's financial well-being (ilarrahmah & susanti, 2021). financial literacy is a person's understanding and ability to manage personal or business finances well. meanwhile, msmes are a business sector that plays an important role in a country's economy. the influence of financial literacy on the financial performance of msmes can be very significant (putri et al., 2023). https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 523 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc apart from financial literacy, another factor that can influence financial performance is financial inclusion. to increase the number of msmes, there is a need for guidance to support the performance of msmes by providing an understanding of financial literacy and financial inclusion (fajri et al., 2021). the financial inclusion index in 2022 is projected to reach 85.10%, according to the findings of snlik (2022) (national survey of financial literacy and inclusion) (ahmad et al., 2023). financial inclusion is an effort to ensure that diverse individuals and groups in society have access to financial services that are meaningful, affordable and appropriate to their needs. financial inclusion aims to reduce financial inequality and increase public participation in the financial system, including banking, insurance, investment and other financial services. this is a concept that encourages financial access for all, regardless of income level, geographic location, or social background (yanti, 2019). the implementation of financial inclusion will open up access for poor people who do not have collateral, do not have permanent, trustworthy work, and are unable to obtain credit to financial services including savings, credit, payments and insurance (lumenta & worang, 2019). the financial inclusion strategy is not an isolated initiative, so involvement in financial inclusion is not only related to the duties of indonesian banks, but also regulators, ministries and other institutions in efforts to provide financial services to the wider community (mali, 2023). financial inclusion means that individuals can freely enter to a good financial institution by considering things like accuracy time, comfort, security and smoothness (fauziah et al., 2024). financial inclusion aims to reduce financial disparities that may exist between groups in society. by allowing more people to participate in the financial system, financial inclusion can help reduce inequality. financial inclusion can increase the economic independence of individuals and families (putri et al., 2023). this research is important to carry out because we want to improve the financial performance of msmes, increasing managerial capacity, namely the ability to prepare financial reports, is an important part of financial management, this research can show how access or limited access to financial services will help identify knowledge and skills gaps among msme actors, which can be used as a basis for designing more effective training and capacity building programs, can also provide insight into the extent to which financial literacy influences msme financial performance. overall, this research has the potential to make a significant contribution to economic development through improving the performance of msmes, which will ultimately have a positive impact on inclusive and sustainable economic growth. previous research conducted (alamsyah, 2020) using the dependent variable, namely financial literacy on sme financial performance. previous research in gorontalo city. the novelty of this research is adding two dependent variables, including ability to prepare financial reports and financial inclusion, so that there are three variables, namely ability to prepare financial reports, financial literacy and financial inclusion. this research was conducted on msmes from january to february 2024 in medan city. based on the background, there are research questions as follows: is the ability to prepare financial reports positive effect on the financial performance of msmes in medan city? does financial literacy have a positive effect on the financial performance of msmes in medan city? does https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 524 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial inclusion have a positive effect on the financial performance of msmes in medan city? does the ability to prepare financial reports, financial literacy and financial inclusion have a positive effect on the financial performance of msmes in medan city? thus, the aim of the research is to analyze and review the influence of ability to prepare financial reports on the financial performance of msmes in medan city. to find out the influence of financial literacy on the financial performance of msmes in medan city. another objective is determining financial inclusion on the financial performance of msmes in medan city. another interesting objective of the researcher is to investigate to find out and analyze whether there is a relationship between the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes in medan city. this research method is classified as an associative quantitative research type, namely research on causal relationships of three or more independent variables and a dependent variable to see the influence between the independent and dependent variables (ilarrahmah & susanti, 2021). the conceptual framework is a description of the variable concepts that will be used in a research, which connects the influence between the independent and dependent variables in this research which can be described in a conceptual framework (tarigan et al., 2023). based on the results of previous research and theoretical studies, the conceptual framework in this research is as follows: figure 1. conceptual framework ability to prepare financial reports and financial performance msmes msme entrepreneurs who have the ability to prepare financial reports properly in accordance with financial accounting standards will be wiser in channeling the funds they have to advance their business and become calculation data in determining how much capital must be spent and how much profit they will get (winarso & kurniawati, 2022). previous research examined by (rinofah et al., 2022) stated that the ability to prepare financial reports variable had a positive and significant influence on the financial performance variable. h1: ability to prepare financial reports positive and significant effect on financial performance msmes carried out by msme entrepreneurs msmes in medan city. ability to prepare financial reports financial literacy financial inclusion financial performance h4 h1 h2 h3 https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 525 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial literacy and financial performance msmes financial literacy is very important, msmes clearly need to learn financial literacy so they can manage their finances effectively. without good financial literacy, these msmes cannot make the right management decisions based on their financial situation (saskia & yulhendri, 2020). previous research researched by (kasendah & wijayangka, 2019) states that the financial literacy variable has a positive and significant effect on the financial performance variable. h2: financial literacy positive and significant effect on financial performance msmes carried out by msme entrepreneurs msmes in medan city. financial inclusion and financial performance msmes financial inclusion is needed by msme players to get convenience in everything business processes. one supporting factor for a business is capital (mali, 2023). previous research conducted by (ahmad et al., 2023) stated that the financial inclusion variable had a positive and significant effect on the financial performance variable. h3. financial inclusion positive and significant effect on financial performance msmes carried out by msme entrepreneurs msmes in medan city. ability to prepare financial reports, financial literacy, and financial inclusion in this research, the three variables will be carried out simultaneously and their relationship will influence the financial performance variable. h4: ability to prepare financial reports, financial literacy, and financial inclusion simultaneously positive and significant effect on financial performance msmes carried out by msme entrepreneurs msmes in medan city. research about the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes has been carried out by many previous researchers. research result by (triana & syera, 2023) showed that the influence of the ability to prepare financial reports positively wasn’t significantly on the financial performance of msmes, financial literacy is a factor that positively and significantly influences the financial performance of msmes in asahan district, but financial inclusion negative wasn’t significant on the financial performance of msmes in asahan district. besides that research result by (marini et al., 2024) that financial literacy is a factor that positively wasn’t significant influences the financial performance of msmes, financial inclusion negative wasn’t significant on the financial performance of msmes in bengkulu city. research the influence of the ability to prepare financial reports, was a factor that has a positive and significant influence on the financial performance of msmes, financial literacy was a factor that positively and significantly influences the financial performance of msmes in babat district, discovered by (ilarrahmah & susanti, 2021). further research revealed the influence of financial literacy significant positive effect on the financial performance in gorontalo city, and financial inclusion significant positive effect on the financial performance in gorontalo city found by (ahmad et al., 2023). research that the influence of financial literacy and financial inclusion significant on the financial performance in cilegon city, has been discovered by (hasanudin & rahmiyanti, 2023). research conducted (lumenta & worang, 2019) which states that financial inclusion affects financial performance. https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 526 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this research method is quantitative research, testing hypotheses using statistics in the form of numbers and analyzing descriptively. research was conducted on msmes in medan city. the population of this research is micro, small and medium enterprises in medan city who are registered on the 2022 medan city umkm simdakop application, totaling 38.343 msmes. the variables tested in the research include financial performance as the dependent variable, and financial performance, financial literacy, and financial inclusion as the independent variables. the sample selection technique uses simple random sampling technique. this technique is used because the population in this study is quite large, so with this sampling technique every member of the population has the same opportunity to become a sample. the sample size for this research was determined using the slovin formula. in quantitative research with many samples using the slovin formula. so the population is n = 38.343 assuming an error rate e (margin of error) of 10%. so the total sample that must be used in this research is as large as the slovin formula calculation: 𝑛 = n 1 + 𝑁 𝑒2 𝑛 = 38.343 1 + 38.343 (10%)2 𝑛 = 97.458 rounded to 100 so, the calculation above to find out the sample size with an error rate of 10% is as many as 97.458 which is rounded up to 100 respondents. based on the calculation results, it is known that the sample used for research is 100 msme units. this research data uses primary data. data was obtained by utilizing data obtained directly through surveys and respondents' answers to questionnaires, which were distributed directly to respondents. respondents' perceptions were measured using likert scale, consisting of five categories, namely strongly disagree (1), disagree (2), disagree (3), agree (4), and strongly agree (5). the analytical method processes data to determine validity and reliability test. multiple linear regression statistical analysis tools were used and the classical assumptions of this research were tested using data processing with the ibm spss statistics 26 program. the data analysis method used in the research is the multiple linear regression analysis method. hypothesis testing uses an individual parameter significance test tool, namely the t statistical test. at the same time, through the f test, it is also necessary to test the determinant coefficient (r2). result and discussion the results of validity testing are known in each sig result statement. (2-tailed) below 0.05 which was obtained based on the criteria rcount > rtable (0.196). so, as a result of testing the validity of this research, it is known that each statement on each variable indicator of ability to prepare https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 527 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial reports, financial literacy and financial inclusion on financial performance meets the criteria for valid data. reliability testing was carried out using cronbach alpha, in order to determine the reliability of the statements of the entire questionnaire. table 1. reliability test variable cronbach's alpha description financial performance 0.602 reliabel ability to prepare financial reports 0.722 reliabel financial literacy 0.795 reliabel financial inclusion 0.610 reliabel source: data processed (2024) this test shows cronbach alpha result for the financial performance variable of 0.602. the ability to prepare financial reports variable is 0.722 and the financial literacy variable is 0.795 and financial inclusion is 0.610. each cronbach alpha value is ≥ 0.600 so the questionnaire is said to be consistent. so it can be concluded that if it meets cronbach alpha credibility, it is declared reliable. test the classic assumption of data normality using the one-sample kolmogorov-smirnov test. table 2. normality test results asymp. sig. (2-tailed) description model 0.200 normally distributed source: data processed (2024) the test results obtained sig. probability, namely the asymp value statistic. get a sig of 0.200 > 0.05 so the results obtained prove that the research data here is normally distributed. the multicollinearity test which aims to determine the relationship between the regression models is in the research, namely if the vif < 10 and the tolerance value > 0.1 then multicollinearity does not occur (hutabarat, silalahi, et al., 2023). table 3. multicollinearity test results variable colinearity statistics tol. vif description ability to prepare financial reports 0.837 1.194 no multicollinearity financial literacy 0.802 1.247 no multicollinearity financial inclusion 0.858 1.166 no multicollinearity source: data processed (2024) https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 528 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this multicollinearity test finds the tolerance value for the ability to prepare financial reports is 0.837 followed vif 1.194. meanwhile, the financial literacy is the tolerance value is 0.802 followed vif 1.247. the tolerance value for the financial inclusion is 0.858 followed vif 1.166. based on these results can be seen that each tolerance value variables above are > 0.1 and vif are less than 10. so it can be concluded that there is no multicollinearity on the research model. statistical analysis of the research was also carried out by the heteroscedasticity test using the glejser breusch-pagan test. a significance probability greater than 0.05 is required. table 4. heteroscedasticity test results variable sig. description ability to prepare financial reports 0.065 no heteroscedasticity financial literacy 0.765 no heteroscedasticity financial inclusion 0.983 no heteroscedasticity source: data processed (2024) in the current test results, the ability to prepare financial reports is 0.065, the financial literacy is 0.765, and the financial inclusion is 0.983. there is no heteroscedasticity. multiple linear regression analysis analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance can be explained through multiple linear regression tests. multiple regression analysis was performed in order to analyze the current research hypothesis submission. the results of the multiplication of this regression analysis were carried out using the spss 26 method. this research aims to determine the regression equation or the influence between ability to prepare financial reports (x1), financial literacy (x2), financial inclusion (x3), and financial performance (y). the results of multiple linear regression analysis can be seen in table 5. as follows: table 5. multiple linear regression analysis results coefficientsa variable b sig. (constant) 6.412 0.006 ability to prepare financial reports 0.209 0.004 financial literacy 0.140 0.001 financial inclusion 0.457 0.000 source: data processed (2024) through the results of multiple linear regression obtained, it is now known that the multiple linear regression equation with the following equation: fp = 6.412 + 0.209apfr + 0.140fl + 0.457fi + e information: https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 529 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. the constant has a value of 6.412. means, if the independent variable is not experience a change in value, then the financial performance is worth 6.412. 2. ability to prepare financial reports variable regression coefficient is 0.209. this means, ability to prepare financial reports has positive effect on financial performance. if the other independent variables do not change, then every increase of 1 unit cr, it will increase financial performance is 0.209. 3. financial literacy variable regression coefficient of 0.140. this means, financial literacy has a positive influence on financial performance. if other independent variables do not experience change in value, then each increase of 1 unit financial literacy will increase the financial performance of 0.140. 4. the regression coefficient of the financial inclusion variable is 0.457. that is, financial inclusion has positive influence in the financial performance. if other independent variables do not experience change in value, then each increase of 1 unit financial inclusion will increase the financial performance of 0.457. hypothesis testing test the hypothesis when this research is carried out by t test and f test. partial test (t test) based on the results of the t test, and testing the hypothesis is as follows: 1. ability to prepare financial reports have significant to the financial performance. it can be seen that ability to prepare financial reports have significant value of 0.004. this significance value is less than 0.05. so can be concluded that ability to prepare financial reports is significant on the financial performance. 2. financial literacy have significant to the financial performance. it can be seen that financial literacy have significant value of 0.001. this significance value is less than 0.05. so concluded that financial literacy is significant on the financial performance. 3. financial inclusion have significant to the financial performance. it can be seen that financial inclusion have significant value of 0.000. this significance value is less than 0.05. it can be concluded that financial inclusion is significant on the financial performance. . simultaneous test (f test) simultaneous test is carried out to determine the effect of the independent variable simultaneously on the dependent variable. this is also called an anova test. table 6. simultaneous test f sig. 26.783 0.000b source: data processed (2024) https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 530 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the calculated f test was obtained at 26,783. from the results of simultaneous tests, the results were that its significant value is 0.000. significance value < 0.05. so it is known that ability to prepare financial reports, financial literacy, and financial inclusion have simultaneously significant positive influence on the financial performance. coefficient of determination analysis the determination test was carried out to find out how well the regression model was produced by the interaction between the independent variables and the dependent variable. this is shown via adjusted r squared value (r2). table 7. r square result model r square 1 0.456 source: data processed (2024) the result of r square value researched at this time were obtained at 0.456 or 45.6%. as for the ability to prepare financial reports, financial literacy, and financial inclusion variables can explain the financial performance variable on micro, small and medium enterprises in medan city by 45.6% while the remaining 54.4% is explained by other variables not explained in this research. the influence of ability to prepare financial reports on financial performance the results of statistical testing on the t-test show that ability to prepare financial reports has a tcount value of 2.992 with a significance level of 0.004 < 0.05, which means that ability to prepare financial reports affects on financial performance. the result support previous research conducted by (ilarrahmah & susanti, 2021), (whetyaningtyas & mulyani, 2016) which states that ability to prepare financial reports affects financial performance. the influence of financial literacy on financial performance the results of statistical testing on the t-test show that financial literacy has a t-count value of 3.323 with a significance level of 0.001 < 0.05, which means that financial literacy affects on financial performance. the result support previous research conducted by (ilarrahmah & susanti, 2021), (triana & syera, 2023), (hasanudin & rahmiyanti, 2023), and (ahmad et al., 2023) which states that financial literacy affects financial performance. the influence of financial inclusion the on financial performance the results of statistical testing on the t-test show that financial inclusion has a t-count value of 4.647 with a significance level of 0.000 < 0.05, which means that financial inclusion affects on financial performance. the influence of financial inclusion on the financial performance of msmes can be very positive (ahmad et al., 2023). financial inclusion refers to efforts to expand the access of individuals and businesses, including msmes, to financial services such as banking, loans, insurance and investment. the main impact of financial inclusion is to provide better access to loans and financing for msmes. the result support previous research conducted by (ahmad et https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 531 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc al., 2023), (hasanudin & rahmiyanti, 2023), (rosliyati, 2022), and (laila & sihotang, 2022) which states that financial inclusion affects financial performance. the influence of ability to prepare financial reports, financial literacy, and financial inclusion on financial performance this research has carried out simultaneous testing through the f test. the results of empirical evidence show that the ability to prepare financial reports, financial literacy, and financial inclusion together have a positive and significant effect on financial performance, carried out by msme entrepreneurs in medan city. the results of this research show that the three independent variables, namely ability to prepare financial reports, financial literacy, and financial inclusion together have a positive and significant influence on the dependent variable financial performance msme in medan city. conclusion based on the results of the analysis that has been carried out, several important conclusions have been obtained, namely that the ability to prepare financial reports partially has a positive and significant effect on the financial performance of msmes. financial literacy partially has a positive and significant effect on the financial performance of msmes in medan city. financial inclusion was found to have a partial positive and significant effect on the financial performance of msmes. another interesting finding is that the analysis carried out simultaneously shows that the ability to prepare financial reports, financial literacy, and financial inclusion have simultaneously significant positive influence on the financial performance of msmes in medan city. the implications of this research encourage the development of strategies and policies that can improve the ability to prepare financial reports, optimize financial literacy, financial inclusion and encourage msme financial management behavior so that it can improve the financial performance of msmes, which in turn will improve the welfare and sustainable growth of the msme sector. this research contributes to providing a deeper understanding of the complexity of the relationship between the ability to prepare financial reports, financial literacy, and financial inclusion and financial performance of msmes. therefore, this research suggests that the government, organizations or related institutions can develop education and training programs aimed at increasing financial literacy and the ability or skills to prepare financial reports, as well as providing efficient and adaptive financial management practices in accordance with specific needs for the development and welfare of msmes. https://www.ilomata.org/index.php/ijtc analysis of the influence of the ability to prepare financial reports, financial literacy and financial inclusion on the financial performance of msmes hutabarat, widiyastuti, duffin, and ervina 532 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference ahmad, m., noholo, s., & wuryandini, a. r. 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(2019). pengaruh inklusi keuangan dan literasi keuangan terhadap kinerja umkm di kecamatan moyo utara. jurnal manajemen dan bisnis, 2(1). https://doi.org/10.37673/jmb.v2i1.305 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 407-425 407 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies rida ristiyana1, anna sofia atichasari2, rizki abdullah3 123universitas islam syekh yusuf, indonesia correspondent: rristiyana@unis.ac.id1 received : january 25, 2024 accepted : april 3, 2024 published : april 30, 2024 citation: ristiyana, r., atichasari, a, s., abdullah, r. (2024). determinants of company value with information transparency as moderation in food beverage sector companies. ilomata international journal of tax and accounting, 5(2), 407-425. https://doi.org/10.61194/ijtc.v5i2.1112 abstract: this study aims to determine the effect of tax avoidance, company size, and leverage on company value with information transparency as moderation in food beverage sector companies listed on the idx in 2017-2021. this type of research is quantitative research and the data used is secondary data. the population in this study amounted to 72 companies and obtained research samples using the purposive sampling method amounted to 13 companies. the data analysis method used is panel data regression analysis using eviews version 10. the results simultaneously show that tax avoidance, company size and leverage affect company value. partially, tax avoidance has a positive and significant effect on company value, while company size has a negative and significant effect on company value. leverage and transparency of information do not affect company value. the results of the moderation effect prove that information transparency is not able to moderate the effect of tax avoidance on company value. on the other hand, information transparency is also unable to moderate the effect of leverage on company value. however, transparency of information can moderate by strengthening the influence of company size on company value. keywords: company value, tax avoidance, company size, leverage this is an open access article under the cc-by 4.0 license. introduction the value of the company is an important point in surviving in business competition. the value of the company is always related to investment. in making investments, potential investors must consider various things such as setting investment goals, reviewing income, debt, and assets owned and understanding the risks of the type of investment chosen (ramadhani & dewi, 2021). the composite stock price index is not static but over time stock prices experience fluctuations or changes. based on data obtained from (bps provinsi dki jakarta, 2020) it is known that the combined stock price and the consumer goods industry have decreased, but a fairly high decline in 2020 at 321 compared to 2019 and the consumer goods industry a fairly high decline was in 2019 at 561 when compared to 2018. according to (kompas.com, 2020) the decline in the composite stock price index was influenced by several factors such as the presence of diseases https://www.ilomata.org/index.php/ijtc mailto:rristiyana@unis.ac.id1 https://doi.org/10.61194/ijtc.v5i2.1112 determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 408 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that had an impact globally, namely the covid-19 outbreak and interest rate cuts by the central bank of the united states. by (kontan.co.id, 2020) the decline in the value of shares in the consumer goods industry is because the level of consumer confidence is still pessimistic. pessimistic consumer confidence is caused by economic conditions that have not improved due to the covid-19 outbreak. each company will experience various changes as experienced by pt mayora indah tbk. quoted by (kontan.co.id, 2021) in november 2021, the decline in the value of the shares was due to a decrease in net profit to 30 percent of idr 977.93 billion and an increase in the cost of goods sold to 20.43 percent of idr 14.80 trillion, resulting in a decrease in the value of myor's shares. the impact of falling stock value on pt mayora indah tbk can cause a decrease in the company's value because the company's performance value decreases. there is one way that many companies do to increase the efficiency of profits obtained by minimizing tax costs. the way taken to minimize the cost of taxes is to reduce the cost of taxes imposed. from an accounting point of view, taxes are imposed as expenses or costs that have the property of reducing the profit obtained. with this treatment, there is a deviation from the company's goal of obtaining as much profit as possible. tax avoidance plays an important role in corporate strategy because it affects increases in cash flow that change the value of the company. to reduce costs, management takes advantage of weaknesses in the law to find loopholes for tax avoidance (robby & angery, 2021a). the size of the company can describe the total of all assets owned by the company. the size of the company can provide changes to the value of the company because according to investors companies that have large total assets, the company tends to apply retained earnings greater than the distribution of dividends to shareholders so that investor interest decreases (dewantari et al., 2020a). leverage or debt is a long-term loan of funds against the total assets owned by the company. leverage in companies can change the value of the company because of the perception of investors who do not want to take risks to invest in companies that have large debt capacities (robby & angery, 2021b). the level of transparency conveyed by the company gives a different impression in the eyes of investors. the lower level of company transparency in presenting reports will make it difficult for potential investors to obtain investment decisions by assessing company performance. companies that are not transparent will get a negative response from the public so the company's value growth slows down or even decreases. based on the results of various studies, different research results such as the research conducted (ramadhani & dewi, 2021) and (nughara & setiawan, 2019) state that there is an influence between tax avoidance and company value. however, there are differences between research (pambudi & kartika, 2022a) and (silaban & l. siagian, 2020) which state that there is no influence between tax avoidance and company value. research conducted by (robby & angery, 2021b) and (muharramah & hakim, 2021a) states that there is an influence between the size of the company and its value of the company. this is contrary to research conducted by (dwiastuti & dillak, 2019a) and (hidayat, 2019a) which explains that the size of the company does not affect the value of the company. research conducted by (anggita, 2022a) and (ramadhani & dewi, 2021) gives the result that there is an intermediate influence leverage against the value of the company. however, the results of research conducted by (hidayat, 2019b) and https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 409 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (zurriah & sembiring, 2020a) are not in accordance with the results of the study. this study found that there was no intermediate influence leverage to the value of the company, and the research conducted by (rajakulanajagam & nimalathasan, 2021a) states that transparency affects the value of the company while based on research conducted by (sari & irawati, 2022a) states that transparency has no effect on the value of the company. based on the description above, this study aims to further examine the effect of tax avoidance, company size, and leverage with information transparency as moderation in sector companies food beverage listed on idx in 2017-2021. signaling theory signal theory is an idea that contains actions taken by company management to produce information in the form of company performance that will be provided by interested parties such as investors. the delivery of information or signals by company managers to interested parties can be of two types, namely signals that are positive or negative (soerzawa et al., 2018a). agency theory agency theory is a theory that describes the relationship between two parties, namely the principal and agent. the principal, namely the shareholders and agents, are the management in the company so there is a separation of ownership between the two parties. with the separation of ownership and control within a company, company management can increase personal wealth by the transfer of resources (soerzawa et al., 2018b). shareholder theory theory shareholder is an idea that focuses on both parties as stakeholders in the company, namely managers and investors. this theory explains that the responsibility of a company is not only to make the company successful but there is a responsibility that must be fulfilled, namely maximizing the welfare of shareholders or shareholders by providing maximum benefits (manullang, 2019). company value company value is a collective assessment for investors of a company's performance for decisionmaking regarding the sustainability of an investment. there is something that is very attached to the value of the company, namely the stock price. the company's share price provides an assessment of the company's value. if the stock price of a company increases, the value of the company increases (saka & istighfa, 2021). information transparency information transparency is the delivery of information related to company performance, both financial and non-financial information completely. transparency discloses material and relevant data related to the condition of the company. information transparency is very important for investors to consider in decision-making. the information presented must be reliable, meaning that each data presented contains appropriate data and occurred (sari & irawati, 2022b). https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 410 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax avoidance tax avoidance is an effort made by management to reduce taxable income through various means of tax planning both legally and illegally. tax avoidance has the aim of saving tax costs that will reduce the amount of income tax burden in the financial statements which will have an impact on increasing company profits (firmansyah & triastie, 2021). company size company size is one alternative that provides information in the form of an overview of the company's condition which is assessed based on the condition of total assets, revenue, and total capital. companies that have a high company size can be stated that the company has a high level of stability so that in its operational activities it can obtain large total assets or revenues (zhafirah et al., 2022). leverage leverage is a ratio used to measure the assets owned by a company financed by debt. the decision to use the source of funds needed by the company is the task of the financial manager because the decision of the source of funds will be used to support the investment planned by the company (hidayat, 2019b). frame of conceptual in figure 1. figure 1. frame of conceptual https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 411 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research hypotheses the effects of tax avoidance, company size and leverage on company value tax avoidance has an impact on company value because tax avoidance is an effort to efficiency of the tax burden imposed. managers will strive to minimize the burden on the company in order to obtain high profits. the higher the company's profit will increase the company's value because the company's performance has increased. this is supported by research conducted by (ramadhani &; dewi, 2021) that tax avoidance affects company value. the size of the company is one of the benchmarks for assessing the condition of the value of a company. this is because the size of the company describes the condition of the company's assets. companies that have a high asset value will be considered promising companies by the public and potential investors. this is supported by the results of research conducted by (muharramah & hakim, 2021b)stating that company size affects company value. leverage is a ratio that measures the level of debt used by companies to finance company assets to develop the company's operational activities and for other things (anggita, 2022b). leverage can affect the value of the company because behind the high use of debt on the company there will be interest costs that can reduce the tax burden imposed. this idea is supported by research (ramadhani & dewi, 2021b) which states that leverage affects company value. based on the description above, the hypotheses formulated in this study are: h1: tax avoidance, company size and leverage affect company value the effect of tax avoidance on company value tax avoidance is an action taken by companies to minimize the tax burden imposed. taxes are a source of funds needed by the state for development efforts, both infrastructure and others for the benefit of all people in the country. but on the company side, taxes are things that need to be carefully calculated. tax avoidance actions carried out by the company aim to maximize the profits obtained which will directly increase the value of the company by looking at the development of profits obtained by the company. research conducted by (nughara & setiawan, 2019b; robby & angery, 2021b) states that tax avoidance has a positive effect on company value. in this study the hypothesis is formulated as follows: h2: tax avoidance has a positive and significant effect on company value the effect of company size on company value the size of the company has a role as a benchmark to assess the company. the size of the company can be measured by looking at the number of assets acquired by the company. assets become important for the company because assets become components in the sustainability of the company's operations. the larger the size of the company, the more the value of the company increases because it describes the condition of large assets. companies that have a large asset value are easier to gain trust from various parties so the high level of public trust in the company will be easy to attract investors. research conducted by (muharramah & hakim, 2021b; robby & angery, 2021b) states that company size has a positive effect on company value. in this study the hypothesis is formulated as follows: https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 412 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3: company size has a positive and significant effect on company value the effect of leverage on company value leverage is a ratio that describes debt conditions such as the source of debt used by a company to develop company activities such as increasing fixed assets or developing company investments. leverage describes the condition of the company in managing its debt to maximize profits. companies that manage and maximize the source of debt funds appropriately such as using funds to develop production have the opportunity to increase company value. research conducted by (anggita, 2022b; ramadhani & dewi, 2021b) states that leverage has a positive effect on company value. in this study the hypothesis is formulated as follows: h4: leverage has a positive and significant effect on company value the effect of information transparency on company value the delivery of clear and complete information by the company can provide convenience to the public and potential investors for consideration in making decisions such as investment. the delivery of all forms of transparent information provides its own value benefits for companies such as avoiding conflicts caused by less informative delivery. companies that convey complete, clear, and consistent information can gain a sense of trust in the company so that investors tend to maintain their investments. research conducted by (rajakulanajagam & nimalathasan, 2021b) states that information transparency has a positive effect on company value. in this study, the hypothesis can be formulated as follows: h5: information transparency has a positive and significant effect on company value the effect of tax avoidance on company value with information transformation as a moderation variable in some studies, tax avoidance is believed to affect the value of the company. this is supported by various findings that explain tax avoidance has benefits, namely minimizing the tax burden and increasing profits obtained. however, some factors can strengthen or weaken tax avoidance efforts to increase company value, such as information transparency. transparency of information carried out by the company can provide benefits such as maintaining the trust of interested parties in the company because it discloses various information clearly and completely as a step in preventing the risk of tax avoidance practices. research conducted by (ramadhani & dewi, 2021b) states that information transparency can moderate the effect of tax avoidance on company value. based on this description, it can formulate hypotheses as follows: h6: information transparency can strengthen the effect of tax avoidance on company value the effect of company size on company value with information transformation as a moderation variable https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 413 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the size of the company can reflect the value of the company because it describes the value of the company's assets. the greater the assets owned by the company, the greater the public trust because the value of a company's assets can indicate the company's success in managing company activities. large companies tend to disclose more complete information compared to smaller companies because large-scale companies are more skilled in information disclosure. so if the company is increasingly skilled in delivering information, the company will be assessed as a company that has high credibility. research conducted (septyaningrum, 2020) states that information transparency can moderate the influence of company size on company value. based on the description above, it can formulate the hypothesis as follows: h7: information transparency can strengthen the influence of company size on company value the effect of leverage on company value with information transformation as a moderation variable leverage is something that can help to increase the value of the company because the company gets additional sources of funds derived from debt that will be used to develop company operations. if the company can manage debt properly, then the company has a greater chance of success than before. a high level of company transparency will encourage investor confidence because it has disclosed various reports so that investors will maintain their investment in the company and this can minimize the risk resulting from the level of leverage owned by the company. based on research conducted by (ramadhani & dewi, 2021b) states that information transparency can moderate the influence of leverage on company value. based on the description above, it can formulate the hypothesis as follows: h8: corporate transparency can strengthen the effect of leverage on company value. method the type of research data used in this study is quantitative research using secondary data. in this study, the population used was sector manufacturing companies food beverage listed on the indonesia stock exchange (idx) from 2017 to 2021. the total population used is 72 companies. this can be obtained by accessing the data available on the official website of the indonesia stock exchange (www.idx.co.id). the sampling technique used in this study is the method of nonprobability sampling by technique purposive sampling. purposive sampling is a sampling technique by sets various criteria as conditions that must be met from the number of populations used. after using the purposive sampling method to determine the number of samples used, a research sample of 13 companies from a research population of 72 companies was obtained. the data analysis technique uses panel data regression by first looking for a suitable model estimate using the chow test. hausman test and langrange multiplier test. after that, proceed with classical assumption testing (normality test, multicollinearity test, autocorrelation test, heteroscedasticity test). testing for moderation using moderated regression analysis (mra). https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 414 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to measure the variables used in this study using various formulas as follows: company value : to calculate the value of the enterprise can use the formula (anggita, 2022b): pbv= price per share book value per share tax avoidance : to calculate tax avoidance can use the formula (nughara & setiawan, 2019b) etr= income tax expense profit before tax company size : to calculate the size of the enterprise can use the formula (robby & angery, 2021b): company size= ln (total assets) leverage : to calculate the leverage can use the formula (hidayat, 2019b) : der= total liquidity total equity information transparency : to calculate the transparency of information can use the following formula (supriatiningsih & jamil, 2021): ti= number of items disclosed total number of items the data analysis technique used in this study is moderated regression analysis (mra). result and discussion there are 3-panel data regression models carried out. model 1 tests the influence of tax avoidance, company size and leverage on company value. model 2 tests tax avoidance, company size, leverage and information transparency on company value. model 3 tests whether information transparency https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 415 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can moderate the partial influence of tax avoidance, company size and leverage on company value. to determine the panel data regression model used, various tests are needed such as the chow, hausman, and lagrange multiplier (lm) test. the following are the test results in the selection of panel data regression models. table 1. chow test model prob. cross-section chi-square 1 0,0000 2 0,0000 3 0,0000 source: data process, 2023 based on the table 1, prob-values for models 1, 2 and 3 are 0.0000 < 0.05, then the model used was the fixe effect model. table 2. hausman test model prob. cross-section random 1 0,0000 2 0,0000 3 0,0008 source: data process, 2023 based on the table 2, values for models 1 and 2 are 0.0000 and model 3 are 0.0008 < 0.05, so the model used used was the fixe effect model, so there are no need to do a lm test. classical assumption test 1) normality test table 3. normality test model prob. jarque bera 1 0.443 1.625 2 0.486 1.536 3 0.763 0.538 source: data process, 2023 based on the table 3, model 1, 2 and 3 have probability value > 0.05, this means that models 1, 2 and 3 are normally distributed. https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 416 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) multicolliniearity test table 4. multicollinearity test model cv cs lv it cv*it cs*it lv*it 1 1.012916 1.106885 1.120400 2 1.058933 1.129777 1.197090 1.156757 3 1.949384 1.256463 1.306154 1.155511 1.999960 1.400150 1.434804 source: data process, 2023 note : cv : company value, cs : company size, lv: leverage, it: information transparency, cv*it :interaction between company value with information transparency, cs*it : interaction between company size with information transparency, lv*it : interaction between leverage with information transparency based on the table 4, values are obtained centered the vif of each variable for models 1,2 and 3 < 10.0, this means models 1, 2 and 3 are not symptoms of multicollinearity. 3) autocorrelation test table 5. autocorrelation test model durbinwatson stat 1 2.014949 2 2.103251 3 2.180238 source: data process, 2023 based on the table 5, dw values for models 1, 2 and 3 are obtained 2.014949, 2.103251, and 2.180238. with a sample of 50 companies because there are outlier data when carrying out the normality test, the du value is obtained at 1.7214 and 4-du 2.2786. based on these values, models 1 and 2 have no autocorrelation symptoms while model 3 obtained dw value 2.180238 with du value 1.7209 and 4-du 2.2791, it can be concluded that model 3 has no autocorrelation symptoms. 4) heteroscedasticity test table 6. heteroscedasticity test model cv cs lv it cv*it cs*it lv*it 1 0.3675 0.1056 0.5596 2 0.2476 0.0792 0.3058 0.3346 3 0.2630 0.5071 0.1834 0.1371 0.4770 0.8320 0.4809 source: data process, 2023 https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 417 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc note : cv : company value, cs : company size, lv: leverage, it: information transparency, cv*it :interaction between company value with information transparency, cs*it : interaction between company size with information transparency, lv*it : interaction between leverage with information transparency based on the table 6, results in models 1, 2 and 3, the probability value of each variable > 0.05, this means in models 1, 2 and 3 there are no symptoms of heteroscedasticity. model test table 7. model test model adjusted r square f-stat sig 1 0,7615 18.39466 0.0000 2 0,7520 18.15475 0.0000 3 0,5405 3.006901 0.0290 source: data process, 2023 based on the table 7 in models 1, 2 and 3, the probability f-prob of each variable < 0.05, this means model goodnes of fit. hypothesis test and mra table 8. hypothesis test and mra effect t-stat sig decision ta-> cv 2.468 0.0183 positive and significant effect cs-> cv -3.687 0.0007 negative and significant effect lv-> cv -0.091 0.9274 no effect it-> cv 0.500 0.6195 no effect it m ta-> cv 1.217 0.2469 not moderating it m cs-> cv 3.423 0.0099 moderate it m lv-> cv -1.868 0.1722 not moderating source: data process, 2023 the effects of tax avoidance, company size and leverage on company value based on the table 7, obtained f-stat 3.006901 > f table 2.64 and sig 0.0290 < 0.05, it means that simultaneously tax avoidance, company size and leverage affect the company value. companies that have a large size are more likely to avoid taxes by minimizing their tax burden. in addition, large companies tend to have high debt to finance their operations to convince potential investors. this will have an impact on the value of the company. it can be concluded that the level of tax avoidance, company size and leverage will increase the value of a company. the results of this study are in accordance with research conducted by https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 418 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (ramadhani & dewi, 2021b) which states that tax avoidance and leverage have an effect and are significant on company value and (muharramah & hakim, 2021b) which states that company size has an effect and significant on company value. the effect of tax avoidance on company value based on the table 8, obtained t-stat 2.468 > 2.03011 and sig. 0.0183 < 0.05. it means tax avoidance have positive and significant effect on company value. in theory, tax avoidance can increase the value of the company, because reducing the amount of tax burden to be paid has a positive effect on company profits. a low tax burden will make the company's after-tax profit higher. the existence of information about high profits indicates good company performance and will provide positive signals for investors, which will further increase the company's stock price. if the stock price increases, the value of the company becomes high. the results of this study are consistent with (nughara & setiawan, 2019b; ramadhani & dewi, 2021b; robby & angery, 2021b) which show that tax avoidance has positive and significant effect on company value. likewise with (hasibuan & firmansyah, 2023; maharani et al., 2020), those showing that tax avoidance has negative and significant effect on company value. the results of this study are inconsistent with (maryanti & biduri, 2022; pambudi & kartika, 2022b; silaban & l. siagian, 2020b; soerzawa et al., 2018b) which show that tax avoidance has no effect on company value. the effect of company size on company value based on the table 8, obtained t-stat -3.687 > 2.03011 and sig. 0.0007 < 0.05. it means company size have negative and significant effect on company value. the size of the company is too large is considered to cause a lack of efficient supervision of operational activities and strategies by the management, it can reduce the value of the company and companies that have a large size may not necessarily be able to guarantee whether resource management can be optimal in achieving the expected goals. thus, the larger the size of the company will reduce the value of the company and vice versa. the results of this study are consistent with (anggraini & my, 2021; mislinawati et al., 2021) which show that company size have positive and significant effect on company value. likewise with (anggita, 2022b; muharramah & hakim, 2021b; robby & angery, 2021b; zurriah & sembiring, 2020b) which show that has positive and significant effect on company value. the results of this study are inconsistent with (dwiastuti & dillak, 2019b; octaviany & hidayat, 2019) which show that company size no effect on company value. the effect of leverage on company value based on the table 8, obtained t-stat -0.091 > 2.03011 and sig. 0.9274 > 0.05. it means leverage no effect on company value. leverage is a tool to measure how much a company relies on creditors in financing company assets. companies that have a high level of leverage mean that they are highly dependent on outside loans to finance their assets. meanwhile, companies that have a low level of leverage finance more of their assets with their capital. however, this is not one of the aspects that investors pay attention to in investing in the company. because investors expect to invest to get a return, so in this case it is likely that investors only see the return obtained without seeing the size of the debt. it can be concluded that leverage does not affect the value of the https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 419 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc company. the results of this study are in line with (bagaskara et al., 2021; lamba & atahau, 2022) which show that leverage no effect on company value. it is different with (dewantari et al., 2020b; pujaningrum & andayani, 2017) which show that leverage have positive and significant effect on company value. the effect of information transparency on company value based on the table 8, obtained t-stat 0.500 < 2.03011 and prob. 0.6195 > 0.05. it means information transparency no effect on company value. transparency in the disclosure of information by companies cannot provide guarantees to provide changes to the value of the company. this is because the main assessment of potential investors to be taken into consideration for investment decisions in a company will be reviewed from the company's financial performance from time to time. the development of the company's financial performance is more promising for consideration in investment decisions because investors can assess the company's condition. apart from the company's financial health, what is an important consideration for potential investors is the dividend policy applied to the company. dividend policy is an aspect that can lure potential investors because of proportional profit sharing or considered profitable for investors, it will increase the interest of potential investors to invest in the company. this means that information transparency is less able to affect the value of the company. this research is in line with (sari & irawati, 2022b; wardani & susilowati, 2020), which states that information transparency does not affect company value, but this research is inconsistent with research conducted by (hesti, 2016; rajakulanajagam & nimalathasan, 2021b) which show that information transparency has a positive effect on company value. the effect of tax avoidance on company value with information transparency as moderation based on the table 8, obtained interaction t-stat 1.217 < 2.03011 and sig. 0.2469 > 0.05. this means that information transparency is unable to moderate the effect of tax avoidance on company value. this can happen because of the tendency of investors not to see how much tax the company pays so it does not consider the amount of tax avoidance made by the company. investors generally prefer to invest in companies with stable or high profits. thus, the presence or absence of tax avoidance in the company does not affect investors' decisions to invest. so that investors will not withdraw their investment or not invest even if the company does tax avoidance or not. thus, tax avoidance is not able to affect the value of the company. moreover, the existence of transparent information will not have an impact on investors because investors prefer companies that have performance with stable or high profits and are less concerned with the information provided by the company. it can be concluded that transparent information is not able to moderate the effect of tax avoidance on the value of the company. this result is in line with (asa & utomo, 2019; magdalena, 2019) state information transparency is unable to moderate the effect of tax avoidance on company value. in contrast (nughara & setiawan, 2019b; pambudi & kartika, 2022b; ramadhani & dewi, 2021b) state that information transparency moderates by strengthening the influence of tax avoidance on company value https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 420 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of company size on company value with information transparency as moderation based on the table 8, obtained interaction t-stat 3.423 > 2.03011 and sig. 0.0099 < 0.05. it means information transparency can moderate and strengthen the influence of company size on company value. companies that have a large scale tend to get pressure from various parties, especially financial analysis parties who have a function to assess the company's performance through the company's financial condition. the financial analysis puts pressure on companies that have a large scale with the aim of making the company able to provide various information related to the development of the company in a certain period. therefore, companies with larger company sizes will tend to be more transparent in delivering information compared to companies that have a smaller scale. this indicates that information transparency can moderate by strengthening the influence of company size on company value. the results of this study are in accordance with research conducted by (septyaningrum, 2020) states that information transparency can moderate the influence of company size on company value. the effect of leverage on company value with information transparency as moderation based on the table 9, obtained interaction t-stat 1.868 < 2.03011 and sig. 0.1722 > 0.05. this means information transparency cannot to moderate the influence of leverage on company value. companies that have a high level of debt will cause companies to experience financial difficulties because excessive use of debt will have an impact on the imbalance between the benefits obtained and the costs incurred due to the debt. if the company experiences that the value of the benefits obtained is not proportional to the costs incurred due to debt, then the company has a great threat such as experiencing losses that can be even more severe such as being unable to operate again or closing permanently with these conditions, companies tend to have a low level of transparency in the delivery of information, causing the level of trust of interested parties or investors in the company is also increasing decreased because investors assume that the company is bad because it does not disclose most of the information it has and shows the level of quality of the company in delivering information. the results of this study are in accordance with research conducted by (dali souisa et al., 2022) state that information transparency is unable to moderate the effect of leverage on company value, while this research is inconsistent with research conducted by (ramadhani & dewi, 2021b; suripto, 2020), states information transparency moderates by strengthening the influence of leverage against the value of the company conclusion based on the test results show tax avoidance has a positive and significant effect on company value, while company size has a negative and significant effect on company value. leverage and transparency of information do not affect company value. the results of the moderation effect prove that information transparency is not able to moderate the effect of tax avoidance on company value. on the other hand, information transparency is also unable to moderate the effect of leverage on company value. however, transparency of information can moderate by strengthening the influence of company size on company value. it is expected that the results of https://www.ilomata.org/index.php/ijtc determinants of company value with information transparency as moderation in food beverage sector companies ristiyana, atichasari, andabdullah 421 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this study will be able to contribute and be taken into consideration for the financial services authority to establish policies and regulations related to company value to maintain the quality of issuers as a form of accountability to stakeholders. reference anggita, k. t. 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(2020a). pengaruh ukuran perusahaan dan leverage terhadap nilai perusahaan melalui praktek manajemen laba rill. jurnal akuntansi dan bisnis. zurriah, r., & sembiring, m. (2020b). pengaruh ukuran perusahaan dan leverage terhadap nilai perusahaan melalui praktek manajemen laba rill. jurnal akuntansi dan bisnis. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 590-604 590 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ugwudioha ofili1, celestine chukwutem ebogbue2, abraham momoh idogho3 123nile university of nigeria, nigeria correspondent: celestineebogbue@yahoo.co.uk2 received : march 12, 2024 accepted : april 23, 2024 published : april 30, 2024 citation: ofili, u., ebogbue, c, c., idogho, a, m. (2024). the impact of forensic skills on fraud detection in federal government agencies in nigeria. ilomata international journal of tax and accounting, 5(2), 590-604. https://doi.org/10.61194/ijtc.v5i2.1202 abstract: fraud in nigerian federal government agencies is a persistent issue. this study explores the impact of forensic skills on fraud detection within these agencies, building upon the established connection between forensic accounting and its effectiveness in uncovering fraudulent activity. to achieve this, we investigated the impact of forensic and audit skills on fraud detection in the federal government agencies in nigeria, identifying its implications on government resources. the focus was on all the federal government ministries and agencies in abuja (the federal capital territory). with the stratified random sampling, a sample size of 100 was selected. the non-experimental research approach was adopted in the collection and analysis of data with the ordinary least square (ols) and regression analysis used to interpret the data. the results of the findings indicated that no significant relationship exists between forensic skills and fraud detection (where the p-value of 0.507 > 0.05 significant level), and the existence of a significant relationship between audit skills and fraud detection in federal government agencies (with a p-value of 0.000 < 0.05 level of significance). this study recommends increased investment in personnel with forensic and audit skills as a course of action to strengthen fraud detection efforts and improve financial accountability in federal government agencies in nigeria. keywords: forensic, forensic skills, forensic accounting/auditing, fraud detection, fraud theory this is an open access article under the cc-by 4.0 license. introduction conventional audit skills are assumed to lack credibility in the public sector in detecting crimes. this has become an issue of discussion as high-profile fraud cases are recorded in the nigerian federal agencies. controlling the frauds or what is generally regarded as “corruption” in the federal agencies, requires the services of forensic accountants, as it “has thus been one of the key issues articulated by most developing nations deepened in corrupt practices” (u. et al., 2015). in nigeria, different governments deduced different means of fighting these financial frauds, even though the https://www.ilomata.org/index.php/ijtc mailto:celestineebogbue@yahoo.co.uk https://doi.org/10.61194/ijtc.v5i2.1202 the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 591 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results insignificantly impacted the economy with massive funds having been spent. the conventional audit quality exercise has been questioned due to cases of reported fraud in the public sector as non-performance or inadequate utilization of taxpayers' resources is being revealed. (pricewaterhousecoopers, 2022) revealed an increase in the number of fraudulent and suspicious financial activities around the globe. in the nigerian public sector, it is practically impossible to decipher the problems of fraudulent practices among the civil servants and the political class. the practices range from contract overstatement, unauthorized and unapproved expenditures, fictitious reporting, asset misuse/conversion for personal use, ghost employees in the payroll, financial extortion, budget falsification/padding, tax under and overstatement, forgery, financial records falsification, etc. (g & atah, 2023; nisak & kurniawan, 2013). most of these are outside the general purview of the conventional audit exercise and, therefore, it is difficult to detect using the traditional audit process even as the detection of fraud is not a responsibility of the conventional auditor (mansor & abdullahi, 2015; rahmawati & kassim, 2020). the rise in the level of fraudulent activities perpetrated by civil servants and politicians in nigeria, with many standing trials in courts had rejuvenated the call for the use of forensic audit skills in investigating fraudulent activities in the public sector. akeke and atah (2020), opined for the equipping of accountants to be fully equipped with advanced abilities to be able to fish out the scavengers utilizing the failure in the systems to misappropriate the funds and punish the populace of nigerians. therefore, skills more sophisticated and comprehensive than traditional accounting and auditing skills are required from setting up internal control systems to detecting all elements of fraud with proof. to detect fraud, forensic accountants utilize exceptional skills beyond the traditional accounting requirements for fraud and crime detection. misrepresentation in the public sector impacts the nigerian economy in totality and adopting a technical position to detect fraud is very vital to the sustenance of the individuals. however, more is required as it takes an understanding of the systems and modalities for the perpetration of fraud to be able to get to the roots of it. the decay in the nigerian system is so costly to the economy as it keeps noticing frequent misuse of collective resources. the country’s image is begging for redemption from the consistent fraud reports. international communities refer to us by different names and signals. interestingly, we can remedy our situation without resorting to foreign assistance. application of forensic skills, such as computer-assisted audit techniques (caat), knowledge of big data analysis, interview audit techniques, and investigative skills is one of the effective skills applicable in forensic auditing to detecting fraud irrespective of where it is concealed (g & atah, 2023). the nigerian government had introduced certain controls. the recent is the treasury single account (tsa) introduced in 2015. however, despite these controls, fraud in the agencies had been on a spike. following this development, this study is set to divulge the impact of the required skills that forensic accountants should possess on fraud detection and how these skills have been utilized in making fraud detection either easy or complicated in nigeria. in nigeria, the demand for forensic skills is at the front burner due to the spike in fraudulent activities in the public and private sectors attributable to attributed to the advancements in https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 592 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc technologies, and the inabilities of the economic and financial crimes commission (efcc) and the independent corrupt practices and other related offences commission (icpc) to investigate and punish offenders (u. et al., 2015), even with constitutional prowess, as these crimes keep ballooning resulting in loss of confidence in the government, tax avoidance, and in inefficiency and ineffectiveness of conventional auditing and investigations, and questioning the integrity and capacity of government auditors, accountants, and politicians. studies have proven the positive relationships between forensic skills and fraud detection in government agencies, recommending upscaling in forensic skills required for financial crime investigations (u. et al., 2015). (okute & enah, 2019) suggested using both forensic skills and conventional audits for fraud detection in tertiary institutions, while (anghel & poenaru, 2023) advocated for the use of “statistical analysis, big data and machine learning, interviews, and physical observation” and performing due diligence on fraud cases. however, most of the research work focused on investigation and prevention (enofe et al., 2015; e. eze & okoye, 2019), or the effectiveness of the application of forensic auditing (modugu & anyaduba j, 2013), rather than on fraud detection. this research is focused on bridging the gaps in the existing literature by providing the impact of forensic skills on fraud detection in the federal government agencies in nigeria. the significance of this research is to improve the body of knowledge in academia and the industry and close the existing literature gap on the impact of forensic skills on fraud detection in the federal government agencies in nigeria. it will add to the theoretical landscape of forensic investigations by emphasizing the need for possession of forensic skills in conducting investigations focused on exposing crimes and standing in defense of such in the courtroom and creating early fraud detection in federal government agencies. also, the study seeks to inform decision-makers in the government, stakeholders, and other industry players of the gross consequences of conducting forensic investigations of financial crimes without having forensic skills. therefore, the research was conducted to answer the question: does there exist any significant relationship between forensic skills and fraud detection in federal government agencies in nigeria? is there a significant relationship between conventional audit skills and fraud detection in the federal government agencies in nigeria? it is hoped that stakeholders armed with the result of this research will gain adequate exposure and will be able to reevaluate fraud investigation techniques for detecting early symptoms in government agencies and rekindling the lost confidence in government based on antecedents and recent developments in the sector (dauda & abubakar, 2020; offor et al., 2022). forensic skills and fraud detection the skills required by a forensic accountant to make his work easy and more understandable in court are too numerous to be classified. most skills of forensic accountants are “specialized and technical”, to understand the place of figures when misstated and fraud when committed . in cases of fraud, researchers have quite agreed that detection takes a detailed understanding of what may have prompted the commission of the actual offense. an investigator in every crime needs investigative and questioning skills to decipher the secret behind the crime. this starts with identifying traces of suspicious activities in the financial records. it must, therefore, begin with possessing statistical skills of understanding, “analysis, interpretation, and presentation of complex https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 593 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial data, supplemented with adequate and relevant information” (anghel & poenaru, 2023; ojukwu et al., 2020). big data and predictive analysis will be to the forensic accountants' advantage in investigative cases. presenting issues in court will need a questioning and defensive mindset and techniques. according to (hassan et al., 2024), a sound thinking mindset will entail understanding what the court wants with a questioning mindset, curiosity, independence and ability to endure is what is required as cognitive skills for a forensic investigator in fraud detection, particularly in the government agencies. a forensic accountant should exhibit experience in both civil and criminal law with an understanding of courtroom procedures. among the cognitive needs in the forensic investigation of fraud are the psychological ability of calmness, reserve, and intelligence (creative thinking), clear communication, and concise communication skills, without which it is difficult to get to the root of a fraud matter. (chukwu et al., 2019), listed the important skills of forensic accountants to include experience in accounting, internal controls, auditing, taxation management, interpersonal relationships, business operations, and communication with analytical abilities, strong writing skills, good verbal communication skills, and creativity. anghel and poenaru (2023), opined that fraud “detection are complex processes that involve a range of strategies”. fraud investigation is the key area of forensic accounting application in the public sector due to negligence, connoting the possession of the required skills for possible detection of supposed crimes. fraud is an intentional act of appropriating personalizing assets or other valuables without approval (okute & enah, 2019). the concept of fraud is a simple useable word in forensic accounting and auditing which comes with different definitions, but is usually “intentional”, and could be classified as either financial or non-financial. (ngozi, 2015), noted that forensic accounting describes engagement that could result in dispute resolution. as a new field of accounting, scholars only adopt definitions to suit what they intend, concluding that it must result in a court determination. however, in contrast, it is not all forensic investigations are the subjects of the court. (ogutu & ngahu, 2016), therefore, agree that it is the “gathering and presenting financial information in a manner that will be accepted by a court” of competent jurisdiction, with enabling skills that could be used to establish the existence of illegality or fraudulent activities in every government organization. “as financial scavengers” (ogutu & ngahu, 2016), forensic accountants must be fully equipped with skills to decipher fraud, accounting crimes, and other related offenses. fraud detection arises because of the difficulty associated with prevention (sulaiman et al., 2023). detection of fraud is the identification of actual or potential financial crimes via spotting warning signals. fraud is a global issue and to developing nations, it has remained a major concern (adebisi & gbegi, 2015) and it has no differentiation in ministry, tribe, and persons. it could be a global epidemic; however, it is the cause of decay in the nigerian system. front line news points to an immediate past governor of kogi state facing efcc investigations of ngn80.2 billion, an exaccountant-general of the federation with charges of ngn80 billion, a former chairman of the defunct pension task team charged with ngn2.1 billion, etc. the cost of fraud cannot be underestimated. four major types of fraud exist in the private and public sectors, and they are https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 594 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc misrepresentation, misappropriation and theft, counterfeit and forgery, and bribery and corruption. the worst perpetrators are government officials. the approach to fraud detection involving the use of an analytic model is to look out for perpetrators of fraud with previous records. models have been developed with traditional data, classifying fraud as supervised and unsupervised, with the supervised models as class membership of a given entity. the drawback of a supervised model includes absolute certainty of classifying events accurately as fraud or nonfraud., noting that any models of fraud can be used to detect only types of fraud that have been identified previously. unsupervised methods of fraud modeling rely on abnormal events, linked with the symptoms of previous fraudulent activities. in fraud determination in an organization, several factors could be juxtaposed to achieve the aim. these include the internal controls (put in place by the firm’s bods and management whose purpose is to assure efficiency in operations), reliability of financial reporting, the firm’s compliance with the relevant laws, information and technology, monitoring, and corporate governance. the audit committees and board of directors remain the suspicious part of corporate governance that could motivate the existence of fraud. historical trace of forensic accounting with evidence, forensic accounting is an old profession that has existed since the roman empire even though it was viewed as an aspect of accounting. in civilized egypt, forensic accountants were referred to as the ‘eyes and ears’ of the pharaohs following their invention. the field could be said to be in existence around 1817 and as old as the bankruptcy act as they were required to testify in court as experts who viewed the accounts. sources equally traced the field's existence to scotland as far back as the 19th century with a claimed advert of a young scottish accountant to be an expert in arbitration support. nevertheless, the profession became popular in the 1800’s and 1900’s as discussions started emerging on forensic witnessing and evidence gathering. forensic stands for evidential use in a court of law, providing standard forensic accountants to adopt. it is an accounting involving the amalgamation of accounting, auditing, and style that adopts an investigative process for determining the commission of fraud (joshi & gallani, 2024) despite some common roles with traditional auditors, forensic accountant is focused importantly on the detection of fraud, much less like financial audit that focuses on the true and fair view of transactions; forensic accounting looks beyond just material misstatement in transactions. the activities investigations, litigation services, assets recovery, property damage, lost profits due to embezzlement and other illegal acts, tax evasion, and money laundering schemes. different authors have formulated theories and models to explain fraud and fraud detection. (g. p. eze, 2019), developed theories of differential association theory, fundamental observation theory, fraud diamond theory, social learning theory, hyperactivation theory, anomie fraud theory, low handing theory, social control theory, differential opportunity theory, social ecology theory, rotten apply theory, all to explain and give concrete meaning to while frauds are perpetrated. also, with varied theories used for fraud detection, prevention, and investigation, this study is anchored https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 595 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on the theory of mindset and problem representation as was propounded by gollwitzer, 1996, and the fraud triangle theory. the mindset theory signifies a type of training with specific features that control a person in the assembling and analyzing of data. it informs the level of processing of information by individuals and various ways of reasoning which impact how people handle data and make decisions. fraud detection projects accountants with different frames of mind and reasoning as experts on fraudrelated job performance. following the persistent fraud cases in public sectors in nigeria, it is assumed that without the right pegs in the right holes, control and detection will remain challenging in the sector. therefore, there is a need for people with the requisite ability, skills, and training in federal government agencies to pave the way for the ease of detection. this means awareness of forensic accountants while criminals perpetrate fraud which is either due to personal, employer, or external pressures. fraud triangle theory accountants' suspicion or identification of fraud is centered around the fraud triangle. the theory can be used to trace the cause of fraud and weakness in the system. it is centered on a tripod of pressure, opportunity, and opportunity. pressure/incentivepressure is central to the causes of fraud. the desire to satisfy all financial needs comes with pressure. (bassey, 2018) gave three types of pressure: lifestyle maintenance pressure, compensation or target pressure arising from employment, or management's financial interest, and external pressure such as threats to maintaining business stability, fulfilling financial covenants, retaining market position, and meeting up market share expectations. opportunitypoor management oversight and inadequate internal control system on implementation are the major factors that spur employees to commit fraud. information asymmetry, resulting from using available data to one’s advantage spurs employees to fraud via using the positions to gain undue advantage as well as to hide fraudulent deeds. rationalization is another cause of fraud. providing all necessary justifications for criminal tendencies or committed fraud. (okoye et al., 2017), note the implications of rationalization, suggesting that an individual only commits fraud if he can provide ethical justification. in bassey's (2018) opinion, rationalization is an act of justification. fraud investigation and techniques forensic investigation is often referred to as forensic science, an application of scientific knowledge to criminal or civil law. it applies to legally putting evidence and facts together in a manner suitable for defense in a court of competent jurisdiction. using investigative and analytical skills to solve issues relating to financial recklessness and not undermining standards stipulated and legal requirements is regarded as forensic investigation. investigation is a search for facts, involving careful examination. it is a vital part of the forensic accounting and auditing process applicable only when an event or transaction is laden with issues or there are lapses with the intent of proving who is responsible, the reason for the action, and the estimated level of damage (if any), a planned and detailed verification of doubt about a transaction (oyedokun, 2015). https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 596 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc empirical literature attempts to examine the effect of forensic accounting on public sector fraud detection and prevention have been made by various authors including (sulaiman et al., 2023), who used a design survey of over one hundred (100) auditors and accountants of four (4) ministries in the fct, examined the significant difference between forensic accounting and fraud identification in the nigerian public sector. using the anova test, the study discovered a significant relationship between forensic accounting and fraud detection in the nigerian public service. (abdulrahman, 2019) studied forensic accounting and fraud prevention in nigeria's public sector using content analysis and found a significant positive influence between forensic accounting techniques and fraud prevention. (adebisi & gbegi, 2015; okoye & gbegi, 2013), on fraud and the nigerian public sector, found that fraud has a significant effect on the economic growth of nigeria inhibiting the sectorial performance. (franca et al., 2023), in their study of forensic accounting and fraud detection in nigeria (a case study of river state), opined that forensic accounting aids fraud detection. using spearman rank correlation, a negatively significant correlation between payroll and procurement fraud was, however, discovered. the study became imperative arising from reports of fraudulent activities in the nigerian public sector, and this is relevant to our study irrespective of changes in focus to forensic skills of fraud detection. (sule et al., 2019) studied the effect of forensic auditing /accounting investigation in financial fraud detection in nigeria and concluded by stating that despite the global recognition of forensic accounting services it receives just a little attention in developing countries arising from a lack of regulators and inadequately equipped professional accounting bodies but concluded that forensic accounting service is significantly related to fraud detection. by utilizing simple mean and standard deviation to investigate forensic accountants and fraud risk detection procedures and adopting multivariate analysis of variance and analysis of variance anova, (okoye & gbegi, 2013) found an effective modification in the extent and nature of audit tests to the risk of managing fraud. the study suggested involving forensic accountants in fraud risk management rather than consulting them. (olofinsola, 2016), in the relevance of forensic accounting in nigeria, found that fit has helped in fraud detection, but it lacks statutory backup, hence, no significant impact on tackling corruption in nigeria. in assessing forensic accounting and auditing techniques on public sector fraud in nigeria, (ogiriki & appah, 2018) used multiple regression analysis to analyze the data relating to public sector fraud detection, investigation, and prevention in nigeria and agreed on the statistical significance with a positive correlation among the variables. from the above discussions, the following hypotheses were developed to answer the research questions formulated: h1: there exists no significant relationship between forensic skills and fraud detection in the federal government agencies in nigeria. https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 597 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2: there exists no significant relationship between audit skills and fraud detection in the federal government agencies in nigeria. method the population focused on all the accountants and finance staff of the accountant and auditorgenerals offices, the efcc, and icpc within the federal government agencies in abuja. the use of accountants and finance staff in the accountant and auditor-general’s offices as well as law enforcement agencies stems from their knowledge of the subject being considered as well as their position in the respective agencies. accountants are in a better position to give out information regarding fraud detection and the applicable skills. they are also in a better position to know the various controls and the means to manipulate them. using stratified random sampling techniques, a sample of 100 was selected. however, only 96 questionnaires were returned and used for the research. result and discussion the research design is a non-experimental descriptive/survey design of collecting and analyzing data. questionnaires were administered to prove existing relationships between variables used in the study. data was collected from a sample to examine the relationship between the variables in the data and answer the developed hypotheses. the primary source of data is used as there is no secondary data to utilize. considering the sensitivity of the topic, staff of federal agencies, even though open, were reluctant to discuss the issues in the open, so as not to be seen as disloyal to the previous persons and impact their postings/positions. therefore, survey research was best suited for this study. the data was interpreted using a table and the ordinary least square (ols) and regression analysis examined the significance of the relation among the variables. the questionnaire was developed and structured on a five (5)-point likert-scale of “strongly agree”, “agree”, “neutral”, “strongly disagree”, and “disagree”, and “disagree”, and was administered to staff of the finance, internal audit unit, efcc, and icpc, among others. spearman correlation was used to analyze the data collected for the hypotheses. model specification fdi= αi +β1fs + β2as + εi, where: fd = fraud detection. fs = fraud skills. as = audit skills. α = intercept/constant β1, β2, β2 = coefficients of the independent variables. ε = error term https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 598 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1: descriptive analysis s/n variable frequency percentage % 1 gender: male female total 55 41 96 57.3 42.7 100 2 educational qualification: bsc. /hnd msc. /mba ph.d. total 57 34 5 96 59.4 35.4 5.2 100 3 age: below 30 years 30-40 years 41-50 years above 50 years total 26 46 20 4 96 27.1 47.9 20.8 4.2 100 4 years of existence: below 5 years 6-10years 11-15years 16years and above total 22 20 32 22 96 22.9 20.8 33.3 22.9 100 5 professional qualification ican anan non total 31 57 8 96 32.3 59.4 8.3 100 6 length of service: 1-5 years 6-10 years 11-15 years 16 years and above total 28 39 15 14 96 29.2 40.6 15.6 14.6 100 7 marital status: single married total 41 55 96 42.7 57.3 100 8 profession: law enforcement accountant total 16 80 96 16.7 83.3 100 source: authors’ computation, 2024. (spss version 23) https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 599 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1 above, is the descriptive values indicating the proportion of the gender of respondents 57.3% (55) are male respondents while 42.7% (41) are female. the ages indicate that 27.1% (26) are below 30 years, 47.9% (46) are within 30 – 40 years, 20.8% (20) are within 41 50 years, and 4.2% (4) are 50 years and above. on educational qualification, 59.4% (57) have a bsc/hnd/ba, 35.4% (34) have an msc, and 5.2% (5), possess a ph.d. professionally, 32.3% (31) are icanqualified, 59.4% (57) are anan members and 8.3% (8.) have professional qualifications. table 1 above also considered the respondents' length of service and marital status. table 2: reliability test: cronbach’s alpha reliability statistics cronbach's alpha cronbach's alpha based on standardized items n of items .883 .890 12 source: authors’ computation, 2024. (spss version 23) table 2 indicates an excellent reliability test score of 0.883 as we assumed consistency with the degree of the instruments. question analysis table 3: question analysis items statement sa a n ds sd fraud detection fd1 fraud detection involves the identification of actual or potential fraud in an organization 31(32.3%) 62(64.6%) 3(3.1%) 0(0%) 0(0%) fd2 it is a proactive risk assessment and reactive to a fraud report 31(32.3%) 61(63.5%) 4(4.2%) 0(0%) 0(0%) fd3 it is key to the better performance of an organization 32(33.3%) 61(63.5%) 3(3.0%) 0(0%) 0(0%) fd4 fraud detection is the identification of possible prediction of fraud associated with known fraudster and their actions in the past 31(32.3%) 61(63.5%) 4(4.2%) 0(0%) 0(0%) forensic skills fs1 investigative and questioning skills are key concepts to fathom the secrete behind any crime 32(33.3%) 61(63.5%) 2(2.0%) 1(1.0%) 0(0%) fs2 statistical skill and analytical skills are important for forensic accountants to be able to investigate big data and predictive analysis of figures 26(27.0%) 68(70.8%) 1(1.0%) 1(1.0%) 0(0%) fs3 cognitive skills an important for forensic accountants 20(20.8%) 72(75.0%) 3(3.1%) 1(1.0%) 0(0%) fs4 legal and regulatory knowledge must be known by forensic accountant 20(20.8%) 72(75.0%) 3(3.1%) 1(1.0%) 0(0%) https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 600 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit skills as1 analytical skill is an important skill for an auditor to analyze, identify trends, and detect abnormalities in the records of any organization 18(18.8%) 65(67.7%) 8(8.3%) 4(4.2%) 1(1.0%) as2 communication skills are crucial to an auditor to enable him to communicate effectively his findings and recommendations to the stakeholders of an organization 20(20.8%) 65(67.7%) 7(7.3%) 3(3.1%) 1(1.0%) as3 technical skills must not be underestimated in auditing because an auditor must know accounting standards, tax laws, and industry regulations. 20(20.8%) 67(69.8%) 7(7.3%) 2(2.1%) 0(0%) as4 rist assessment skill is important to any audit assignment to identify and prioritize audit areas with high-risk 20(20.8%) 65(67.7%) 8(8.3%) 3(3.1%) 0(0%) source: authors’ computation, 2024. (spss version 23) table 3 analyses the contents of the administered questionnaires in numbers and percentages in brackets. the figure below depicts the graphical representation of the various statements in the questionnaire note: sa: strongly agreed, a: agreed, n: neutral, d: disagree, and sd: strongly disagree figure 1: statement analysis in numbers source: authors’ computation, 2024 0 10 20 30 40 50 60 70 80 statement analysis sa a n d sd https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 601 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2: statement analysis in percentages source: authors’ computation, 2024 ** +/computation error the graphs are a representation of the outcomes of the administered questionnaires in number and percentage of responses. test of hypotheses decision rule: accept null hypothesis if p-value > 0.05 and reject alternative hypothesis. reject the null hypothesis if the p-value <0.05 and reject the alternate hypothesis. the tables below show the results obtained from multiple regression for the hypotheses and their interpretations. table 4: correlations fraud detection fraud skill audit skill spearman's rho fraud detection correlation coefficient 1.000 .069 .378** sig. (2-tailed) . .507 .000 n 96 96 96 forensic skill correlation coefficient .069 1.000 .070 sig. (2-tailed) .507 . .500 n 96 96 96 audit skill correlation coefficient .378** .070 1.000 sig. (2-tailed) .000 .500 . n 96 96 96 **. correlation is significant at the 0.01 level (2-tailed). from table 4, forensic skill is positive and proves that there is no significant relationship with fraud detection in the federal government agencies in nigeria (p-value of 0.507 > 0.05), with a 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% statement analysis stongly agreed agreed neutral disagreed strongly disagreed https://www.ilomata.org/index.php/ijtc the impact of forensic skills on fraud detection in federal government agencies in nigeria ofili, ebogbue, and idogho 602 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corresponding correlation coefficient of 0.069, illustrating there is no significant relationship between forensic skills and fraud detection in federal government agencies in nigeria (h1 is accepted). furthermore, the results equally showed that there is a significant relationship between audit skills and fraud detection in the federal government agencies in nigeria (p-value of 0.000 < 0.05) and a corresponding correlation coefficient of 0.378, proving h2 alternate to be realistic. the empirical analysis showed that both forensic skills and audit skills have a positive relationship with fraud detection, but forensic skills were not significant while audit skills were significant which agrees with the findings of other researchers including (sulaiman et al., 2023). this is in corroboration with (okafor & agbiogwo, 2016), opining that possession of basic forensic skills could significantly aid in the reduction of fraud cases within an organization. to the best of the knowledge of the researcher, no study had a contrary result. conclusion from the analysis, it has been discovered that both forensic and audit skills have a positive relationship with fraud detection in the federal government agencies in nigeria. hence, we conclude that proper auditing activities are an important skill for fraud detection meaning a proper application of audit skills within the agencies poses a possibility of fraud detection considering the regular usage than forensic investigations. since the study proved that there is a significant relationship between audit skills and fraud detection, emphasis should be placed on training and awareness among the accountants, finance officers, and internal auditors within the agencies of the federal government with the requisite auditing/accounting qualifications paving the way to practice. investigations of financial crimes without the application of the requisite knowledge and audit skills will mean inefficient representation in the courtroom. this seems to be a reason why anti-graft agencies are consistently losing fraud cases in nigerian courts, impacting government resources (money, material, and manhours) in executing such cases. reference abdulrahman, s. 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(2019). the effect of forensic accounting investigation in detecting financial fraud. a study in nigeria. academic research in business and social sciences, 9(2, 545 – 553. u., a. b., lukman, a. o., a., m. k., a., z., & t, m. o. (2015). curbing financial crimes with antigraft bureaus in nigeria: the accountants’ perception. accounting and management information systems, 14(1), 107–127. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 895-912 895 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office novianita rulandari stiami institute of social sciences and management, indonesia correspondent : novianitarulandari@gmail.com received : september 14, 2023 accepted : october 23, 2023 published : october 31, 2023 citation: rulandari, n. (2023). evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office. ilomata international journal of tax and accounting, 4(4), 895-912. https://doi.org/10.52728/ijtc.v4i4.966 abstract: evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office based on evaluation criteria (william n. dunn) from 6 criteria, namely effectiveness, efficiency, adequacy, equality, responsiveness, and accuracy has been running well and by the regulations. taxation. inhibiting entities in the implementation of msme tax incentive policies are msme actors, there are obstacles in the use of such incentives, namely in the preparation and submission of realization reports and obstacles also arise from the fissures who have difficulty guiding taxpayers and there are constraints in the administrative system. the driving entity in the implementation of msme tax incentive policy is socialization through whatsapp media and mail media by ar, confirmation and appeal of ar to taxpayers immediately submit realization reports, provide ar guidance to taxpayers in delivering realization reports if taxpayers experience obstacles, providing opportunities to taxpayers pp 23/2018 during the december tax period to report on the realization of incentive use during 2020. keywords: tax incentives, policy evaluation, covid-19 pandemic, msmes this is an open-access article under the cc-by 4.0 license. introduction during the covid-19 pandemic in 2020 until now, national development in indonesia has experienced drastic changes. with the current conditions, indonesia will of course need quite a lot of funds to carry out its development activities. these funds come from domestic and foreign sources. one way to obtain funds from domestic sources is by collecting taxes. taxes are the safest and most reliable source of funds because they are flexible and easier to influence through the policies of the country concerned (drucker et al., 2020; enrich, 2002; okafor et al., 2020). for several decades, indonesia's economy has slowed down and even stopped for a while due to the covid-19 pandemic. referring to the article written by fitriani (2020), the central statistics agency (bps) has announced that the indonesian economy experienced an economic slowdown https://www.ilomata.org/index.php/ijtc mailto:novianitarulandari@gmail.com https://doi.org/10.52728/ijtc.v4i4.966 evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 896 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the first quarter of 2020 by 2.9% and is stated to have decreased when viewed from the fourth quarter of 2019 which was recorded at minus 2 .41% this was announced by suhariyanto as head of bps. several stocks and trades throughout the world experienced a decline, in indonesia itself, many businesses experienced deficits due to the economic shutdown and also the implementation of limited activities in indonesia, which caused the weakening of the indonesian economy and state finances (hembre & dantas, 2022; liu et al., 2020; sun et al., 2021). currently, in line with the decline in positive covid-19 cases and the implementation of vaccinations, according to the economic minister, airlangga said that the current performance of the retail sector has shown an increase in retail sales in the q1-2021 period. several shopping subgroups that experienced an increase in the first quarter of 2021 include supermarkets, restaurants, medical, household, and fashion. apart from that, the release of indonesian manufacturing purchasing managers' index (pmi) data also showed encouraging things, where the indonesian manufacturing sector experienced accelerated growth in april 2021 by recording a record high at 54.6, which means an increase from 53.2 in the previous month. according to a press release from the coordinating ministry for the economy (05/05/2021) msmes are the most important pillar in the indonesian economy. based on data from the ministry of cooperatives and smes for 2021, the number of msmes has now reached 64.2 million with a contribution to gross domestic product (gdp) of 61.07% or 8,573.89 trillion rupiah. the contribution of msmes to the indonesian economy includes the ability to absorb 97% of the total existing workforce and raise 60.4% of total investment. however, the high number of msmes in indonesia cannot be separated from the existing challenges (kovac & klun, 2021; ward et al., 2020; xiao & xi, 2021). to answer this challenge, the government has implemented several msme support programs, including incentives and financing assistance through the pen program, people's business credit, national movement proud to be made in indonesia (gernas bbi), digitalization of msme marketing, strengthening entrepreneurship alumni of the pre-employment card program through kur financing, and also includes a long-term strategy to raise the class of msmes through the job creation law. by law no. 28 of 2007 concerning general provisions and tax procedures (kup), tax is a mandatory contribution to the state owed by an individual or entity that is coercive based on law, with no direct compensation, and is used for state needs as much as possible. prosperity of the people. based on the contents of this law, it is clear that taxes are a source of income for the state. one that contributes quite highly to state tax revenues is the micro, small, and medium enterprises (msme) sector (kasami, 2021; starnini et al., 2021). one of the government's efforts in the field of taxation in national economic recovery is the existence of a tax incentive policy. this tax incentive policy aims to help move the wheels of the country's economy which is experiencing a rapid decline due to the covid-19 pandemic. the tax incentive policy is contained in minister of finance regulation (pmk) number 86 of 2020. this regulation is a revision of the previous pmk, namely pmk number 44 of 2020 concerning tax incentives for taxpayers affected by the coronavirus pandemic. the 5 (five) tax incentive policies are pph article 21 incentives, pph article 22 on imports, pph article 25 installments, msme tax and vat. according to putra (2016) micro, small and medium enterprises (msmes) are productive businesses owned by individuals or entities that have met the criteria as stipulated in law number https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 897 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 20 of 2008. msmes have an important role in the development, of the indonesian economy, and energy absorption. work. zee, stotsky, and ley (2002) define tax incentives from a legal perspective (statutory term) as a special tax provision granted to qualified investment projects that represents a statutory favorable deviation from a corresponding provision applicable to investment projects in general, meaning that incentives tax is special treatment given to certain investment projects only. according to the directorate general of taxes (2013) providing tax incentives is one of the efforts made by the government to increase investors' interest in investing. by providing tax incentives, it is hoped that this will have a positive impact on increasing investment levels and causing various multiplier effects on the national economy. thus, state revenues originating from the tax sector are increasing. minister of finance regulation (pmk) no.82/pmk.03/2021 concerning amendments to minister of finance regulation no.9/pmk.03/2021 concerning tax incentives for taxpayers affected by the 2019 coronavirus disease pandemic. on july 1 2021 minister of finance of the republic of indonesia issued an extension of tax incentives, namely pmk no.82/pmk.03/2021 for the july to december 2021 tax period to support programs to strengthen public health and accelerate national economic recovery due to the impact of the 2019 coronavirus disease pandemic. those who can take advantage of the government borne final income tax facility (dtp) are msmes that already have a pp 23 certificate. yustinus prastowo, special staff to the minister of finance, revealed that the utilization of msme tax incentives in 2020 only reached 65 percent of the target. for 2020, around 280 thousand msme taxpayers will take advantage of around 65 percent of the target. "in 2021 there will be around 127 thousand in the current year or around 27 percent of the target," said prastowo during the good morning indonesia program on metro tv, wednesday (18/5/2021) (rahmi et al., 2022; rekayana, 2016; rulandari & rahmayani, 2023). the government provides tax incentives, including for msmes affected by the covid-19 pandemic. this incentive, which was originally only until december 2020, has been extended until 30 june 2021. with this policy, the role of the government needs to be intensified through socialization and assistance regarding the latest tax regulations so that msme players are willing to take advantage of msme tax incentives and the sustainability of msmes is maintained (estrada et al., 2020; khan et al., 2023). msme players only need to submit a realization report so they can use this incentive. the tax will be borne by the government or the tax will be (0) zero as long as the turnover obtained does not exceed idr 4.8 billion a year. msme players report every month the turnover obtained, the tax should be 0.5% percent of the turnover paid, but the tax is borne by the government and it is enough to report it via www.pajak.go.id. msme players who want to take advantage of this incentive do not need to submit a pp 23 certificate but simply submit a monthly realization report. as is known, the existence of msme tax incentives means that msme players receive final pph incentives at a rate of 0.5 percent by government regulation number 23 of 2018 which is borne by the government. in this way, msme taxpayers do not need to make tax deposits. parties who transact with msmes also do not need to withhold or collect tax when making payments to msme players (barberia et al., 2022; ojide et al., 2022). https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 898 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the reality of this policy is that not all msme business actors know and utilize it, so there needs to be socialization, understanding, and assistance for msme business groups to be able to take advantage of this tax incentive opportunity. in developing countries, regulation is very difficult to disseminate to the lowest levels, whereas this tax incentive policy is intended for msmes whose economy is still at the bottom level, so there needs to be more in-depth socialization from the parties concerned and there needs to be an evaluation carried out by the government and tax authorities regarding the implementation of previously determined tax incentives, so that the evaluation can be used as a reference for improving the policies that have been made. the jakarta kelapa gading pratama tax service office is one of the tax service offices that implemented government regulation number 23 of 2018 as a replacement for government regulation number 46 of 2013 which was also previously implemented by this tax service office. based on the various phenomena above, the author is interested in conducting research with the title "evaluation of tax incentive policies for msmes during the covid-19 pandemic in increasing taxpayer compliance at the jakarta kelapa gading primary tax service office". based on previous research, the first one conducted by lili marlinah (2021) explained that the benefit of tax incentives is to help the economic recovery program or what is known as pen (national economic recovery) carried out by the current government. the second research conducted by rafika sari (2018) states what tax incentive policies are for msme businesses and the government's efforts to assist msme actors in their use and prepare strategies to face various policy obstacles, through the dissemination of simple bookkeeping and tax applications that are easy to understand and affordable. the third research conducted by wikrama parahita (2021) explains how assistance for msmes can take advantage of the tax incentive program provided by the government to msmes during the covid-19 pandemic. the fourth research conducted by dewi noor fatikhah rokhimakhumullah (2021) states that the effectiveness of using tax incentives during this pandemic, can show the level of msme taxpayer compliance and influence the sustainability of msme businesses which showed positive results in the first quarter. the fifth research conducted by ropinov saputro and farah meivira (2020) states that taxes are an important income stream for government development projects. the sixth research in an international journal conducted by daniel twesige and faustin gasheja (2019) explains the significant relationship between tax incentives and positive msme growth in rwanda and this journal concluded that tax incentives are the key to msme growth (ann et al., 2021; gonzález canché, 2022). the difference between the research examined by the author and the six previous studies is that the author will evaluate the policies that have been made by the government in the form of msme tax incentives, whether these incentives affect the level of taxpayer obligations or not, whereas the six previous studies focus more on how to apply or implement the policy. msme tax incentives created by the government for msme players. the research location that will be used by researchers is also different from previous research, namely in several msmes and the jakarta kelapa gading pratama tax service office which has not previously been researched by previous researchers (afonso, 2013; benavides & peters, 2015; osborne et al., 2013). the six previous studies explain tax incentives for msmes and the author will focus more on how to evaluate tax incentive policies for msmes during the covid-19 pandemic in increasing taxpayer compliance. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 899 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc micro, small, and medium enterprises (msmes) are a private sector that is certain to have great potential for tax revenue because the existence of msmes which can be found almost along the road can make a significant contribution to economic growth. therefore, the government continues to strive to explore taxes from the msme sector by making it easier to carry out tax administration and also providing relief in the form of reducing tax rates as stated in government regulation number 23 of 2018. pmk number 9/pmk.03/2021 is a step by the indonesian government in extending the time for providing tax incentives to overcome the impact of the covid-19 pandemic until 30 june 2021, which was originally through pmk 86/pmk.03/2020 to pmk 110/pmk.03/2020 regarding providing tax incentives until 31 december 2020. apart from the extension of time given, the government also expanded the business field classification (klu) code. submission of applications for the use of incentives and realization reports is carried out online via the directorate general of taxes website. msme taxpayers receive a 0.5% final income tax incentive (pp 23 of 2018) which is borne by the government (dtp). therefore, msme taxpayers do not pay the tax owed, and parties carrying out transactions with msmes do not need to withhold or collect tax. to use this msme tax incentive, msme players do not need to submit a pp 23 certificate, as in the previous minister of finance regulation, but only need to submit a realization report no later than the 20th of the following month. furthermore, the effectiveness of using this tax incentive will be seen from the level of compliance of msme taxpayers and the sustainability of msme businesses after using it, through a literature review of research that has been carried out previously (raut et al., 2017; sudrajat et al., 2022). evaluation is one level in the public policy process, evaluation is a way to assess whether a policy or program is running well or not. evaluation has various definitions, william n. dunn (2003) gives the meaning of the term evaluation that: "in general, the term evaluation can be equated with assessment, rating and assessment, words that express efforts to analyze policy results in terms of their unit value. in a more specific sense, evaluation is concerned with the production of information regarding the value or benefits of policy results. the definition above explains that policy evaluation is the result of a policy that in reality has value from the results of the policy objectives or targets. the final part of a policy process is policy evaluation (dunn et al., 2013; richardson, 2013; sager, 2018). evaluating a program or public policy requires the existence of criteria to measure the success of the program or public policy. regarding policy performance in producing information, there are evaluation criteria according to william n dunn as follows: table 1. policy evaluation criteria criteria type question effectiveness have the desired results been achieved? efficiency how much effort is required to achieve the desired results? achieve the desired results? adequacy how far the desired results are achieved solve the problem? alignment are costs and benefits distributed? evenly across groups certain? responsiveness do policy outcomes satisfy needs, preferences or values of groups accuracy are the desired results (goals) actually useful or valuable? source: william n dunn (2003:610) https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 900 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the criteria above are benchmarks or indicators for evaluating public policies. because this research uses qualitative methods, the discussion in this research is related to the questions formulated by william n. dunn for each criterion. the following is a conceptual model: method in this research, the author used a qualitative approach. a qualitative approach was used because this approach can describe "evaluation of tax incentive policies for msme players during the covid-19 pandemic in increasing taxpayer compliance at kpp pratama jakarta kelapa gading." in this qualitative research, the main instrument is the researcher himself, so that he can explore problem phenomenon: 1. the country's economy is experiencing a slowdown due to the covid-19 pandemic 2. state revenues sourced from taxes have decreased due to the covid19 pandemic 3. socialization of msme tax incentives that have not been comprehensive in the community 4. lack of public interest in final income tax incentives dtp for msme actors 5. the number of business actors who do not know and utilize msme incentive regulation: pmk nomor 44/pmk.03/2020 pmk nomor 86 /pmk.03/2020 pmk nomor 110/pmk.03/2020 pmk nomor 9/pmk.03/2021 pmk nomor 82/pmk.03/2021 policy evaluation according to william n. dunn: 1. effectiveness 2. efficiency 3. adequacy 4. alignment 5. responsiveness 6. accuracy evaluation of msme tax incentives at kpp pratama jakarta kelapa gading runs effectively. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 901 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the problems that exist within the jakarta kelapa gading primary tax service office and in society, namely the msme taxpayers (wp) themselves. in this case, researchers play an active role in creating research plans, research processes, and research implementation, so that they become determining factors in the overall research process (dixon & elston, 2019; kumala et al., 2021; swianiewicz et al., 2019). based on the characteristics of informants or sources stated by neuman, the informants or sources in this research consisted of 4 (four) informants or sources. informants are needed to find out information related to the process of implementing the rate reduction policy for taxpayers with certain business operations. these informants are: informant i : head of service section informant ii : ar sex waskon informant iii : lecturer at the stiami institute informant iv : msme taxpayers informant v : msme taxpayers informant vi : msme taxpayers in this research, the author will obtain data and information from the jakarta kelapa gading pratama tax service office. result and discussion in research conducted at the jakarta kelapa gading pratama tax service office, the author obtained two types of data, namely primary data (interviews) and secondary data (documents) which can be used as a basis for analyzing the implementation of rate reduction policies for taxpayers with certain business operations in increasing revenue. final income tax at the jakarta kelapa gading pratama tax service office. primary data the author obtained data in the form of interviews from 6 informants. the following are the results of in-depth interviews and verbatim analysis of informants 1 to informant 6 regarding the implementation of the rate reduction policy for taxpayers with certain business operations. according to informants 1 and 2, the institutions involved in policy-making have carried out their duties effectively because in the policy-making process, there are expert staff who work in their respective departments. according to informants 1 and 2, regarding the extent to which the tax incentive policy can help the pen program being implemented by the government, this msme tax incentive policy can help the national economic recovery program and can be shown through the data above. according to informants 1 and 2, related socialization, the tax authorities have socialized the msme tax incentive policy. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 902 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to informants 1 and 2 regarding the process of implementing the socialization of msme tax incentives, the socialization is currently carried out online and assistance is provided to msme actors. according to informants 1 and 2 regarding the msme tax incentive policy which will be able to overcome the problem of decreasing sources of state revenue during the covid-19 pandemic, it can be concluded that this incentive can handle the problem of decreasing revenue during the current covid-19 pandemic. according to informants 1 and 2 regarding whether the msme tax incentive policy can increase economic added value for msme taxpayers, it can be concluded that the msme tax incentive policy itself can increase economic added value for msme actors during the covid-19 pandemic. according to informants 1 and 2, the desired result of implementing msme tax incentives during the covid-19 pandemic is that the government wants msmes to be able to survive and carry out their business activities during the covid-19 pandemic because msmes themselves are the most important pillar of the country's economy. according to informants 1 and 2, regarding outreach to msme actors, it can be concluded that the government and tax authorities themselves have socialized the msme incentive policy to msme actors, both socializing the msme tax incentives themselves and how to use these tax incentives. according to informants 1 and 2, the government hopes that msmes in indonesia can survive the covid-19 pandemic and continue to innovate in carrying out their business activities. according to informants 1 and 2 regarding criticism and suggestions, the government is very willing to accept criticism and suggestions from the public. according to informants 1 and 2 regarding whether the indonesian government's policy on msme tax incentives is by the economic conditions of the community, it can be concluded that the msme tax incentive policy is very appropriate to the current economic conditions of the indonesian community. according to informants 1 and 2 regarding the level of compliance of msme taxpayers, taxpayers are not yet optimal in utilizing these incentives because they are hampered in preparing realization reports. according to informants 1 and 2, whether or not the msme tax incentive policy is appropriate during this pandemic, according to informants 1 and 2, this policy is appropriate during the covid19 pandemic. according to informants 1 and 2, regarding obstacles in implementing tax incentive policies for msmes, there are obstacles in utilizing these incentives, namely in the preparation and submission of realization reports. according to informants 1 and 2, the efforts made by the kpp to optimize msme tax incentives include assisting, outreach via social media by the social media team, (ii) outreach via whatsapp media and letters by ar, (iii) confirmation and appeals by ar to taxpayers to immediately submit realization reports, (iv) guiding by ar to taxpayers in submitting their realization reports if the https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 903 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxpayer experiences problems, (5) giving taxpayers pp 23/2018 the opportunity in the december tax period to report the realization of their incentive utilization during 2020. according to informant 3, the msme incentives are right on target and informant 3 is also aware of the existence of msme tax incentives. according to informant 3, the validity period of this msme tax incentive has been socialized. according to informant 3, the msme tax incentive policy has been socialized to msme players. according to informants, 3 msme incentive policies are of interest to msme players. according to informant 3, the validity period of this msme incentive policy has not been consistently socialized. according to informant 3, the tax authorities have informed them about the realization report. according to informants, these 3 msme incentive policies can develop businesses because the funds used to pay taxes can be allocated to these business activities. according to informant 3, supporters of this policy are to provide convenience and ease the tax burden on msme taxpayers. according to informant 3, the obstacle to this policy is the lack of understanding of taxpayers. according to informants, these 3 policies are quite helpful for msmes during the covid-19 pandemic. according to informants 4.5 and 6, msme tax incentives have been socialized by the tax authorities and are right on target. according to informants 4, 5, and 6, socialization regarding how to use this incentive has been communicated appropriately, but the informants have not been able to fully understand the policy. according to informants 4, 5, and 6, the msme incentive policy has taken advantage of this tax incentive policy. according to informants 4, 5, and 6, the msme incentive policy can influence the business activities of msme players, and taxpayers are quite interested in taking advantage of this msme incentive policy. according to informants 4, 5, and 6, the validity period of this msme tax incentive has been socialized. according to informants 4, 5, and 6, the validity period of this msme incentive policy has not been consistently socialized. according to informants 4, 5, and 6, these msme actors have been given education about realization reports, both in making and reporting them. according to informants, 4.5 and 6 realization reports have been reported every month. according to informants 4, 5, and 6, this msme incentive policy can develop businesses because the funds used to pay taxes can be allocated to these business activities. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 904 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to informants 4, 5, and 6, the obstacles faced in utilizing msme incentive policies are in the preparation and reporting of realization reports. according to informants 4, 5, and 6, further counseling and more frequent training and tax classes are needed. according to informants 4, 5, and 6, supporters of this policy are to provide convenience and lighten the tax burden on msme taxpayers. according to informants 4 and 6, the obstacles to this policy are a lack of understanding of taxpayers and a lack of understanding about the internet, for informant 5 there have been no perceived obstacles. according to informants 4, 5, and 6, this incentive is beneficial for msmes who are experiencing difficulties during the covid-19 pandemic. apart from the data in the form of interviews obtained, researchers also succeeded in obtaining secondary data in the form of documents from the data and information processing (pdi) section at the jakarta kelapa gading pratama tax service office regarding the number of registered taxpayers, effective taxpayers, along with the compliance ratio of non-msme taxpayers and msmes from 2018 to 2020. the number of registered taxpayers from 2018 to 2020 experienced a significant increase. the following is data on the number of registered taxpayers and the percentage of compliance for 2018 2020 at the jakarta kelapa gading pratama tax service office. table ii. number of taxpayers registered at the service office jakarta kelapa gading pratama tax 2018-2020 year taxpayer registered taxpayer effective spt compliance compliance ratio non msmes msmes non msmes msmes non msmes non msmes msmes 2018 75.646 16.518 27.306 8.487 30.274 7.048 110,87% 83,04% 2019 73.582 14.294 29.532 8.938 29.636 7.415 100,35% 82,96% 2020 86.606 15.507 35.109 8.916 36.935 7.570 105,20% 84,90% based on the data above, it can be seen that the growth and level of compliance of msme taxpayers registered at kpp pratama jakarta kelapa gading from 2018 2020 has increased significantly. in 2018 there were 16,518 registered msmes. in 2019 there was a decrease of 22.24% to 14,294, in 2020 there was an increase of 12.13% to 15,507. however, there are still taxpayers who are not compliant, judging by the percentage of compliance that has not reached 100 percent. based on one of the account representatives (ar) of the supervision section, to maximize the level of compliance of msme taxpayers, kpp still needs to provide further counseling to msme taxpayers in kelapa gading to provide socialization regarding this tax incentive policy. the realization of msme tax incentive receipts at the jakarta kelapa gading pratama tax service office can be seen in the following table. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 905 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table iii. number of umkm wp, active wp and wp that reported spt at the pratama jakarta kelapa gading tax services office 2018-2020 number of wp year msmes wp report active report spt 2018 16.518 7.048 7.048 2019 14.294 7.415 7.415 2020 15.507 7.570 7.570 the table above shows the number of msme taxpayers, taxpayers who actively report, and those who report spt, for the number of msmes in 2018 was 16,518 for taxpayers who reported spt in 2018 was 7,048, indicating that as many as 9,470 msme taxpayers did not report spt, then in 2019 there was a decrease in the number of msme taxpayers by 22.24% to 14,294 and those who reported spt were 7,415 indicating that 6,879 msme taxpayers did not report spt, then in 2020 there was an increase in the number of msme taxpayers by 12.13% to 15,507 and those who reported spt as many as 7,570 indicate that 7,937 msme taxpayers did not report spt. table iv comparison of the number of incentive applications and incentive realization at the pratama jakarta kelapa gading tax services office in 2020 amount of yg type submit only which percentage wp incentive submit succeed success happened on 1.047 106 941 89,88% a lot 2.442 122 2.320 95,00% total 3.449 228 3.261 90% the table above shows a comparison of the number of taxpayers who applied for incentives and those who successfully utilized the incentives. based on a review of the types of taxpayers, the majority of incentive applications were made by corporate taxpayers totaling 2,442, followed by individual taxpayers totaling 1,047. the number of people applying for sket for individuals was 106 taxpayers and the number of people applying for sket for corporate taxpayers was 122 with the success rate for utilizing incentives for individuals only being 89.88%. next, followed by corporate taxpayers reaching 95%. evaluation of tax incentive policies for msme players during the covid-19 pandemic in increasing taxpayer compliance at the kelapa gading kpp one evaluation model that can explain how a policy is evaluated is wilian n. dunn's evaluation theory where 6 (six) types serve as a benchmark for whether a policy will succeed or fail, namely: 1) effectiveness 2) efficiency https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 906 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3) adequacy 4) equalization 5) responsiveness 6) accuracy a. effectiveness (effectiveness) based on the results of interviews regarding effectiveness during the covid-19 pandemic in terms of policy formulation, the formulation is centralized in the office of the directorate general of taxes (djp). formulation is carried out at the central level by expert staff. this policy has not been effective but is quite helpful in the economic recovery program (pen) which is being implemented by the government. this is proven by the issuance of fiscal support to support msmes in the form of interest subsidies, tax incentives, and guarantees for new working capital loans for msmes. the reason this policy has not been effective is because of the 15,507 msme taxpayers who applied for incentives, 3,449 or around 22% were msme taxpayers, while 3,261, or around 21% managed to take advantage of them. b. efficiency efficiency concerns the amount of effort required to increase effectiveness, generally measured in monetary units. policies that achieve the highest effectiveness with the smallest costs are called efficient if the targets to be achieved by a public policy are very simple while the costs incurred through the policy process are too large compared to the results achieved. in terms of efficiency, there are 3 sub-indicators, namely: a) savings on costs incurred (economic) based on the results of interviews, informants conveyed that the implementation of socialization was carried out in various ways to save budget costs, one of which was via email, the internet, or social media. the conclusion is that in implementing socialization there are cost savings because the socialization process is carried out online. b) utilization of resources to achieve results based on the results of interviews, researchers concluded that one of the things that supports the implementation of socialization well is human resources (hr), including tax authorities, especially ars and also extension workers who support and provide information by holding socialization and assistance to the taxpayers who need assistance. in conclusion, according to researchers, tax authorities have informed or socialized taxpayers to convey information by applicable sops and adapt to current technological developments. the tax authorities support the implementation of the msme tax incentive policy through their respective duties and functions. c) maximizing utilization, based on the results of interviews with informants 1 and 2, the aim of this msme incentive policy is so that the wheels of the economy in indonesia continue to run well through msmes, which are very numerous in indonesia. efforts made by the tax authorities to ensure that people take advantage of this tax incentive policy are by holding socialization, then holding tax classes, and also assisting taxpayers regarding this incentive policy itself or regarding the realization report which must be reported every month to be able to take advantage of this tax incentive policy. the conclusion, according to the researchers, is https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 907 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the facilities provided by the tax authorities can maximize the use of this tax incentive policy. c. adequacy adequacy relates to the extent to which policies or activities meet needs or values in resolving problems that occur. the problems that occur are problems of a policy so that it can be concluded that the problem is included in one type of problem. adequacy can be said to mean that the goals that have been achieved are felt to be sufficient in various ways. inadequacy, there are 3 subindicators, namely: a) fulfilling target needs based on the results of interviews that have been conducted, according to informants 1 and 2 regarding whether the msme tax incentive policy can increase economic added value for msme taxpayers, it can be concluded that the msme tax incentive policy itself can increase economic added value for msme actors during the pandemic. covid-19. the conclusion is that the msme tax incentive policy can meet the needs of msme actors if it is utilized by taxpayers because the funds used for tax payments can be used for the business activities of msme actors. b) the method used is appropriate based on the results of interviews, tax authorities have utilized digital media as a means of providing information related to msme tax incentive policies. in carrying out outreach, various media are used so that the information can be conveyed to msme players. in conclusion, according to researchers, the method used is by various types of information media to socialize this policy to taxpayers who will take advantage of this incentive. c) satisfy the targets to be achieved based on the results of interviews with informants, it is said that not all taxpayers have the same understanding of this incentive, but if you look at the data the public's interest is large enough to take advantage of this incentive policy. d. equity equity concerns the distribution of consequences and efforts between different groups in society. a particular program may be effective, efficient, and covered if the costs of benefits are evenly distributed. in terms of equality, there are 2 sub-indicators, namely fairness and equal benefits received. based on the results of interviews, researchers concluded that this msme tax incentive policy can be utilized by msme players who have a certain gross turnover & and are subject to final income tax based on pp number 23 of 2018 and there is an additional incentive of 2.4 trillion from the government for this msme incentive policy. so it can be concluded that this msme tax incentive policy is fair and msme actors receive the same benefits from the implementation of this policy. https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 908 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc e. responsiveness responsiveness concerns the extent to which an activity or policy can satisfy the needs or preferences of certain community groups. in terms of responsiveness there are several sub indicators, namely: a) according to the needs, preferences, and values of a particular group based on the results of the interview, the informant said that the implementation of the msme tax incentive policy was to the conditions of society during the current covid-19 pandemic and the msme tax incentive policy was in line with community expectations and could help the community to carry out their business activities. the conclusion, according to the researchers, is that the tax authorities have implemented policies that are appropriate to the current conditions of society so that the community feels helped. b) there was positive feedback based on the results of interviews, researchers concluded that this msme tax incentive policy received a positive response from the public and the tax authorities were also ready to help the community if they experienced problems in utilizing this msme tax incentive policy. based on the results of interviews that have been conducted, according to informants 1 and 2 regarding the level of compliance of msme taxpayers, taxpayers are not optimal in utilizing these incentives because they are hampered in making realization reports. f. appropriateness appropriateness concerns the value of the program objectives and the assumptions underlying those objectives. based on the results of interviews related to the accuracy of the researchers, they concluded that the substance of the objective of the msme tax incentive policy is within the framework of national economic recovery (pen) activities which are being carried out by the government. the government hopes that with this tax incentive policy, the wheels of the economy will continue to run well and msmes in indonesia can survive during the current covid-19 pandemic. obstacles in implementing the msme tax incentive policy an obstacle is something that limits or prevents something from achieving the goals and objectives of a policy. based on the results of interviews conducted with kpp pratama jakarta kelapa gading regarding obstacles to implementing tax incentive policies for msme players, there are obstacles in using these incentives, namely in preparing and submitting realization reports. several obstacles arise in the implementation of the final pph pp 23 dtp incentives at kpp pratama kelapa gading. some taxpayers of pp 23/2018 are less proactive in knowing the latest tax policies so these taxpayers are not aware of the existence of tax incentives. meanwhile, several taxpayers in pp 23/2018 who are aware of the existence of these incentives do not yet understand that there are further obligations that must be carried out in the form of https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 909 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc submitting realization reports. some taxpayers think that tax incentives will be obtained automatically when taxpayers submit sket. regarding the realization of reporting obligations, the lack of reporting facilities and complicated reporting procedures trigger taxpayers not to take advantage of incentives. apart from obstacles from the taxpayer side, obstacles also arise from the ar side. ar has difficulty guiding taxpayers because it is not easy for taxpayers to understand the provisions through online explanations. meanwhile, the incentive administration system (djp online) for reporting realization is sometimes slow. the djp online system also provides taxpayers with the opportunity to change the transaction value in the realization report so that it can become a mode of tax avoidance. efforts to optimize msme tax incentive policies optimization efforts that have been carried out by kpp pratama kelapa gading include: a. socialization via social media by the social media team b. socialization via whatsapp media and letter media by ar, c. ar's confirmation and appeal to taxpayers to immediately submit realization reports, d. providing ar guidance to taxpayers in submitting realization reports if taxpayers experience problems, e. providing the opportunity for taxpayers of pp 23/2018 during the december tax period to report the realization of the use of incentives during 2020. despite the efforts that have been made by kpp pratama kelapa gading, several obstacles have not been resolved. an alternative solution to anticipate taxpayers who have not used whatsapp and to increase the opportunity for msme taxpayers to know about incentives is to socialize them via sms blast. apart from that, another alternative is to simplify the realization reporting procedure by only going through the website using the taxpayer's online djp account without the csv file upload procedure, such as the implementation of annual spt submissions. reporting in this way can minimize the complexity of filling out csv files, making it easier for taxpayers. conclusion based on the results of the research and discussion discussed in the previous chapter, it can be concluded that: 1. evaluation of the msme tax incentive policy using william n. dunn's approach which has 6 evaluation criteria, namely effectiveness, efficiency, adequacy, equity, responsiveness, and accuracy is still not considered effective due to the low number of msme taxpayers who take advantage of these incentives. 2. the inhibiting entities in implementing the msme tax incentive policy are msme actors. there are obstacles in using these incentives, namely in the preparation and submission of realization reports and obstacles also arise from ar. ar has difficulty guiding taxpayers because it is not easy for taxpayers to understand the provisions through online explanations. meanwhile, the incentive administration system (djp online) for reporting realization is sometimes slow. the djp online system also provides taxpayers with the opportunity to https://www.ilomata.org/index.php/ijtc evaluation of tax incentive policy for msmes in the covid-19 pandemic period in improving taxpayer compliance at the jakarta kelapa gading primary tax service office rulandari 910 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc change the transaction value in the realization report so that it can become a mode of tax avoidance. 3. the driving entity in implementing the msme tax incentive policy is socialization via whatsapp and letter media by ar, ar's confirmation and appeal to taxpayers to immediately submit realization reports, providing ar guidance to taxpayers in submitting realization reports if taxpayers experience problems, providing opportunities for taxpayers pp 23/2018 during the december tax period to report the realization of the use of incentives during 2020. based on the conclusions above, the author provides advice to tax authorities as follows: a. it would be better for tax authorities to carry out consistent, comprehensive, and more indepth outreach to msme players so that 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(2021). the covid-19 and earnings management: china’s evidence. journal of accounting and taxation, 12(2), 59–77. https://doi.org/10.5897/jat2020.0436. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 3, july 2025 page no. 1-14 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah1, marliyati2, jati handayani3, lilis mardiana anugrahwati4, dara avril titanya5 12345politeknik negeri semarang, indonesia correspondent: nikmatuniayah@polines.ac.id1 received : april 8, 2025 accepted : july 5, 2025 published : july 31, 2025 citation: nikmatuniayah., marliyati., handayani, j., anugrahwati, l, m., titanya, d, a. (2025). the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use. ilomata international journal of tax and accounting, 6(3), 1-14. https://doi.org/10.61194/ijtc.v6i3.1479 abstract: siskeudes, which is a village financial system implemented by the local government to record and report transactions for accountability of the use of village funds, is important for village officials to be accountable for its implementation. this system is expected to provide effective information to villagers. this study aims to test and analyze the influence of cooperation culture, perception of usefulness, and perception of ease of use on the use of accounting information systems (ais); as well as the indirect influence of cooperation culture on the use of ais mediated by perception of usefulness and perception of ease of use. this study investigated 10 villages sampled from the ungaran timur district, semarang regency. ungaran timur district was selected because the characteristics of the village are still closely related to the culture of cooperation. the required data were collected by a survey using a questionnaire. the collected data were analyzed using the partial least squares (pls) smart 2.0 m3 analysis tool. the results of the study demonstrate that the culture of cooperation influences the perception of usefulness, ease of use, and the use of ais. likewise, the perception of the usefulness of ais affects the use of ais, except for the ease of use factor. keywords: mutual cooperation, usefulness, convenience, information system, finance this is an open-access article under the cc-by 4.0 license. introduction as soon as the government issued law no. 6 of 2014 concerning villages, the government allocated funds (apbdesa) for village development with quite large funds. each village will receive a budget from the apbn of at least 10 percent of the district/city balancing funds in the apbd. funds of that size can be used as much as possible by the village government and the village consultative body to meet all village needs and activities. the objectives of village development are aimed at: (1) improving the quality of human life; (2) improving community welfare; (3) alleviating poverty. this development includes: fulfilling basic needs, developing village facilities and infrastructure, developing local economic potential, and utilizing natural resources and a sustainable environment. https://www.ilomata.org/index.php/ijtc mailto:nikmatuniayah@polines.ac.id https://doi.org/10.61194/ijtc.v6i3.1479 the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc how to implement village fund management by implementing an information system based on good financial governance (gfg). the principles of gfg include: accountability based on results and work, transparency in every financial transaction, empowerment of professional managers, and the existence of a strong, professional, and independent external audit institution (siti amerieska, 2015). conflict of interest is accountability, which is one of the elements of gfg, and is very much needed in the management of village finances and assets. the reason is that in the field, it was found that there were various guidelines adopted by village officials. according to (sujarweni, wiratna. v, 2015), "because there are no financial reporting standards in the village, perhaps the government can make similarities with pp no. 71 of 2010 where according to the pp, among others, budget realization report, balance sheet, cash flow report, equity change report, and notes to the financial statements." accounting information systems play an important role in public sector accountability, where accounting systems and public accountability are the main essence in managing regional government organizations. the public sector accounting infrastructure that has been built in decentralized governance is the government accounting standards (sap) stipulated in government regulation no. 24 of 2005. siskeudes is a village financial system issued by bpkp to account for village financial accountability. this financial system is filled in perpetuity and online, integrated in sub-districts and regencies. every end of the year or beginning of the year, it is audited by bkpp, the inspectorate. the biggest obstacles faced in its management are the ability of human resources and the application of the information system itself. in the research on user acceptance of information technology, one model of the technology acceptance model (tam) is used. this technology acceptance model (tam) was developed by davis by adopting the theory of reasoned action (tra). perceived ease of use and perceived usefulness are what determine individual acceptance of information technology. the formation of perceptions of togetherness and ease of use determines the attitude towards using technology, the impact will then form behavioral intention to use, and ultimately influence the use of information technology (actual technology use). next, cultural factors need to be considered because culture has a major impact on human behavior and practices in carrying out their activities (mccoy et al., 2007). (pragatha, 1995) explains that the culture owned by a person or a company organization will affect the behavior of the business being managed. (hartono, 2007: 17) explains that user behavior in tam (technology acceptance model) is an action taken by a user in the context of an it system, namely actual use. (tunnel iv, 2013) found that national culture influences the implementation of an information system. similar to rahayu's research (2012), which found that organizational culture influences the implementation of ais. thus, culture, including the culture of cooperation inherent in village life, especially in java, has a major direct impact on behavior, including the behavior of using ais. several researchers who have studied the influence of culture on accounting information systems are: renandy fauzan & sasa s suratman (2022), purnama ramadhan & rudy fachruddin (2017), ayi astuti, erina pinasti, & ari bramasto (2019), dan suardikha, i made (2013). this study replicates the research of (suardikha, i made, 2013: 102-128) who studied the "tri hita karana culture" in rural patraman bali, its influence on the accounting information system mediated by perception of usefulness and perception of ease of use. the novelty of this study lies in replacing https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the variable "tri hita karana culture" with "cooperation culture," which is inherent in the village of java island. cooperation is a principle held by people in the past, by worked together and helped each other. the traditions of sambatan, rewang, or building omah are examples of various attitudes of cooperation that are still inherent in society. this study aims to test and analyze the influence of cooperation culture, perception of usefulness, and perception of ease of use on the use of accounting information systems (ais); as well as the indirect influence of cooperation culture on the use of ais mediated by perception of usefulness and perception of ease of use. this study uses tam theory by adding cultural theory, especially cooperation culture, as its conceptual framework. tam is an it/is model developed to predict the adoption and use of it/is. both constructs have high determinants and empirically tested validity (davis, 1989). the idea of this research comes from davis (1989), srite et al. (2008), and suardikha (2011) who proved that the culture of "tri hita karana" has a direct effect on the use of ais and is indirectly mediated by the main variables of tam (perceived usefulness and perceived ease of use) as an expression of ais success. the urgency in this study is that the cultural variable "tri hita karana" is converted into "mutual cooperation culture," which is a variable of attachment in village culture in java. this study aims to test and analyze the influence of cooperation culture, perception of usefulness, and perception of ease of use on the use of accounting information systems (ais); as well as the indirect influence of cooperation culture on the use of ais mediated by perception of usefulness and perception of ease of use. accounting information system the definition of a system, according to james a. hall (2009:6), is a group of two or more interconnected components or subsystems that function with the same goal. meanwhile, according to west churchman in a book written by (krismiaji, 2010:1), a system is defined as a series of components that are coordinated to achieve a series of goals. based on this understanding, a system is a series of interconnected components to achieve the same goal. information systems, according to romney in a book written by (krismiaji, 2010:16), are organized ways to collect, enter, process, and store data, and organized ways to store, manage, control, and report information in such a way that an organization can achieve its stated goals. meanwhile, according to james a. hall (2009:9), an information system is a series of formal procedures in which data is collected, processed into information, and distributed to users. based on this understanding, an information system is a series of organized ways to process data and produce information. accounting information system is a system that processes data and transactions to produce useful information for planning, controlling, and operating a business (krismiaji, 2010:4). meanwhile, according to james a. hall (2009:10) accounting information system is processing various financial transactions and non-financial transactions that directly affect the processing of financial transactions. it can be concluded that the definition of accounting information system is the process of presenting information from processing transaction data, both financial and nonfinancial, for the benefit of the company's business. (krismiaji, 2010:6) states that the accounting https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information system has four cycles, which are the main cycles: revenue cycle, expenditure cycle, conversion cycle, general ledger, and reporting cycle. the revenue cycle is a cycle that adopts various sales and cash receipt systems. the expenditure cycle is a series of systems aimed at procuring goods, purchasing, cash disbursements, and payment of debt settlements. the conversion cycle includes various systems such as salaries and wages, inventory, production, and cost accounting. while the general ledger and reporting cycle is the final stage of recording, starting from transaction evidence, journaling, posting to the general ledger, adjustments, and working papers, financial reports are generated. technology acceptance model (tam) this study uses the technology acceptance model (tam) theory, which is a model that is widely used in research to examine information technology acceptance behavior. perceived ease of use and perceived usefulness are two key indicators that determine individual acceptance of information systems. formation of perceptions of usefulness and ease of use determines attitudes toward use (attitude toward using technology ), in turn forms behavioral intention to use, and ultimately influences the use of information technology (actual technology use). the tam model developed by davis has been widely reviewed, replicated, and developed by other researchers. research on behavioral aspects in the use of information technology continues to develop, as conducted by adamson shine, barnett et al., fagan et al., jones et al., and ilias & nazirah. the results of these studies indicate that the tam model can consistently and validly explain the behavior of accepting information technology. some researchers also add the tam model with several external variables that determine the perception of usefulness and ease of use. external variables used include individual variables, organizational variables, culture variables, and task characteristics. village financial system: cash receipts and disbursements village financial system: an integrated financial system to record the receipt and expenditure of village funds and other funds received by the village government. villages in financial management must be transparent and accountable, so an accountable and user-friendly village financial application is needed. the database uses microsoft access, so it is more portable. this application is used at the village level, district level as a compilation (sql). control of opening the application consists of user_id, password, and user level. administrator level in the district, and operator level in the village. cash receipts by the village government, according to permendagri no. 113 of 2014, can be in the form of village income sourced from original village income, transfer income, other income, or financing receipts. meanwhile, cash expenditures by the village government can be in the form of spending in the field of village government administration, village development implementation, community development, unexpected fields, or for cost expenditures. the cash receipt and cash expenditure accounting information system provides useful information for management decision-making. the preparation of village financial statements https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc involves several activities as follows (yuliansyah & rusmianto, 2015): first, village regulations are established on the village revenue and expenditure budget (apbdesa). the village government conducts financial transactions, namely cash receipts, which are a source of village income, and cash expenditures in the form of spending to run village operations and programs. based on the payment request letter and proof of cash receipt, the village treasurer records in cash books (general cash book, tax subsidiary book, and bank book). the village treasurer posts the cash book to each account in the ledger. then the treasurer makes a trial balance, which is a summary of the balances of each account in the ledger. the village treasurer calculates and makes adjustments to accounts related to current assets to prepare the village asset report. the village treasurer prepares financial reports. figure 1. village financial administration cycle source: minister of home affairs regulation no. 113 of 2014 organizational culture: mutual cooperation according to burnett (in ndraha 2003), culture has a broad technographic meaning including science, beliefs, arts, legal morals, customs, and various other abilities and habits acquired as members of society. (kreitner & kinicki, 2004: 532) state that organizational culture is the social glue that binds members of an organization. every human being is influenced by the culture in which they live. there are four dimensions of organizational culture according to hofstede (1980, 1984), namely: individualism; power distance, avoidance of uncertainty, and masculinity. abdillah (2006, p. 4) said, "cooperation is an activity carried out together and voluntarily so that the activities carried out can run smoothly, easily and lightly". cooperation is working together to complete work and together enjoying the results of the work fairly. in this cooperation, work is https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc carried out together, selflessly, and voluntarily by all residents. this cooperation and mutual assistance have been carried out since ancient times in the kingdom era, both on the island of java and the archipelago. the following are the principles of gotong royong contained in the life of the village community: 1. sincerity of participation and togetherness/unity. 2. help each other and prioritize common/public interests. 3. efforts to adjust and integrate/unify one's interests with common interests. previous research and hypothesis amerieska, siti (2015). the results of the study indicate that in the management of village finances and assets, there is still superiority of human-centered accountability, which can be seen from the level of accountability, where the first level is addressed to the supervisory board (bpd, village consultative body). budhi adiani (2015) studied the measurement of customer satisfaction towards academic services in 2014 at the semarang state polytechnic. the results of the study showed the level of satisfaction with academic services in each type of service. rini handayani (2010) researched the factors that determine the effectiveness of information systems in public sector organizations. the results of the study showed that top management, information system management, and information systems statistically had a positive effect on the effectiveness of information systems, user satisfaction. nikmatuniayah (2014) researched the professional ethics model of excellent service of village officials in increasing public trust. the results of the study were that there was an influence of the application of professional ethics (responsibility and moral integrity) on public trust, both directly and indirectly through excellent service of village officials in banyumanik district, semarang. nikmatuniayah, budhi adiani, and lilis mardiana (2018) designed a village accounting information system based on sap. nikmatuniayah et al.'s research (2019) on "study of determining factors of acceptance and use of village accounting information systems in semarang regency". the results of the study showed the influence of external factors on the actual use of computer-based accounting information systems in semarang regency. about the purpose of village accounting aimed at public service, continued on the village financial and asset management model based on sharia enterprise theory. leading research of the study program nikmatuniayah et al. (2019). the idea of this research comes from davis (1989), srite et al. (2008), and suardikha (2011) who proved that the “tri hita karana” culture has a direct influence on the use of ais and is indirectly mediated by the main variables of tam (perceived usefulness and perceived ease of use) as an expression of ais success. the urgency in this study is that the “tri hita karana” cultural variable is converted into “mutual cooperation culture,” which is a variable of attachment in javanese village culture. the influence of mutual cooperation culture on perceived usefulness, perceived ease of use, and use of ais: h1a: mutual cooperation culture influences perception of usefulness h1b: mutual cooperation culture influences ease of use https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h1c: mutual cooperation culture influences the use of ais the influence of mutual cooperation culture on the use of ais mediated by the main variable of tam h2: mutual cooperation culture influences the use of ais mediated by perception of usefulness and perception of ease of use. the influence of perceived usefulness and perceived ease of use on ais use h3a: perceived usefulness influences the use of ais h3b: perceived ease of use affects the use of ais. method population is a generalization area consisting of objects/subjects/subjects that have certain qualities and characteristics determined by the researcher , to be studied and then conclusions drawn (sugiyono, 2011, 73). the population used in this study was all the villages in semarang regency. while the sample is part of the number and characteristics possessed by the population (sugiyono, 2011, p. 70). the sampling technique used is quota sampling, which involves selecting samples from a population that has certain characteristics up to the desired number. semarang regency consists of 19 sub-districts, which are divided into 208 villages and 27 sub-districts. ungaran barat and ungaran timur sub-districts were selected as samples because they are classified as densely populated and developed areas. by the study of this study on the implementation of the village law, samples were taken from 5 villages in ungaran barat sub-district and 5 villages in ungaran timur sub-district. the data used in this study are primary. research location: semarang regency. data collection is accessed through the distribution of questionnaires in selected villages. the questionnaire was distributed to selected respondents in may-june 2022. the questionnaire was sent out for two months, and the returned and complete questionnaires were further processed. the questionnaire of this research was arranged in the form of closed statements using a five-level likert scale. the questionnaire was adopted from (suardikha, 2011) with the addition of the variable “mutual cooperation culture”. the questions in the questionnaire were measured using a likert scale, which is a scale that can measure the subject's response into 5 points (hartono 2008, 131). the questionnaire was distributed directly to respondents by field officers (students). indepth interviews were conducted by researchers with key informants, namely sekdes mluweh and kalikayen. the research hypothesis was tested using the pls smart 2.0 m3 program to produce a fit model in order to test the research hypothesis. research variables include: (1) mutual cooperation culture: cooperation is working together to complete work and together enjoy the results of the work fairly. in this cooperation, work is carried out together, selflessly, and voluntarily by all residents. (2) perception of usefulness: the level of individual belief that the use of ais will improve their performance. (3) perception of ease of use: the level of a person's belief that the https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc use of ais is easy and will be free from the user's effort. (4) use of ais: an action taken by a person related to ais or interaction between a person/professional and ais. table 1. research variables and indicators variables variable concept research indicators culture of mutual cooperation cooperate fairly and voluntarily 1. sincerity of participation and togetherness/unity. 2. help each other and prioritize common/public interests. 3. efforts to adjust and integrate/unify one's interests with common interests. perception of usefulness confidence level: the use of sia improves performance 1. performance 2. productivity 3. effectiveness perceived ease of use the level of confidence in using sia is easy and free 1. learning 2. interaction 3. experience use of sia a person's interaction with sia 1. transaction processing cycle 2. budgeting/work plan making 3. internal control process figure 2. research framework perception of usability mutual cooperation perception of ease of use uses of ais https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion semarang regency is a regency in central java province with ungaran as its capital. the area of semarang regency is 981.95 km2 with a total population of 978,253 (2009). semarang regency consists of 19 subdistricts, which are further divided into 208 villages and 27 urban villages. areas that have dense settlement density or distribution are the city center area (ungaran district), areas along the semarang-bawen corridor, and areas directly bordering semarang city and salatiga city. the livelihoods of the population in semarang regency are generally still working in agriculture, which is in accordance with the potential of the region. semarang regency is still mostly agricultural land. rural areas in semarang regency are in accordance with village law no. 6 of 2014, which states that a village is an area whose residents or communities make their main livelihood in the agricultural, farming, or agrarian sectors (yuliansyah & rusmianto, 2016). this village is still closely related to its culture, namely: gugur gunung, sadranan, sedekah bumi, which is usually called gotong royong or cooperation. cooperation is a form of social solidarity for personal or group interests. cooperation can also be expanded as working together in all fields, including finding solutions to various problems faced by the community, including materials, manpower, money, and intellectual contributions from donors, the community, and government budgets. the focus of this study is mutual cooperation with a mutual assistance system and cooperation with a voluntary work system. in the village locations of semarang regency, recording and reporting of village fund finances have been attempted using the village financial system, or what is called siskuedes. after conducting an initial investigation, according to the user, the implementation of siskeudes has not been able to meet all reporting needs according to the village sap. the system can only meet planning, budgeting, and general cash reports. the problems in using siskeudes faced by villages in the ungaran district are more related to human resources and the sia application itself. the questionnaires were distributed in ten envelopes sent to the villages of west ungaran, including branjang, keji, lerep, and nyatnyono villages. five more were sent to the villages of east ungaran, including: mluweh, kalikayen, leyangan, kawengen, and kalongan. the ones with the largest responses were mluweh, kalisidi, branjang, and lerep. meanwhile, kawengen village did not return due to the busyness of the village officials in preparing for the august commemoration. the questionnaires were sent on august 8 to the villages of mluweh, kalikayen, kawengen, kalongan, and leyangan. the remaining 5 envelopes were sent to the villages in west ungaran: keji, nglerep, branjang, nyatnyono, and kalisidi on august 10. the next questionnaires were taken on august 30 and 31, except for kawengen village, which did not return. the questionnaire was filled out by the siskuedes admin, treasurer, and village secretary, mostly; the rest were village officials from the finance, government, and service sections. respondents who sent answers were viewed by gender; most were male, as many as 60%, the rest were female, as much as 40%. for age, the majority were 40 and above, so there may be a lack of understanding of technology, considering the level of education of 60% high school. viewed from the length of work, it is known that most respondents have worked for more than 10 years. meanwhile, from the perspective of difficulty and interpretation, the understanding and mastery of siskuedes are still weak, with most respondents, as many as 56%, admitting to having difficulty operating siskuedes. https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. length of service frequency percent valid percent cumulative percent valid < 5 years 18 39.1 39.1 39.1 6-10 years 8 17.4 17.4 56.5 > 10 years 20 43.5 43.5 100.0 total 46 100.0 100.0 table 2. siskuedes difficulties frequency percent valid percent cumulative percent valid yes 26 56.5 56.5 56.5 no 20 43.5 43.5 100.0 total 46 100.0 100.0 the reasons for the difficulty in understanding and mastering siskuedes as the only financial application are: proof of purchases is not the same as the rab, in filling out the menu, which is long-winded and complicated, even though it is only for simple data input purposes. https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. r square & average variance extracted r square r square adjusted utility 0.306 0.291 convenience 0.362 0.347 use of sia 0.462 0.423 cronbach's alpha rho_a composite reliability average variance extracted (ave) cooperation 0.921 0.937 0.938 0.716 utility 0.941 0.953 0.948 0.607 convenience 0.900 0.903 0.916 0.500 use of sia 0.940 0.947 0.947 0.547 table 5. fornell-larcker criterion cooperation utility convenience use of sia cooperation 0.846 utility 0.554 0.779 convenience 0.601 0.765 0.707 use of sia 0.496 0.656 0.584 0.740 figure 3. structural model https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6. mean, stdev, t-values, p-values original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p valu es gotong royon' -> usefulness 0.554 0.586 0.124 4.456 0.000 mutual cooperation > convenience 0.601 0.643 0.079 7,571 0.000 mutual cooperation > use of sia 0.158 0.158 0.228 0.695 0.487 uses -> use of sia 0.468 0.496 0.154 3,046 0.002 ease -> use of sia 0.131 0.103 0.220 0.594 0.553 table 7. mean, stdev, t-values, p-values original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev| ) p valu es mutual cooperation -> usefulness -> use of sia 0.259 0.293 0.123 2.107 0.03 6 mutual cooperation -> convenience -> use of ais 0.078 0.069 0.145 0.541 0.58 9 based on the research results, it is known that the culture of cooperation has a significant positive effect on the usefulness of ais. the culture of cooperation has a significant positive effect on the ease of ais. the culture of cooperation has an insignificant positive effect on the use of ais. the influence of culture on the use of ais is significant, the same as the research of (suardikha i made, 2013: 102-128). this shows that the culture of cooperation in the form of sengkedan, sedekah bumi, and sambatan shows local wisdom cooperation, where public interests are prioritized over personal interests. about the village financial information system, the sense of responsibility of village financial holders in accounting for village funds is influenced by the culture of cooperation. this culture of togetherness and prioritizing public interests fosters a sense of responsibility and understanding of the use of village ais. the following results: the usefulness of ais has a significant positive effect on the use of ais. the higher the perception of usefulness, the higher the value of the use of this ais. this significant positive effect on the use of ais is in line with the research of haryono & darsono (2014: 123). haryono & darsono studied the use of accounting information systems at pt. pos indonesia yogyakarta branch. the ease of ais has a positive but insignificant effect on the use of ais. usefulness can mediate, while ease is not proven. understanding of usefulness can mediate the positive influence on the use of ais. the use of ais in this case, siskuedes, brings benefits in increasing the accountability of village financial reports. except, the ease variable does not affect the use of ais. this is due to the lack of understanding of technology in the village's financial information system. village officials, treasurers who are mostly high school educated, with an age range of 40 years and above, experience limitations in operating the village's ais. conclusion based on the research results, it is known that cooperative culture has a significant positive effect on the usefulness of ais and the ease of ais. mutual cooperation culture has a positive but insignificant effect on the use of ais. the usefulness of ais has a significant positive effect on the use of ais. then, the ease of https://www.ilomata.org/index.php/ijtc the influence of gotong royong culture on the use of accounting information systems mediated by perception of usefulness and perception of ease of use nikmatuniayah, marliyati, handayani, anugrahwati, and titanya 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ais has a positive but insignificant effect on the use of ais. the usefulness factor is able to act as a mediator, while ease is not proven. the results of this study are limited to village partners who are relatively close to the city, so that understanding of technology is certainly different if respondents have different cultures or environments that are still rural, far from the city, and there is no easy access. for further research, it can be continued with research on "local government good governance model towards industry 4.0". how the village government, especially the village, can be empowered and move towards clean governance. thanks to p3m semarang state polytechnic for facilitating providing dipa polines research funds. funding agencies did not influence the design, execution, analysis, interpretation, or preparation of the manuscript. thanks are also extended to the village heads and village officials in ungaran regency who were willing to be resource persons. reference adams, d. a., nelson, r. r. & todd, p. a. 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(2016). village accounting. jakarta: salemba empat publisher https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 202-220 202 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange dewi rejeki1, siti nurlatifah2 12krisnadwipayana university, indonesia correspondent: sitinurlatifah@unkris.ac.id2 received : november 14, 2023 accepted : january 9, 2024 published : january 31, 2024 citation: rejeki, d., nurlatifah, s. (2024). the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange. ilomata international journal of tax and accounting, 5(1), 202-220. https://doi.org/10.52728/ijtc.v5i1.1045 abstract : mining sector companies have an important role for the country, because the contribution given is very significant and affects economic growth in indonesia. this mining sector company has an impact on the continuous use of natural resources, even though the available natural resources are very limited to meet human needs and take a long time to renew. based on the development of profitability of mining sector companies in indonesia for four years, from 2019-2022 there was a decrease in profitability in 2019-2020. this decrease was caused by several factors, including the covid-19 pandemic, contract delays and cancellations, the company's awareness of environmental activities decreased resulting in a decrease in company awareness of social and environmental which included environmental costs, environmental disclosure, and environmental performance. the reason of this observe is to prove the impact of the implementation of green environmental costs, environmental disclosure, and environmental performance on profitability in mining sector companies listed on the company's indonesia stock exchange as well as the indonesia stock exchange. the approach used is a quantitative technique using secondary statistics in the shape of reports and annual reports on mining area corporations indexed on the indonesia stock exchange (idx) the duration ofc2019-2022 as many as 32 samples. the data analysis techniques used are descriptive statistical tests and multiple linear regression tests. the outcomes of this observe prove that partly environmental costs have a negative and significant impact on profitability, environmental disclosure has no impact on profitability, environmental performance has a positive have an effect on profitability. simultaneously, environmental expenses, environmental disclosure, and environmental overall performance concurrently or collectively have an significant impact on profitability. keywords: environmental cost, environmental disclosure,environmental performance and profitability this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:sitinurlatifah@unkris.ac.id https://doi.org/10.52728/ijtc.v5i1.1045 the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 203 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction the increase in the number of companies established in indonesia shows that the economy is getting more advanced and stronger. the primary goal of starting a enterprise is to turn a profit. because by making a profit, most of the companies can survive and develop so that they can achieve their goals (“rejeki dewi,” 2023). in the general public, the growth of enterprises is often associated with the process of increasing production and wages in economic activity. it cannot be separated from the community around which the company stands. the firm activities are expected not only to think about maximizing its profitability but to improve the surrounding environment that supports the company's activities (tisna et al., 2020b). in the industrial era 4.0, the company's demands not only focus on owners and management, but all parties such as consumers, employees, society & the environment. thoughts based on companies, related to the interests of several parties such as the environment, this is because environmental aspects have benefits for the surrounding community and have benefits for the company in the long run (dwicahyanti & priono, 2021). there are many companies in the capital market in indonesia with various area, one of which is a branch of mining. the mining sector has an important role for the country, because the contribution made by the mining sector is very significant and affects economic growth in indonesia. mining sector companies produce natural resources such as metal minerals, fuel management and rocks. simply put, mining sector companies carry out natural resource management activities. quoted on the page (katadata, 2021) since 2000, every quarter the central statistics agency (bps) records growth in mining sector companies. the mining and quarrying sector grew by 7.78% from year to year and the third quarter of 2021, the highest level since 1995. this mining sector company has an impact on the continuous use of natural resources, even though the available natural resources are very limited to meet human needs and take a long time to renew. the company will implement a variety of different strategies to maximize the profit results obtained. this can be illustrated by the movement of profitability of mining area corporations in 2019-2022 in indonesia. the following is a graphic image and average profitability, as measured via return on assets: illustration -1 development of profitability of mining sector companies listed on the indonesia stock exchange 2019 2022 source: data processed by researchers, 2023 1.47% 0.25% 3.47% 4.78% 0.00% 2.00% 4.00% 6.00% 2019 2020 2021 2022 development of profitability of mining sector companies listed on the indonesia stock exchange 2019-2022 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 204 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc founded on the data in illustration 1, it shows that profitability in 2019 was 1.47%, in 2020 profitability decreased by 0.25%, in 2021 it increased by 3.47% and in 2022 it experienced a rapid increase of 4.78%. it be able to explained that the development of profitability of mining sector companies in indonesia for four years has decreased in 2019-2020. this could be visible from the ratio cost that has declined in 2019-2020. the decline in profitability in 2019-2020 become caused by the covid-19 pandemic, settlement delays and cancellations, the employer's awareness of environmental activities decreased resulting in a lower in the organisation's consciousness of social and environment. another factor that affects the decline in profitability, namely environmental factors, during the covid-19 pandemic environmental factors also decreased. these environmental factors include environmental costs, environmental disclosures, and environmental performance. environmental costs decrease because the enterprise's operating doings are limited so as to the profits obtained by the company decrease and environmental costs incurred decrease (damayanti, se., m.si. & widyowati, 2022). the decrease in environmental disclosures is because companies only disclose voluntary and incomplete environmental disclosures so that contributions made by companies are not visible to the public and investors (ningtyas & triyanto, 2019). meanwhile, environmental performance decreases because operational activities are limited so that it affects the company's environmental activities and causes environmental performance to decrease (lestari et al., 2020) as stated by the director general of environmental pollution and damage control of the ministry of environment and forestry (klhk), sigit reliantoro who expressed his disappointment with several companies in indonesia that put aside ethics in doing companies in order to reap more profits in the midst of a pandemic and not a few companies that made the covid-19 pandemic as an excuse for not implementing their commitments in carrying out their social responsibility. companies that care about environmental problems have a tendency to enhance long-term financial performance, because by being environmentally responsible, the company will be valued by stakeholders and improve the company's image. consequently, environmental accounting present as one of the answers to clear up environmental sustainability issues. so that companies do not carelessly use natural resources without caring about future impacts (w sri et al., 2018). according to (sari & wahyuningtyas, 2016) environmental accounting is a new accounting mechanism that focuses on data collection, analysis, and reporting for social and environmental items and transactions rather than financial objects and transactions. according to vol 2 (no 1). psak number 33 of 2011, environmental accounting is a strategy for managing and disclosing environmental responsibility in manufacturing companies. the purpose of implementing environmental accounting is one of the most effective ways for businesses to meet public demand. the point of interest of most of the people is not only on the corporation's financial performance however on environmental factors. in addition, the implementation of environmental accounting is a favorable factor for both investors and potential investors. as a result, businesses are no longer limited to reaping the benefits of their investments while also taking steps to mitigate risks associated with the company's operational strategy. in this study, environmental accounting has three disclosures i.e. environmental costs, environmental disclosure and environmental performance. according to (zainab & burhany, 2020) environmental costs can also be defined as expenses incurred due to terrible environmental quality https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 205 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc or as expenses that can arise, and consist of expenses associated with activities such as detection and investigation of environmental damage, detection and monitoring of the environment, monitoring and treatment of waste. while according to (ningtyas & triyanto, 2019) environmental disclosure is a shape of corporate social responsibility to fulfill the activities carried out by the company in fulfilling its social responsibilities in the form of true and complete disclosure reports in accordance with applicable disclosure standards, namely the global reporting initiative (gri) standard. in addition, environmental performance is also one way to increase profitability. according to (lako, 2018), environmental performance is the corporation's performance so that the environment is more useful to prevent environmental damage. environmental overall performance is guided by means of the quantity of environmental damage resulting from enterprise activities.if the level of environmental productivity increases, there will be a slight increase in damage. lack of attention to the environment can lead to serious problems. even though companies that establish their businesses around residents' residences have made agreements with the community to carry out their activities based on applicable norms and rules. if this is violated, then the company can lose the trust of the community. therefore, the government through the ministry of environment and forestry established the enterprise performance score evaluation application in environmental management (proper) to prosperous the corporation's role in preserving the environment. the outcomes of the proper assessment might be announced regularly in the corporation's annual report so that it can be seen by the public. with the help of this assessment, the general public can easily understand the extent of environmental control association finished through the corporation (lako, 2018). based at the history that has been defined, the reason of the trouble on this study is to empirically show the effect of the implementation of environmental fees, environmental disclosure and environmental overall performance on profitability in mining sector agencies indexed on the indonesia inventory trade 2019-2022 each partly and simultaneously. environmental accounting environmental accounting as the method of identifying, measuring cost, recording, summarizing, reporting and disclosing data about items, transactions, activities or the effect of economic, social and environmental activities of the enterprise on society, the environment and the enterprise itself in reporting accounting information so one can offer relevant information for users of accounting information in the decision-making process. there are three (3) unique qualitative characteristics of green accounting information which are very beneficial in comparing choice-making checks for customers, specifically: (1) accountability; (2) integrated and comprehensive; and (three) obvious (lako, 2018). according to (ikhsan, 2008a) environmental management accounting is the method of identifying, accumulating, estimating, analyzing, reporting, and transmitting data approximately (1) information primarily based on material and energy flows, (2) records primarily based on environmental expenses, (3) different measurable statistics for decision making for the corporation. environmental management accounting is the method of identifying, accumulating, estimating, analyzing, reporting, and transmitting data approximately (1) information primarily https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 206 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on material and energy flows, (2) records primarily based on environmental expenses, (3) different measurable statistics for decision making for the corporation. according to (hansen & mowen, 2014), environmental management accounting is basically a combination of information from financial accounting and cost accounting to improve efficiency, reduce environmental impact and risk and reduce environmental protection costs. implementation environmental accounting what the corporation does is an attempt from the corporation to satisfy the wishes of stakeholders, due to the fact the focus of stakeholders isn't always only from the corporation's financial factors, however also related to the corporation's environmental factors, whether or not the enterprise will pay interest to the environmental effect of the corporation's operational activities. (damayanti & widyowati, 2022). a enterprise is stated to play a position in protecting the environment if the organisation can pay interest to the environment itself. the shape of corporate duty towards the environment is through environmental care, environmental involvement, environmental reviews and environmental audits. environmental costs information environmental expenses consistent with (hansen & mowen, 2014) are those expenses incurred because of bad high-quality or negative environmental nice which can arise. so, environmental expenses relate to the introduction, detection, repair, and prevention of environmental degradation. at the same time as the environmental expenses according to (zainab & burhany, 2020) states the costs associated with the possibility or presence of poor quality in an unfavorable surrounding environment. results of previous research conducted by (damayanti, se., m.si. & widyowati, 2022) states that the better the environmental costs incurred through the corporation will depend on the corporation profitability. environmental costs are costs incurred by companies to fulfill their corporate social and environmental responsibilities. environmental expenses are used to prevent or repair environmental damage because of the company's operational activities. that is supported by way of other studies performed by using (sholikin & setiawan, 2018) and (tisna et al., 2020b) which states that environmental costs affect profitability. but it is one of a kind from the studies performed via (lestari & wangi, 2020)(asjuwita & agustin, 2020) which states that environmental costs have no impact on profitability. environmental disclosure understanding environmental disclosure according to (suhardjanto and miranti 2009) in (sulistiawati & dirgantari, 2017a) it is a form a form of corporate social responsibility through environmental disclosure within the annual report wherein the network can screen the activities finished by using the company in satisfying its social responsibility voluntarily. environmental disclosure has been stated in the applicable law number 47 of 2012 regarding responsibility and environment of restricted liability organizations in article 6 which states that the implementation of social and environmental responsibility is disclosed inside the corporation's annual report and sustainability report and accounted for inside the popular general meeting of shareholders (gms). environmental disclosure aims to be an intermediary medium for the world https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 207 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of companies, the general public, and investors which is then established as a guiding principle in articulating points of view from both economic, social, and political fields (ikhsan, 2008b). research results by (ningtyas & triyanto, 2019) shows that environmental disclosures affect profitability and the studies is in line with studies carried out with the aid of (wijayanti, 2021). according to (haninun et al., 2018), environmental disclosure has an effect on profitability. but it is different from the research conducted by (damayanti, se., m.si. & widyowati, 2022) and (lestari et al., 2019), which states that environmental disclosures have no effect on profitability. environmental performance understanding environmental performance according to (ningtyas & triyanto, 2019), is a mechanism for the company or company performance in creating and integrating an excellent environment and maintaining the environment. based on the opinions of experts (sulistiawati & dirgantari, 2017b) and (lestari et al., 2019) stating environmental overall performance is the corporation's overall performance in keeping the sustainability of the corporation's environment due to damage caused by the company itself. the company has a responsibility and concern for the environment by being attentive to the environment. the company must have good environmental performance, as an effort to worship companies that are environmentally friendly or care about the environment. so that it can increase the trust of the general public and traders in the corporation. if the environment around the company is healthy, then its productivity will also increase. alternatively, a company's performance may be characterized as subpar if it fails to adequately explore or understand its environment. today, many important organizations are working to raise awareness of the environmental crisis, so businesses must continue to monitor and protect ecosystems around them. from the definition above it is able to be concluded that environmental overall performance is an effort made by the corporation in protecting the surrounding surroundings because of corporation activities.when the company carries out activities, the process of activities carried out through the corporation can have a positive and negative impact. the problem that often occurs is the physical impact caused by the company on the environment, for example water pollution, air, and biodiversity destruction. so that damage due to the corporation's operational activities will cause the company to be seen as having poor environmental performance. the outcomes of studies conducted by (lestari et al., 2020), (rajak, 2022), (wati et al., 2021) and (ningtyas & triyanto, 2019), stating that environmental performance has an impact on profitability. however it isn't consistent with studies by (asjuwita & agustin, 2020), (olivia et al., 2022)and (damayanti, se., m.si. & widyowati, 2022), which states that environmental overall performance has no impact on profitability. the purpose of establishing the company is to meet human needs for products and maintain the company's existence, by improving all company activities and optimizing those obtained through increasing product sales and minimizing operational costs. this can be measured using the profitability ratio (yuni, 2022). according to (kasmir, 2010), profitability is used to evaluate a corporation's capability to seek income and also presents a degree of the extent of effectiveness of the control of an corporation. this is indicated by using the earnings generated from income and https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 208 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investment earnings. the lowest line is that profitability indicates the efficiency of the corporation. profitability is a corporation's potential to make a earnings. (ramdhonah et al., 2019), profitability is one of the essential factors of the corporation, because further to presenting excellent appeal for investors who will invest their finances in the corporation additionally as a degree of the effectiveness and efficiency of the use of all assets inside the corporation's operational strategies. according to (kasmir, 2010), the profitability ratio is a ratio to evaluate the corporation's potential to are looking for earnings. this ratio also affords a degree of the extent of control effectiveness of an corporation. this ratio also offers a measure of the extent of control effectiveness of an enterprise. that is indicated by means of the income generated from sales and funding earnings. in essence, using this ratio shows the efficiency of the corporation. it can be concluded that profitability is the corporation's overall performance on the effectiveness and performance of the use of enterprise finances to get profits and estimating how much the company's performance to get these profits. according to (kasmir, 2010) profitability is a ratio to assess a employer's capacity to make a income.. this ratio additionally provides a degree of the level of control effectiveness in the company. this is indicated by the earnings generated from sales and investment income in a length. table-1 research sample criteria no research sample criteria number of companies 1 number of mining sector companies on the indonesia stock exchange in 2019-2022 49 2 who does not meet the criteria: 3 mining sector companies that do not publish complete financial statements and annual reports each year end as of december 31, 2019-2022 (12) 4 mining sector companies that do not report financial statements in rupiah during the 2019-2022 period (13) 5 mining sector companies that did not participate in proper during the 2019-2022 period (5) 6 mining sector companies that do not disclose environmental costs 20192022 (4) 6 loss-making mining sector companies (5) 7 number of issuers (2019-2022 period) 8 8 number of samples (x4 years) 32 source: data processed by researchers, 2023 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 209 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method the studies was performed by using taking secondary information in the shape of financial statements and annual reports on mining area corporations indexed at the indonesia stock exchange (idx) for the duration of the 2019-2022 duration via the reputable website of the indonesia efek exchange, www.idx.. co.id. this study uses quantitative methods to obtain empirical evidence of factors that affect profitability with the variables used, specifically independent variables and dependent variables. in this study using 3 (three) independent variables, specifically environmental costs, environmental disclosure and environmental performance; and the dependent variable is profitability. population and research sample the population used on this observe is mining corporations indexed at the indonesia stock exchange (idx) for the 2019-2022 duration with a population of 49 corporations. wherein the statistics used in this take a look at are secondary records within the form of annual reviews and sustainability reviews received from the reputable website of the indonesia stock exchange (idx) www.idx.co.id and the professional website of mining corporations in indonesia. the sampel sampling method the use of the purposive sampling technique was obtained as shown in table-1 below, where the results are obtained a total of 8 (eight) mining sector companies with a total of 32 samples that can be processed. the following is a table of research sample criteria: data analysis techniques the information analysis used in this study is descriptive statistical evaluation that's a statistics analysis technique with the aim of providing an overview to describe research variables ranging from minimum value, maximum value, mean value and standard deviation (hastuti & ghozali, 2019). after conducting descriptive statistical analysis, the next stage that needs to be done is the classical assumption take a look at in the shape normality test, multicollinearity test, heterokedasticity test and autocorrelation test. if the results are normally distributed, then multiple linear regression analysis and model feasibility test are carried out, namely the coefficient of determination partial regression coefficient test (t test) and simultaneous regression coefficient test (f test). r2) results and discussion overview of the research object the object of this study is 8 (eight) mining sector companies with a total of 32 samples listed on the indonesia stock exchange (idx) in the 2019-2022 period. the financial statements used are annual reports and sustainability reports of mining sector companies published on the indonesia stock exchange the names of mining sector companies can be seen in the table as follows: https://www.ilomata.org/index.php/ijtc http://unknown/?id=rid15 the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 210 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 list of mining sector companies listed on the indonesia stock exchange that are research samples no company code company name 1 alka alaska industindo tbk 2 antm aneka tambang tbk 3 feeling cita investindo tbk 4 ifsh ifishdeco tbk 5 intp indocement tunggal prakarsa tbk 6 ptba bukit asam tbk 7 smcb solusi bangun indonesia tbk 8 smmt golden eagle energy tbk data analysis techniques the data analysis technique used in this study is multiple linear regression analysis technique, which is a data analysis technique used to examine the influence of independent variables on dependent variables partially or simultaneously. multiple linear regression analysis was performed using the spss for windows program version 26.0. the steps of data analysis of this study are as follows: (1) descriptive statistical test (2) conducting classical assumption tests consisting of normality tests, multicollinearity tests, heteroscedasticity tests, and data autocorrelation tests. the classical assumption test aims to ensure that the research data are eligible for multiple linear regression analysis. (3) compiling multiple linear regression equations based on the results of data analysis including model feasibility tests (f tests) to test whether the regression model used is feasible or not and partial significance tests (t tests) to test whether the independent variable has a significant effect on the dependent variable. the t-test is also performed using a significance level of 5% or 0.05. if the probability value (sig.) is less than the level of significance, then the independent variable has a significant effect on the dependent variable described in the discussion. descriptive statistical test results descriptive statistical assessments in this study obtained effects based on table-1 as follows: table-3 descriptive statistical results descriptive statistics n minimum maximum mean std. deviation environmental costs 32 .0009 1.6437 .111206 .2975794 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 211 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc environmental disclosure 32 .0667 .6667 .353125 .1714078 environmental performance 32 2 5 3.22 .975 profitability 32 .0028 .3926 .096172 .1061119 valid n (listwise) 32 source: data processed by researchers, 2023 from the outcomes of descriptive statistics on independent variable (x1), namely environmental costs calculated by the environmental cost index have a minimum value of 0.0009, then a maximum value of 1.6437, an average value (mean) of 0.111206, and a standard deviation value of 0.2975794. from the outcomes of descriptive statistics on the independent variable (x2), namely environmental disclosure calculated using the corporate social responsibility disclosure index (csrdi) shows a minimum value of 0.0667, a maximum value of 0.6667, an average value (mean)0, 0, 0, 0,35125 and a standard deviation value of 0.1714078. from the outcomes of descriptive statistical tests on independent variables (x3), namely environmental performance calculated using the company performance rating assessment program in environmental management (proper) from the entire sample of mining sector companies, none received a black proper rating. companies that have a minimum value of 2 (red proper rating category) are pt alaksa industrindo tbk, pt cita investindo tbk, pt ifishdeco tbk for the 2019-2022 period. then the maximum value of 5 (gold proper rank category) is pt bukit asam tbk in 2019, 2021, and 2022. for the mean value of 3.22, and the standard deviation value of 0.975. from the outcomes of descriptive statistics on the dependent variable (y), namely profitability calculated using return on assets (roa) shows a minimum value of 0.0028, a maximum value of 0.3926, an average value (mean) of 0.096172, and a standard deviation value of 0.1061119. classical assumption test results 1. normality test results the nomality test in this study obtained results based on table-4 as follows: table 4 normality test results kolmogorov-smirnov test one sample non-standardized residuals n 32 normal parametersa,b mean .0000000 std. deviations .95007834 the most extreme differences absolute .146 positive .109 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 212 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc negative -.146 statistical test .146 asim. sig. (2-tailed) .083c source: data processed by researchers, 2023 based on the results of the n iormalitas test in the table above, it can be known that the value of asymp. sig (2-taileid) seibeisar 0.083 ≥ 0.05. so, it can be concluded that the test results show normal distributed data. 2. heterokedasticity test results the heterokedasticity test in this study obtained results based on table-5 as follows: table 5 heterokedasticity test results coefficient pattern non-standardized coefficients standard coefficient t sig. b error std. beta 1 (constant) .356 .724 .492 .627 environmental cost (x1) .041 .053 .140 .760 .453 environmental disclosure (x2) -.271 .217 -.342 1.248 .222 environmental performance (x3) .252 .399 .170 .632 .533 source: data processed by researchers, 2023 based on the table above, the results of the x1 variable sig value of 0.453 ≥ 0.05 were obtained. then the results for the variable x2 are known sig values of 0.222 ≥ 0.05. and the results for the intuik variable x3 are known sig values of 0.533 ≥ 0.05. thus, it can be drawn to that the test results show no symptoms of heterodasticity. 3. autocorrelation test results the autocorrelation test in this study obtained results based on table-6 as follows: table 6 greetings autocorrelation test modelb summary pattern r r square customize d r square std. estimation error durbinwatson 1 .798a .638 .599 .70977 .985 source: data processed by researchers, 2023 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 213 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the table above, it is known that the value of durbin-watson (d) value is 0.985 with a significance of 5%, obtained results of 0 < 0.985 < 1.2347, so that until this result shows that the ilmodel used is free or does not occur positively. 4. multicollinearity test results the multicollinearity test in this study obtained results based on table-7 as follows: table 7 multicollinearity test results coefficient pattern collinearity statistics tolerance vif 1 environmental cost (x1) .947 1.056 environmental disclosure (x2) .430 2.323 environmental performance (x3) .445 2.245 source: data processed by researher 2023 based on the table 7 it is known, for variable x1 is environmental cost of 0.947, then for variable x2 is environmental disclosure of 0.430, and for variable x1 is environmental performance of 0.445. all three variables are greater than 0.10. multiple linear regression test results primarily based on the effects of the classical assumption test that has been achieved, it is able to be visible that the information in this observe meet the standards indicated by using normally disbursed information, no multicollinearity, free of autocorrelation, and no heterokedasticity. which means that the information is certified to apply multiple linear regression models. primarily based on statistics evaluation using ibm spss 25, the subsequent equation may be formulated: y = a + b1x1 + b2x2 + b3x3 + ei so, the results of the regression equation are obtained as follows: y = -6.616 + (-0.531) x1 + (-0.273) x2 + 1.256 x3 +e information: y : profitability a : constant b1, b2, b3 : regression coefficient https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 214 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc x1 : environmental cost x2 : environmental disclosure x3 : environmental performance ei : error rate the regression equation above indicates the relationship most of the independent variable and the dependent variable in element. the effects of the multiple linear regression test can be seen inside the following table: table-2 multiple linear regression test results source: data processed by researchers, 2023 the effect of environmental costs on profitability primarily based on the table above, it may be visible that environmental cost (x1) in the significance level a = 0.05. 0.000 ≤ 0.05 with a partial test result (t-test) of -6.516 it is able to concluded that h1 is rejected. in this situation, environmental expenses are partly affected by profitability. with a negative constant value of 0.531 indicates a negative influence of the dating among environmental cost and profitability. this means that every time a company discloses the value of environmental costs, it reduces the price of profitability. conversely, if the company does not disclose the value of environmental costs, it will add value to profitability. in the short term, environmental costs have an effect on reducing the profitability of the enterprise. however, within the lengthy run by incurring environmental costs, the enterprise gets an excellent picture or picture within the eyes of stakeholders and the network. thus, it can increase the trust of stakeholders and the public to be able to invest or buy products or use company services in order to enhance the business enterprise's financial overall performance. the effects of this observe are consistent with studies carried out with the aid of (tisna et al., 2020a) i.e. environmental costs negatively have an effect on the profitability of the enterprise. the study states that increased environmental costs can reduce a company's profitability. this is because coefficientsa type unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -6.616 1.103 -5.999 .000 environmental costs -.531 .081 -.762 -6.516 .000 environmental disclosure -.273 .331 -.143 -.827 .415 environmental performance 1.256 .607 .353 2.069 .048 https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 215 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc environmental costs are additional costs incurred by the company. this result is also reinforced by (ladyve et al., 2020), which states that environmental costs are considered a corporate expense. the same thing was also expressed by (damayanti, se., m.si. & widyowati, 2022), (sahputra et al., 2020) and (onyinyichi et al., 2017), which states that environmental costs have an impacton profitability. the effect of environmental disclosure on profitability furthermore, primarily based at the table above, it is able to also be visible that environmental disclosure (x2) in the significance level a = 0.05 which is 0.415 ≥ 0.05 with partial test results (ttest) of -0.827, it can be concluded that h2 is accepted. in this case, partial environmental disclosure has no effect on profitability. a negative constant value of -0.273 indicates the absence of an effect of the relationship between environmental disclosure and profitability. this means that the small amount of environmental information disclosure made by the company does not affect the size of a company's profitability. this is because mining companies have not disclosed complete information related to the environment in accordance with the applicable disclosure standards, namely the global reporting initiative (gri) standards, resulting in no significant influence between environmental disclosure and profitability. research conducted by nuraini (2010) in (damayanti, se., m.si. & widyowati, 2022) states that the company will only disclose good information and will not disclose if such information is badnews because it is considered to damage the company's reputation and will reduce investor confidence in the company. this result is also reinforced by (sahputra et al., 2020) which states that the company only makes environmental disclosures with sober information. the same thing was also expressed by (lestari & wangi, 2020) and (wati et al., 2021) which states that environmental disclosure variables have no effect on profitability. the effect of environmental performance on profitability finally, primarily based at the table above, it is able to also be visible that environmental performance (x3) has a significance of a = 0.05, which is 0.048 ≤ 0.05, with partial test results (ttest) of 2.069, it is able to be concluded that h3 is rejected. in this case, environmental overall performance partially affects profitability. with a positive constant value of 1.256 shows a positive have an effect on of the connection among environmental overall performance and profitability. this means that every time a company discloses the value of environmental performance, it'll growth the cost of profitability. conversely, if the company does not disclose the value of environmental performance, it will reduce the value of profitability. studies performed (lestari & wangi, 2020) states that there is an impact of environmental performance on profitability. in the study stated that if the company's environmental performance has increased, the company's profitability level will increase, as well as if the company's environmental performance is low, the level of profitability decreases. that is supported by means of studies performed through (ladyve et al., 2020) which states that with good environmental performance will also get a good response from investors and stakeholders and also have an impact on increasing income in the long run. this is reinforced by research (wijayanti, 2021), (wati et al., 2021) (manrique & martí-ballester, 2017), (haninun et al., 2018) and (rajak, 2022) which states that environmental performance affects profitability. https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 216 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effects of environmental costs, environmental disclosures, and environmental performance on profitability simultaneously, the f-test results were obtained at 16.420 with a significance value of 0.000 less than 0.05 (0.000 < 0.05). it can be concluded that environmental cost, environmental disclosure, and environmental performance simultaneously or together have a significant effect on profitability. this shows that environmental costs, environmental disclosures, and environmental performance can make a company's profitability rise or even fall. the results of this study are in line with research conducted by (sahputra et al., 2020) which states that reporting company activities related to environmental performance and environmental costs is one way to send positive signals to stakeholders so as to increase profitability. environmental disclosure contains information related to environmental activities to stakeholders correctly, completely and in detail so that it will affect profitability. this result is also acknowledged by (damayanti, se., m.si. & widyowati, 2022) which states the disclosure of environmental expenses incurred in the implementation of the corporation's social and environmental duty, it can reduce the company's profitability. so that environmental overall performance and environmental disclosure are important because they aim to help companies in managing environmental costs so can be allocated appropriately so that the company gets a sustainable business image, which is capable of offer benefits not only for the enterprise and the community but also the surrounding environment. conclusions based at the outcomes of studies carried out in checking out environmental expenses, environmental disclosure and environmental overall performance on profitability in mining corporations indexed on the indonesia stock exchange inside the 2019-2022 duration, the subsequent conclusions may be drawn: 1. environmental value variables have a negative and significant impact on profitability in mining corporations indexed at the indonesia inventory exchange inside the 2019-2022 period. this suggests that the more environmental costs disclosed, the less profitability it describes. conversely, if the company does not disclose the value of environmental costs, it will add value to profitability. increased environmental costs can reduce a company's profitability. this is because environmental costs are additional costs incurred by using the corporation so as to lessen the corporation's profitability. 2. environmental disclosure variables have no effect on profitability in mining companies indexed on the indonesia stock exchange in the 2019-2022 duration. this is because the mining company still does not disclose data associated with the surroundings completely in accordance with the applicable disclosure standards, namely the global reporting initiative (gri) standards, because the company will only disclose good information and will not disclose if the information is bad news because it is considered to damage the company's reputation and will reduce the interest and trust of investors to invest. https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 217 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. environmental performance variables have a positive influence on profitability in mining companies indexed on the indonesia stock exchange in the 2019-2022 duration. so, it can be concluded that the better the environmental performance of a company will add value to profitability. conversely, any decrease in environmental performance will reduce the value of the company's profitability. 4. environmental value variables, environmental disclosure, and environmental overall performance simultaneously or collectively have a significant impact on profitability in mining businesses indexed at the indonesia stock exchange within the 2019-2022 duration. reporting company activities associated with environmental costs and environmental performance is one manner to send positive indicators to stakeholders in order to increase profitability. environmental disclosure contains information related to environmental activities to stakeholders correctly, completely and in detail so that it will affect profitability. recommendations 1. advice for academics the outcomes of this examine may be considered for further research. further research is expected to continue research related to profitability based on other factors. factors related to the environment such as environmental accounting, environmentally friendly products, environmental activities, environmental involvement and reporting, and environmental awareness and audits or factors that are not related to the environment such as working capital, good corporate governance, corporate value, leverage, wisdom and company size so that they can benefit other interested parties. 2. advice for the company from the outcomes of this have a look at, it is predicted that corporations might be extra stimulated to pay unique interest to the surrounding surroundings. the corporation need to be more able to improve the quality of a good environment to create a comfortable and healthy environment, so that those who benefit not only the surrounding but the company also feel the benefits. 3. advice for external parties the results of this study are expected to help external parties such as investors and shareholders in making decisions to entrust the funds they will invest or lend to a company, and provide an overview of social responsibility and environmental impacts that arise. the real implication of the results of this study is that mining companies in indonesia should pay attention to the impact of environmental costs, environmental disclosures, and environmental performance on their profitability. from statistical test data, it can be seen that environmental costs have a negative and significant influence on profitability, which means that companies must look for ways to reduce environmental costs without sacrificing environmental quality. environmental disclosure has a positive influence on profitability, which means that companies must increase their transparency and accountability in reporting their environmental activities to stakeholders. environmental performance also has a positive influence on profitability, which means that companies should strive to improve their environmental performance by implementing environmentally friendly practices, such as energy saving, emission reduction, and waste https://www.ilomata.org/index.php/ijtc the effect of the implementation of environmental accounting on profitability in mining sector companies listed on the efek indonesia exchange rejeki & nurlatifah 218 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management. thus, mining companies can increase their profitability while fulfilling their social responsibility to the environment. reference asjuwita, m., & agustin, h. 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(2018). analisis komparasi penerapan green accounting (studi kasus pada industri batubara dan industri logam tahun 2014-2016). jurnal akuntansi & keuangan unja, 3(4), 9–18. wati, l., kusumawati, n., a, e. t., & n, a. t. (2021). pengaruh penerapan green accounting terhadap profitabilitas pada perusahaan sub sektor industri kimia. national conference on applied business, education, & technology (ncabet), 1(1), 660–672. https://doi.org/10.46306/ncabet.v1i1.53 wijayanti, m. (2021). likuiditas, kinerja lingkungan, dan pengungkapan lingkungan terhadap profitabilitas (studi empiris pada perusahaan manufaktur yang terdaftar di bei tahun 2015-2019). ummagelang conference series, 509–522. yuni, l. w. (2022). pengaruh profitabilitas terhadap nilai perusahaan dengan kebijakan deviden sebagai mediasi. jurnal cendekia keuangan, 1(1). https://doi.org/10.32503/jck.v1i1.2192 zainab, a., & burhany, d. i. (2020). biaya lingkungan, kinerja lingkungan, dan kinerja keuangan pada perusahaan manufaktur. industrial research workshop and national seminar, 26– 27. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 574-589 574 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax maria yoaneta tia1, syarif m. helmi2, elok heniwati3 123universitas tanjungpura, indonesia correspondent: b1034211018@student.untan.ac.id1 received : march 13, 2024 accepted : april 22, 2024 published : april 30, 2024 citation: tia, m, y., helmi, s, m., heniwati, e. (2024). does the culture of hanging out affect taxpayer compliance in paying vehicle tax. ilomata international journal of tax and accounting, 5(2), 574-589. https://doi.org/10.61194/ijtc.v5i2.1207 abstract: there are motor vehicle tax arrears in pontianak which are increasing every year so it is necessary to examine whether the consumptive factor hanging around taxpayers can influence taxpayer compliance. this research aims to explore the influence of a consumer lifestyle, especially in the context of hanging out activities, on taxpayer compliance in paying motor vehicle tax (pkb) in pontianak, west borneo. the research method used in this research is descriptive quantitative. the data used is primary data using a questionnaire via google form. the population of this study were taxpayers who were registered and domiciled in pontianak, west kalimantan with a sample size of 191 people and used a simple random sampling method. this research data was tested using the spss version 29 software. the analytical method used are linear multiple regression and moderated regression analysis (mra). the results show that the variables of hanging out and group hanging out behavior have a significant effect on compliance with paying pkb. however, the frequency of hanging out and spending on hanging out activities did not show a significant influence. tax awareness does not significantly moderate the relationship between hanging out variables and tax compliance. the implication of this research is to encourage the implementation of an approach that is more focused on utilizing social norms and social interactions in community hangout culture to strengthen tax awareness and obligations, especially related to motor vehicle taxpayer compliance. keywords: hanging out culture, taxpayer awareness, taxpayer compliance this is an open access article under the cc-by 4.0 license. introduction every year there is an increase in the number of motorized vehicles, so the number of taxpayers also increases (hidajat, 2018). of course, this can have a very good impact, namely with the high interest in motor vehicle ownership, it is hoped that the taxes collected by the regional government will also increase (anggraeni & sulistyowati, 2020). https://www.ilomata.org/index.php/ijtc mailto:b1034211018@student.untan.ac.id https://doi.org/10.61194/ijtc.v5i2.1207 does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 575 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the increase in regional tax revenue on motorized vehicles must of course be in line with the level of payment compliance for taxpayers (putri et al., 2023). however, in reality this is inversely proportional because there are still many taxpayers who do not balance awareness with compliance in paying taxes. thus, many unpaid tax installments increase every year (thamrin, 2024). this is proven by registered data on motor vehicle tax arrears in west borneo reaching idr 920,619,426,442 which consists of 686,069 unit motorbikes and 53,674 unit four-wheeled vehicles and above that have not paid their vehicle tax (tribun pontianak, 2020). the ability of taxpayers to carry out a consumptive lifestyle is increasing so that they are able to consume goods that are categorized as luxury goods. therefore, the government is trying to direct consumer behavior by collecting taxes on taxable goods which are included in the luxury goods category (sriwahyuni, 2014). a consumer lifestyle in society can increase regional income (rahayu & kustina, 2019). with the existence of taxes, the government can inhibit people's consumptive lifestyle (murthi et al., 2018). imposing a low tax rate on goods other than those included in the luxury goods category will make people tend to choose these goods (prabowo et al., 2019). with the increasing growth of shopping centers and coffee shops on a global scale, it is directly proportional to the number of enthusiasts. apart from the availability of adequate accommodation, advertising through social media and mass media can also build consumer behavior in society (subagio, 2019). current desires in consumer life are no longer based solely on needs, so this behavior tends to reach an excessive level. consumptive behavior is generally defined as behavior that often prioritizes desires over needs without a clear priority measure (armilu, 2022). in other words, consumption is excessive behavior in using goods and services. the context of consumer lifestyle behavior is very broad and is not only understood as fashion, but also includes food, excessive use of electricity, purchasing luxury goods, and many others. one of the consumer behaviors that influences people's social culture is the culture of hanging out. hanging out is a gathering activity carried out by an individual or with other people around them. the culture of hanging out has become a modern culture that is commonly practiced by all people. with the various choices offered by these hangout places, people have a variety of choices so that this creates an attractive lifestyle for taxpayers and without realizing it, dependence on hanging out activities is quite high (fauzi et al., 2016). this need is then facilitated by the industries that participate in it, thereby creating consumer behavior towards the industry being offered. the culture of hanging out can have positive value if it is assessed from the perspective of socializing fellow people, to interact with each other and let go of tiring routines. in this hangout activity, of course the owner of the hangout location will offer a variety of menu products that are available to be enjoyed at that time at a certain price. for example, if you calculate one time hanging out, you will spend rp 15,000 to rp 100,000 and if you hang out 3 (three) times a week, you will spend around rp 2,340,000 to rp 15,600,000 which is not a small amount. this kind of hanging out culture can make it difficult for people to set aside funds for other needs outside of primary needs, such as compliance with paying vehicle tax. for various reasons, taxpayers avoid and ignore compliance with the obligation to pay vehicle tax. in research by (anggraeni & sulistyowati, 2020), (kowel et al., 2019), (krisnadeva & merkusiwati, 2020), (marilyn & ruslim, 2023), (susanti & melani, 2018) and (wangi et al., 2023) show that awareness of taxation can have an influence on taxpayer compliance. this can happen because the public can realize the importance of implementing taxpayer obligations without coercion which can influence decisions in complying with their obligations. however, this is not in line with the https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 576 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research of (alfiani & subadriyah, 2018), (dewi et al., 2022), and (joni, 2021) which show that tax awareness cannot influence taxpayer compliance. this happens because tax awareness is not a determining factor that shows a taxpayer's compliance. taxpayer compliance can be influenced by intentions where intentions are expressed through taxpayer awareness (justin & arfianti, 2023). tax awareness is people's knowledge regarding taxes (rinanto et al., 2022). a person's level of awareness regarding taxation can be seen from how well the taxpayer understands the regulations provided. the higher the tax awareness, the higher the taxpayer's tax compliance (karyanti & nafiah, 2022; ramadhan et al., 2022). with the large number of taxpayers who have not paid vehicle tax due to low interest and awareness of taxpayers, this research intends to determine the level of taxpayer compliance more broadly regarding the influence of the background of consumer society on tax compliance in motorized vehicles in the people of pontianak in west borneo with tax awareness as a moderating variable. attribution theory attribution theory is a theory first put forward by fritz heider in 1958 and then developed by bernard weiner in 1974. attribution theory explains how an individual's behavior in carrying out a task or something that can be done or not can be influenced by something. this influence can come from internal or external circumstances. behavior caused by internal states is behavior that is within the individual's control (hargiyarto & witono, 2024). meanwhile, behavior that is influenced by external circumstances is an individual's attitude that is influenced from outside the control of the individual who is forced to behave by something (anggraeni & sulistyowati, 2020). attribution theory in this research is very relevant to be used as the main theory in explaining taxpayer behavior which is caused by internal factors, namely taxpayer awareness, frequency of hanging out, and spending on hanging out and external factors, namely places to hang out and hanging out behavior which change a person's attitude, namely mandatory attitude. tax in determining the willingness or unwillingness to pay motor vehicle tax. compliance theory compliance theory is a theory that is defined as an individual's condition in which the individual obeys the orders or rules given or not (wangi et al., 2023). an appropriate compliance theory can also force someone to be more compliant with applicable laws, just as taxpayers try to fulfill their obligations by paying taxes on time. compliance theory in tax compliance can be defined as taxpayer obedience in fulfilling all tax obligations in accordance with the provisions of tax laws and regulations (anggraeni & sulistyowati, 2020; kowel et al., 2019). tax compliance is notification of income and tax compliance that is in line with applicable regulations and laws (wardani & wati, 2018). this statement describes that taxpayers who comply with regulations will report their taxes properly and correctly, and pay all tax debts right before they are due without any influence from the tax authority (ghozali, 2017). conformity theory conformity is a type of social influence in which an individual changes his attitudes and behavior to be in line with applicable social norms (crandall & stangor, 2005). by doing this, the individual will behave according to the rules that he considers proportional and adhered to by a group. conformity behavior will emerge when the individual follows the behavior or attitudes of a group which causes pressure from the group, either real or imagined. conformity spreads cultural values https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 577 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and customs, “group beliefs” that are important in society. based on the statement above, conformity theory can be concluded as a change in individual attitudes and behavior caused by pressure or pressure created by a group, where the individual tries to be in line with the habits or customs of that group (fitriyani et al., 2013; myers, 2010). the effect of hanging out frequency on tax compliance attribution theory explains that individual behavior in carrying out tasks, especially in fulfilling tax obligations, can be influenced by internal factors. it can be noted that taxpayers who often hang out are more likely to ignore their obligations due to frequent hanging out. the frequency of people's hanging out habits regarding tax compliance by fulfilling their obligations in paying motor vehicle taxes can be seen from how often taxpayers spend their time in a week hanging out. the more often taxpayers spend their time hanging out, the lower the level of compliance in paying vehicle tax. h1: there is an influence on the frequency of hanging out on the level of taxpayer compliance. the influence of hanging out places on tax compliance attribution theory explains that an individual's behavior can be influenced by external factors (anggraeni & sulistyowati, 2020). when taxpayers are faced with hangout places of different quality, the expenses that taxpayers will spend may be different. like the hangout places for foreign brands such as starbucks, where the average drink price range is idr 40,000 to idr 50,000 compared to the usual coffee shop which has a drink price range of idr 10,000 to idr 20,000. so, the expenses that taxpayers will spend will be different and the hangout places that taxpayers go to will be able to influence taxpayer compliance with motor vehicles. h2: there is an influence on where you hang out on the level of taxpayer compliance. the effect of hanging out expenditures on tax compliance based on the bank indonesia glossary dictionary, expenditure is a payment made currently for obligations in the future to obtain several benefits; if made for operational costs, the expenditure is called operational costs; cash costs of obtaining goods, services, or business results. attribution theory explains that an individual's behavior can be determined by that individual's control. the hanging out costs that taxpayers will spend will of course vary. the higher the funds spent by taxpayers on hanging out, the more difficult it is for taxpayers to set aside funds to pay taxes. h3: there is an influence of hanging out spending on the level of taxpayer compliance the influence of group hanging out behavior on tax compliance attribution theory explains how an individual's behavior can be influenced by external factors. based on conformity theory, group behavior is an interaction between one or more individuals who join together to achieve the desired goal. this group behavior in hanging out is seen from whether the taxpayer is hanging out, alone or with friends. in a larger matter, the behavior of individuals in a particular group can shape the behavior of a community of taxpayers who are obedient in fulfilling their obligation to pay taxes. this is caused by the construction of society which is a collection of individuals who have the same views on the same object. so, it can be assessed whether the taxpayer is able to carry out his obligations in paying vehicle tax when acting alone or with friends. https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 578 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h4: there is an influence of group behavior on the level of taxpayer compliance the influence of taxpayer awareness moderates the frequency of hanging out on tax compliance based on attribution theory, taxpayer awareness is an internal state that originates from oneself to behave obediently (hargiyarto & witono, 2024). tax awareness in society can explain the situation where taxpayers know their obligations towards taxation and have a sense of willingness or willingness to fulfill their tax obligations for their involvement in the country, which will be used to support the country's development. taxpayers' tax awareness in paying taxes will be lower if taxpayers spend a lot of time hanging around and don't remember their obligations. the more time taxpayers spend hanging out, the less awareness taxpayers have of fulfilling their obligations to pay taxes. h5: there is an influence on taxpayer awareness in moderating the frequency of hanging out on tax compliance the influence of taxpayer awareness in moderating hanging out places on tax compliance tax awareness is the taxpayer's willingness to carry out their obligations and provide taxpayer involvement to the state which supports the country's development. if taxpayers know that choosing a place to hang out can result in greater expenses, they will not be able to fulfill them and will tend to ignore their obligations and awareness of taxation will be lower. the theory of conformity in hangout places is just to maintain a status symbol, in order to maintain one's appearance and prestige. the thoughts and behavior of society are formed because each individual has their own motives for being in that social environment, and a need arises that must be fulfilled to gain and maintain relationships with other people and their social environment. h6: there is an influence on taxpayer awareness in moderating where hangouts influence tax compliance the influence of taxpayer awareness moderates hanging out expenditures on tax compliance tax awareness of taxpayers in paying their obligations is one of the awareness of citizens. the higher the awareness of citizens, the higher the morality of taxation (alfiani & subadriyah, 2018). if taxpayers are aware that paying taxes is important, taxpayers will limit their spending on hanging out and start fulfilling their obligations in paying taxes. h7: there is an influence on taxpayer awareness in moderating hanging out spending on tax compliance the influence of taxpayer awareness moderating group hanging out behavior on tax compliance conformity is a change in the attitudes and behavior of an individual caused by pressure built by a group, where an individual tries to conform to the norms that exist within the group. in terms of taxpayer awareness, group behavior can influence individual actions. if a group is aware of its obligations in paying vehicle tax, the greater the action of each individual in the group to participate in paying their vehicle tax (wangi et al., 2023). this is because group behavior can influence individual behavior in acting and thinking due to the similarity of behavior in groups. https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 579 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h8: there is an influence on taxpayer awareness in moderating group hanging out behavior which influences tax compliance. method the research method used in this research is descriptive quantitative. this research uses primary data, namely data obtained by filling out a questionnaire that using google forms. primary data was obtained by distributing questionnaires to taxpayer respondents. respondents’ answers are measured with likert scale with a value of 1 indicating strongly disagree to 5 indicating strongly agree. the population of this study are taxpayers who were registered and domiciled in pontianak, west kalimantan. the sample in this research was 191 people. the sampling technique used in this study was simple random sampling. the data obtained was analyzed using spss version 29 software. the analytical method used are multiple linear regression analysis which is useful for testing independent variables against their dependents and moderated regression analysis (mra) is used to test the moderating variables. result and discussion characteristics of respondents who are motor vehicle tax payers there were 191 taxpayer respondents in pontianak, west borneo who were used as samples in this research. the characteristics of the respondents can be seen in the table below: table 1. characteristics of motor vehicle tax payer (pkb) respondents characteristics information number of people percentage (%) gender male female 105 86 55% 45% total 191 100% age 20-29 30-39 40-49 5059 > 60 56 45 48 37 5 29.3% 23.6% 25.1% 19.4% 2.6% total 191 100% level of education elementary school junior high school senior highschool diploma bachelor, master, doctor 2 2 31 17 139 1% 1% 16.2% 8.9% 72.8% total 191 100% occupation self-employed private sector employees civil servants temporary employees other 35 48 40 13 55 18.3% 25.1% 20.9% 6.8% 28.8% https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 580 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc total 191 100% average monthly income 2,000,000 – 3,000,000 3,000,000 – 5,000,000 5,000,000 – 8,000,000 8,000,000 – 10,000,000 >10,000,000 57 50 35 13 36 29.8% 26.2% 18.3% 6.8% 18.8% total 191 100% type of vehicle owned motorcycle car 130 61 68.1% 31.9% total 191 100% source: processed primary data (2024) there is a gender balance between the characteristics of male and female taxpayer respondents. the age range of tax respondents is taxpayers who are of productive age as evidenced by the respondents' ages being between 20-29 years. most taxpayer respondents have a high educational background, namely 80% have a diploma or bachelor's degree. for jobs, taxpayers tend to be spread evenly between permanent and non-permanent workers. some taxpayer income ranges are above the umr (regional minimum wage) of pontianak, namely in the range of idr 2,000,000 idr 3,000,000 by 29.8% and up to idr 5,000,000 by 26.2%, which is dominated by respondents who own motorcycle. descriptive statistics the following is a table of descriptive statistical test results: table 2. results of descriptive statistical analysis variable n answer frequency average answer minimum maxsimum frequency of hanging out 191 7 25 16 place of hanging out 191 5 25 14 hanging out spending 191 5 23 14 hanging out group behavior 191 5 25 16 taxpayer awareness 191 10 25 21 taxpayer compliance 191 11 25 19 frequency of hanging out * taxpayer awareness 191 90 575 303 place of hanging out * taxpayer awareness 191 85 625 297 hanging out spending* taxpayer awareness 191 50 525 298 hanging out group behavior * taxpayer awareness 191 90 625 337 source: processed primary data (2024) https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 581 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the statistical data in table 2, it can be seen that the variable frequency of hanging out (x1) has a minimum value of 7, a maximum of 25, and an average of 16. the variable place of hanging out (x2) has a minimum value of 5, a maximum of 25, and an average of 14 the hanging out spending variable (x3) has a minimum value of 5, a maximum of 23, and an average of 14. the hanging out group behavior variable (x4) has a minimum value of 5, a maximum of 25, and an average of 16. the taxpayer awareness variable (z) has. minimum value 10, maximum 25, and average 21. the taxpayer compliance variable (y) has a minimum value of 11, maximum 25, and average 19. results of descriptive analysis on the variable taxpayer awareness moderates the frequency of hanging out (x1.z) has a minimum value of 90, a maximum of 575, and an average of 303. the taxpayer awareness variable moderating place of hanging out (x2.z) has a minimum value of 85, a maximum of 625, and an average of 297. the taxpayer awareness variable moderates hanging out spending (x3. z) has a minimum value of 50, a maximum of 525, and an average of 298. the taxpayer awareness variable moderating group hangout behavior (x4.z) has a minimum value of 90, a maximum of 625, and an average of 337. instrument quality test in testing the quality of this research instrument, the pearson correlation formula was used, the test criteria were measured based on the significance of α = 0.05. an indicator instrument is said to be valid if it obtains a sig. value < 0.05. reliability testing uses cronbach's alpha calculations, with cronbach's alpha > 0.60 being tested, it is said to be reliable, whereas cronbach's alpha < 0.60 is not reliable. in the validity test results, each indicator for each research variable obtained a significant value of <0.05, thus each questionnaire item showed that the data was valid because it had a significant value of <0.05. the results of the reliability test on the variables hanging out frequency (x1), hanging out places (x2), hanging out expenditure (x3), hanging out group behavior (x4), taxpayer awareness (z), and taxpayer compliance (y) show reliable values with cronbach's alpha > 0.60. classic assumption test the classical assumption test in this research used the normality test carried out with the kolmogorov-smirnov test, the heteroskedasticity test carried out with the glejser test, and the multicollinearity test by looking at the tolerance values and variance inflation factors (vif). this classical assumption test is used with the aim of finding out the parametric value of the estimator used is correct and unbiased. https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 582 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. classic assumption test result variabel normality heteroskedasticity multicollinearity t vif equation 1 frequency of hanging out 0.200 0.506 0.952 1.050 place of hanging out 0.745 0.682 1.465 hanging out spending 0.228 0.843 1.187 hanging out group behavior 0.734 0.764 1.308 equation 2 frequency of hanging out 0.200 0.433 0.952 1.051 place of hanging out 0.775 0.659 1.517 hanging out spending 0.256 0.840 1.191 hanging out group behavior 0.747 0.717 1.395 taxpayer awareness 0.140 0.815 1.226 frequency of hanging out * taxpayer awareness 0.781 0.530 1.885 place of hanging out * taxpayer awareness 0.694 0.418 2.395 hanging out spending* taxpayer awareness 0.217 0.501 1.997 hanging out group behavior * taxpayer awareness 0.635 0.482 2.075 source: processed primary data (2024) in the results of the kolmogorov-smirnov test, equations 1 and 2 have an asymp value. sig (2tailed) 0.200 > 0.05. thus, it can be concluded that the residual data is normally distributed. in the heteroscedasticity test results of equations 1 and 2, each variable has a probability value > 0.05. thus, it can be concluded that in equations 1 and 2 there is no heteroscedasticity. in the multicollinearity test results for equations 1 and 2, it can be seen that each variable has a tolerance value > 0.10 and a vif value < 10. thus, it can be concluded that equations 1 and 2 do not indicate multicollinearity. multiple linear regression analysis and moderated regression analysis this analysis is used to test the influence of the independent variables, namely frequency of hanging out (x1), places to hang out (x2), spending on hanging out (x3) and group hanging out https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 583 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc behavior (x4) on the dependent variable, namely taxpayer compliance (y). the results of multiple linear regression analysis are shown in table 4 as follows: table 4. multiple linear regression analysis and moderated regression analysis test results variable b t sig. multiple linear regression analysis (constant) 12,156 9,217 0,000 frequency of hanging out -0,049 -0,972 0,332 place of hanging out 0,194 3,554 0,000 hanging out spending 0,112 1,704 0,090 hanging out group behavior 0,210 3,763 0,000 f = 16,901 0,000 adjusted r square = 0,251 moderated regression analysis (constant) 13,275 3,018 0,003 frequency of hanging out -0,079 -1,670 0,097 place of hanging out -0,041 -0,118 0,906 hanging out spending -0,149 -0,466 0,641 hanging out group behavior -0,051 -0,169 0,866 taxpayer awareness 0,089 0,405 0,686 frequency of hanging out * taxpayer awareness 0,005 1,716 0,088 place of hanging out * taxpayer awareness 0,006 0,381 0,704 hanging out spending* taxpayer awareness 0,011 0,696 0,487 hanging out group behavior * taxpayer awareness 0,007 0,504 0,615 f = 22,481 0,000 adjusted r square = 0,504 source: processed primary data (2024) based on the results of linear regression analysis, the regression equation obtained is y = 12.156 0.049x1 + 0.194x2 + 0.112x3 + 0.210x4. in the linear regression analysis, a constant value was obtained of 12.156, the regression coefficient value for hanging out frequency (x1) was negative at 0.049, hanging out places (x2) was 0.194, hanging out expenditure (x3) was 0.112, and group hanging out behavior (x4) was 0.210. based on the results of data processing in equation 2, the regression equation is obtained, namely y = 13.275 0.079x1 0.041x2 0.149x3 0.051x4 + 0.089z + 0.005x1.z + 0.006x2.z + 0.011x3.z + 0.007x4.z. in the moderated regression analysis, a constant value was obtained of 13.275, the regression coefficient value for hanging out frequency (x1) was negative at 0.079, https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 584 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hanging out places (x2) was negative at 0.041, hanging out expenditure (x3) was negative at 0.149, group hanging out behavior (x4) was negative at 0.051 , taxpayer awareness (y) of 0.089, frequency of hanging out is moderated by taxpayer awareness (x1.z) of 0.005, places to hang out are moderated by taxpayer awareness (x2.z) of 0.006, hanging out spending is moderated by taxpayer awareness (x3. z) of 0.011, and group hanging out behavior is moderated by taxpayer awareness (x4.z) of 0.007. t test effect of frequency of hanging out on tax compliance: this hypothesis states that the more often someone hangs out, the lower the level of compliance in paying vehicle tax. the results of the analysis show that the variable frequency of hanging out (x1) does not have a significant influence on tax compliance (y) because the significance value is (sig > 0.05). this indicates that hanging out activities themselves do not directly affect tax compliance. in society, this could mean that other factors can influence tax compliance behavior in society. the effect of hanging out places on tax compliance: this hypothesis assumes that certain hangout places can influence individual tax compliance. the location of a hangout can influence social norms or feelings of obligation to pay taxes. for example, places where there is a strong sense of community responsibility or where there are visible reminders or discussions about tax obligations might encourage individuals to comply more readily. the results of the analysis show that the hangout variable (x2) has a significant influence on tax compliance (y) with a significance value of 0.000 <0.05. the effect of hanging out expenditures on tax compliance: this hypothesis states that the more someone spends while hanging out, the more likely they are to comply with paying taxes. however, the results of the analysis show that the hanging out expenditure variable (x3) does not have a significant influence on tax compliance (y) because the significance value is (p > 0.05). this indicates that the amount of expenditure on social activities does not directly affect the level of tax compliance in society. the effect of group hanging out behavior on tax compliance: this hypothesis states that social norms and interactions in hanging out groups can influence individual tax compliance behavior. the results of the analysis show that the group hanging out behavior variable (x4) has a significant influence on tax compliance (y) with a significance value of 0.000 < 0.05. this indicates that social interactions and norms that develop in hanging out groups can influence individuals to be more compliant in paying taxes, perhaps through the influence of peer pressure or positive norms related to community obligations. the effect of taxpayer awareness moderating the frequency of hanging out on tax compliance: this hypothesis assumes that individual awareness of tax obligations will moderate the relationship between hanging out frequency and tax compliance. however, the results of the moderation analysis show that taxpayer awareness (z) does not moderate the influence of the variable frequency of hanging out (x1) on tax compliance (y). it is show that regardless of whether https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 585 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc individuals are highly aware or less aware of their tax obligations, the frequency of hanging out does not significantly impact their compliance with paying taxes. the effect of taxpayer awareness moderating hanging out places on tax compliance: this hypothesis assumes that individual awareness of tax obligations will moderate the relationship between hangout places and tax compliance. however, the results of the moderation analysis show that taxpayer awareness (z) does not moderate the influence of the variable hanging out places (x2) on tax compliance (y). this implies that awareness of tax obligations does not alter the impact that specific hangout places have on individuals' compliance with tax payments. the influence of taxpayer awareness in moderating hanging out expenditures on tax compliance: this hypothesis states that individual awareness of tax obligations will moderate the relationship between hanging out spending and tax compliance. however, the results of the moderation analysis show that taxpayer awareness (z) does not moderate the influence of the variable hanging out expenditure (x3) on tax compliance (y). it is show that regardless of individuals' awareness levels regarding tax obligations, how much they spend during social activities does not significantly affect their compliance with tax payments. the influence of taxpayer awareness moderating group hanging out behavior on tax compliance: this hypothesis assumes that individual awareness of tax obligations will moderate the relationship between group hangout behavior and tax compliance. however, the results of the moderation analysis show that taxpayer awareness (z) does not moderate the influence of the variable group hanging out behavior (x4) on tax compliance (y). this implies that individuals' awareness of tax obligations does not change how social norms and interactions within hangout groups influence their compliance with paying taxes. from the results of multiple linear regression analysis in table 4, it can be concluded that several factors such as places to hang out (x2) and group hanging out behavior (x4) have a significant influence on tax compliance with a significant value of 0.000 < 0.05, while other factors such as frequency of hanging out (x1) and hanging out expenditure (x3) do not show a significant influence with a significant value of > 0.05. apart from that, taxpayer awareness (z) also cannot moderate the relationship between the hanging out culture variable and tax compliance. f test based on table 4, the results of multiple linear regression analysis show that the calculated f is 16.901 > f table is 2.24 with a significant value of 0.000 < 0.05. thus, there is a significant influence on the independent variables, namely frequency of hanging out (x1), places to hang out (x2), hanging out expenditure (x3), and hanging out group behavior (x4) simultaneously on the dependent variable, namely motor vehicle taxpayer compliance (y). meanwhile, the results of the moderated regression analysis obtained f count of 22.481 > f table 2.24 with a significant value of 0.000 < 0.05, thus there is a significant simultaneous influence on the independent variables, namely frequency of hanging out (x1), places to hang out (x2), hanging out spending (x3), hanging out group behavior (x4) moderated by taxpayer awareness (z) of the dependent variable, namely motor vehicle taxpayer compliance (y). https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 586 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc coefficient of determination test (r2) based on table 4 of the results of multiple linear regression analysis, the results of testing the coefficient of determination in the adjusted r2 linear regression analysis obtained a value of 0.251, this means that the variance of the independent variables, namely frequency of hanging out, places to hang out, spending on hanging out, and behavior of hanging out groups can explain the dependent variable, namely motor vehicle tax compliance was 25.1% and the remaining 74.9% was explained by other variables not examined in this study. meanwhile, in the moderation regression analysis, adjusted r2 was 0.504. this means that the variants of the independent variables are frequency of hanging out (x1), places of hanging out (x2), spending on hanging out (x3), behavior of hanging out groups (x4), awareness of taxpayers (z), frequency of hanging out moderated by awareness of taxpayers (x1.z), hanging out places moderated by taxpayer awareness (x2.z), hanging out expenditure moderated by taxpayer awareness (x3.z), and hanging out group behavior moderated by taxpayer awareness (x4.z) can explain the dependent variable, namely motor vehicle taxpayer compliance of 50.4% and the remaining 49.6% is explained by other variables not examined in this study. conclusion in this research, results were obtained regarding the answer to the research objective of finding out whether the influence of the hangout culture of the people of pontianak in west borneo can influence taxpayer compliance with tax awareness as a moderating variable. the analysis on the frequency of hanging out indicates that it does not significantly influence tax compliance, suggesting other factors are likely more pivotal in shaping compliance behavior. in contrast, specific hangout places significantly impact tax compliance, possibly due to the social norms and community responsibilities fostered in those locations. however, hanging out expenditures do not correlate with higher tax compliance, indicating that spending on social activities does not affect compliance levels. group hanging out behavior significantly influences tax compliance, highlighting the role of social interactions and norms in shaping compliance behavior. despite these influences, taxpayer awareness does not moderate the relationships between hanging out variables which are, frequency of hanging out, places to hang out, spending on hanging out, and behavior of hanging out groups to tax compliance. this research findings underscore the complex interplay of social factors and awareness in influencing tax compliance behavior in societal contexts. this research provides new insight that not only individual factors such as tax awareness are important, but also social norms and interactions within communities can have a significant impact. the implication of this research is to encourage the implementation of an approach that is more focused on utilizing social norms and social interactions in community hangout culture to strengthen tax awareness and obligations, especially related to motor vehicle taxpayer compliance. this research has several limitations that need to be considered for future studies. first, the number of respondents involved in this research was 191 people, which may not have represented all relevant aspects of the population. it is recommended to take a larger and more representative sample of the population studied. furthermore, the study's focus was confined to individual taxpayers who frequently engage in social activities in pontianak, west borneo, potentially limiting the applicability of the results to other regions or demographics. additionally, the research may be https://www.ilomata.org/index.php/ijtc does the culture of hanging out affect taxpayer compliance in paying vehicle tax tia, helmi, and heniwati 587 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc constrained by limited access to comprehensive prior studies on the topic, which could have provided more nuanced insights and comparisons. reference alfiani, s., & subadriyah. 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(2023). pengaruh pengetahuan perpajakan, sanksi, tarif, sosialisasi dan kualitas pelayanan pajak terhadap kepatuhan wajib pajak di kantor samsat kabupaten bandung. kumpulan hasil riset mahasiswa akuntansi (kharisma), 5(2), 443–454. wardani, d. k., & wati, e. (2018). pengaruh sosialisasi perpajakan terhadap kepatuhan wajib pajak dengan pengetahuan perpajakan sebagai variabel intervening (studi pada wajib pajak orang pribadi di kpp pratama kebumen). jurnal nominal, 7(1), 33–54. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 437-452 437 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction jufri yandes1, amud sunarya2, muhtarom3, destiana4 1234universitas terbuka, indonesia correspondent: amud@ecampus.ut.ac.id received : january 27, 2024 accepted : april 10, 2024 published : april 30, 2024 citation: yandes, j., sunarya, a., muhtarom., destiana. (2024). implementation of tax incentives on issuers' financial ratios: reduction and reaction. ilomata international journal of tax and accounting, 5(2), 437-452. https://doi.org/10.61194/ijtc.v5i2.1117 abstract: this study aims to analyze whether the implementation of reduction (deduction) of tax incentives has or does not have a reaction (influence) on the financial ratio (roe) of shares of idx issuers lq45 index during the covid-19 outbreak in 2022. the study employs a hypothesis testing approach with classical assumption tests and simple regression analysis, focusing on secondary data from the lq45 index during the 2022 covid-19 outbreak. it examined a population of 45, using 36 samples that met specific criteria. a simple linear analysis model was used to investigate the impact, if any, of tax incentive reductions on the financial ratio (roe) of the issuers' stocks. this study, which uses simple regression analysis, reveals that the implementation of tax incentive reductions made by the indonesian government does not react (influence) on the financial ratio (roe) of idx-listed stocks in the lq45 index during the covid-19 outbreak in 2022. the study suggests that the indonesian government's tax incentive reductions may not impact the financial ratios (roe) of companies listed on the idx, particularly in the lq45 index during the covid19 outbreak in 2022. this lack of impact is attributed to companies not utilizing these incentives, possibly due to insufficient awareness of their benefits and challenging criteria set by the government for obtaining these incentives. despite common beliefs that tax incentives can influence financial performance, this study indicates they might not significantly affect the financial ratios of these companies. the real implications is research indicates that the indonesian government's reduction of tax incentives did not elicit a response in the financial ratio (roe) of shares issued by lq45 index companies on the indonesia stock exchange during the covid-19 outbreak in 2022. this suggests that the implementation of tax incentive cuts by the indonesian government had no impact on the financial ratio (roe) of lq45 issuer shares during the covid-19 outbreak in 2022, based on a sample size of 36. keywords: tax incentives, issuer, financial ratios, roe, public policy this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc file:///c:/users/putri%20ayu%20lestari/downloads/loa%20october%202023/loa%20january%202024/amud@ecampus.ut.ac.id https://doi.org/10.61194/ijtc.v5i2.1117 implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 438 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction the covid-19 pandemic has become a global issue, causing crises in nearly every country around the world. the first spread of covid-19 occurred in china, with the outbreak reported on december 31, 2019, in the city of wuhan, hubei province, china. however, covid-19 cases appear to have emerged before that date. according to a who report on february 2, 2020, the first confirmed covid-19 cases in china occurred on december 8, 2020. a doctor from the jin yin-tan hospital in wuhan, who treated early patients, mentioned that the first known infection date was december 1, 2019, based on a report in the lancet medical journal. however, there are many reports stating that the initial emergence date of this pandemic is different from what was originally reported on december 31, 2019 (fauziyyah & ersyafdi, 2021). in indonesia, president joko widodo officially announced the first covid-19 case on march 2, 2020. two indonesian citizens who tested positive for covid-19 had contact with a japanese citizen who had visited indonesia. on march 11, 2020, for the first time, an indonesian citizen died from covid-19. the victim, a 59-year-old man, was known to have attended a seminar in bogor, west java, from february 25 to 28, 2020 (ihsanuddin, 2020). as of december 9, 2020, the latest data on the spread of covid-19 in indonesia, according to the covid-19 handling task force, shows that there were 586,842 confirmed cases, 483,497 recoveries, and 18,000 deaths. additionally, global covid-19 distribution data from the who indicates that 220 countries have been affected by covid-19, with 67,210,778 confirmed cases and 1,540,777 deaths. in indonesia, covid-19 continues to pose a significant threat across various industries, particularly in healthcare and the economy. the economic wheels have slowed down, even reaching a state of "standstill" due to the pressure of covid-19. several sectors profoundly affected include the industrial, tourism, trade, transportation, and investment sectors. alongside the uncertainty that also fuels market concerns about the impact and development of this outbreak, stock prices have weakened. there is a clear distinction between the preand post-pandemic periods. the composite stock price index shows negative movement due to covid-19, thereby affecting the indonesian economy (rifa’i et al., 2020). global stock exchanges also experienced a decline in prices, evidenced by the simultaneous decrease in composite stock price indices of global exchanges during the pandemic. in indonesia, the composite stock price index (ihsg) of the indonesia stock exchange (idx) declined from january 2020 until reaching its lowest point in early april. however, starting in may 2020, it began to show a slow upward trend. almost all stock exchanges worldwide were similarly affected. the indonesian government through the ministry of finance made strategic steps to overcome the extraordinary conditions that hit the world, namely covid-19, which was a disaster for all countries, including indonesia. indonesia in march 2020 began the era of lssr (large scale social restrictions) until it changed to the term irca (imposing restrictions on community activities) and where finally the government announced the revocation of ppkm status (idx, 2023a) in indonesia at the end of 2022 (indonesia, 2022). one of the strategies of the government of indonesia in overcoming this situation is to create a tax incentive policy for economic recovery. there are several studies conducted by researchers regarding tax incentive policies including, (liu & mao, 2019)produce research that says tax incentives increase investment and company productivity. (tang & wang, 2022) say tax incentives improve csr performance through cash https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 439 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc savings and pollution reduction mechanisms. (budiman et al., 2022) the results of his study found that the knowledge of msme tax compliance can be influenced by tax incentives. the results of the study of (murtiningtyas et al., 2022) reads that the impact of taxpayer compliance is influenced by tax incentive policies during the covid-19 pandemic. (ashry et al., 2022) said in his research that there is a significant effect of tax incentives in attracting investment. furthermore, (aryodamar, 2013) said that tax incentives have no impact on the number of companies conducting ipos (initial public offerings). (regita et al., 2022) produced research showing that the tax incentive policy has a positive and significant effect on the level of compliance of op (individual) taxpayers who are msme actors. (alvi et al., 2022) in their research obtained results that showed that tax incentives had no impact or effect on accounting prudence. research conducted by (xiao & zhao, 2022) found that tax incentives positively affect the efficiency of corporate innovation. (sugiyarti & rina, 2020) in their research revealed that tax incentives affect accounting conservatism. (kinyua & okiro, n.d.) in their research found that tax incentives have a positive impact on the financial performance of savings and loan cooperatives in kenya. according to (hanita et al., n.d.) in their research suggested that during the covid-19 virus pandemic, motor vehicle tax incentives had a significant impact on the level of compliance of taxpayers when paying motor vehicle taxes. furthermore, research by (auliansyah & rachmawati, 2022) in their study explained that the tax incentive deduction variable during the covid-19 situation had a negative and significant impact on company valuation. the next study was conducted by (abdelhakim & zouaghi, 2022) where the results showed that tax incentives had a significant impact on financial performance in tunisian companies. the study conducted by (deyganto, 2022) resulted in a study that tax incentives consisting of tax holidays, tax allowances, reduced costs or tax rates, accelerated depreciation, loss carry forward, and tax exemptions have a positive and statistically significant impact on the sustainability of msmes. a study conducted by (arius, 2022) found that the results of the study showed a difference in financial performance on the variables of far, roa, and roe of finance companies in indonesia before and after the implementation of tax incentives, but there was no significant difference in npf before and after the implementation of tax incentives. furthermore, research conducted by (agustin & djunaidy, 2022) obtained study results showing that tax incentives have a positive influence on the level of wp (taxpayer) compliance. (septiani & tjaraka, 2021) in the research results show that tax incentives directly have a positive effect on stock trading volume, as indicated by the positive coefficient results. according to research by (ifieliano et al., 2022) said that the income tax incentive discount policy did not directly affect the right issue corporate action. turning to the research conducted by (suryani & noviari, 2023) said the market did not react significantly on the days around the announcement of the sales tax incentive policy on luxury goods, as measured by abnormal returns. the latest research conducted by (ispriyarso & wibawa, n.d.) is quite interesting, where the results of his research show that the majority of respondents or most of the respondents interviewed have not utilized these tax incentives due to ignorance of the incentives, lack of understanding of the procedures, and so on. https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 440 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc looking at some of these studies or studies, it turns out that the application of tax incentive policies is more focused on activities in the economic and financial sectors. in line with this, that indonesia's economic and financial conditions during this time span were tested by the conditions of the covid-19 outbreak, including especially in activities in the capital market commonly known as the indonesia stock exchange (idx) which may have an impact on the financial ratio (roe) of issuers' shares in the capital market as seen from the free fall of issuers' share prices in march 2020. we know that in the activities of the capital market there are two main things that run, namely first the economic function and the financial function (nurhaliza, 2021). during that period, the indonesian government made a strategy to overcome this situation by making a tax incentive policy for the shares of issuers in the indonesia composite index (ici) under the auspices of the indonesia stock exchange (idx) capital market, including the regulation of the minister of finance of the republic of indonesia number 123 /pmk.03 /2020 regarding the form and procedures for submitting reports and taxpayer lists in the context of fulfilling the requirements for reducing income tax rates for domestic corporate taxpayers in the form of public companies chapter ii tariffs and requirements for reducing tariffs article (menteri keuangan republik indonesia, 2020), and strengthened by government regulation of the republic of indonesia number 55 of 2022 concerning adjustments to regulations in the income tax sector chapter xiii closing provisions article 70 (pp nomor 55 tahun 2022, 2022) signed directly by mr. president. all these regulations are none other than one of the special treatments provided by the government in terms of tax incentive facilities. the tax incentive regulation contains a public company or public company (tbk) has the facility to get a three percent (3%) discount from the applicable income tax rate of 22% and can meet the applicable requirements so that it is also expected to support the sustainability of issuers' shares in the ici under idx control which may have an impact on the level of financial ratios (roe) of the issuers. where we know the ici is filled with several indices or stock combinations that support the ici maneuver, such as lq45, idx80, idx30, jii, jii70, issi, kompas100, mnc36, and others. figure 1: illustration of the indonesia composite index (ici) one of the oldest indices that plays an important role in supporting stock price maneuvers on the idx is the lq45 index. below are 45 issuers that are in the lq45 index in the period january 2022. within a year there are several changes in issuers that enter and exit the lq45 index in accordance with the procedures and requirements made by the idx. lq-45 idx-80 idx-30 j i i jii-70 i s s i kompas-100 mnc-36 (etc.) https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 441 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1: list of lq45 index stocks january 25, 2022 source: (idx, 2023) seeing from this introduction, and there are still not many studies on tax incentives associated with issuers' shares, and reflecting on the strategy that has been made by the government from 2020 to 2022 regarding these tax incentives which are expected to help the sustainability of issuers' shares, especially in terms of their finances during the covid-19 outbreak in 2022, so researchers try to take the theme with the aim of knowing whether the application of tax incentive reductions made by the indonesian government has a reaction to the financial ratios of issuers, in other words whether the tax incentive cuts have an influence on the financial ratio (roe) of the shares of issuers of the lq45 index during the covid-19 outbreak in 2022. this study is expected to be an empirical study that has its own advantages because it chooses the research subject in the form of issuers and the object of research in the form of issuers' financial ratios, and hopefully can provide benefits by providing information for stakeholders and shareholders, issuers, shareholders and the government, especially as a tax incentive policy maker so that it can be a recommendation to continue to conduct studies, improvements, and innovations in terms of implementing tax incentives that can be utilized by issuers included in the idx after the covid-19 outbreak. from the explanation above, the problem formulation in the research is does the implementation of reducing tax incentives have an impact on the financial ratio (roe) of shares of idx lq45 index issuers in 2022? then the second one is does implementation of tax incentive reduction does not have a reaction to the financial ratio (roe) of the shares of idx issuers in the lq45 index in 2022?. tax incentives cambridge dictionary explains tax incentives as "a reduction in taxes that encourages companies or people to do something that will help the country's economy" (cambridge university, 2023). the tax incentive variable in this study is a dummy variable that takes the value of 1 for issuers number issuer code number issuer code number issuer code 1. ‘adro 16. ‘excl 31. ‘mncn 2. ‘amrt 17. ‘ggrm 32. ‘pgas 3. ‘antm 18. ‘hmsp 33. ‘ptba 4. ‘asii 19. ‘hrum 34. ‘ptpp 5. ‘bbca 20. ‘icbp 35. ‘smgr 6. ‘bbni 21. ‘inco 36. ‘tbig 7. ‘bbri 22. ‘indf 37. ‘tins 8. ‘bbtn 23. ‘inkp 38. ‘tkim 9. ‘bfin 24. ‘intp 39. ‘tlkm 10. ‘bmri 25. ‘itmg 40. ‘towr 11. ‘brpt 26. ‘jpfa 41. ‘tpia 12. ‘buka 27. ‘klbf 42. ‘untr 13. ‘cpin 28. ‘mdka 43. ‘unvr 14. ‘emtk 29. ‘medc 44. ‘wika 15. ‘eraa 30. ‘mika 45. ‘wskt https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 442 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that meet certain criteria, namely having the number of shares registered and traded on the stock exchange at least forty percent (40%) and 0 for shares that do not fall into the category of certain criteria. according ro (klemm & van parys, 2012) no tax incentives have proven to be successful in increasing gross private fixed capital formation. apart from that, according to (abeler & jäger, 2015) one scenario with simple taxes, the other complex, yet both offer identical economic incentives. participants in the complex scenario show less response to new taxes, some even ignoring them, especially those with lower cognitive ability. surprisingly, participants equally overlook major and minor incentive changes, defying rational inattention models. financial ratio (roe) roe is one of several financial ratio references used by the issuer's shareholders. this ratio measures how much profit is generated by the company compared to the capital paid up by shareholders (samsul, 2006). stakeholders are largely dependent on financial statements to determine the decisions to be taken, both those sourced from within and outside the company. according to (heikal et al., 2014) roe ratios indicate how efficiently companies utilize their own capital (net worth) and assess the profitability of investments made by the company's shareholders or owners. beside that according to (ichsani & suhardi, 2015) roe impacts trading volume, albeit with limited effectiveness, as other factors also influence trading volume beyond profitability ratios. investors consider factors beyond profitability, such as roe, in their decision-making process. issuer the issuer is a company party that conducts a public offering (idx, 2023b). then according to ojk, the issuer is a party that conducts a public offering, namely a securities offering conducted by the issuer to sell securities to the public based on the procedures regulated in the applicable laws and regulations (otoritas jasa keuangan, 2017). according to (greenwood & hanson, 2013) a substantial decrease in issuer quality serves as a more dependable indicator of credit market overheating compared to swift overall credit expansion. apart from that, according to (he et al., 2012) investors assess the likelihood that major issuers may have received overly optimistic ratings compared to smaller issuers, particularly in times of economic expansion. the findings indicate that in turkey, hot-market issuers typically generate proceeds from the sale of primary shares equivalent to 98% of their pre-ipo total assets, whereas cold-market issuers generate around 68% (brycz et al., 2017). according to (baker & mansi, 2002) we examine how publicly traded corporate bond issuers and institutional investors assess four major rating agencies and their roles in capital markets. results show stark differences between issuers and investors. while most institutional investors require only one rating for rated corporate bonds, issuers typically seek two or more. there are also discrepancies regarding the accuracy and timeliness of ratings in reflecting creditworthiness. these variations highlight the distinct roles played by rating agencies in the market. capital market the capital market is a meeting between parties who have excess funds and parties who need funds by trading securities (tandelilin, 2010) according to law of the republic of indonesia number 8 of 1995 concerning the capital market, the capital market is defined as activities related to the public offering and trading of securities, public companies related to the securities they issue, as well as institutions and professions related to securities (uu nomor 8 tahun 1995, 1995a). in https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 443 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indonesia, the capital market is also referred to as the indonesia stock exchange (idx). the stock exchange is a party that organizes and provides systems and or facilities to bring together the sale and purchase offers of securities of other parties with the aim of trading securities between them (uu nomor 8 tahun 1995, 1995b). the stock exchange has existed in the territory of indonesia since the dutch colonization in the 1912 period in batavia. at that time, the stock exchange was created by the dutch east indies through its government for the purposes of the colonial government. however, later the stock exchange went into suspended animation, and finally indonesia through its government reactivated the capital market in 1977. according to (deng et al., 2023) empirical evidence demonstrates that opening up capital markets has a positive impact on corporate environmental, social, and governance (esg) performance, facilitated by external monitoring mechanisms. this impact varies depending on the unique characteristics of each firm. lq45 indeks lq45 is an index that measures the price performance of 45 stocks that have high liquidity and large market capitalization and are supported by good company fundamentals (idx, 2023b). lq45 is one of the indexes that has been in indonesia for quite a long time. it is recorded on the indonesia stock exchange that the lq45 has a base date of july 13, 1994 and a launch date of january 02, 1997. the lq45 index is one of the main pillars of the indonesia stock exchange in the movement of buying and selling shares in indonesia. every year, the return growth of the lq45 index increases, but in 2020, the return of the lq45 index experienced a significant decline due to the emergence of the covid-19 pandemic. in 2021, the lq45 index return increased by 7.4%, while in 2022, the lq45 index return was positive again at 0.62%. data from the indonesian stock exchange (bei) as of the end of 2022 recorded 835 companies, with 45 of them being companies included in the lq45 index (hariyanto & ferdian, 2023). the lq45 index consists of 45 shares on the idx with high liquidity and large market capitalization value and have passed the selection according to the selection criteria (sucayono, 2024). method this study is quantitative and uses an explanatory research approach that explains the relationship between existing variables. the variables include dependent (roe) and independent variables (tax incentives). hypothesis testing is done using statistical program for social science (spss) with data obtained through the indonesia stock exchange. population the population in this study are issuers that are listed and survive in the lq45 index in the idx in the period from the beginning to the end of the 2022 period. sample the sample was obtained using purposive sampling method through certain criteria. in this study, there are 45 issuers included in the lq45 index, but only 36 issuers can meet the criteria to be included in the sample of this study, including the criteria are issuers that survive in the lq45 https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 444 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc index for a full year in 2022 without ever leaving the lq45 index, and have credible financial ratio data (roe) and are free as data outliers in this study. table 2: list of samples no. issuer code tax incentive (dummy 1 or 0) financial ratios roe (2022) 1. amrt 1 0.26 2. antm 0 0.12 3. asii 1 0.12 4. bbca 1 0.18 5. bbni 1 0.13 6. bbri 1 0.17 7. bbtn 1 0.15 8. bfin 1 0.19 9. bmri 1 0.17 10. brpt 0 0 11. buka 1 0.11 12. cpin 1 0.16 13. emtk 0 0.28 14. eraa 1 0.14 15. excl 0 0.06 16. hmsp 0 0.24 17. hrum 0 0.28 18. icbp 0 0.1 19. inco 0 0.09 20. indf 1 0.1 21. inkp 1 0.15 22. intp 1 0.08 23. jpfa 1 0.14 24. klbf 1 0.16 25. mdka 1 0.04 26. medc 0 0.25 27. mika 0 0.19 28. mncn 1 0.13 29. pgas 1 0.1 30. smgr 1 0.06 31. tbig 0 0.13 32. tins 0 0.26 33. tlkm 1 0.15 34. towr 0 0.25 35. untr 0 0.22 36. wika 0 _0.001 https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 445 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research variables dependent variable: in this study, it is known that the dependent variable is roe symbolized by the alphabet y. independent variable: furthermore, the independent variable is denoted by the alphabet x, namely tax incentives. table 3: variable scaling no. variable indicators size 1. roe (y) scale/ ratio 2. tax incentives (x) the total number of shares of the issuer that must be paid up and traded on the idx is at least 40%. nominal (dummy, 1 or 0) data analysis technique descriptive statistical analysis: this analysis aims to provide an overview or description of the data obtained from the descriptive analysis results. there are several results of this analysis including the mean, and standard deviation of each variable studied, both the independent variable (x), and the dependent variable (y). classical assumption test: before carrying out linear regression analysis, it is necessary to start the classical assumption test. where this assumption test is divided from normality test, heteroscedasticity test. simple linear regression analysis: simple linear regression analysis has a purpose that is interpreted to understand the impact of one independent variable (x) on the dependent variable (y). get the basic model as follows: y = c + βx + ε … y : roe ratio c : constant x : tax incentive (dummy) β : x regression coefficient ε : confounding factor/residual (error) hypothesis testing hypothesis testing aims to determine whether the reduction in tax incentives has a reaction or has no reaction to the financial ratio (roe) of the shares of issuers in the lq45 index in 2022 to the reduction in tax incentives made by the indonesian government so that two hypotheses are formed, namely: roe = net profit after tax total equity 𝑥 100% https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 446 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h01 = implementation of tax incentive reduction has a reaction to the financial ratio (roe) of the shares of idx issuers lq45 index in 2022 h02 = implementation of tax incentive reduction does not have a reaction to the financial ratio (roe) of the shares of idx issuers in the lq45 index in 2022 it is hoped that this hypothesis testing can help answer the objectives of this study, and thus the following scheme of thought is also formed. figure 2: scheme of thought result and discussion descriptive statistical analysis table 4: descriptive statistical analysis values information n mean std. deviation tax_incentive 36 0.58 0.500 roe 36 0.148861 0.0737669 the results of descriptive statistical analysis show that the data for the tax incentive variable has a mean value of 0.58 and std. deviation of 0.500, with not too far a number between mean and std. deviation, this indicates that the data value of the tax incentive variable (dummy) is quite diverse or varied in the sample used. furthermore, the roe variable has a mean value of 0.148861 and a std. deviation 0.0737669, this indicates that the number on the std. deviation is smaller and far enough adrift with the mean number which means that the data on the financial ratio variable (roe) is less diverse or varied in the sample used or in other words the data value in the sample is closer to the mean. classical assumption test normality test table 5: normality test values one_sample_kolmogorov_smirnov test n 36 asymp_sig.(2_tailed) .200 c, d https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 447 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc starting through the normality test value one_sample_kolmogorov_smirnov test research shows the nominal asymp. sig. (2_tailed) 0.200> 0.05 which explains the data information with a total sample size of 36 in this study is normally distributed. if the test is not normally distributed, the research cannot continue, but the results obtained exceed 0.05 so that the data used passes this test and can be continued in the next test. heteroscedasticity test (correlations spearman's rho) table 6: heteroscedasticity test values correlations unstandardized_residual spearman's rho tax_incentive sig. (2_tailed) 0.741 n 36 after doing the normal test, the heteroscedasticity test is continued, where the test used uses the spearman's rho correlations test type and the resulting table above has a sig. (2_tailed) the independent variable tax incentive is more than (>) 0.05, namely 0.741> 0.05, which means that from these results there is no heteroscedasticity problem. this result indicates that the regression test conducted in this study is free from inequality in the variance of the residuals (the difference between the observation value and the predicted value), in other words, the residual variation from one observation to another is constant. simple linear analysis test table 7: linear analysis test values coefficients model b sig. 1 (constant) 0.165 0.000 tax_incentive 0.027 0.286 after passing the normality and heteroscedasticity tests, then proceed to the simple linear analysis test, and considering the results of the simple linear analysis values obtained and supported by the spss program, it can be said that the constanst (α) value shows 0.165 and then the tax incentive coefficient value is (0.027). based on this, a basic research model equation can be formed as follows: roe = 0.165 + (0.027 tax_incentive) + ε … it is also obtained from the results that the sig. tax_incentive of 0.286, where this result shows a value exceeding> 0.05 which indicates that tax incentives do not have a significant effect on the financial ratio (roe) of the issuer's shares. https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 448 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc coefficient of determination (r2) table 8: coefficient determination (r2) values model summary model r r square 1 .183 0.033 the coefficient of determination shows the r square result of 0.033, this result indicates that only 3.3% of the variation in the financial ratio (roe) can be explained by the tax incentive variable, while the remaining 96.7% can be explained using variables outside the model. this indicates that the role of tax incentives is very small in explaining the variation in the financial ratio (roe) of lq45 issuer shares in 2022. hypothesis testing reading and seeing from the results of the analysis and tests, the results of the hypothesis are accepted and read, namely h02: the implementation of tax incentive reductions has no reaction to the financial ratio (roe) of the shares of issuers in the idx lq45 index in 2022. in other words, tax incentive deductions have no effect on the financial ratio (roe) of the shares of issuers that are members of the lq45 index in 2022 during the covid-19 outbreak. all tests used have met the test requirements for each test in this study, and it boils down to the results of the hypothesis, namely the reduction or deduction of tax incentives has no reaction or influence on the financial ratio (roe) of the shares of issuers of the lq45 index during the covid-19 outbreak in 2022. interestingly, the results of this research hypothesis contradict the results of several previous studies, including the research of kinyua & okiro (n.d.) which states that tax incentives have a positive impact on the financial performance of savings and loan cooperatives in kenya, then the research of abdelhakim & zouaghi (2022) which reads that tax incentives have a significant impact on the financial performance of companies in tunisia. conclusion tax incentives are made by the government to help the sustainability of the indonesian economy because we know that the covid-19 outbreak is a test for all countries in the world, so that after researchers read information and references from the beginning of the introduction to testing existing data, as well as with the very small test results of the coefficient of determination in this study, it shows that it turns out that the tax incentive reduction made by the indonesian government has no reaction to the financial ratio (roe) of the shares of idx issuers lq45 index during the covid-19 outbreak in 2022. this means that the implementation of tax incentive cuts made by the indonesian government has no effect on the financial ratio (roe) of lq45 issuer shares during the covid-19 outbreak in 2022 using 36 samples as test data. researchers concluded based on the results of the hypothesis that there is a suspicion that this happened because the issuers did not take advantage of the tax incentive reduction, due to lack of knowledge of the benefits of the policy that could be directly felt by the issuers, and there were conditions or criteria determined by the indonesian government to obtain tax incentives that were considered quite difficult to implement by the issuers, this was supported by the results of a study conducted by https://www.ilomata.org/index.php/ijtc implementation of tax incentives on issuers' financial ratios: reduction and reaction yandes, sunarya, muhtarom, and destiana 449 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ispriyarso & wibawa (n.d.)which stated that the respondents in their research had not taken advantage of the tax incentives due to ignorance of the incentives, and lack of understanding of the procedures. the suggestions that researchers can express in this study are the need for an active government role as a policy maker by conducting research in advance to find information on the main needs needed by issuers regarding tax incentives that are urgently needed by issuers. then the requirements for obtaining the tax incentive policy should not be too difficult for issuers to fulfill. and in the future, researchers hope that there will be more studies that discuss or examine by adding or combining variables including tax incentives that can determine or provide a reaction to the issuer's financial statements. reference abdelhakim, b. e. n., & zouaghi, l. 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(2022). tax incentives and corporate innovation efficiency: a moderated mediating effect model. 2022 international conference on mathematical statistics and economic analysis (msea 2022), 1057–1063. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4, october 2024 page no. 1-12 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm factors influencing interest in using financial technology qris among accounting lecturers in bandar lampung-indonesia evi yuniarti1, kamelia septiani2, rusmianto3, lihan rini puspo wijaya4, umarudin kurniawan5 12345politeknik negeri lampung, indonesia correspondent: kameliaseptiani13@gmail.com2 received : august 25, 2024 accepted : october 5, 2024 published : october 31, 2024 citation: yuniarti, e., septiani, k., rusmianto., wijaya, ;, r, p., kurniawan, u. (2024). factors influencing interest in using financial technology qris among accounting lecturers in bandar lampung-indonesia. ilomata international journal of tax and accounting, 5(4), 1-12. https://doi.org/10.61194/ijtc.v5i4.1243 abstract: this study aims to analyze the effect of perceived promotional attractiveness, ease of use, and risk of use on interest in using qris (quick response code indonesian standard) financial technology. quantitative methods are used with primary data obtained through questionnaires. data analysis was performed using smartpls to test measurement and structural models. the results showed that the perception of promotional attractiveness, ease of use, and risk of use did not have a significant effect on interest in using qris. the t-count value is smaller than the t-table and the p-values are greater than 0.05. the research model has a predictive relevance value of 3.99% which indicates that this model lacks predictive relevance. the fsquared value of each variable shows a weak effect. the conclusion of this study is that perceived promotional attractiveness, ease of use, and risk of use do not affect interest in using qris financial technology. these findings make an important contribution in understanding the factors that influence qris usage interest and can be used as a basis for furtheir research by adding other variables such as perceived satisfaction and system reputation to get better results. keywords: qris, promotional attractiveness, ease of use, risk of use, interest in use. this is an open access article under the cc-by 4.0 license introduction the industrial revolution 4.0 has greatly influenced technological advancements, particularly in indonesia's banking sector (mawardani & dwijayanti, 2021). while this revolution provides opportunities for enhanced interaction, it also brings potential disruptions to various aspects of daily life (yuniarti et al., 2020). a notable change is the increased adoption of internet and digital financial technology by indonesians, highlighted by the launch of the national non-cash movement (gnnt) by bank indonesia in 2014 (risma & sri, 2021). bank indonesia reported that electronic money transactions reached idr 35.10 trillion in december 2021, marking a 58.60% growth compared to the previous year (nadhilah et al., 2021). innovations in the financial services sector, like financial technology (fintech), have made financial services more accessible https://www.ilomata.org/index.php/ijjm mailto:kameliaseptiani13@gmail.com https://doi.org/10.61194/ijtc.v5i4.1243 qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm to the public through non-cash payment systems available on personal devices (aisyah et al., 2023; setiawan & mahyuni, 2020). one aspect of fintech is the development of non-cash instruments like e-money and e-wallets, which are becoming increasingly popular with various options such as gopay, ovo, linkaja, and dana. to facilitate, accelerate, and secure transactions using qr codes, bank indonesia introduced the quick response code indonesian standard (qris) on august 17, 2019 (hu & li, 2023; nizar, 2017; saputri, 2020). despite the growing adoption of qris, several challenges still limit its widespread use, including difficulties with top-ups, application errors, and poor signal quality (akhyar & sicily, 2023). in bandar lampung city, qris is still not widely used, with only 12.43% of the population utilizing it in 2023 (lampung provincial statistics agency, 2023). concerns about usage risks and personal data security are major obstacles to increasing interest in qris. this research explores factors that influence user interest in qris, such as perceived benefits, ease of use, and associated risks (jaya, 2020). the study aims to address the research gap by providing a deeper understanding of user perceptions of qris and how these factors impact the decision to use the technology, particularly among accounting lecturers (hamdan et al., 2024; kristyawan wihayanto putra, 2025; permana & aryowiloto, 2024). based on the background provided, this study aims to examine the impact of perceived benefits, ease of use, and perceived risk on accounting lecturers' interest in using qris electronic money (lesi, 2020; santoso et al., 2021). the research questions include whetheir perceptions of promotional attractiveness, ease of use, and risk influence lecturers' interest in using qris (komalawati & ariftio, 2021; nugroho, 2023). this study is expected to contribute to the field of accounting and taxation through the digitalization of accounting, and also serve as a reference for future research on the benefits and ease of qris transactions (khofifa, 2023; li et al., 2022). by investigating the factors that affect user interest in qris, this research aims to offer new insights that can help boost the adoption of digital financial technology in indonesia (martini et al., 2022; rjoub et al., 2023). method this research method includes several stages that are comprehensively detailed, from sampling techniques to data analysis. the following is a detailed explanation of each of these stages: population and research sample the population in this study were accounting lecturers at universities in bandar lampung city. there are 9 universities with a total population of 155 lecturers recorded in the university database (pddikti). this population consists of lecturers spread across various universities such as lampung state polytechnic, bandar lampung university, lampung university, technocratic university of indonesia, malahayati university, sang bumi ruwa jurai university, mitra indonesia university, raden intan lampung state islamic university, and darmajaya informatics and business institute. the sample for this research was selected using a combination of probability sampling and purposive sampling techniques. probability sampling was employed because the population size https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm was known, while purposive sampling was chosen due to specific considerations aligning with the research criteria. purposive sampling was selected because there are often constraints that make random sampling difficult, so it is used to ensure that the sample criteria closely match the research objectives. according to the slovin formula, with a 10% margin of error, the calculated sample size is 61 respondents. types and methods of data collection the type of data used in this study is primary data. this primary data was obtained directly from respondents through distributing questionnaires. the questionnaire used contains questions related to perceived ease of use, perceived risk of use, and perceived promotional attractiveness of interest in using financial technology qris. primary data is measured using a likert scale which is commonly used to measure attitudes and opinions. data collection methods the data collection method was carried out using a questionnaire distributed online. this questionnaire is closed with each question measured using a likert scale of 1-5. this scale is used to measure respondents' attitudes, opinions, and perceptions about the social phenomenon under study. variable operationalization this study involveis several variableis, both dependent and independent. the dependent variable is interest in using financial technology qris, while the independent variables consist of perceived promotional attractiveness, perceived ease of use, and perceived risk of use. each variable is operationalized through several indicators measured in the questionnaire. data analysis and hypothesis testing for data analysis, this study employs the partial least squares (pls) method using smartpls software. the pls method was chosen because it can estimate path models that involve latent constructs with multiple indicators, and it aids in obtaining latent variable values for predictive purposes. pls is also considered a robust analysis method, as it does not require the assumption of normal data distribution and can estimate linear relationship between the constructs being studied. model measurement (outer model) outer model evaluation is carried out by twisting convergent and discriminant validity. convergent validity is twisted by looking at the loading factor value and average variance extracted (avei) for each variable. the loading factor value must be more than 0.70 for confirmatory research and more than 0.60 for exploratory research. the vei should also be more than 0.50 for both types of research. discriminant validity is twisted by comparing the square root of their avei with their correlation between latent constructs, where the square root of their avei must be greater than their correlation between latent constructs. structural model (inner model) inner model analysis aims to predict their relationship between latent variables. evaluation of their structural model is done by looking at the r-square value for each endogenous latent variable, which shows the predictive power of the structural model. an r-squared value of 0.67 indicates strong strength, 0.33 indicates moderate strength, and 0.19 indicates weak strength. in addition, the inner model analysis also involves measuring effect size (f²) and predictive relevance (q²) to assess the quality of the prediction model. overall, the research method was carefully designed to ensure the validity and reliability of the research results. the use of pls methods and appropriate https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm sampling techniques is expected to provide an accurate picture of the perceptions of accounting lecturers in bandar lampung towards the use of qris financial technology. result and discussion validity teist there are 2 validity tests in pls-sem, namely convergent validity and discriminant validity which are seen based on the value of loading factor, average variance extracted (avei) values and cross loading value (abdillah & hartono, 2015). validity convergent loading factor convergent validity has 2 test criteria, namely looking at the loading factor value and the average variance extracted (avei) value. question items are considered to have passed the convergent validity test if the loading factor value must be greater than 0.70 and the average variance extracted (avei) value must be greater than 0.50 (irwandi & yuniarti, 2023). the results of the loading factor in this study area in table 1. table 1. hasil uji validity convergent loading factor variable indicator loading factor p-value information perception of promotional appeal x1_1 0.802 <0.001 valid x1_2 0.822 <0.001 valid x1_3 0.782 <0.001 valid x1_4 0.750 <0.001 valid x1_5 0.818 <0.001 valid perception ease of use x2_1 0.861 <0.001 valid x2_2 0.812 <0.001 valid x2_3 0.796 <0.001 valid x2_4 0.841 <0.001 valid x2_5 0.844 <0.001 valid x2_6 0.850 <0.001 valid perception of usage risk x3_1 0.777 <0.001 valid x3_2 0.771 <0.001 valid x3_3 0.762 <0.001 valid x3_4 0.778 <0.001 valid x3_5 0.776 <0.001 valid interest in using financial technology qris y1_1 0.905 <0.001 valid y1_2 0.951 <0.001 valid y1_3 0.885 <0.001 valid y1_4 0.708 <0.001 valid y1_5 0.776 <0.001 valid y1_6 0.844 <0.001 valid y1_7 0.862 <0.001 valid source: smartpls data processing, 2024 https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm based on table 2. each question of the variables of perception of promotional attractiveness, perception of ease of use and perception of risk of use has a valid loading factor value. this is due to the fact that the loading factor value on each question item has a value of more than 0.70. validity convergent average variance extracted (avei) table 2. hasil uji validity convergent average variance extracted variable ave information perception of promotional appeal 0.633 valid perception of ease of use 0.696 valid perception of usage risk 0.597 valid interest in using financial technology qris 0.724 valid source: smartpls data processing, 2024 based on the table above, it can be concluded that all variables in this study have avei values of more than 0.50 (yuniarti et al., 2023). discriminant validity cross loading discriminant validity is used to ensure that each latent variable or indicator in the study has a unique value and is not intertwined with other variables or indicators. the model is considered good if the loading factor value is the largest compared to the cross loading value for each variable. table 3. hasil uji discriminant validity cross loading x1 x2 x3 and x1_1 0.802 0.150 0.097 0.161 x1_2 0.822 0.145 0.115 0.200 x1_3 0.782 0.264 0.224 0.073 x1_4 0.750 0.145 0.286 0.083 x1_5 0.818 0.309 0.246 0.261 x2_1 0.157 0.861 0.373 0.109 x2_2 0.299 0.812 0.406 0.176 x2_3 0.295 0.796 0.253 0.133 x2_4 0.217 0.841 0.190 0.124 x2_5 0.193 0.844 0.266 0.122 x2_6 0.127 0.850 0.281 0.149 x3_1 0.154 0.152 0.777 0.185 x3_2 0.231 0.345 0.771 0.212 x3_3 0.201 0.392 0.762 0.089 x3_4 0.081 0.231 0.778 0.176 x3_5 0.214 0.318 0.776 0.198 source : smartpls data processing, 2024 https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm based on table 3. the results show that the cross loading value can be concluded that there is no problem with the discriminant validity, because all indicators have a greater correlation coefficient with their latent variables. reliability teist reliability test has the aim of making the accuracy of the consistency of the instrument to measure a construct, this test is carried out using the composite reliability value and croncbach alpha. table 4. reliability test results variable composite reliability cronbach alpha information perception of promotional appeal 0.896 0.864 reliable perception of ease of use 0.932 0.913 reliable perception of usage risk 0.881 0.836 reliable interest in using financial technology qris 0.948 0.938 reliable source: smartpls data processing, 2024 based on the table above, the reliability test results show that the cronbach's alpha and composite reliability values for all constructs exceed 0.70. this indicates that the constructs have meet the reliability criteria and have high reliability. with the previous data, it can be concluded that this study has good convergent validity, discriminant validity, and composite reliability. the analysis and evaluation of the measurement model in the pls-sem algorithm calculate results are as follows: figure 3. pls-seim algorithm outer model equation https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm structural model analysis (inner model) coefficient of determination (r-squared) in assessing the structural model, r-square is used to determine how much the independent variables are able to explain the dependent variable. the greater their-square value, the greater the influence of exogenous latent variables on endogenous variables. their-squared value obtained of 0.093 indicates that the independent variables (promotional attractiveness, ease of use, and risk of use) only explain 9.3% of the variance in the dependent variable (interest in using financial technology qris). this means that 90.7% of the variability in interest in using qris is influenced by other variables outside this research model, which indicates that the model is weak. predictive relevance (q-squared) the next step in measuring the structural model is with predictive relevance (q-square). predictive relevance (q-square) evaluates how well the model can predict its value and parameter estimates. the model is considered to have predictive relevance if the q-squared value> 0, while if the q-squared value ≤ 0, the model is considered to lack predictive relevance. table 5. q-squared test results sso ssei q² (=1-ssei/sso) x1_daya withdraw promotion 305.0000 305.0000 x2_keimudahan usagei 366.0000 366.0000 x3_risiko usagei 305.0000 305.0000 y_minat use of fintech qris 427.0000 409.9533 0.0399 source: smartpls data processing, 2024 the q-squared result is 0.0399 if presented at 3.99%, which means that the research model can be said to lack predictive relevance. f-squared the f-squared value shows the effect of endogenous variables on exogenous variables. the fsquared criteria are: 0.02≤ f ≤ 0.15 = weak effect, 0.15 ≤ f ≤ 0.35 = medium effect, f ≥ 0.35 = large effect. based on table 6, each variable has a weak effect size. table 6. f-squared test results relationship f2 criterion promotional appeal to interest in using qr is finteich 0.032 weak eisai of use for interest in using qris fintech 0.003 weak usage risks to interest in using qr is fintech 0.028 weak source: smartpls data processing, 2024 https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm normed fit index (nfi) the last step in this study is to analyze the fitt model that shows how good or good the author's research model is, which can be seen through the value of the normed fit index. the nfi yield value is 0.6787 if rounded to 0.68 or 68%. this shows that the researcher's research model is 68% fit or the fit is good. the analysis and evaluation of the measurement model in the pls-sem algorithm calculate results are as follows: figure 4. pls-seim algorithm inner model equation hypothesis test the way to seiei the results of hypothesis testing is done by comparing t-tables and t-counts. the value of the t-calculation is seen through the results of bootstrapping testing using smartpls software. the hypothesis test in this study will use the value of t-statistic, so this study uses a twotailed hypothesis test so that the value of t-statistic must be > 1.65 and the value of p values must be < 0.05. if the value of t-calculate> t-table, then h0 is rejected and ha is accepted and vice versa. table 7. hasil uji path coefficients original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values information x1 > y 0.178 0.1662 0.1807 0.9880 0.3236 rejected x2 > y 0.056 0.0680 0.1648 0.3445 0.7306 rejected x3 > y 0.175 0.2115 0.1479 1.1853 0.2365 rejected source: smartpls data processing, 2024 the findings of this study offers a detailed understanding of how perceived promotional attractiveness, ease of use, and risk impact the interest in using qris financial technology, while also comparing these outcomes with relevant theories and previous research. https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm firstly, regarding perceived promotional attractiveness, the study reveals that qris promotions do not significantly influence user interest. this aligns with the research by (mulyaningtyas & ihsan, 2023), which also found that promotion has a positive but insignificant effect. however, this result contrasts with (mujib & amin, 2023) research, which identified a significant positive impact of perceived promotion on customer interest in using qris in surabaya. this discrepancy suggests that while promotion is a key factor in capturing consumer attention, qris promotions may not be as competitive as other payment methods like gopay and linkaja, which offer more appealing and frequent promotions. therefore, to enhance qris's appeial, it is essential to reassess and improve promotional strategies, incorporating more aggressive and creative promotional techniques. (ghozali, 2021) second, in terms of perceived ease of use, the results of this study indicate that the perceived ease of use of qris does not have a significant influence on user interest. this finding is in line with (mulyati, 2023) which also states that ease of use has no effect on qris user interest. however, this is different from the results of research by ningsih, sasmita & sari (2021) which found that ease of use has a positive and significant effect. these findings indicate that although qris is designed to facilitate transactions, users' lack of understanding and experience with this system can be a major inhibiting factor in its adoption. therefore, it is important to increase education and socialization efforts regarding how to use qris, so that users feel more comfortable and confident in using this technology. third, regarding perceived risk of use, the results of this study indicate that perceived risk does not have a significant effect on interest in using qris, in line with mulyati's research (2023). however, this result is different from the research of (fadhli & fachruddin, 2016) which found that risk perception has a negative effect on the use of internet banking. although the risk perception of qris has no effect on user interest in this study, it is still important to maintain and improve security and transparency measures in the qris payment system. security and protection of user data are crucial factors that can affect user trust and convenience. if qris can maintain high security standards and address security issues quickly and effectively, then the perception of risk can be minimized, which in turn can increase user interest and adoption. overall, this study makes a significant contribution in understanding the factors that influence interest in using qris and how they differ from previous research findings. the findings underscore the importance of improved promotional strategies, increased user education, as well as reinforcement of high security standards in influencing interest in using qris. the practical implications of this research includes the need for qris managers to adjust promotional and educational strategies, and ensure system security that can increase user trust and satisfaction. conclusion based on the test results and discussion, the conclusion of this study shows that the perception of promotional attractiveness, ease of use, and risk of use does not have a significant effect on interest in using qris financial technology. qris users feel that the promotions offered are still lacking, the ease of use of qris is not fully understood even though it has been introduced as an easy and reliable electronic payment standard, and perceptions of usage risk have no effect on user interest. https://www.ilomata.org/index.php/ijjm qris: awareness and understanding the key drivers yuniarti, septiani, rusmianto., wijaya, and kurniawan 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijjm for future research, it is recommended that researchers add additional variables such as user satisfaction, system reputation, and system quality to get more comprehensive results. in addition, the use of better data collection methods and expansion of the population, sample, and research locations will help obtain more accurate data and produce better research. reference abdillah, w., & hartono, j. 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(2020). qris di mata umkm: eksplorasi persepsi dan intensi umkm menggunakan qris. e-jurnal ekonomi dan bisnis universitas udayana, 10(9), 921–946. yuniarti, e. i., nurmala, n., asliana, e. i., mursalin, m., satpathy, m., attiya, a. a., & seiceileian, n. a. (2020). environmental innovation and financial performance: a case study of the mediating role of environmental management. electronic journal of education, social economics and technology, 4(1), 38–42. https://doi.org/10.33122/eijeiseit.v4i1.83. yuniarti, e. i., nurmala, n., & irwandi, i. (2023). quality cost analysis in improving the competitiveness of the rattan industry towards the making indonesia 4.0 program. journal of accounting and management research, 9(1), 38–44. https://www.ilomata.org/index.php/ijjm the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 636-645 636 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange) ramadanti¹, yohanes c. seralurin², kurniawan patma³, victor pattiasina4 123universitas cenderawasih, indonesia 4universitas yapis papua, indonesia correspondent: victorpattiasina6@gmail.com4 received : march 15, 2024 accepted : april 29, 2024 published : april 30, 2024 citation: ramadanti., seralurin, y, c., patma, k., pattiasina, v. (2024). the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ilomata international journal of tax and accounting, 5(2), 636-645. https://doi.org/10.61194/ijtc.v5i2.1282 abstract: this study aims to test and provide empirical evidence regarding the effect of liquidity, leverage, and company size on tax aggressiveness. the population in this study consisted of mining companies listed on the indonesia stock exchange from 2020 to 2022. the sampling method used in this study was purposive sampling. the methodological approach used is quantitative using structural equation modeling (sem). the results of this study indicate that liquidity has no effect on tax aggressiveness, leverage has no effect on tax aggressiveness, and company size has a negative and significant effect on tax aggressiveness. keywords: liquidity, leverage, firm size, tax aggressiveness this is an open access article under the cc-by 4.0 license. introduction indonesia is one of the largest countries in the world with the fourth-largest population. the country is rich in natural resources and strategically located as a hub for international trade, which attracts entrepreneurs to establish companies here. besides its abundant natural resources and strategic trade location, indonesia’s large population is an advantage for increasing revenue through taxation. taxation has always been a significant issue for companies, leading them to seek ways to minimize their tax payments. over the past six years (2018-2023), indonesia's tax ratio has never reached 15%. the mining sector significantly contributes to tax revenue, both through income tax and value-added tax from domestic and import transactions. the sector is a major contributor, providing the fourthlargest tax revenue at 94% compared to other sectors (databoks, 2024). despite this, the mining sector's contribution remains low relative to indonesia's abundant natural resources, indicating the need for the government to optimize this sector's tax contributions. tax avoidance in indonesia has become a concerning phenomenon, causing substantial tax revenue losses estimated at us$ 46 billion annually (pajakku, 2020). this practice also harms countries globally, with potential tax losses of up to us$ 5 trillion over the next decade (tax justice network, 2023). the mining sector is particularly notorious for tax avoidance. in 2023, there were 2,741 illegal mining sites (peti) in indonesia, which fuel black market trade of mining products, exacerbating tax violations (ministry of energy and mineral resources, 2023). additionally, 50% of licensed https://www.ilomata.org/index.php/ijtc mailto:victorpattiasina6@gmail.com https://doi.org/10.61194/ijtc.v5i2.1282 the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 637 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mining companies in indonesia (with iup) do not have taxpayer identification numbers (npwp) (liputan6.com, 2022). this indicates that tax avoidance is not only conducted by illegal miners but also by large companies that should comply with tax regulations (rusdi hidayat, 2019; silalahi, 2023). an example of aggressive tax behavior is pt toba pulp lestari tbk (inru), which was involved in a tax aggression case amounting to rp 19 trillion. the company was found manipulating export documents to conceal export values and avoid taxes, reporting rp 167 trillion in false export transactions but only declaring rp 13 trillion to evade export duties (tribunnews.com, 2020). the positive accounting theory serves as the grand theory for this research, explaining that companies choose accounting policies to maximize firm value and minimize contract costs (mansor & abdullahi, 2015; rahmawati & kassim, 2020; scott, 2015). according to watts & zimmerman (1983), three main hypotheses underlie this theory: bonus plan hypothesis, debt/equity hypothesis, and political cost hypothesis. the bonus plan hypothesis suggests that managers with bonus plans are motivated to choose accounting methods that increase current earnings to boost their bonuses. the debt/equity hypothesis posits that companies with high debt are more likely to select accounting methods that increase earnings to avoid breaching debt covenants. the political cost hypothesis suggests that large companies might choose accounting methods that reduce earnings to mitigate public and regulatory pressure (devos & rahman, 2023; hajawiyah et al., 2022). tax aggressiveness can be influenced by a company's liquidity. liquidity reflects a company's performance in terms of its ability to pay current liabilities with its current assets. liquidity can be measured using several ratios, one of which is the current ratio (cr), indicating a company's ability to pay short-term obligations with its current assets (kasmir and lainnya 2019, putri and hanif 2020). leverage, the company's ability to pay long-term debt, also affects tax aggressiveness. leverage can be measured using the debt to asset ratio (dar). higher leverage increases interest expenses, reducing taxable income and potentially lowering tax payments (hidayat and muliasari 2020). (abdullah 2020) found a significant relationship between leverage and tax aggressiveness in chemical sector companies, while (febrilyantri 2022, kusumawati and kartika 2023) found no such effect in mining companies. these results are supported by studies conducted ((pattiasina 2019, stawati 2020, rambe and utami 2021, febrilyantri 2022, kusumawati and kartika 2023, meldisthy, espa et al. 2024, tanvanno, tanevia et al. 2024) . firm size, indicating the scale of a company's operations, can influence tax aggressiveness. larger firms tend to manage their finances better and optimize their tax management to maximize stakeholder benefits (roslita and safitri 2022). previous studies have shown mixed results on the impact of firm size on tax aggressiveness (allo, alexander et al. 2021) but the results of this study contradict the results of the study (ramadani and hartiyah 2020, malau 2021, utomo and fitria 2021, febrilyantri 2022, hayani and darmawati 2023). the novelty and differences presented by this research provide significant contributions to understanding tax aggressiveness in indonesia's mining sector. with its advanced methodological approach, focus on the latest data, and in-depth analysis, this study offers new insights that can be utilized by policymakers, academics, and practitioners to develop more effective strategies in https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 638 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc managing and overseeing tax aggressiveness practices within the mining industry (ardhi & lubis, 2023; mashuri & ermaya, 2019). method the data analysis method used in this research is to use the smartpls (cheah, thurasamy et al. 2020) approach where testing is carried out in several stages, namely: descriptive statistical test, outer moder test, inner model test, and research hypothesis testing. the population consists of all mining companies listed on the indonesia stock exchange (idx) from 2020 to 2022. the sample is selected using purposive sampling based on specific criteria relevant to the research objectives. sample criteria: 1. mining companies listed on the idx during 2020-2022. 2. companies that publish financial statements in indonesian rupiah. 3. mining companies that incurred losses. 4. companies with complete information required for the study. variable measurement: variables in this study are measured using ratios as outlined in table : variable scale measurement current ratio (cr) ratio current assets / current liabilities debt to asset ratio (dar) ratio total debt / total assets firm size (ln) ratio ln (assets) effective tax rate (etr) ratio income tax expense / pre-tax profit data analysis uses smartpls software to perform structural equation modeling (sem), including tests for descriptive statistics, outer model, inner model, and hypothesis testing. result and discussion descriptive statistics table presents descriptive statistics for the variables analyzed, including minimum, maximum, mean, and standard deviation values for liquidity, leverage, firm size, and tax aggressiveness. name min max mean std. dev. cr 1.009 9.283 2.176 1.733 dar 0.081 0.700 0.400 0.179 ln 25.659 31.446 29.016 1.567 etr 0.108 0.775 0.320 0.166 source: smartpls output, 2024 https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 639 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table above shows the average liquidity value of 2.176 with a standard deviation of 1.733, the highest liquidity value of 9.283, and the lowest liquidity value of 1.009. the average leverage value is 0.400 with a standard deviation of 0.179, the minimum value is 0.081, and the maximum value is 0.700. the average firm size is 29.016 with a standard deviation of 1.567, the minimum value is 25.659, and the maximum value is 31.446. the average tax aggressiveness is 0.320 with a standard deviation of 0.166, the minimum value is 0.108, and the maximum value is 0.775. outer model test table shows that all indicators for the latent variables in this study have loading factor values above 0.5, indicating that they are valid and reliable indicators for the respective variables. indicator likuiditas leverage firm size tax aggressiveness cr 1.000 dar 1.000 ln 1.000 etr 1.000 source: smartpls output, 2024 based on table above, it shows that all indicators of latent variables in this study have a factor loading value above 0.5. thus, these indicators are valid and reliable indicators as indicators that reflect the variables of this study. based on table above, it shows that all vif values are <5 so it can be concluded that the data does not have high collinearity. this shows that the variables used will not cause errors in the assessment of significance. r-square value shows that liquidity, leverage, and firm size explain 32.4% of the variance in tax aggressiveness. indicator r-square tax aggressiveness 0.324 source: smartpls output, 2024 based on table above shows that tax aggressiveness can be explained by 32.4% by liquidity, leverage and company size and the rest can be explained by variables not examined in this study. https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 640 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inner model test collinearity test results indicate that all vif values are below 5, suggesting no high collinearity among the variables. indicator vif cr 1.000 dar 1.000 ln 1.000 etr 1.000 source: smartpls output, 2024 f-square values suggest a small effect of liquidity and leverage, while firm size has a moderate effect on tax aggressiveness. indicator f-square liquidity 0.072 leverage 0.011 firm size 0.191 source: smartpls output, 2024 based on table above, it shows that the liquidity variable has a small effect, the leverage variable has a small effect as well and the company size has a moderate effect. model fit model fit is used to assess the suitability of a model. the srmr (standardized root mean square residual) value is utilized to evaluate the appropriateness of the relationships between variables in the model. a model is considered fit to explain the relationships between variables if the srmr value is less than 0.10 (ghozali, 2014). model fit test results indicator saturated model estimated model srmr 0.000 0.000 d_uls 0.000 0.000 d_g 0.000 0.000 chi-square 0.000 0.000 nfi 1.000 1.000 source: smartpls output, 2024 based on table above, it can be concluded that the srmr value is 0.000 where the value meets the criteria because it is <0.10, so the pls model in this study is declared fit and suitable for use in testing the research hypothesis. https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 641 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis testing hypothesis testing in this study is conducted using bootstrapping. the hypothesis test is carried out with the t-test, where a p-value < 0.05 indicates significance, and vice versa. h1 is accepted if the pvalue < 0.05 (ghozali, 2014). effect original sample (o) sample mean (m) standard deviation (stdev) t statistics p value liquidity -> tax aggressiveness -0.319 -0.339 0.174 1.834 0.067 leverage -> tax aggressiveness 0.126 0.109 0.234 0.537 0.591 firm size -> tax aggressiveness -0.402 -0.391 0.169 2.381 0.017 source: smartpls output, 2024 the effect of liquidity on tax aggressiveness based on table, it can be concluded that liquidity does not have a positive effect on tax aggressiveness, as evidenced by a path coefficient of -0.319, a t-statistic of 1.834, and a p-value of 0.067. the t-statistic is less than 1.96, and the p-value is greater than 0.05. this study shows that liquidity does not directly affect a company's tax aggressiveness. this means that the level of a company's liquidity, whether high or low, does not influence how aggressive the company is in avoiding or minimizing its tax obligations. positive accounting theory's debt/equity hypothesis suggests that companies with high liquidity tend to maintain profits to keep good relationships with creditors, implying that highly liquid companies may not need to be aggressive in tax matters due to their financial stability. these findings align with the study by (hidayat and muliasari 2020, allo, alexander et al. 2021, malo, harjito et al. 2024), which found that liquidity does not affect tax aggressiveness. however, they contradict the study by (ramadani and hartiyah 2020, febrilyantri 2022) , which stated that liquidity positively affects tax aggressiveness. the effect of leverage on tax aggressiveness based on table, it can be concluded that leverage has a positive but not significant effect on tax aggressiveness, as evidenced by a path coefficient of 0.126, a t-statistic of 0.537, and a p-value of 0.591. the t-statistic is less than 1.96, and the p-value is greater than 0.05. this study shows an insignificant relationship between leverage and tax aggressiveness in mining companies. however, there is a tendency for tax burdens to increase with rising interest expenses, as interest expenses can reduce taxable income. positive accounting theory explains that companies with high leverage tend to maintain profits for stability, considering interest expenses to lower tax https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 642 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc burdens. however, the characteristics of debt in mining companies, such as shareholder loans and operational funding, can minimize interest expenses and their impact on profit. these findings align with the study by (febrilyantri 2022, kusumawati and kartika 2023), which found that leverage does not affect tax aggressiveness. however, they contradict the studies by (abdullah 2020, hidayat and muliasari 2020), which stated that leverage positively affects tax aggressiveness. the effect of firm size on tax aggressiveness based on table, it can be concluded that firm size has a negative and significant effect on tax aggressiveness, as evidenced by a path coefficient of -0.402, a t-statistic of 2.381, and a p-value of 0.017. this study shows that larger firms tend to have lower tax aggressiveness compared to smaller firms. larger firms often have more assets, leading to higher depreciation and lower taxable income. they are also more closely monitored by tax authorities, encouraging compliance and reducing tax aggressiveness. the complex structure and decision-making processes in larger firms make aggressive tax strategies difficult and increase compliance costs. these findings align with the studies by (utomo and fitria 2021, hayani and darmawati 2023), which found that firm size negatively affects tax aggressiveness. however, they contradict the study by (hayani and darmawati 2023, richard 2023, malo, harjito et al. 2024), which stated that firm size does not affect tax aggressiveness, and the study by malau (2021). conclusion based on the analysis of data on the influence of liquidity, leverage, and firm size on tax aggressiveness in mining companies from 2020 to 2022, the following conclusions can be drawn: 1. liquidity, proxied by the current ratio (cr), does not affect tax aggressiveness, proxied by the effective tax rate (etr). this indicates that liquidity does not influence the level of tax aggressiveness. 2. leverage, proxied by the debt to assets ratio (dar), does not affect tax aggressiveness, proxied by the effective tax rate (etr). this indicates that leverage does not influence the level of tax aggressiveness despite having a positive effect. 3. firm size, proxied by the natural logarithm of assets (ln), has a negative effect on tax aggressiveness, proxied by the effective tax rate (etr). this indicates that firm size influences tax aggressiveness. the practical, theoretical, and policy implications of this research highlight the importance of firm size in determining tax aggressiveness and challenge some traditional views on the roles of liquidity and leverage. by leveraging these insights, stakeholders can develop more effective strategies for managing and overseeing corporate tax behaviors, ultimately contributing to a more transparent and compliant business environment. while this study provides valuable insights into the impact of liquidity, leverage, and firm size on tax aggressiveness in the mining sector, these limitations must be considered when interpreting the https://www.ilomata.org/index.php/ijtc the influence of liquidity, leverage, and firm size on tax aggressiveness (case study on mining companies listed on the indonesia stock exchange). ramadanti, seralurin, patma, and pattiasina 643 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results. future research that expands the data scope, considers additional variables, and employs different analytical methods can help address these limitations and offer a more comprehensive. suggestions 1. future research can include other factors that may influence tax aggressiveness. 2. future research can add more indicators to reflect each variable, such as quick ratio and cash ratio for liquidity, debt to equity ratio and long-term debt to equity ratio for leverage, and equity value and sales value for firm size. additional indicators for tax aggressiveness may include cetr, gaap etr, and dtax. 3. future research can extend the study period beyond three years. reference ardhi, f., & lubis, a. w. 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"ukuran perusahaan memoderasi pengaruh capital intensity dan profitabilitas terhadap agresivitas pajak." esensi: jurnal bisnis dan manajemen 10(2): 231-246. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 221-233 221 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi1, desinta pramesti2, budi harsono3 123universitas internasional batam, indonesia correspondent: hendi.luo@uib.ac.id1 received : november 16, 2023 accepted : january 11, 2024 published : january 31, 2024 citation: hendi., pramesti, d., harsono, b. (2024). the moderating effect of sustainability reporting on the influence of tax avoidance on firm value. ilomata international journal of tax and accounting, 5(1), 221-233. https://doi.org/10.52728/ijtc.v5i1.1048 abstract: the purpose of this research is to obtain empirical evidence supporting the hypothesis that sustainability reports can reduce shareholders' negative reactions to tax avoidance. the selected research sample consists of non-financial companies listed on the indonesia stock exchange over a period of five years (2018-2022). the research data were tested using panel regression methods. the results of the test on 1.690 observation data indicate that only 40% of the samples engage in sustainability reporting. this suggests that a considerable number of publicly listed companies in indonesia do not engage in sustainability reporting. the results of the analysis indicate that tax avoidance does not have a significant impact on the company's value. sustainability reporting as a moderating variable has a positive effect on the relationship between tax avoidance and the company's value. several control variables have a significant impact on firm value, namely leverage, profitability, and plant assets. this study contributes to the analysis of the impact of tax avoidance on the value of companies in indonesia, moderated by sustainability reporting. keywords: firm value, sustainability reporting, tax avoidance this is an open access article under the cc-by 4.0 license. introduction in recent years, there has been a growing recognition of the multifaceted relationships between corporate financial practices, sustainability reporting, and overall firm value. one intriguing avenue of inquiry whitin this realm is the potential moderating effect of sustainability reporting on the influence of tax avoidance strategies on firm value. tax avoidance, characherized by legally minimizing tax liabilities, is a common financial practice engaged in by corporations seeking to optimize their fiscal responsibilities (stefhanie & dewi, 2022). at the same time, sustainability reporting has emerged as a mechanism for companies to transperently communicate their enviromental, social, and governance (esg) performance to stakeholders. their interaction of these two dynamics raises questions about how sustainability reporting might temper or amplify the impact of tax avoidance on a firm’s overall value. https://www.ilomata.org/index.php/ijtc mailto:hendi.luo@uib.ac.id1 https://doi.org/10.52728/ijtc.v5i1.1048 the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 222 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc one of the methods commonly used by financial managers in effort to echance firm value is through tax management (kusuma & juliani, 2018). taxes represent the primary source of state revenue aimed at fostering economic growth and prosperity in indonesia (kementerian keuangan indonesia, 2019). the government seeks substantial income from the tax sector, intending to fund development, while companies, conversely, aim to minimize tax expenditures. high tax costs reduce the net profit received by companies, prompting them to take measures to reduce tax payments through tax avoidance (rezki, achsani & sasongko, 2020). understanding the dynamics at play involves delving into the rationale behind tax avoidance strategies. high level of tax avoidance are often associated with firms seeking to miximize shortterm profitability by reducing tax expenses. tax avoidance occurs when it is not in violation of tax regulations. taxpayers often exploit the weakness in tax legistation to reduce their tax liabilities (irawan & turwanto, 2020; kovermann, 2018). the hope is that tax avoidance activities can optimize the firm value, minimize costs, and generate profits for the company (nurfadilah & rosharlianti, 2020). however, the risk of uncertainty in future tax payments affects investor assessments of tax avoidance practices, potentially leading to a decline in the firm value. the potential moderating effect of sustainability reporting enters this equation as it introduces a layer of transparency and accountability. companies that engage in sustainability reporting are committed to disclosing not only their financial performance but also their environmental and social impacts. this additional layer of disclosure may influence how stakeholders perceive and react to tax avoidance practices, ultimately shaping the firm's overall value. the value of a company can be associated with various factors, one of which is the enhancement of tranparency and accountability that can drive the firm value (li, gong, zhang & koh, 2018). companies can take steps to improve transparency for investors by issuing sustainability reports. the publication of sustainability reports can reduce negative preceptions among investors and encourage capital investment. sustainable practices can be seen as a motivation to enhance investor value. this underscores the recomendation for companies to disclose their sustainability reports to enhance loyalty, build strong relationship with the comunity, ultimately creating a positive firm value (almansoori & nobanee, 2019). furthermore, sustainability reporting is becoming an integral part of corporate governance, driven by increasing awareness of environmental and social issues among investors and the broader public. investors, in particular, are showing a growing interest in companies that demonstrate a commitment to sustainable and responsible business practices. against this backdrop, sustainability reporting may act as a moderating force on the influence of tax avoidance on firm value by influencing investor sentiment. firms with robust sustainability reporting may be better positioned to navigate potential reputational risks associated with aggressive tax planning, thus mitigating any negative impact on their market value. the regulatory environment also plays a crucial role in shaping the dynamics between tax avoidance, sustainability reporting, and firm value. governments and regulatory bodies are increasingly emphasizing the importance of sustainable business practices, and some jurisdictions are introducing reporting requirements related to environmental and social factors. the presence https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 223 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of such regulations may amplify the moderating effect of sustainability reporting on the relationship between tax avoidance and firm value. companies complying with these regulations may find themselves under greater scrutiny for their tax practices, potentially altering the calculus of how tax avoidance influences their perceived value. in conclution, exploring the moderating effect of sustainability reporting on the relationship between tax avoidance and firm value opens a window into the evolving landscape of corporate finance, governance, and stakeholder expectations. as companies navigate the delicate balance between financial optimization and ethical responsibility, understanding how sustianbility reporting influences the impact of tax avoidance can provide valuable insights for both scholars and practitioners in the fields of finance, accounting, and corporate social responsibility. this research seeks to contribute to this ongoing discourse by shedding light on the intricate interplay between financial strategies, transparency, and long-term sustainable value creation. furthermore, the importance of analyzing the role of sustainability reporting, which are not mandatory in indonesia until recently in 2019 (pwc, 2023), can enhance understanding of the impact of sustainability reports on changing shareholders’ perception of tax avoidance. tax avoidance, the legal practice of minimizing tax ability through strategic financial planning, has a complex multifaceted impact on firm value (lestari & ningrum, 2018). the relationship between tax avoidance and fim value is often intricate, influenced by various factors such as industry dynamics, regalatory enviroments, and stakeholder perceptions. one key aspect of tax strategies, companies can reduce their tax burden, leading to higher net income and, consequently, an increase in firm value. this is particularly relevant in industries where profit margins are tight, and every percentage point of tax savings can significantly contribute to overall financial health. however, the impact of tax avoidance on firm value is not uniformly positive. stakeholders, including investors and the public, may view aggressive tax palnning with skepticism, as it can raise ethical concerns. excessive tax avoidance may lead to reputaional damage, eroding trust and goowill, which can have a determental effect on firm’s market value. additionally, the regulatory environment play a crucial role in shaping the consequences of tax avoidance. changes in tax laws or increased scrutiny from tax authorities can expose companies engaged in aggrassive tax practice to legal and financial risks, affecting their overall value. the supervison and enforcement of tax laws in indonesia are still relatively weak, leading to the investors benefiting more from tax avoidance activities than the risks that can be detected by tax authorities (irawan & turwanto, 2020). generally, tax avoidance practices are conducted within the scope of tax regulations (lestari & ningrum, 2018; yee, s & abdullah, 2018). the relationship between tax avoidance and firm value is further nuanced by the potential impact on a company’s cost of capital. while tax avoidance can contribute positively to earnings, it may increase a firm’s risk profile, leading to higher required returns from investors. this can offset the gains from reduces tax expenses, influencing the firms’s overall valuation. moreover, tax considerations can impact investment decisions and capital allocation, affecting a company’s growth prospect and, conswquently, its long-term value. https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 224 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investors and analysts closely monitor a firm’s effective tax rate as akey performance metric. transparency in financial reporting regarding tax strategies can mitigate concerns and positively influence the market perception of a company. striking the right balance between tax efficiency and ethical behavior is crucial for firms aiming to maximize shareholder value in the long run. in summary, the effect of tax avoidance on firm value is a dynamic interplay of financial, ethical, and regalatory factors, and companies must navigate this landscape strategically to achive sustainable growth and maintain stakeholder trust. research by herron and nahata (herron & nahata, 2020) suggests that the firm value is significantly positively influenced by tax avoidance. the research conducted by irianto, sudibyo, and wafirli (2017) stated that profitability can influence a firm value through profit enhancement. companies with high revenue are highly susceptible to utilizing tax avoidance strategies to reduce income and minimize tax payments. the firm size of acompany has asignificant influence on tax avoidance practices. research finding conducted by dewi (2023) found the magnitude of a firm value plays pivotal role in shaping its approach to tax avoidance. the increasing in firm value provides the company with opportunities to capitalize on existing gaps and undertake tax avoidance practices in the course of each transaction. however, studies conducted by yee, sapiei, and abdullah (2018) found negative relationship between tax avoidance and the form value. a similar study by jecky and suparman (2021) reported the same finding, stating that the firm value is negatively influenced but not significantly. therefore, the following hypothesis is proposed: h1: tax avoidance is significantly positively related to the firm value. tax avoidance use an opportunistic action that violates the implicit contract between a company and society. consequntly, it can hinder the government from collecting taxes from the company and may be seen as sacrificing public interests. therefore, paying taxes reflects the company’s constribution to society and aligns consistently with the pupose of issuing sustainability reporting. tax avoidance can have negative impacts such as reputational damage, media pressure, tax penalties, and even boycotts by the public against the company. thus, the issuance of sustainability reporting should be consideres a risk management strategy that can enhance the company’s reputation. sustainability reporting has a direct influence on risk management, which in turn affects firm value (j. siva, a. silva & chan silva et al., 2019). by disclosing esg-related risks and initiatives, companies can better anticipate and address potential challenges. this proactive approach to risk management resonates positively with investors and creditors, as it indicates the company's preparedness to navigate a rapidly changing business environment. consequently, this risk mitigation aspect contributes to the overall resilience and sustainability of the firm, positively impacting its perceived value. one significant impact of sustainability reporting on firm value lies in its ability to attract and satisfy the demands of an increasingly esg-conscious investor base. as more investors prioritize companies that demonstrate a commitment to sustainable practices, the correlation between positive sustainability reporting and increased firm value becomes evident. investors are more likely to allocate capital to firms that integrate sustainability into their core business strategies, https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 225 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc recognizing the long-term value creation potential embedded in responsible corporate behavior (machmuddah, sari & utomo, 2020). sustainability reporting also plays a crucial role in regulatory compliance, responding to the increasing emphasis on esg factors in corporate governance. as regulatory frameworks evolve to incorporate sustainability disclosure requirements, companies adhering to these standards are more likely to meet compliance expectations. this alignment with regulatory guidelines not only mitigates legal risks but also positions the company as a responsible corporate citizen, positively influencing its perceived value in the eyes of regulators and investors alike. sustainability reporting has emerged as a critical mechanism for corporations to communicate their commitment to environmental, social, and governance (esg) principles (fitriyah, 2019). the correlation between sustainability reporting and firm value has garnered increasing attention, and the interplay between sustainability reporting and tax avoidance practices adds an intriguing layer to this relationship. the transparency inherent in sustainability reporting contributes significantly to how stakeholders perceive a company's ethical and responsible business conduct. firms that engage in comprehensive sustainability reporting often demonstrate a commitment to long-term value creation, aligning with the growing investor interest in sustainable and socially responsible investments (almansoori & nobanee, 2019; j. park, h. park, & lee, 2018). additionally, information asymetry with external investors can be avoided by improving communication channels through the issuance of sustainability reports (li et al., 2018). companies that publish sustainability reporting for ethical reasons are generally perceived as less involved in activities seeking personal gain, such as tax avoidance. this encourages increased investor trust to invest their capital in companies that disclose sustainability reports. other research conducted by farhana and adelina (2019) found positive and significant impact of sustainability reporting on firm value. this indicates that information disclosed by companies through the issuance of sustainability reports can help enhance the firm value through stock value movements. fuadah, dewi, and arisman (2018) in their research showed a positive and significant influence between environmental disclosure and firm value. qureshi, kirkerud, theresa, and ahsan (2020) found that there is a positive association between sustainability reporting and firm value. similarly, findings from the research conducted by fatchan and triswamawi (2016) indicate the same result, namely, a statistically significant influence on firm value. rudyanto and pirzada (2020) mentioned in their study that tax avoidance does not affect firm value; therefore, sustainability reporting does not play a moderating role. thus, the second hypothesis proposed in this study is: h2: sustainability reporting can moderate the impact of tax avoidance on firm value. method the research was conducted using secondary data obtained from the financial reports of companies listed on the indonesia stock exchange. the official website of the indonesia stock exchange is www.idx.co.id. the data collection process began by visiting the official reports based https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 226 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc on predetermined sample selection criteria, and extracting information related to the companies, such as market capitalization, total assets, total liabilities, net income, and other relevant information needed to measure all variables in the study. the data analysis method and hypothesis testing in this research involved panel regretion analysis. this method is used to analyze the relationship between the dependent variable, independent variable, moderating variable, and control variable based on a combination of cross-sectional and time-series data. the panel data collected for this research includede samples of publicly trade companies over a five-year period (2018-2022). property, oil and gas firms were also excluded because they are subject to final tax, resulting in no reported tax expenses. the statistical software used to analyze the panel data was eviews version 11. the data analysis prosess involded descriptive statistic testing, selecting the best model, panel regression, and hypothesis testing. information amount amount of non-financial companies listed on the indonesia stock exchange (idx) from 2018-2022 623 property companies (92) energy companies (83) companies without complete listing during the observation period (285) amount of company samples 338 this study employs firm value as the endogenous variable, tax avoidance as the exogenous variable, and sustainability reporting as the moderating variable. firm value is a reflection of a company’s condition often associated with stock prices. a high firm value can be an indicator of the wellbeing of owners and shareholders (irawan & turwanto, 2020). enhancing firm value can contribute to market confidence in the company, not only based on its current performance but also on its future prospects. firm value is measud using tobin’s q (q). tax avoidance can be measured using the cash effective tax rate (cert) (wang, xu & sun, 2020). cetr is calculated by dividing the prepaid tax amount by pre-tax income. control variable in this study include firm size, growth, fixed assets, profitability, leverage, company age, and liquidity. firm size (size), measured by the natural logarithm (ln) in total assets, indicates that lager companies are generally considered better. sales growth (growth) reflects increasing company revenue as form a growing demand and competitive strength (inger vansant, 2019). growth is measured by substractring this years’s revenue from the previous years’s revenue. plant assets (ppe) are used as a control variable to indicates productivity. plant assets are measured by diving total fixed assets by total assets. profitabbility is measured using return on assets (roa), where a higher value can attract investors to invest their capital, roa is calculated by dividing net income after tax by total assets. high leverage (lev) can boosts the firm value (endri & fathony, 2020), measured by diving total debt by total assets. firm age (age) indicates hpw long the compny has been established. liquidity (liq) is measured by the sum of cash and long-term investments divided by the sum of assets from the previous year. https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 227 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. research framework result and discussion the discussion begins by presenting the descriptive statistics of the research variables. subsequently, the results and discussion will address the research objectives through model feasibility tests, the coeffiecient of determination, and hypothesis testing. descriptive statistics provide an overview of the minimum, maximum, mean, and standard deviation of all research data. the number of observations used in this study is 1690. the variable colums include independent, dependent, moderation, and control variables. the following tabel 1 presents the results of the descriptive statistical test. the descriptive statistics test table 1. result of the descriptive statistic test variable n min. max. mean std. dev. firm value (q) 1690 0.00 564,000,000 649,635.6 14,051,514.0 tax avoidance (cetr) 1690 33.0 9,768.3 6.6 237.9 sustainability reporting (sr) 1690 1.0 2.0 1.4 0.6 firm size (size) 1690 8.1 32.5 23.3 5.4 leverage (lev) 1690 0.5 3,462.0 7.0 121.4 profitability (roa) 1690 -1,391.2 3,612.4 1.3 94.3 growth (growth) 1690 -1.7 593,964.4 356.3 14,448.5 firm age (age) 1690 4.0 116.0 36.3 17.5 plant assets (ppe) 1690 0.00 662.4 1.8 24.5 liquidity (liq) 1690 0.00 863,580.1 915.6 21,221.5 source: eviews 11, 2023 https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 228 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. result of the descriptive statistic test variable dummy variable description n std. dev. sustainability reporting (sr) 0 = does not publish sustainability reporting 1.013 60% 1 = publishes sustainability reporting 677 40% total 1.690 100% source: eviews 11, 2023 based on table 1., the dependent variable, which is firm value (q) indicates that the average (mean) company size is around 649,635.6 with a median value of 1.2. the maximum value for company size is 564,000,000.0, while the minimum is 0.00. the high standard deviation (std.dev.) of 14,051,514.0 suggests significant variation in company sizes, indicating a substantial amount of diversity within the dataset. the lowest firm value was pt royal prima tbk in 2022. meanwhile, the highest firm value was bakrie telecom tbk in 2020. the independent variable, tax avoidance (cetr) ha an average of 6,6. cetr represents the actual amount of cash tax payments. the cetr figure is more indicative of tax avoidance practices as it reflects the effective tax rate applied to taxpayers’ income. a cetr persentage close to the prevailing corporate income tax rate indicates a lower level of tax avoidance. conversely, a larger difference between cetr and the applicable income tax rate indicates a higher level of tax avoidance practices. table 2. reveals that 40%, equivalent to 677 instances, involve themselves in sustainability reporting. this underscores the fact that a substantial number of publicly traded companies in indonesia have yet to adopt sustainability reporting. the delay in implementation from 2019 to 2021, attributed to the impact of covid-19, has contributed to this situation. currently, only listed financial institutions are obliged to comply with sustainability reporting requirements. model feasibility test tabel 3. result of the chow and hausman test effect test statistic prob. cross-section f 1.2473 0.0042 test summary chi-sq. statistic prob. cross-section random 286.2211 0.0000 source: eviews 11, 2023 the results of the eviews software test for the chow test indicates a significance probability of 0,0042, which is smaller than 0,05. subsequently, the hausamn test produces a probability of 0,0000, meaning it is smaller than 0,05. therefore, this study utulizes the fixed effect model (fem) to test the hyphothesis. https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 229 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc f-test and coefficient of determination test table 4. result of the f-test and coefficient determination test f-statistic 9.6883 prob (f-statistic) 0.0000 r-squared 0.7147 adjusted r-squared 0.6409 source: eviews 11, 2023 the results of the f-test yield a probability of 0,0000. this indicates that the dependent and control varibles simultaneously have a significant impact on the firm’s value. the coefficient of determination test results show an adjusted r-square value of 0,7147. it means that the independent, moderator, and control variables used in this study can predict the dependent variance by 71,47%, while remaining 28,53% is influenced by other variables not included in this study. hyphothesis test table 5. result of t test – cetr descriptio n without moderating variable dengan variabel moderasi coefficien t probabilit y conclutio n cofficien t probabilit y conclutio n coefficient 1310098 0.15620 1310098 0.15620 cetr -309942 0.87690 insig. -309942 0.87690 insig. sr -423495.4 0.47640 insig. -423495.4 0.47640 insig. size -384568.3 0.07640 insig. -384568.3 0.07640 insig. lev 105594.2 0.00000 sig. (-) 105594.2 0.00000 sig. (-) roa 48109.76 0.00000 sig. (+) 48109.76 0.00000 sig. (+) growth -2.156182 0.89190 insig. -2.156182 0.89190 insig. age -91255.46 0.67820 insig. -91255.46 0.67820 insig. ppe -223675.5 0.00000 sig. (-) -223675.5 0.00000 sig. (-) liq 1949858 0.85930 insig. 1949858 0.85930 insig. cetr*sr 3081.419 0.87720 insig. 3081.419 0.87720 insig. source: eviews 11, 2023 table 2 shows the results of testing the hypothesis regarding the influence of tax avoidance on firm value. the following is the regression equation model from the study. q = – 3100909 – 3099.42 cetr – 423495.4 sr – 384568.3 size – 2.156182 growth – 22367.5 ppe + 48109.76 roa + 105594.2 lev – 91255.46 age + 1.949858 liq + 308.419 cetr*sr + 𝜀 https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 230 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax avoidance is significantly positively related to the firm value hyphothesis 1 states that tax avoidance has a positive impact on firm value. the results of the conducted reseach indicate that this hyphothesis is not supported. the t-test results show a negative influence with a value of -3,0994, but it is not significant with a probability value of 0,8769 > 0,05. the results of the research analysis indicate that there is no impact of tax avoidance activities on the firm value. this means that any activity aimed at reducing corporate tax payments does not disrupt the company's value. the reason for this lack of impact is that investors generally do not pay much attention to the tax payment activities of the company; instead, they prioritize the company's profits and dividends. this condition also provides evidence supporting the need for additional regulations regarding tax payments to ensure that companies continue to pay taxes accurately. similarity, the test results for the independent and control variables, namely cetr, sr, growth, and age, also exhibit non-significant effects. variables lev, ppe, and roa have significant impact on the dependent variable. these findings align with the research conducted by jacky and suparman (2021), which indicates that tax avoidance cannot be the case of a decrease in firm value. this confims that tax avoidance practices in companies are considered within legal boundaries and regulations, having no negative impact on the companies. the study is consistent with the research by irawan and turwanto (2020), where tax avoidance practices aimed at minimizing tax payments to the government are perceived by investors as an effective and efficient investment method to enhance dorm value, resulting form increased profits distributed to investors. sustainability reporting can moderate the impact of tax avoidance on firm value the second hyphothesis, indicates that sustainability reporting can significantly positively moderate the relationship between tax avoidance and firm value, is rejected based on the test results show in table 5. there is a positive influence, but is not significant, with a coefficient value of 3,081 for cetr*sr and probability of 8,8772. the results of this test indicate that sustainability reporting, as a moderating variable, has a positive effect on the relationship between tax avoidance and form value, but is not significant. the limited impact of sustainability reporting on firm value in indonesia may be attributed to the fact that sustainability reporting is still a relatively new issue in the country. investors may have low understanding and knowledge about it. the findings align with the conclusion that the disclosure of sustainability reports does not significantly influence the firm value as calculated based on tobin's q. these research findings align with the study by farhana and adelina (2019), which states that information disclosed by companies through the publication of sustainability reports can help enhance firm value through stock price movements. an increase in the level of sustainability reporting disclose is directly propotional to an increase in firm value. additionally, larger-scale companies tend to have larger stakeholders, leading to higher scrutiny to disclose information to all stakeholders, including sustainability reporting disclosure. regarding control variables, leverage has a significant impact on form value. this results is consistent with the research by nugroho (2021). companies with higher leverage tend to have higher values. this is due to the payment of interest on debt, which can reduce the taxes (cetr) https://www.ilomata.org/index.php/ijtc the moderating effect of sustainability reporting on the influence of tax avoidance on firm value hendi, pramesti, and harsono 231 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the company needs to pay. this results in an increase in profit with a reduction in tax payments, leading to an increase in firm value. profitability has a significant positive impact on firm value, in line with the study conducted by deswanto and siregar (2018). the high profits earned by the compny results in a higher amount of income tax to be paid. this increase encourages companies to engage in tax avoidance practices. therefore, higher profitability results in a negative impact on the effective tax rate. this implies that when a company generates more profit, the effective tax rate decreses, leading to an increase in tax avoidance (irianto, sudibyo & wafirli, 2017). conclusion this research utilized data from non-financial companies listed on the indonesia stock exchange published from 2018 to 2022. the testing was conducted on 338 companies, resulting in a total of 1,690 data points. about 40% of the listed companies have already published sustainability reports. based on this percentage, it can be inferred that a significant portion of companies in indonesia has issued sustainability reports. the study suggests that this practice can serve as a driver and motivation for companies to present sustainability reports, providing a positive perception for investors to invest in these companies. upon analyzing the hypothesis test results, it can be concluded that the first hypothesis, which states that tax avoidance measured by cetr does not significantly influence firm value, is supported. the second hypothesis testing indicates that sustainability reporting as a moderating variable is capable of moderating the relationship between tax avoidance and firm value but is not significant. this suggests that with the issuance of sustainability reports, companies may avoid tax avoidance practices, leading to an increase in firm value. several control variables, such as leverage, fixed assets, and profitability, were found to have a significant impact on firm value. the results of this research are expected to contribute to the literature on sustainability reporting moderating the practice of tax avoidance and its impact on firm value. reference almansoori, a. m., & nobanee, h. 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(2020). corporate tax avoidance: a literature review and research agenda. journal of economic surveys, 34(4), 793–811. https://doi.org/10.1111/joes.12347 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 426-436 426| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the role of the housewife in managing family finances (case study in south labuhan batu regency) dina anjani1, yenni samri juliati nasution2, laylan syafina3 123universitas islam negeri sumatera utara, indonesia correspondent: dinaanjani3321@gmail.com received : january 13, 2024 accepted : march 31, 2024 published : april 30, 2024 citation: anjani, d., nasution, y, s, j., syafina, l. (2024). the role of the housewife in managing family finances (case study in south labuhan batu regency). ilomata international journal of tax and accounting, 5(2), 426-436. https://doi.org/10.61194/ijtc.v5i2.1103 abstract: this research aims to examine the role of housewives with upper secondary education in managing family finances in aek torop barat hamlet km 6, asam jawa village, south labuhan batu regency. this research use desciptive qualitative approach . the research site is located in aek torop barat hamlet km 6 asam jawa village, south labuhan batu regency. research time from may 2023 to november 2023. primary data on field activities directly through interviews, asking questions and answers to informants. for the data taken, there were 2 (two) housewives who met the criteria determined by the author from 80 housewives. who work, have a monthly income, and have a secondary education or above (bachelor's degree). techniques used by researchers in this research survey is in form interview ( interview ) for make it easier in the research. interview is a communication process or an interaction which aims to collect something information which appear through ask answer between a researcher with an informant or research subject (if the subject is man). so researcher do analysis data with the aim of making the data that has been obtained easier to use understood. this analysis uses theories related to the topic of this discussion is an attempt to observe the role of housewives in managing household finances. the research results show that housewives play an important role in financial planning, financial decision making, savings and investment. they face challenges in the form of unexpected expenses and inflation. education influences financial understanding. educated housewives are able to manage finances more planned and invest for period long housewife households strive to increase financial literacy, use digital financial applications, and participate in financial development programs to overcome challenges. despite facing various challenges, educated housewives have a significant role in managing household finances. with the knowledge of household financial management, the implementation and impact on day-to-day life will enable her to better manage her expenses, save for educational needs and have a much better financial life. keywords: housewife, family financial management this is an open access article under the cc-by 4.0 license https://www.ilomata.org/index.php/ijtc mailto:dinaanjani3321@gmail.com https://doi.org/10.61194/ijtc.v5i2.1103 the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 427| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction managing household finances is a crucial aspect in daily family life. successful financial management can influence economic stability, level of welfare, and quality of life of family members. in the context of indonesian society, the role of housewives in managing family finances is often the main focus, considering the mother's traditional role as household manager and decision maker in family matters(a. et al., 2022; adiputra & patricia, 2019). the role of housewives in managing family finances is often considered normal and receives little attention. however, if examined further, this role has a significant impact on family stability and welfare. housewives with secondary and higher education have better knowledge and understanding of financial management, which can help them in making wise financial decisions for their families (ainiyah et al., 2021; radhitya, 2018). in recent years, social and economic changes have occurred in various regions of indonesia, including in aek torop barat hamlet km 6, asam jawa village, south labuhan batu regency. the development of education in the area also shows an increase, especially for housewives with upper secondary education backgrounds. higher education is expected to have a positive impact on knowledge, skills and attitudes in facing dynamic economic changes (akbar et al., 2019; alfons et al., 2017). however, even though they have secondary or upper secondary education, it is not yet clear what role housewives play in managing their household finances and what impact this education has on overall family financial management. therefore, in-depth and comprehensive research on the role of housewives with upper secondary education in managing household finances in aek torop barat hamlet km 6, asam jawa village, south labuhan batu regency is relevant and needs to be carried out (al-hakim et al., 2019; amalia et al., 2020). west aek torop hamlet km 6 asam jawa village, south labuhan batu regency, there are many housewives with secondary and upper secondary education who take an important role in managing family finances. however, research on how they carry out this role is still very limited. therefore, it is hoped that this research will provide a clearer picture of how housewives in this region manage family finances, as well as the challenges and opportunities they face (amalia et al., 2019; amila & suryadi, 2016; darma et al., 2020). the author chose to conduct research in the aek torop barat hamlet area km 6 asam jawa village, south labuhan batu regency because the role of the housewife is very crucial in the family. housewives are often the managers of family finances, a very important task because it includes meeting the needs of all family members. they are responsible for ensuring the availability of needs in the family, determining the amount of expenditure and priorities. however, in this area, many housewives are less able to manage family finances. they often depend on their husband's salary, and sometimes this salary is not sufficient. this happens because they don't understand how to use money well and don't understand their financial income and expenses (fankhauser & burton, 2011; harahap, 2018; hastuti et al., 2022). https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 428| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to (nasution et al., 2020), the pattern of participation carried out by female workers can be grouped into three, namely: a. contribute more than 50% in helping fulfill family welfare b. contribute less than 50% in helping fulfill family welfare c. contribute to fulfilling family welfare by 50%. with this contribution, family economic fulfillment is achieved due to a steady income, and women's participation in public spaces, especially campuses, is also greater, however, women's role as housewives and educating children is slightly reduced, as is time with the family because their work is also scheduled (daily, 2020; hasibuan, 2012; masyruroh & rahmi, 2018). culture and social order in the surrounding environment, brings changes in how individual perspectives take action based on (amalia et al., 2020). like the financial aspect, the problem with people is that they are influenced to follow the latest trends or follow the endless flow of lifestyle. through this pkm, the activity implementers tried to explore and hold discussions with housewives around wijaya kusuma (samarinda city) in september 2021, regarding their understanding of finance. special targets are needed for them to review their experiences regarding managing household finances which are increasingly wasteful with income that is constant or even tends to decrease. with the sharing and discussions (s&d) method, concrete new problem solving is obtained, where there is a common perception to develop specific strategies. of the 27 housewives, who have multiple roles apart from taking care of their families, they can finally understand which household needs are priorities and which are not, so that their monthly income can be set aside for savings or investment. it is hoped that this contribution through pkm will be a simple but meaningful breakthrough for irt (nofianti & denziana, 2010; pasaribu et al., 2019; perdana & widodo, 2013). according to wahasusmiah, et al., (2022) entitled family financial management for career women who play a dual role as housewives, the results of the research show that family financial management for married career women at unissula is carried out using various methods and is managed as well as possible. the wife's expertise in various existing financial management methods, and by facing and experiencing various kinds of obstacles in existing financial management (wulandari & sri utami, 2020; yafiz et al., 2015; yuliani, 2019). housewives in family financial management with the research results stating that financial management in the family is a way of managing family finances systematically and carefully through the planning, implementation and evaluation stages (suryadi & museliza, 2021; utami, 2019; widyaningsih & puspasari, 2021). housewives in managing family finances must think intelligently, carefully and appropriately in using finances so that they can always create a good family and experience continuous growth. with the housewife's ability to manage family finances in an effective, timely, right place, right price and right quality manner, family prosperity will be realized based on budiantoro, et al., (2019) (ratnasari et al., 2021; soegoto et al., 2020; sukirman et al., 2019). looking at the existing problems and based on relevant research, the author wishes to help housewives in the aek torop barat hamlet area km 6, asam jawa village, south labuhan batu regency in managing their finances better. both from their husband's salary and their own income. https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 429| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc one way is to record expenses and income every month, so that there are no disputes and part of your salary can be saved. so the author is interested in taking the title " the role of housewives with middle and upper education in managing family finances (case study in south labuhan batu regency) ". this research aims to examine the role of housewives with upper secondary education in managing family finances in aek torop barat hamlet km 6, asam jawa village, south labuhan batu regency. method this research uses a qualitative descriptive approach, namely research that provides a picture of actual conditions, where this research was carried out using field research. to explain an object, event, or social environment that appears in narrative writing (tarigan, 2011). the research site is located in aek torop barat hamlet km 6 asam jawa village, south labuhan batu regency. the research period is from may 2023 to november 2023. the data source is yang become primary data sources in survey study this is data which refers on data which obtained through survey study field or fields research which through interviews and so on. this refers to field activities directly through interviews, asking questions and answers to informants. for the data taken, there were 20 housewives who met the criteria determined by the author from 80 housewives with slovin formula in aek torop barat hamlet km 6 asam jawa village, south labuhan batu regency. n = 𝑁 1+𝑁(𝑒2 ) n = 80 1+80(0.22 ) n = 80 1+0.04 n = 80 4.2 n = 19,1 ~ 20 respondent in this case researchers will use a data source, including: namely: books related to materials and works study and results study other, like report study and journal which where relate tightly with discussion as well as can help in improvement of this research. object on study this is related with topic problem which will studied by researcher in survey study this is the role of the housewife in management finance family in aek torop barat hamlet km 6 asam jawa village, south labuhan batu regency. subject on survey study this is mother house household with the criteria that is a housewife who works, has a monthly income, and has a secondary education or above (bachelor's degree) . the research required qualitative data. based on the problem formulation, this research requires data that explains the form and meaning of the procession and offerings of the single child ruwatan tradition. https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 430| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to collect the necessary data, researchers use various methods, including observation, which involves systematically observing and recording the investigated phenomena directly on the object. in this research, the author conducted systematic observations and recordings to gather data and information. the author visited the location directly to obtain accurate information about the place and the traditions of the community being studied. the observation activity was not limited to visible facts but also included information obtained through interviews and other means of data collection. observation through the sense of hearing allows for the inclusion of various expressions and questions that are part of everyday life in our understanding of reality. to achieve a thorough understanding, reliable data mining methods are necessary. the in-depth interview technique is an interactive process used to obtain information directly from the source. it is commonly used to assess a person's condition. in-depth interviews allow for the exploration of what is hidden in a person's heart, whether it pertains to the past, present, or future. researchers obtain data and information in research by means of questions and answers with predetermined subjects, using interview techniques. in interview techniques, researchers use a type of unstructured interview to freely explore various aspects and directions in order to obtain complete and in-depth information. this approach adequately fulfills efforts to understand the ruwatan tradition by directly asking questions to the resource persons. researchers use documentation techniques to search for data in the form of notes, transcripts, books, newspapers, magazines, photographs, agendas, and other sources. this technique helps to uncover the truth about societal traditions. results and discussion research result housewives play a very important role in managing family financial management . as in islam, allah swt commands us to prepare for future life in accordance with accounting. as explained in qs al-baqarah 282. this verse talks about the importance of documentation and recording financial transactions, which are the basic principles of accounting. from the results of the research conducted, it can be seen that to be able to manage family finances, housewives must pay attention and consider various things so that a strategy is formed in managing financial expenses. the strategy that housewives can use to manage family finances well in aek torop barat hamlet km 6 asam jawa village, south labuhan batu regency is by implementing several steps. the following is data on the number of housewives who have secondary or higher education in managing family finances. https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 431| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1 housewife's salary education upper middle and working no name age work education salary 1 mrs. kh 33 kindergarten teacher s1 < rp. 3,000,000 2 mrs. ms 24 kindergarten teacher s1 < rp. 3,000,000 3 mrs. sv 30 employee diploma < rp. 3,000,000 4 mrs. sf 28 employee high school < rp. 3,000,000 5 mrs. ar 26 employee diploma < rp. 3,000,000 6 mrs. l 32 kindergarten teacher s1 < rp. 3,000,000 7 mrs. aa 31 employee s1 < rp. 3,000,000 8 mrs. li 29 employee diploma < rp. 3,000,000 9 mrs. sy 35 employee diploma < rp. 3,000,000 10 mrs. mm 27 employee high school < rp. 3,000,000 11 mrs. dm 27 kindergarten teacher s1 < rp. 3,000,000 12 mrs. sk 25 employee high school < rp. 3,000,000 13 mrs. df 31 employee high school < rp. 3,000,000 14 mrs. ej 29 employee diploma < rp. 3,000,000 15 mrs. vn 24 employee high school < rp. 3,000,000 16 mrs. vf 26 kindergarten teacher s1 < rp. 3,000,000 17 mrs. sj 33 employee diploma < rp. 3,000,000 18 mrs. ar 32 employee diploma < rp. 3,000,000 19 mrs. fw 27 kindergarten teacher s1 < rp. 3,000,000 20 mrs. sg 25 employee s1 < rp. 3,000,000 source: author's research data research results can be obtained from interviews conducted by the author with research informants as follows: they said that manage the household finances by dividing them to meet daily needs and have a monthly budget and long-term financial planning. in managing finances, they communicate with their husband in making family financial decisions. financial decisions are taken based on mutual agreement with the husband. some of them also have savings in the form of gold and land for his family's future. the education has a big influence on their mindset in managing finances, planning for urgent needs or unexpected expenses by saving. then financial literacy is very important among housewives. some of the housewives who had a good educations, can manages their household finances by dividing them to meet daily needs and save. also have a monthly budget and long-term financial planning. good communication with their husband helped their family financial decisions based on mutual agreement with their husband. without a special role in decision making. the husbands had savings in the form of gold and land for his family's future. and the housewives overcomes https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 432| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial challenges by saving and only spending money on things that are considered important or when really needed. education has a big influence on one's mindset in managing finances, planning for urgent needs or unexpected expenses by saving. they feel financial literacy is very important among housewives. the following are research results based on answers to interview questions regarding the role of housewives in managing family finances. a) family financial management: the majority of housewives with upper secondary education are aware of the importance of managing household finances. they use monthly budgets and long-term financial planning to manage family income and expenses. b) role in financial decision making: housewives with upper secondary education play an active role in family financial decision making. they are involved in discussions and communication with other family members to reach an agreement on money management, in this case the husband. c) savings and investments: most housewives have savings and investments for the family's future. they tend to choose safer and more profitable investments to achieve long-term financial goals. d) financial challenges: housewives face several challenges in managing household finances, such as unexpected expenses and inflation which affect the family's purchasing power. e) strategies to overcome challenges: to overcome financial challenges, housewives use various strategies, including increasing financial literacy, adopting digital financial applications, and participating in financial development programs. f) education and financial management: higher secondary education provides a better understanding of financial management. these housewives tend to be more organized and disciplined in managing household finances. g) recording and tracking expenses: some housewives use financial apps or other recording methods to monitor and track household expenses more efficiently. h) social pressure and consumptive lifestyle: some housewives face social pressure related to a consumptive lifestyle in the environment where they live. however, they try to overcome this pressure by being wiser in managing family finances. i) financial literacy among children and adolescents: j) housewives with middle and upper level education are aware of the importance of financial literacy among children and teenagers. they are involved in educating children about financial management from an early age. k) long term plans: housewives plan the family's financial future carefully, including retirement and preparation for immediate needs. the role of housewives is not only needed in managing finances but also in increasing family income so that family welfare can be maintained. some of the efforts made by housewives to improve the family economy is by opening a business in the food sector by processing food into various side dishes. other efforts made by housewives to increase family income are by working odd jobs, farming, and others, as well as trading or doing business online. a deeper understanding is needed regarding how to manage family finances well. https://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 433| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the research results show that housewives with good education play a significant role in managing household finances. they have a better understanding of financial planning, investing, spending, and risk management. respondents emphasized the importance of creating a carefully prepared family budget to regulate efficient and effective allocation of funds. in managing family finances, housewives with good education tend to have a tendency to make long-term investments such as buying gold, land, and others. this investment is seen as a way to secure the family's future and face possible economic risks. apart from that, housewives with upper secondary education are also more careful in spending. they have the ability to prioritize urgent family needs, such as children's education and health, thereby reducing the risk of getting into debt or other financial problems. however, this research also identified several challenges faced by housewives with upper secondary education in managing household finances. based on an interview they never participated in programs or training related to financial management. communities or social groups help housewives by providing counseling to become productive housewives. not only managing time, communication is also considered important in the family when women are working. of course, the priority is communication with her husband and children. basically, looking at current conditions, there is nothing wrong with women working. however, so that household obligations are not neglected, time management and communication with family are important. this also ensures that there are no misunderstandings, so it is necessary to maintain good communication with her husband in making family financial decisions. meanwhile, housewives with lower secondary education are more likely to have poor financial management skills. the salaries, which are not high due to the low level of education, have quite a big impact. so these housewives tend to earn very little. so they can only earn enough to meet their daily needs and to save. they cannot invest in gold and land or houses. open communication about family finances plays an important role in reducing conflict and creating family financial policies that are mutually acceptable to all family members. on the other hand, the role of housewives is also influenced by culture and social norms in the region. some stay-at-home mothers may face pressure to provide additional financial support for the family, especially if they have more education and better job opportunities. in situations like these, financial decisions often have to be made taking into account a number of factors, including individual aspirations and overall family responsibilities. in addition, this research highlights the importance of housewives' active involvement and participation in the family financial decisionmaking process. housewives with secondary education tend to act as wise financial managers, but they also take a collaborative approach in ensuring family financial decisions are accurate and in line with shared goals. apart from the reason for providing for family welfare, the data obtained from respondents regarding the reason they chose to continue working even with additional duties was to put into practice the knowledge they had in the language of maslow's theory of needs, namely for selfhttps://www.ilomata.org/index.php/ijtc the role of housewives in managing family finances (case study in south labuhan batu regency) anjani, nasution, and syafina 434| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc actualization. in research by yenni samri et al 2020: maslow's pyramid of needs theory describes that the need for self-actualization is the highest need in human life. conclusion based on the results of research on the role of housewives in managing family finances in case studies in south labuhan batu regency, it can be concluded that housewives play an important role in financial planning, financial decision making, savings and investment. they face challenges in the form of unexpected expenses and inflation. education influences financial understanding. educated housewives are able to manage finances in a more planned manner and invest for the long term. housewives strive to increase financial literacy, use digital financial applications, and take part in financial development programs to overcome challenges. despite facing various challenges, educated housewives have a significant role in household financial management. also for housewives with lower secondary education. they can help their husbands to meet their daily needs and to save. with the knowledge of household financial management, the implementation and impact on day-to-day life will enable her to better manage her expenses, save for educational needs and have a much better financial life. references a., w., r., a., d., c., w., r., m., & hardiyono, b. 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(2024). the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality. ilomata international journal of tax and accounting, 5(2), 353-366. https://doi.org/10.61194/ijtc.v5i2.1106 abstract: banks are typically linked with conservative accounting practises due to the handling of big assets. this study investigates how company governance impacts accounting conservatism by focusing on audit quality. the analysis involves the independent variable corporate governance, the intervening variable audit quality, and the dependent variable accounting conservatism. this study focused on the 10 largest banks in indonesia that were listed on the indonesian stock exchange from 2015 to 2020. using purposive sampling, 9 banks were selected for the study. data collection was conducted using secondary data, the statistical method used was path analysis. this study's findings suggest that corporate governance has a negative impact on audit quality and accounting conservatism. corporate governance negatively affects audit quality and through audit quality affects accounting conservatism. keywords: accounting conservatism, corporate governance, audit quality this is an open access article under the cc-by 4.0 license. introduction in indonesia, the banking industry is increasingly vital in financial intermediation, especially as economic growth and global uncertainty increase. in this context, accounting conservatism becomes crucial in managing risks and providing stakeholders accurate and reliable financial information. accounting conservatism is an essential concept in financial accounting that emphasizes prudence in the recognition of profits and assets (popescu & nișulescu, 2019). the principle of conservatism is highly relevant in the banking industry due to its inherent risks and uncertainties. studying how audit quality and corporate governance impact the practice of accounting conservatism in indonesian banking companies is an important and intriguing research topic. corporate governance is the activity and process that governs the interaction of stakeholders having an interest in the organization. accounting conservatism is a financial reporting method that is more cautious and prudent in recognizing income, assets, expenses, and liabilities. studying how corporate governance impacts accounting conservatism is important since banking company https://www.ilomata.org/index.php/ijtc mailto:agungnurmansyah1@uhb.ac.id https://doi.org/10.61194/ijtc.v5i2.1106 the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 354 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policies play a crucial role in building confidence with shareholders and associated parties. research by marziana et al., (2016), and pasko et al., (2021) revealed that firms with robust corporate governance practices are inclined to adopt a more cautious approach when disclosing their results. they point out that corporate awareness of good governance grows to strengthen internal control mechanisms that can result in more conservative revenue recognition. some research may not show a clear link between company governance and accounting conservatism. research by almutairi & quttainah, (2019) research concluded that a strong board of directors does not have a substantial impact on accounting conservatism. a robust board of directors is crucial for supervising business management but may not directly influence conservative financial reporting rules. studying how corporate governance impacts audit quality in the banking sector is crucial due to the industry's stringent requirements and significant financial concerns. corporate governance is crucial in ensuring that audit practices provide accurate and reliable financial reports. research conducted by khamoussi, (2016) research indicates that robust corporate governance, particularly in terms of oversight and openness, might enhance audit quality. banking companies with solid governance tend to have better internal controls, ensuring that audit practices are carried out carefully and comprehensively, thus improving the quality of the resulting financial statements. nevertheless, some studies show mixed results. research by khamoussi, (2016) research indicates a negative correlation between board size and audit quality in the banking sector. a correlation was discovered indicating that when the board size increases, it becomes more challenging for the board to oversee audit activities, potentially impacting audit quality. a study on the impact of audit quality on accounting conservatism in the banking sector indicates that audit quality is crucial in influencing cautious practices in financial reporting (padmawati & fachrurrozie, 2015). therefore, it is vital to understand how audit quality affects accounting conservatism in the banking industry. research conducted by chen et al., (2015) found that high audit quality can increase accounting conservatism in the banking industry. given the high economic risks, conservative policies in financial reporting are essential in this industry. high audit quality can provide confidence that the estimates and judgments made in the financial statements reflect the actual conditions, and this can encourage management to apply conservative policies in financial reporting. however, research by (2020) shows that high audit quality does not always positively impact accounting conservatism in the banking industry. they found that too much internal assurance provided by auditors can reduce accounting conservatism. this may be the tendency of management to rely on internal assurance rather than applying conservatism in the financial statements. research shows that corporate governance significantly influences accounting conservatism in the banking industry through audit quality. corporate governance includes organizational structure, audit committees, incentive policies, and information transparency that can influence conservative policies in financial reporting. recent studies indicate that corporate governance can influence the connection between audit quality and accounting conservatism in the banking sector. research by gao & wagenhofer, (2021) discovered a direct correlation between effective corporate governance https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 355 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and superior audit quality, leading to enhanced accounting conservatism within the banking sector. good corporate governance, including an influential audit committee, information transparency, and a good relationship between management and the board of directors, can provide confidence that financial statements reflect actual conditions. this motivates management to apply conservative policies in financial reporting to anticipate the risks and uncertainties associated with the banking business. however, nguyen et al., (2020) discovered that the correlation between company governance and accounting conservatism via audit quality is not consistently favorable. they found that too much board intervention in the audit process can reduce conservative tendencies in financial reporting. too much interference can reduce auditor independence and encourage management to implement more aggressive policies in financial reporting. this research examines whether corporate governance affects accounting conservatism through audit quality or whether corporate governance has a direct effect on accounting conservatism. research framework corporate governance influences audit quality defond & zhang, (2014) discuss the role of the audit committee in the audit quality framework, which emphasizes the role of the audit committee in helping clients achieve the desired level of audit quality. zgarni et al., (2016) that the more meetings the audit committee holds, the more effective it will be in carrying out the duties and responsibilities of the audit committee, so that the audit quality will be better and with frequent meetings, the audit committee has control over the company to obtain quality audit, and supported by research by gebrayel et al., (2018). in this research, corporate governance has a negative effect on audit quality. corporate governance influences accounting conservatism corporate governance influences accounting conservatism. under intense competition, some companies may want to show better financial performance or be more profitable to attract investors or shareholders. this may encourage them to adopt a less conservative approach in their accounting (nurmansyah et al., 2019). the findings of this study are consistent with the findings of widiatmoko et al. (2020), in their research which found that corporate governance influences accounting conservatism. audit quality influences accounting conservatism audit quality affects accounting conservatism. the results of this research are supported by research by sultana, (2015) who also states that investors will be more inclined towards conservative accounting data produced by large kaps (audit quality). the results of this research are supported by research by padmawati & fachrurrozie, (2015) where audit quality affects accounting conservatism. https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 356 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate governance influences accounting conservatism through audit quality corporate governance influences accounting conservatism through audit quality. with high audit quality, the relationship between good corporate governance practices gebrayel et al., (2018), and accounting conservatism becomes stronger, because high audit quality can increase confidence in the financial information provided by the company zgarni et al., (2016). hypotheses that can be taken are: h1 : corporate governance influences audit quality h2: corporate governance influences accounting conservatism h3: audit quality influences accounting conservatism. h4: corporate governance influences accounting conservatism through audit quality method population and sample in this study, the population is banking companies listed on the indonesia stock exchange (idx) from 2015 to 2020. statistical tabulations indicate that there are 45 banking companies listed on the indonesia stock exchange (idx). the study utilized purposive selection to choose samples, specifically targeting banks that ranked in the top 10 based on assets in 2021. the sample is determined based on specific criteria and includes the 10 largest banks. due to inadequate data from bank syariah indonesia, 9 banks are required to meet the standards. the study utilizes accounting conservatism as the dependent variable, corporate governance as the independent variable, and audit quality as the mediating variable. the analytical methods utilized include descriptive analysis and path analysis. table 1. criteria for sample selection accounting conservatism shroff et al., (2013) define conservatism as the act of decreasing earnings and reducing net assets when faced with negative news, without boosting earnings or net assets in reaction to positive https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 357 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc news. based on the research of givoly & hayn, (2000), this study measures conservatism using the accrual model. the method of measurement is based on givoly and hayn's (2000) definition of conservatism. the conacc value obtained by a banking industry is calculated using a formula. a higher conacc value indicates a more conservative banking industry, while a lower value indicates the opposite. conacc it = (ni it cfo it) x -1 description: connac : the level of conservatism of company i at time t ni it : net income before exceptional items plus depreciation and amortization cfo it : cash flow from operating operations audit quality the study uses earnings quality as a proxy to assess audit quality. audit quality in financial statements is frequently linked to the quality of earnings. the auditor's objective is to ascertain if the figures in the financial statements are accurately depicted and represent the true condition of affairs. sulaiman et al., (2018) in their research assessed audit quality using the company's earnings quality approach. dichev et al., (2012) assess earnings quality by the amount of discretionary accruals contained in earnings figures. reported earnings can be manipulated based on management goals, with higher discretionary accruals indicating lower earnings quality (marai et al., 2020). audit quality is measured by a formula proxied on discretionary accruals using the deangelo, (1986) model. de angelo's discretionary accrual model calculation is as follows: 1. formula for calculating total accruals: ta it = ni it cfo it description: ta it : total accruals for business i in year t ni it : the net income of business i in year t cfo it : cash flow from operational activities of business i in year t 2. non discretionary accrual calculation is calculated by the formula: nda it = ta it-1 description: nda it : non-discretionary accrual of business i in year t ta it-1 : total accruals for company i in the previous year, t-1. 3. discretionary accrual is calculated using the following formula: da it = (ta it ndait) / ta it-1 description: da it : discretionary accruals for business i in year t https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 358 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ta it : total accruals for business i in year t ta it-1 : total accruals for company i in the previous year, t-1. nda it : non-discretionary accrual of firm i in year t corporate governanace corporate governance is proxied by the audit committee's role in the audit quality framework, which emphasizes the audit committee's role in helping clients achieve the desired level of audit quality (abbasi et al., 2020). another objective, which is a logical consequence of implementing the audit committee's duties, is to empower and strengthen the independence of auditors, both internal and external auditors, and oversee the effectiveness of the company's internal control and risk management implementation. zehri, (2016) suggests that audit committees can demand more significant audit effort from public accountants. more audit effort usually indicates that audit quality is also higher. audit committee = ln (number of audit committee) result and discussion test classical assumptions normality test the normality test utilizes the kolmogorov-smirnov normality test to compare the data distribution being assessed for normality with the conventional normal distribution. a significance level of ≥ 0.05 indicates that there is no statistically significant difference between the data being tested and the standard normal data, suggesting that the data being examined is standard. the kolmogorov-smirnov normality test yielded a score of 0.114, indicating that the data in this investigation follows a normal distribution.. multicollinearity test in this study to test heteroscedasticity by looking at the results of the calculation of the variance inflation factor (vif) 2 variables, it is less than 10, and the tolerance value is more than 0.1, so it can be said that multicollinearity between independent variables in the regression model is concluded that there is no heteroscedasticity in this study. heteroscedasticity test graph test is done by looking at the plot graph between the predicted value of the dependent variable (zpred) and its residual (sresid). from the plot graph test results, there is no clear pattern, and the points spread above and below the number 0 on the y axis, so there is no heteroscedasticity. https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 359 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc descriptive analysis descriptive statistical studies provide a representation of research variables. the data in this study passed normality, heteroscedasticity, and multicollinearity tests. the study includes 10 banks, which account for 72% of total banking assets in indonesia, providing an overview of the banking sector in the country. table 2. descriptive results table 2 illustrates the results of descriptive calculations in this study. the statistical calculations show that corporate governance, proxied by the number of audit committees, averages 4.644, which indicates compliance with government regulations of having at least 3 people on the audit committee. the average audit quality assessment is -0.148, indicating that the average bank has good audit quality. regarding accounting conservatism, the average bank has a score of -4.574, indicating that banks tend to be less conservative in their banking activities. first path regression equation this research introduces a novel regression model that analyzes the effects of exogenous variables on corporate governance (x1) and audit quality (x2) simultaneously and partially. table 2 displays the outcome of regression analysis conducted with the spss 24 software, indicating that corporate governance has a notable impact on audit quality. variabel n min max mean std. deviation corporate governance 54 3 8 4,644 1,310 audit quality 54 -99 92 -0,148 47,26 accounting conservatism 54 -31,56 45,93 -4.574 13,46 source: data processed with spss 24 picture 1 the effect of corporate governance on audit quality corporate governance (x1) audit quality (x2) https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 360 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. linear regression test results from table 3, it can be concluded that corporate governance affects audit quality. first path analysis regression equation: x2 = -0.324x1 + e corporate governance hurts audit quality, so the more significant the corporate governance, in this case, the greater the number of audit committees, the smaller the implementation of audit quality. table 3 shows that corporate governance harms audit quality, indicated by the calculation of p of 0.017, which is <0.05. so, with the description above, the first hypothesis is that corporate governance hurts audit quality. second path multiple regression equation the research used a second path regression model to analyze the partial and simultaneous effects of corporate governance (x1) and audit quality (x2) on accounting conservatism (y1). table 3 displays the outcomes of a regression study conducted with the spss 24 software, indicating a strong impact of corporate governance and audit quality on accounting conservatism. table 4. multiple linear regression test results from table 4, it can be concluded that corporate governance and audit quality affect accounting conservatism. the regression equation is : directly y1 = -0.395x1 0.549x2 + e indirectly y1 = -0.177x1 0.549x2 + e standardized coefficients t sig. beta corporate governance -0,324 -2,474 0,017 a dependent variable: audit quality standardized coefficients t sig. beta corporate governance -0,395 -3,227 0,002 audit quality -0,549 -4,483 0,000 a dependent variable: accounting conservatism https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 361 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc directly the study finds that corporate governance has a negative impact on accounting conservatism, meaning that stronger corporate governance leads to less accounting conservatism. the study finds that corporate governance has a negative impact on accounting conservatism, meaning that stronger corporate governance leads to less accounting conservatism. this is supported by the results in table 4, which show a p-value of 0.002 < 0.05. therefore, the hypothesis that corporate governance harms accounting conservatism is confirmed. additionally, the study suggests that audit quality may also undermine accounting conservatism. table 4 shows that stronger audit quality is associated with lower accounting conservatism (p < 0.05), supporting the hypothesis that audit quality affects accounting conservatism. direct and indirect influence testing the sobel test can be used to determine the direct or indirect relationship. the sobel test assesses whether the corporate governance variable influences accounting conservatism either directly or indirectly through audit quality. the sobel test results indicate a significance value of 0.032, which is less than 0.05, suggesting that corporate governance influences accounting conservatism via audit quality. corporate governance's impact on audit quality this study suggests that corporate governance negatively impacts audit quality, indicating that having more audit committees can enhance audit quality. defond & zhang, (2014) examine the audit committee's function within the audit quality framework, focusing on how it assists clients in attaining the targeted audit quality. zgarni et al., (2016) that the more meetings the audit committee holds, the more effective it will be in carrying out the duties and responsibilities of the audit committee, so that the audit quality will be better. the effectiveness of the audit committee in carrying out its duties and responsibilities is positively correlated with the frequency of its meetings. therefore, holding more meetings can lead to better audit quality, and is supported by research by gebrayel et al., (2018) that meetings, the size of the audit committee can improve audit h2 h1 h3 β6 picture 2 the effect of corporate governance on accounting conservatism through audit quality corporate governance (x1) audit quality (x2) accounting conservatism (y1) https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 362 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc quality, this is following agency theory, agent and principle conflicts require an audit committee as an arbiter in overcoming existing problems, by often conducting meetings so that they better understand the problem so that it can be resolved. however, it is not following research conducted by hasan et al., (2020) that audit meetings (describing good governance) do not affect audit quality, meaning that the greater the number of audit committee meetings, the less likely it is to employ a robust external monitoring mechanism and is supported by research alqatamin, (2018). good corporate governance in the indonesian banking industry enhances audit quality by facilitating effective oversight of the audit process. robust corporate governance can promote transparency, accountability, and integrity in conducting audits, enhancing audit quality in the banking sector. the effect of corporate governance on accounting conservatism this study indicates that corporate governance negatively impacts accounting conservatism. specifically, the findings indicate that as the audit committee becomes more involved, bank management becomes less conservative. in highly competitive environments, some companies may be motivated to present more favorable financial performance to attract investors or shareholders. this may encourage them to adopt a less conservative approach in their accounting (nurmansyah et al., 2019). the results of this study follow the research of widiatmoko et al. (2020), which showed that corporate governance had a notable adverse effect on accounting conservatism. nasr & ntim, (2018) stated that there is an influence between corporate governance and accounting conservatism. audit quality's impact on accounting conservatism this study found that audit quality negatively impacts accounting conservatism. increasing audit quality leads to more accounting conservatism. this means that the increasing audit quality causes an increase in accounting conservatism. the results of this study are supported by sultana, (2015) research, also states that investors will be more likely to conservative accounting data generated from large kap (audit quality). the results of this study are supported by research by padmawati & fachrurrozie, (2015) where audit quality affects accounting conservatism. the role of corporate governance in improving audit quality in the indonesian banking industry. in addition, the results of this study are also expected to provide policy recommendations to improve corporate governance practices and audit quality in the indonesian banking industry and positively contribute to the development of the banking industry in indonesia. high-quality audits can provide confidence in the reliability of the company's financial statements, thereby encouraging the application of conservative accounting practices to avoid potential distortion of financial information. careful and detailed audits will strengthen the practice of accounting conservatism, prioritizing prudence in revenue and loss recognition.this research contradicts the results of sultana, (2015) which states that audit quality does not affect accounting conservatism. audit quality has no impact on accounting conservatism in indonesia due to the strict oversight of banks by the ojk and bank indonesia. government oversight ensures that banks adhere to the precautionary principle to prevent any impact on accounting conservatism due to audit quality. https://www.ilomata.org/index.php/ijtc the impact of corporate governance in indonesia's biggest banks on accounting conservatism through audit quality nurmansyah 363 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of corporate governance on accounting conservatism through audit quality corporate governance impacts accounting conservatism via audit quality, as demonstrated by this study. audit quality can moderate the relationship between corporate governance and accounting conservatism. with high audit quality, the relationship between good corporate governance practices and accounting conservatism will be stronger because high audit quality can strengthen confidence in the financial information presented by the company. this study provides a new understanding of the importance of the relationship between corporate governance, audit quality, and accounting conservatism in indonesia's banking industry. the results suggest that banking businesses should focus on investing in audit methods that adhere to high standards and promote the establishment of robust corporate governance to enhance financial stability and stakeholder confidence. conclusion corporate governance affects accounting conservatism through audit quality. when good corporate governance practices are well implemented, it can create a favorable environment for improving audit quality. high audit quality will help ensure that the financial statements of banking companies reflect their true financial condition and reduce the risk of manipulation or misuse of financial information. in addition, research also shows that higher accounting conservatism in the banking industry can benefit stakeholders, such as investors, regulators, and creditors. accounting conservatism can increase the confidence and reliability of the financial information presented, thus helping to reduce uncertainty and promote better investment decisions. therefore, banking companies need to consider implementing good corporate governance practices through strict supervision and transparency in financial reporting to improve accounting conservatism and audit quality, thus providing long-term benefits for all stakeholders. this research aims to enhance the banking industry in indonesia by exploring the impact of audit quality and corporate governance on accounting conservatism. the findings offer valuable insights for stakeholders in the banking industry, regulators, and the academic community. additionally, this study's results are anticipated to establish a basis for enhancing accounting conservatism practices, ultimately enhancing financial information quality and transparency in indonesia's banking industry. reference abbasi, k., alam, a., & bhuiyan, m. b. u. 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(2007). financial instruments: disclosures. in international accounting standards board. . https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 681-691 681 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lessons for indonesia from singapore, the united states, and nepal qowiya hasna naury1, vissia dewi haptari2 12politeknik keuangan negara stan, indonesia correspondent: vissiadewih@pknstan.ac.id2 received : may 28, 2024 accepted : july 10, 2024 published : july 31, 2024 citation: naury, q, h., haptari, v, d. (2024). gender-based taxation: comparative lessons for indonesia from singapore, the united states, and nepal. ilomata international journal of tax and accounting, 5(3), 681-691. https://doi.org/10.61194/ijtc.v5i3.1278 abstract: this paper examines the implementation of tax policies that are in line with gender based taxation in singapore, the united states and nepal as well as policy recommendations that can be implemented in indonesia through qualitative methods using literature studies and regulatory reviews. the discussion approached in several scopes; working women, corporate participation, caregiver, domestic work support, pink tax, women-owned businesses, widows, and taxation for families. in which this paper finds that singapore, nepal, and the united states have implemented a series of policies that create a more welcoming ecosystem for women to participate in economic activities, which indonesia can use as an example in designing gender based taxation in the future. keywords: gender-based taxation, gender, genderinequality, working woman this is an open access article under the cc-by 4.0 license. introduction indonesia's "vision 2045," outlined in the national long-term development plan (rpjpn) 20252045, aims to transform the nation into a sovereign, advanced, and sustainable archipelago. a primary goal is to elevate per capita income to a comparable level along developed countries, projecting indonesia to rank fifth globally with a per capita income of usd 30,300. achieving this requires robust economic growth (shari & abubakar, 2022), significantly influenced by the labor force participation rate (lfpr) (solow, 1956). despite improvements, indonesia's lfpr shows significant gender disparities, with female participation lagging behind due to socio-economic changes (schaner & das, 2016), family welfare levels (la ode, 2021), government policies (akmal & zulkifli, 2017), and education level (harijadi, 2020). furthermore, despite periodic increases, the remuneration of women remains considerably inferior to that of men in indonesia. this underscores a persistent gender inequality that hinders economic growth. significant barriers faced by women compared to men in participating in economic development highlight a pronounced gender disparity in indonesia. as defined by susanto (2015), gender https://www.ilomata.org/index.php/ijtc mailto:vissiadewih@pknstan.ac.id https://doi.org/10.61194/ijtc.v5i3.1278 gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 682 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inequality encompasses a range of disparities between genders, including economic marginalisation, the subordination of rights, stereotyping, exposure to violence and the fulfilment of multiple roles. this inequality, driven by fundamental attitudes, results in persistent genderunequal outcomes (astudillo et al., 2022). as observed by ferrant & kolev (2016), gender inequality, as reflected in the gender inequality index (gii), on a certain level can have a detrimental impact on global gdp. in particular, gender inequality significantly impacts per capita income in indonesia (sari, 2021). conversely, improving gender equality boosts economic growth (oecd, 2022). enhancing gender equality involves developing human resources, market competitiveness, and productivity (oecd, 2022). from 2018 to 2022, indonesia's gii decreased to 0.459, while the gender development index (gdi) improved, thanks to efforts like the gender mainstreaming strategy (pug). however, uneven gender development persists. globally, the gender gap in 2023, closed at 68.4%, indicating it could take 131 years to achieve parity (zahidi, 2023). while a commitment to gender equality is an important step towards creating a more just and equitable society, it is not sufficient in itself to guarantee equal opportunities for men and women (ajizah & khomisah, 2021). furthermore, it is crucial to acknowledge the role that equality plays in indonesia's broader development process (wibowo, 2011). it is at this point that the potential for taxation to play a role becomes apparent. as stated by stotsky (1996) that taxation is fundamentally gender-neutral, yet the tax system undeniably harbors gender explicit and/or explicit biases. approximately 51.2% of oecd member countries consider gender a primary focus in tax policy-making (oecd, 2022). this is reflected in the implementation of tax reforms aimed at enhancing gender equality. gender-based taxation (gbt) represents a further development of the gender-responsive budgeting (grb) movement, which concerns itself with the allocation of resources using a gender-responsive perspective. while there is no universally accepted definition of gbt, it can be understood as a more gender-equal approach to taxation and budgeting. moreover, alesina et al. (2011)’s gbt advocation correlate gbt and ramsey (1927) theory, which proposes that the tax system should be structured in a manner that imposes reduced taxes on groups with a higher elasticity of labor supply. moreover, the significance of pigou's role in the combination of pigou and ramsey types into gbt considerations was highlighted in moreover, the significance of pigou's role in the combination of pigou and ramsey types into gbt considerations was highlighted in meier & rainer (2015). an example of gbt is sri lanka's policy, which allows companies to deduct an additional 50% of the salary costs for women on maternity leave from their taxable income. in contrast, indonesia appears to have yet to implement the substantial incentives or relaxations offered by the government specifically to women, particularly those in the working class. this highlights the necessity for a more genderequal tax policy (widodo et al., 2020). in light of the foregoing information, we chose to undertake a comparative analysis of the implementation of gbt-in-line-policy in singapore, the united states, and nepal. this analysis will examine the application of gbt in these countries and identify potential avenues for its application in indonesia, with a particular focus on strategies for enhancing hdi and economic growth. this research differs from previous studies in two key respects. firstly, it considers a different set of countries. secondly, it offers recommendations for the indonesian government https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 683 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on a comparative analysis of the implementation of gbt in singapore, the united states, and nepal. method the data collection method used in this research is a qualitative method in the form of a literature study. the literature study was carried out through secondary data analysis with a descriptivequalitative approach. we chose literature study because this method was adequate in terms of providing the data needed to compile this research, in addition due to limited access to obtain primary data in the form of interviews with policy makers related to this research topic. secondary data used in the literature study are regulations, previous research data which includes research that has been studied extensively and that has not been studied extensively, survey results obtained from the indonesian central bureau of statistics (bps) and world bank, also relevant documents, all of which were published between 2014 and 2024 to maintain the relevance of research results. the interpretation developed by the author on secondary data uses supporting theories put forward by experts on related topics and comparisons on each policy focus between indonesia and comparison countries. we developed some interpretation comparation the policy gender based taxed based on some references. from several references in analyzing the comparison, we summarize and divide into 3 (three) core areas, namely gender background, gender-based taxes and the economic environment associated with gender issues as shown in the following table: no area references 1. gender background: references that show explanations related to gender such as: • gender inequality simultaneously has a significant effect on per capita income. gender inequality variables that have a partial effect include wages for women workers, women's labor force participation, and gender development • the problems and characteristics gender issues, gender actualization. 1) ajizah, n., & khomisah, k. (2021) 2) babbar, k., martin, j., ruiz, j., parray, a. a., & sommer, m. (2022) 3) ferrant, g., & kolev, a. (2016) 4) harijadi, p. (2020) 5) la ode, s. (2021) 6) schaner, s., & das, s. (2016) 7) setyonaluri, d., nasution, g., ayunisa, f., kharistiyanti, a., & sulistya, f. (2021) 8) smith, m. v, kruse, a., weir, a., & goldblum, j. (2013) 9) susanto, n. h. (2015) 10) tambunan, t. t. h. (2017) 11) tuwu, d. (2018) 12) wibowo, d. e. (2011) 13) zahidi, s. (2023) 14) zhu, h., & kuriyama, c. (2016) https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 684 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc • highlighting gender specific constraints faced by female entrepreneurs in developing their businesses and participating in exports market. 2. gender base taxes: • society resolves its distributional concerns efficiently with genderspecific lump sum transfers, gbt with higher marginal tax rates on (single and married) men is optimal • tax systems and tax reforms on households depending on their composition and across the income distribution. the note also provides policy recommendations and good practices that will add to the region’s efforts to strengthen fiscal policy taking a gender perspective into account. • propose an alternative approach that starts with a clear focus on the policy goal of gender equality, from the perspective of a broader feminist fiscal policy agenda. • the optimal structure of differential taxation by gender is partly determined by a ramsey-type inverse elasticity rule and partly by a pigouvian tax element. • key aspects of fiscal policies and legislation that affect 1) alesina, a., ichino, a., & karabarbounis, l. (2011) 2) astudillo, k., cibils, v. f., pessino, c., & rossignolo, d. (2022) 3) grown, c., & mascagni, g. (2024) 4) meier, v., & rainer, h. (2015) 5) niesten, h. (2023) 6) oecd. (2022) 7) oecd. (2024) 8) ramsey, f. p. (1927) 9) stotsky, m. j. g. (1996) 10) widodo, a., priadana, d. n. a., ardana, p. s., & fabillah, a. d. n. (2020) https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 685 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gender equality by establishing a comprehensive baseline of reliable legal and tax information. 3. the economic environment associated with gender issues: references that show explanations related to economic and gender area such as : • economic growth, government spending, index of human development, the participation of female labor force • gender inequality, as reflected in the gender inequality index (gii), on a certain level can have a detrimental impact on global gdp • the women who work and have income play significant role to support the family finance, to meet the needs of household life such as: as the complementary of the husband and family income; for daily shopping needs; for school’s fee and children’s expenses; and for other important needs such as when it comes to crises, severe illness, and other family problems. 1) akmal, m., & zulkifli, z. (2017) 2) folbre, n. (2018) 3) kotler, p., & keller, k. l. (2006) 4) rakhmawati, a., & rani, s. (2022) 5) sari, c. p. (2021) 6) shari, r. m., & abubakar, j. (2022) 7) solow, r. m. (1956). https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 686 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion 1. domestic work support gender inequality in indonesia gives form to a stereotype that associates women with their obligations to domestic roles, using the term "dapur, sumur, kasur" or kitchen, well, and bed (tuwu, 2018). this negative connotation limits the capabilities of women in line with the results of setyonaluri et al. (2021) research indicates that over 90% of women between the ages of 18 and 40 are primarily responsible for domestic work, which is not formally remunerated. further, the majority of employed women subsequently opted to resign, attributing their decision primarily to domestic responsibilities (setyonaluri et al., 2021). the absence of sufficient domestic service provision by the government can act as a deterrent for women in labor force by giving them longer working hours and bigger workloads (folbre, 2018) furthermore, it results in a reduction in the proportion of women participating in the labor market (schaner & das, 2016) . policy initiatives have been implemented in singapore and the united states to provide support for women in the workforce. in singapore, married women are entitled to a reduction in taxable income equivalent to twice the foreign worker levy, which provides financial relief for those who employ domestic workers. the united states (u.s.) offers a tax credit, known as the child and dependent care credit, which allows parents to claim a maximum of 35% of qualifying care expenses, thereby reducing the amount of tax owed. these measures provide flexibility and peace of mind for working mothers. indonesia on the other hand does not explicitly provide specific said tax regulations, it does facilitate the deduction of expenses for childcare facilities as income deductions for companies, on the condition that the facilities in question fulfill the benefit in kind criteria. however, indonesia could further ease the domestic work burden by adopting specific regulations similar to those in singapore and u.s., as an illustration, the indonesian government could implement an income deduction on individual income tax specifically for daycare and/or child caregiver expenses, potentially modeled on the zakat as an income deduction scheme. 2. working women in nepal, women who are solely reliant on one source of income from employment (remuneration only) are eligible for a 10 percent tax deduction. this deduction does not apply to women who have opted to combine their income with their husband for tax purposes. this policy was enacted as part of nepal's efforts to encourage women to participate in the labor force by providing a substantial tax rebate with no nominal limit. thus far, indonesia has yet to implement a policy that is explicitly tailored to the unique challenges and opportunities faced by women being in the workforce. indonesia could adopt a policy modeled by nepal, which provides reward for women's participation in the labor force. singapore offers a total of 16 weeks of paid maternity and paternity leave, with the first eight weeks of salary paid by the employer and the remaining weeks funded by the government., while women who are engaged in business or freelance who do not have the security of an employer are given a cash incentive of 56 days of total earnings. while the application of similar policies in indonesia is still limited to the imposition of maternity leave as a deduction from an employer's income, indonesia may follow singapore's example by re-examining the duration of paid maternity leave and designing tax policies that are inclusive of those who are not covered by formal employment. https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 687 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. tax incentives for caregiver singapore provides an extra $3000 taxable income deduction for women who are married, divorced or widowed and are caring for their parents, in-laws, ex-in-laws, someone 12 years older or unmarried disabled people. this policy only applies to one woman per family. u.s. gives additional tax deductions from the share of expenses for taking care of dependents left behind to work but not specific to women. in indonesia, the benefits available to caregivers are confined to income deductions for dependents and are not gender-specific. this reflects a tax implicit gender bias whereas tax benefits structure does not account for unpaid caregiving work, which is predominantly performed by women. consequently, women are unable to benefit from the same tax advantages as men, who may be able to claim reimbursement for childcare costs from their employers (grown & mascagni, 2024). indonesia has the option of adopting the personal income tax benefits approach, as exemplified by singapore and the united states. this would entail providing benefits to the rightful owner, accompanied by supporting documentation attesting the coverage of dependents. 4. widows singapore exempts taxes for alimony, whereas the united states provides an additional income deduction of $25,900 per tax year for a period of two years following the death of a spouse. in nepal, a 35% tax deduction is available on the registration of land ownership in the name of a woman whose spouse has died. furthermore, tax is exempted on government allowances received by women with a deceased spouse. in contrast, indonesia continues to categorize alimony as taxable income and does not have any explicit regulations providing tax facilities for widows. it would be beneficial for indonesia to consider implementing temporary income deductions upon the death of a spouse, as well as tax exemptions on alimony and other nominal support provided to widows, in line with the examples set by the three previously mentioned comparator countries. these tax incentives represent a form of state intervention aimed at providing assistance to an individual who is experiencing difficulties in managing their financial situation as they adjust to a new reality in their life, as niesten (2023) addressed the absence of tax policies in asia and the pacific that recognize widows as a vulnerable demographic. 5. woman-owned businesses and corporation’s participation in supporting women's entrepreneurship and promoting economic independence among women, nepal's policy of offering a 10-year tax exemption for women-owned businesses could be adapted to provide greater support and encourage more women to initiate a culture of entrepreneurship and sustain businesses in indonesia, in accordance with data provided by the world bank, in 2015, only 22.1% of businesses in indonesia had the participation of women in ownership and to address the primary obstacle preventing women from establishing business enterprises is the difficulty they experience in accessing financial credit (tambunan, 2017; zhu & kuriyama, 2016) . a tax credit is available in the united states for companies which hires specific person that falls on certain group that implicitly favors women. the credit is up to $2,400 for each newly hire. in an effort to promote gender equality in the workplace, nepal has implemented a 10% tax reduction for companies with a minimum of one-third female employees. despite the lack of an explicit instrument to encourage companies to recruit women and facilitate women's workforce participation, indonesia permits companies to expense corporate social responsibility (csr) https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 688 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc activities as an income deduction, thereby enabling them to contribute to gender equality and women's empowerment through various program initiatives. indonesia has the potential to emulate nepal's approach by implementing targeted policies that encourage the involvement of private enterprises in addressing the constant imbalance in the representation of women in the labor force. 6. pink tax in addition to income tax, women are confronted with gender-based disparities in consumption costs. these costs are often higher for women than for men, a phenomenon observed in nearly all countries, including indonesia (rakhmawati & rani, 2022). in the united states, this phenomenon is referred to as the "pink tax". the united states government accountability office (2018) asserts that there is no additional cost to companies for producing goods labeled pink, a finding that aligns with the conclusions of rakhmawati & rani (2022). these researchers argue that the pink tax phenomenon is merely a means for companies to boost their profits. the price differentiation strategy aligns with the first stage of the price discrimination theory, wherein providers establish distinct pricing for the same product to distinct market segments (kotler & keller, 2006). in order to eliminate the phenomenon of the "pink tax," the united states government has drafted bills at the state and federal levels that address price disparities and tax exemptions on products designed for women's health and other consumer goods. in example, the gender tax repeal act of 1995 and the improving diaper affordability act of 2023 bill. the indonesian government has yet to address the potential impact of the so-called "pink tax" on consumption patterns and the implicit gender bias inherent in this phenomenon. indonesia may wish to consider adopting a similar approach to that taken by the united states with regard to the exemption of certain items from value-added tax (vat). this could potentially include items such as diapers and sanitary napkins, which are regarded as being among the essentials of daily living and human rights (babbar et al., 2022; smith et al., 2013). 7. taxation for families in the context of a number of women performing multiple roles in supporting the economic activities of their households, the majority of women face the challenge of a higher marginal tax rate as a second-earner in a joint-taxation scheme, as oecd (2024) states that 75% of secondearners in organization for economic co-operation and development (oecd) member countries are women. the majority of countries, including indonesia, have an opt-out joint taxation scheme that categorizes married women as a single entity with their husbands by default. in contrast, nepal employs an opt-in joint taxation scheme, affording women greater autonomy in financial decisionmaking and the ability to navigate the higher marginal tax rate associated with the progressive tax structure. indonesia may benefit from adopting an opt-in joint taxation system, as exemplified by the approach taken in nepal. further research is required on indonesia's second-earner tax wedge in the context of the latest regulatory developments. https://www.ilomata.org/index.php/ijtc gender-based taxation: comparative lesson for indonesia from singapore, the united states, and nepal naury and haptari 689 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the gender gap that occurs in social life, especially for women, is a real problem that requires the presence of the state to mediate. price disparities, stereotypes, domestic job responsibilities, sexual and domestic violence, wage gaps, the choice between working or being a housewife are all things that hinder and hinder a woman that can be minimized through taxation and budgeting policies that use a gender perspective. governments can help optimize gender equality through the use of tax and budgeting functions that take into account the explicit and implicit impact of taxation on gender. this is called gender based taxation. singapore, nepal, and the united states have implemented a series of policies that create a more welcoming ecosystem for women to participate in economic activities, which indonesia can use as an example in designing gender based taxation in the future. nevertheless, further research is required to assess the feasibility of implementing said policies in the context of indonesia's socio-economic conditions. reference ajizah, n., & 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(2016). gender-related constraints faced by women-owned smes. small, 10, 49. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 730-741 730 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag brandon christian tomasila1, hisar pangaribuan2 12universitas advent indonesia, indonesia correspondent: 2032005@unai.edu 1 received : september 2, 2023 accepted : october 16, 2023 published : october 31, 2023 citation: tomasila, b, c., pangaribuan, h. (2023). the influence of audit opinion, auditor switching, and number of audit committees on audit report lag. ilomata international journal of tax and accounting, 4(4), 730-741. https://doi.org/10.52728/ijtc.v4i4.908 abstract: despite the fact that listed firms must abide by standards set forth by the indonesia stock exchange (idx) to submit audited financial reports and publish them, it has not reduced the number of companies that do not publish their financial reports in accordance with the applicable rules. as of february 2023, a total of 32 issuers have been sanctioned for late publication of their financial reports. a high audit report lag table results in inaccurate and outdated financial information. this research's main goal is to prove how the number of audit committees, the number of audit opinions, and auditor change may affect how long it takes to produce an audit report. a quantitative research approach utilizing secondary data is employed for this investigation. the research focuses on manufacturing and transportation firms publicly traded on the idx during the years 2020-2021. the sample size encompasses 160 companies, spanning a 2year research period and yielding 320 data points. the analysis' conclusions show that audit opinion has a big impact on the audit report lag; in contrast, auditor switching and the number of audit committees do not have a substantial influence on this duration. the researcher recommends that future studies consider broadening the scope of the research population to enhance result accuracy and incorporate a more diverse sample. keywords: audit report lag, auditor, financial information quality this is an open access article under the cc-by 4.0 license. introduction the term "financial statements" refers to a combination of information portraying a company's financial health and performance, which can enhance its appeal and value to the public. these statements play a vital role in aiding investors' decision-making processes. however, when seeking such financial information, various challenges can arise, one of which we refer to as "audit report lag"(abid et al., 2018). the interval between financial statement releases and the auditor's assessment of those statements is referred to as "audit report lag" by (fujianti & satria, 2020). by comparing the financial https://www.ilomata.org/index.php/ijtc mailto:2032005@unai.edu https://doi.org/10.52728/ijtc.v4i4.908 the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 731 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc statements' publishing date to the business's book closing date, this information is ascertained. when this lag is excessively long, users of financial statements are unable to access accurate and current information about the company, making it crucial to draw the company's attention to address this issue promptly (annisa & hamzah, 2021). recently, (ramli, 2023) reported through kompas.com that as of february 10, 2023, 32 recorded companies were fined 150 million indonesian rupiahs each for failing to publish their financial statements before september 2022. this penalty was imposed according to provision ii.6.3 of exchange regulation no. i-h, which stipulates penalties for corporations that late on reporting their financial statements or between the 61st and 90th days after the deadline. i gede nyoman, the director of company assessment at the idx, explained that the penalty process involved several stages, including warning letters i, ii, and iii, along with corresponding fines, for companies that failed to meet deadlines. in another instance, (purwanti, 2022) reported that, as of may 9, 2022, out of 785 recorded companies, only 668 had submitted their financial reports on time to the idx (indonesia stock exchange). the remaining 91 issuers were either late or had yet to submit their reports at all, resulting in sanctions in the form of written warning i, as outlined in provision ii.6.1 of exchange regulation no. i-h. the delay in publishing financial reports deprives users of timely information and leads to financial penalties for companies. despite the regulations set by the idx, the number of companies failing to comply remains high, resulting in a significant audit report lag. these cases underscore the importance of addressing audit report lag within companies, prompting the researcher to investigate the factors influencing it. one of the factors considered in this research is "audit opinion." (darmayanti et al., 2021) explain audit opinion as the standardized statements made by auditors regarding a financial statement of the company based on the findings of the audit. companies receiving unfavorable audit opinions tend to exhibit deficiencies in their financial statement presentations, leading auditors to spend more time on their audit procedures, thereby increasing audit report lag (yuliusman et al., 2020). in other words, companies with better audit opinions tend to have fewer errors in their financial statements, reducing the need for extensive document searches and investigations and resulting in shorter audit procedures(muda et al., 2020). additionally, "auditor switching" can also trigger audit report lag. companies may switch auditors to maintain auditor independence and objectivity (nawangsari & iswajuni, 2019). however, when auditor switching occurs, it typically takes longer for the new auditor to familiarize themselves with the company and its procedures, potentially prolonging the audit report lag. another aspect considered in this research is the "size of the audit committee". the audit committee, consisting of at least three members and mandatory for publicly traded companies, operates under the supervision of the company's board of commissioners (setiadi & siagian, 2022). a larger audit committee size may reduce audit report lag by enhancing oversight of the preparation of audit reports and minimizing errors in financial statements. consequently, auditors can conduct their procedures more efficiently (hasan et al., 2020). https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 732 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on this information, the researcher has identified a problem to be studied within transportation and manufacturing companies recorded on the idx for 2020-2021. this problem is framed as the research question: "can audit opinion, auditor switching, and the number of audit committees influence audit report lag in transportation and manufacturing companies recorded on the idx in 2020-2021?" this research target is to uncover the impact of audit opinion, auditor switching, and the amount of audit committees on audit report lag within these companies. by conducting this research, the researcher hopes to shed light on factors affecting audit report lag and, in turn, the delayed publication of financial statements, providing valuable insights for companies and serving as a reference for future researchers examining similar issues. audit report lag audit report lag refers to the timeframe encompassing the sequence of activities involved in auditing financial statements. this period commences from the moment a company concludes its bookkeeping processes and extends until the audited financial statements are officially released (ginting & hidayat, 2019). the swifter the completion of audit procedures, the shorter the resulting audit report lag. conversely, the audit report lag tends to be more substantial when the audit process extends over a more extended period. a prolonged audit report lag can diminish the quality of a company's information because its relevance diminishes as financial statements are released later. furthermore, a protracted delay in publishing financial statements, characterized by a high audit report lag, can signify underlying issues within the company's financial reporting (rusmanto & herlina, 2020). audit opinion an audit opinion represents the judgment of an independent external auditor upon concluding the examination of the adequacy of financial statements (mbandlwa, 2022). following their assessment of financial statement audit procedures, external auditors deliver a verdict in the form of an audit opinion, outlining the sufficiency of a company's financial statements. companies that receive unfavorable audit opinions exhibit more discrepancies in their financial reporting (nguyen & trinh, 2020). such companies complicate the audit process and necessitate a longer timeframe for audit activities, resulting in an extended audit report lag. conversely, companies receiving a favorable audit opinion demonstrate the accuracy of their financial statement preparation, leading to expedited audit procedures and a reduced audit report lag. in essence, a company's financial statements garnering a more favorable audit opinion are related to a shorter audit report lag; in contrast, a less favorable opinion corresponds to a longer audit report lag. auditor switching auditor switching refers to replacing a company's existing auditor with a new one (budisantoso et al., 2017). this transition is undertaken to uphold the independence and objectivity of the auditor in executing the company's audit (reid et al., 2019). when a company opts for auditor switching, the incoming auditor is unfamiliar with its operations and needs time to acquaint themselves with the organization thoroughly. consequently, the new auditor requires an extended period to comprehend and familiarize themselves with the company, in contrast to the previous auditor who had prior audit experience with the company (jura & tewu, 2021). the introduction of a new auditor lengthens the audit duration, leading to a more significant audit report lag compared to the https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 733 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc former auditor, who had prior familiarity (swandewi & badera, 2021). therefore, adopting auditor switching within a company tends to increase the audit report lag, whereas companies maintaining the same auditor generally experience a shorter audit report lag. number of audit committees the audit committee is a mandated group established by companies, particularly those publicly traded in indonesia (pangaribuan et al., 2019). this committee, which must have a minimum of three members, is under the direction of the board of commissioners and includes two outsiders who preserve their independence from the business. its primary role involves supervising the company's operations and ensuring its financial health is sound during each reporting period, encompassing the status of its financial statements(abdillah et al., 2019). a greater number of audit committee members within a company translates to more effective oversight of financial statement preparation and the monitoring of document completeness. consequently, this facilitates the efficiency of the company's audit process and allows for proactively addressing of issues that may arise during the audit (su & wu, 2017). in simpler terms, an increased count of audit committee members in a company corresponds to a decreased audit report lag; in contrast, a lower number of committee audits is linked to a longer delay in the company's audit report. research hypotheses h1: audit opinion has a negative impact on audit report lag. h2: auditor switching has a positive impact on audit report lag. h3: the quantity of audit committee members has a positive impact on audit report lag. method this study uses secondary data and a quantitative methodology. the research population consists of 215 businesses from the manufacturing and transportation industries that were publicly listed on the idx in 2020-2021. the annual reports of these businesses on the idx website (www.idx.co.id) provided the data for this study. utilizing a purposive sampling method over a 2-year observation period, the researcher identified 160 companies meeting the following criteria: (1) inclusion in the manufacturing and transportation sectors and recorded on the idx in 2020-2021, (2) accessibility of annual reports covering the period from 2019 to 2021, and (3) inclusion of relevant data in their annual reports pertinent to this research. from this group of eligible companies, 320 data samples were collected. research variables audit report lag audit report lag is the study's dependent variable. the company's yearly financial reports contain the information needed to calculate audit report lag. the number of days between the publication of the company's financial report and the date its books were closed is used to calculate the audit report lag. the difference or time gap obtained from this subtraction is recorded in days. https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 734 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit report lag = audit report date financial report date audit opinion audit opinion serves as an independent variable in this research. the data source is drawn from the company's annual financial reports, specifically the independent auditor's report. a dummy variable is used to assess the audit opinion, where 1 = unqualified opinion, and 0 = other than an unqualified opinion. auditor switching auditor switching functions as an independent variable in this research. as the data source, the researcher utilizes the company's annual financial reports, and a dummy variable is employed for the measurement method. 1 = companies that switched auditors during the research period, 0 = companies that did not undergo auditor switching during the research period. number of audit committees another independent variable in this research is audit committees number, with the company's annual financial reports as the data source. the audit committee members are counted in order to measure this variable, including the chair and any committee members that worked for the company during a particular time period. this data will then be utilized as the basis for the research. regression analysis is conducted in this research to examine the relationships between variables. in this study, audit report lag was the dependent variable, and audit opinion and audit opinion lag were the independent factors (a dummy variable), the number of audit committees, and auditor switching (both dummy variables). regression analysis is performed in this research to demonstrate the relationships between variables. the spss program is used to analyze the data. as applied in regression analysis, the following equation: arl= α+β1ao+β2as+β3nac+ε explanation: arl = audit report lag α = constanta β1-β4 = regression coeffisients ao = audit opinion as = auditor switching nac = number of audit committees ε = standard error https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 735 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion descriptive statistics test analysis descriptive statistical analysis in this study is used to analyze data from variables that are not dummy variables. descriptive statistical analysis is performed to comprehensively describe the research data, including displaying the mean, minimum (min), maximum (max), and standard deviation of the data. the non-dummy variables in this research are the number of audit committees and audit report lag. the results of the descriptive analysis of these variables, which pertain to manufacturing and transportation companies recorded on the idx in 2020-2021, are presented in table 1. table 1. descriptive statistics n minimu m maximum mean std. deviation audit report lag 320 34,00 236,00 102,4531 32,94068 number of audit committees 320 1,00 6,00 3,0688 ,42080 valid n (listwise) 320 source: data processed by researchers with ibm spss statistics 26 (2023) the result of the descriptive statistical analysis, as displayed in table 1, reveals that our dataset comprises 160 company samples observed over two years, resulting in a total of 320 research samples (n=320). table 1 also indicates that the standard deviation is smaller than the mean, which means that the dispersion of the data variable is small or there is not a significant gap, making the data suitable for analysis. in terms of audit report lag within the research sample, the minimum recorded value is 34 days, representing the shortest time taken by an auditor to complete the audit process in the sampled companies; in comparison, the maximum value stands at 236 days, denoting the longest duration. on average, the audit report lag is 102.45 days, with a standard deviation of 32.94. concerning the composition of audit committees within the research sample, the smallest number observed is 1, indicating that some companies have only one audit committee member; in contrast, the largest number recorded is 6, representing the highest count of audit committee members in the research sample. on average, there are approximately 3.0688 audit committee members, with a standard deviation of 0.42080. frequency statistics test frequency statistics were applied to the dummy variables used in this study, specifically audit opinion and auditor switching, to provide a summary of the research findings. the corresponding data is displayed in table 2 and table 3. https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 736 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. frequency of audit opinion frequency percent valid percent cumulative percent valid ,00 6 1,9 1,9 1,9 1,00 314 98,1 98,1 100,0 total 320 100,0 100,0 source: data processed by researchers with ibm spss statistics 26 (2023) table 2 shows that out of the 320 data samples of the audit opinion variable for manufacturing and transportation companies recorded on the idx in 2020-2021, 314 companies received an unqualified opinion, while six other companies received a non-unqualified opinion. from the data above, it can be concluded that 98.1% of the total research samples have an unqualified audit opinion, and 1.9% received a non-unqualified opinion. table 3. frequency of auditor switching frequency percent valid percent cumulative percent valid ,00 279 87,2 87,2 87,2 1,00 41 12,8 12,8 100,0 total 320 100,0 100,0 source: data processed by researchers with ibm spss statistics 26 (2023) table 3 indicates that out of the 320 data samples of the auditor switching variable for manufacturing and transportation companies recorded on the idx in 2020-2021, 279 companies did not undergo auditor switching, which accounts for 87.2% of the whole samples. meanwhile, 41 other companies experienced auditor switching, representing 12.8% of the total samples. coefficient of determination test table 4. coefficient of determination model summaryb mode l r r square adjusted r square std. error of the estimate 1 ,288a ,083 ,074 31,69818 source: data processed by researchers with ibm spss statistics 26 (2023) according to table 4's r-square value of 0.083, the audit report lag variance across the cited companies for the specified time period is only 8.3% explained by audit opinion, auditor switching, and the audit committees number used in this study. the majority of this variability is attributed to factors other than the ones under investigation. https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 737 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc furthermore, the adjusted r-square value of 0.074, equivalent to 7.4%, represents the combined explanatory power of audit opinion, auditor switching, and the audit committees number in clarifying the audit report lag variable. the coefficient of determination test, as displayed in table 4, reveals a multiple r value of 0.288, notably distant from 1. this value signifies that the effect of audit opinion, auditor switching, and the number of audit committees on audit report lag in manufacturing and transportation companies recorded on the idx in 2020-2021 is relatively weak. table 5. coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 165,139 19,204 8,599 ,000 audit opinion -69,041 13,116 -,285 -5,264 ,000 auditor switching 1,129 5,307 ,011 ,213 ,832 number of audit committees 1,602 4,237 ,020 ,378 ,706 source: data processed by researchers with ibm spss statistics 26 (2023) arl = 165,139 69,041ao + 1,129as + 1,602nac + ε the results derived from the regression analysis equation yield the following conclusions: evidently, the companies examined exhibit a positively weighted audit report lag, approximating around 165 days. this implies an inherent potential for audit report lag, represented by a constant value of 165. the outcomes of the regression analysis demonstrate an inverse coherence between audit report lag and audit opinion. in simpler terms, a company receiving a more favorable audit opinion completes the audit process more swiftly, resulting in a shorter audit report lag, as implied by the coefficient value of -69.041. moreover, the regression analysis results reveal a positive correlation among audit report lag and instances of auditor switching. this signifies that when a company undergoes auditor switching, the audit report lag tends to extend, as indicated by the coefficient value of 1.129. furthermore, the analysis shows a favorable correlation between the size of the audit committee and the audit report lag. this implies that a higher count of audit committee members corresponds to a larger audit report lag within the company, supported by the coefficient value of 1.602. these findings align with the research of (kurniawan & mutmainah, 2020), which posits that an enlarged audit committee members numbers can lead to reduced individual responsibilities due to coordination and communication challenges. the result of the hypothesis test for audit opinion, as presented in table 5, indicates a significant p-value of 0.000, falling below the significance threshold of 0.05. therefore, audit opinion indeed plays a significant role in influencing the audit report lag within manufacturing and transportation https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 738 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc companies recorded on the idx in 2020-2021. the t-value in table 5 is -5.264, indicating that audit opinion exerts a adverse effect on the audit report lag. in essence, a more favorable audit opinion correlates with a reduced audit report lag, while a less favorable opinion tends to prolong the audit report lag. consequently, derived from these findings, h1 is affirmed, and h0 is rejected. these results align with the conclusions of (hanafi & usman, 2017), who found a significant negative impact of audit opinion on audit report lag in manufacturing companies recorded on the idx from 2012 to 2015. similarly, (ani, f., chomsatu, y., dan dewi, 2020) arrived at similar outcomes, demonstrating the significant impact of audit opinion on audit report lag in banking companies recorded on the idx between 2014 and 2017. however, the results differ from those obtained by (made et al., 2021), suggesting that audit opinion does not exert an effect on audit report lag in mining companies recorded on the idx from 2016 to 2018. the hypothesis test results for auditor switching yield a significant p-value of 0.832, exceeding the significance threshold 0.05. this implies that the auditor switching on 2020–2021 and documented on the idx has not affect the lag on audit report in manufacturing and transportation sectors. consequently, h1 is rejected, and h0 is accepted. these findings align with the conclusions of (angelia & mawardi, 2021), who also found that auditor switching does not impact the lag on audit report in manufacturing companies recorded on the idx from 2015 to 2018. however, these results contrast utilizing the research done by (rezi et al., 2022), who concluded that auditor switching does influence the lag on audit report in property and real estate companies recorded on the idx during the period 2016-2019. in table 3 was found that as much as 87.2 percent of companies did not undergo auditor switching because the research year's sample was taken from 2020-2021, which was during the covid-19 period, causing companies to tend not to switch auditors. similarly, the hypothesis test concluded that the number of audit committees yielded a significant p-value of 0.706, surpassing the significance threshold of 0.05. this suggests that the number of audit committees does not exert a significant impact on the lag of audit report within manufacturing and transportation companies recorded on the idx in 2020-2021. therefore, h1 is rejected, and h0 is accepted. these findings are consistent with the results obtained by (dzulkifli & dewayanto, 2022), who found that the number of audit committees does not influence the lag of audit report in islamic banking entities recorded under ojk during the period from 2016 to 2020. nevertheless, these outcomes diverge from the research conducted by (uly & julianto, 2022), which concluded that the audit committee number does have a significant impact on audit report lag in manufacturing sector companies recorded in kompas 100 and registered on the idx from 2018 to 2020. https://www.ilomata.org/index.php/ijtc the influence of audit opinion, auditor switching, and number of audit committees on audit report lag tomasila and pangaribuan 739 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion in summary, the research's findings indicate that the audit opinion variable can indeed influence the delay in audit reports for manufacturing and transportation companies recorded on the idx in 2020-2021. this conclusion stems from the hypothesis test involving audit opinion, which resulted in a significant value of 0.000, falling below the customary threshold of 0.05. however, it is noteworthy that auditor switching does not exert any discernible impact on the delay of audit reports within the same set of companies during the specified period. the hypothesis test for auditor switching and its impact on audit report lag, which produced a significant result of 0.832 and exceeded the 0.05 cutoff, supports this finding. thus, it can be inferred that auditor switching does not play a significant impact on audit report lag. furthermore, the research concluded that audit committee number does not have a substantial impact on audit report lag among manufacturing and transportation companies recorded on the idx in 2020-2021. this result is established through the hypothesis test involving the audit committee number, which produced a significant value of 0.706, exceeding the 0.05 threshold. as a suggestion for future research, the author recommends considering the inclusion of additional variables to explore other factors that might contribute to audit report lag. additionally, expanding the research sample to include a more diverse and extensive population could lead to more accurate and comprehensive results. reference abdillah, m. r., mardijuwono, a. w., & habiburrochman, h. 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(2022). pengaruh opini audit, audit tenure, dan komite audit terhadap audit report lag. accounting student research journal, 1(1), 37–52. yuliusman, putra, w. e., gowon, m., dahmiri, & isnaeni, n. (2020). determinant factors audit delay: evidence from indonesia. international journal of recent technology and engineering (ijrte), 8(6), 1088–1095. https://doi.org/10.35940/ijrte.f7560.038620 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 605-618 605 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger agata valentina veni1, nurhadi sucipto2, wiwit apit sulistyowati3 123universitas swadaya gunung jati, indonesia correspondent : wiwit.apit.sulistyowati@ugj.ac.id3 received : march 13, 2024 accepted : april 25, 2024 published : april 30, 2024 citation: veni, a, v., sucipto, n., sulistyowati, w, a. (2024). implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger. ilomata international journal of tax and accounting, 5(2), 605-618. https://doi.org/10.61194/ijtc.v5i2.1245 abstract: pt bsi (pt bank sharia indonesia) is one of the largest islamic banks in indonesia which is the result of the merger of three state-owned islamic banks, including pt bni sharia, pt bank mandiri sharia, and pt bank bri sharia. this study aims to analyze the role of good corporate governance in supporting the performance of islamic banking after the merger into bsi by analyzing the value of roa and roe before and after the merger, and reviewing the role of gcg in supporting financial performance as measured by the cgpi rating obtained from the company's annual report. this study uses a quantitative descriptive approach in analyzing differences in roa and roe before and after the merger, and analyzing the role of gcg in supporting this financial performance. the results of the analysis on gcg indicators show that there is no difference before and after the merger. meanwhile, financial performance shows an increase compared to before the merger, which is indicated by the value of roa and roe in 2020 to 2022. this study gives insight in developing knowledge related to the financial performance after merger, and focusing on the sharia bank industry. keywords: good governance, bank performance, pt bsi’s, merger this is an open access article under the cc-by 4.0 license. introduction intermediary financial institutions or better known as banks are one of the important aspects in modern economic activities. the role of banks in the traffic of capital and payment activities is as a facilitator that has a link in economic growth in a country. in addition, banks are also financial management institutions that have a dominant function in the economic movement of society (sahoo et al., 2019). based on the pattern of operation, banks can be divided into two, namely conventional banks and islamic banks (asfarawenti & saiful, 2019; halim et al., 2020) . the development of the islamic banking industry in indonesia is currently quite rapid, the birth of law https://www.ilomata.org/index.php/ijtc mailto:wiwit.apit.sulistyowati@ugj.ac.id https://doi.org/10.61194/ijtc.v5i2.1245 implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 606 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc number 21 concerning islamic banking in 2008 is a legal basis that can provide encouragement in the existence of islamic banking with a concrete example, namely bank sharia mandiri which can be seen from its banking assets which recorded a growth of 13.03 percent in 2020 which was previously recorded at idr 112.29 trillion in 2019, this is a good impact on the performance of islamic banking (irawati et al., 2019; rustendi, 2018). according to the financial services authority, the journey of islamic banking has a change recorded in september 2021, marked by developments in the percentage of market share, which originally amounted to 4.87 percent in 2015, an increase of 6.52 percent (financial services authority, 2016). february 1, 2021 was a decisive point in the development of islamic banks in indonesia, when the minister of state-owned enterprises made changes to the position of 3 stateowned islamic banks, namely bank sharia mandiri, bank bni sharia, and bank bri sharia, all three of which were subsidiaries of the companies bank mandiri, bank bni and bank bri which eventually became one entity, namely pt bank sharia indonesia. after the merger, bsi was categorized as commercial banks by business activity 3 (three) with a core capital of idr 23.2 trillion and ranked 7th (seven) nationally for commercial banks in indonesia with total assets of idr 265.3 trillion. (laporan keuangan pt. bsi tahun 2021, 2021) the performance of the 3 (three) state-owned islamic banks in 2020, starting with the performance of pt bank sharia mandiri which has succeeded in having an impact on quality business growth with a profit exceeding idr 1.07 trillion, this data provides a conclusion of an increase of 22.66 percent year on year as of september 2020, this is due to an improvement in the cost of funds due to an increase in the ratio of low-cost funds or current account and saving account (casa) which in turn has become a driving force in the process of increasing profits. this positive achievement is a foothold for the sustainability of mandiri sharia ahead of the merger with two himbara-owned islamic banks in 2021. from a business point of view, until the end of september 2020 bank mandiri sharia recorded third party funds (dpk) at idr 106.12 trillion and an increase of 17.26 percent from idr 90.49 trillion as of september 2019. where savings which are contributors and mainstay products experienced a growth of 19.12 percent year on year to idr 44.77 trillion, this made the casa portion reach up to 59.22 percent of total deposits. the increase in deposits made the value of bank mandiri sharia assets reach idr 119.43 trillion, up 16.19 percent from september 2019 which was recorded at idr 102.78 trillion. bank mandiri sharia managed to maintain financing growth with well-maintained quality during the pandemic, in addition to bank mandiri sharia's financing distribution which reached idr 79.27 trillion compared to the previous year, whose growth was 7.39 percent on an annual basis as of september 2020. this achievement strengthens bank mandiri sharia's position as the largest islamic bank in indonesia. apart from bank mandiri sharia, pt bank bri sharia has also recorded net profit growth in the third quarter of 2020 of 238 percent compared to the 2019 period year on year to idr 190.5 billion. this increase in net profit occurred due to support and optimization of the intermediary function followed by controlling the cost of funds. until the third quarter of 2020, bank bri sharia distributed financing worth idr 40 trillion and experienced a growth of 57.90 percent year on year, this was due to the support of the retail section (sme, micro and consumer) to provide more optimal achievements. on the third-party fund (dpk) side, bank bri sharia recorded a https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 607 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc growth of 72.7 percent. in raising funds, bank bri sharia focuses on increasing low-cost funds (casa) by 135 percent year on year in the third quarter of 2020 which aims to control the cost of funds. in the third quarter of 2020, the total assets of bank bri sharia were recorded at idr 56.09 trillion. bank bni sharia, which is the third state-owned bank to merge with net profit attributable to owners, was recorded at only idr 387.01 during the third quarter of 2020 compared to 2019, the profit figure decreased by 16.05 percent year on year, while third party funds (dpk) managed to reach idr 45.65 trillion or increased by 21.76 percent year on year. this increase in dpk has an influence on the increase in total assets of pt bni sharia in the third quarter of 2020 which reached idr 52.39 trillion compared to the previous year, the percentage increase in assets owned by pt bni sharia was recorded at 19.30 percent year on year. according to anam, the realization of bni bank's recorded financing was idr 32.28, this can be seen from the consumer segment which contributed idr 16.40 trillion or contributed 50.80 percent, the commercial segment of idr 7.74 trillion with a percentage contribution of 23.97 percent, and the small and medium segment of rp6.18 trillion with a percentage role of 19.15 percent. (anam, 2023) according to umam & kimberly (2022) the vision of creating a strong and competitive national banking system that is responsive to the complex and dynamic developments of the times is the background for the merger of islamic banks. advantages and obstacles in the merger process of islamic banks, according to setiawan (2020) the merger of islamic banks can have several positive impacts such as expanding the economic scale of a company, providing strength to capital, and providing benefits to customers, especially msme activists (micro, small, medium enterprises). however, on the one hand, this can raise concerns about layoffs due to difficulties in coordination and communication between bank management that previously had great strength and a strong culture. during the two years that bank sharia has been active, the president director of pt bank sharia indonesia, said that asset growth, financing quality, and dpk (third party funds) growth have increased, besides that bsi noted an increase in the use of bsi mobile of around 39 percent or equivalent to 4.81 million users. this can be said to be a brilliant achievement after the merger in 2021. based on bank indonesia regulation in chapter one which contains general provisions, contained in article 1 (one) point 10 (ten), good corporate governance or what can be said as a bank governance which has several principles, including: transparency, accountability, responsibility, professionalism, fairness. this is reaffirmed in article 2 (two) point 1 (one), that all banks and sharia business units are required to carry out banking activities by implementing gcg, in addition to the obligation to implement gcg regulated by law, the implementation of gcg is important, especially in protecting the rights and obligations of stakeholders. also, this study considers the importance of good corporate governance in improving financial performance. relevant previous studies according to yantiningsih et al. (2016), it is said that the implementation of gcg has a positive and significant effect on financial performance projected by (car and bopo). this picture shows that the quality of gcg implementation in the islamic banking industry has contributed to improving the financial performance of islamic banking, and can affect the attractiveness of https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 608 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investors to increase investment (amendolagine et al., 2023; karan et al., 2023). however, the implementation of gcg still has a negative and significant effect on financial performance projected by, roa and roe. the corporate governance mechanism is a procedure or rule with the aim of producing good corporate governance so that it can provide many benefits for the company. mechanisms in gcg supervision are divided into two groups, namely internal and external. according to wardhani (2007), internal mechanism is a way of controlling the company by using internal structures and processes such as the number of boards of directors, boards of commissioners, and independent commissioners. the board plays a very significant role and even the main role in determining the company's strategy. indonesia is a country that uses the two-tier concept, where the board consists of the board of directors and the board of commissioners. while the external mechanism is a way of influencing the company with corporate control and market mechanisms. there are several studies regarding the effect of gcg implementation on financial performance (ma & kuo, 2021; nguyen et al., 2021; tamakloe et al., 2023; vinh & dung, 2020). based on research conducted by fadhillah (2018), it is concluded that gcg has a positive effect on financial performance in the profitability ratio with indicators of good corporate governance (gcg), non-performing financing (npf), and return on asset (roa). in addition, gcg also has a negative effect on financing risk with an indicator of the npf rate, and there is an influencing relationship between the npf rate and roa. in research agustina & maria (2017), the results of the first study showed that the concurrent positions of the sharia supervisory board and the independent commissioner board had a significant effect on maqasid sharia performance, while the results of the second study showed that the board of commissioners, sharia supervisory board, independent commissioner board had a significant effect on maqasid sharia performance. the results of the first study say that the concurrent positions of the sharia supervisory board and the independent board of commissioners have a significant effect on maqasid sharia performance, while the results of the second study show that the board of commissioners, sharia supervisory board, audit committee, and audit committee meetings have no significant effect in improving maqosid sharia performance in indonesia. gcg before and after the merger had no difference, being at score 2 (good), but after the merger there was an improvement in roa while in fdr, npf, and car there was no difference either before or after the merger. from several studies that have been conducted previously, it can be concluded that assessing the performance of a bank is not enough to be assessed from the financial aspect alone, but nonfinancial aspects are an important concern, one of which is the implementation of gcg in the bank's operational system. banks are institutions that depend on public funds and trust with many internal or external risks and many rules governing the banking sector (highly regulated). the implementation of gcg has become a must in the banking industry, especially islamic banking at this time in realizing healthy, conducive and sharia-compliant financial conditions. through this, the need for the implementation of quality corporate governance (gcg) in banking is expected to increase (apriliyana & suryarini, 2018; shin & kim, 2019). https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 609 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research idea was generated from research yunistiyani & harto (2022) which said there were data limitations, namely only one year and there were other ratios that were not examined according to rgec guidelines. in this study, the data studied will have an update on the improvement of post-merger islamic banking performance. in accordance with the research background which focuses on looking at the comparison of bsi performance before and after the merger and the role of gcg in the performance process so that it can be seen whether there is an increase in financial and non-financial performance improvement after the merger (abu et al., 2022; banafa et al., 2015; kuroki & motokawa, 2021). method this study uses a descriptive approach method, by analyzing secondary data in the form of financial reports, annual reports of islamic banks, and corporate governance reports before and after the merger into pt bsi, to analyze corporate governance, this research uses five gcg principles, namely: transparency, accountability, responsibility, professionalism and fairness, as well as the cgpi rating adopted from iicg (the indonesian institute for corporate governance), while measuring the financial performance of indonesian islamic banks, this study uses roa and roe. the object of this research is three state-owned banks that merged into pt bsi in 2021, the three banks are pt bni sharia, pt bri sharia, pt bank mandiri sharia with the largest share ownership value held by bank mandiri sharia, the data used is secondary data on financial and annual reports obtained from the bank sharia indonesia website and islamic banking performance data from the ojk website, the research sample uses the financial statements of the three banks in 2019, the financial statements of pt bsi in 2021 and the financial statements of pt bsi in 2022, the next step is to analyze the financial condition of banks with roa and roe at the three stateowned enterprises banks after the merger into pt bsi. result and discussion pt bank sharia indonesia cgpi post merger on december 13, 2023 pt bsi won an award in the category of extraordinary sharia banking company on good corporate governance implementation in an event organized by cnbc indonesia awards 2023, this award was given to pt bsi which was considered successful in implementing good corporate governance (gcg) well based on five principles namely transparency, accountability, responsibility, independence, and equality and fairness. the reporting and implementation of gcg at pt bsi is in accordance with the regulations contained in the ojk through bank indonesia regulation number 11/33/pbi/2009, pojk number 8/pojk.03/2014 and seojk number 10/ seojk.03/2014 concerning health level assessment of sharia commercial banks and sharia business units in this case pt bsi implements gcg self-assessment. pt bsi's self-assessment is carried out every semester, namely at the end of the june and december periods, and the gcg self-assessment results are grouped into 5 (five) https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 610 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc categories, namely rank 1 (first), rank 2 (second), rank 3 (third), rank 4 (fourth), and rank 5 (fifth). in semester ii-2022, the results of bsi's gcg assessment received a score of 2 (good), which means that the implementation of pt bsi's gcg in semester ii-2022 is quite stable compared to the assessment in semester i-2022, this score of 2 (good) was obtained by pt bsi for a complete governance structure and infrastructure, a governance process whose implementation is in accordance with the provisions reflected in the fulfillment and implementation of obligations to all stakeholders, and another example of implementing good governance is the implementation of iso 37391 standard:2021 compliance management system for the scope of anti-money laundering, anti-money laundering and prevention of financing of terrorism. the last indicator that helps in the assessment is the governance result itself in the form of the achievement of the main indicators of the bank's financial performance in 2021 and 2022, as well as a form of nonfinancial achievement in the form of awards received by pt bsi in 2021 and 2022. (laporan keuangan pt. bsi tahun 2022, 2022) it can be concluded that the things that support and can be an opportunity for the development of gcg assessment in the future are in the governance structure which includes the assessment of shareholders, board of commissioners, board of directors, and the person in charge of functional management, while the assessment indicators on the governance process include the effectiveness of systems and mechanisms in managing business model changes, and the assessment indicators on governance results include financial performance and non-financial performance. in 2021 pt bsi received a score of 88.89 and in 2022 pt bsi received a score of 90 which means that pt bsi is a highly trusted islamic bank in the corporate governance perception index (cgpi) assessment organized by the indonesian institute for corporate governance (iicg), this is a good achievement both financially and non-financially and is real evidence not only based on self-assessment. the implementation of gcg in all aspects of work at pt bsi has yielded positive results, especially the net profit which was recorded at 31.04 percent year on year to idr 4.20 trillion and there was an increase in assets of 14.23 percent year on year with an acquisition figure of idr 319.85 trillion in the third quarter of 2023. in terms of sustainable financing distribution, bsi also continued to increase until the third quarter of 2023 with an acquisition figure of idr 53.6 trillion dominated by msme of idr 43.4 trillion and green financing of idr 10.2 trillion. with this good performance, consumer confidence continues to increase, especially after the merger, the number of customers has reached 19.22 million customers or with a growth rate of 10.9 percent year on year, the increase in the number of customers also has an impact on the increase in bsi mobile users, until the third quarter of 2023 registered users on bsi mobile reached 5.9 million users, while the number of transactions also shot up to idr 266.3 million. through digital channels and smart agents, pt bsi also continues to increase accessibility with a vision in service and reaching all levels of society, this is reflected in the number of qris transactions which reached 7.28 million transactions. https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 611 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pt bank sharia indonesia implementation of good corporate governance principles if these achievements and good performance are linked to the five principles of gcg, the following conclusions can be drawn: 1. transparency in this disclosure principle, it is expected that the company can provide material and relevant information in a way that is easily accessible and understood by stakeholders in every business activity carried out by the company. in this case pt bsi has implemented it in the form of a website (https://ir.bankbsi.co.id/) owned by bank sharia, in which there is company info, financial info, governance, disclosure, stock info, and several complementary features that make it easy for anyone to access information about bank sharia indonesia, and there is also data in the form of financial reports from year to year. 2. accountability in the principle of accountability, pt bsi has optimized the performance and role of each individual company through several points contained in the general meeting of shareholders report which can be found in chapter 1 of the 2021 pt bsi gcg report which can be obtained from the pt bsi website directly, there are points that explain the change of positions and positions in order to improve the performance and role itself and for the implementation of audits pt bsi has appointed the public accounting firm tanudiredja, wibisana, rintis & rekan (a member firm of pwc global network) and public accountant m. jusuf wibisana to audit the company's financial statements for the fiscal year ending on december 31, 2021. (laporan keuangan pt. bsi tahun 2021, 2021) likewise, in 2022 on agenda three contained in the gcg report of pt bsi in 2022, it has determined the public accounting firm tanudiredja, wibisana, rintis & rekan (a member firm of pwc global network) and public accountant m. jusuf wibisana to audit the company's financial statements for the fiscal year ending on december 31, 2022. and explained at subsequent points regarding changes in position holders in order to optimize the performance and role of individuals in the banking business, especially pt bsi. (laporan pelaksanaan tata kelola 2021, 2021) 3. responsibility the principle of responsibility is a principle that enforces where laws must be obeyed by the company and is responsible for society and the environment, in this case it has been outlined in several regulations contained in the gcg report of pt bsi for 2021 and 2022, including: law number 21 of 2008 concerning sharia banking, financial services authority regulation number 27 / pojk.03 / 2016 concerning capability and compliance assessment for the main parties of financial institutions, and there are still many regulations and laws that are used in running this banking business, and it can be said that this is a form of pt bsi's responsibility in running a business, as a limitation, protection of shareholders, the general public, government and also stakeholders. power. https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 612 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. professional professional principles and also independence that have been applied in pt bsi's banking activities can be seen in the composition of the board of commissioners and the provisions of each board of commissioners who serve do not hold concurrent positions in financial institutions or those that conflict with applicable laws and regulations, then there are also provisions described in the pt bsi governance report, namely all members of the board of commissioners do not have financial and / or family relationships (up to the second degree, both vertical and horizontal) with controlling shareholders (psp), and / or fellow members of the bsi board of commissioners and / or members of the bsi board of directors, the purpose of this regulation is to prevent conflict of interest conditions from occurring. the implementation of the duties, authorities and responsibilities of the board of commissioners during 2021 and 2022 was generally in accordance with the articles of association and prevailing laws and regulations. in an effort to carry out its duties and responsibilities to supervise the activities and operations of the bank, the board of commissioners during the 2021 and 2022 periods conducted meetings with a quorum (meeting the minimum number of meeting participants) and decisions were made based on deliberation to reach consensus without excluding the dynamics that occurred during the meeting. 5. fairness based on pt bsi's gcg report for 2021 and 2022, good gcg implementation can align the bank's objectives with those of its stakeholders to create a conducive business climate that ultimately helps the company achieve its stated performance. likewise with this fifth principle, the principle of fairness will be created when the first to fourth principles are well realized, the financial statements will reflect the existing and reasonable conditions when the preparation process is transparent, the gms process is detailed in the form of reports and can be accessed on the pt bsi web is a proof that pt bsi wants to show that these five principles have been implemented into post-merger business activities. pt bank sharia indonesia financial post merger roa (return on assets) is a measurement tool for the efficiency of an activity that is largely determined by the method of depreciation or decrease in fixed assets, to analyze the roa value, previously it was necessary to know how much the roa value of pt bsi was in the year before and after the merger, it can be seen in the financial ratio table that has been presented. https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 613 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1: table of profit or loss and other comprehensive income of pt bsi description 2022 (idr million) 2021 (idr million) bri sharia 2020 (idr million) mandiri sharia 2020 (rp million) bni sharia 2020 (idr billion) total income from fund management by bank as mudharib 19.622.865,00 17.808.432,0 0 4.347.121, 00 8.635.480,0 0 4.095,00 third party right to profit sharing of temporary shirkah funds -4.032.169,00 4.378.807,00 1.458.915, 00 2.590.433,0 0 -920,00 bank-owned profit sharing rights 15.590.696,00 13.429.625,0 0 2.888.206, 00 6.045.047,0 0 3.175,00 other business income 3.701.111,00 3.012.246,00 360.909,00 2.088.766,0 0 177,00 operating expenses -9.895.336,00 8.782.773,00 6.156.216,0 0 -2.087,00 provision for loss on earning and non-earning assets net -3.748.797,00 3.551.249,00 1.180.051, 00 -552,00 operating profit 5.647.674,00 4.107.849,00 433.258,00 1.977.597,0 0 3.352,00 non-operating income (expense) – net 8.534,00 -45.641,00 -28.027,00 -17.622,00 -24,00 profit before zakat and tax expense 5.656.208,00 4.062.208,00 405.231,00 1.959.975,0 0 689,00 zakat -141.405,00 -101.684,00 -48.999,00 -17,28 source: pt bsi financial report https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 614 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc description 2022 (idr million) 2021 (idr million) bri sharia 2020 (idr million) mandiri sharia 2020 (rp million) bni sharia 2020 (idr billion) income tax expense -1.254.621,00 932.319,00 -157.177,00 -476.488,00 -166,72 net profit 4.260.182,00 3.028.205,0 0 248.054,00 1.434.488,00 505,00 total other comprehensive income net of tax 50.893,00 189.591,00 7.188,00 6.239,00 455,00 comprehensive income (loss) for the period 4.311.075,00 3.217.796,0 0 255.242,00 1.440.727,00 basic earnings per share for the year (in full rupiah) 102,54 73,69 25,45 2.379,00 diluted earnings per share (in full rupiah) 102,54 73,66 25,45 182,00 source: pt bsi financial report table 2: financial ratio table of pt bsi (%) description 2022 2021 bri sharia 2020 mandiri sharia 2020 bni sharia 2020 return on assets (roa) 1,98 1,61 0,81 1,65 1,3 return on equity (roe) 16,84 13,71 5,03 15,03 9,97 source: pt bsi financial report the roa value can be found by using the calculation of the roa ratio value. roa = (net income / total assets) * 100% the following is an analysis of the roa value from 2021 at the beginning of the merger process until 2022, and the roa value in 2020 as a comparison material with the roa value after and https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 615 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before the merger, the roa value data retrieval is sourced from the financial information report in the financial overview section on the pt bsi website. if you look at the pt bsi financial ratio table from 2020 before pt bsi merged to 2022 after the merger, it can be seen that there was an increase, the roa value in 2020 at bri sharia, mandiri sharia, and bni sharia banks, on average, has an amount of 1.25 percent and in 2021 it has increased by 0.36 percent, then increased again in 2022 with a value of 1.98 percent, from 2021 to 2022 pt bsi's roa value has increased by 0,37 percent , from the results of these calculations it can be said that pt bsi has a positive efficient and productive level, and also the high roa value indicates that the company can manage its balance sheet in achieving profits, when viewed from return on equity (roe) the average roe in 2020 of the three islamic banks is 10.01% when compared to the roe value in 2021 and 2022 it can be said that there is an increase in roe percentage from year to year. this research is in line with research hisamuddin & tirta k (2015) that the implementation of good corporate governance (gcg) can improve company performance positively, which measures financial performance using roa and roe when islamic banking has not merged which publishes annual reports and good corporate governance (gcg) reports for the period 2008 to 2010. gcg and financial performance return on equity (roe) which is the ratio between the bank's net income and its own capital which has increased every year after the merger can be concluded that the increase in net income from the bank concerned has a positive effect, indicating that if the quality of gcg implementation increases, it will also be followed by an increase in roe value. this contradicts the research of pratiwi (2016) shows that the quality of gcg has a significant negative effect on the roe ratio, while in research hisamuddin & tirta k (2015) which reveals that the implementation of gcg can improve financial performance and reduce the risk of fraud for its own interests, from these two studies it can be concluded that the implementation of gcg on roe value does not have a big role. conclusion this study aims to analyze the effect of good corporate governance on the financial performance of islamic banks after the merger with gcg measurement with cgpi ratings and measurement of financial performance on roa and roe, from the results of the analysis there are differences in roa and roe values both before the merger and after the merger, while gcg before and after the merger has no difference and based on the corporate governance report it can be concluded that the company implements good governance policies. changes in roa and roe values that show an increase are evidence of the company's ability to generate profits from its assets. this is in line with the quality of financing that is getting better with the target market applied at this time. in the end, the results of the merger of the three state-owned banks gave a positive view by recording good performance in the world of islamic banking and became a milestone in increasing market share in the process of developing the halal industry in indonesia. https://www.ilomata.org/index.php/ijtc implementation of good corporate governance in supporting financial performance of indonesian islamic banking post merger veni, sucipto, and sulistyowati 616 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research can be a practical implication in consideration before investing, while for stakeholders it can be an evaluation of the company's strategy if the company's performance after the merger has not shown a positive trend. in addition, the success or failure of the bsi merger can be a benchmark for the government regarding the plan to merge btn sharia into bsi. the improvement in the financial performance of pt bsi banking is the impact of the merger that has occurred for three years since 2021, with an increase in financial performance, the level of trust of stakeholders will also increase, one example is investors who will invest. this study has several limitations and is still not too complete in various aspects and lacks depth in the discussion of financial performance indicators other than roa and roe there are still many financial performance measurements that can be seen to assess the development of pt bsi. suggestions for further research are to conduct research with a longer data period than only data obtained two years after the merger in order to obtain broader research results in describing the financial performance of pt bsi post merger. reference abu, m., ibrahim, u. a., & muritala, t. a. 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(2020, october 25). ini untung dan rugi merger bank bumn syariah. kontan.co.id. https://insight.kontan.co.id/news/ini-untung-dan-rugi-merger-bank-bumn-syariah shin, h., & kim, s.-i. (2019). the effect of corporate governance on earnings quality and market reaction to low quality earnings: korean evidence. sustainability (switzerland), 11(1). https://doi.org/10.3390/su11010102 tamakloe, b., boateng, a., mensah, e. t., & maposa, d. (2023). impact of risk management on the performance of commercial banks in ghana: a panel regression approach. journal of risk and financial management, 16(7), 322. umam, k., & kimberly, v. b. (2022). analysis of the merger of pt bank syariah indonesia in legal and sharia perspective lk2 fhui. lk2 fhui. lembaga kajian keilmuan fakultas hukum universitas indonesia. https://lk2fhui.law.ui.ac.id/portfolio/analysis-of-the-merger-of-ptbank-syariah-indonesia-in-legal-and-sharia-perspective/ vinh, v. q., & dung, n. t. (2020). liquidity risk, bank credit risk, and financial performance: evidence from vietnamese commercial banks. journal of risk and financial management, 13(6), 131. https://doi.org/10.3390/jrfm13060131. wardhani, r. (2007). mekanisme corporate governance dalam perusahaan yang mengalami permasalahan keuangan. jurnal akuntansi dan keuangan indonesia, 4(1), 95–114. https://doi.org/10.21002/jaki.2007.05 yantiningsih, n. d., islahuddin, & musnadi, s. (2016). pengaruh kualitas penerapan good corporate governance (gcg) terhadap knerja keuangan pada perbankan syariah indonesia (periode 2010-2014). jurnal magister akuntansi pascasarjana univesitas syiah kuala, 5. yunistiyani, v., & harto, p. (2022). kinerja pt bank syariah indonesia, tbk setelah merger: apakah lebih baik? reviu akuntansi dan bisnis indonesia, 6(2), 67–84. https://doi.org/10.18196/rabin.v6i2.15621 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 97-113 97 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc carbon tax research trend muhammad bima1, rhisma indah setiawati2, dwi apriliana agustin3, mohamad djasuli4 1234university of trunojoyo madura, indonesia correspondent : 210221100058@student.trunojoyo.ac.id1 received : october 30, 2023 accepted : december 31, 2023 published : january 31, 2024 citation: bima, m., setiawan, r, i., agustin, d, a., djasuli, m. (2024). carbon tax research trend. ilomata international journal of tax and accounting, 5(1), 97-113. https://doi.org/10.52728/ijtc.v5i1.1002 abstract: this research focuses on mapping articles that discuss carbon tax published through sinta 1 and 2 accredited journals and scopus quartile 1 and 2. the purpose of this research is to explore more deeply about carbon tax research with a focus on business management and accounting in the 2015-2023 period. the method used in this research is a quantitative method with a bibliometric approach. this bibliometric approach is used to determine the development of research topics related to carbon tax research trends. research samples, journal names, publication years, research methods, types of research variables and research data sources are the basis for mapping in this study. this research also visualizes carbon tax keywords using vosviewer software. the results found that the search for articles that discuss carbon tax research found 8 articles published from accredited journals sinta 1 and sinta 2 and 50 articles from journals indexed by scopus quartile 1 (q1) and quartile (q2) . this study contributes to knowing the trend of scientific publications on carbon tax, and provides an opening for researchers in conducting future research by conducting deeper calculations related to the amount of carbon emissions and carbon tax involving subjectivity in disclosure assessment. keywords: carbon emissions, carbon tax, taxation this is an open access article under the cc-by 4.0 license. introduction global problems can threaten various things both in terms of the environment and human life (lindenmayer et al., 2023). this threat is the impact of climate change arising from global problems. one of the triggers of climate change is the increase in exposure to greenhouse gases (ghg) (mar et al., 2022). the united nations (un) suggests that the increase in ghg exposure will occur in line with economic growth, population and the increase in the level of human life (belmonte-ureña et al., 2021). the solution to reducing greenhouse gas (ghg) emissions can be done if a carbon tax is implemented (brand et al., 2013; ihsan & hutama, 2023; qiu et al., 2020). several countries in the world have implemented carbon taxes such as finland (roh et al., 2020; zhou et al., 2021). apart from finland, carbon tax has also been implemented for a long time in africa (alton et al., 2014; choi, 2013; shu et al., 2017). carbon tax is an excise tax levied based on the amount of energy including coal, coke, gas, and crude oil (dong et al., 2023; dwyer et al., 2013; https://www.ilomata.org/index.php/ijtc mailto:210221100058@student.trunojoyo.ac.id https://doi.org/10.52728/ijtc.v5i1.1002 carbon tax research trend bima, setiawan, agustin, and djasuli 98 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc j. zhang et al., 2024). the existence of a carbon tax policy makes it possible for entities to do business with the minimum possible (spending the smallest possible cost) but as much as possible to increase finances that can increase entity profits. this strategy has the potential to increase state revenue. the revenue can be allocated to sustain economic growth and improve national development for a country (zhao et al., 2022). carbon tax is one of the most interesting topics to be researched further. a lot of research has been done by previous researchers who focus on one subject area such as business, management and accounting with the keyword carbon tax. (chang et al., 2023; goh et al., 2023; mashhadi rajabi, 2023; o’ryan et al., 2023; ramadhani & koo, 2022; sun & chen, 2022; q. zhang et al., 2022; s. zhang et al., 2023). this study was motivated by research from (wimala & yeremy, 2022) on bibliometric analysis of tax research. researchers tried to re-examine in the same way related to taxation, namely carbon tax. by using 8 articles on carbon tax in 7 accredited journals sinta 1 and sinta 2 during 2015. in addition, researchers also used scopus quartile 1 and quartile 2 indexed journals with a total of 50 articles on carbon tax found during 2015. this research aims to explore in more depth about carbon tax research with a focus on the field of business management and accounting where gaps will be sought that can be researched by future researchers. previous research examined the potential application of carbon tax policies in industry using the bilbliometric analysis method. the difference in research conducted by previous researchers is that researchers focus more on the subject area with the keyword carbon tax and the subject area of business, management and accounting. previous research conducted by wimala & yeremy (2022) looked at the effect of carbon tax implementation, especially in the construction industry in countries that have implemented carbon taxes before. in addition, wimala & yeremy's research (2022) looked at the potential for its application in indonesia and also used swot analysis to determine internal and external factors in the implementation of carbon tax policies. based on the above statements, researchers focused on selecting sinta 1 and 2 indexed journals and scopus indexed journals with quartile 1 (q1) and quartile 2 (q2). thus, 8 sinta 1 and 2 articles and 50 quartile 1 (q1) and quartile 2 (q2) articles were collected for the period 2015-2023. the period of 2015-2023 was chosen by researchers because in 2015 there was the paris agreement. this agreement controls countries to reduce carbon dioxide and greenhouse gas emissions to limit global warming below 2.0 degrees celsius (delbeke et al., 2019; kuo et al., 2016; ran & xu, 2023; stefano & richard, 2009). the contribution of this research is to determine the trend of scientific publications on carbon tax, the core journals of scientific publications on carbon tax, journals of scientific publications based on research variables, scientific publications based on year of publication, research methods, scientific publications on carbon tax research data sources and visualization of carbon tax keywords using vosviewer. second, this article provides an overview of future research to conduct deeper calculations related to the amount of carbon emissions and carbon tax and involves subjectivity in assessing disclosure. in addition, the contribution of research on carbon tax with bibliometric analysis is expected to contribute to the development of science as a form of progress in human civilization. https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 99 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the literature review aims to report trends, relationships, consistencies, and gaps so that work can be done in an organized manner and can be evaluated. according to donthu et al. (2021) bibliometric analysis is a popular method that can be used in exploring and analyzing large amounts of scientific data. this can make it possible to reveal the evolution in a particular field, as well as highlight the developing fields in the field being studied (donthu et al., 2021). according to (haryani & sudin, 2020) in the implementation of bibliometric analysis, there are several steps that must be taken, including the data search process. this bibliometric data search was carried out manually by accessing sinta and scopus web journals with the keyword carbon tax and focusing on the business, management and accounting sub-area. in the bibliomertic analysis, researchers chose journals accredited by sinta 1 and 2 and scopus with quartile 1 and 2. bibliometric analysis was carried out on two aspects; (1) development trends in journals with carbon tax keywords. for the second aspect, using visualization of the results of bibliometric analysis with the help of vosviewer. bibliometrics is conducted to further explore the research on carbon tax with a focus on business management and accounting where it will look for blemishes that can be researched by future researchers. this article is presented in 5 sections. the first is the introduction, the second is the literature review, the third is the research method, the fourth is the results and discussion, which presents information related to mapping based on mapping the name of the scientific journal and the year of publication of the research, mapping the year of publication of carbon tax articles, mapping the carbon tax method, and mapping the source of research data and finally the fifth is the closing (conclusion). methods the research conducted by the researcher used descriptive quantitative with bibliometric approach. the unit of analysis used in this research is scientific articles on carbon tax. the research data source is scientific publications on carbon tax with accredited scientific journals sinta 1 and 2 and scopus quartile 1 and 2. the reason for choosing these accredited scientific journals is because sinta 1 and 2 are national journals that have been verified or have been recognized as true and have been reviewed by several reliable reviewers to be published. researchers use the scopus data base because they consider the quality of reputation that has been recognized internationally. in addition, scopus also has a big impact on a journal or institution in the world of scientific publications. the population used is scientific publications on carbon tax that have been scientifically published and indexed by sinta 1 and 2 and scopus quartile 1 and quartile 2. the samples used in this study are scientific publications on carbon tax indexed by sinta 1 and 2 and scopus quartile 1 and quartile 2 for the last 8 years from 2015-2023, found 8 sinta 1 and 2 articles and 50 scopus quartile 1 and 2 articles. the data collection technique used by researchers is secondary data. researchers conduct searches by opening the scopus database at www.scopus.com with a subscription account (paid) so that researchers can access all its features. then the researcher uses the term or keyword carbon tax (carbon tax) with the search results taken in the article title. the data obtained by researchers is publication data in the field of taxation with the scope of carbon tax for the last 8 years, namely 2015-2023. after obtaining the search results, researchers began to explore the sinta and scopus https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 100 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc databases to see the core journals of scientific publications on carbon tax, journals of scientific publications based on research variables, scientific publications based on the year of publication and research methods and scientific publications on carbon tax research data sources. furthermore, the researcher made an effort to visualize the development of research on carbon tax using vosviewer software and presented the result items for the top 4 clusters. result and discussion research sample selection result a total of 8 carbon tax articles were collected from national scientific journal sites indexed by sinta 1 and 2. can be seen from table 1. in addition, there are also 50 articles on carbon tax from international scientific journal sites indexed by scopus quartile 1 (q1) and quartile 2 (q2). both types of journals have a submission deadline of december 31, 2023. some articles that do not fit the sample criteria will be excluded and here there are 58 eligible articles, of which there are 50 scopus q1 and q2 articles and 8 sinta 1 and 2 articles. the selection of the article sample is presented in table 1. for articles that do not meet the requirements such as not including sinta 1 and 2 journals and q1 and q2 scopus journals will be excluded from the sample selection results. the samples that have been selected based on the filters that have been selected by researchers will then be discussed in more detail in the next discussion. for figure 1, the researcher focuses on explaining the development of articles published from accredited journals sinta 1 and 2. it can be observed that the distribution of publications in 8 articles from 2015 to 2023. in 2016 there was only 1 article from sinta that explained about carbon tax. as for 2016 and 2017, there were no articles published in sinta 1 and 2 that discussed carbon tax. in 2019 there was 1 article published from a sinta accredited journal. however, in 2020 and 2021 there were no articles published from sinta 1 and 2 journals. 2022 is the year when sinta 1 and 2 accredited articles can increase to 4 articles that discuss carbon tax. in 2023 there were publications from sinta 1 and 2 journals but only 2 articles were published. thus, it can be said that 2022 is the year with the highest number of published articles, namely 4 articles since the last 8 years 2015 to 2023. in 2023 is the year that has the second most publications with a total of 2 articles published in sinta 1 and 2, the rest in 2016 and 2021 only 1 article can be published. apart from these years there were no articles published in national accredited journals sinta 1 and 2. thus, research on carbon tax is still minimal because only 8 studies with 7 journals as a place of publication. figure 2 is the distribution of q1 and q2 scopus journals in 2015-2023. researchers added q1 and q2 scopus journal mapping sources because according to researchers if the coverage of sinta 1 and 2 journals is only a few and still minimal. researchers mapped from 2015 to 2023, which is the same as the coverage of sinta 1 and sinta 2 mapping. from figure 2, it can be observed that in 2015 and 2016 there were only 2 studies that discussed carbon tax. 2015 and 2016 were the years with the least number of carbon tax studies. from figure 2, it can be observed that 2019 and 2023 are the years with the highest number of studies on carbon tax, each of which has 11 articles or 11 studies. from 2017 to 2019, there was an increase in research on carbon tax. 2020 experienced a decrease in the number of studies where there were only 4 articles. after 2020 until 2023 there was https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 101 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an increase in the number of studies on carbon tax. thus, it can be concluded that the amount of carbon tax research conducted from 2015 to 2023 is quite a lot, namely 50 articles. the 50 scientific articles on carbon tax research are accredited by scopus q1 and q2. table 1. carbon tax research sample selection no. research sample selection criteria n 1 articles on sinta 1 and sinta 2 websites 8 2 articles on scopus q1 and q2 accredited international journal websites 50 3 incomplete article 0 4 articles that do not match the research topic 0 publication of sinta 1 and 2 carbon tax 2015-2023 figure 1. distribution of sinta 1 and 2 journals 2015-2023 source: sinta.kemendikbud.go.id (2023) figure 2. scopus journal distribution q1 and q2 2015-2023 source: scopus.com (2023) 0 2 4 6 8 10 12 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 n u m b er o f a rt ic le s years of publication scopus publication q1 and q2 carbon tax 2015-2023 https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 102 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mapping by scientific journal name and publication year table 2 shows a description of the mapping of sinta 1 and 2 carbon tax publications based on journal names. the mapping of scientific journal names and years of publication refers to and is the same as research conducted by sari et al. (2023). sari et al. (2023) describes the classification of articles based on the name of the scientific journal and year of publication. this analysis can provide an overview of information related to the distribution of articles on carbon tax from year to year and what journals can dominate for the publication of scientific articles. in addition, this analysis is also used to see the consistency of journals in publishing articles on carbon tax. table 2 shows that the journal indonesian treasury review: journal of treasury, state finance, and public policy and journal of accounting and finance are the national scientific journals that publish the most articles on carbon tax, namely 2 articles (25%). the other types of journals can only publish 1 (12.5%) article on carbon tax. from table 2 observed by researchers for the last 8 years, the journal of treasury, state finance, and public policy and the journal of accounting and finance have consistently published articles on carbon tax where there are 2 articles each (25%). table 3 shows that the journal of cleaner production is the international scientific journal that publishes the most articles on carbon tax. journal of cleaner production published 27 articles (54%). the journal with the second most articles is the international journal of production economics. the international journal of production economics published articles on carbon tax with a total of 6 articles (12%). apart from the journals mentioned above, there is only 1 article (2%) in each journal. table 3 also explains that the journal of cleaner production from 2015-2023 has been consistent for the last 8 years. this is because in the last 8 years the journal of cleaner production is the journal with the most publications. thus, apart from the journal of cleaner production, the opportunity to publish articles on carbon tax is an opportunity for further researchers. from table 3, it can be seen that there are many only 1 journal that contains articles about carbon tax. table 2. mapping of sinta 1 and 2 carbon tax publications by journal name no journal name year of publicatio n 20152023 (total article) percentage (%) 1 jurnal manajemen teknologi : indonesian journal for the science of management 1 12,5% 2 indonesian treasury review: jurnal perbendaharaan, keuangan negara, dan kebijakan publik 2 25% 3 jurnal akuntansi riset 1 12,5% 4 jurnal reviu akuntansi dan keuangan 1 12,5% 5 internasional jurnal of artifical intelligence research 1 12,5% 6 jurnal akuntansi dan keuangan 2 25% total 8 100% source: personal data processing results (2023) https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 103 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. mapping of q1 and q2 scopus carbon tax publications by journal name no. journal name year of publicatio n 20152023 (total articles) percentag e (%) 1 journal of cleaner production 27 54% 2. international journal of production economics 6 12% 3 national tax journal 1 2% 4. pakistan journal of commerce and social sciences 1 2% 5. socio-economic planning sciences 1 2% 6 technological forecasting & social change 1 2% 7 tourism economics 1 2% 8 transportation research part e 1 2% 9 annals of tourism research 1 2% 10 current issues in tourism 1 2% 11 decision sciences 1 2% 12 the electricity journal 1 2% 13 industrial management and data systems 1 2% 14 journal of global information management 1 2% 15 journal of hospitality and tourism management 1 2% 16 journal of modeling in management 1 2% 17 meditari accountancy research 1 2% 18 operational research 1 2% 19 omega (united kingdom) 1 2% total 50 100% source: personal data processing results (2023) mapping by year of publication table 4 shows the mapping of the year of publication of sinta 1 and 2 carbon tax articles. based on the year of publication, 2022 is the number of years with the most articles published than other years, namely 4 articles (50%). the year 2022 is also the most research topics on carbon tax since the last 8 years. then in 2023 is the year with the second most publications from sinta 1 and sinta 2 journals. the number of carbon tax research in 2023 was 2 scientific articles (25%). for 2016 and 2019 are years where there is only 1 publication of scientific articles (12.5%). apart from the previously mentioned years, there were no studies explaining carbon tax indexed by sinta 1 and sinta 2. thus, carbon tax is still very minimal to be published in nationally accredited journals such as sinta 1 and sinta 2. the year that there are no scientific publications on carbon tax is an https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 104 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc interesting finding. this is because carbon tax is a new thing implemented in indonesia and is a very interesting trend topic if studied in more depth and can add to the treasure of knowledge in the field of taxation. table 5 describes the mapping of the year of publication of carbon tax articles from scopus q1 and q2. the year 2019 is the largest year of publication of articles describing carbon tax from scopus q1 and q2, namely 10 articles (20%). furthermore, the second most research on carbon tax is shown in 2018 and 2023. these years both published scientific research articles on carbon tax (carbon tax) as many as 9 articles (18%). 2021 is the third year that describes scientific research on carbon tax, namely 6 articles (8%). 2016 was the year that published the fewest articles in scopus q1 and q2, namely 1 article (2%). in 2016, research on carbon tax was still minimal. of course, this is an opportunity for researchers to further research during the year. fluctuations since the last 8 years from 2015 to 2023 have increased research on carbon tax. thus, research on carbon tax can continue to be developed because considering that since the last 8 years only 50 articles indexed by scopus q1 and q2. table 4. mapping of the year of publication of sinta 1 and 2 carbon tax articles year number of articles percentage (%) 2023 2 25% 2022 4 50% 2021 0 0% 2020 0 0% 2019 1 12,5% 2018 0 0% 2017 0 0% 2016 1 12,5% 2015 0 0% total 8 100 source: personal data processing results (2023) table 5. mapping of the year of publication of q1 and q2 scopus carbon tax articles year number of articles percentage (%) 2023 9 18% 2022 4 8% 2021 6 12% 2020 4 8% 2019 10 20% 2018 9 18% 2017 5 10% 2016 1 2% 2015 2 4% total 50 100% source: personal data processing results (2023) https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 105 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mapping by research method table 6 presents information about the mapping based on the research method of carbon tax articles sinta 1 and 2. in 2022 and 2023, many carbon tax studies conducted research with quantitative methods. quantitative research in 2022 and 2023 each with the number of articles 2. quantitative research also occurred in 2019. in 2019 there was only 1 research on carbon tax using quantitative methods. since the last 8 years quantitative research amounted to 5 studies (62.5%). meanwhile, qualitative research was highest in 2022. in 2022 carbon tax research using qualitative methods was only 2 articles. while other research occurred in 2016, but only consisted of 1 qualitative method research article. the number of qualitative research methods since the last 8 years is 3 articles (37.5). interestingly enough, there are no mixed methods in carbon tax research. thus it can be concluded that the opportunity for future researchers is to increase the number of mixed research methods. in addition, it can be developed more deeply and more research with qualitative methods. this is because qualitative research is less when compared to quantitative research. furthermore, table 7 presents the mapping based on the research methods of q1 and q2 scopus carbon tax articles. when viewed from table 7, the number of quantitative and qualitative research methods has the same proportion, namely 24 research methods each (48%). in quantitative research methods, 2019 was the year with the most research using quantitative methods, namely 7. 2018 also dominated, namely there were 6 quantitative research methods. 2015 was the least year that used quantitative research. for qualitative research, 2023 is the year with the most research in qualitative methods, namely 7. the least research on qualitative occurred in 2015, 2016, 2022, namely only 1 each. for mixed methods only 2 (4%), occurred in 2021 and 2023. thus the gap from further researchers can use mixed methods because in mixed methods there are still minimal researchers to research it. table 6. mapping by research method of carbon tax articles sinta 1 and 2 year research methods (number of articles) number of articles quantitative qualitative mixed 2023 2 0 0 2 2022 2 2 0 4 2021 0 0 0 0 2020 0 0 0 0 2019 1 0 0 1 2018 0 0 0 0 2017 0 0 0 0 2016 0 1 0 1 2015 0 0 0 0 total 5 3 0 8 (%) (62,5%) (37,5%) (0%) (100%) source: personal data processing results (2023) https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 106 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7. mapping by research method of q1 and q2 scopus carbon tax articles year research methods (number of articles) number of articles quantitative qualitative mixed 2023 1 7 1 9 2022 3 1 0 4 2021 2 3 1 6 2020 1 3 0 4 2019 7 3 0 10 2018 6 3 0 9 2017 3 2 0 5 2016 0 1 0 1 2015 1 1 0 2 total 24 24 2 50 (%) (48%) (48%) (4%) (100%) source: personal data processing results (2023) mapping by research variable type table 8 shows the mapping of carbon tax research variables based on journals indexed by sinta 1 and sinta 2. the carbon tax variable is the variable with the highest total of 4 (25%). furthermore, the constraints and green economics variables are the second most variables, namely 2 (12.5%). over the past 8 years, the total variables found from 8 articles are 16 variables (100%). thus, it can be concluded that the use of variables other than carbon tax, constraints and green economics can be used in research on carbon tax because it is still very minimal. in table 9, there is also a mapping of the types of research variables on carbon tax (carno tax). the mapping is mapped from q1 and q2 scopus indexed journals. during the last 8 years 2015-2023 there were 33 research variables (100%) from 50 q1 and q2 scopus articles. the variables of carbon tax, reducing energy consumption, economy and the tourism industry are the most variables of other variables, namely 4 (8.33%). the environment variable is the 2nd variable with the most total variables over the last 8 years, namely 3 (6.25%). carbon tax research seen from table 9 which is still 1 variable (2.08%) can be used as a development in future research. table 8. mapping by research variable type carbon tax sinta 1 and 2 no. research variables total articles 2015-2023 percentage (%) 1 carbon emission disclosure (ced) 1 6,25% 2 company value 1 6,25% 3 carbon tax 4 25% 4 carbon emissions 1 6,25% 5 carbon pricing 1 6,25% 6 monitoring system 1 6,25% 7 carbon accounting 1 6,25% 8 constraints 2 12,5% https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 107 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 9 carbon tax policy 1 6,25% 10 environmental taxation 1 6,25% 11 green economics 2 12,5% total 16 100% source: personal data processing results (2023) table 9. mapping by type of research variable carbon tax scopus q1 and q2 no. research variables total articles 2015-2023 percentage (%) 1 environmental tax 1 2,08% 2 productivity 2 4,16% 3 energy efficiency 2 4,16% 4 the fairness of carbon tax 1 2,08% 5 reduced water consumption 1 2,08% 6 reducing energy consumption 4 8,33% 7 ccus source-sink matching 1 2,08% 8 economy 4 8,33% 9 speed sensitivity 1 2,08% 10 household demand 1 2,08% 11 strategy and performance of low-carbon 1 2,08% 12 management decisions 1 2,08% 13 emission allowances 1 2,08% 14 emission price 1 2,08% 15 enterprise decisions 1 2,08% 16 supply chain enterprise operations 1 2,08% 17 government carbon tax 1 2,08% 18 carbon tax policy 2 4,16% 19 changes in market shares of domestic producers 1 2,08% 20 changes in exports 1 2,08% 21 manufacturing and remanufacturing decisions 1 2,08% 22 social welfare 1 2,08% 23 green subsidies 2 4,16% 24 revenue sharing and first-mover advantage 1 2.08% 25 consumer environmental awareness 2 4,16% 26 environmental audits 1 2.08% 27 renewable energy consumption 1 2,08% 28 the environment 3 6,25% 29 the tourism industry 4 8,33% 30 carbon capture (storage) 1 2,08% 31 network participation 1 2,08% 32 enterprise decisions 1 2,08% total 48 100% source: personal data processing results (2023) https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 108 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mapping by research data source the mapping of research data sources is done by classifying articles on carbon tax based on data sources, namely primary data, secondary data, and mixed data (primary and secondary). tables 11 and 12 show the mapping based on the research data sources. table 11 maps carbon tax research data sources from sinta 1 and 2 indexed journals while table 12 maps carbon tax research from scopus q1 and q2 journals. table 11 shows that secondary data is the most widely used research data in carbon tax research during 2015-2023. secondary data sources in research on this topic are obtained from entity report data and for primary data sources in this study are obtained from questionnaire surveys, observations, interviews, documentation, and experiments. for table 12 for the last 8 years, the most secondary data is also 26 (52%). no different from table 11 for this secondary data is also obtained from entity report data while for secondary data, namely from questionnaire surveys and others. for mixed data, both tables 11 and 12 are data that is minimally used, of course this is interesting for future research if you use mixed data. table 10 : mapping by data source of carbon tax research sinta 1 and 2 year research data source (number of articles) number of articles primary data secondar y data mixed 2023 1 1 0 2 2022 2 2 0 4 2021 0 0 0 0 2020 0 0 0 0 2019 0 1 0 1 2018 0 0 0 0 2017 0 0 0 0 2016 0 0 1 1 2015 0 0 0 0 total 3 4 1 8 (%) (37,5%) (50%) (12,5%) (100%) source: personal data processing results (2023) table 11 : mapping by data source of q1 and q2 scopus carbon tax studies year research data source (number of articles) number of articles primary data secondary data mixed 2023 4 4 1 9 2022 3 1 0 4 2021 2 4 0 6 2020 1 3 0 4 2019 4 5 1 10 https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 109 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2018 4 5 0 9 2017 3 1 1 5 2016 0 1 0 1 2015 0 2 0 2 total 21 26 3 50 (%) (42%) (52%) (6%) (100%) source: personal data processing results (2023) figure 3 visualization of carbon tax keywords from scopus journals q1 and q2 source: personal data processing results (2023) from the results of data processing in figure 3 using keywords, the carbon tax research development map indexed by scopus from 2015-2023 formed 32 clusters with a total of (162 items). researchers will display the top 4 clusters with a total of (41 items). the presentation of the 4 clusters will be displayed in table 13 below. table 12 : exposure of items from each cluster in q1 and q2 scopus journals on carbon tax. no cluster item of each cluster 1 cluster 1 (11 item) 1. aviation sector 2. climate change 3. dynamic recursive cge 4. environmental policy 5. inserve optimization 6. location 7. mechanism design 8. production technology 9. revenue recycling 10. sustainability https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 110 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 11. transport-related carbon-emisions 2 cluster 2 (11 item) 1. carbon emission abatemen 2. consumer environmental awareness 3. cost-sharing 4. environmental awareness 5. firs-mover advantage 6. make-or-buy decision 7. pricing decision 8. retailer-driven 9. revenue sharing 10. revenue-sharing 11. supply chain management 3 cluster 3 (10 item) 1. carbon capture and storage 2. dispatch optimization 3. emission reduction potential 4. environmental audits 5. environmental management systems 6. low carbon dispatch 7. mixed-integer linear programming 8. operating expenses 9. renewable energy 10. tokyo stock exchange 4 cluster 3 (10 item) 1. carbon emissions reduction 2. cge model 3. chile 4. co2 emissions 5. construction sector 6. dynamic stochastic general equilibrium model 7. economy-wide effects 8. environmental quality 9. output 10. tourism source: personalized result (2023) conclusions this study aims to explore carbon tax research with a focus on business management and accounting in scientific journals indexed by sinta 1 and 2 and scopus q1 and q2 during the period 2015-2023. the number of studies used in this study is 58 articles consisting of 8 sinta articles and 50 scopus articles selected according to predetermined procedures. this study dominates that the donating publication year in sinta 1 and 2 journals is 2022. as for q1 and q2 scopus journals, namely 2019 and 2023. indonesian treasury review: journal of treasury, state finance, and public policy and journal of accounting and finance are journals that publish https://www.ilomata.org/index.php/ijtc carbon tax research trend bima, setiawan, agustin, and djasuli 111 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the most articles from sinta 1 and 2 journals, namely 2 articles (25%). for q1 and q2 scopus journals, journal of cleaner production is the journal that published the most articles from 20152023, namely 27 articles (54%). quantitative method is the most used research method in carbon tax research in sinta 1 and sinta 2 as well as scopus q1 and q2. for data sources, most researchers use secondary data sources. visualization of carbon tax keywords found 32 clusters with a total of 162 word items. researchers only present the top 4 clusters with a total number of items 41. in this study, only the keyword carbon tax was used to search for journals. thus, further research can add several keywords related to the topic of carbon tax so that more research articles on carbon 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(2021). supply chain management under carbon taxes: a review and bibliometric analysis. omega (united kingdom, 98, 102295. https://doi.org/10.1016/j.omega.2020.102295 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 554-573 554 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi1, maulidyati aisyah2, herlina rahmawati dewi3, asaquita sophie premarci4 124universitas islam indonesia, indonesia 3university of pecs, hungary correspondent: mahmudi@uii.ac.id1 received : march 10, 2024 accepted : april 21, 2024 published : april 30, 2024 citation: mahmudi., aisyah, m., dewi, h, r., premarci, a, s. (2024). the effectiveness of learning accounting information system with monsoonsim. ilomata international journal of tax and accounting, 5(2), 554-573. https://doi.org/10.61194/ijtc.v5i2.1197 abstract: several accounting education institutions have adopted an experiential learning model through business game simulation to enhance students' ability in understanding course material and increase their competence. monsoonsim is a platform that provides business simulations packaged in the form of web-based games that offer students the experience of running a business virtually. this research examines the effectiveness of using monsoonsim in increasing student competency in the accounting information systems (ais) course from the perspective of tam and utaut theory. this study is quantitative research with a survey approach. the sample for this research was 102 students who used monsoonsim as a learning medium for the ais course. this study confirms that perceived ease of use, facilitating condition, and social influence regarding the use of monsoonsim have a positive significant influence on students’ ais competence. then, the higher student’s competence in ais, the better students’ learning outcome. however, perceived usefulness and perceived enjoyment of monsoonsim do not affect significantly on students’ ais competence. this study support of the use of business game simulation in accounting education institutions to enhance the better understanding of ais. keywords: monsoonsim, experiential learning, game simulation, learning outcome, ais competence. this is an open access article under the cc-by 4.0 license. introduction accounting profession faces tremendous challenges in the era of digitalization (gulin et al., 2019). in the digital era, accounting information systems (ais) are the leading pillar in adopting the latest technology (soudani, 2012). this is very reasonable because managers need fast and reliable information produced by the company's accounting information system (stefanou, 2006). therefore, accounting education institutions need to make ais combined with information technology as a top priority to assist decision making that can contribute to improving organizational performance (yoshikuni et al., 2023). https://www.ilomata.org/index.php/ijtc mailto:mahmudi@uii.ac.id https://doi.org/10.61194/ijtc.v5i2.1197 the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 555 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, the success of implementing an accounting system is greatly influenced by the competence of the employees who operate and develop the system (soudani, 2012). students often experience difficulties in understanding accounting systems courses because of the abstract explanations about the application of this knowledge in company practice. many students do not understand the real practices of business processes in companies. ais is an important subject in accounting education that focuses not only on accounting but also on data management, decision-making, and information system. because of the uniqueness of the ais course for students, effective learning methods for this course are an issue in accounting education (moradi et al., 2020). unfortunately, many students face some difficulties in studying ais due to the complexity of the course structure and teaching style (vatanasakdakul & aoun, 2011). therefore, providing effective ais teaching methods is a challenge for accounting education. kharbat & muqattash, (2020) suggested that accounting education should continuously update technology-related courses including ais in the era of digitization. guizi et al., (2021) urge to reform undergraduate accounting teaching with a more innovative teaching model in the era of digital intelligence and artificial intelligence. one of the learning models for the ais course that can be developed is through the experiential learning model. david kolb in 1984 developed a learning method in the form of experiential learning and it has been proven to be applicable in several academic institutions (jonathan & laik, 2019). the experiential learning method can bridge the theory learned in college with the reality of business practice (wrenn & wrenn, 2009). experiential learning has many forms of activities such as company visit, field study, internship, practicums, and business simulation. business simulation game has been adopted by several universities as their learning method with the focus on economic and managerial (peterková et al., 2022). through business simulation games, students are more enthusiastic in learning because they feel involved in carrying out the company's business activities (dharmastuti et al., 2021). students engage in designing planning, implementing, and making business decision making (laurischkat & viertelhausen, 2017). business simulation game is an alternative model of innovative teaching method in business and accounting course that promotes student-centered learning and an experiential learning approach. using business simulation game as a pedagogical approach can be classified as game-based learning. although it had been used as a learning tool at several universities, business game simulation should be developed by integrating it to the state of the arts technology, for example augmented reality game-based learning. there are several platforms of business simulation game that can be used such as monsoonsim, erpsim, hec montreal, business simulation suite, ja titan, and unisim. there is still little research that tests the effectiveness of using business simulation game methods in accounting, especially those that use monsoonsim as ais learning tool. previous studies investigated the relationship between the use of game simulation and students’ competency on business management (dharmastuti et al., 2021). susanti et al. (2020) found that students had better competencies when the ais course was integrated with sap compared to when the course https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 556 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc was carried out conventionally without being integrated with sap. sap is an integrated accounting software that provides business game simulation for the student in understanding accounting cycles and business processes. this study explores the effectiveness of using monsoonsim in learning ais.the objective of this research is to investigate the impact of using monsoonsim toward students’ competency in the ais. specifically, this study investigates whether perceived usefulness, perceived ease of use, perceived enjoyment, facilitating condition, and social influence in using monsoonsim affect the students’ ais competency and learning outcome. this study provides several contributions. this study provides new evidence regarding the effectiveness of using gamification and experiential learning as the learning method in accounting education. this study also enriches the literature of the adoption of accounting technology in supporting courses understanding and students’ competences. technology adoption accounting information systems is one of the courses that has high technological content in accounting education. ais covers several course materials such as the accounting procedures, data management, application programs, information technology infrastructure, and internal control (romney et al., 2020). in ais, students learn business process including revenue cycle, expenditure cycle, production cycle, payroll cycle, and reporting cycle. companies vary in adopting technology to support the implementation of corporate accounting information systems. there are several factors that influence technology adoption, such as explained by technology acceptance model (tam). tam theory explained there are several behavioral factors that influence technology adoption, i.e. perceived usefulness and perceived ease of use (davis, 1989). the tam theory underwent development until it gave birth to the utaut 1 and utaut 2 theories. the tam and utaut theories became mainstream research used in technology adoption research (marikyan & papagiannidis, 2023). tam is the most basic acceptance model used to predict the intention to adopt technology and information system. however, tam has limitation because this theory does not consider the influence of external factors such as social and environmental that play important roles in deciding to adopt new technology. because of the limitations of the tam theory, venkatesh et al. (2003) then developed the unified theory of acceptance and use of technology (utaut). the first model of utaut consists of four factors, i.e. performance expectancy, effort expectancy, social influence, and facilitating conditions (venkatesh et al., 2003). venkatesh et al. (2012) then developed other three constructs into utaut 2, i.e. hedonic motivation, price value, and habit. this research is based on tam theory to predict the influence of the variables perceived ease of use and perceived usefulness of the use of monsoonsim on student competency in ais courses. meanwhile, to predict the influence of social influence, facilitating conditions, and perceived enjoyment variables on student competence in ais courses, the utaut theory is used. then, to predict the influence of student competency in ais courses on perceived learning outcomes we used the learning model theory proposed by harter (1988). https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 557 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc monsoonsim business simulation higher education has used business simulation game for around half a century (faria, 2006; faria et al., 2008). the superiority of business simulation game is this method provides a glimpse of the real-world application of accounting system that cannot be gained from theory in the textbooks. through business simulation game, students improve their performance by finding out business solution according to the most suitable strategy for any possible situation (vos & brennan, 2010). by taking part in a business simulation game, students can absorb knowledge while following the game flow (liu et al., 2011). students in the business simulation games are the active players that each of the participants has the role to complete certain tasks. through role playing, participants explore and find solutions to every business problem that must be overcome (ruohomäki, 1995). the use of role playing can be used to increase understanding, creativity and innovation in business, accounting, auditing and information systems courses (powell et al., 2020). previous study suggested that students engaged in experiential simulation learning perform better than the traditional approach (sathe & yu, 2021). learning and knowledge are slightly different concept but have close relationship (kolb et al. (2014). learning refers to the understanding of a student that is created through repetitious process whereby knowledge refers to the understanding acquired through the transformation of experience. business simulation game provide the model of business reality that can stimulate understanding and skill that could not be gained in traditional class (vartiainen & ruohomäki, 1994). through business simulation games, accounting students can improve their accounting skills and understanding of business processes because it is as if they are actors in the transaction and decision-making process (srimaryani et al., 2023). monsoonsim is a learning platform that use artificial intelligence to improve the understanding business process. there are over 80,000 monsoonsim users around the world that are registered. monsoonsim can be run in group that consist of several players, maximum five people. there are at least 12 modules available in monsoonsim that can be simulated, including finance, warehouse & logistics, human capital management, marketing, service, wholesale, retail, forecasting, and maintenance. hypothesis development not many studies investigated the factors that influence the decision to use games as a learning tool in education sector (cronan & douglas, 2012). previous study conducted by shafudin et al. (2018) focus on the determinant of the use of monsoonsim business simulation at universiti teknologi malaysia (utm) for undergraduate program. they found that the intention to use monsoonsim was affected by perceived usefulness and perceived enjoyment. research regarding the effect of using monsoonsim as a learning tool to improve student competence in business has been conducted by dharmastuti et al. (2021). they provide empirical evidence that perceived usefulness, perceived ease of use, and perceived enjoyment of using monsoonsim affect students’ competency in business. the use of monsoonsim as a form of experiential learning method actually can be applied in other subjects. hwang (2019) observed online asynchronous class using business simulation, i.e. hec montreal. the results of his study https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 558 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc showed that after using such business simulation the students had better understanding in business decision compared to the previous condition when using traditional method. therefore, all measures have positive effect of learning from the use of the game. another study conducted by shafudin et al. (2018) found that the perceived usefulness affects the students’ interest in using monsoonsim. hypothesis 1 is stated as below: h1: perceived usefulness of monsoonsim has a positive effect on the students’ ais competency. based on tam, perceived ease of use can affect the users’ intention in adopting the new technology (davis, 1989). perceived ease of use related to the users trust toward of new technology that is believed can help them doing their work better. perceived of use is is about the belief of the user that there will be less effort in using the new technology. perceived ease of use is closely related to user friendly technology. based on utaut, perceived ease of use is related to effort expectancy or level of effort that is needed by user to operate the new technology (venkatesh et al., 2012). users tend to choose to adopt new technology because of their expectation of how simple the technology is (im et al., 2011). dharmastuti et al. (2021) found that perceived ease of use has a positive effect towards the students’ business competency. hwang (2019) showed perceived ease of use had a positive effect towards the student understanding of the university course. the hypothesis 2 is proposed as followed: h2: perceived ease of use in using monsoonsim has a positive effect on the students’ ais competency. perceived enjoyment is how the user is delighted to use the new technology because the activity is interesting (shin & lee, 2014). perceived enjoyment has a relationship with the intrinsic motivation which brings joy and fun feeling in using certain technology (davis et al., 1992). dharmastuti et al. (2021) showed that perceived enjoyment in using monsoonsim as the business simulation game has positive impact on student competency in business. using monsoonsim as learning tool to understand business process brought enthusiasm for the students and reduce stress. other empirical evidence showed by shafudin et al. (2018) universiti teknologi malaysia students who used monsoonsim business simulation admitted that monsoonsim entertained and improved their understanding. hypothesis 3 is stated as below. h3: perceived enjoyment in using monsoonsim has a positive effect on the students’ ais competency. the decision to use a new technology can be influenced by the social environment. other people's opinions regarding their experience of using new technology can be a reference for accepting or rejecting the use of new technology (venkatesh et al., 2012). social influence plays an important role in influencing technology adoption behavior. the more suggestions and testimonies of other people regarding the benefits of a technology can make individuals more confident in using that technology (thompson et al., 1991). research by silva et al. (2020) confirmed that accounting students have a positive attitude towards the use of game-based learning due to social influences in their environment. the model of utaut suggested that the social influence was a significant factor that affect individual behavior toward using certain technology. https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 559 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h4: social influence in using monsoonsim has positive effect on the students’ ais competency. facilitating conditions related to the user believed that there is support both technically and organizationally to use a certain technology (venkatesh et al., 2003). facilitating condition can be in many forms such as hardware, internet connection, and help service. users commonly need guidance and help in adapting to the new technology and user tend to stop using the new technology if the facilitating condition is not sufficient (lewis et al., 2013). facilitating condition is the environmental factors that influence the ease of using the new technology (venkatesh et al., 2012). susanto et al. (2021) found that facilitating condition had significant impact on the behavior of the user in using the new technology. therefore, hypothesis 5 is stated as follow: h5: facilitating conditions in using monsoonsim has a positive effect on the students’ ais competency. students are provided with various courses to improve their competencies. according to hoffmann (1999) there are two different concepts of competency. the first view states that competency is embedded in a person naturally. the other view holds that competency is a set of performance and standards which can be used to measure the output of learning. competency can be seen as the set of observable performance that consist of knowledge, skills, and abilities that contribute to the enhancement of an individual’s performance. there are three domains of competence that represent individual different including cognitive, social, and physical (harter, 1988). based on the study conducted by dharmastuti et al. (2021) students’ competency increases after using the monsoonsim business simulation. they also found that students’ competency positively affects learning objective. dharmastuti et al. (2021) showed that students’ competency is the mediate variable between perceived usefulness and perceived enjoyment to the learning objective. h6: students’ ais competency has positive relationship with perceived learning outcome. https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 560 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pu1 pu2 pu3 peou1 peou3 peou2 peou4 pe1 pe2 pe3 pe4 fac1 fac2 fac3 fac4 si1 si2 si3 s a c 1 s a c 2 s a c 3 s a c 4 s a c 5 s a c 6 s a c 7 s a c 8 s a c 9 p l o 1 p l o 2 p l o 3 p l o 4 p l o 5 p l o 6 p l o 7 figure 1 depicted the research model proposed. figure 1. research framework method sample the population in this study were accounting students who had taken ais subjects using monsoonsim as a learning tool. the sample for this research is accounting students of universitas islam indonesia (uii) who have taken the ais course and used monsoonsim. uii students were chosen as the research sample because uii is actively participated in monsoonsim competition at the national and international level for more than 10 years. uii accounting team frequently won national and international monsoonsim championship. at the time this research was conducted there were around 300 active monsoonsim users. we used a purposive sampling method to obtain h6 (+) h5 (+) h4 (+) h3 (+) h1 (+) h2 (+) percieved usefulness of monsoonsim percieved ease of use of monsoonsim percieved enjoyment of monsoonsim facilitating condition of monsoonsim social influence of monsoonsim students’ ais competence percieved learning outcome https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 561 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research data with sample criteria, namely that students had taken ais courses and the class used monsoonsim to support course learning. the final sample results obtained were 102 students. research variables and measurement this study consists of five independent variables, i.e. ease of use, perceived usefulness, performance expectancy, effort expectancy, and facilitating conditions. these independent variables are measured with questionnaire developed by venkatesh et al. (2012) and tao et al. (2009). students’ ais competency as mediating variable is measured with questionnaire adopted from harter (1982) and referring to the study conducted by haleem & kevin (2018). whereas dependent variable is students learning outcome which is measured using instrument developed by venkatesh (2012). data is obtained by distributing questionnaire through google form. the eligible respondent should fulfil criteria, such as respondents must be the active users of monsoonsim and has taken ais course with monsoonsim business simulation as the learning tool. data analysis data analysis is conducted through descriptive analysis and inferential statistics. descriptive analysis is used to interpret and summarize raw data that could explain the characteristic of data such as the frequency, minimum value, maximum value, mean, and standard deviation for every variable. inferential analysis in this study is used to test hypotheses. this study employed pearson correlation and multiple linear regressions. pearson correlation is used to measure the strength of association between two variables and multiple linear regression is used to analyze the significancy level of the association between dependent variable and independent variables. the research design in this study uses a structural equation model. pls is suitable for the analysis that concern with testing the research using structural model (hair et al., 2019). this study used smartpls to analyze data. so far, smartpls is the most advanced pls-sem software used by the researchers (henseler, 2017). result and discussion this research uses primary data obtained by distributing the online questionnaire through google form. in the initial stage, online questionnaires were distributed to 150 respondents. after analyzing the questionnaire again, there were several respondents' answers that were incomplete and did not meet the criteria. so that the final results of the questionnaire that can be processed are 102. the questionnaire consists of 40 items which are then divided into 8 sections according to the constructs. this research uses a purposive sampling method with certain criteria, namely that only respondents who have taken ais courses and must have played monsoonsim as a learning tool. https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 562 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. characteristic of the respondents description frequency % gender male 36 35.6 female 66 65.4 age 19-20 31 32.3 21-23 69 67.7 gpa 3.50-4.00 63 61.5 3.00-3.50 37 38.5 below 3.00 0 0 ais grade a 23 22.4 a31 30.3 a/b 30 29.4 b+ 19 18.4 below b 0 0 total 102 100% source: authors’ data processed with smartpls (2024) descriptive statistic analysis the results of descriptive statistic tests can be shown below: table 2. descriptive analysis variable min. max. mean std. deviation perceived usefulness of monsoonsim 1 5 4.3 0.638 perceived ease of use of monsoonsim 2 5 3.8 0.833 perceived enjoyment of monsoonsim 2 5 4.2 0.803 facilitating condition of monsoonsim 1 5 3.6 0.692 social influence of monsoonsim 1 5 3.8 0.924 students’ ais competence 1 5 3.7 0.865 learning outcome 2 5 4.1 0.766 source: authors’ data processed with smartpls (2024) table 3. research model fitness source: authors’ data processed with smartpls (2024) from table 3 it can be showed that srmr value is 0,075. smsr is a measure to determine the goodness of the research model. henseler et al. (2014) introduced the srmr as a goodness of fit measure for pls-sem that can be used to detect model misspecification. a research model is considered has a goodness of fit model if the smsr value is less than 0.10 or of 0.08 (benitez et discrepancy value criterion srmr 0.075 0.08 duls 10.490 dul <95% bootstrap quantile dg 94.818 dg <95% bootstrap quantile (hi95 of dg) approximate model fit (estimated model) srmr<0.08 https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 563 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc al., 2020; hu & bentler, 1999). table 3 showed that srmr value in this study is 0,075 or below 0.08 which means this research has a good of fit model. validity and reliability analysis the validity of instrument is analyzed based on loading factor and the value of average variance extracted (ave). loading factor measure correlation between each item or indicator toward its construct. ave measure the variation of the item can be explained by the construct. loading factor should be greater than 0,7, whereas the standard value of ave should above 0,5. even though the loading factor is less than 0,7 but higher than 0,5 there is no need to remove the item as long as loading value is still greater than ave score. table 4. validity and reliability variable indicator code loading ave cronbach’s alpha composite reliability perceived usefulness pu1 0,874 0,684 0,769 0,866 pu2 0,861 pu3 0,820 perceived ease of use peou1 0,800 0,643 0,812 0,877 peou2 0,882 peou3 0,858 peou4 0,882 perceived enjoyment pe1 0,713 0,714 0,805 0,884 pe2 0,829 pe3 0,856 pe4 0,802 facilitating condition fac1 0,797 0,726 0,812 0,888 fac2 0,878 fac3 0,803 fac4 0,935 social influence si1 0,802 0,653 0,823 0,882 si2 0,937 si3 0,904 ais competency sac1 0,794 0,645 0,908 0,927 sac2 0,790 sac3 0,850 sac4 0,810 sac5 0,764 sac6 0,804 sac7 0,748 sac8 0,797 sac9 0,823 perceived learning outcome plo1 0,721 0,851 0,913 0,945 plo2 0,796 plo3 0,798 plo4 0,727 plo5 0,764 plo6 0,745 plo7 0,757 source: authors’ data processed with smartpls (2024) the ave value can indicate the discriminant validity of research. the standard score for ave should be higher than 0.5. discriminant validity is fulfilled if the ave root value is greater than https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 564 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the correlation value between the construct and other constructs in the model. the ave value and it can be seen from table 4. it can be seen that the ave value respectively are perceived usefulness of 0.684, perceived ease of use of 0.643, perceived enjoyment of 0.714, facilitating condition of 0.726, social influence of 0.653, students’ ais competence of 0.645, and students’ learning outcome of 0,851. because the ave values of all variables are greater than 0,5 it can be inferred that discriminant validity is not an issue in this study. to test the reliability of data, this study used cronbach’s alpha and composite reliability. based on table 4 it can be shows that all variables of this study have cronbach alpha and composite reliability more than 0,7. therefore, it can be concluded this data is reliable. multicollinearity test variance inflation factor (vif) can be used as the indication of the existence of common method bias. if the value of vif is greater than 3,3 it is the indication of common method bias (kock, 2015). common method bias happens if the independent and dependent variable have the same response method. table 5 showed that vif inner value of each of the variables are below 3,3. the vif value range from 1.000-2.693. it can be concluded that the independent variables have not correlated each other in this model. table 5. multicollinearity variable vif perceived usefulness 2.693 perceived ease of use 1.276 perceived enjoyment 2.611 facilitating condition 1.893 social influence 1.526 students’ ais competence 1.000 source: authors’ data processed with smartpls (2024) inner model analysis inner model analysis is used to determine how much endogenous variables are influenced by exogenous variables in a structural model. the value of r-square can be used to indicate how much endogenous variable is influence by its exogenous variables. table 6 showed that the variable of perceived usefulness, perceived ease of use, perceived enjoyment, social influence, and facilitating condition has r square value of 0.516. it can be interpreted that 51% of the students’ ais competence can be explained by perceived usefulness, perceived ease of use, perceived enjoyment, social influence, and facilitating condition. likewise, students’ ais competency can explain 55% of the perceived learning outcome variable. table 6. r square & adjusted r square variable r square adjusted r square ais competency 0.516 0.679 perceived learning outcome 0.550 0,543 source: authors’ data processed with smartpls (2024) https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 565 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pu1 pu2 pu3 peou1 peou3 peou2 peou4 pe1 pe2 pe3 pe4 fac1 fac2 fac3 fac4 si1 si2 si3 s a c 1 s a c 2 s a c 3 s a c 4 s a c 5 s a c 6 s a c 7 s a c 8 s a c 9 p l o 1 p l o 2 p l o 3 p l o 4 p l o 5 p l o 6 p l o 7 figure 2. path coefficient based on table 7 shows that path coefficient for the hypothesized relationships has a range from 0.000 to 0.042. most of the relationships tested have significant value less than 0,05 except for the perceived usefulness and perceived enjoyment. the path coefficient for each relationship can be shown in the following table: students’ ais competence r2 = 0.506 0.592** 0.371** 0.218* -0.074 0.119 0.279** perceived usefulness of monsoonsim perceived ease of use of monsoonsim perceived enjoyment of monsoonsim facilitating condition of monsoonsim social influence of monsoonsim perceived learning outcome r2 = 0.350 * significant at p < 0.05 ** significant at p < 0.01 https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 566 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7. inner weights output relationship original sample t stat p value perceived usefulness of monsoonsim → ais competency (h1) 0,119 1.025 0.306 perceived ease of use of monsoonsim → ais competency (h2) 0,279 3.113 0.002 perceived enjoyment of monsoonsim → ais competency (h3) -0,074 0.667 0.505 social influence on using monsoonsim → ais competency (h4) 0,218 2.037 0.042 facilitating condition on using monsoonsim → ais competency (h5) 0,371 3.121 0.002 students’ ais competency → perceived learning outcome (h6) 0,592 9.547 0.000 source: authors’ data processed with smartpls (2024) table 7 showed that perceived usefulness of monsoonsim did not affect significantly on students’ ais competency ( = 0,119; t = 1,025; p value = 0,306). it can be concluded that the hypothesis 1 is not supported. it seems that students are not yet convinced about the benefits of monsoons in the real world. this study found that there is significant influence of perceived ease of use of monsoonsim on students’ ais competency ( = 0,279; t = 3,113; p value = 0,002). students who perceive monsoonsim easy tend to have better ais competency. based on this result hypothesis 2 is supported. this study found that perceived enjoyment of monsoonsim did not affect significantly on students’ ais competence ( = -0,074; t = 0,667; p value = 0,505). even though monsoonsim is a business simulation game, monsoonsim is certainly not the same as games that provide entertainment. monsoonsim is more of an educational game in the business field. based on this result hypothesis 3 is not supported. we found that social influence has a significant effect on students’ ais competence ( = 0,218; t = 2,037; p value = 0,042). this is quite reasonable because monsoonsim is a business simulation game that is played in groups. the role of group members is important in influencing team performance. it can be concluded hypothesis 4 is supported. facilitating condition also has a positive and significant effect on students’ ais competence ( = 0,371; t = 3,121; p value = 0,002). monsoonsim has adequate technical support that helps users use this tool well. apart from that, internet network support also affects system performance. the better the supporting facilities, the better the performance. based on that result, hypothesis 5 is supported. then finally students’ ais competence affects significantly on perceived learning outcome ( = 0,592; t = 9,547; p value = 0,000). students who have higher ais competency will have better learning outcomes. thus, hypothesis 6 is supported. this study predicts perceived usefulness of monsoonsim will positively affect students’ ais competency. however, the statistical test does not support this hypothesis. this result is different with the previous studies conducted by dharmastuti et al. (2021) and shafudin et al. (2018). the reason is that users are still new to using monsoonsim so they don't know the real benefits of https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 567 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc using monsoonsim (bajis et al., 2019). students are not sure whether what they are doing in playing a business simulation is really in accordance with business practices. this research shows that perceived ease of use of monsoonsim has a positive and significant effect on students’ ais competency. davis (1989) states that perceived ease of use is one of the main factors that affect the intention to use new technology. the next question is whether after adopting the new technology, namely monsoonsim, will student competence also increase. the results of this research confirm that the use of new learning technology, namely monsoonsim, has been proven to be able to increase student competency in ais courses. the result of this study is also consistent with previous study conducted by shafudin et al. (2018) at utm and dharmastuti et al. (2021) at atmajaya university. they found that game-based learning method could increase enthusiasm and participation. the effectiveness of employing business simulation game as a learning tool is not only in offline class only but also in online asynchronous class (hong et al., 2020). therefore, gamification learning can be implemented for both offline and online class. this study does not find any significant effect of perceived enjoyment of monsoonsim toward students’ ais competency. this result is not supporting the finding of shafudin et al. (2018) and dharmastuti et al. (2021), but consistent with a study conducted by hussein (2018). hussein (2018) found that students' perceived enjoyment of using computers was not a significant factor in influencing them to participate in e-learning. perceive enjoyment is not always the main factor to use new technology that will affect performance. ryan & deci (2000) show that individual will show enthusiasm and desire to learn and explore, and do not need extrinsic incentives, such as fun and enjoyment. for example, someone uses the internet for studying or learning activities, where the level of enjoyment of using the internet for learning may be different from using the internet for entertainment or making online transactions (punnoose, 2012). people who are used to surfing the internet in their daily lives may consider it a routine activity that no longer excites them. thus, the intensity and routine of technology use may reduce the level of enjoyment in using the technology. facilitating conditions of monsoonsim improve students’ ais competency. students consider monsoonsim's facilitating conditions to be sufficient so that it has a positive effect on their academic performance in ais courses. facilitating conditions will not have a significant effect if the user already has sufficient equipment and knowledge to operate the new technology or information system without requiring further technical assistance. utomo et al. (2021) showed that facilitating condition has a positive impact on the user behavior in using new technology. adoption of new technology is driven by the availability of supporting resources and facilities such as internet, software, and hardware support (alam et al., 2021). this study found that social influence in using monsoonsim has a significant effect on students’ ais competency. monsoonsim is a type of game that is played in groups. therefore, social influence, namely the influence of group members or other groups, will influence student performance, both individual and group performance. in the group game-based learning model, social interaction is a very important factor (vartiainen & ruohomäki, 1994). this finding is https://www.ilomata.org/index.php/ijtc the effectiveness of learning accounting information system with monsoonsim mahmudi, aisyah, dewi, and premarci 568 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consistent with the study conducted by im et al. (2011) that found a positive association between social influence and student competencies. furthermore, this research found that students’ais competency has a positive impact on perceived learning outcome. it can be inferred that after using monsoonsim, the competency of student in ais increase and eventually improve their learning outcome. this result confirms the empirical evidence showed by dharmastuti et al. (2021) that also found that the students’ business competency affects positively on their learning outcome. student competencies will improve the achievement and gaining learning objectives (levant et al., 2016). conclusion this study explored the effectiveness of using monsoonsim as gamification learning method to improve student’s competency in ais and learning outcome. based on the hypothesis testing using sem-pls model, it can be concluded that perceived ease of use, social influence, and facilitating condition of monsoonsim significantly affect students’ competency in ais course. unfortunately, perceived usefulness and perceived enjoyment of monsoonsim do not affect significantly on students’ ais competency. this study also found that student’s competency in ais has a positive impact on learning outcome. based on this result, this study concludes that using monsoonsim as a tool to support ais learning is relevant and provides a positive benefit to improve student academic performance and competency. because this research was conducted using a survey approach, there are some inherent biases, so it is necessary to be careful in interpreting the findings of this research. it is hoped that future research can expand the research sample or use experimental research methods so that it can provide richer evidence. accounting education institution should consider the use of experiential learning such as monsoonsim or other business simulation platform to enhance the students’ understanding in ais course. reference alam, f., yang, q., bhutto, m. y., & akhtar, n. 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(2023). role of emerging technologies in accounting information systems for achieving strategic flexibility through decision-making performance: an exploratory study based on north american and south american firms. global journal of flexible systems management, 1–20. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 619-635 619 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period mohamad ferrari fariel noer muhajiroh1, nurul kamila2 12universitas bina insani, indonesia correspondent: nurulkamila@binainsani.ac.id2 received : march 14, 2024 accepted : april 27, 2024 published : april 30, 2024 citation: muhajiroh, m, f, f, n., kamila, n. (2024). the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 20182022 period. ilomata international journal of tax and accounting, 5(2), 619-635. https://doi.org/10.61194/ijtc.v5i2.1245 abstract: the company is in a liquid state when the company is able to pay short-term debt. this study aims to determine the manufacturing sector companies listed on bursa efek indonesia with the effect of cash turnover, accounts receivable turnover and inventory turnover on liquidity. this research method uses quantitative methods with a sampling model of 5 years of financial statements and a population of manufacturing sector companies listed on indonesian stock exchange. the analysis used is the classic assumption test, the coefficient of determination test, the multiple regression test, the t test and the f test. the results of the analysis show that cash turnover on liquidity is significantly negative, accounts receivable turnover on liquidity is not significant, inventory turnover on liquidity is not significant. while the results of cash turnover, receivables turnover and inventory turnover on liquidity are partially significant. based on these results, only cash turnover is significant to liquidity, there is an opposite relationship due to negative results. so if cash turnover increases, liquidity decreases and vice versa. keywords: liquidity, turnover ratio, manufacture industry this is an open access article under the cc-by 4.0 license. introduction in the current era of globalization, causing the business world in indonesia to increase and develop. this development causes competition between companies to be very tight. where each company tries to participate in competing and being the best in their respective fields, and being able to survive in the business world. this can add problems for management in a company to achieve this goal and carry out its business activities. therefore, every company becomes motivated to improve and perfect the company's management and financial performance. in general, it must be able to maintain its financial performance by stabilizing the company's operations because the heart of the company is in its finances and operations. so the higher the stock market value of the company in indicating high interest for investors to invest in the company. the company's management, especially the finance department, must pay attention to https://www.ilomata.org/index.php/ijtc mailto:nurulkamila@binainsani.ac.id https://doi.org/10.61194/ijtc.v5i2.1245 the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 620 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc its liquidity so that its short-term obligations are stable and do not hamper the company's operations. a company that is said to be liquid is a company that can pay its short-term obligations in accordance with the specified time. so that it can cover the current liabilities owned by the company. so the greater the ratio of current assets, the higher the company's ability to pay its short-term obligations. liquidity is included in the problems that companies must pay attention to in carrying out their business performance. companies that are unable to pay financial obligations at maturity, the company will be doubted by potential investors. the company certainly will not get the trust of creditors and investors if the liquidity problem continues to occur. so that this will disrupt the cooperation that exists between the company and the investors who have invested their capital for the smooth running of the company's business. accounts receivable turnover has a significant positive effect on liquidity, while cash turnover has no significant effect on liquidity. simultaneously accounts receivable turnover and cash turnover have no significant effect on liquidity (rosalina et al., 2022). liquidity during the covid-19 pandemic was lower compared to the period before the pandemic. it can be accepted that the solvency value during the covid-19 period was lower compared to the period before the pandemic. this study focuses on the liquidity of manufacturing companies in the basic and chemical industry sectors, various industries, and consumer goods industries. however, the findings indicate that covid-19 did not affect the decline in liquidity of manufacturing companies in the basic and chemical industry sectors, various industries, and consumer goods industries (syafitri & khalifaturofi’ah, 2023). cash turnover is very important in the financial statements in the company, this will maintain operations in the company. cash turnover refers to the frequency with which the company can convert cash assets into income. if the higher the cash turnover, the faster the company generates profits from its cash assets. in the context of liquidity, companies with high cash turnover tend to have more cash available in order to meet their obligations and operational needs within the specified timeframe. therefore, high cash turnover has a positive impact on liquidity (warasto et al., 2023). accounts receivable turnover is classified within current assets and ranks second after cash. this positions receivables as a significant current asset. therefore, a company must manage its receivables effectively to avoid undesirable situations, such as payment failures by buyers. to mitigate this risk, it is advisable for receivables to have a short repayment period, enabling them to be quickly converted into cash. regarding the impact of receivables turnover on liquidity, it is evident that a higher receivables turnover means less working capital is tied up in receivables. in the current context, this indicates that a higher receivables turnover is very positive for the company, as it results in less working capital being invested in receivables. (elmia & rivandi, 2023). inventory turnover is one of the levels of measurement in a company that can prove whether the company can be said to be working efficiently so that it can produce a liquid company and determine the better its operations. then, if the inventory turnover is higher, the profit obtained by the company will increase, because the inventory in the warehouse can be sold properly. so to increase the liquidity of the company must pay attention to inventory turnover, the thing that can https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 621 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc be done by the company is to pay attention to inventory turnover. then the higher the inventory turnover, the greater the company's profit because the inventory is sold in cash or credit and will increase the company's cash, so that incoming cash can be used to buy inventory and the company can fulfill its short-term obligations (salam et al., 2022). cash turnover is positively and significantly correlated, referring to the frequency at which a company converts its cash assets into revenue. therefore, the higher the cash turnover, the faster the company generates revenue from its cash assets. in terms of liquidity, a higher cash turnover ensures the company can meet its obligations and operational needs promptly. (warasto et al., 2023). cash represents the liquid funds that can be used to finance the company's operations. cash can thus be concluded to have a significant impact on a company's liquidity, as it is the lifeblood of the financial statements. the circulation of cash is crucial for maintaining liquidity within the company (aurorita et al., 2023). cash turnover is stated to be negative and insignificant because cash turnover on liquidity is not accepted, so this proves that the high and low cash turnover is very influential on liquidity (elmia & rivandi, 2023). due to the higher level of sales and compared to working capital, this use of cash becomes inefficient but has no impact on the level of liquidity or current ratio. this is because in hotel and restaurant companies with working capital investment is more dominant on receivables so that the effect on cash turnover becomes very small or insignificant (dinata, 2023). accounts receivable turnover is stated to be positive and significant, this proves that higher accounts receivable turnover implies that higher accounts receivable turnover implies less working capital invested in accounts receivable, which is clearly very positive for a very good company (elmia & rivandi, 2023). so it is concluded that accounts receivable turnover can find out how long receivables are obtained or collected in a period, it can be known through the average number of days in accounts receivable collection so that it can also find out the number of days of uncollectible receivables, this affects the dimensions or indicators of liquidity (aurorita et al., 2023). accounts receivable turnover is also stated to be negative and insignificant. this can occur if the company has the amount of cash that can still fulfill to pay the company's short-term obligations so that the company does not rely on receivables to pay its debts (trisnayanti et al., 2020). and the results of this study which show that asset trading has no significant effect on decreasing consumer investment in consumer and industrial companies listed on the indonesia stock exchange (indrianto, 2020). inventory turnover states positively and significantly inventory turnover individually has a positive and significant effect on profitability in manufacturing companies listed on the indonesia stock exchange. this is because manufacturing companies will get high profits so that they can increase their company's profits (andriani & supriono, 2022). and in this study it is significant but produces negative results because it uses a sample of small companies which causes the company to experience setbacks due to the impact of covid-19. it is concluded that only large companies can survive with their inventory turnover while small companies cannot use their inventory turnover properly (sunardi et al., 2021). https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 622 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inventory turnover is stated to be negative and insignificant, stating that inventory turnover has no significant effect on current ratio liquidity (maulana, 2022). shows the level of inventory turnover in companies with a small level of liquidity, it can be interpreted that the level of turnover in inventory turnover will decrease if using company liquidity (salam et al., 2022). currently, companies in the manufacturing sector are striving to improve their financial performance to attract potential investors to invest their funds and creditors to provide loans to their businesses. demonstrating a high level of liquidity is essential for companies to showcase strong financial performance. a company with good liquidity levels indicates a robust financial position, making it more appealing to investors and creditors. therefore, it is essential to manage finances effectively, including cash, receivables, and inventory management.(purwanti et al., 2023). manufacturing companies in the basic and chemical industry sectors, various industries, and consumer goods industries experienced an increase in inventory during the covid-19 pandemic. this was due to a decrease in consumer product purchases, leading to unsold and accumulated inventory, which added to the company's current assets. excessive inventory can cause future losses because products have expiration dates. if not promptly processed and sold, products will deteriorate and result in losses for the company. this indicates that current assets in these sectors are greater than their short-term liabilities. (syafitri & khalifaturofi’ah, 2023). companies in the manufacturing sector in indonesia has been expansive for seventeen consecutive months. with the manufacturing pmi index in january 2023 increasing to 5.3 from 50.9 in december 2022 (larasti, 2023). the manufacturing sector is also in the expansion zone which shows the resilience of the indonesian economy in the global turmoil and manufacturing slowdown that occurs in any country, and output and new demand in indonesia have experienced the fastest growth over the past three months. as a result, domestic demand remained strong. although demand on the export side is still experiencing obstacles. (larasti, 2023) this study is to analyze the effect of cash turnover, inventory turnover, and accounts receivable turnover on liquidity in the manufacturing sector in indonesia, particularly in the post covid-19 pandemic context. by focusing on practical implications, this study makes a contribution to the corporate finance literature and provides strategic recommendations for the financial management of manufacturing companies in developing countries. based on the description above, research was conducted to determine the effect of cash turnover, accounts receivable turnover and inventory turnover on liquidity in companies in the manufacturing sector listed on the indonesian stock exchange for the period 2018-2022. signaling theory this theory posits that when company executives possess valuable information, the company's share price will rise as the company is motivated to share this information with potential investors. this is beneficial for the company, as providing accurate and positive information helps distinguish it from other companies. consequently, the market can more easily recognize and disseminate the news about the company's strong performance. a positive signal reflects a company's future success, making it more credible than signals from companies with poor past financial performance. (ross et al., 2022). https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 623 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc signal theory can be reduced by signaling a lot of information so that asymmetric problems, namely two sides that do not match, can be easily reduced. asymmetric information in the market occurs if there is more information by the company than the amount of information known by outsiders or investors. cash turnover cash is a crucial current asset and highly liquid, essential for meeting the company's needs. the more cash a company has, the higher its liquidity. cash turnover measures the efficiency of the company's cash use. cash flow is central to a company's operations and is fundamental in any financial valuation model. whether an analyst is valuing a potential investment or the company itself, estimating cash flows is vital to the valuation process. the formula for cash turnover is where sales are the total of sales after deducting returns, discounts and sales discounts. and the average cash comes from the average in the period and is divided by 2. a company that has a cash turnover value of more than 1 can be said to be a good company (gitman & zutter, 2014). receivable turnover this ratio measures the duration needed to collect receivables within a period or how frequently the funds invested in these receivables circulate in that time frame. a higher ratio signifies that the working capital tied up in receivables is less than it was in the previous year, which is advantageous for the company. conversely, a lower ratio indicates excessive investment in receivables. the smoothness of receiving receivables and measuring whether or not investment in receivables is good can be seen from the turnover rate. receivables turnover is the period of receipt of receivables from a company during the formula for receivables turnover, namely where these sales come from total sales after deducting returns, discounts and sales discounts, and average receivables derived from the average for the period and divided by 2 (hayat et al., 2021). inventory turnover inventory turnover is a ratio used to measure how frequently the funds invested in inventory are cycled through in a given period. known as the inventory turnover ratio, it indicates how many times the inventory is replaced within a year. a lower ratio signifies poor performance, while a higher ratio indicates better performance. (seto et al., 2023) inventory turnover is also used to assess the company's ability to face competition, plan business profits, and overall find out how well the company can carry out company activities. the formula for inventory turnover is where the cost of this product comes from the total costs incurred by the company to produce or purchase an item that is sold during a certain period. and the average inventory comes from the average in the period and is divided by 2 (hayat et al., 2021). liquidity liquidity measures a company's ability to meet its short-term obligations as they come due. it reflects the company's overall financial health and its ability to pay bills promptly. low liquidity can indicate potential cash flow issues and a risk of bankruptcy. maintaining sufficient liquidity for https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 624 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc daily operations is crucial for a company's stability. two key metrics for measuring liabilities include the current ratio, which assesses a company's capacity to cover short-term debts with liquid assets. the current ratio measures a company's ability to pay its short-term financial debts using its more liquid assets. however, highly liquid assets like cash in banks and securities do not generate high returns, as shareholders prefer the company not to over-invest in liquidity. companies need to balance the security provided by liquidity with the low returns these liquid assets offer to investors. the primary measures of liquidity are the current ratio and the cash ratio. the formula for the current liquidity ratio is where current assets come from assets that are expected to be converted into cash or used in operations within one year or one business cycle, whichever is longer. meanwhile, current liabilities come from obligations that must be paid within one year or one business cycle (gitman & zutter, 2014) conceptual framework so that it shows results that are in accordance with the problem formulation and research objectives. this research uses a quantitative research methodology approach. the use of a quantitative approach is expected to clarify how liquidity is applied. based on the explanation of the literature review and conceptual framework, the hypothesis in this research is as follows h1: there is a positive and significant on cash turnover on liquidity h2: there is a positive and significant on receivables turnover on liquidity h3: there is a positive and significant on inventory turnover on liquidity h4: there is a simultaneous influence of cash turnover, receivables turnover and inventory turnover on liquidity https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 625 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this research uses a quantitative research methodology approach. this method is referred to as the positivistic method because it is based on the philosophy of positivism. this method is a scientific scientific method because it has fulfilled scientific rules, namely concrete empirical, objective, measurable, rational, and systematic. in this study, the data used is secondary data taken from the official website of the indonesia stock exchange (www.idx.co.id). and the data is from the company's internal sources in the form of the company's financial statements during 2018-2022. the population used in this study with the financial statements of manufacturing sector companies listed on the indonesia stock exchange website with a population of 91 companies. as for the sample of this study using nonprobability sampling and purposive sampling. because by using these samples in order to achieve a quantitative design in accordance with the research methods used. the time for data collection is the financial statements listed on the stock exchange for the period 2018-2022. classical assumption test the classical assumption test is used to test the assumptions contained in multiple linear regression modeling, and the data will be able to be analyzed further without bas data results. the classic assumption tests used in this study are normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. (ghozali, 2018) multiple regression test multiple linear regression technique is used to determine the functional relationship between the dependent variable associated with two or more independent variables the following research model is used in statistics to test the hypothesis of multiple linear regression method for this study: y = α+b1x1+b2x¬2+b¬3x3+e y = liquidity x₁ = cash turnover x₂ = reivable turnover x3 = inventory turnover ɑ = constant b = coefficient regression coefficient of determination test a measure that can show information about the extent to which the variability of one variable can be explained or estimated by one or more of the other variables in this regression model. the https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 626 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc coefficient of determination ranges between 0 and 1, and can be interpreted as the percentage of variability that can be explained (nuryadi et al., 2017). t test the t-test essentially measures the influence of an individual independent variable in explaining variations in the dependent variable. it is used to determine whether an independent variable has a significant partial effect on the dependent variable. in this research, the criteria for the t-test are as follows: if the significance value is 0.05 or less, it is considered significant. first, the direction of the regression coefficient should be checked; if it aligns with the hypothesis, then ha (the alternative hypothesis) is accepted. however, if the significance value is greater than 0.05, it is not considered significant, leading to the rejection of ha, indicating that the independent variable does not influence the dependent variable. (ghozali, 2018). f test the f-test can be conducted by comparing the f statistic with the f critical value (f table) in excel. if the f statistic is greater than the f critical value (f table), then ho is rejected and ha is accepted, indicating that the model is significant. this can also be confirmed by looking at the significance column. using the regression test with the enter/full model method, the model is considered significant if the significance column value (%) is less than the chosen alpha level (the acceptable risk of type 1 error, typically 10%, 5%, or 1% in social sciences). conversely, if the f statistic is less than the f critical value, the model is not significant, which is also indicated if the significance column value (%) is greater than alpha. (margareth, 2017) result and discussion data description the research description is a description of the data that will be used in the study, then testing in this study tries to find out the description or condition of liquidity by using the influence of cash turnover, receivables turnover, inventory turnover. then the research method uses a quantitative approach. while the data taken for this study with a population of manufacturing sector companies listed on the indonesia stock exchange in the 5year period from 2018-2022. with the number of samples for this study as many as 30 manufacturing companies listed on the indonesia stock exchange. in this study, the criteria for data collection were manufacturing companies listed on the bei for the period 2018-2022, with the criteria that the company had gone public during the period and did not experience suspension and delisting and had complete data for research, from 160 companies in the manufacturing sector getting 91 manufacturing sector companies in accordance with the criteria. however, of the 91 samples of manufacturing sector companies, only 30 https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 627 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc companies can be used in this study, because there are many outlier data or extreme data so that the sample used for research is 30 companies. descriptive statistical analysis table 1: descriptive statistic descriptive statistics n minimum maximum mean std. deviation turnover cash 150 -.20 1.89 .8886 .47797 turnover receivable 150 .03 1.89 .8310 .29720 turnover inventory 150 -.04 1.16 .6259 .23483 liquidity 150 -.55 1.25 .3657 .34338 valid n (listwise) 150 [source: output spss 26, 2024] based on the table 1, it can be concluded that the average value of cash turnover shows 0.8886, the lowest value of cash turnover is -0.20, namely in the bton company in the 2021 financial statements and the highest value of cash turnover is 1.89 in the akpi company in the 2022 financial statements with a standard deviation from cash turnover of 0.47797. the average value of accounts receivable turnover obtained is 0.8310 while the value of accounts receivable turnover has the lowest value, namely 0.03 in the arna company in the 2021 financial statements and the highest value owned by accounts receivable turnover is 1.89 in the wton company in the 2020 financial statements. for the value of the standard deviation obtained by accounts receivable turnover is 0.29720. the average value of inventory turnover obtained from the table above is 0.6259, while the lowest value is -0.04 in the delta company in the 2020 financial statements and the highest value of inventory turnover is 1.16 in the arna company in the 2019 financial statements, while for the value of the standard deviation obtained is 0.23483. the average value for liquidity obtained from table 4.1 is 0.3657, while for the lowest value of liquidity is -0.55 in the kras company in the 2019 financial statements and for the highest value of liquidity is 1.25 in the cpin company in the 2022 financial report year, while for the value of the standard deviation is 0.34338. https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 628 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc normality test table 2: normality test [source: output spss 26, 2024] based on these results, it shows that the results of the one-sample kolmogorov-snirnov test with a significant value of 0.200, these results indicate that the data is normally distributed, because the significant value is more than 5% or 0.050, so the normality test can be said to be normal. multicollinearity test table 3: multicollinearity test [source: output spss 26, 2024] the test used to find a relationship or correlation in the independent variables is the multicollinearity test. in this test, the collinearity statistic table is used which is found in the tolerance and vif columns, it can be concluded that from each dependent variable for the tolerance value of money it has been found that the result is greater than 0.1 while for vif each independent variable is smaller than ten, from these results the independent variables used do not occur correlation. the purpose of the multicollinearity test in this study is to test whether the regression mode finds a correlation between variables, namely between currency exchange (x1), cash turnover (x2), accounts receivable turnover (x3). inventory turnover occurs in the general population of the model and one of the estimation methods does not occur in the general population of the model. the results are shown in the table. https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 629 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc heteroscedasticity test picture 1. heteroscedasticity test [source: output spss 26, 2024] in figure 2 of the scatterplot results can be seen the results of the heteroscedasticity test which shows on the zpred and sresid scatter plot graph, the points on the graph are scattered above and below 0 so it shows no heteroscedasticity. autocorrelation test and coefficient of determination table 4: autocorrelation test and coefficient of determination [source: output spss 26, 2024] a good regression model if the regression model has no autocorrelation effect. so to find out whether or not there is an autocorrelation effect by using the durbin watson (dw test) with the provisions if the value du < d < 4 du. the result of the table is the dw value obtained is 1.785. then this shows that the dw value of 1.785 is between the du value of 1.7741 and 4-du 2.2259, so du < dw < 4-du. so the conclusion is that there is no autocorrelation with the decision not to be rejected (ghozali, 2018). the coefficient of determination test is used to find the possibility of independent variables. in the table, the adjusted r2 value is 0.560 which can show that the strength of the independent variables used for my research is 56% and 44%. can be explained by other variations. https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 630 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc t test table 5: t test [souce: output spss 26 2024] this t test is carried out on the regression coefficient partially which is used to determine the partial significance between the independent variable and the dependent variable. then the test is carried out with a level of α = 5%, if the significant value of the t test> 0.050. a. variable x1 cash turnover, the independent variable cash turnover gets the results from the sig table which shows the results of 0.000 <0.050, then these results indicate that h1 is accepted, it can be concluded that partially the independent variable cash turnover has a negative significant result on the dependent variable liquidity. b. variable x2 accounts receivable turnover, then the results of the independent variable with a significant value of 0.011< 0.050. then h2 is rejected, it can be concluded that partially the independent variable accounts receivable turnover on the dependent variable liquidity has positive and significant effect. c. variable x3 inventory turnover, based on table 4.6, the results of the independent variable inventory turnover with a significant value of 0.040< 0.050, then h3 is rejected, it can be concluded that partially the independent variable inventory turnover on the dependent variable liquidity has negative and significant effect. f test table 6: f test [souce: output spss 26 2024] https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 631 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the f test shows the results based on the anova table obtained in the table, with a significant value of 0.000 at a confidence level of 0.05 (0.000 <0.05), it can be concluded that all hypotheses are accepted. it can be interpreted that the independent variables simultaneously cash turnover, accounts receivable turnover, and inventory turnover have a significant influence on the dependent variable, namely liquidity. the effect of cash turnover on liquidity based on the results of table 5 with a significant value (0.000> 0.050) with t value -8.444, then partially the independent variable cash turnover on the dependent variable liquidity has significant results with a negative effect, this is in line with previous research conducted by dinata (2023), rizal (2021), iis & herlina (2022), dewi & yulistina (2020), octarini et al. (2019) and purwanti et al. (2023) it can be concluded that cash turnover on liquidity shows that if cash turnover increases, liquidity will be lower and vice versa. in the context of regression analysis, this means that each unit of increase or decrease in variable x1 will cause a change of negative regression coefficient in the value of the dependent variable y. cash turnover is one measure of the return of current assets to cash through sales with the company's ability to meet its short-term obligations through a certain amount of cash owned by the company, this cash turnover can affect liquidity. although cash turnover owned by manufacturing sector companies is high, there are factors that affect cash turnover that can be negative to liquidity, it could be due to factors from the ineffective turnover of receivables in the company and hoarding inventory in warehouses that cannot be disbursed into cash, so that in paying short-term obligations the company is unable to pay its debts. the effect of receivable turnover on liquidity based on the results of table 5, with t value 2.573 and a significant value (0.011 <0.050), the results of the test state a positive and significant effect, this is in accordance with previous research conducted by ramadani et al. (2023), dinata (2023), ahmad & heru (2022), suharti et al. (2022), carolin et al. (2023) and rosalina et al. (2022). so partially it can be concluded that accounts receivable turnover has a significant positive effect on liquidity. this shows that changes in accounts receivable turnover have a significant direct impact on the company's ability to meet short-term obligations. the level of liquidity of a company is influenced by its accounts receivable turnover. if the level of accounts receivable turnover has a high value, the possibility of a receivable being collected quickly is also high. thus the faster the company turns it into cash, and the company's ability to pay off its short-term debt will also increase. in addition, the company will also avoid the risk of uncollectible receivables and reduce the company's loss burden. this will provide a positive signal for investors and users of financial statements. the effect of inventory turnover on liquidity based on the results from table 5 with t value -2.068 and a significant value (0.040 < 0.050). then partially the independent variable inventory turnover is significantly negative on the dependent https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 632 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variable liquidity. this is in accordance with previous research conducted by sunardi et al. (2021), maulana (2022), suharti et al. (2022), septiyana (2020) and ahmad & heru (2022), so the partial results of inventory turnover have a negative and significant effect on liquidity, indicating that changes in inventory turnover have the opposite effect. where inventory turnover increases, liquidity decreases. inventory turnover shows the results that the higher the inventory turnover rate, the lower the rate of return on a company's short-term obligations. that the company may experience difficulty in managing cash flow and inventory effectively. these factors suggest that even if inventory moves quickly, it is not always due to increased liquidity, especially if sales do not generate sufficient cash or if short-term debt increases to support inventory purchases. companies need to optimize inventory and cash flow management strategies to ensure better short-term financial health. conclusion the results of the classical assumption test which consists of four tests, namely for the normality test the data is declared normal (0.200 > 0.050), the multicollinearity test states that there is no multicollinearity, the tolerance value is more than 0.1 and for the vif value it does not exceed 10, for the heteroscedastic test the graph points are spread and below 0 then heteroscedasticity does not occur, the autocorrelation test states that there is no positive and negative autocorrelation with the decision not being rejected because du<dw<4-du (1.7741<1.785<2.2259). the coefficient of determination test shows 0.056, so the independent and dependent variables can be explained by other variables (56% and 44%). hypothesis t test 1 has a sig value (0.000 < 0.050) and the calculated t value is -8.444, then cash turnover has a negative and significant effect on liquidity. factors that cause cash turnover to have a negative effect could be due to inefficient accounts receivable turnover and the accumulation of inventory in the warehouse so that it cannot be converted into cash. hypothesis t test 2 has a sig value (0.011 < 0.050) and a calculated t value of 2.573, so receivables turnover has a positive and significant effect on liquidity. this means that the level of liquidity of a company is influenced by its receivables turnover. if the receivables turnover rate has a high value then the possibility that a receivable can be collected quickly is also high. hypothesis t test 3 has a sig value (0.040 < 0.050) and a calculated t value of -2.068, then inventory turnover has a negative and significant effect on liquidity. this shows that even though inventory moves quickly, this is not always accompanied by an increase in liquidity. hypothesis f test 4 sig value (0.000 < 0.050) then cash turnover, receivables turnover and inventory turnover have a positive and significant effect on liquidity. https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 633 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference ahmad sugiarto, & heru sutapa. 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(2023). dampak pandemi covid-19 terhadap kinerja keuangan perusahaan manufaktur yang terdaftar di bei. journal of business & banking, 13(1), 33. https://doi.org/10.14414/jbb.v13i1.3734 https://www.ilomata.org/index.php/ijtc the effect of cash turnover, receivables and inventory on the liquidity of manufacturing companies on the indonesian stock exchange for the 2018-2022 period muhajiroh and kamila 635 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc trisnayanti, a., mendra, n., & bhegawati, d. (2020). pengaruh perputaran kas, perputaran persediaan, perputaran piutang terhadap likuiditas perusahaan manufaktur subsektor makanan dan minuman yang terdaftar di bursa efek indonesia. jurnal riset akuntansi, 10, 87–97. warasto, h. n., janudin, j., & baharani, s. (2023). pengaruh perputaran kas, perputaran piutang dan perputaran modal kerja terhadap likuiditas pada pt. mandom indonesia tbk periode 2012-2021. scientific journal of reflection : economic, accounting, management and business, 6(3), 574–582. https://doi.org/10.37481/sjr.v6i3.698 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 386-406 386 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study muhammad bima1 mohammad nizarul alim2 12universitas trunojoyo madura, indonesia corespondent: 210221100058@student.trunojoyo.ac.id1 received : january 28, 2024 accepted : april 3, 2024 published : april 30, 2024 citation: bima, m., alim, m, z. (2024). mapping green tax research trends: a bibliometric analysis study. ilomata international journal of tax and accounting, 5(2), 386-406. https://doi.org/10.61194/ijtc.v5i2.1116 abstract: a green tax is a type of tax that is applied to reduce the amount of pollution and preserve the green environment. this research focuses on the results of mapping research articles on the topic of green taxes from scopusindexed international journal literature q1 (quartile 1) to q4 (quartile 4) for the period 2015-2024. the purpose of this research is to examine more deeply about green tax research with a bibliometric analysis study focusing on the subject areas of environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, computer science. this research uses a descriptive quantitative approach with simple statistical analysis on bibliometric analysis. bibliometric analysis is used to know future research trends on green taxes. this research also includes visualization analysis results from data processing results with vosviewer. the results of the study have found 182 articles from scopusindexed journals q1 (quartile 1) to q4 (quartile 4). the contribution of this research is that it can provide future directions in determining innovative green tax design and distribution effect analysis and provide insights that have value for policymakers in sustainable development. keywords: green tax, renewable energy, economic growth, green tax reform this is an open access article under the cc-by 4.0 license. introduction green taxes originated in the 1920s in the united states due to a proposal to tax environmentally harmful activities (ashworth et al., 2006; daniels, 2009). the emergence of the green economy is driven by efforts to reduce pollution, carbon emissions, and damage to ecosystems (loiseau et al., 2016). this transition can be achieved by taxing environmentally harmful activities or incentivizing green initiatives. there are two ways to implement a green tax transition: an emissions trading policy based on the amount of pollution control and a carbon trading market (dong et al., 2020). the emergence of carbon dioxide (co2) emissions and harmful gases is the origin of the green tax (chien et al., 2021). this pollution control has been enforced since the occurrence of environmental pollution, which has been increasing since the industrial revolution (z. tan et al., 2022). many countries impose green taxes in various forms, such as carbon taxes. aside from carbon taxes, pollution taxes are also a good control measure compared to other measures, https://www.ilomata.org/index.php/ijtc mailto:210221100058@student.trunojoyo.ac.id https://doi.org/10.61194/ijtc.v5i2.1108 mapping green tax research trends: a bibliometric analysis study bima and alim 387 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc including subsidies, fees, permit trading, etc (z. tan et al., 2022). the logical reasons underlying pollution taxes to be a better control are that they can provide direct price signals overall, promote market efficiency, and allow solutions to be tailored to revenue outcomes. in 1960 there was an environmental crisis with the start of the debate on pollution taxes (karmaker et al., 2021). in this phenomenon, there was a proposal by the organisation for economic cooperation and development (oecd) oecd council (2024) that environmental taxes can be considered as a theoretical basis. in the following decades, many environmental taxes such as carbon, sulfur, and emission taxes existed. the decade of the 1990s saw the introduction of new taxes, such as environmental, ecological, and green taxes (qi et al., 2023). the concept of green taxes gained attention and became a favorite research agenda of international organizations and economists due to its effectiveness in cost reduction. the existence of green taxes also helps in mitigating global climate change (doğan et al., 2022). these green taxes are also largely generated from burning fossil fuels, petroleum, coal, and natural gas (rodríguez et al., 2019). as such, the implementation of green taxes can help reduce co2 emissions and encourage a shift towards greener and cleaner alternatives (k. zhang et al., 2016). green taxes are designed to incentivize individuals and businesses to adopt greener practices and reduce environmental impacts (osório & zhang, 2022; mpofu, 2022). the importance of implementing green taxes can encourage a shift towards cleaner technologies and discourage practices that can damage the environment. green tax is a topic of great interest for further research. previous studies have been conducted by previous researchers focusing on areas such as environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, and computer science (lu & cheng, 2023; cheng et al., 2022; silva et al., 2018; yeganeh et al., 2021; ghasemi et al., 2020; rausch & yonezawa, 2018; day & day, 2022; kapeller et al., 2023). this study was motivated by the research of nobanee & ullah (2023) about bibliometric analysis of research in the field of taxation. this research tries to re-examine with the same method related to green taxes. one hundred eighty-eight green tax research articles were found with the results of 182 articles indexed by scopus quartile 1 to 4 from 2015-2024. green tax mapping is so important in terms of carbon dioxide reduction. this was also stated by moreno-carbonell et al. (2020) highlighted the importance of mapping green tax policies to provide insights into their distribution, effectiveness, and potential impact on environmental and economic outcomes. the authors note that while there is a growing body of literature on green tax policies, there is still a lack of comprehensive and systematic mapping, such as bibliometric visualization. another study by nobanee & ullah (2023) emphasized the need to map green tax regulatory policies across different countries and regions. this research aims to examine the green tax research more deeply in a bibliometric analysis study. previous research by nobanee & ullah (2023) used a bibliometric analysis study to explore the effectiveness of green taxes in reducing pollution and its impact on economic growth. this research continues the previous research conducted by nobanee & ullah (2023), using the subject area coverage of environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, and computer science. this study uses the scopus-indexed journal database quartile 1 (q1) to quartile 4 (q4) with a vulnerable period of 2015-2024. the period range was chosen to expand previous research conducted in 2015-2022, https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 388 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc but researchers will add up to 2024. the contribution of this research is that it can provide an overview of future research on green taxes and as a future direction in determining innovative tax designs and analyzing distribution effects. in addition, this research also contributes to offering valuable insights for policymakers in striving for sustainable development. a literature review aims to report trends, relationships, consistencies and gaps (hahn & kühnen, 2013; x. j. tan et al., 2022). thus, the work will be easier, more organized, and can be evaluated properly. according to donthu et al. (2021), bibliometric analysis is a method that is well known for its popularity and can be used in exploring and analyzing large amounts of scientific data. this can be probable in revealing certain evolutions and highlighting the field's development under study (dounthu et al., 2021). according to moral-muñoz et al. (2020), bibliometric analysis can be done in several steps, including searching for study data. data search with bibliometric analysis is carried out using the scopus web on paid access by writing the keyword green tax and focusing on the subject areas of environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, computer science. researchers used articles from q1 (quartile 1) to q4 (quartile 4) scopus journals in this bibliometric analysis. the aspects used in this bibliometric analysis are the keywords green tax and using statistical tools to process the findings and visualize the results of the bibliometric analysis with vosviewer software rocks. this bibliometric analysis was conducted by digging deeper into green tax research with a subject area focus on environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, computer science and defining the results in a descriptive quantitative manner. this study focuses on the research objectives, namely that the main findings can provide gaps that will be researched by future researchers with the latest research gap. this research is useful for future research, where each of the results of the research objectives will be able to provide a view of what steps future researchers will take if they will research on the same topic and can use research gaps that are rarely researched (latest). this latest research gap will be a view and guideline for future research as a novelty for future researchers. so that the scope of future research will be wider. in order for the research conducted by researchers to be more far-reaching, researchers use the scopus international journal database as secondary data. this article presents 5 stages, namely introduction, literature review, research methods, mapping and simple statistical data processing results to determine the number of percentages studied and visualization with the help of vosviewer software. the last is the closing (conclusion). method the research conducted by researchers used a descriptive quantitative approach to bibliometric analysis. the reason for using a descriptive quantitative approach is that this research analyses data by calculating percentage proportions and describing the data that has been collected. then proceed to look for research gaps using bibliometric analysis. bibliometric analysis can assist in intellectual development by using a systematic process and structure and analyzing journals, author names, keywords and countries in a particular field (khatib et al., 2022). specific scientific fields and research advances can be used to understand better and develop structures and theories https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 389 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (ronda-pupo, 2017). another reason researchers use bibliometric analysis is because it can quantitatively measure scientific results, such as the number of journal publications, keywords, author lists and the distribution of research by country. this can be used to evaluate the research performance of individuals, institutions, and funding agencies. bibliometric analysis can also be used to track research trends, identify keywords, and provide information on research policy for decision-making. furthermore, this bibliometric analysis uses vosviewer software. some researchers have used bibliometric analysis approaches, such as research conducted by ibrahim et al. (2022) and suleiman yahaya et al. (2020). other studies that use bibliometric analysis such as research from zheng & kouwenberg (2019) research on corporate governance and suleiman yahaya et al. (2020) research on business model innovation. the unit of analysis used in this research is scientific articles on green taxes. the data source of this research is scientific publications on green tax research using international scientific journals indexed by scopus q1 to q4. the selection of scopus-indexed international journal articles from q1 to q4 certainly has a reason, namely because of the consideration of the quality of the reputation that has been internationally recognized and has been reviewed by several reliable reviewers to be published. in addition, scopus-indexed international journals also have a major impact on journal publications or institutions in the world of scientific publication research. the population used in this study is scopus-indexed international journal articles q1 to q4 that examine green taxes with a range of 10 years from 2015 to 2024. one hundred eighty-eight articles were found, but only 182 articles could be downloaded. this is due to system errors in searching the scopus article database. this research uses secondary data sources from green tax literature. the data collection technique uses a literature study obtained from scopus literature with a discussion of green taxes. the population in this study were all articles on green taxes from the scopus web with a range of years 2015-2024. the sample used in this study is the subject of the research area. the stages of searching for literature are by opening the website www.scopus.com with a subscription (paid) with the aim of being able to access all features of the scopus article. the researcher then wrote using the word term green tax with the search results taken from the article title. the data obtained by researchers is data on publications in the field of taxation with the scope of green taxes for the last ten years, namely the period 2015-2024. the results of the data search will be explored on the scopus database by looking at core journals and mapping based on publication year, quartile level, research method, journal name, research data source, ten keywords, top 10 countries with green tax article publishers, and top 10 authors of green tax article publishers. furthermore, researchers will present quantitatively and visualize the development of green tax research using the vosviewer software tool. below is figure 1 flowchart of the literature search process. https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 390 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1 flowchart of literature search process start determine data base (scopus journals q1, q2, q3, and q4) define keyword (green tax) by selecting article title determine subject area and time span (20152024) search and data collection stage based on research sample criteria found 188 articles about green tax not downloaded 6 articles downloadable 182 articles on green taxes can you downl? articles will be processed using simple statistical tools and vosviewer finish presented in the form of quantitative descriptive analysis, graphs, and tables finish yes no https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 391 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: personalised results (2024) result and discussion result sample selection based on green tax quartiles and year of publication taxation is inseparable from economic change (lestari, 2021). therefore, a lot of research on taxation is currently developing. in the academic world, the development of research interest is mainly identified by the volume of published works. table 1 is a table with a selection of articles based on a sample of research on green taxes from the source of scopus journals q1 to q4. a total of 188 scopus-indexed articles have been found over the past ten years, from 2015 to 2024. researchers can only find 182 research articles on green taxes consisting of (quartile) q1, q2, q3, and q4. many researchers published a number of research articles on green taxes in q1, with a total of 127 articles (67.5%). there were also 40 research articles on green taxes published in q2 (21.2%). for q3 and q4, there were six articles (3.1%) and 7 articles (3.7%), respectively. some articles have not been determined by quartile, namely 2 articles (1%). a total of 6 articles (3.1%) were not found in the search process. this is because an error cannot be downloaded on the scopus data base system. table 1. scopus journal sample selection based on q1-q4 no quartile number of articles persentage 1 article quartile 1 (q1) 127 67.5% 2 article quartile 2 (q2) 40 21.2% 3 article quartile 3 (q3) 6 3.1% 4 article quartile 4 (q4) 7 3.7% 5 article not yet assigned a quartile 2 1% 6 article not found 6 3.1% total 188 100% source: scopus journal data processed (2024) figure 2 proportion of analysis percentage by q1 to q4 source: axcel data processing (2024) 68% 21% 3% 4%1%3% article quartile 1 (q1) article quartile 2 (q2) article quartile 3 (q3) article quartile 4 (q4) article not yet assigned a quartile article not found https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 392 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a total of 182 articles have been mapped over the last ten years, from 2015 to 2024. researchers chose to map starting in 2015 because they wanted to perfect previous research conducted by nobanee & ullah (2023). nobanee & ullah (2023) research conducted by nobanee & ullah (2023) mapped from 2015 to 2022. however, researchers will try to refine until 2024 and focus on the subject areas of environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, computer science. from the mapping results based on table 2, 2023 is the year with the highest number of studies discussing green taxes, namely 63 articles (34.6%). the year 2022 is the year with the second highest number of research on green taxes, namely 40 articles (21.9%). the third most research on green taxes, which occurred in 2020 and 2021, is sure to be the same with 19 articles (10.4%). the last research occurred in 2015 and 2016, namely 3 articles (1.6%). researchers also present a picture of the development of research articles from 2015 to 2024 which is presented in figure 4. and 3. table 2. mapping results based on the year of publication of green tax research in scopus journals q1-q4 in 2015-2024 no year of publication number of articles percentage 1 2015 3 1.6% 2 2016 3 1.6% 3 2017 9 4.9% 4 2018 7 3.8% 5 2019 15 8.2% 6 2020 19 10.4% 7 2021 19 10.4% 8 2022 40 21.9% 9 2023 63 34.6% 10 2024 4 2.1% number of articles 182 100% source: personal data processing results (2024) figure 3 percentage proportion on number of publication articles by year source: excel data processing results (2024) 2%2% 5% 4% 8% 10% 10% 22% 35% 2% percentage number of articles 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 393 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3 is the total proportion of the percentage of published articles by year. from this percentage, if seen from the point of view of the original research objectives, future researchers can increase research on green taxes with subject areas such as researchers. subject areas include environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, computer science. differences from previous research conducted by nobanee & ullah (2023) are from the subject area and period of article mapping. figure 4 scopus journal distribution q1-q4 in 2015-2024 source: www.scopus.com mapping by scientific journal name and visualization result mapping based on the names of scientific journals has been done with the help of vosviewer software (batubara et al., 2022). this mapping includes journal name, number of articles/documents, citations, and total link strength. the top 10 journals that discuss research on green taxes are presented in table 3. the journal with the first most research is sustainability switzerland, with 22 articles. the journal environmental science and pollution research is the journal with the most research strength, and the journal environmental science and pollution research is the second journal, with a total of 18 articles/documents. the third journal is occupied by the journal of cleaner production, which has 13 articles with 574 citations. journal of environmental economics and management has the most minor publications, namely 1 article. for this reason, future authors can choose the journal of environmental economics and management when publishing research articles that discuss green taxes. thus, it is likely to be accepted and published. the mapping results based on this journal are also depicted in the visualization results by vosviewer in figure 5. 3 3 9 7 15 19 19 40 63 4 0 10 20 30 40 50 60 70 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 n u m b e r o f a r t ic l e s year of publication article mapping based on year of publication https://www.ilomata.org/index.php/ijtc http://www.scopus.com/ mapping green tax research trends: a bibliometric analysis study bima and alim 394 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. mapping by journal name of scopus green tax articles q1, q2, q3, and q4 no source documents citations total link strength 1 sustainability switzerland 22 220 15 2 environmental science and pollution research 18 169 19 3 journal of cleaner production 13 574 4 4 international journal of energy economics and policy 7 31 8 5 journal of environmental management 4 361 4 6 economic research ekonomska istrazivanja 3 40 3 7 international journal of environmental research and public health 3 20 2 8 energy reports 3 33 4 9 applied economics 2 22 3 10 journal of environmental economics and management 1 37 4 source: vosviewer data processing results (2024) figure 5 visualization based on research journal source: vosviewer data processing results (2024) for more details, the researcher will present the results of statistical data processing with excel. this presentation is in the form of graphs and percentages in the form of pie charts. the following figure 6 is the result of statistical data processing with excel. https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 395 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 6 graph of number of journal publications source: excel data processing results (2024) figure 7 percentage of journal publications on green tax q1,q2,q3, and q4 source: excel data processing results (2024) mapping by research method mapping based on research methods is carried out by researchers with the aim of providing gaps for future researchers who will research green taxes (kang et al., 2020). this mapping is done by analysing one by one the articles that have been found, namely 182 research articles in table 4. over the past ten years, quantitative research has been the most widely conducted research, namely 123 (67.5%) articles. this was followed by qualitative research with 33 (18.1%) articles. the rest of the research researchers used mixed research (combining quantitative and qualitative research) in as many as 26 (14.2%) studies. the year 2023 saw the highest number of quantitative studies, with 43 studies. the second most quantitative research was found in 2022, with 22 studies. for the most qualitative research, there were 9 studies in 2022 and 2023. the second highest number of qualitative research is in 2020, namely 6 studies. but here, there is a uniqueness that in 2023, there were 11 mixed studies that occurred in 2023. for this reason, further research can take 20 17 12 776 44533333323212222222111111111111111111111111111111111111111111111111111111111111 0 5 10 15 20 25 s u st ai n ab il it y… f ro n ti er s in … r es o u rc es p o lic y e n er gy p o lic y r en ew ab le … in te rn at io n al … c o m p u te rs … t ra n sp o rt at io n … s o ci et y r ev is ta … m at h em at ic s m an ag er ia l a n d … jo u rn al o f… jo u rn al o f… in te rn at io n al … ie e e … f o li a… e u ro p ea n … e n er gy a n d … e co n o m ic a n d … c lim at e c h an ge … b u ild in g… n u m b e r o f a rt ic le s journal name graph of number of articles in journals percentage number of journalssustainability switzerland environmental science and pollution research journal of cleaner production https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 396 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc qualitative and mixed method research because there is still minimal research using these methods with the topic of green tax research. table 4. mapping by research method of scopus green tax articles q1, q2, q3, and q4 year research methods number of articles (number of articles) quantitative qualitative mixed 2015 3 0 0 3 2016 1 2 0 3 2017 7 1 1 9 2018 5 2 0 7 2019 13 1 1 15 2020 12 6 1 19 2021 15 2 2 19 2022 22 9 9 40 2023 43 9 11 63 2024 2 1 1 4 total 123 33 26 182 (%) 67.5% 18.1% 14.2% 100% source: personal data processing results (2024) figure 8 proportion of the number of quantitative method studies source: excel data processing results (2024) 2%1%6% 4% 10% 10% 12% 18% 35% 2% quantitative methods 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 397 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 9 proportion of qualitative research methods source: excel data processing results figure 10 proportion of mixed method studies source: excel data processing results (2024) figure 10 is the proportion of results by excel data from the number of inventions of quantitative methods, qualitative methods and mixed methods. this proportion is depicted on a pie chart with the results in the form of a percentage. mapping based on research data sources mapping based on research data sources has been carried out by researchers presented in table 5. the purpose of mapping this research data source is to find future research gaps that can be a reference for future research using which data sources will be used. researchers carried out this mapping by analyzing one by one the articles that had been found, namely 182 articles. it was found that most sources of research data were primary data sources, around 136 articles (74.7%). for secondary data sources, 39 articles (21.4%) have been found. the rest of the mixed research data sources are 7 (3.8%) articles. research using primary data occurred the most in 2023, which amounted to 50. 2022 became the year with the second-highest number of studies using primary data, which amounted to 31. secondary data used by researchers also occurred the most in 2023, which amounted to 8. for the second secondary data, there were 7, namely in 2022. the average primary data source is done by distributing questionnaires, questionnaires, interviews to 0%6% 3% 6% 3% 18% 6% 28% 27% 3%qualitative methods 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0%0%4%0%4% 4% 8% 34% 42% 4%mixed method 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 398 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc respondents and documentation. as for secondary data, on average, researchers use information obtained from company financial reports and analyze the results of this information. table 5. mapping by research data source of scopus green tax articles q1, q2, q3, and q4 year research data source number of articles (number of articles) primary scondary mixed 2015 3 0 0 3 2016 2 1 0 3 2017 4 5 0 9 2018 3 4 0 7 2019 9 6 0 15 2020 14 5 0 19 2021 17 2 0 19 2022 31 7 2 40 2023 50 8 5 63 2024 3 1 0 4 total 136 39 7 182 (%) 74.7% 21.4% 3.8% 100% source: personal data processing results (2024) figure 11 proportion of total percentage source of primary data source: excel data processing results (2024) 2%1%3% 2% 7% 10% 13% 23% 37% 2%primary data source 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 399 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 12 proportional percentage of total secondary data source source: excel data processing results (2024) figure 13 proportion of percentage of mixed data sources sources: excel data processing results (2024) figures 11, 12, and 13 represent the percentage proportion of the number of research data sources on green taxes. the proportion is presented in 3 pie charts consisting of the percentage proportion of the number of primary data sources, the percentage proportion of the number of secondary data sources, and the percentage proportion of the number of mixed data sources. based on the data that has been processed above, future researchers can conduct research using secondary and mixed data sources to expand the scientific literature. this is the same as research conducted by (nobanee & ullah, 2023). 10 top keyword green tax research and visualization result author keywords are also important in bibliometric analyses. comerio & strozzi (2019) suggest that the co-occurrence of keywords is an insightful technique for developing scientific constructs because keywords provide a coherent explanation. chen et al. (2021) also believe that keywords reflect a particular topic in a particular discipline. to be able to understand the literature on green 0%3% 13% 10% 15% 13% 5% 18% 20% 3% secondary data source 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0%0%0%0%0%0%0% 29% 71% 0% primary & secondary data source mixed 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 400 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxes, the visualisation analysis of the most emerging keywords was carried out by setting minimum criteria. the keywords presented in figure 3 have been the subject of discussion for the last ten years. from the results of data processing using vosviewer, the keyword carbon tax became the keyword with a total link strength of 67 times. the second most frequently used keyword in green tax research is environmental tax with a total link strength of 48 times. it is not surprising that these two keywords top the research on green taxes. this is because carbon tax and environmental are part of green tax which is often reviewed in previous studies. thus, the number of keyword occurrences indicates the strength of the relationship between keywords in the same article and keyword analysis represents the general content of the article (nobanee & ullah, 2023). table 6. top keyword of green tax research no keywords occurrences total link strength 1 carbon tax 18 67 2 environmental tax 13 48 3 green innovation 12 47 4 environmental taxes 11 46 5 green finance 7 32 6 renewable energy 6 32 7 green tax 8 30 8 carbon taxes 6 26 9 green tax reform 7 25 10 economic growth 6 24 source: vosviewer data processing results (2024) figure 14 keyword visualization source: vosviewer data processing results (2024) the results of the mapping carried out by researchers based on keywords can provide an overview of future research. these keywords can be used as research variables. carbon tax is the keyword with the highest occurrence results. future researchers can develop research on carbon tax where carbon tax is still related to green tax. research on carbon tax has been done by many previous https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 401 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc studies, such as research conducted by (ramadhani & koo, 2022; j. zhang et al., 2024). apart from the carbon tax variable, research from this keyword can also use other variables or keywords such as renewable energy, economic growth and others. top 10 authors with green tax research and scopus visualization results in q1-q4 authorship analysis plays an important role in trend identification and cluster analysis of green tax research. by analyzing collaboration patterns among researchers and institutions, author-based analysis can provide insights into the development of the green tax research field. the emergence of new research topics and perspectives, as well as the evolution of research networks and communities. ngo than quang, phan thi thu hien, gyamfi bright akwasi, and hoo wong chee are the authors with the most publications presented in table 7. the average author only published 2 documents in common, with a total strength of 9. next, the researcher provides an image presentation of the visualization of the top authors. table 7. top 10 authors with green tax research no author name document total link strength 1 ngo,than quang 2 9 2 phan, thi thu hien 2 9 3 gyamfi, bright akwasi 2 8 4 hoo, wong chee 2 6 5 ng, alex hou hong 1 6 6 ng, chee pung 1 6 7 ofori, elvis kwame 1 6 8 sam, toong hai 2 6 9 sarpong, kwabena agyarko 1 6 10 tee, poh kiong 2 6 source: vosviewer data processing results (2024) figure. 15 visualization by autor name source: vosviewer data processing results (2024) https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 402 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc top 10 countries with green tax research and visualization results in the study of bibliometric reviews, citation analysis remains one of the most widely used techniques (khan et al., 2022). citation analysis is considered a quantitative tool used to evaluate a discipline, topic, author, or journal based on the total citations generated. citation analysis also includes patterns, frequency examination, and graphs of article citations. (nobanee & ullah, 2023). this is also true of the mapping of green tax research by country presented in table 8. researchers found that china is the leading country with the highest number of research articles on green taxes, namely 115 articles with 2,357 citations. zhang et al. (2016) examined carbon taxes from 1989 to 2014 and found that the united states was the top country in research on green taxes. this shift is due to china's rapid industrialization and encourages researchers to explore green taxes in china. therefore, along with the development of china, it is important to be able to implement and explore. pakistan occupies the second place with 13 research articles and 579 citations. it turns out that the comparison is higher than in the united states. mapping based on this country is also depicted in the visualization results in figure 16. table 8. countries of scopus green tax articles q1, q2, q3, and q4. no country name document citation total link strength 1 china 115 2.357 64 2 pakistan 13 579 28 3 united kingdom 10 193 24 4 turkey 10 625 20 5 saudi arabia 4 167 13 6 united arab emirates 3 137 11 7 australia 11 65 10 8 taiwan 5 44 10 9 india 12 273 9 10 united states 14 177 8 source: vosviewer data processing results (2024) figure 16 visualization by country source: vosviewer data processing results (2024) https://www.ilomata.org/index.php/ijtc mapping green tax research trends: a bibliometric analysis study bima and alim 403 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion green taxes are considered an emerging topic in the environmental field and can assist in promoting environmentally friendly behavior. this study aims to examine more deeply about green tax research by using a descriptive quantitative bibliometric analysis study. a total of 182 articles on green taxes were found from the scopus-indexed journal literature q1, q2, q3 and q4 with a subject area focus on environmental science, energy, economics, econometrics and finance, social sciences, engineering, business management and accounting, and computer science. this mapping was conducted during 2015-2024 and improves on previous research. the mapping is based on publication year, quartile level, research method, journal name, research data source, ten keywords, top 10 countries with green tax article publishers, and top 10 authors of green tax article publishers. the mapping results are also presented as a visualization of data processing with vosviewer to find out future research gaps. the main finding in this study is that each of the results and discussions presented by the researcher provides a gap for future research, such as what methods can be used in the future, what research variables to use and what research data sources can be used. this research contributes to future research on green taxes as a future direction in determining innovative tax designs and analyzing distribution effects. green tax is a type of tax that every country should be able to implement because it can provide benefits to the community itself. benefits in terms of increased state revenue and public health. thus, researchers provide suggestions for future governments to include carbon taxes, pollution taxes, congestion charges, renewable energy subsidies, energy-efficient building incentives, environmentally friendly goods and services procurement policies, and environmental impact assessments. in addition, the government should also implement a goods and services policy for business entities to purchase environmentally friendly products and services. this can stimulate demand for environmentally friendly products and services for other business entities. this research article has limited problems, such as research using a single scopus database in searching for research literature on green taxes. future research can conduct research using databases from international journals such as elsevier and thomson reuters in searching for literature. the results of bibliometric analysis can be compared with research that current researchers have written. thus the coverage obtained will be broader and will add to the treasure of knowledge in the field of taxation research, especially green taxes. reference ashworth, j., geys, b., & heyndels, b. 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(2019). a bibliometric review of global research on corporate governance and board attributes. sustainability (switzerland), 11(12), 1–25. https://doi.org/10.3390/su11123428 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 3 july 2025 page no. 1-19 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) aji fajar suryo antoro1, abdurrahman rahim thaha2 12universitas terbuka, indonesia correspondent: ajifajar@ecampus.ut.ac.id1 received : may 20, 2025 accepted : june 29, 2025 published : july 31, 2025 citation: antoro, a.f.s. & thaha, a.r. (2025). analysis of the acceptance of the local tax administration system using the technology acceptance model (tam). ilomata international journal of tax & accounting, 6(3), 1-19. https://doi.org/1061194/ijtc.v6i3.1446 abstract: local governments continuously strive to provide the best public services to their citizens, one of which is tax administration services through digital platforms. each region faces unique challenges in developing an online system for local tax administration, making it crucial to understand the factors influencing the effectiveness of these services. this study uses the technology acceptance model (tam) as a conceptual framework and partial least squares structural equation modelling (pls-sem) using the smart pls application to analyze the factors affecting the acceptance of the local tax administration system (sipad) by 131 taxpayers in boyolali regency. the results of hypothesis testing reveal that experience, compatibility, complexity, perceived ease of use, and perceived usefulness have varying impacts on the acceptance of sipad, with three hypotheses accepted and seven rejected. these findings underscore the importance of making sipad user-friendly, compatible, and perceived as useful to enhance the efficiency and effectiveness of tax administration and increase local tax revenue. the study also highlights the need for adequate training and socialization for taxpayers to keep pace with rapid technological developments. a well-implemented system is expected to expand the taxpayer base and support the success of local tax administration reforms. keywords: local tax administration, digital tax services, technology acceptance model (tam), partial least squares structural equation modelling (pls-sem), taxpayer adoption. this is an open access article under the cc-by 4.0 license. introduction the online service index, telecommunications index, and human capital index are the three indices that make up the e-government development index (egdi). indonesia was rated 107th out of all countries in 2018. in comparison to other asean nations like singapore, malaysia, brunei darussalam, thailand, the philippines, and vietnam, indonesia is ranked far lower. enhancing knowledge and proficiency in information and communication technology (ict) and ict infrastructure is severely hampered by this circumstance (maulana, 2020). e-government has been applied in various contexts, ranging from online government services to the electronic exchange of information and services with citizens, businesses, and other governmental entities. historically, e-government has been viewed as the implementation of https://www.ilomata.org/index.php/ijtc mailto:ajifajar@ecampus.ut.ac.id1 https://doi.org/1061194/ijtc.v6i3.1446 analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information and computer technology to improve the efficiency of government institutions and deliver online public services(nations, 2023) evidence shows that e-government can enhance equity, accountability, and transparency in delivering public services. moreover, it improves bureaucratic efficiency and effectiveness and encourages stakeholder participation in public policy formulation. since enacting presidential instruction no. 3 of 2003 on national policy and strategy, indonesia has implemented egovernment for almost twenty years. however, its implementation has not achieved optimal results, as it has not been evenly applied and remains below the average level in asean (r. a. nugroho & purbokusumo, 2020). in implementing e-government at the local government level, three crucial issues arise: first, local autonomous governments’ initiatives and understanding regarding e-government implementation tend to be isolated. second, the implementation through regional websites is hindered by ineffective management systems and workflows due to regulatory, procedural, and human resource limitations. third, many local governments identify e-government implementation merely as the creation of government websites (web presence), causing the process to stall at the maturation stage without progressing to subsequent stages (wirawan, 2020) to improve the performance of internet-based government service delivery, the government must identify and address obstacles that reduce user satisfaction with electronic services. to increase consumer willingness to continue using electronic services offered by the government, it is essential to effectively address barriers such as website design, online service quality, and privacy assurance (chen et al., 2015). the primary goal of implementing online government services is to enhance accessibility and convenience in delivering essential government services to users (carter & bélanger, 2005). however, citizens exhibit lower satisfaction levels with electronic services due to various factors, including inadequate digital literacy, distrust in the system, and confusion arising from unclear instructions (lee et al., 2011). a total of 2,088 accessibility violations were found on 34 provincial government websites in indonesia, indicating a lack of attention to accessibility in e-government services. these violations were categorized as severe, critical, and minor, with 24 types of errors based on wcag 2.1 (web content accessibility guidelines) (amaliah et al., 2023). as local governments compete to develop sophistication, the information provided is effectively accessible to all segments of society. this study focuses on boyolali regency, one of the regencies in central java province, indonesia, which has implemented the local tax information system (sipad) in its government processes. the primary objective of this research is to examine the variables influencing sipad acceptance by local taxpayers using tam as a conceptual framework. key elements to be determined include perceived usefulness, perceived ease of use, and social and environmental factors that may affect sipad acceptance by local taxpayers. in measuring the performance of local tax revenue, tax ratio and tax effort are two leading indicators. tax ratio is the percentage of local tax revenue to grdp, showing the contribution of taxes to the local economy. at the same time, tax effort measures the efficiency of the government in collecting taxes compared to its potential. in the 2015-2019 period, boyolali regency's tax https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effort was 0.488, placing it 48th out of 113 districts/cities in java, far below surakarta city, which ranked 8th with a value of 0.732 and a tax ratio of 0.92%. although the efficiency of tax collection in boyolali is still low, the level of tax revenue is not that bad with a tax ratio of 0.69%, ranking it 28th. the boyolali district government is known for its progressive initiatives and policies in local tax management, making it an informative case study for tax administration best practices. the outcomes of this study are anticipated to furnish the boyolali regency financial agency and relevant stakeholders with critical insights necessary for formulating effective strategies and policies aimed at enhancing taxpayer engagement with sipad. widespread implementation of sipad is expected to increase tax administration efficiency and broaden the taxpayer base. taxpayers' use of sipad will facilitate the achievement of these objectives by reducing administrative burdens, enhancing accessibility, and streamlining tax administration procedures. therefore, identifying the determining factors that influence sipad acceptance by taxpayers is crucial for developing approaches to increase its usage. the technology acceptance model (tam), created by davis in 1987, is a conceptual framework used to study technology acceptance. tam states that technology adoption is influenced by individuals' perceptions of usefulness and ease of use. perceived usefulness refers to individuals' assessments of the benefits obtained from using the technology, while perceived ease of use relates to individuals' evaluations of the simplicity of using the technology (dorasamy et al., 2010). the object of this research is the local taxpayers' perception of using the local tax administration system. the local tax administration system was officially introduced and launched in 2018. this system is expected to help taxpayers fulfill their tax obligations, such as calculating, paying, and printing documents related to local tax obligations. five years after the local tax administration system was implemented, it is time to evaluate its usage based on responses from local taxpayers in boyolali. this study employs the technology acceptance model (tam) to explore and analyze the behavior of taxpayers in accepting and using the local tax administration system. tam helps identify the main factors influencing users' intentions and behaviours when receiving and using technology. the primary constructs of tam include actual system use, attitude toward using, perceived usefulness, and perceived ease of use. this study adopts the technology acceptance model and expands it with other factors tested in previous research: experience, compatibility, and complexity, providing practical insights into taxpayer behavior that can be applied in the field of public administration. experience, the experience variable in the technology acceptance model (tam) considers users' previous experiences with technology and how this influences their attitudes and intentions toward new technology. positive previous experiences with similar technology can increase perceptions of usefulness and ease of use of new technology, affecting the intention to use it (dishaw & strong d m, 1999). previous user experiences can influence users' intentions to adopt a new system or technology because users with positive experiences tend to be more open to new technology and have more positive attitudes toward it (jackson et al., 1997). based on the theory above, the hypotheses in this study are as follows: https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h1: experience has a positive and significant influence on perceived usefulness. h4: experience has a positive and significant influence on perceived ease of use. compatibility, in the acceptance of it innovation, the "compatibility" variable refers to the extent to which users perceive it innovation as consistent with their task needs or work environment. the "compatibility" factor significantly influences users' perceptions and acceptance of it innovation. if users feel that the it innovation fits their needs, they are more likely to accept and adopt the technology. conversely, incompatibility can be a barrier to the acceptance of it innovation (xia & lee, 2000). based on the theory above, the hypotheses in this study are as follows: h2: compatibility has a positive and significant influence on perceived usefulness. h5: compatibility has a positive and significant influence on perceived ease of use. complexity, complexity refers to the level of difficulty or intricacy in learning and using technology. in tam, complexity is a factor that influences the perceived ease of use of a technology. the more complex a technology is, the more difficult it is for users to learn and use, which in turn can reduce the likelihood of technology adoption. research has shown that the easier users can master technology and the more intuitive the user interface, the higher the likelihood of adoption. based on the theory above, the hypotheses in this study are as follows: h3: complexity has a positive and significant influence on perceived usefulness. h6: complexity has a positive and significant influence on perceived ease of use. perceived ease of use, perceived ease of use encompasses the extent to which consumers feel it is easy or difficult to use information services (davis, 1989). the perceived ease of use construct is only significant during the initial period of adopting and using the system and becomes insignificant during extended and continuous usage (venkatesh et al., 2003). based on the theory above, the hypotheses in this study are as follows: h7: perceived ease of use has a positive and significant influence on perceived usefulness. h9: perceived ease of use has a positive and significant influence on attitude toward using. perceived usefulness, in a broad sense, perceived usefulness relates to the extent to which consumers believe using the information system services will enhance their performance (seddon, 1997). consumers can use e-filing services if they believe that using the system can improve their efficiency or save time when performing various transactions. based on the theory above, the hypotheses in this study are as follows: h8: perceived usefulness has a positive and significant influence on attitude toward using. attitude toward using is a positive or negative evaluation of performing the related behavior. these attitudes are shaped by beliefs, social norms derived from normative beliefs, motivation to comply, and perceived behavioral control, which is influenced by beliefs regarding the availability of opportunities and resources required to perform the behavior(ajzen, 1985). based on the theory https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc above, the hypotheses in this study are as follows: h10: attitude toward using has a positive and significant influence on actual system use. actual system use. the actual system use variable in the original technology acceptance model (tam) refers to users' real actions in using the system or technology under consideration after they form the intention to use it. actual system use measures the extent to which users apply the technology or system in their daily activities after developing the intention to do so based on their perceptions of usefulness and ease of use (davis, 1987). method the research method used in this study is a quantitative method based on positivism philosophy. this approach is employed to test hypotheses with a focus on a specific population or sample. data is collected using research instruments, and the subsequent analysis is performed using quantitative and statistical techniques (sugiyono, 2016). the research data was collected through purposive sampling, with sample criteria being in boyolali district and having used the online tax system. the questionnaire was distributed online via google forms to local taxpayers in boyolali district. data testing includes validity tests (construct validity) through convergent validity and discriminant validity and reliability tests using cronbach alpha and composite reliability (ghozali, 2008). the data analysis involves descriptive statistics to describe respondent identities and variables in percentages. further analysis uses the pls (partial least square) model with the smart pls application, which includes structural model design, construct measurement, path diagram estimation, parameter evaluation, goodness of fit evaluation, and hypothesis testing using the bootstrap method (wiyono, 2011). the application of partial least squares structural equation modelling (pls-sem) and the tam in this research is warranted by their appropriateness for investigating intricate interactions among variables in prediction frameworks. pls-sem is especially beneficial for examining smaller samples and non-normally distributed data commonly found in practical public administration research, such as taxpayer behavior. the tam, extensively utilized in technology adoption research, provides a comprehensive framework for analyzing how perceived ease of use and usefulness affect the acceptability of digital tax systems such as sipad. this methodology offers insights into local tax administration systems while enabling greater adaptation and comparison in global contexts, rendering it helpful for both theoretical and practical consequences. the parameters tested are as follows: table 1. parameter test parameter test value validity test 1. convergence validity: a. loading factor b. average variance extracted (ave) 2. discriminant validity: > 0,7 > 0,5 https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a. fornell larcker criterion or htmt b. cross loading a. ave > correlation between constructs b. loading factor value> cross loading value reliability test 1. composite reliability 2. cronbach’s alpha > 0.7 correlation between constructs 0.7 testing the significance of the direction of relationship based on the t-statistic value or p-value t-statistic > 1,96, or p-value < 0,05 source: processed by the author (2023) based on the theoretical review above, the following table shows the indicators for this study: table 2. measurement scales constructs items measures experience exp1 i often use the boyolali regency local tax information system (sipad) exp2 i have a lot of experience in resolving errors in the boyolali regency local tax information system (sipad). i master the boyolali regency local tax information system (sipad) based on previous experience exp3 i mastered the boyolali regency local tax information system (sipad) based on previous experience exp4 i have experience in using technology similar to the boyolali regency local tax information system (sipad) compatibility com1 the features of the boyolali district local tax information system (sipad) system suit my needs. com2 using the boyolali district local tax information system (sipad) matches my work style com3 the development of the boyolali regency local tax information system (sipad) is very suitable for my current situation complexity comp1 the development of the boyolali regency local tax information system (sipad) is very suitable for my current situation compl2 the visual display (user interface) of the boyolali district local tax information system (sipad) is confusing compl3 there are many features of the boyolali district local tax information system (sipad) that i do not use compl4 i need a lot of time and effort that you need to use the boyolali regency regional tax information system (sipad) perceived ease of use pe1 it is easy for me to learn and use the boyolali district local tax information system (sipad) pe2 user manuals, error catalogs, and auxiliary functions of the boyolali regency local tax information system (sipad) are easy to understand and clear https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc constructs items measures pe3 in general, the boyolali regency online regional tax information system (sipad) application is very user-friendly or easy to use perceived usefullnes pu1 the use of the boyolali regency regional tax information system (sipad) system can improve my tax reporting performance pu2 the use of the boyolali district local tax information system (sipad) system can increase the effectiveness of my tax reporting pu3 the use of the boyolali district local tax information system (sipad) can improve simplify my tax reporting pu4 i often encounter errors in the boyolali regency regional tax information system (sipad) system attitude toward using atu1 i feel comfortable using the boyolali regency local tax information system (sipad) atu2 i believe that the boyolali regency local tax information system (sipad) helps me carry out tax obligations more efficiently atu3 i feel frustrated when using the boyolali regency local tax information system (sipad) actual system use asu1 compared to other tax administration systems, i use the boyolali regency local tax information system (sipad) as my first choice for reporting and paying taxes. asu2 i always use the boyolali district local tax information system (sipad) to fulfill my tax administration obligations. asu3 i understand and have utilized the features/functions of the boyolali district local tax information system (sipad) in carrying out my tax administration. result and discussion demographic profile of respondents. the study collected a total of 131 valid responses; the characteristics of the study respondents are summarized in table 3. of these respondents, 84 people (64.1%) were female, while 47 people (35.9%) were male. the education level of most respondents was senior high school, with a total of 93 people (71.0%). furthermore, there were 26 respondents with a diploma/graduate/master/doctorate level of education (19.8%) and 12 respondents with a junior high school level of education (9.2%). a total of 121 respondents (92.4%) were business owners, and 10 respondents (7.6%) were employees. regarding the type of business, 67 respondents (51.1%) were involved in trading businesses, 42 respondents (32.1%) were in culinary businesses, and the rest came from service, industry, agriculture, livestock, and fishery businesses. https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. demographic profile of respondents variable category frequency percentage gender male 47 35,9% female 84 64,1% level of education elementary school 0 0,0% junior high school 12 9,2% senior high school 93 71,0% university 26 19,8% position employee 10 7,6% owner 121 92,4% type of business service 9 6,9% culinary 42 32,1% trade 67 51,1% industry 6 4,6% agriculture, farm, fisheries 7 5,3% source: processed by the author (2023) measurement model results the two-stage pls-sem procedure involves assessing the measurement model for validity and reliability, followed by assessing the structural model for hypothesis testing. construct validity consists of two parts: convergent validity and discriminant validity. convergent validity test results with loading factor values based on the data taken from the sample data in table 2 above, the results of the convergent validity test with the loading factor value of each indicator are more than 0.7, so the sample data is valid as shown in table 4 below: table 4. factor loadings for measurements variable indicator outer loadings actual system use (asu) asu1 0,955 asu2 0,889 asu3 0,894 attitude toward using (atu) atu1 0,955 atu2 0,934 atu3 0,880 compatibility (com) com1 0,834 com2 0,908 com3 0,940 complexity (comp) comp1 0,879 comp2 0,853 comp3 0,852 comp4 0,859 experience (exp) exp1 0,865 https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc exp2 0,822 exp3 0,874 exp4 0,826 perceived ease of use (pe) pe1 0,914 pe2 0,915 pe3 0,922 perceived usefulness (pu) pu1 0,896 pu2 0,871 pu3 0,865 pu4 0,904 source: processed by the author (2023) convergent validity test results with average variance extracted (ave) values ave values are obtained through pls algorithms for valid indicators. as illustrated in table 4 below, all ave values exceed the 0.5 threshold, as required by the established criteria. this result further confirms the convergent validity of the construct. table 5. results of average variance extracted (ave), composite reliability (cr), cronbach’s alpha (ca) cronbach's alpha composite reliability (rho_a) composite reliability (rho_c) average variance extracted (ave) asu 0,902 0,959 0,938 0,834 atu 0,914 0,926 0,946 0,854 com 0,875 0,879 0,923 0,801 com 0,884 0,893 0,920 0,741 exp 0,869 0,880 0,910 0,717 pe 0,907 0,907 0,935 0,782 pu 0,906 0,906 0,941 0,841 source: processed by the author (2023) table 6. results of average variance extracted (ave), composite reliability (cr), cronbach’s alpha (ca) cronbach's alpha composite reliability (rho_a) composite reliability (rho_c) average variance extracted (ave) asu 0,902 0,959 0,938 0,834 atu 0,914 0,926 0,946 0,854 com 0,875 0,879 0,923 0,801 com 0,884 0,893 0,920 0,741 exp 0,869 0,880 0,910 0,717 pe 0,907 0,907 0,935 0,782 pu 0,906 0,906 0,941 0,841 source: processed by the author (2023) https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc discriminant validity using fornell-larcker. the criteria for discriminant validity test using fornell-larcker is that the ave value must be higher than the correlation between constructs. in table 7 below, it is explained that the root ave value is listed at the highest value in each column. for example, in the first column (asu column), the root ave value is 0.913, and the correlation value between constructs is 0.213; 0.213; 0.174; 0.123; 0.147; 0.168; 0.422. the correlation value between these constructs is still smaller than the root ave value. then, we continued the test on the atu column until the pu column found the same results. so, it can be concluded that the research data has good divergent validity, or it is inevitable that each concept of each latent model (construct) is different from other variables. the test results are shown in table 7 below: table 7. fornell-larcker criterion asu atu com comp exp pe pu asu 0,913 atu 0,213 0,924 com 0,174 0,499 0,895 comp 0,123 0,358 0,511 0,861 exp 0,147 0,093 0,400 0,573 0,847 pe 0,168 0,605 0,714 0,534 0,360 0,884 pu 0,422 0,627 0,650 0,472 0,406 0,629 0,917 source: processed by the author (2023) discriminant validity test results with cross loading value a validity test with cross-loading is a method in pls-sem analysis that is used to evaluate the extent to which the indicators used to measure a construct have a strong relationship with the intended construct. in this test, each indicator is tested against constructs in the model other than the one they are supposed to measure. suppose the cross-loading value of the indicators is low or insignificant against other constructs. in that case, it indicates better construct validity because the indicator is more correlated with the intended construct than with other constructs in the model. table 8. correlation among latent variables and cross loadings asu atu com comp exp pe pu asu1 0,955 0,236 0,145 0,083 0,084 0,067 0,392 asu2 0,889 0,141 0,144 0,081 0,177 0,181 0,378 asu3 0,894 0,184 0,191 0,176 0,167 0,245 0,390 atu1 0,240 0,955 0,419 0,256 0,028 0,486 0,579 atu2 0,247 0,934 0,472 0,357 0,139 0,628 0,624 atu3 0,087 0,880 0,494 0,380 0,082 0,553 0,526 com1 0,143 0,412 0,834 0,505 0,441 0,614 0,596 https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc asu atu com comp exp pe pu com2 0,184 0,453 0,908 0,390 0,292 0,619 0,531 com3 0,143 0,473 0,940 0,472 0,340 0,682 0,614 comp1 0,125 0,340 0,518 0,879 0,544 0,523 0,457 comp2 0,078 0,289 0,449 0,853 0,516 0,477 0,433 comp3 0,143 0,336 0,416 0,852 0,424 0,433 0,370 comp4 0,075 0,261 0,352 0,859 0,477 0,385 0,346 exp1 0,099 0,117 0,430 0,533 0,865 0,381 0,363 exp2 0,099 0,066 0,291 0,472 0,822 0,285 0,347 exp3 0,183 0,093 0,389 0,494 0,874 0,310 0,353 exp4 0,116 0,023 0,210 0,428 0,826 0,218 0,307 pe1 0,407 0,590 0,575 0,391 0,314 0,601 0,914 pe2 0,430 0,585 0,594 0,462 0,400 0,561 0,915 pe3 0,324 0,549 0,621 0,445 0,404 0,569 0,922 pu1 0,224 0,591 0,544 0,419 0,269 0,896 0,577 pu2 0,138 0,539 0,609 0,393 0,299 0,871 0,553 pu3 0,103 0,473 0,697 0,524 0,380 0,865 0,555 pu4 0,130 0,537 0,674 0,549 0,322 0,904 0,541 source: processed by the author (2023) based on the table above, in the actual system use (asu) column, there are 3 indicators, namely asu1, asu2, and asu1. this is the loading factor value. other indicators outside the asu indicator are cross-loading values. the criterion for this test is that the loading factor value must be higher than the cross-loading value. the value of asu1, asu2, asu3 is 0.955; 0.889; 0.894. while the value of other indicators outside the highest asu indicator is pe2 worth 0.430. then, the test on other variables results in the loading factor value being higher than the cross-loading value, so it can be concluded that the research data has met the criteria in the validity test with cross-loading. reliability test results with cronbach's alpha and composite reliability values based on table 4 above, the results of the reliability test with cronbach's alpha (ca) and composite reliability (cr) produce values greater than 0.7 for all variables, so it can be stated that the indicators used met good reliability. https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc structural model results following the pls-sem procedure, the bootstrapping method was used to simulate each relationship hypothesis. testing the significance of the direction of the relationship is based on the t-statistic or p-value. if the t-statistic value > 1.96 or the p-value < 0.05. figure 1. t-statistic test results with p value source: processed by the author table 9. of t-statistic test results no hypothesis original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stde v|) p values 1 exp -> pu 0,121 0,131 0,119 1,018 0,309 2 comp -> pu 0,061 0,042 0,144 0,423 0,673 3 com -> pu 0,359 0,356 0,153 2,351 0,019 4 exp -> pe -0,017 -0,008 0,093 0,178 0,859 5 comp -> pe 0,237 0,229 0,099 2,389 0,017 6 com -> pe 0,600 0,602 0,074 8,055 0,000 7 pe -> pu 0,297 0,305 0,119 2,491 0,013 8 pu -> atu 0,408 0,409 0,101 4,027 0,000 9 pe -> atu 0,348 0,341 0,118 2,960 0,003 10 atu -> asu 0,213 0,232 0,091 2,338 0,020 source: processed by the author (2023) based on the results of the t-statistic test on 10 (ten) hypotheses, 7 (seven) hypotheses have been generated whose p-value is <0.05 (significant). from the table above, the results of hypothesis testing can be described as follows; h1: [exp->pu] taxpayer experience may not significantly affect sipad's perceived usefulness due to rapid developments in the tax administration system, including changes in interface and features that can confuse users. this finding contrasts with earlier studies, such as in uganda, where education and it proficiency significantly influenced the perception of the usefulness of e-tax systems. however, as technological advancements accelerate, prior experience becomes less relevant, highlighting the need for continuous training to improve user competence and ease of system adoption. (maiga & asianzu, 2013). https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these findings also differ from previous research in south africa, which shows that computer selfefficacy and information access have a positive influence on the perceived ease of use of the tax efiling system in south africa. these results support the idea that direct experience with the system and access to the right information can increase perceived usefulness (mpinganjira, 2015). another study in nigeria also showed different results, including that the integration of user feedback into system design has been shown to improve compliance rates. this indicates that a responsive approach to taxpayer needs is essential for successful digital tax administration (adeyeye, 2019). this suggests that as tax systems evolve, prior experiences may not adequately prepare users for new interfaces and functionalities, necessitating ongoing training and support. h2: [comp->pu] the complexity profoundly impacts perceived usefulness. the test findings indicate that complexity heavily impacts perceived usefulness (p-value = 0.673) for sipad. this shows that the more complete the features in sipad, the more valuable it is for taxpayers. compared with previous research, the same results were found for the hypothesis complexity exhibits a substantial association with behavioral intention to use e-filing in malaysia. the result indicated that simplifying complex systems led to greater perceived usefulness and user engagement (dorasamy et al., 2010). this result is also consistent with findings in malaysia, where the complexity of the e-filing system negatively affected its adoption (adeyeye, 2019). research in kenya similarly identified system complexity as a barrier to practical usage (lhassan et al., 2022). therefore, simplifying sipad’s features and user interface can significantly improve its perceived usefulness, much like the recommendations from (rakhmawati et al., 2020), which advocate for user-friendly designs to enhance adoption rates. these insights underscore the importance of simplifying tax administration systems to improve user engagement globally. h3: [com->pu] compatibility profoundly impacts perceived usefulness. the test outcomes indicate that compatibility has a significant role in perceived ease of use (p-value = 0.019) on sipad. this shows that compatibility is the main factor in determining the use of sipad. the present results align with prior research, with the hypothesis that compatibility has a significant effect on perceived ease of use (fu et al., 2006). similar results were found in research in east java, indonesia, that compatibility and perceived usefulness have a positive effect on tax compliance. similar results were found in a study in 2023 that e-filing system quality has a positive effect on user satisfaction and perceived usefulness, confirming that system compatibility is important for high perceived usefulness, with perceived usefulness acting as a mediating variable (rakhmawati et al., 2020). this suggests that ensuring compatibility with users' current systems can significantly enhance the effectiveness of digital tax solutions. h4: [exp->pe] the test results show that taxpayer experience does not have a significant effect on the perceived ease of use of sipad, namely with a p-value = 0.859. this indicates that taxpayer experience is not a substantial factor in determining the use of sipad. this finding is different from the findings of previous research in india in 2015, which found that computer and web skills had a significant effect on perceived ease of use (mustapha & obid, 2015a). he asserts that it is insufficient for the government only to offer effective website design and easy navigation; it is also https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc essential to establish a learning process to enhance customer proficiency, thus facilitating taxpayers in managing tax administration more efficiently. the findings of this study differ from those of previous research. with the results of hypothesis testing, computer self-efficacy has a positive effect on perceived ease of use (wang, 2003). the findings of a study conducted in 2003 revealed that system experience and computer playfulness significantly influenced perceived ease of use. in a broader context, research in various developing countries suggests that as tax systems become more complex, the relevance of prior experience diminishes, necessitating targeted training programs to enhance user proficiency. this highlights the need for continuous education in the face of rapid technological changes. h5: [comp->pe] complexity possesses a considerable effect on effect on perceived ease of use. the test results show that complexity is having a significant impact on sipad's perceived usefulness (p-value = 0.017). the findings of this study are similar to previous research, namely, perceived ease of use has a significant positive relationship with user satisfaction, emphasizing the importance of system quality in influencing perceived ease of use (ghanifia et al., 2021). the study's findings align with other research, demonstrating that perceived ease of use strongly influences the link between tax service quality and online tax systems. this mediation leads to increased tax compliance and revenue generation in nigeria, as confirmed by hypothesis testing results (mustapha & obid, 2015b). this suggests that addressing complexity can lead to improved user experiences across different contexts. h6: [com->pe] compatibility possesses a considerable effect on perceived ease of use. the test results show that compatibility is having a significant impact on sipad's perceived usefulness (pvalue = 0.000). this indicates that the more compatible sipad is with the existing system, the easier it is for users to use it. these results are consistent with previous research, with the hypothesis that compatibility has a significant effect on perceived usefulness (fu et al., 2006). the findings of this study align with previous research, indicating that perceived ease of use is affected by factors such as control, intrinsic motivation, and emotion, all of which can be influenced by system compatibility (venkatesh, 2000). this reinforces the idea that compatibility is a critical factor in the successful adoption of digital tax solutions. h7: [pe->pu] perceived usefulness has a significant effect on perceived ease of use. the test results show that perceived usefulness has a considerable influence on sipad's perceived ease of use (p-value = 0.013). this indicates that the more valuable the sipad features are, the easier it is for taxpayers to use sipad. this finding is similar to the results of previous research, which showed that perceived ease of use has an influence that varies depending on the nature of the task, with perceived usefulness having a more significant effect on it adoption (gefen & straub, 2000). perceived ease of use has an essential influence on perceived usefulness in the context of enterprise resource planning (erp) https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc system implementation (muliati, 2019). this highlights the interconnectedness of these constructs in fostering user engagement. h8: [pu->atu] perceived usefulness has a significant effect on attitude toward using. the test results show that perceived usefulness has a considerable influence on attitude toward using (pvalue = 0.000) sipad. this indicates that the more useful sipad is for users, the more positive the user's attitude towards using sipad. this finding is the same as the results of previous research, which found that perceived usefulness significantly influences user intention to use the internet tax system, emphasizing the importance of perceived usefulness in influencing user attitudes (chang et al., 2005). this study's findings corroborate previous research, which demonstrates a significant positive relationship between the quality of tax services and the online tax system, mediated by perceived ease of use. this suggests that perceived usefulness plays a crucial role in fostering positive attitudes towards using the system (mustapha & obid, 2015b). promoting the benefits of digital tax systems can significantly improve user acceptance. h9: [pe->atu] perceived ease of use has a significant effect on perceived usefulness. the test results show that perceived ease of use does not have a substantial impact on sipad's perceived usefulness (p-value = 0.003). this indicates that the easier it is for users to use sipad, the more positive the user's attitude toward using sipad is. this finding is the same as the results of previous research, which showed that perceived ease of use has a significant influence on user attitudes, which in turn affects user satisfaction with electronic taxation systems (chang et al., 2005) these findings align with previous research, demonstrating that e-filing, perceived ease of use, and perceived usefulness positively influence corporate taxpayer compliance. this indicates that perceived ease of use is crucial for fostering a positive attitude toward the system's use(amalia & fahrudi, 2021). another study in indonesia in 2023 showed different results. it found that perceived ease of use and self-efficacy significantly affected the actual use of the web e-invoicing system, but perceived usefulness had no significant effect (zahra et al., 2023). h10: [atu -> asu] attitude toward using has a significant effect on actual system use. the test results show that attitude toward using sipad is having a substantial impact on sipad's actual system use (p-value = 0.020). this indicates that the more positive the user's attitude towards using sipad, the higher the level of sipad use. this finding is similar to the results of previous research, which showed that perceived usefulness and perceived ease of use do not affect student performance in the mandatory use of e-learning, emphasizing the importance of attitudes and behavioral intentions in actual system use (m. a. nugroho et al., 2018). this finding is the same as the results of previous research, which found that positive attitudes toward the use of technology systems, including erp systems, strongly influence users' intentions https://www.ilomata.org/index.php/ijtc analysis of the acceptance of the local tax administration system using the technology acceptance model (tam) antoro & thaha 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to use these systems effectively (muliati, n.d.). this highlights that by promoting positive attitudes toward sipad through effective communication and continuous improvements, the boyolali financial agency can increase the actual system usage among taxpayers. the findings from this research provide crucial insights for the boyolali regency financial agency and related stakeholders to enhance taxpayers' sipad usage. specifically, the lack of significant influence of taxpayer experience on perceived usefulness and ease of use suggests the need for comprehensive training and socialization programs to help taxpayers adapt to the evolving system. additionally, the significant impact of complexity and compatibility on perceived usefulness and ease of use underscores the importance of simplifying and enhancing system features to ensure user-friendliness and seamless integration with existing platforms. promoting the benefits of sipad through effective communication strategies can improve user attitudes and increase adoption rates. monitoring and evaluating user feedback will ensure continuous improvement, and leveraging successful practices from regions like surakarta can guide boyolali in implementing effective initiatives. conclusion this research examines the determinants affecting the adoption of the regional tax administration system (sipad) in boyolali regency using the lens of the technology acceptance model (tam) and partial least squares structural equation modelling (pls-sem). the findings indicate that experience, compatibility, complexity, perceived ease of use, and perceived utility had differing influences on the acceptability of sipad. out of the 10 hypotheses examined, seven were affirmed and three were dismissed. these findings underscore the essential need to enhance system compatibility, user-friendliness, and perceived utility in promoting the increased use of sipad. moreover, ongoing training and socialization initiatives are crucial for assisting taxpayers in acclimating to swift technology advancements. the effective execution of sipad is anticipated to improve tax administration efficiency, boost local tax income, and strengthen regional tax reform efforts. these findings provide essential information for policymakers, especially in areas or nations encountering identical difficulties with the implementation of digital tax systems. the wider implications indicate that resolving user experience and system integration challenges, together with ongoing taxpayer education, might be crucial factors for the effective worldwide adoption of digital tax systems. references adeyeye, g. b. 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(2023). assessing perception and actual usage of the e-tax system as a vat periodic tax return reporting system: an empirical study in indonesia. proceedings of the 2023 14th international conference on e-business, management and economics, 216– 221. https://doi.org/10.1145/3616712.3616772 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 465-487 465 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting putri setyaningrum1 , anita carolina2 12universitas trunojoyo madura, indonesia correspondent: 210221100047@student.trunojoyo.ac.id1 received : february 15, 2024 accepted : april 14, 2024 published : april 30, 2024 citation: setyaningrum, p., carolina, a. (2024). literature review: development of credit union research topics perspectives in the field of financial accounting. ilomata international journal of tax and accounting, 5(2), 465-487. https://doi.org/10.61194/ijtc.v5i2.1144 abstract: in the modern era, technological developments are changing so rapidly that they are causing social imbalances, including in the business world. current entities must be able to adapt to changes in the modern era, one of which is the non-profit credit union entity. the purpose of this research is to examine trends in mapping the development of credit union research because considering the current conditions, many non-profit entities need information to make decisions quickly, accurately and accountably. this research uses descriptive quantitative methods with a literature review model using vosviewer and publish or perish. the data used is secondary data obtained from the official website of the scopus journal. the research conducted focuses on the sub areas of financial inclusion, consumer welfare, commercial banks and cooperatives. the research results found a total of 200 scopus articles from 2018 to 2024 and sorting was carried out to find articles that were relevant to credit unions. the results of this sorting found 59 credit union articles. thus, the sample size of this research was 59 articles from the 200 articles found. the development of credit unions with analysis of topics, keywords, authors, journal names, organizations and countries is the result of research mapping. researchers also found that the development of credit union research fluctuated every year based on the results of the researchers' analysis. the contribution of this research is to provide an overview of a broader research area for future researchers in the credit union research topic focused on financial accounting. keywords: credit union cooperative, financial inclusion, consumer welfare, commercial banks, cooperative this is an open access article under the cc-by 4.0 license. introduction over the past decade, expanding financial services to more marginalized groups in developing countries has been critical for financial inclusion to reduce poverty and inequality (alvarezgamboa et al., 2023). cooperatives are democratic organizations owned and governed by members, who are also workers, producers, or customers of the organization. despite their https://www.ilomata.org/index.php/ijtc mailto:210221100047@student.trunojoyo.ac.id1 https://doi.org/10.61194/ijtc.v5i2.1144 literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 466 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ownership, it shows that they are also investors, patrons and community members (voigt & oelsnitz, 2024; barra & ruggiero, 202; ibikoule et al., 2024). cooperatives are companies where all members can take part in decision-making and governance processes (ferraro et al., 2024). the distinctive feature of cooperatives lies in collective governance and the fact that profits are reinvested in the cooperative or local projects and activities rather than distributed to shareholders. credit unions are non-profit entities, providing services to their members. the credit union aims to mutually strengthen solidarity, empower and strengthen prosperity among its members and the achievement of goals. credit unions can be seen from their financial management capabilities, marketing activities, increasing and empowering membership and other business fields (garcia & gonzaga, 2024; llewellyn et al., 2021). based on the understanding that a credit union is a financial institution, the main foundation for sustainability lies in the efficient management of funds or savings and loans within the credit union (gomez-biscarri, 2021). savings are a type of accumulation of funds to increase capital. capital is used as principal savings and mandatory savings. meanwhile, loans are capital or funds given to members to support and drive the economy and develop and improve businesses (a et al., 2023). credit unions are becoming a more significant topic in the financial sector and have proven to be a professional game changer in overcoming socio-economic imbalances in local communities who cannot access financial services and products (van rijn, 2022; beccalli et al., 2023). credit unions are increasingly recognized as having the ability of large corporate organizations to make significant contributions to individuals living on low incomes. (mashange et al., 2022; wang et al., 2022) credit unions are considered the main solution to minimize information asymmetry and high transaction costs that cause market imperfections and credit rationing (meira & ramos, 2023). credit unions can increase access to financial services for low-income families (cuong et al., 2020; simamora et al., 2023). credit unions seek to maximize the benefits they provide to their members, but to successfully achieve a fair socio-economic balance and meet member-driven goals, credit unions must be sustainable (kumkit et al., 2024). credit union sustainability is also reflected in its continuity or penetration level (dereeper et al., 2020). to date, credit unions have demonstrated their true cooperative identity and demonstrated a strong commitment to cooperative values (simkhada & bhattarai, 2023). credit unions can maintain their distinct cooperative identity. although credit unions have become larger and more diverse, they still operate as member-owned cooperatives with democratically elected boards of directors, with each member having only one vote, regardless of the amount of deposits in the credit union (boadu et al., 2024). this structure is fundamentally different from the shareholder ownership model (da silva et al., 2017) credit unions arguably have more flexibility to focus on prosocial goals, such as financial education, financial inclusion, consumer-friendly interest rates, diversity and inclusion, and possible outcomes. does not increase profits but remains an important part of the credit union's identity (d. g. mckillop & wilson, 2015) despite significant changes in size, membership and regulation in recent decades, credit unions continue to reflect the identity and values of cooperatives and are unique compared to institutions other financial matters in terms of structure and impact. in the current era of modernization, business plays an important role in the economic progress of a country. entities such as non-profit credit unions play a major role in business progress amidst https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 467 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the rapid flow of modernization. before the advent of sophisticated technology, the traditional system was still applied. however, as time goes by, the development of the globalization era must be accompanied by skills in mastering technology and being able to provide creative innovation to develop the business. this phenomenon is considered important as a sector in the world of finance because globally companies are owned by several members and can obtain large benefits (maia et al., 2019). economic benefits are mainly obtained from members who obtain better interest rates on deposits and loans than those provided by conventional financial institutions (alvarez-gamboa et al., 2023; vik et al., 2023). there have been several studies conducted by previous researchers that focused on cooperative financial institutions in terms of characteristics, structure, cooperative behaviour, performance and contribution of financial cooperatives to the real economy using the literature review method (d. mckillop et al., 2020). this research was motivated by van rijn's (2022) research on the development of credit unions, the credit union movement, and cooperative values. there is research that is in line with cruz & mariana (2024) which discusses the development of credit unions and evaluates the financial relevance of the economic sector to the profitability of credit unions, (van rijn, 2022) emphasizing the need for research on the development of credit unions in asia using other methods. therefore, researchers want to examine the development of research on credit unions with 4 topics: financial inclusion, consumer welfare, commercial banks, and cooperatives. this research aims to examine credit unions in asia using literature review methods and bibliometric analysis studies. previous research by d. mckillop et al. (2020) used a literature review of cooperative financial institutions. this research was motivated by the research of d. mckillop et al. (2020) which discusses cooperative financial institutions and van rijn, (2022) discusses the development of credit unions, the credit union movement, and cooperative values. so this research focuses on the development of credit union research with 4 topics, namely financial inclusion, consumer welfare, commercial banks, and cooperatives using bibliometric analysis with the help of vosviewer. this research uses the scopus-indexed journal database from the science direct website, covering the period 2018-2024. this vulnerable period was chosen to expand previous research conducted in 2018, but this research will extend to the 2018-2024 period. the contribution of this research is that it can provide an overview of future research on the development of the credit union movement and as a future direction in overcoming socioeconomic imbalances in local communities who cannot access financial services and products. in addition, this research also contributes to social movements, which is relevant considering the increasing need for strong values and ethical behaviour from financial institutions. the research objective or focus of this research is to analyze credit union research on 4 topics: financial inclusion, consumer welfare, commercial banks, and cooperatives. therefore, the results of this research are expected to provide complete information about the development of credit union research to researchers and practitioners who are interested in credit unions on the 4 topics of financial inclusion, consumer welfare, commercial banks, and cooperatives in the future in the years that the researchers have determined. literature review is a method that uses various study sources that are considered appropriate for the research objectives (d. mckillop et al., 2020). the purpose of the literature review is to identify and understand relevant previous research results so that they can be synthesized into a new https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 468 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc theoretical framework (hamed et al., 2024). bibliometric analysis is a method of bibliographic analysis that is based on the assumption that researchers always report the results of their research (dande et al., 2024; d. mckillop et al., 2020). by always communicating the results obtained and conducting joint studies on a specific research topic, it is hoped that this will provide progress and develop the knowledge of researchers (andoh et al., 2024). bibliometric analysis helps researchers analyze publication trends because it can be used to evaluate research results in various fields of study (andoh et al., 2024; trivedi et al., 2022). bibliometric analysis can be carried out using a search process, in the search process it is important to look for database sources that are relevant to the issue being discussed, increasingly to filter articles in bibliographic databases (de giovanni et al., 2024). this bibliometric analysis uses the scopus database, scopus was chosen because it contains a collection of citations and abstracts of scientific publications which are considered the most complete (alkadi et al., 2024). research by liesa & porcel (2024) states that scopus is widely used in the field of bibliometrics. in this bibliometric analysis, researchers used articles from the scopus journal. the aspects used in this bibliometric analysis are the keyword credit union, using statistical tools to process the findings and visualization of the bibliometric analysis results with the help of vosviewer software. this bibliometric analysis aims to dig deeper into information about the development of credit unions. the results of this research analysis will be discussed further in the discussion and results of data processing using vosviewer. with 4 topics: financial inclusion, consumer welfare, commercial banks, and cooperatives, researchers will explain them in narrative and graphic form so that they are easier for readers to understand. therefore, it is hoped that the results of this research will provide complete information about the development of credit union research with the 4 topics of financial inclusion, consumer welfare, commercial banks, and cooperatives to researchers and practitioners who are interested in this topic in the future, in the years that the researchers have determined. this research is useful for future research, where the results of this research can produce research gaps that are rarely researched or are the newest. this latest research gap will be the perspective of future research as the latest research by future researchers so that the scope or scope of distribution of future research will be wider. apart from that, this research can also provide benefits for parties related to entities, especially non-profits, in managing their business so that the entity's goals can be achieved. method researchers used a literature review methodology with a descriptive quantitative approach to bibliometric analysis. for bibliometric analysis, researchers used vosviewer software to analyze the finding data. secondary data was used in this research. the data collection technique uses literature studies obtained from the publish or perish software by selecting the sciencedirect web journal indexed by scopus. for article selection, refer to the main discussion of credit unions for 4 topics, namely financial inclusion, consumer welfare, commercial banks, and cooperatives. the population of this research is all articles about the development of credit union research from the scopus journal spanning the years 2018 to 2024. the reason the researchers took the period https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 469 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2018 was that this year was the year with the highest level of credit union transactions and research at that time was also booming. the population in this study is 200 articles that have been collected in publish or perish. the sample used in this research is the subject area of financial accounting research. the sample used by the researcher was 59 scopus articles, but the results of checking on the scopus website turned out to be 61 scopus articles. this is because when checking there is a time difference between checking the publish or perish software and the scopus web. therefore, the results of the number of articles include additional research that has just been published in the scopus database. from these differences, the author can add mapping analysis based on organization, journal name, and number of countries, where the results of the data processing are processed from the results of checking the scopus journal web. the aim of adding this mapping is so that the analysis results can be broader and can describe future research objects more perfectly. bibliometric analysis applies statistical and mathematical models to analyze scientific publications to establish indicators of scientific activity and research performance (farooq, 2024; zyoud et al., 2015). bibliometric analysis is used to evaluate the results of existing scientific work and map scientific fields, search for or trace the development of new knowledge in certain fields in certain periods. bibliometrics is usually carried out using two approaches, namely the number of publications which functions as an indicator to measure productivity and the number of citations, an indicator that measures the impact of the articles produced (farooq, 2024; murgadoarmenteros et al., 2015; zyoud et al., 2015). the reason researchers use bibliometric analysis is because it can provide measurement results, such as the number of journal publications, citations, keywords, and the distribution of credit union topics in asia. this analysis uses vosviewer. vosviewer is an application that can be developed to create and display maps based on bibliometric data. this application provides a text-mining feature that allows users to build and describe visualizations of networks or relationships in journal citations. vosviewer can present specific information about bibliometric graphic maps. if keywords appear outside the vosviewer visualization, it means that the keywords appear together with existing publications (erlina et al., 2024; murgado-armenteros et al., 2015). a bibliometric and systematic literature review approach summarizes the scope of qualitative and quantitative literature to assess publications about credit unions (qing et al., 2024). systematic reviews increase the transparency of research. while several other researchers have used both approaches in similar studies, issues ahead in the literature include the vosviewer software adopted to visualize bibliometric analysis. the use of vosviewer opens up space for examining bibliometric mapping in full. (osabutey & jackson, 2024; oyewole et al., 2024). vosviewer's display capabilities make very efficient comparisons of past and present literature to reveal how a particular research area is developing. the purpose of using the vosviewer software application is to find research gaps or loopholes that can be researched by future researchers. vosviewer software also presents results in the form of clusters for each research topic. this can be used as a reference in looking for research ideas that will carry out similar research so that stagnant research does not occur. the meaning of stagnant research is research that has been around for a long time but is still being discussed or researched again on the same issue but only with a difference in time (research novelty that is not very significant in the research conducted). this credit union research also uses the https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 470 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc scopus database feature in carrying out the process. the researcher took the subject area of business management and accounting for the same period, namely 2018 to 2024. figure 1 explains the data collection steps carried out by the author. bibliometric data is taken automatically from scopus data using pop (publish or perish). researchers used the keyword "credit union cooperatives" in the first step of the search, which resulted in an initial population of n=200 journals. final data was obtained by refining the search using the scopus automatic system to limit results. researchers filtered the years 2018-2024, subject area business "management and accounting" and "economics, econometric, and finance," document type "article," keywords "credit union" and "cooperatives." refinement of the search yielded final data for analysis. the data is n=115 journals. researchers sort journals that are relevant to the topic. so, the final results obtained data from n=59 journals. figure 1. inclusion and exclusion criteria figure 1 shows a strict process, data source process, keyword search, and inclusion & exclusion filters. thus, the final filtered documents obtained were 59 articles that would be used for bibliometric analysis. • scopusdata source • credit union, financial inclusion, consumer welfare, commercial banks, cooperative keyword search • “ publication year, document type, research area, language“ • publication year : 2018-2024 • document type : articles • research areas : credit union, financial inclusion, consumer welfare, commercial banks, cooperative • language :english • final filtered documents : 59 inclusion & exclusion filters https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 471 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2. final data filtered documents publish or perish figure 2 shows the metric results by pubish or perish. this research uses the scopus data source, publish or perish data collection, and document filter with the keyword "credit union cooperative" for publication years 2018 to 2024. the results obtained in the citation metric for the number of publications were 59 papers with 51.67 citations. result and discussion number of publications in academia, developments in research interests are primarily identified by the volume of published work. figure 3 depicts the total volume of publications and citations each year. this publication and citation covers "credit union cooperative" from 2018-2024. annual publications and citations experience ups and downs every year. the highest number of publications will be in 2023, and the highest number of citations will be in 2018. this graph decreased from 2019 to 2020; in 2021, it increased until 2023 and decreased in 2024. it is possible that 2024 has not yet been half a year, and there are limited data. they were obtained by researchers. so, the researcher concluded that only a few people have researched the topic of credit unions. the researcher concluded that annual publications and citations could increase in the coming year because, looking at the graph in 2023, it rose drastically even though 2024 decreased drastically. still, according to the researcher, 2024, it will increase if articles are published on credit unions in the next few months. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 472 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3. yearly literature growth author analysis this authorship analysis uses vosviewer to describe a list of authors who show significant influence in credit unions with four topics: financial inclusion, consumer welfare, commercial banks, and cooperatives. this analysis identifies each author based on the number of articles published on the research topic. figure 4. co-authorship visualization using the established criteria, only 59 met the criteria. as seen in figure 4. authors unrelated to each other are not included in the visualization. the size of the circular nodes corresponds to the number of articles, while the lines connecting the nodes indicate collaborative authorship. the colors represent collaborative groups. green and purple clusters have the same number of https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 473 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference items; green has the highest number of links. in that sense, the author who contributed a lot was pavlovskaya; marianna was in the highest cluster. a relatively large number of researchers dominate network visualization. keyword analysis figure 5. density visualization of most cited literature figure 6. author keyword co-occurrence https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 474 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the credit union research, four topics, financial inclusion, consumer welfare, commercial banks, and cooperatives, are some essential keywords found through searches, as shown in figure 6. financial inclusion is the keyword most frequently used by authors, appearing 15 in total—link strength 12. the second keyword, cooperative, which is the most commonly used cooperative, appears 10 with a total link strength of 9; the third keyword, consumer welfare, appears 10 with a total link strength of 8, and the fourth commercial bank keyword appears 10 with a total link strength of 5. it is not surprising that financial inclusion is at the top of the ranking because it is essential for economic empowerment and encouraging sustainable development (gao et al., 2024; ghosh, 2024). topic analysis this article will develop research on credit unions on four topics: financial inclusion, consumer welfare, commercial banks, and cooperatives. based on scopus data. based on the mapping results, 59 articles met the research study criteria. figure 7. vosviewer credit union mapping data processing the results of mapping the credit union topic, the results of absorption from scientific journal article data originating from scopus where the credit union relationship between the issues above uses vosviewer network visualization, including issues related to credit unions are financial inclusion, consumer welfare, commercial banks, cooperative. the larger the node size, the more often the author's name appears in the asset data, or it can be interpreted as the author being dominant on a particular research topic because he has a strong network of authorship relationships with other authors. to show the dominance of journals, the focus was on 59 journals according to the research topic; data collection was carried out by looking at various citation indices for each journal, which were then analyzed using vosviewer software. all clusters that have been visualized have an interest in other clusters. as shown in figure 7, "financial inclusion" is the most https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 475 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc popular in credit union research. this topic is a trending research topic with the highest number of publications. analysis based on 10 journal names for top total link strength analysis based on journal names has been obtained by researchers from the results of the collection which is presented in table a with journal name, number of documents, citations, and total link strength. qualitative research in accounting and management is the journal with the highest total link strength, namely 54, and only has 1 document included in scopus on the topic of credit union research. furthermore, review of quantitative finance and accounting is a journal with a total link strength of 48. the number of link strengths in the journal review of quantitative finance and accounting has a difference of 6. the journal review of quantitative finance and accounting has a greater number of documents, namely 3. social and environmental accountability journal is a research journal that examines credit unions, the same as the previous journal. the social and environmental accountability journal has a total link strength of 46, a difference of 2 from the review of quantitative finance and accounting journal. social and environmental accountability journal has 1 research document. of the 10 journals described by researchers, the journal of business has the lowest total link strength, namely 16. for this reason, researchers in the future can use journal sites with the fewest documents to be able to publish their work. no source document citations total link strength 1 qualitative research in accounting and management 1 3 54 2 review of quantitative finance and accounting 3 26 48 3 social and environmental accountability journal 1 2 46 4 international journal of managerial finance 1 5 37 5 research in international business and finance 1 2 35 6 journal of financial service research 3 42 34 7 latin american business review 1 3 24 8 rausp management journal 3 17 23 9 public money and management 2 3 17 10 journal of business 2 59 16 table a. 10 journals with the top total link strength apart from the results of presenting the top total link strength created by the researchers, the researchers also presented the results in the form of vosviewer data processing images. this aims to determine the dissemination of research results on the credit union research topic. the https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 476 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc following are the results of research data processing based on journal names using vosviewer software which are presented in figure 8. from the results of data processing with vosviewer software, it is known that there are a total of 9 clusters, 38 items, 186 links, and a total link strength of 421. figure 8. overlay visualization analysis results for mapping based on journals source: vosviewer data processing figure 9. results of network visualization analysis for mapping based on journals source: vosviewer data processing the purpose of density analysis is to see which parts of the research are rarely used. in figure 10, density visualization analysis for mapping based on journals, there is a yellow color with a wide range. for the slightly yellow color range, it can be confirmed that research on the topic of credit https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 477 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc unions is a topic that is rarely researched in this journal. future authors will likely conduct credit union research if they submit it to journals that rarely research credit unions. figure 10 results of density visualization analysis for mapping based on journals source: vosviewer data processing analysis based on top 10 organizations for total link strength mapping based on organizational analysis is presented by researchers in table b. the purpose of this presentation is to find out which agencies carry out research related to credit unions. by knowing the agency conducting the research, researchers in the future, if there is an opportunity, can collaborate in improving research development, especially research on credit unions. in this presentation, the order from top to bottom is based on total link strength. goizueta business school, emory university, atlanta, united states is an organization or agency that has the highest total link strength, namely 405. the second place is occupied by the organization business school, university of colorado denver, united states with a total link strength of 389. indian school of business, telangana, hyderabad, india is the organization in third place in the total link strength ranking, namely 389. terry college of business, university of georgia, athens, united states is the organization in fourth place in total link strength 389. there is something unique about the results this mapping is that the indian school of business, telangana, hyderabad, india, and the terry college of business, university of georgia, athens, united states have the same total link strength, documents, and citations. john molson school of business, concordia university, montreal, qc, canada is one of the organizations with the lowest total link strength, namely 160. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 478 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no organization documents citations total link strength 1 goizueta business school, emory university, atlanta, united states 2 35 405 2 business school, university of colorado denver, united states 1 12 389 3 indian school of business, telangana, hyderabad, india 1 12 389 4 terry college of business, university of georgia, athens, united states 1 12 389 5 departement of accountancy, queensland university of technology – qut, brisbane 1 3 260 6 master of management, sanata, dharma university, yogyakarta, indonesia 1 3 260 7 school of accountancy, queensland university of tecchonology, brisbane, australia 1 3 260 8 arhur j. bauernfeind college of business, murray state university, 130 business building 1 2 160 9 cirano, montreal, qc, canada 1 2 160 10 john molson school of business, concordia university, montreal, qc, canada 1 2 160 table b. 10 organizations with the top total link strength figure 11. results of network visualization analysis for mapping based on organization source: vosviewer data processing https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 479 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 11 is an image that presents the results of network visualization analysis for mapping based on organization. meanwhile, figure 12 is an image that presents the results of density visualization analysis for mapping based on organization. the purpose of presenting this image is to define the influence of the development of credit union research which continues to grow rapidly and look for research opportunities. many organizations publish work on credit unions as a research topic. this will add to the latest research results in the future. if you look at it based on color. the year 2024 is defined by the color yellow. the yellow color appears in financial accounting and management. likewise, blue with the year 2018, purple for 2020, and so on. for a complete distribution of data results, see figure 11. figure 12. densinty visualization analysis results for mapping based on organization source: vosviewer data processing mapping analysis by country analysis by country was carried out by researchers to find out which countries contributed to research on credit union research. table c presents the results of the mapping analysis based on the top 10 countries with the top total link strength. research on credit unions is mostly conducted in the united states. the united states has a total of 20 documents and 167 citations with a total link strength of 491. australia is the country with the second highest total link strength, namely 439, and the number of documents created is 20 documents. the next country with the third highest total link strength is indonesia. indonesia conducted research on credit unions by publishing 4 articles and these articles were published in the international journal scopus. the total number of citations made by indonesia based on table c data is 67. further research was carried out by the united kingdom. the united kingdom has the fourth largest number of studies with a total link ranking. the country with the lowest total link strength is in tenth place, namely spain with a total link strength of 33. spain has also published 2 research documents with 10 citations. research on credit unions has been carried out a lot and has become a unique research development for researchers. researchers in the future can collaborate with researchers across countries so that their work can achieve the best index. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 480 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no country documents citations total link strength 1 united states 20 167 491 2 australia 6 33 439 3 indonesia 4 6 336 4 united kingdom 9 87 263 5 brazil 12 33 211 6 germany 2 4 152 7 canada 3 6 147 8 india 2 12 141 9 vietnam 1 5 131 10 spain 2 10 33 table c. 10 countries with the top total link strength figure 13. results of network visualization analysis for mapping by country source: vosviewer data processing figure 13 is an image that presents the results of network visualization analysis for mapping by country. this image explains that since 2020 there has been a lot of research development on credit unions. purple is a color with prominent areas and shows that the research carried out has developed and is being carried out a lot. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 481 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 14. densinty visualization analysis results for mapping by country source: vosviewer data processing figure 14 is a presentation of the results of density visualization analysis for mapping by country. the density visualization analysis aims to find out which countries have conducted research on credit unions with sustainable development results. this also applies to knowing the extent to which researchers in a country contribute to research results aimed at the development of science. this research aims to evaluate trends and mapping in the development of credit union research through bibliometric analysis. findings from the study of annual publications show that only a few people have researched the topic of credit unions. the researcher concludes that yearly publications and citations can be increased in the coming year because the graph in 2023 has increased drastically. however, in 2024, it has decreased drastically, but according to the researchers, in 2024, it will grow. in the next few months, articles will be published on credit unions. among the topics in this research, "financial inclusion" is a topic that is more common in credit union research. therefore, the most popular and actively researched credit union research topic today is financial inclusion. in the author analysis, the author who contributed a lot was pavlovskaya; marianna was in the highest cluster in the vosviewer analysis. financial inclusion is the keyword most frequently used by writers, appearing 15 with a total link strength of 12. the second keyword, cooperative, which is the most commonly used cooperative, appears 10 with a total link strength of 9; the third keyword, consumer welfare, appears 10 with a total link strength of 8, and the fourth commercial bank keyword appears 10 with a total link strength of 5. from the results of research on the development of the topic of financial inclusion (financial inclusion), the development of research on the topic of financial inclusion provides a direction of knowledge that is very important for business actors in running their businesses, especially for msmes (micro small and medium enterprises). this is because financial inclusion can have an influence on financial planning which has an impact on the sustainable performance of msmes (micro small and medium enterprises). in the results of consumer welfare, the researchers concluded that when doing business for the msme type of business, systematic steps are needed. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 482 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this systematic stage is conducting a survey of the types of businesses in the surrounding area, online surveying the partners who have been determined, determining the right resource person to provide webinar material if needed, and planning for the webinar activity once it has been completed. the results of research on the topic of commercial banks and cooperatives provide information that non-profit institutions such as credit unions have the advantage of paying higher deposit interest rates to their members. additionally, charging lower fees for services such as checking accounts and atm withdrawals. in conclusion, credit unions can save their members money on borrowing, deposits and savings products. the results of this research show that there has not been much research on credit unions since 2018-2024, but the researchers conclude that interest in research on credit unions will increase looking at the graph. the results of the mapping show that the most researched credit union research topic with a sample of 59 articles is "financial inclusion" and the year with the highest number of publications is 2023, but the highest number of citations is in 2018. the researcher concludes that the results of this research can provide research ideas future regarding credit unions. the implementation of credit union accounting has its characteristics, such as having operational objectives for the company and meeting user needs in the decision-making process. apart from that, the characteristic of presenting credit union financial information lies in conveying the form of terms according to the level of knowledge of the users. in practice, three processes must be carried out, ensuring input and output processes. the transaction input used can be cash or non-cash. for the process stage itself, transactions have been grouped by each account and can be found in the member book, kspa, sum/suk summary, journal book, etc. below, the researcher will present the flow stages of how to process credit union (cu) transactions. https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 483 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 15 transaction process flow at the credit union in credit union transactions, the first stage begins, namely the transaction in supporting documents is recorded or entered into a book called the supporting evidence book. after the first stage is completed, an accountant can create a journaling process which is obtained from transactions that have been provided in previous bookkeeping. after the journaling process is complete, the next stage is to group transactions which will be given an account code and will be entered into the ledger. in this ledger, transactions are grouped for each account and can finally be entered into the balance sheet. at the stage of creating a balance sheet or working paper, you need to pay careful attention to what is included in assets, liabilities, and equity. this is because this process will be used for decision-making by interested parties within an entity. the interested parties themselves include internal and external. internal parties, namely employees and managers. meanwhile, for external parties, namely creditors, government, and investors. of course, these interested parties take policies, such as investing, by looking at the company's financial reports to assess several things, such as employee performance and the company's growth and development, whether it can progress or, conversely, the value of a company's performance will decrease day by day. recording transactions in supporting documents and/bookkeeping evidence recording transactions sequentially (chronologically) in a journal (diary or memorial) systematic grouping of transactions guided by estimated numbers recording transactions into the auxiliary book summary of transactions (as working paper) in the work sheet or briefly in the trial balance/residual balance. finished start https://www.ilomata.org/index.php/ijtc literature review: development of credit union research topics perspectives in the field of financial accounting setyaningrum and carolina 484 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the rapid development of technology provides encouragement for business people to adapt to utilize technology based on qualified skills. many entities or companies are competing to create new innovations so that these entities can develop rapidly, for example, credit union entities. this research aims to dig up more in-depth information about credit union research topics with the subject areas of financial inclusion, consumer welfare, commercial banks and cooperatives. the results of this research are that 200 scopus articles have been found on the sciencedirect website and 59 articles or 61 articles have been used as samples. this research seeks to explore the development of credit unions from 2018 to 2024. the research uses a bibliometric approach to analyze the findings of research articles that are relevant to the subject area and the quantitative descriptive method is used in this research. mapping is also carried out by researchers to find out the results of research that has been carried out previously. this mapping includes analysis of topics, keywords, authors, journal names, organizations and countries. the research results show that the development of credit union research experiences ups and downs every year. the benefit of this research is that it can provide knowledge for readers and related parties such as non-profit entities in managing their business and the vision and mission can be achieved optimally. this research also contributes to providing an overview of the scope of the research area for future researchers so that it is broader in terms of further research development. it is hoped that this research can provide complete information to researchers and practitioners who are interested in future credit union research, about variables that are relevant to credit unions and variables that have not been researched much before. apart from that, it is also hoped that the results of this researcher's research can be used as reference material or solutions for entities, especially non-profit entities, in developing their business. thus, it is not only practitioners or academics who reap the benefits of this research, non-profit entities and related institutions can benefit from this research. based on the benefits of this research, the researcher is aware that there are limitations to this research. this research has limitations in the number of samples, topics related to credit unions, and types of research methods. therefore, future researchers can review more samples from international journals indexed by scopus, especially quartile 1 and 2. future research also uses different topics such as the subject areas of business management and accounting and uses descriptive qualitative methods or mixed methods between quantitative and qualitative. apart from that, the results of future research can be compared with research made by current researchers in order to update research from time to time, especially in the field of financial accounting. reference a, j. g., b, d. g. m., & os, j. 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(2015). scientific research related to calcium channel blockers poisoning. human and experimental toxicology, 34(11), 1162–1170. https://doi.org/10.1177/0960327115571768 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 709-725 709 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy jhon dogor sabatya tampubolon1,valentine siagian2, jhon rinendy3 123universitas advent indonesia, indonesia correspondent: 2132028@unai.edu1 received : june 1, 2024 accepted : july 13, 2024 published : july 31, 2024 citation: tampubolon, j, d, s., siagian, v., rinendy, j. (2024). boosting corporate performance: green accounting and audit quality synergy. ilomata international journal of tax and accounting, 5(3), 709-725. https://doi.org/10.61194/ijtc.v5i3.1384 abstract: this study aims to explore the impact of green accounting and audit quality on company performance in property and real estate companies listed in 2021–2022. this study used the purposive sampling method, observing 138 observations from 69 companies. this study uses 91 gri g4 framework criteria statements to assess the level of green accounting disclosure. corporate performance in this study is measured by roa, roe, and npm. the results of this study, based on statistical data, show that green accounting only has a significant positive effect on npm. the results of the audit quality effect on roa, roe, and npm indicate that the effect was positive and insignificant. based on this study indicates that the effect of green accounting is only seen in npm, for that in the future there should be more companies that voluntarily make corporate sustainability reports. keywords: corporate performance, green accounting, audit quality this is an open access article under the cc-by 4.0 license. introduction the changing times have a positive impact on business development. companies experience rapid growth by implementing a variety of diverse strategies, with the aim of surviving in the long term. companies operate a business with a structured plan with to achieve goals, both in the short and long term, a sustained and focused effort is required. the company's ability to achieve its set goals is known as company performance (shofwatun et al., 2021). efforts to improve performance must be carried out effectively and efficiently on a consistent basis to achieve company goals, along with achieving revenue, profitability and growth (nanda et al., 2023). in other words, company performance is the key to achieving goals that exceed previous expectations. when the company achieves the desired success, its achievements will be clearly reflected in its financial statements. financial reports are often the main window for stakeholders to see the company's development systematically and in detail. https://www.ilomata.org/index.php/ijtc mailto:2132028@unai.edu https://doi.org/10.61194/ijtc.v5i3.1384 boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 710 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc every company has its own value in the eyes of investors (mandjar, yustina triyani, 2019). before investors make an investment, they generally evaluate the company's performance through published financial statements. company performance has a major impact on the market's assessment of the company. a company's financial condition is clearly reflected in its performance, as the two are strongly linked. in addition, a company's performance also depends on the amount of assets it owns, as assets make an important economic contribution to the company's operations. therefore, the reliability and accuracy of financial statements are crucial in making smart decisions in the company. fraud in the financial accounts can damage the company's reputation and negatively impact both domestic and international investors. underperforming investments can significantly impede economic progress and foster a sense of mistrust among all stakeholders. the financial accounts demonstrate an organization's success following a sequence of operational endeavors. one instance of financial statement manipulation in property and real estate companies, specifically pt hanson international tbk, has been documented. quoted from sandria (2021), the managing director of hanson international was fined idr 5 billion for violating capital market regulations. these violations include early revenue recognition and neglect of the presentation of the sale and purchase agreement in myrx's 2016 financial statements. ojk identified several legal violations, particularly the use of the full accrual method for revenue recognition in the sale of ready-to-build lots with a gross value of rp 732 billion. this action resulted in the december 2016 financial statements being overstated by rp 613 billion. the reporting errors raise serious questions about the integrity and reliability of the company's accounting practices. financial statements are a formal document that describes the financial performance of a company as a means of official communication between company management and investors (mirza et al., 2010; hasanaj & kuqi, 2019). the main purpose of preparing financial statements is to present detailed information about the financial condition, operational performance, and cash flow of an entity during a certain period. the hope is that the information contained in the financial statements can provide significant benefits to stakeholders in the context of economic decision-making. the strategy to improve the company's financial performance during periods of economic growth is to strive to maintain competitiveness through innovation in work processes and operations. thus, the company can optimize asset and capital management in order to remain competitive in the market and achieve optimal levels of profitability (rosha & lace, 2021). by adopting innovations in various operational aspects, the company can improve asset usage efficiency, maximize return on equity, and ensure a healthy net profit margin, which will have a positive effect on the company's overall financial performance. in an effort to maximize the company's operational results, the continuous use of resources results in negative impacts on the surrounding environment, such as air pollution, water pollution, or land use restrictions and limitations on meeting human needs (cahya, 2022). modern industries are required to understand and implement strategies so that companies do not only focus on achieving profits but also have concern for social and environmental aspects, considering them an important element in business sustainability (wiredu et al., 2023). therefore, green accounting is one of the answers and tools for industries that aim to preserve the environment so that the company's performance remains attractive in the eyes of investors and https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 711 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the public (faranika & illahi, 2023). this will also benefit all parties involved, including employees, the general public, and the environment, by reducing health risks in everyday life (kusumaningtias, 2013). industries need to maintain environmental sustainability in accordance with applicable standards. this entails not only efficient waste management, but, more importantly, meeting society's demands so that the entire production process, from the manufacture of raw materials to the disposal of products after consumption, does not cause environmental pollution. rahman & islam (2023). companies involved in the production process must be able to carry out the concept of sustainable and environmentally friendly industries in an integrated, comprehensive, and effective manner (yehezkiel et al., 2023). improving environmental performance is a very crucial aspect of ensuring the sustainability of natural resources and maintaining the balance of the ecosystem (arsjah et al., 2023). to achieve company goals and targets, effective environmental management and compliance with applicable government regulations are required (faranika & illahi, 2023). according to rosilawati et al (2021; shashanka, (2023) green accounting is an accounting method that seeks to link ecological financial planning with the company's operational funds. green accounting can operate organically, manage costs, and allocate resources into innovations that do not harm the ecosystem, and advance the production cycle without causing environmental damage (fadillah et al., 2023). the implementation of a green accounting program in the company will contribute positively, including strengthening trust when carrying out transactions to purchase products or services offered by the company (rizki et al., 2023). the implementation of green accounting has a good impact on company performance because it shows the surrounding community that the company cares about the environment. productivity in carrying out green accounting methods is a long-term investment that aims to produce good value for authorized parties and stakeholders in the company (mardiana & wuryani, 2019). the results of this study are not in line with previous researchers who show that green accounting had no positive influence on company performance (pratiwi et al., 2023). this is what encourages the author to look at testing more deeply with the use of samples in property and real estate sector companies in indonesia. information disclosing the fact that the company has implemented green accounting can be seen from the results of financial statements and sustainability reports. high trust in financial statements can only be achieved with a quality audit. in every final result after the audit process is carried out, the company's expectation of the opinion given by the auditor is a high quality and trustworthy opinion, because it is closely related to helping facilitate stakeholder decision making (mukrimaa et al., 2016). assessment of audit quality depends entirely on two factors, namely independence and competence in helping the integrity of the financial markets as a whole (lona & pratiwi, 2023). audit quality is defined as attributes derived from regulatory requirements and mutual benefits, or behaviors and demonstrations that improve the efficiency of audit work and professional attitudes (arista et al., 2023). in other words, audit quality is something that needs to be maintained to provide confidence to investors through the auditor's experience (hutapea & ferinia, 2022). in addition, it can be concluded that a tempo that has a process in an examination conducted by an independent and competent auditor is audit quality. https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 712 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc there are still discrepancies in previous research findings and limited studies that have been conducted in indonesia regarding the factors that influence company performance. this encourages researchers to conduct research in overcoming the challenges of company performance. to examine the role of green accounting and audit quality in improving company performance. this study will focus on the real estate and property sector, especially those that have gone public for the 2021-2022 period. signaling theory signaling theory stems from the idea that not all parties have an equal opportunity to access information. this theory is based on the belief that management will tend to provide information to investors or shareholders when they have positive news that impacts the company, such as an increase in company value. therefore, managers need to use financial statements as a tool to convey information to stakeholders. this theory basically focuses on how to reduce the information imbalance between company management and external parties and this signal theory was first introduced by ross in 1977 (marundha et al., 2022). corporate performance corporate performance is the result of accumulated capacity obtained through business activities, which is influenced by operationality in optimizing the utilization of its resources (rosha & lace, 2021). corporate performance reflects the entity's ability to generate profits from its assets, equity, and liabilities. company performance is a description of the company's financial condition that has an influence on investor interest in the company in predicting profitability in the future (hutabarat, 2020). in the realm of investment, investors must have the skills to recognize the potential of promising investments. this is so that the chosen investment can provide optimal results. one important aspect in making investment decisions is financial statements. financial statements present information about profitability, risk, timing, and cash flow, all of which will affect stakeholders' expectations (puspita, 2019). these expectations will then have an impact on the valuation of the company. evaluating the financial performance of a company involves analyzing the effects of cumulative financial and economic decisions and comparing them using comparative measures such as profitability ratios (iqbal et al., 2023). there is a view that the higher the company's income, the better the assessment of the company's performance. one indication as a motivation that drives investor interest in companies that have high valuations is the presence of healthy financial performance, because usually the company's ability to provide high dividends to investors is a reflection that the same thing happens to financial performance that earns high profits (ningrum, 2022). financial performance is a specific evaluation used to measure a company's success in generating profits. to measure financial performance, some of the main indicators used are return on asset (roa), return on equity (roe), and net profit margin (npm). these indicators are considered comprehensive because they can provide an overall picture of a company's performance, are easy to understand, and can be applied to different types of companies. green accounting https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 713 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the definition of green accounting is the performance carried out by the company in an effort to improve the quality and image of the company which at the same time adds confidence to every individual and stakeholder concerned with business sustainability for a long time(seifert & bartelmus, 2018). environmental accounting is a measurement system that allows companies to quantify the impact of their environmental conservation activities (yehezkiel et al., 2023). it allows companies to report the impact of their operational activities on the environment in the financial statements. green accounting not only helps in reducing the negative impact on the environment, but also promotes competitive advantage by reducing the use of natural resources and energy and health risks (dianty & nurrahim, 2022; shashanka, 2023). the concept of environmental accounting encourages companies to address the environmental problems they face, while still considering financial aspects. the application of green accounting also shows the company's responsibility to stakeholders, because it reflects their attention to the environmental impact of their operations, rather than just focusing on financial value alone (rahman & islam 2023; nyantakyi et al., 2023). legislation related to green accounting includes law no.23 of 1997 on environmental management, which establishes responsibilities for individuals and organizations to care for and manage the environment, as well as provide appropriate and accurate information about it (suhaidi et al., 2024). audit quality companies in presenting financial statements that may have errors in the presentation of material components and will definitely not be reported by the auditor with an unqualified opinion (junaidi & nurdiono, 2016). auditor professionalism in examining financial statements with independence and competence and in accordance with applicable standards is a must that every individual auditor must have (carp & istrate, 2021). general information in the financial statements is where the final results of the financial audit are disclosed with indicators of auditor independence and competence. in order to achieve quality audit standards, auditors must comply with the principles of accounting ethics, professional norms, and financial accounting standards applicable in indonesia (muhamad rafly herdiansyah et al., 2022; zalata et al., 2020). the effect of green accounting on corporate performance green accounting practices efforts to improve environmental performance in companies while also improving financial performance so that the environment is properly managed and preserved in accordance with applicable government standards (hamidi, 2019; latifah & soewarno, 2023). in damayanti & astuti (2022) research revealed that there was no significant effect of green accounting implementation on company performance in the mining sector and chemical industry. the same result in faizah (2020) show that the application of green accounting has no significant effect on company performance. in addition riyadh et al., (2020) stated that green accounting has a negative effect on company performance. reseach by sinaga & valentine (2024) stated that green accounting affect net profit margin. one of the findings of (khan & gupta, 2022) one of the findings from (khan & gupta, 2022) states that there is a significant positive relationship between green accounting on company performance, due to the gap in previous research, therefore the hypothesis of this study is : h1: green accounting has a significant positive effect on roa https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 714 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2: green accounting has a significant positive effect on roe h3: green accounting has a significant positive effect on npm audit quality on company performance excellent auditors have the ability to examine financial records and have a strong track record, thereby reducing investor anxiety about the bias of financial information (carp & istrate 2021);(sattar et al., 2020). audit quality is one of the sources that can have a strengthening or weakening effect on an unqualified opinion (jeong, 2020);(zhang et al., 2022). research by sinambela et al (2021) states that audit quality has a positive effect on company performance. the reliability of financial statements will be improved by the company's audit quality based on the findings of saputra & kubertein (2023) it is concluded that audit quality has a positive and insignificant effect on banking sector companies 2016-2019. also the findings of al-ahdal & hashim (2022) state that the relationship between audit quality and company performance is not significant, so the development of the author's hypothesis: h4 : audit quality has a significant positive effect on roa h5 : audit quality has a significant positive effect on roe h6 : audit quality has a significant positive effect on npm green accounting and audit quality on company performance improvements in company performance must be equalized with the implementation of green accounting in the company as proof that the company cares about the lives of the surrounding community. green accounting has become an integrated function related to environmental preservation and management for the benefit of the area around the company (emy, 2020). in addition, proof that the company's performance has been carried out according to applicable standards can be proven on financial reports and sustainability reports that are checked by qualified public accountants. in the research of faranika & illahi (2023) it is suggested that there is an effect of green accounting and audit quality on firm value, the difference in variable testing that occurs in the findings of salsabila & widiatmoko (2022) states the results that green accounting on firm value with mediation of financial performance has a significant effect. this study focuses on the dependent variable of this company's performance. h7: green accounting and audit quality have a significant positive effect on roa h8: green accounting and audit quality have a significant positive effect on roe h9: green accounting and audit quality have a significant positive effect on npm https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 715 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. theoretical framework methods population and sample in this study, property and real estate sector companies listed on the idx in 2021-2022 are the population to be investigated. for this study, a sample of 69 companies for 2 years was used. the data processing technique is to use financial reports and sustainability reports that can be accessed via www.idx.co.id to observe the gri g4 disclosure indicators, big4 public accounting firm, company performance. with the aim of determining whether the research is relevant to research in the field. by applying research tools, samples will be randomly selected and data collected for statistical examination. this study uses purposive sampling method for sampling. the predetermined criteria include: 1) property and real estate companies listed in 2021-2022, 2) companies that delisted during the study period. there are 162 property and real estate companies during 2021-2022, after the sampling process by considering several criteria previously described, 69 companies were found to be eligible. thus, the total number of companies sampled in the study was 138 companies. table 1 sample selection no description total 1. number of property and real estate companies listed on the indonesia stock exchange during 2021-2022 162 roa green accounting roe audit quality npm corporate perpomance https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 716 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. companies that delisted during the study period (24) number of companies studied in 2021-2022 total sample for 2 years 138 this study's findings method, which uses quantitative measurements, is used to study a special population or sample (ferinia, 2023). the approach used is a correlation approach, to see how each variable relates to one another. secondary data is information obtained from pre-existing data sources and can be accessed by researchers for further analysis or research purposes (marisya & sukma, 2020). this study uses secondary data from the company's annual report and sustainability report during 2020-2021. table 2 variables definition variable measurement formula corporate performan ce financial ratios are a method of analyzing financial statements by comparing and dividing numbers to obtain relevant relationship (lase et al., 2022) roa = net income/ total asset roe = net income / total equity npm = net income / sales green accounting green accounting refers to measuring and reporting the economic value of environmentally friendly business practices. (faranika & illahi, 2023). gri index = numbers of indicators disclosed / 91 gri g4 indicators audit quality the big4 public accounting firm distinguishes it self from its competitors or non big4 with consistent excellence in competence and independence (apriani et al., 2020). dummy variables: 1 if firms audited by big 4, 0 otherwise firm size size of the firm measeured by the total asset owned by the firm =ln(ta) sales growth sales growth of the firm from the previous year (sales year t sales year t-1)/ sales year t-1 leverage ratio of total debt compare to total equity owned by the firms total debt/total equity results and discussion descriptive statistics descriptive statistics is a useful tool to provide an overview of the data. in this study, we will use descriptive statistics to analyze green accounting, audit quality, and performance of property and https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 717 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc real estate companies listed on the indonesia stock exchange from 2020 to 2021, focusing on roa, roe, and npm indicators. by using this method, we can gain a comprehensive understanding of the characteristics and data trends of these companies over the period. descriptive statistics are carried out to describe the characteristics of the data in the study. descriptive statistics can be done by finding the maximum value, minimum value, average value, and standard deviation. table 3 descriptive statistic n min max mean std. dev. green accounting 138 .00 1.00 0.1697 0.37651 audit quality 138 .00 1.00 .1232 .32985 roa 138 -41.00 33.00 .5290 7.07952 roe 138 -238.00 62.00 -1.1014 23.10127 npm 138 -747.00 8256.00 34.8768 724.49407 source : secondary data processed 2022 descriptive research on green accounting with gri g4 index measurement refers to a study that aims to describe and analyze green accounting practices in companies or organizations, focusing on how these practices impact the assessment of corporate environmental performance using the gri g4 index. the companies examined in this study have an average number of disclosures around 43-60 for a total of 25% of all samples and the highest number of disclosure indexes are 5% of the companies of the whole with a total disclosure of 61-152. and the rest of the companies do not disclose gri g4 index in their sustainability reports. the lack of frequency and appropriateness in compliance evaluation indicates that gri g4 indicators are not fully reflected in the context of property and real estate companies in indonesia in 2021-2022. some indicators are never even included in published sustainability reports, resulting in a low level of compliance. however, if we consider only the indicators presented by the companies, the level of compliance with them is quite good. table 4 frequencies audit quality frequency percentage 0 121 87.68 1 17 12.32 total 138 100 table 4 provides a distribution of the frequency and percentage of firms based on their audit quality status. audit quality is represented as a dummy variable with values 0 and 1. the distribution indicates that a majority of the firms in the sample (87.68%) are classified as having audited by non big-4 cpa firms, while a smaller portion (12.32%) are audited by big 4 cpa firms. this distribution is crucial for understanding the potential impact of audit quality on financial performance metrics, as analyzed in the preceding tables. green accounting and corporate performance https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 718 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5 presents the regression results analyzing the impact of green accounting (greenacc) on three financial performance indicators: return on assets (roa), return on equity (roe), and net profit margin (npm). the table includes six columns, representing different model specifications for each dependent variable with and without control variables such as firm size, sales growth, and leverage. all models account for firm fixed effects (firm fe). roa: the coefficient for greenacc is positive but not statistically significant in both models for roa (0.02, t = 0.74 and 0.02, t = 0.69). similar to roa, the coefficient for greenacc is positive but not statistically significant for roe (0.02, t = 0.21 and 0.02, t = 0.25). the coefficient for greenacc is positive and statistically significant for npm (7.13, t = 2.45 and 7.23, t = 2.43), indicating that green accounting has a significant positive impact on net profit margin. table 5. effect of green accounting on roa , roe and npm (1) (2) (3) (4) (5) (6) roa roa roe roe npm npm constanta -0.01 7.20* 0.01 21.75 -3.44 155.8 (-0.12) (2.13) (0.05) (1.97) (-0.66) (0.47) greenacc 0.02 0.02 0.02 0.02 7.13* 7.23* (0.74) (0.69) (0.21) (0.25) (2.45) (2.43) firmsize -0.26* -0.81* -5.86 (-2.13) (-2.00) (-0.48) salesgrowth 0.01 0.01 0.103 (0.48) (0.12) (0.55) leverage 0.12 1.65* 6.46 (0.51) (2.23) (0.29) firm fe adjusted r square yes -0.05 yes -0.02 yes -0.10 yes -0.03 yes 0.06 yes 0.02 n 138 138 138 138 138 138 t statistics in parentheses * p < 0.05, ** p < 0.01, *** p < 0.001 the results suggest that green accounting practices have a notable positive effect on net profit margins, indicating that companies engaging in sustainable accounting practices might achieve better profitability margins. however, the impact on roa and roe is not significant, suggesting that the adoption of green accounting alone may not strongly influence these metrics. firm size has a negative impact on both roa and roe, highlighting potential scalability issues in larger firms. the significant positive impact of leverage on roe underscores the role of debt in enhancing equity returns. these findings contribute to the growing body of literature on the financial implications of sustainable business practices. the significant relationship between green accounting and npm aligns with the theory that sustainability initiatives can enhance profitability. the lack of significant effects on roa and roe may imply that the benefits of green accounting are more nuanced, potentially yielding long-term rather than immediate financial returns. we should integrate these insights into the broader discussion on the strategic value of sustainability in corporate financial management. this finding is not in line with previous researcher faizah (2020), who found that there is no relationship between green accounting and npm in companies that participated in proper 2015–2018. as a result, this study provides instructions for future researchers to conduct further research on the two variables mentioned above. https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 719 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit quality and corporate performance table 6 presents the regression results analyzing the impact of audit quality (aqual) on three financial performance indicators: return on assets (roa), return on equity (roe), and net profit margin (npm). the table includes six columns, representing different model specifications for each dependent variable with and without control variables such as firm size, sales growth, and leverage. all models account for firm fixed effects (firm fe). the aqual coefficient is positive but not statistically significant in both roa models (0.0159, t = 0.63 and 0.0156, t = 0.63). the coefficient for aqual is positive and approaches significance (0.149, t = 1.83 and 0.139, t = 1.75) for roe, suggesting a potential positive impact of audit quality on return on equity. the coefficient for aqual is positive, but not statistically significant (0.452, t = 0.18, and 0.383, t = 0.15) for npm. the models explain a small portion of the variance in the dependent variables, with adjusted r-squared values ranging from -0.05 to 0.01. this suggests that while the models incorporate firmspecific effects, there are other unaccounted factors influencing financial performance. table 6. effect of audit quality on roa , roe and npm (1) (2) (3) (4) (5) (6) roa roa roe roe npm npm constanta 0.00500 7.270* 0.0200 21.73* 0.130 183.6 (0.10) (2.15) (0.12) (2.01) (0.03) (0.53) aqual 0.0159 0.0156 0.149 0.139 0.452 0.383 (0.63) (0.63) (1.83) (1.75) (0.18) (0.15) firmsize -0.265* -0.807* -6.723 (-2.15) (-2.05) (-0.53) salesgrowth 0.000792 0.000159 0.0765 (0.42) (0.03) (0.39) leverage 0.101 1.561* 4.229 (0.44) (2.15) (0.18) firm fe adjusted r square yes -0.05 yes -0.02 yes -0.05 yes 0.01 yes -0.01 yes -0.05 n 138 138 138 138 138 138 t statistics in parentheses * p < 0.05, ** p < 0.01, *** p < 0.001 the results suggest that audit quality does not have a statistically significant impact on roa or npm, but shows a positive trend towards significance in its effect on roe. this finding is in line with previous research by elewa and el-haddad (2019), which also concluded that there is no significant relationship between audit quality and roa. however, there is a gap where previous researchers also found that audit quality has a significant positive effect on roa (ugwu et al., 2020). this may be because the audit's focus is more on the compliance and validity aspects of the financial statements than operational factors that may affect roa. on the other hand, the test results between audit quality and roe in the findings elewa & el-haddad (2019) show no significant relationship, this shows a difference in results with the author. this result may be due to the fact that the audit's focus is more on the compliance and validity aspects of the financial statements than directly on the factors that affect roe. roe is influenced by various other factors, such as operational efficiency, capital structure, and management strategies, which may https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 720 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc not be fully reflected in audit quality. the findings conducted by bakare (2023) show that there is a significant relationship between audit quality and npm which means that it is different from the author's findings, this supports a deeper study of these two variables with a larger population and sample size. high audit quality affects roe because accurate and reliable financial reports increase investor confidence, reduce financial risk, and prevent errors or fraud that could harm the company. quality auditors also provide advice to improve operational efficiency, help companies manage costs better and indirectly have a positive impact on roa and npm. as a result, this study makes an important contribution to deepening our understanding of the complexity of the interaction between audit practices and financial performance and encourages further research to understand the factors that affect roa more comprehensively. therefore, we need more research to gain a deeper understanding of the intricate relationship between audit practices and financial performance, as well as other factors influencing roe. these findings highlight the nuanced role of audit quality in financial performance. while its impact on roa and npm is not significant, the near-significant positive effect on roe suggests that quality audits may contribute to enhanced equity returns. better financial transparency and accuracy could contribute to this, fostering greater investor trust. the persistent negative relationship between firm size and profitability metrics underscores the complexities larger firms face, possibly due to bureaucratic inefficiencies or higher operational costs. we should weave these insights into the broader discussion on the strategic importance of audit quality in corporate governance and financial performance management. green accounting and audit quality on corporate performance table 7 presents the regression results analyzing the combined impact of green accounting (gaq) and audit quality on three financial performance indicators: return on assets (roa), return on equity (roe), and net profit margin (npm). the table includes six columns, representing different model specifications for each dependent variable with and without control variables such as firm size, sales growth, and leverage. firm fixed effects (firm fe) are accounted for in all models. the coefficient for gaq is positive but not statistically significant in both models (0.0266, t = 0.31 and 0.0179, t = 0.21) on roa. the coefficient for gaq is positive but not statistically significant (0.0461, t = 0.16 and 0.0301, t = 0.11) on roe. the coefficient for gaq is negative and not statistically significant (-0.275, t = -0.03 and -0.514, t = -0.06) on npm. the models explain a small portion of the variance in the dependent variables, with adjusted rsquared values ranging from -0.10 to -0.01. this suggests that while the models incorporate firmspecific effects, there are other unaccounted factors influencing financial performance. the results suggest that the combined impact of green accounting and audit quality does not have a statistically significant effect on roa, roe, or npm. this finding is consistent with the findings of previous research by majid et al. (2022), which also concluded that green accounting and audit quality have no significant effect simultaneously on roa and roe, as well as research by nyantakyi et al. (2023), which states that concern for the environment is a major factor in the company's financial performance, especially in terms of net profit margins. this indicates that while both green accounting and audit quality individually show potential effects on financial performance, their combined influence is not robust enough to yield significant results in this sample. the negative https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 721 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and significant impact of firm size on roa and roe aligns with findings from previous models, indicating scalability challenges for larger firms. the significant positive impact of leverage on roe continues to underscore the beneficial role of debt in amplifying equity returns. these findings provide nuanced insights into the interplay between green accounting and audit quality in influencing financial performance. the lack of significant combined effects suggests that while these practices individually contribute to financial outcomes, their integration does not necessarily enhance performance metrics in a significant way. table 7. effect of green accounting and audit quality on roa , roe and npm roa roe npm (1) (2) (1) (2) (1) (2) constanta 0.00500 7.247* 0.0200 21.79 0.130 185.0 (0.10) (2.13) (0.12) (1.97) (0.03) (0.53) gaq 0.0266 0.0179 0.0461 0.0301 -0.275 -0.514 (0.31) (0.21) (0.16) (0.11) (-0.03) (-0.06) firmsize -0.265* -0.810* -6.773 (-2.13) (-2.00) (-0.53) salesgrowth 0.000835 0.000613 0.0781 (0.44) (0.10) (0.40) leverage 0.111 1.648* 4.454 (0.49) (2.23) (0.19) firm fe adjusted r-square yes -0.05 yes -0.03 yes -0.10 yes -0.03 yes -0.01 yes -0.05 n 138 138 138 138 138 138 t statistics in parentheses * p < 0.05, ** p < 0.01, *** p < 0.001 this could imply that firms need to strategically manage and optimize these practices rather than relying on their combined implementation for financial gains. the persistent negative relationship between firm size and profitability metrics, along with the positive impact of leverage on roe, should be highlighted to underscore the importance of efficient scale management and prudent debt utilization in enhancing financial performance. conclusions the test results show that the adoption of green accounting in property and real estate companies in 2021-2022 only significantly affects the company's financial performance, as measured by npm. this suggests that investing in green accounting practices can enhance the company's asset efficiency and boost its financial performance, particularly in terms of net profit margin (npm). this finding contradicts previous researchers' findings, who examined a sample of companies using proper 2015–2018 and found no correlation between green accounting and npm. the resulting effect on the roa and roe indicators is both positive and insignificant. the audit quality variable, which includes roa, roe, and npm, also only has a positive but insignificant effect on company performance. this may be due to factors such as cost, preference for local https://www.ilomata.org/index.php/ijtc boosting corporate performance: green accounting and audit quality synergy tampubolon, siagian, and rinendy 722 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc public accounting firms, and industry-specific needs applied by the company according to the selected period. this study is consistent with apriani et al.'s (2020) previous findings, which state that there is no significant relationship between audit quality and an entity's financial performance, indicating that financial performance is not entirely dependent on the choice of public accounting firm that conducts the audit. there are several limitations that occur in this study, one of which is the use of a small sample and choosing the type of industry that does not use resources directly. it is also good if the research on the application of green accounting is seen from mining and energy sector companies. the green accounting approach restricts its scope to the number or quantity of disclosures that align with the gri g4 index, without taking into account the quality of the reported information. during the time period studied, the authors found that there were still a few entities that voluntarily reported sustainability reports, which led to imperfections in the data collected. this study's data, specific to firms in indonesia's property and real estate industries between 2020 and 2021, may not be universally applicable. in future studies, we suggest broadening the scope of firm performance evaluation, improving the methodology for identifying elements that impact an organization's performance, and increasing the number of research samples and sectors that heavily depend on resources for their operations. we should integrate supplementary financial performance measures that are relevant to the overall sustainability of the system. furthermore, it is critical to improve the accuracy and reliability of the information presented in the sustainability report by encouraging regular and mandatory reporting from entities. furthermore, it is imperative to evaluate the caliber of information disclosure in the sustainability report rather than solely focusing on the volume or number. this approach allows for a more accurate evaluation of sustainability practices and their impact on firm performance. in addition, future research might explore undertaking a comparison analysis of organizations that voluntarily produce sustainability reports against those that are required to do so. therefore, we can gain a clearer understanding of the differences in the quality and impact of voluntary and mandated sustainability reporting. references al-ahdal, w. m., & hashim, h. a. 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(2023). gri standards-based sustainability reporting disclosure practices across countries. media riset akuntansi, auditing & informasi, 23(2), 241–256. https://doi.org/10.25105/mraai.v23i2.17959 zalata, a. m., elzahar, h., & mclaughlin, c. (2020). external audit quality and firms’ credit score. cogent business and management, 7(1). https://doi.org/10.1080/23311975.2020.1724063 zhang, l., ma, y., & hu, y. (2022). does ceo duality worsen or fosters audit quality: evidence from chinese firms? economic research-ekonomska istrazivanja , 36(1), 1–21. https://doi.org/10.1080/1331677x.2022.2095521 bakare, t. (2023). effect of the interaction between audit firm size and audit quality on the financial performance of listed consumer goods companies in nigeria. journal of accounting research, organization and economics. https://doi.org/10.24815/jaroe.v5i3.27194. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 726-746 726 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia diah ayu putri wulandari1, mazda eko sri tjahjono2, iis ismawati3, mulyanah4 1234universitas sultan ageng tirtayasa, indonesia correspondent: diahmiharjo@gmail.com1 received : june 3, 2024 accepted : july 16, 2024 published : july 31, 2024 citation: wulandari, d, a, p., tjahjono, m, e, s., ismawati, i., mulyanah. (2024). gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia. ilomata international journal of tax and accounting, 5(3), 726-746. https://doi.org/10.61194/ijtc.v5i3.1403 abstract: this research attempts to ascertain how gender diversity, corporate social responsibility, return on assets, and leverage affect tax aggressiveness. the novelty and contribution of this research is that these four variables have not all been studied for their influence on tax aggressiveness in manufacturing companies listed on the indonesia stock exchange (idx) from 2019 to 2022. previous studies with different company sectors and periods have also proven mixed research results. the total research population was 170 companies, and 86 sample companies were selected using the purposive sampling technique. the research period was four years, so 344 research data were collected. then, 62 research data were outlier data, so the final number of samples to be tested was 282 research data. ibm spss 25 was used to conduct a multiple linear regression analysis approach. this study will present the results of descriptive data analysis and parametric statistical analysis, which include classical assumption tests, hypothesis tests, and coefficient of determination tests. the research conclusion shows that gender diversity and leverage have a negative effect on tax aggressiveness. the presence of women on the company's board will help the supervisory function so that the level of corporate tax aggressiveness can decrease. in addition, the increase in corporate leverage will reduce the tax burden so that the level of corporate tax aggressiveness will also decrease. meanwhile, corporate social responsibility and return on assets positively affect tax aggressiveness. companies carry out the fulfillment of csr obligations only to obtain a good image in order to cover up irresponsible actions, such as tax avoidance. in addition, profitable businesses may make the most of their resources to optimize their tax planning to reduce their tax burden and raise their level of tax aggressiveness. keywords: tax aggressiveness, gender diversity, corporate social responsibility, return on asset, leverage this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:diahmiharjo@gmail.com https://doi.org/10.61194/ijtc.v5i3.1403 gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 727 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction tax is an essential funding source for the indonesian economy, development, and improving people's welfare. in line with law no. 16 of 2009 concerning the general tax provisions and procedures, article 1 paragraph (1) defines tax as an obligatory payment that people or organizations must make to the state in accordance with the law without obtaining any kind of reimbursement. in line with law no. 36 of 2008, article 2 paragraph (1), personal tax subjects are individuals who live in indonesia or do not. in contrast, corporate tax subjects are groups of individuals and/or capital that are a unit, whether or not they are engaged in business. according to the financial report published by the ministry of finance, the state earned idr 2,635.843 billion in revenue in 2022, and 114.05 percent of the total, or idr 2,034.552 billion, came from the tax sector. this shows that state income from the tax sector occupies the highest percentage compared to alternative revenue streams. the company is a domestic tax subject and has become a taxpayer since the company was founded. as a taxpayer, the company must pay taxes following applicable provisions. the more taxes the company pays, the more revenue the state gets from the tax sector. although taxes provide the government with state money, they can also burden companies and reduce their net profit (kurniasih & sari, 2013). because of this, companies aim to reduce their tax liability by pursuing aggressive tax strategies. it is common to observe the phenomena of tax aggression in the form of tax evasion attempts, especially those carried out by manufacturing companies. in 2019, the (tax justice network, 2019) published the ashes to ashes report. the report revealed that a subsidiary of british american tobacco (bat), pt bentoel international investama tbk. (rmba), was suspected of carrying out tax avoidance practices in indonesia. rmba also obtained loans from jersey via a netherlands company to evade tax deductions for interest payments. due to a deal with the netherlands, indonesia applies a 20 percent tax deduction. however, the tax is 0 percent. due to this practice, indonesia lost usd 11 million in state revenue annually. indonesia ought to have been entitled to levy a tax of 20 percent, or usd 33 million or usd 11 million, annually on a debt of usd 164 million. despite a later revision to the agreement between indonesia and the netherlands allowing indonesia to apply a 5 percent tax, the regulation went into effect in october 2017, after bentoel had finished the load interest payment transaction. one of the factors related to tax aggressiveness is gender diversity. one form of diversity in a company is the presence of women in board membership (aurellia & sambuaga, 2022). (kristina & wiratmaja, 2018) said that the small presence of women on the board of commissioners may be due to different views regarding women and men in leading a company, especially in indonesia. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 728 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, companies should pay more attention to the presence of women on the board to reduce tax aggressiveness because women are considered to have a higher level of tax compliance than men (ambarsari et al., 2018). (jarboui et al., 2020) said that the presence of women on corporate boards has gained much importance because of their effective role in monitoring managerial performance. in the same way as outside directors, female directors effectively monitor and oversee board affairs. furthermore, female directors have higher levels of risk aversion, ethical and moral standards, independent thinking, and the ability to make well-informed judgments that raise the board's transparency and credibility. therefore, it becomes sense to assume that having more women on the board of directors would greatly lessen the chance of tax aggression (richardson & lanis, 2016). in the study by (ambarsari et al., 2018), tax aggressiveness has been demonstrated to be negatively impacted by gender diversity. having female board members can assist in reducing tax aggression since women comply with taxes at a higher rate than males do. research by (richardson & lanis, 2016) also proves that increasing how many women serve on the board can reduce the possibility of tax aggressiveness. according to (issa & fang, 2019), decisions made by female boards are also more socially oriented, so women are considered more effective in discussing corporate social responsibility issues. however, it does not coincide with research by (widuri et al., 2020), which indicates that, when used as a mediator, sustainability performance has a small but beneficial impact on gender diversity on boards with regard to tax evasion. companies are required to be accountable to stakeholders for all their activities ((wiratmoko, 2018)click or tap here to enter text.. the term "corporate social responsibility" (csr) describes an organization's dedication to upholding morals, supporting economic growth, and enhancing living standards for the general public and workers. (zeng, 2019) said that the social viewpoint on csr views corporate tax payment as a crucial element. one key way that businesses may interact constructively with society is by paying taxes. businesses that adopted a socially conscious stance would pay their fair amount of taxes. the study results of (rahayu & wahjudi, 2021; rahman, 2021; yunistiyani & tahar, 2017) prove that csr disclosure positively affects tax aggressiveness. research by (zeng, 2019) also discovered substantial evidence linking tax evasion to csr in a good way. however, it is not in line with research by (mohanadas et al., 2020) who failed to discover any statistical evidence linking business tax aggressiveness and csr success. according to (budianti & ika sulistyawati, 2019), the following other elements affect tax aggressiveness: leverage and profitability. the company’s profitability demonstrates its capacity to generate income during asset sales and share capital at a certain level. a company’s return on asset (roa) can provide insight into its profitability. as a measure of a company's potential for profit, roa allows enterprises to lower their tax burden by positioning themselves in tax planning (chen et al., 2010). the findings of studies conducted by (rahayu & wahjudi, 2021; rahman, 2021; yauris & agoes, 2019) prove that profitability proxied by roa positively affects corporate tax aggressiveness. companies with low roa levels will use third-party assistance (debt) to support the company's operational activities. leverage (debt level) is a ratio that assesses how well both the short and long-term debt can be used to fund business assets (apriliana, 2022). the company's high dependence on loans or debt indicates a high level of leverage. companies that involve third parties as operational funding assistants have low profits, so the etr value can also be low (rahayu & wahjudi, 2021). the findings of the research of (dinar et al., 2020; rahayu & wahjudi, 2021) prove that leverage negatively affects tax aggressiveness. many parties with different variables and empirical evidence have researched tax aggressiveness. this study replicates research conducted by (rahayu & wahjudi, 2021). however, in this study, https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 729 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc researchers used gender diversity, csr, roa, and leverage to determine their influence on tax aggressiveness because the outcomes of earlier research continued to diverge. the period used in this study is 2019-2022. manufacturing companies were chosen as research objects because they have the most significant number of companies compared to other companies and more complex company problems, so they are anticipated to be better capable of describing the state of companies in indonesia. according to the following description, researchers are considering carrying out studies under the heading, "gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia". this study makes several important contributions. this study has a theoretical and practical purpose. the theoretical purpose can be used for additional literature that provides theoretical acknowledgment. meanwhile, the practical purpose can be used for the company to decide to do the aggressiveness tax and also to the findings by researchers in the form of learning models developed by educators. this research adds to the expanding body of research on the connections between gender diversity, csr, roa, leverage, and tax aggressiveness. many have discussed these variables but in different time spans and research results. it is anticipated that the findings of this study will be taken into account for future research on what factors can affect tax aggressiveness. stakeholder theory according to the stakeholder theory, a company serves its stakeholders as well as its own interests. as stakeholder theory explains, stakeholders in a firm have a right to know about its activities that can affect their decisions. they can also control or influence how the company uses its economic resources. (yunistiyani & tahar, 2017) stated that the intervention of other parties is significant for the continuity of company operations so that stakeholders can influence companies to disclose their annual reports transparently. legitimacy theory (lanis & richardson, 2013) applied legitimacy theory as one perspective to develop a duty to the environment and society disclosure theory. according to this theory, the community can withdraw a company's operating permit if it does not fulfil its obligations. whether the business thrives will depend on how it interacts with the surrounding area and community. according to the legitimacy thesis, businesses must abide by social norms and limitations (rustiarini, 2011). based on this theory, a company will voluntarily report its activities if management considers this to be the expectation of the surrounding environment. a company’s survival can be threatened if society believes it has violated the social contract. agency theory agency theory explains two mutually beneficial relationships between the principal and the agent (fitri et al., 2019). according to agency theory, people are exclusively driven by their own interests, which leads to a disagreement between the agent and the principal (kurniawati, 2019). disparities in the principal's and the agent's interests may affect the firm’s ability to pay such as taxes. indonesian taxation uses a self-assessment system, permitting businesses to compute and submit taxes. agency theory in tax aggressiveness can be seen from managers (agents) who reduce taxable income to reduce the amount owing on taxes (nugraha & meiranto, 2015). tax aggressiveness tax aggressiveness is a tax strategy intended in order to lower taxable income (martinez, 2017). the methods and techniques that tend to be used are to exploit the shortcomings seen in the tax regulations themselves and not violate tax laws (wicaksono, 2017). according to (lanis & https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 730 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc richardson, 2012), companies that use aggressive taxation are viewed as reckless. companies that pay taxes honestly can cause conflict with the company's main objectives, so reducing tax burden costs is a solution (dayang et al., 2014). businesses may attempt to take advantage of tax law loopholes to lower their tax liability. the number of loopholes they use increases their tax aggressiveness. corporate tax aggression may result in significant losses (lanis & richardson, 2012). as the recipient of taxes, the government will be harmed by this action because it can reduce state revenue. tax aggressiveness in companies damages the state because taxes are a component of state revenue used for people's welfare. state revenue decreases with a company's level of tax aggressiveness. the impact on society is that they do not get adequate facilities and support for development obtained from the government for this action (purwanggono & rohman, 2015). gender diversity gender diversity focuses on the company's inclusion of female board members. as stated by (arfken et al., 2004), gender diversity can help companies solve problems more effectively, develop fresh ideas, and provide insights that help employees learn new things. diversity in gender on the board is expected to enrich solutions to issues in the company due to individuals' diverse characters and motivations that influence decision-making or actions taken (aurellia & sambuaga, 2022). the company's board of directors' representation of women demonstrates that gives everyone the same opportunity to occupy essential positions in the company regardless of gender based on the abilities possessed and needed by the company (amanda oktariyani & rachmawati, 2021). research by (lanis et al., 2017) demonstrates the significant influence that having one or more female directors on the board has on tax aggressiveness. there are higher moral and ethical requirements among female directors. female directors are more autonomous, are less willing to take risks, and provide more appropriate decisions that have the potential to raise transparency and trust in the board (tanujaya & anggreany, 2021). therefore, having more female board directors can minimize the potential for companies' tax avoidance. study by (ambarsari et al., 2018; aurellia & sambuaga, 2022; tanujaya & anggreany, 2021) proves that gender diversity negatively affects corporate tax aggressiveness. h1. gender diversity negatively affects tax aggressiveness. corporate social responsibility csr first appeared in formal academic discourse when howard r. bowen published his book “social responsibility of the businessman” in 1953. bowen's basic idea of csr refers to the obligation of business actors to run their companies in accordance with the values and goals that the community in which their companies operate wants to achieve. (yunistiyani & tahar, 2017) said that csr imposes two obligations on companies, namely csr activities and paying taxes, which increase company expenses and can encourage companies to take aggressive tax actions. the corporate tax aggressiveness increases with the amount of csr disclosure because some of the csr items are expenditures that may be attributed to them (deductible expenses), so many companies carry out csr only to reduce gross income. in addition, companies that only engage in social responsibility can obtain a good image in order for the business to conceal its careless acts, such as tax evasion (pramita & susanti, 2023). research by (yunistiyani & tahar, 2017) proves that csr positively affects tax aggressiveness. the more csr disclosure there is, the more aggressive the corporation is with taxes. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 731 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2. corporate social responsibility positively affects tax aggressiveness. return on asset roa is one of the ratios that can describe a company's profitability. (rahman, 2021) said that profitability is considered an important indicator that is expected to affect etr, where the level of profitability starts from income before tax. (rahayu & wahjudi, 2021) claimed that businesses with high roa levels would also have large tax obligations. this can happen because very profitable businesses will find it easier to manage company resources. this will thereafter be applied to reduce the total amount of taxes due (yauris & agoes, 2019), thus encouraging companies to take tax-aggressive actions. according to agency theory, people behave in their best interests even though the principal and agent have the same desire, namely, a high level of roa. for the principal as a tax collector, the more tax revenue may be obtained, the more profitable the business is. for the agent, a high roa might be a sign of a successful business. since the principal's and the agent's interests are distinct, agency conflicts arise as the roa level rises, and the agent must pay a more significant tax to the principal. for the principal, tax is the primary source of income that must be maximized, while taxes are a cost that needs to be reduced for the agent, which can encourage the agent to take taxaggressive actions. research by (rahman, 2021; yauris & agoes, 2019) proves that roa positively affects tax aggressiveness. due to its huge profits, the corporation will have large tax liabilities, which drives it to pursue aggressive tax strategies to reduce them. companies will search for ways to cut their taxes below what is reasonable. h3. return on asset positively affects tax aggressiveness. leverage a financial ratio called leverage shows how a company's debt, capital, and assets are related to one another. companies may use debt to finance their investment and operating needs (suyanto & supramono, 2012), and the debt will incur interest that must be paid. according to rahayu & wahjudi (2021), companies that use external assistance to fulfil company capital will have highinterest expenses and can reduce profits. low profits result in low tax burdens, so companies with high debt levels have low tax aggressiveness. (hartadinata & tjaraka, 2013) said that companies with debt will provide good performance results, as evidenced by better profit gains compared to companies that do not have debt. the company will show good profit conditions, so creditors consider it healthy because debt contracts still bind it. debt can raise a company’s worth, but it can put the company at risk when used excessively. for this reason, management will operate prudently and refrain from taking significant risks on high debt to commit tax evasion. because a company's earnings grow with leverage, large levels of leverage will discourage tax evasion (watts & zimmerman, 1978). research by (dinar et al., 2020; nugraha & meiranto, 2015; rahayu & wahjudi, 2021) tax aggressiveness will rise in a corporation with minimal debt. leverage negatively influences tax aggressiveness. h4. leverage negatively affects tax aggressiveness. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 732 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method research approach this study uses quantitative methods. a descriptive research methodology will be employed in this quantitative study. this approach accurately and methodically explains the facts and traits of the things and subjects examined. this approach is chosen because factors whose effects will be examined will provide a methodical, precise, and factual explanation of how the variables under examination—namely, the effect of leverage, csr, gender diversity, and roa on tax aggressiveness—relate to one another. operational variables dependent variable (y) a dependent variable is one that is affected by how an independent variable turns out (sugiyono, 2022). tax aggressiveness is the dependent variable in this research. (lanis & richardson, 2012) used the effective tax rate (etr) to measure tax aggressiveness because several previous studies had done so. the company is less tax-aggressive and lowers the etr value. compared to pre-tax income, a low etr suggests a lower income tax burden. this is the aggressive tax formula. independent variable (x) dependent variables are influenced by, give rise to, or result from independent variables (sugiyono, 2022). the study's independent variables include gender diversity, csr, roa, and leverage. gender diversity (x1) the diversity of sexes inside a corporation, namely between male and female employees, is called gender diversity. nonetheless, the study defines variety in gender, for example, having female board members as directors. the existence of women in a company is believed to provide a positive reaction to investors towards the company because it has female representation on its board of directors. according to studies by (ambarsari et al., 2018), this study focuses on women's participation on business boards. gender diversity is determined by taking the total number of directors and commissioners and dividing it by the total number of women on the board. corporate social responsibility (x2) csr is a business's obligation to ethically and transparently consider how its actions and choices affect the environment and society while promoting sustainable development. csr is proxied in the company's csr disclosure. performance measurements are classified into three primary categories by the gri-g4 standard: economic, environmental, and social. human rights, society, workplace comfort and labor practices, and product responsibility are a few of them. this measurement was chosen because, according to previous studies, these measures are the best to use because no measure provides a better proxy for measuring the same thing, such as research conducted by (susanto & veronica, 2022) using 89 csr items. this is the csr calculation formula. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 733 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc return on asset (x3) profitability is proxied using roa. it measures the business's ability to turn a profit and is calculated by comparing profit before taxes to finalize the quarter's assets total (kurniasih & sari, 2013). according to (lanis & richardson, 2013), the formula below may be used to determine roa. leverage (x4) the leverage ratio illustrates how much debt a company has compared to its assets or how much of its assets are financed by debt. debt to total assets (dar), which compares a company's total debt with its total assets, is the method used in this study to quantify leverage (suyanto & supramono, 2012; tiaras & wijaya, 2017). this measurement was chosen to know the company’s debt level. an asset can be used as a guarantee for the debt. when a corporation has sufficient assets, it will utilize its debt to indicate its debt in the comparison. leverage measurement can be computed with the aid of the subsequent formula. data collection method the technique for gathering data for this investigation is to collect empirical data, especially from sources produced by companies, such as annual reports evidenced in their annual reports. the information was gathered from the idx website through the annual reports of businesses listed between 2019 and 2022. the study's data were gathered using documentation. financial reports, annual reports, and other crucial information were gathered from the official website of the business and the idx website (www.idx.co.id), which served as the documentation data sources. multiple linear regression analysis was used in this work. the spss 25 program was used to make calculations. this study will present the outcomes of descriptive data analysis and parametric statistical analysis, which include classical assumption tests, hypothesis tests, and determination coefficient tests. the description of the data results uses the average of the entire sample data that has been calculated. to calculate the average, a class interval calculation is needed to determine the predicate of each variable, then used as a reference to create a rating scale. sampling technique the research population for 2019 through 2022 consisted of manufacturing enterprises listed on the idx. the basis for the demographic selection is the company's idx listing because the idx is the largest and most representative stock exchange in indonesia. the choice of manufacturing companies was made because these companies typically represent a variety of industries, have the https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 734 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc most significant number of employees, and deal with more complicated business issues. they are, therefore, seen to be more appropriate for describing the state of businesses in indonesia. in quantitative research, samples comprise the quantity and composition of the population (sugiyono, 2022). this study used the purposive sampling approach, which involves selecting samples in a non-random way that must match criteria tailored to the research goals or issues. between 2019 and 2022, the idx had 170 manufacturing companies. the following table outlines the criteria considered in the purposive sampling strategy used for sample selection in this study. result and discussion descriptive statistics the objectives of descriptive statistics were to ascertain the gender diversity, tax aggression, leverage, csr, roa, and mean (or average) values of each variable. descriptive statistical analysis yielded the following results for the tax aggressiveness (y): a mean of 0.2429, a standard deviation of 0.04686, a maximum of 0.39, and a minimum of 0.08. based on this study, the mean score of 0.2429 indicates that the corporation's average tax aggressiveness is less than 50 percent. in light of the results of the descriptive statistical analysis, gender diversity (x1) has a minimum of 0.00, a maximum of 0.83, an average (mean) of 0.1562, and a standard deviation of 0.14976. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 735 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gender diversity on board directors and commissioners is present in 15.62 percent of the 282 research samples of firms, as indicated by the mean value of 0.1562. in light of the results of the descriptive statistical study, corporate social responsibility (x2) has an average (mean) of 0.3724, a standard deviation of 0.15798, a maximum of 0.62, and a minimum of 0.16. in light of the results of the descriptive statistical study, return on asset (x2) has an average (mean) of 0.3724, a standard deviation of 0.15798, a maximum of 0.62, and a minimum of 0.16. in light of the results of the descriptive statistical study, return on asset (x4) has a minimum of 0.00 and a maximum of 0.83, with an average (mean) of 0.3725 and a standard deviation of 0.17510. classics assumption test results to ascertain if the classical assumptions underlying the multiple regression equation have been violated, the classical assumption test must be performed. in order to increase the precision and effectiveness of the analysis's interpretations and minimize any vulnerabilities that can result from the enduring use of traditional assumptions, this test seeks to determine the link between the independent and dependent variables. normality test results the nonparametric kolmogorov-smirnov test examined the data's normalcy at a five percent significance level. as can be seen from the above normality test results, the significance is 0.068 > 0.05. given that the significance is greater than α = 0.05, the regression model is considered normally distributed and satisfies the normality condition. multicollinearity test results https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 736 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the multicollinearity test evaluates if the regression model is applicable and detects any association among the independent variables. independent variables and a regression model should not correlate. in research data, tolerance values and variance inflation factors (vif) can be used to identify signs of multicollinearity. in the event that the tolerance exceeds 0.10 and the vif falls below 10, the data is deemed free of multicollinearity problems. the tolerance values of the gender diversity, csr, roa, and leverage variables are, respectively, 0.981, 0.950, 0.934, and 0.919, exceed 0.10, according to the multicollinearity test findings in table 4. then, less than 10, the vif values of the leverage, csr, roa, and gender diversity variables are 1.019, 1.053, 1.070, and 1.088. we infer that multicollinearity interference does not appear in the regression model. heteroscedasticity test results if the sig. (2-tailed) is less than 0.05, the data is deemed heteroscedastic; otherwise, it is called nonheteroscedastic. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 737 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the gender diversity variable has a spearman's rho value with a sig. (2-tailed) of 0.859, corporate social responsibility of 0.997, return on assets of 0.283, and leverage of 0.655, as seen from spearman's rho table above. because of each variable's sig. (2-tailed) spearman's rho value is more than 0.05, and the study's data do not exhibit heteroscedasticity symptoms. autocorrelation test results the autocorrelation test in this study used the cochrane-orcutt method by looking at the durbinwatson value. the durbin-watson value is 1.977 with α = 5%, the quantity of data is 282, the dl value is 1.7852, the du value is 1.8371, and 4-du is 4-1.8371, as can be seen in the above table. 1.8371 < 1.977 < 2.1629 is the number that fits the du < dw < 4-du requirement. it is clear from this that there are no signs of autocorrelation in this regression model. multiple linear regression analysis multiple linear regression analysis is utilized to predict the regression coefficient value for each variable in the study model and ascertain the study variable's significance value—which forms the https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 738 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc basis for performing hypothesis testing. the multiple regression analysis for this investigation yielded the following results. the equation can be explained as follows. a. the constant value of 0.232 means that if the independent variable is 0 (zero) or does not exist (constant), the dependent variable, tax aggressiveness, will increase by 0.232. b. the coefficient value of the gender diversity (x1) is 0.045, which is positive. this means that every one-point increase in gender diversity, assuming that other independent variables remain constant, will increase etr and decrease tax aggressiveness by 0.045. c. the csr (x2) coefficient value is -0.040, which is negative. this means that every increase in one csr point, assuming that other independent variables have a constant value, will decrease etr and increase tax aggressiveness by 0.040. d. the roa (x3) coefficient value is -0.073, which is negative. this means that every onepoint increase in roa, assuming other independent variables remain constant, will decrease etr and increase tax aggressiveness by 0.073. e. the coefficient value of the leverage (x4) is 0.073, which is positive. this means that every one-point increase in leverage, assuming other independent variables remain constant, will increase etr and decrease tax aggressiveness by 0.073. hypothesis test results determination coefficient test results (r2) the coefficient of determination (adj. r2) measures the extent to which the model can account for the variance in the dependent variable. the r2 value ranges from 0 to 1 (ghozali, 2018). the goal https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 739 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of this test is to ascertain whether the degree of accuracy of the regression analysis is optimal. the adj. r2 value is obtained as follows in the results of statistical calculations. in light of the facts from before, this study's coefficient of determination (adj. r2) is 0.131, or 13.1%. the study's independent variables can account for 13.1 percent of the dependent variable's variance; other factors not included in the analysis account for the remaining 86.9 percent. goodness of fit test results (f) using a model feasibility test at the α = 5% level, the goodness of fit test was used to ascertain the substantial impact of gender diversity, csr, roa, and leverage on tax aggressiveness. the significance of the regression result was examined before performing the f-test. assume that the significance level of f exceeds 0.05. then, if the significance (σ = 5%) is less than 0.05, it suggests that both ha and h0 are allowed. (ghozali, 2018). in addition, if the fvalue exceeds the ftable, ha is approved, and h0 is refused. the following table displays the f-test results. it is recognized from the preceding table that the significance is 0.000 < 0.05, and the fvalue is 11.624 > ftable of 2.40. therefore, it may be said that this regression model is possible. partial test results (t) partial tests measure the degree to which each independent variable influences the dependent variable. they also indicate the direction of impact of each variable, as evidenced by the sign of each independent variable's regression coefficient. these are the findings of the t-test for this study. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 740 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc depending on the test findings shown in the above table, the impact of gender diversity, csr, roa, and leverage on tax aggressiveness may be described as follows. a. gender diversity (gd) has a tvalue of 2.586 > ttable value of 1.969 and a significance of 0.010 <0.05, indicating that h0 is denied and h1 is accepted. gender diversity has a significant positive impact on etr and a negative impact on tax aggressiveness. b. corporate social responsibility (csr) has a tvalue of 2.354 > ttable value of 1.969 and a significance of 0.019 < 0.05, indicating that h0 is denied and h2 is accepted. corporate social responsibility has a significant negative impact on etr and a considerable positive impact on tax aggressiveness. c. return on assets (roa) has a tvalue of 2.474 > ttable value of 1.969 and a significance of 0.014 <0.05, indicating that h0 is denied and h3 is accepted. return on assets has a significant negative impact on etr and a considerable positive impact on tax aggressiveness. d. leverage (lev) has a tvalue of 4.684 > ttable value of 1.969 and a significance of 0.000 <0.05, indicating that h0 is denied and h4 is accepted. leverage has a significant positive impact on etr and a significant negative impact on tax aggressiveness. the effect of gender diversity on tax aggressiveness this study looks into how gender diversity affects tax aggressiveness. gender diversity has a regression coefficient of 0.045 in a positive direction and a significance of 0.010 <0.05, as indicated by table 11. nevertheless, the tax aggressiveness in this study is proxied by etr, and the two have an inverse relationship: the more corporate tax aggressiveness, the lower the etr. in conclusion, it may be said that gender diversity and etr have a positive association, whereas tax aggressiveness and gender diversity have a negative correlation. the degree of corporate tax aggressiveness decreases as manufacturing companies' gender diversity increases. since this data confirms the first premise that gender diversity negatively impacts corporate tax aggressiveness, h1 is accepted. this study's results coincide with agency theory, which claims that in decision-making by the agent from the principal, the agent may prioritize his own goals, which are not in accordance with what the principal wants. differences in goals will cause agency conflicts and agency costs to be more pronounced due to greater information asymmetry. several studies have shown that gender diversity will improve the effectiveness of supervision. (aurellia & sambuaga, 2022) said that the presence of a female board will optimize the supervisory function to ensure that the company has https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 741 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc complied with applicable regulations and is cooperative in carrying out its obligations as a taxpayer. women can monitor managerial performance, restrain opportunistic behavior, and prevent managers from avoiding taxes to benefit their own interests. the results of this study are likewise in accord with the results of the study by (ambarsari et al., 2018), which claims that tax aggression is negatively impacted by gender diversity on the board. because women have higher tax compliance than males, this demonstrates how having women on the board might minimize tax aggression. the degree of tax aggression that the corporation engages in decreases with increasing gender diversity. the results of research by (aurellia & sambuaga, 2022; yuwono & fuad, 2019) also prove that tax aggression is negatively impacted by gender diversity. female directors effectively supervise and offer insight into board matters. they tend to be risk-averse, more ethical, and more independent, and they facilitate transparent decisions, thereby increasing board trust. the effect of corporate social responsibility on tax aggressiveness this study looks into how csr affects tax aggressiveness. csr has a regression coefficient of 0.040 in the negative direction and a significance of 0.019 <0.05, as indicated by table 11. nevertheless, in this study, tax aggression is represented by etr, and the two are inversely correlated: the etr decreases with increasing tax aggression. in conclusion, it may be said that csr significantly affects tax aggressiveness positively and significantly affects etr negatively. a manufacturing company's tax aggressiveness increases with its amount of corporate social responsibility. since these conclusions support the second hypothesis that csr positively affects corporate tax aggressiveness, h2 is accepted. this is consistent with the legitimacy and stakeholder theories, which explain that firms must consider the satisfaction of all parties in carrying out company activities and decision-making. (yunistiyani & tahar, 2017) said that a company's degree of csr disclosure corresponds to its level of tax aggression. this is because a company's csr spending may be written off as costs, meaning that many corporations engage in csr solely to lower their gross income. furthermore, businesses that engage in social responsibility just to project a positive image in order to conceal their careless behavior, such as tax evasion (pramita & susanti, 2023). the findings of this investigation are consistent with the findings of research by (septanta et al., 2023; yunistiyani & tahar, 2017). it claimed that csr positively impacts tax aggressiveness. businesses complete their csr responsibilities to improve their public image and garner community support. the degree of tax aggression the business practices increases with the amount of csr disclosure. the effect of return on asset on tax aggressiveness this research looks into how roa affects tax aggressiveness. roa has a regression coefficient of -0.073 in the negative direction and a significance of 0.014 <0.05, as indicated by table 11. still, etr serves as a proxy for tax aggression in this study, and the two are inversely correlated: the greater the tax aggressiveness, the lower the etr. in conclusion, it may be said that roa significantly affects tax aggressiveness positively and etr negatively. corporate tax aggressiveness increases with a manufacturing company's roa. since these findings support the third hypothesis that roa positively affects corporate tax aggressiveness, h3 is accepted. the findings of this investigation concur with agency theory, explaining that each individual acts in their own interests even though the principal and agent have the same desire, namely a high level of roa. a high roa can indicate strong business performance for the agent. however, it also means that the agent must pay a higher amount of tax to the principal, which creates agency https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 742 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conflicts because the principal and the agent have different interests. on the one hand, the higher the roa, the more tax can be collected by the principal as a tax collector. taxes are the principal's primary source of revenue, which must be maximized, but they are the agent's burden, which must be avoided, which may lead the agent to behave in an aggressive tax manner. the findings of this investigation are consistent with those of the study conducted by (yauris & agoes, 2019), which demonstrates that profitability significantly impacts tax aggressiveness as measured by roa. since a company's primary objective is maximizing profits, better profitability always translates into greater tax aggression. this is because profitable corporations will try to minimize their tax burden since it can potentially lower earnings. profitable businesses can better allocate their resources to tax planning that minimizes their tax liability, leading to a rise in tax aggression. research conducted by (rahayu & wahjudi, 2021; rahman, 2021) also shows that profitability proxied by roa positively affects tax aggressiveness. the effect of leverage on tax aggressiveness this study looks into how leverage affects tax aggressiveness. leverage has a regression coefficient of 0.073 in a positive direction and a significance of 0.000 <0.05, as indicated by table 11. nevertheless, the tax aggressiveness in this study is proxied by etr, and the two have an inverse relationship: the more corporate tax aggressiveness, the lower the etr. in conclusion, it may be said that there is a significant negative effect between tax aggressiveness and leverage and a significant positive effect between leverage and etr. the corporate tax aggressiveness of a manufacturing corporation decreases as its leverage increases. since these findings support the fourth hypothesis that leverage negatively affects corporate tax aggressiveness, h4 is accepted. the findings of this study support the agency theory, which states that there may be a conflict of interest between the principal and the agent due to the funding structure. the agent needs to find alternative sources of money, such as loans, to make up the difference if the principal refuses to accept further cash for the business's operating expenses. a high leverage value indicates that the company is borrowing more and incurring greater interest expenses so that the amount of company profit borne will decrease. the decrease in company profit will also decrease the company's share of the tax burden. the tax burden and the degree of tax aggressiveness displayed by the corporation will both decline with increasing debt levels. the findings of this investigation are consistent with those of (kusuma & maryono, 2022) study, it declared that leverage significantly reduces tax aggression. the degree of tax aggression that a corporation engages in decreases with increasing leverage. the results of research by (nugraha & meiranto, 2015; septiani & muid, 2019) also prove the same thing that leverage negatively affects tax aggressiveness. this research has both theoretical and practical ramifications. its evolution of conceptions of teaching and learning has theoretical ramifications. the study's findings are anticipated to be incorporated into future research on the effects of gender diversity, leverage, csr, and roa on tax aggression. they may also serve as a reference for supplementary literature that offers theoretical knowledge and comprehension. educators created the researchers' practical implications as learning models. this study aimed to extend understanding of the variables influencing tax aggression by putting the knowledge learned during the lecture session to use. it is anticipated by the universities that this study will be taken into account by future academics who wish to investigate the characteristics that affect corporate tax aggression. https://www.ilomata.org/index.php/ijtc gender diversity, corporate social responsibility, return on asset, and leverage on the corporate tax aggressiveness of manufacturing companies in indonesia wulandari, tjahjono, ismawati, and mulyanah 743 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion this study contributes to the literature in several ways. based on the study results above, we may infer that gender diversity and leverage negatively affect tax aggressiveness. this suggests that a company's degree of tax aggressiveness declines as its gender diversity and leverage grow. women are considered to be more so than males in terms of tax compliance. women's representation on the corporation's board of directors can enhance the supervisory function to ensure that the company has complied with applicable regulations and paid attention to cooperation in carrying out its obligations as a taxpayer. a high leverage value indicates that the company is increasingly borrowing, which impacts the emergence of greater interest burdens so that the amount of company profit borne will decrease. the decrease in company profit will also lead to a decrease in the tax burden that the business must bear. thus, by increasing gender diversity and leverage, companies can reduce tax aggressiveness. conversely, csr and roa have a beneficial impact on tax aggression. businesses must include information about their social responsibility implementation in their yearly reports. since some of the company's csr expenditures are deductible expenses, many businesses just use csr to lower their gross revenue and project a positive image to hide their reckless behavior, including tax evasion. roa serves as a gauge of a company's profitability. profitable businesses will have an easier time allocating firm resources, which may then be used to reduce the amount of taxes that need to be paid. thus, in order to lower their tax obligations, businesses often use roa and csr expenses. this suggests that a company's level of tax aggression increases in proportion to its csr and roa. this research is limited to a four-year research period, 2019-2022. future research should encompass a broader period to capture current and relevant conditions. broadening the dataset used in the study will enhance the accuracy of the research findings and provide representation for almost all indonesian corporations listed. in addition, only 13.1 percent of the study's independent variables could account for their impact on the dependent variable; 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(2019). relationship between corporate social responsibility and tax avoidance: international evidence. social responsibility journal, 15(2), 244–257. https://doi.org/10.1108/srj-03-2018-0056 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 667-680 667 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable hidayatulloh ilham rachmat1, sri trisnaningsih2 12universitas pembangunan nasional "veteran" jawa timur, indonesia correspondent: trisna.ak@upnjatim.ac.id2 received : march 8, 2024 accepted : may 1, 2024 published : july 31, 2024 citation: rachmat, h, i., trisnaningsih, s. (2024). the impact of company size and profitability on firm value with institutional ownership as a moderating variable. ilomata international journal of tax and accounting, 5(3), 667-680. https://doi.org/10.61194/ijtc.v5i3.1159 abstract: a nation's manufacturing sector is vital to its economic development. firm value is the main worry for investors and management in the face of the global competitiveness and the covid-19 epidemic. as a result, this study looks at how profitability and company size affect the company's value, with institutional ownership serving as a moderator. quantitative research methodology is employed, and secondary data from 63 industrial sector manufacturing organizations listed on the idx is the type of data used. from this population, 22 samples of companies were collected to be tested. sem-pls was used to test the data. the findings demonstrated that while profitability has no bearing on business value, company size does. the impact of company value is not mitigated by institutional ownership on the relationship between firm size and profitability. these findings suggest that a big business will have the chance to grow its worth. however, strong profitability does not always translate into higher solid worth. because it has limited control over management performance, institutional ownership is unable to regulate the relationship between the two, which permits fraud to occur and affect the scale and profitability of the business. managers and investors can utilize this research to evaluate and augment a company's value in order to stimulate the economy of the country, especially for manufacturing enterprises in the industrial sector that are listed on the idx. keywords: firm value, company size, profitability, institutional ownership this is an open access article under the cc-by 4.0 license https://www.ilomata.org/index.php/ijtc mailto:trisna.ak@upnjatim.ac.id https://doi.org/10.61194/ijtc.v5i3.1159 the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 668 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction a nation's manufacturing sector is one of its key markers of progress. since it plays a key function in offering goods that satisfy the wants of customers. due to the dynamics of globalization and escalating rivalry, manufacturing firms must keep innovating. and keep their items' quality intact. particularly having the ability to boost a company's worth and guarantee its longevity by choosing wisely financially through stock price techniques and delivering success to interested parties (syafhira & trisnaningsih, 2021). the industrial sector, in particular manufacturing firms, was selected by the author due to its critical role in economic expansion. the industrial sector plays a significant role in both the general expansion of the economy and satisfying consumer demands. information obtained from the central bureau of the industrial sector has the ability to attain a bright future through innovation and sustainable efforts, as evidenced by statistics demonstrating its rapid expansion and significant contribution to national exports. specifically, by raising company value, as this will influence investor interest (wasista & asmara putra, 2019). since firm value will represent the current status of the business, it is a crucial factor that needs to be given careful consideration (s. k. putri & utomo, 2021). the company's stock price will represent firm worth over the long run; the higher the stock valuation, the greater the value of the company (kolamban et al., 2020). the price of shares that are exchanged on the market is known as stock valuation. stability in stock valuation can be seen as a sign that the business has solid fundamentals and promising future growth, indicating that its current state is favorable and its valuation is reasonable (aulia firdaus et al., 2024). 2020 has shown us that the covid-19 epidemic has caused extremely erratic stock price changes. where the share prices of several companies have dropped sharply, having a negative impact on the company's worth and decreasing investor interest. this demonstrates the significance of it is crucial for shareholders and management to decide how profitable a company will be and how prosperous it will be. consequently, in order to raise the value of the company, management and shareholders must collaborate (assidiqiyah, 2019). a rise in shareholder welfare will occur after a company's worth increases (di et al., 2024). a number of moderating characteristics, including institutional ownership, profitability, and firm size, can also have an impact on a company's value rise or fall. these variables are useful for stakeholders, particularly investors, to take into account when making an investment in a desired company. the company's size will undoubtedly influence how investors choose to allocate their capital (kusumaningrum et al., 2022). similarly, profitability indicates performance; the more the profit, the higher the performance (rahmani & mauluddi, 2020). because institutional ownership is thought to reduce the likelihood of issues developing that could ultimately lower the company's value, it was also selected as a moderating variable (trisnaningsih & mariyama, 2021). it is clear from the statement above that the goal of this study is to investigate how business value is impacted by firm size, profitability, and institutional ownership as moderating factors. the anticipated benefits of this research for management, investors, or other stakeholders in recognizing the elements that impact firm value and choosing wisely when it comes to management and investment (chen et al., 2014; yoon et al., 2018). https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 669 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agency theory according to agency theory, there is a relationship between two parties: the first acts as the principle or owner, while the second acts as an agent or manager. due to the division of responsibilities in its application between the owner and the agent, agency issues may arise as each party seeks to maximize its own interests and may have an adverse effect on the value of the company (eisenhardt & eisenhardt, 2018). the issue of information mismatch between managers and business owners can also be explained by this approach. managers have the ability to engage in earnings management techniques that are detrimental to business owners because they possess greater information than owners of the organization (tamara et al., 2022). thus, monitoring is required to maintain the stability of all parties involved and lower the possibility of the company's worth declining. signaling theory the mechanism by which businesses can communicate signals or information to other parties about their quality is explained by the signaling theory. the release of both financial and nonfinancial data can serve as an indicator of the caliber of the business (wulandari & meini, 2024). greater and higher-quality financial information disclosure can boost investor trust in the business. disclosing non-financial data, including corporate social responsibility, can help boost a company's investor base. the significance of information for external parties' investment is emphasized by signal theory (suardana et al., 2020). following disclosure, market players will evaluate and assess the data to determine whether it represents a good or negative signal. positive indicators, such rising stock prices, will provide the business promising future prospects and raise its valuation (hidayat & khotimah, 2022). impact of company size on firm value because they are thought to have a better future, stakeholders, especially investors, will invest in shares of a huge corporation. in order to give a big business the chance to raise its valuation. total assets are used to calculate a company's size. because having several assets will draw the attention of investors and raise the company's value (farizki et al., 2021; suryana & rahayu, 2018). according to research by (silkfan & azwir, 2022), the value of a company is significantly impacted negatively by its size. in order for the theory put forth to be: h1: company size has a significant effect on firm value impact of profitability on firm value profitability is a projection of the company's ability to earn profits. one of the measurements that can be taken is using roa (trisnaningsih & mariyama, 2021). the higher the company's roa, the company is considered to have a good and efficient ability to manage its assets to increase company profits (apriantini et al., 2022). based on research conducted by (syafhira & trisnaningsih, 2021), (sahara et al., 2022), (fatoni, 2021) state that profitability has a positive and significant effect on firm value. therefore, if more investors are interested, it will increase the stock price so that the company value will also increase (sabrin, 2016; susanti et al., 2012). https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 670 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2: profitability has a significant effect on firm value the impact of firm size and institutional ownership as a moderating factor on firm value there will be more laborers and managers in the management of a larger organization. for the business to succeed, control is therefore necessary. incorporating institutional ownership is one of the available controls. due to the fact that it is crucial for overseeing and monitoring managers' performance (syafhira & trisnaningsih, 2021). the relationship between business value and company size might be moderated by institutional ownership, according to study by (silkfan & azwir, 2022). wherein more control is required the larger the size. h3: institutional ownership can moderate the relationship between firm size and firm value. the impact of profitability and institutional ownership as a moderating factor on firm value according to (suardana et al., 2020), profitability refers to a company's capacity to allocate resources in a way that maximizes earnings and adds to its overall worth. high institutional ownership, meantime, also affects corporate policy and business strategy. a company's business strategy can be influenced by active institutional investors that prioritize making the most profits possible. they can offer guidance and motivation to use tactics that can boost revenue.(purwaningsih, 2022) research indicates that institutional ownership has a moderating influence and enhances the correlation between business valuation and profitability. because institutional ownership encourages investors to regularly check on the management and performance of the business. h4: institutional ownership can moderate the relationship between profitability and firm value. the following is an illustration of the hypothesis structure based on the aforementioned framework: https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 671 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this study uses quantitative approaches in a descriptive manner. the quantitative data source for this study was the annual reports of manufacturing companies in the industrial sector that were listed on the indonesia stock exchange for four years, starting in 2019 and ending in 2022. the research instrument used in this research is the yearly report, accessible on the www.idx.co.id website, on manufacturing companies in the industrial sector that are listed on the indonesia stock exchange for the period of 2019–2022. this study examines four elements in total: one moderating variable, two independent variables, and one dependent variable. the opinions of stakeholders or investors about how well the business is managing its resources translate into firm value (y). when this opinion is formed in light of precise data gathered about the business (saifaddin, 2020). price book value (pbv), a ratio that contrasts the share price on the market with the book value of the shares, is used as the measuring indicator for company value (lukiman and hafsari, 2018). due to the fact that pbv increases with firm trust (ali et al., 2021). in this study, independent variables come in two varieties. the first kind is company size (x1). the size of the company corresponds to the size of the corporate entity. according to andini (2020) the formula for calculating company size is calculated from total assets.. profitability (x2) is the second variable to be considered. a ratio known as profitability indicates a company's capacity to make money from the operations it conducts (mega ardianis wari, 2021). according to hery (2016: 106) roa is calculated from net income divided by the company's total assets. an effecting or moderating variable in a study is one that modifies the connection between the dependent variable (y) and the independent variable (x). in order to either increase or decrease the two's influence. researchers used institutional ownership (z) in this investigation. as a variable that modifies. improvements for more efficient supervision can be made by taking institutional figure 1. conceptual framework https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 672 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc interests in management oversight into consideration (ramadhani, 2021). the ratio of owned shares to outstanding shares is the measurement indicator that is employed. all manufacturing businesses in the industrial sector that were listed on the indonesia stock exchange (idx) between 2019 and 2022 made up the study's population. there are 63 companies in the population. purposive sampling was the method employed in the investigation. sampling, that is, sampling in accordance with specific preset standards. this makes it possible for researchers to choose samples that are thought to be the most typical of the population or phenomenon they are researching. based on these findings, a sample of 22 businesses overall was derived from the population. as for the sample used as follows: table 1 sample of companies. no company code company name 1. jpte jasuindo tiga perkasa tbk 2. apii arita prima indonesia tbk 3. arna arwana citramulia tbk 4. asgr astra graphia tbk 5. asii astra international tbk 6. bhit mnc asia holding tbk 7. hexa hexindo adiperkasa tbk 8. koni perdana bangun pusaka tbk 9. mfmi multifiling mitra indonesia tbk 10. mlia mulia industrindo tbk 11. mark mark dynamics indonesia tbk 12. spto surya pertiwi tbk 13. skrn superkrane mitra utama tbk 14 cakk cahayaputra asa keramik tbk 15. soss shield on service tbk 16. blue berkah prima perkasa tbk 17. hope harapan duta pertiwi tbk 18. sini singaraja putra tbk 19. ccsi communication cable systems in 20. scco supreme cable manufacturing & commerce 21. untr united tractors tbk 22. impc impack pratama industri tbk source: processed secondary data (2024) result and discussion this study employs smart pls 4.0 software to examine the relationship between firm value and profitability and company size, with institutional ownership serving as a moderating factor. there are two phases to sem-pls testing: testing the outward model and the inside model. the stages and outcomes will be described in more detail below: https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 673 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc outer model analysis one method for evaluating the reliability and validity of the chosen variables is outer model analysis. the tester employs three different measurement kinds in this analysis: cronbach's alpha, discriminant validity, and convergent validity. convergent validity table 2. convergent validity variable outer loading company size (x1) 1,000 profitability (x2) 1,000 firm value (y) 1,000 institutional ownership (z) 1,000 firm size – institutional ownership 0,768 profitability – institutional ownership 0,811 source: output smartpls 4.0 in 2024 a loading factor value of an independent variable is considered valid and suitable if it exceeds 0.7. all of the variables in the previously given table have loading factors larger than 0.7, meaning that they have all been satisfied and are considered practically significant. average variance extracted (ave) table 3. average variance extracted variable ave company size (x1) 1,000 profitability (x2) 1,000 firrm value (y) 1,000 institutional ownership (z) 1,000 firm size – institutional ownership 1,000 profitability – institutional ownership 1,000 source: output smartpls 4.0 in 2024 we can see from the preceding table that every variable that is currently in use has a value greater than 0.5. thus, it may be said that more than half of the variance of its indicators can be explained by a single hidden variable (sari et al., 2018). https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 674 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc discriminant validity table 4. discriminant validity z x1-z x2-z y x2 x1 institutional ownership (z) 1,000 -0,338 -0,010 0,010 -0,064 0,210 x1 z -0,338 1,000 -0,134 0,009 0,001 0,016 x2 z -0,010 -0,134 1,000 0,076 0,104 0,001 firm value (y) 0,010 0,009 0,076 1,000 0,184 -0,274 profitability (x2) -0,064 0,001 0,104 0,184 1,000 -0,145 company size (x1) 0,210 0,016 0,001 -0,274 -0,145 1,000 source: output smartpls 4.0 in 2024 the cross loading value of the current variables is greater than 0.7, or 1.000, as can be seen in the table above. furthermore, the cross loading exhibits a higher predictive power compared to the latent variable. in order for the chosen variables to be considered fulfilled. cronbach’s alpha composite reliability metrics and cronbach's alpha are used in this study's reliability test. if the variable's value is more than 0.7, it will be deemed genuine and credible. as stated by hardisman (2021: 7) in (f. putri et al., 2023). table 5. cronbach's alpha dan composite reliability cronbach’s alpha composite reliability kepemilikan institusional (z) 1,000 1,000 x1 – z 1,000 1,000 x2 – z 1,000 1,000 nilai perusahaan (y) 1,000 1,000 profitabilitas (x2) 1,000 1,000 ukuran perusahaan (x1) 1,000 1,000 source: output smartpls 4.0 in 2024 as can be seen from the above table, every variable has a composite reliability value more than 0.7 and a cronbach's alpha of 1.000. in order for these variables to be regarded as having high criterion and dependability. inner model analysis analyzing the link between exogenous (x) and endogenous (y) variables in the chosen study is the goal of inner model analysis (nugraheni et al., 2023). r-square testing and significant values were employed in this analysis by the researchers. https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 675 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc r-square table 6. r-square r-square firm value (y) 0,220 source: output smartpls 4.0 in 2024 finding the amount that the independent variable influences the dependent variable is the aim of the measurement. as can be seen in the above table, the firm value has an r-square value of 0.220, which indicates that the independent variable accounts for 22% of the company value's explanation. but the remaining 88% can be attributed to characteristics that are not included in this test. path coeficients table 7. path coeficients original sample p-values x1 -> y -0,397 0,000 x2 -> y 0,167 0,266 x1-z -> y 0,043 0,739 x2-z -> y 0,095 0,555 source: output smartpls 4.0 in 2024 with a path coefficient value of -0.397 and a p-value of 0.000 <0.05, the test findings above show that company size considerably lowers firm value. the second test's findings show that profitability has no bearing on a company's worth. the path coefficient's p-value is 0.167. it is more than 0.05, at 0.266. in that instance, the results are not significant. it was thus discovered that institutional ownership was unable to moderate the relationship between firm value and company size with respect to the third test outcome. the route coefficient value is 0.043 and the p-value is 0.739>0.05. in that instance, the results are not significant. in the ultimate test, institutional ownership cannot control the relationship between profitability and corporate valuation. the route coefficient value is 0.095 and the p-value is 0.555>0.05. secondly, the results don't really matter. impact of company size on firm value according to this study, business value is significantly impacted negatively by the size of the company. so the first hypothesis is accepted. where the p-value is 0.000 <0.05 and the path coefficient for firm size is -0.397. furthermore, the outcomes are deemed noteworthy. the findings of this investigation align with previous studies carried out by (silkfan & azwir, 2022). which claims that the value of a corporation is significantly impacted negatively by its size. the larger the company, the more appealing it will be to potential investors. a larger company is thought to have a brighter future than one that is smaller (meidiyustiani, 2023). larger businesses will therefore have the chance to appreciate in value. total assets are used to determine a company's size. possessing a big number of assets can help the business become more valuable and draw in investors (farizki et al., 2021). nevertheless, (anisa et al., 2021) indicates that the findings of this study do not match since it is believed that a larger company will result in a lower firm value, company size has no bearing on firm value. https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 676 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc impact of profitability on firm value the present analysis elucidates the noteworthy affirmative impact of profitability on business value. consequently, the second hypothesis is disproved. the study's findings show that, with a pvalue of 0.266>0.05, firm size has a path coefficient of 0.167. additionally, the outcomes are deemed unimportant. the study's findings are consistent with study carried out by (farizki et al., 2021) when the firm value is unaffected by profitability. thus, it can be said that profitable businesses might not always be able to effectively manage their assets. in order to prevent the company's outcomes from being optimized. the unstable nature of uncertain profits will have an impact on investor interest and warrant consideration. consequently, the value of the corporation cannot rise either. however, there are different results on research conducted by (hidayat & khotimah, 2022). namely profitability has a significant influence on firm value. which means that if the company has high profitability, it will be a good prospect to attract investors. and the higher the ratio, the greater the profit owned. the impact of firm size and institutional ownership as a moderating factor on firm value the relationship between business size and firm value cannot be moderated by institutional ownership, as this study demonstrates. consequently, the third hypothesis is disproved. the test findings demonstrate this. institutional ownership has a p-value of 0.739>0.05 and a path coefficient of 0.043. in order for these outcomes to be announced negligible. thus, it follows that institutional ownership is unable to oversee managers' performance in running the business. in the future, the manager's performance will have an impact on the management of the business, which could raise or lower the business's size and worth. furthermore, institutional ownership plays little part in the decision-making process because the outcome will ultimately determine the size anticipated by all assets and business worth. nevertheless, this study's findings contradict those of earlier studies by (silkfan & azwir, 2022). where the relationship between firm size and company value can be strengthened by the gcg projected by institutional ownership. the impact of profitability and institutional ownership as a moderating factor on firrm value it was discovered in the previous study that institutional ownership was unable to regulate the association between firm value and profitability. consequently, the fourth hypothesis is disproved. where the p-value is 0.555>0.05 and the path coefficient for institutional ownership is 0.095. in order for these findings to be deemed unimportant. thus, it can be said that institutional ownership also plays a little part in decision-making, particularly when it comes to management choices that have an impact on company value and profitability. in order to provide the company's managers and employees more control over management. this is consistent with the findings of (budiharjo, 2021). when corporate valuation and profitability are not able to be moderated by institutional ownership. nevertheless, the findings of this investigation disagree with(purwaningsih, 2022) research. which discovered that institutional possession enhances the profitability and business value's connection. since it is thought to play a significant role in performance monitoring. https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 677 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the conclusions drawn from the previously discussed test findings and conversation. first, the value of a corporation is significantly impacted negatively by its size. where the first hypothesis is supported. the larger the company, the more appealing it will be to potential investors. second, business value is positively and marginally impacted by profitability. the degree of risk or resource governance are two other variables that may have an impact, so the second hypothesis is disproved. lastly, the impact of firm value is not mitigated by institutional ownership in the link between company size and profitability. in order to rule out the third and fourth possibilities. because institutional ownership is limited in its ability to oversee corporate executives. these findings indicate the necessity for additional factors when measuring business value. for instance, concentrating on raising production, efficiency, and taking policy or risk concerns into account. such that more variables not included in this study might be included in future research to maximize and vary the outcomes. reference ali, j., faroji, r., & ali, o. 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(2022). pengaruh good corporate governance, profitabilitas dan ukuran perusahaan terhadap manajemen laba pada perusahaan sektor property and real estate. kompartemen: jurnal ilmiah akuntansi, 20(2), 329–340. https://www.ilomata.org/index.php/ijtc the impact of company size and profitability on firm value with institutional ownership as a moderating variable rachmat and trisnaningsih 680 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc trisnaningsih, s., & mariyama, e. (2021). good corporate governance memoderasi pengaruh profitabilitas, leverage, dan ukuran perusahaan terhadap tax avoidance. seminar nasional akuntansi dan call for paper (senapan), 1(2), 736–753. https://doi.org/10.33005/senapan.v1i2.159 wasista, i. p. p., & asmara putra, i. n. w. 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(2018). does esg performance enhance firm value? evidence from korea. sustainability (switzerland), 10(10). https://doi.org/10.3390/su10103635 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-8971; e-issn: 2714-8963 volume. 6 issue 1 january 2025 page no: 1 – 24 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa estelle deseree abrahams1 1sol plaatje university, south africa correspondent: estelle.abrahams@spu.ac.za1 received : november 11, 2024 accepted : december 30, 2024 published : january 31, 2025 citation: abrahams, e.d. & pretorius, t. (2025). examining the management impact: a literature review on the phasing out of cheques in south africa. ilomata international journal of tax and accounting, 6(1), 1 – 24. https://doi.org/10.61194/ijtc.v6i1.1512 abstract: south african reserve bank, along with other financial authorities, announced that as of december 31, 2020, the acceptance or issuance of cheques as a valid form of payment would cease. this study seeks to explore the management implications of this decision, considering the developing economic landscape of this country. a qualitative approach was employed, utilizing existing literature to gain insights into the potential impact of discontinuing cheques. the findings suggest that changes will be necessary for businesses and financial houses to accommodate new digital payment solutions and educate vulnerable persons. keywords: digital payment; developing country, banking, cheque payment. this is an open access article under the cc-by 4.0 license introduction during the third quarter of 2004, triple-digit growth in electronic banking already appeared in south africa. as profit margins and revenues steadily increased, the south african banks could have an extra option to make money by assessing its core customers: when is that customer ready for new service delivery channels? the extant evidence related to the diffusion of information and communications technology (ict) banking services seems to believe that they are increasing with the increase in demand for digital banking services, even though reports show that there is a reduction in banking costs. as a result of the increased deployment and accessibility of digital banking services and other self-service banking technologies, such as the automatic teller machine (atm), electronic funds transfer (eft), internet, and mobile devices, transaction costs between the banks and the customers started to decrease which, in turn, made face-to-face branch banking expensive for banks (burns, 2022; howell, 2020; bosompem & nekhwevha, 2023). as the global spread of the covid-19 virus extended to south africa, financial institutions responded by implementing measures aimed at mitigating transmission risks. consequently, infected citizens and the broader populace began to curtail face-to-face banking activities as a precautionary measure to https://www.ilomata.org/index.php/ijtc mailto:estelle.abrahams@spu.ac.za1 https://doi.org/10.61194/ijtc.v6i1.1512 examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc safeguard public health. in response to the constraints imposed by the covid-19 pandemic, financial institutions sanctioned the utilization of alternative banking channels such as automatic teller machines (atms) and electronic funds transfers (efts) to facilitate ongoing banking operations. however, notwithstanding these provisions, segments of the population, particularly the elderly and individuals with low socio-economic status, encountered challenges in availing themselves of digital banking options due to deficiencies in digital literacy and limited access to digital devices. consequently, reliance on traditional cheque-based transactions persisted among these demographics. this scenario unfolded amidst the backdrop of the south african reserve bank's deliberations on the phased discontinuation of cheques, a policy initiative propelled by multifarious considerations (james, 2021; matli & ngoepe,2020; pazarbasioglu et al.,2020). at this point in time, a study of its nature has not been conducted that seeks to review and provide reflection and illuminations on how the discontinuation of cheques has been managed by countries around the world. cheques used to be widely utilized as a payment option in south africa. over the past few years, rapid government, regulatory, and marketplace developments have laid the groundwork for the phasing out of cheques. south africa transitioned from using cheques as a primary mode of payment to using modern, digital payments. the phasing out of cheques will bring relevant implications to financial institutions, businesses, and consumers. the study aims to contribute by bringing to light the management aspects that countries would have focused on during the discontinuation process to gradually phase out cheque services. the study will also make assessment checks against both the south african reserve bank’s (sarb's) objective rationale of phasing out cheques during the proposed timeframe as well as the stakeholders' responses either through submissions during the review period or consultations between 2018-2019. furthermore, consultative engagements have occurred within industry forums, and inclusive of sarb's other role players. (coffin et al., 2020; isniah et al., 2020; frederiksen et al., 2020). the financial sector conduct authority (fsca), south african reserve bank (sarb), banking association south africa (basa) and the payments association of south africa (pasa) issued a mutual public statement that the use of cheques as a method of disbursement or compensation will no longer be accepted, commencing on the 31st of december 2020 (sarb, 2020). the south african reserve bank (sarb) announced in june 2020 that the country would start taking steps to discontinue cheque services. while some have been able to fully function without cheques, others still rely on it based on the current cheque clearing and payment process. these groups include beneficiaries, such as the elderly, businesses, and government organizations. there remain risks and challenges as the financial and banking industry, in collaboration with the government, work to implement alternative solutions, ensuring that nobody is left behind. (urban & townsend, 2021; khambule, 2021; gronbach et al., 2022; webb & vanqa mgijima, 2024; simatele & maciko, 2022; ntimane, 2020; bisong et al., 2020; gelb & mukherjee, 2020; loewald et al., 2022; ndikumana et al., 2020). the review sought to answer three questions: first, the extent of usage of cheques in south africa (or its relative importance). second, assess the impact of discontinuation of cheques. third, examine the https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implications of the discontinuation of cheques. introducing less risky payment instruments, especially for making cash-like payments (customers and merchant payments) will foster the pursuit of a less cash society initiative. reducing fraud associated with and protecting both the customer and merchant in the process will be necessary. another major implication is that electronic payment systems must have the same seamless offering as analog instruments (cheques). this review has elicited valuable insight into fostering moderation of payment policy in the broader quest to achieve financial stability. (foster et al., 2021; gainsbury & blaszczynski, 2020; pazarbasioglu et al., 2020). method the study utilized existing data and case studies to assess the management impact resulting from the discontinuation of cheques. a qualitative desk review was conducted to access existing data, chosen for its efficiency and rapidity (clark, 2005, p. 2). to collect data on the research topic, relevant literature such as books, journal articles, dissertations, and regulatory publications will be reviewed. the study aims to acquire background information concerning the usage of cheques, the process of discontinuing cheques, and its associated implications. result and discussion cheques made their debut in south africa during the late 1790s. approximately three decades later, the emergence of the second oldest bank in the nation assumed a pivotal role in shaping the trajectory of cheque usage within the country. originally conceived as a mechanism through which issuing banks provided their clientele access to securely held funds, the initial introduction of cheques lacked a formalized framework. it wasn't until 1921 that the first legislative enactment delineating rules and protocols governing cheques in south africa materialized. this legislative measure was crafted to curtail the practice whereby enterprises disbursed cheques as remuneration to their employees, necessitating subsequent cashing at banks and granting issuing enterprises access to extended credit. furthermore, the legislation mandated the inclusion of an authorized signatory's signature on every issued cheque (alvaredo & atkinson, 2022; mabin, 2020; cronin, 2022; vermeulen, 2021). the establishment of the cheque office, a clearing mechanism, in 1839 marked a pivotal development in streamlining cheque processing operations within cape town. nevertheless, individual banks maintained distinct procedures through their respective payments or discounts offices. it was not until 1894 that all banks universally adopted a standardized british model incorporating wording and signature strokes for cheques cleared via the cheque office. this initiative heralded the formal commencement of the clearing system, which attained full institutionalization in 1906 by establishing a central bank tasked with managing the accounts of various group banks. initially comprising 11 member banks alongside jersey and three irish banks, the cheque office witnessed exponential growth, swelling to 25 member banks by the conclusion of 1848. subsequently, the cheque office https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc amalgamated with the bank of england, consolidating its operational framework within a broader institutional context. (kinns, 2021; parry, 2024; festo et al., 2023; haddad et al., 2023; zitha, 2023). south africa has placed itself on a development pathway that involves advanced adaptation from traditional methods to the advancements of more technologically oriented modes of payment. however, it is clear from other countries that have embarked on cheque discontinuation that the cheque is still favored due to its reliability and security features. cheques were most popular in rural areas and predominantly used by elderly south africans, pensioners, the informal sector, the so-called "unbanked communities," and even the further economically challenged and financially underserved. the rural and poorer demographics rely heavily on cheques to settle accounts. for example, school fees, rental, municipal charges, or receiving wages or subsidies. these individuals might be negatively affected, raising the costs and the lower volumes for the banks in terms of using cash, autoteller machines, or electronic debits like efts. the decline in cheque usage over time can be attributed to various factors. firstly, the issuance of cheques was perceived as cumbersome and time-consuming, leading to decreased adoption. additionally, the populace's lack of widespread education on cheque preparation contributed to diminishing familiarity and usage. moreover, consumers faced limited fraud protection when using cheques, diminishing their appeal. the interbank cheque processing infrastructure became outdated and unable to keep pace with rapid digital advancements. the onset of the covid-19 pandemic in 2020 exacerbated the downward trend in cheque usage. in response to these trends, the consultation paper "the phasing out of cheques in the national payment system," issued on october 2, 2020, delineated the circumstances surrounding the discontinuation of cheques. december 31, 2020, marked the final day south african banks accepted cheques for deposit or encashment. banks must communicate broadly with their clients to prepare them for this transition, guiding alternative digital payment methods. stakeholders are urged to cease issuing and accepting cheques after december 31, 2020, and engage with their banks to learn about electronic payment alternatives (sarb, 2020). cheques were once a prevalent form of payment in south africa, peaking in popularity during the 1990s, constituting nearly 80% of non-cash payments. however, technological advancements over recent decades, such as increased internet access and the proliferation of internet-enabled mobile devices, have transformed business practices and payment preferences. consumers have shifted towards electronic payment transactions due to the stability and reliability of digital infrastructure. consequently, cheque usage has declined, with businesses and individuals favoring online payment methods like debit/credit cards and electronic fund transfers. this transition to digital payment methods has been further accelerated by global economic crises and the covid-19 pandemic, with consumers considering digital methods more efficient and user-friendly (alalwan, dwivedi, rana, & algharabat, 2018; alalwan, baabdullah, rana, tamilmani, & dwivedi, 2018; goel, sahai, vinaik, & garg, 2019; aladwani, 2001; leong, hew, ooi, & wei, 2020). https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the unprecedented covid-19 pandemic has ushered in a new era for businesses and interpersonal relationships, fundamentally altering society's operations. south africa has endured some of the most stringent lockdown measures and restrictions to combat the virus. this highlights the stark gap between those with access to technology and those without access. given this reality, planning to phase out cheques has become even more complicated. it's important to note that the decision to get rid of cheques was made solely by the south african reserve bank without consulting the people directly affected by it. this lack of involvement makes the potential hardships they might face even worse. originally, the plan was to eliminate cheques by 2025, a decision made in june 2012. it's crucial to fully understand the consequences and develop a plan that ensures everyone has fair access to other payment methods. finding a balance between advancing technology and ensuring everyone, especially those in rural areas, can still access financial services is key. by doing this, south africa can reduce the negative impact on marginalized individuals and create a more inclusive society. (torkelson, 2020; du plessis et al., 2022; cipriani et al., 2023). the discontinuation of cheques will increase financial and organizational costs. discontinuation of payment instruments or methods is seen as a normal, natural progression in the evolution of payment systems. it reflects the social needs of consumers and society at large to simplify their payment-making process. the advent of technological innovations has significantly improved payment processes. the national monetary authority or major commercial banks process many electronic payment methods. payment instruments serve various essential functions, including their non-negotiable nature, widespread acceptance, and the distinction that cheques are used for payment rather than as debt instruments. consumer transaction account charges (ctac) typically cover most credit transfers, while banks are introducing the faster payment solution (fps) to expedite payment processing, aiming for transactions to match the speed of incoming funds. with the introduction of fps, the ctac, which usually allows 7-9 direct debits, undergoes a review to modernize its operations. another improvement stems from the national clearing system (ncs) agreement, a four-party clearing scheme implemented by commercial banks. (kollamparambil & oyenubi, 2021; bargain & aminjonov, 2021). many businesses, nonprofit organizations, and individuals still depend on cheques for part, if not all, of their payment and receipt requirements. a similar scenario can be anticipated in south africa, where the relevant financial institutions have already decided and commenced preparations to discontinue the processing and clearing of cheques. the approach of these institutions is to discontinue cheques in a phased manner. this is not so much to ease the administrative burden to both the financial institutions and their customers due to the elimination of cheques, but rather to migrate the customers to alternative payment and receipt mechanisms, which they may not yet be familiar with (cipriani et al., 2023; gronbach et al., 2022; li, 2022; santoro et al., 2022; uddin et al., 2022; asah & louw, 2021). implementing such a strategy sustainably holds the potential to yield valuable insights for financial institutions engaging in analogous discontinuation initiatives. the efficacy of the discontinuation strategy hinges significantly upon the behavioral dynamics of the affected clientele. it is imperative to https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc recognize that the mechanisms and frameworks governing these behavioral responses substantially influence the discontinuation strategy's effectiveness. notably, varying customer segments exhibit distinct behavioral tendencies, underscoring the importance of tailored management approaches to address their expectations. as elucidated, protracted preparation periods coupled with sustained awareness initiatives tend to yield more favorable outcomes among customers. managing affected customers' emotional reactions and apprehensions throughout the transitional phase is paramount. moreover, enterprises must adapt their operational frameworks to accommodate heightened reliance on electronic processes. ensuring uninterrupted working capital flow necessitates formulating and implementing robust contingency plans within business operations (naim, 2023; janiszewski & laran, 2024). electronic funds transfer (eft) is a general term that refers to the movement of funds from one account to one or more other accounts. efts are commonly used for small and recurring payments, such as paying wages or allowing members to pay subscriptions and make loan repayments. there are various forms of eft, including bank drafts, wire transfers, direct deposits, atm transfers, and electronic clearing or settlement processes such as ach (automated clearing house). the ach is an electronic network that processes large volumes of credit and debit transactions in batches. the eft (eftpos) electronic payment system allows consumers to conduct financial transactions using a debit or credit card equipped with a magnetic stripe or chip. the state-of-the-art eftpos system was patented in 1982 and became available in australia in 1984. eftpos payments are made at a peripheral device specifically designed to process card purchases at retail outlets and are accessed by the outlets' customers. solutions have been developed to enable the eftpos capabilities available on a merchant's smartphone. this may enable the payment on a customer's mobile phone. australia has placed an opportunity for growth in eftpos systems in the future. a real-time transfer of funds can signify the realization of convenient cash equity, cash analysis, and real-time settlement. in south africa, efforts are underway to achieve this for certain transactions. for instance, the johannesburg stock exchange's strate csd and the south african reserve bank's sarb-rtgs are involved, with over 70 south african banks and other financial institutions being authorized users of the sarb-rtgs system. additionally, transactions involving 25 automatic clearing bureau (acbs), such as the south african postbank, are facilitated via the strate csd. an intriguing advancement in the electronic fund transfer realm is utilizing blockchain technology. blockchain, known for underpinning bitcoin, finds application in digital currency, reminiscent of the electronic funds transfer (eft) mechanism using bearer instruments like cheques. the potential applications of blockchain are vast, and future developments and integrations into daily transactions could reduce reliance on general bearer instruments like cheques. through consensus mechanisms, blockchain can replace individual intermediaries or auditing groups, ensuring fiat currency transfers meet the necessary criteria. three dimensions eft, equity, and settlement interact to provide the regularity of electronic value transfers (bisht et al., 2022; gentilini, 2022; mhlanga, 2023). https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mobile payments are digital payments processed over the mobile network that do not pass through bank clearing systems. transactions may be cleared in peer-to-peer or real-time payments, between consumers and internet merchants, and for in-store, proximity and mpos purchases. mobile payments can be subdivided into basic, sme and large corporate payments. the lowest-value transactions are basic payments, while sme and large corporate payments account per unit for the highest and second-highest-value transactions, respectively. mobile payments can be used to buy goods and services, and there are advanced mobile person-to-person (p2p) services if the recipient has a bank account, the same bank as the sender, or a different bank from the sender. these transactions occur in various clearing times, such as real-time payments, two-hour payments to the same-bank recipient, and next-day payments to a different-bank recipient (rba, 2019). real-time payments are the most common mobile payments. (pairman & sanggita, 2021; regragui, 2022; jean pierre & mombeuil, 2023; afeti & amanfo, 2021; mahakittikun, 2020; xu & gao, 2021; moonde, 2023). in south africa, the majority of those without bank accounts are unbanked people and youth in the informal sector receiving wages and sending remittances. these various types of mobiles money solutions are categorized as follows: (1) centered traditional banking, (2) telecommunication company (telco)–bank partnership solutions, (3) partnerships between banks and the retail sector, and (4) retail sector/supermarket. over the last decade, mobile payments using airtime, electronic fund transfers, telco–bank cross-selling agreements, and bank-driven mobile applications have quickly grown in south africa (fienup, 2016; woolman, 2018; mikosz, 2019; techcentral, 2019). mobile payments benefit society, businesses, and financial institutions. some of the main drivers making mobile payments successful include (1) the personal, intimate, always-on single identity, (2) legal compliance, the single identity, guaranteed proof of delivery, and an automated banking guarantee for documentation, (3) enabling all types of payments with confirmation, (4) the economic dividend payment to the identities, and (5) instant settlement and reconciliation data. mobile payments, while promising benefits for various segments of society including recipients, small-scale merchants, and providers of goods and services, also present numerous advantages for financial institutions (barrett and kone, 2015; bojjagani et al., 2023; siano et al., 2020; ahmed et al., 2021; torkelson, 2020). online banking is growing dramatically. a banking supervision report of payment distribution systems in 2021 indicates that the number of online card payments is expected to exceed 100 million for the first time. this has been fueled by more consumers enjoying subscription-based services, an increasing e-commerce market, and the utilization of split payments by retailers. despite the smaller number of digital services, online banking and bill payment services have seen strong growth through the past decade, averaging more than 20 million transactions per year (demirgüç-kunt et al., 2022; bukvic2021; simatele & maciko, 2022; de et al., 2021; demirgüç-kunt et al., 2021; van zanden, 2023; eksteen & humbani, 2021; onyango, 2021). one of the oldest services in the online banking space is customer-initiated payments, which allow customers to make payments to both banked and unbanked beneficiaries. payments initiated by the https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc customer are split into real-time payments, batch, and large volume payments. the latter refers to accounts for most corporate clients into corporate-to-corporate payments or business to business services, commonly known as eft. eft utilizes debit card and regular overnight settlement mechanisms. furthermore, the majority of payment transactions in south africa are normal, recurring payments customers make to a predefined list of beneficiaries. these have seen an average of 32 million transactions per year. (torkelson, 2020; simatele & maciko, 2022; gronbach, 2020). several countries have made significant strides in discontinuing the usage of cheques, including sweden, canada, and singapore. in 2012, sweden implemented a complete cessation of bank cheques, driven by major banking entities such as nordea, skandinaviska enskilda banken (seb), handelsbanken, swedbank, and danske bank, in collaboration with the swedish bankgirocentralen responsible for cheque clearing. this decision stemmed from growing concerns regarding cheque fraud, prompting a collective initiative to halt cheque clearing operations. similarly, in 2020, all three major banks in canada ceased the issuance of cheques. this strategic move aims to incentivize businesses to transition to digital payment solutions, thereby reducing associated costs linked with cheque processing for enterprises. moreover, in singapore, united overseas bank (uob) and dbs bank have fully discontinued cheque usage. this decision aligns with evolving consumer and business preferences favoring expedient payment alternatives such as instant e-payments, which offer accessibility and convenience. safety considerations also play a pivotal role in the adoption of these faster payment modalities. (deep,2022; auer et al., 2020; kang et al., 2021; tetlow & dalton, 2020; balliester reis, 2022; skovgaard‐smith, 2023; bilotta & botti2021; náñez et al., 2020). the south african reserve bank (sarb) is responsible for drawing up, announcing, and directing the strategy and framework relating to the national payment system (nps). the government, in consultation with the sarb and other oversight bodies of the nps, has to draw up policy and law dealing with matters of banking, the sarb, and nps. payments under the national payment system are subject to the nps act, as well as payments under any system declared by the minister in terms of section 7 of the nps act. an overarching policy framework is necessary to guide bank behavior in relation to cheques upon discontinuation. some industry measures align with what is set out in regulation 444 of the banks act 94 of 1990 (hereinafter referred to as regulation 444), but some still are not fully aligned. as the directive on the discontinuation of cheques is not clear nor prescriptive enough, it can complicate the way adverse clients' effects are mitigated (coco & viegi, 2020; zhang & huang, 2022; loewald et al., 2022; fantacci & gobbi; ozili, 2023; opare & kim, 2020; cant et al., 2021; tut, 2023). due to the introduction and adoption of e-payments, payment regulation boards within countries have realized that it is costly to process and manage the e-payment channels. in the case of south africa, the financial intelligence anti-money laundering and countering the financing of terrorism act (fic act 38 of 2001) was thus imposed in 2013 to address the fica stamps on cheque payers. https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the electronic clearing of cheques was found costly, including the items (including the e-cheques) on the e-debiting order dispatch system (ods), and thus was not secured or protected to the payees or payers (chitimira & munedzi, 2023; chitimira, 2021; gaviyau & sibindi, 2023; yozi, 2020; smith, 2021; van wyk, 2020; booysen, 2022; ojukwu-ogba & osode, 2020; gaviyau & sibindi, 2023; chitimira & munedzi, 2021). users, fund administrators, and payment banks proved that there was a need to review and assess the current regulatory environment that could better facilitate customers to switch to electronic payment instruments. when the banks did not achieve the specified payment obligations, the reserve bank had no option but to enforce compliance. this had a significant influence on the total probability of cheques bouncing in the banking system, which increased risk in the clearing of cheques. the national payment system banks had to provide funds to clear the cheques, shifts, or reserves to the clearing bank and (or) reserve banks in order to show that they could indemnify the customers that would be at risk of banking account debits and dishonours as a pre-payment notification. (mbah et al., 2021; bowden et al., 2021; mamudu, 2021). the reserve bank enforced the reserve bank of south africa act, implying that all south africans are mandated to use e-payment methods. the success of this policy implied that all partnerships, such as the south african government tax invoices, would be converted to the cheapest e-payment costs – electronic funds transfers (eft). if there were no imposed policies, then the objectives stated by the regulators in their charter would not be achieved. if the regulations were not enforced, users would continue to pay expensively as the payments were (and are) still clearing and floating (schulze, 2020; olukayode2021; gronbach, 2020; ntimane, 2020; chitimira & ncube2023; simatele & mbedzi, 2021; domingo et al., 2023). the protection of personal information act no. 4 of 2013 (popi) addresses the right to privacy and secure consumer protection for personal information processed by businesses. it also promotes the protection of personal information and regulates how it is processed. this act establishes a standard for the protection of personal information and defines responsible parties, private bodies, and the processing of information for its protection. processing of information involves any person who processes information in south africa. any person is defined as an individual, body corporate, partnership, trust, or any form of association (fryer, 2021; netshakhuma, da et al., 2020). the popi act allows for the retention of paper-based records. however, once information is captured in electronic form, these paper-based records may be destroyed. the records should be retained if required by law, contract, or any agreement with a third party. consumer protection is increasingly important for both businesses and consumers. the consumer protection act no. 68 of 2008 (lcpa) came into effect on 1 april 2011. this act provides a new regulatory regime for the protection of consumers in south africa. it explains how businesses relate to consumers, including advertisements, marketing, and promotional activities. it prevents businesses from discriminating against consumers and helps prevent the exploitation of developing consumer https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc power. the act also promotes positive business and consumer relations and social and economic welfare. it emphasizes that all electronically stored records must meet specific technological standards to be valid and effective. this act particularly affects businesses where records are transferred electronically during business transactions. it promotes consumer protection interests and considerations and applies to businesses, consumers, and property transactions. it provides consumer education and promotes consumer rights. it also governs complaints to the national consumer commission. (potwana, 2022; tentu, 2023; laing, 2021). many small and medium enterprises (smes) prioritize managing cash flow, recognizing that hoarding cheques can be a common oversight in sme operations. it's evident that relying heavily on cheques can hinder a business's future growth potential. cash management strategies should ensure that highly liquid cash needs can be met promptly, ideally within two to three days, and no longer than five trading days. the objective is to minimize the amount of cash tied up, thereby mitigating cash flow challenges and potential liquidity issues. simply accelerating the speed of fund clearance through banking operations does not address the underlying issue of cash lock-up. the rules governing the reserve normal clearance (rnc) process stipulate that insufficient cleared funds are the primary factor contributing to liquidity strains. online payment solutions, such as electronic funds transfers (efts) and instant payments, facilitate rapid settlement of funds between different bank platforms, often within hours or even seconds. this inherently reduces cash lock-up, as funds are swiftly transferred between banks, enhancing liquidity and minimizing cash flow disruptions (tut, 2023; mann, 2023; kronick & koeppl, 2023; oluwasegun et al., 2021; una et al., 2020; khan; faccia, 2023; maghsoudi et al., 2023). most sme payment systems are not the most efficient, and often the costs of processing these payment systems are not taken into consideration. cash management costs in an sme environment have a hidden cost: this includes their own and interbank transaction charges, fraud costs, and bank account administration fees that banks charge on transactions. smes will need to implement costeffective payment system solutions that will enable the efficient collection and payment of funds to and from their clients and debtors. if smes do not adapt to low-cost and easy-to-manage and reconciled payment systems, the cost of payment processing that is facilitated by sme companies could become an industry barrier in the south african economy landscape (botha et al., 2021; chingapi & steyn, 2022; telukdarie et al., 2023; msomi & olarewaju, 2021; khoase et al., 2020; nazir & roomi, 2020; rajagopaul et al., 2020). discontinuing cheques is one of the fsca recommendations for the south african market. cheques play a critical role among vulnerable and underserved populations. vulnerable persons and underserved populations include older adults, youth, those living in poverty, and those living in rural settings. with rapid globalization, digitalization is inevitable, including in developing markets such as south africa. leadership and a collaborative stakeholder approach are required to address these problems. in order to avoid these underserved individuals being even further left behind in poverty, due to the emerging trend of financial exclusion, it is essential to keep cheques accessible and https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc affordable. financial services, of which payment mechanisms are part of, provide access to economic security and social safety, especially for vulnerable and relatively disadvantaged persons and groups. indeed, poor individuals and those lacking access to economic resources, services, and markets are typically reliant on cash for their survival. despite the benefits thereof, cash usage incurs opportunity costs and/or the risk of predatory crimes (abrahams & pretorius, 2023; mavhuru, 2022; huneberg, 2020; chisiiwa, 2023). cheques serve as a means to compensate individuals or entities, such as small spas or informal microenterprises, for services rendered or goods provided. they are also used to distribute social security benefits, welfare payments, or pensions to individuals residing in countries other than their own. typically, these payments are processed through banks, often without direct supervision, which offer various services to facilitate these transactions. individuals and groups receiving payments via cheques commonly deposit their funds in bank accounts or invest in savings products rather than keeping cash at home. in such cases, there is a need for innovation and broader adoption of alternative payment methods, including electronic transactions and initiatives like general-purpose reloadable cards. these alternatives offer lower transaction costs and can potentially benefit individuals financially. however, it is essential to respect the autonomy of individuals and groups receiving these payments, even if their financial circumstances are relatively less favorable. for instance, recipients of social welfare grants in south africa are entitled to bank their monthly payouts independently, without being required to wait until the end of the year to access their accumulated funds. additionally, recipients should have the freedom to decide how they wish to utilize their payments, without interference from municipalities or other intermediaries dictating how the funds should be spent or allocated (coibion et al., 2020; chen et al., 2021; zhang et al.,2020; ahmad et al., 2020; alzoubi et al., 2022). south africa is breaking away from its previous stance of maintaining the status quo, which is unprecedented. recognizing that existing payment solutions, including cash, have not been fully optimized, presents an opportunity for improvement. urgent action is needed to mitigate risks, and both professional and public organizations must proactively seek collaborative solutions. a crucial decision point involves setting national policies to ensure that all electronic payment options are accessible to everyone and to promote competition in payment markets. banks play a vital role in addressing adverse consequences and fulfilling their social responsibilities. additionally, addressing educational challenges is essential (maphosa, 2020; megannon, 2022). three main categories of challenges face individuals in this context. firstly, there are challenges related to credit, savings, and investment decision-making, which can burden consumers. it is important to examine the distributional impacts of discontinuing cheques and address issues of financial inclusion. the elderly, who may lack digital skills and technology knowledge, are particularly vulnerable to the discontinuation of cheque payments. furthermore, reduced access to bank branches may exacerbate exclusionary practices, especially impacting minority racial deposit groups and the elderly, as https://www.ilomata.org/index.php/ijtc examining the management impact: a literature review on the phasing out of cheques in south africa abrahams and pretorius 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc highlighted by previous research. (ranchhod & daniels, 2021; gronbach et al.,2022; schotte & zizzamia, 2023). conclusion the study specifically focused on the management impacts of the discontinuation of cheques in south africa. the discontinuation of cheques is expected to have widespread impacts across various social and business sectors. currently, most research in this area relies on qualitative methods, aiming to capture the perspectives of affected parties. however, this study, conducted in south africa, takes a different approach, focusing specifically on the intangible impacts on human labor and technology management. the key findings from the literature analysis highlight several areas of concern regarding human labour management. these include workforce-related business cultures adapting to the digital age, potential losses of valuable skill sets leading to challenges in digital inclusivity, workforce education and retention, and heightened stress levels among employees despite the growing importance of cybersecurity management. on the technology front, impacts are expected to center around system upgrades leading to revenue losses, increased monopoly power favoring network operators, potential limitations in access to banking services, and a potential rise in the overall cost of payment tools. however, it's important to note that the literature analyzed in this study is limited in scope due to a lack of interdisciplinary collaboration. future research should strive to be more comprehensive, including in-depth interviews with key stakeholders from various organizations. furthermore, it's crucial to consider the potential implications of government regulations and policies, as well as the broader economic impact both locally and globally. with technology constantly evolving, organizations must adapt and innovate to remain competitive. this necessitates collaborative efforts between government bodies, businesses, and financial institutions. by taking a proactive approach and addressing challenges head-on, it's possible to mitigate risks and ensure a smooth transition to alternative payment methods. through thorough research and understanding of the multifaceted impacts, organizations and policymakers can make informed decisions to navigate the changing landscape of digital transactions, ultimately fostering a more inclusive and resilient society. references abrahams, e. & pretorius, t. 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(2023). the impact of millennium and sustainable development goals on women leaders within south african schools. post-independence development in africa: decolonisation and transformation prospects (pp. 279-299). springer international publishing. https://doi.org/10.1007/978-3-030-96139-2_14 https://www.ilomata.org/index.php/ijtc https://journals.co.za/ https://uj.ac.za/ https://www.sciencedirect.com/ the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3 july 2024 page no. 764-781 764 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk felix feriadi1, indra widjaja2, rogue s evangelio3 12universitas tarumanagara indonesia, 3university of phillipines diliman correspondent: feriadifelix1986@gmail.com1 received : may 5, 2024 accepted : june 23, 2024 published : july 30, 2024 citation: feriadi & widjaja. (2024). the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk. ilomata international journal of management, 2(3), 764-781 https://doi.org/10.61194/ijtc.v5i3.1486 abstract: this study examines the influence of critical financial indicators on the stock price of pt adaro energy indonesia tbk, with particular emphasis on earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) from 2008 to 2023. organizations encounter significant competitive challenges in escalating global economic integration, rendering financial performance analysis essential for strategic decision-making. although much study has been conducted on financial ratios, limited studies comprehensively investigate the collective impact of these factors on stock prices within indonesia's energy industry, particularly over an extended data range. this study employs a quantitative research methodology and multiple regression analysis, revealing that eps strongly affects stock prices, underscoring its vital importance in shareholder value. the data demonstrate that eps and per substantially influence stock prices independently, but dpr has no meaningful impact. eps, per, and dpr jointly exert a substantial effect, accounting for 65.6% of the volatility in stock prices. these insights enhance the comprehension of the significance of financial measures in stock valuation, offering strategic considerations for investors and corporate management in their decision-making processes. keywords: earnings per share, price earnings ratio, dividend payout ratio, stock price, pt adaro energy indonesia tbk, financial analysis, investment strategy this is an open-access article under the cc-by 4.0 license. introduction globalization, driven by economic progress, has intensified commercial competitiveness. this needs organizations to flourish in changing work environments. thus, businesses must create the correct plan to sustain and improve operations. however, firm growth takes significant funds. external stock market fundraising is one way to get capital. (antaranews, 2024). law 8 of 1995 defines the capital market in article 1 12; law 4 of 2023 modified it. the capital market is part of the financial system, which comprises public offers and trading, investment management, public firms and issuers, and securities-related institutions and professions (ojk, 2023). https://www.ilomata.org/index.php/ijtc mailto:feriadifelix1986@gmail.com https://doi.org/10.61194/ijtc.v5i3.1486 the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 765 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indonesia stock exchange (idx) oversees and supports capital market activity. like traditional markets, the idx is owned by shareholders or investment product sellers. these firms are called securities companies (idx, 2024). in the capital market, investors must carefully choose a corporation to hold their cash for effective fund allocation. the most prominent capital market tool is equities. (liputan6, 2023). thus, investors require stock price information to evaluate firms and make investment decisions. investors can reduce risk using this knowledge. investors acquire shares for dividends or capital gains. profit also increases a company's share value in the future. (ojk, n.d.). fundamental research should be done before investing in the company's shares. investors can assess issuer financial data using this strategy. financial statements may reveal the company's current position and assist in predicting its future (desiyanti, 2017). a company's financial report can affect stock price swings and investor reactions. financial ratios are used for firm analysis or fundamental analysis. investors evaluate a firm, using the price-earning ratio, dividend-payout ratio, and earnings per share. 2021 (stiawan, 2021). eps compares a company's profit after interest and taxes to its total share count. investors are more interested in a firm with a high eps ratio because of its profit potential. per divides stock price by eps. this ratio estimates the company's future earnings potential for investors. company growth potential determines investors' willingness to boost the per ratio. per ratios are higher for fast-growing companies and lower for slow-growing ones. since the per ratio rises, the company's stock price increases, and vice versa. share prices always reflect firm performance. investors acquire and keep firm shares to profit from stock price growth. profit usually determines dividends and stock value. in addition to the predicted rate of return, investors examine the dividend payout ratio. company dividends are distributed. at the gms, shareholders approve dividends. investors must possess shares for a specified amount of time to get dividends. no dividends will impact the stock price. thus, dividend-free corporations' stock values will not fall. dividends don't affect investors' decisions. still, dividends are strategic for corporations and investors. annual dividend payments show good management and cash flow stability to the organization. this will promote firm growth and investor confidence, affecting stock prices. higher dividend payout ratios (dpr) improve stock prices. advances in technology and information increase competition amongst issuers, affecting their performance. every company must increase product quality to please customers. leading indonesian mining and coal business pt adaro energy indonesia tbk implements this technique. adaro now has numerous integrated energy enterprises. company subsidiaries work in mining, power production, port services, ship loading, significant ship transportation, marketing, and dredging. it operates a mine in south kalimantan and aims to lead southeast asia's mining and energy industry. (indonesiainvestments, n.d.) https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 766 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. last five years pt adaro eps, per, dpr, and stock price year earning per share price earning ratio dividend price ratio stock price usd times % usd 2023 0,05309 2,91 48,74 0,15439 2022 0,08032 3,05 40,11 0,24474 2021 0,02927 5,39 69,63 0,15768 2020 0,00459 22,07 99,92 0,10138 2019 0,01264 8,47 61,88 0,10697 source: researcher processed data, 2024 the stock price of pt adaro energy indonesia tbk fluctuates often. like eps, per, and dpr, it changes every period. stock investors may purchase, sell, or hold according to swings. due to varied occurrences, many factors must be addressed. in contrast, the author uses the study's concerns as a basis for writing and analysis. based on the above analysis, the research model framework is as follows: figure 1. framework (source: processed image, 2024) this research analyzes the effects of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk over the 2008–2023 period. by examining these financial indicators, the study aims to understand their partial and simultaneous impacts on stock prices. it offers a comprehensive perspective on their significance in investment decisions within indonesia's energy sector. this research is important for both academic and practical reasons. academically, it enhances the existing body of knowledge on financial performance analysis within indonesia's energy sector, specifically focusing on long-term data trends. practically, the findings provide actionable insights for corporate management to improve shareholder value and for investors seeking data-driven decision-making strategies. by identifying the relative impacts of eps, per, and dpr, this study equips stakeholders with practical tools to optimize investment decisions and operational strategies effectively. method this research was quantitative. sugiyono (2022:22) defines the quantitative approach as a positivist research method used to study a population or sample. researchers gather and analyze data using quantitative or statistical methods to test theories. the study employs time series data. financial report data spans 2008-2023. the reason for selecting the 2008–2023 time frame is twofold. first, 2008 marks the initial public offering (ipo) of pt adaro energy indonesia tbk, signifying the https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 767 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc availability of comprehensive and standardized financial data following the company's listing on the stock exchange. second, 2023 represents the most recent data, ensuring the study incorporates the latest economic developments and trends. by encompassing this time frame, the research captures a complete and up-to-date picture of the company's financial performance and its effects on stock prices. the author employs descriptive, correlational, and causal approaches in this study. (nazir, 2014:43) descriptive techniques are methods used to assess a system of ideas, an item, a scenario, a group of people, or a category of occurrences at a certain period. this descriptive research aims to depict the details, nature, and relationships of the phenomena being examined in a rigorous, factual, and accurate manner. at pt adaro energy indonesia tbk, the author will determine if events or facts impact stock price and the independent variables (earnings per share, price-earnings ratio, and dividend payment ratio). the correlational technique, according to (sugiyono, 2019:70), seeks to determine the link between two or more variables. according to sugiyono (2019:93), the causal research approach considers the potential of a causal link between the independent variable, which influences, and the dependent variable, which is influenced. the data analysis used in this study is multiple linear regression. this model was chosen to determine how much influence the independent variables have on the dependent variables, partially or together. before the regression model is used to test the hypothesis, the following are first carried out: this study conducted classical assumption tests to ensure the regression model's validity. these tests included a normality test to confirm that the data follows a normal distribution, a multicollinearity test to detect high linear correlations among independent variables, a heteroscedasticity test to check for unequal variances in the error terms, and an autocorrelation test to identify any relationships between residuals. once all the requirements for the regression model were satisfied, the next step was hypothesis testing. this step aimed to determine whether the proposed hypothesis could be accepted or rejected. the data analysis for this stage was performed using two essential methods: the f-test to assess the overall significance of the model and the t-test to evaluate the importance of individual variables. result and discussion earning per share at pt adaro energy indonesia tbk in 2008-2023 table 2. earning per share at pt adaro energy indonesia tbk in 2008-2023 year earning after tax number of shares earning per share growth thousands usd thousands of shares usd % 2023 1.641.436 30.917.363 0,05309 -33,90 2022 2.493.079 31.037.420 0,08032 174,43 https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 768 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2021 933.493 31.893.160 0,02927 537,20 2020 146.926 31.985.962 0,00459 -63,65 2019 404.192 31.985.962 0,01264 -3,24 2018 417.720 31.985.962 0,01306 -13,57 2017 483.297 31.985.962 0,01511 44,43 2016 334.623 31.985.962 0,01046 119,51 2015 152.441 31.985.962 0,00477 -14,31 2014 177.897 31.985.962 0,00556 -23,96 2013 233.965 31.985.962 0,00731 -39,28 2012 385.348 31.985.962 0,01205 -29,98 2011 550.354 31.985.962 0,01721 122,67 2010 247.162 31.985.962 0,00773 -46,78 2009 464.404 31.985.962 0,01452 363,49 2008 79.784 25.469.531 0,00313 source: researcher processed data (2024) significant growth is evident based on pt adaro energy indonesia tbk eps growth statistics from 2008 to 2023. eps increased 537% in 2021 and 174% in 2022, indicating a financial improvement for the company. however, eps declines in other years because of profit shrinkage or stock price increases without compensation. kasmir (2019) states that a good eps must be positive and stable over time to indicate consistent company profitability. additionally, good eps must be above the industry average to show company growth. pt adaro's eps increased significantly from 2021 to 2023 compared to the energy sector, especially the mining, gas, and petroleum subsector. this shows that while eps adaro does not increase yearly, the company still has a solid competitive position. comparison of earning per share of pt adaro and the industry average (in rupiah) year adaro industry 2023 899,00 22,65 2022 1134,00 26,76 2021 202,20 3,95 table 3. source: researcher processed data (2024) pt adaro energy indonesia tbk has demonstrated strong performance potential, evidenced by positive eps that exceeds the industry average for many years. the organization must ensure consistent and favorable eps growth to preserve and enhance sustainable profitability. pt adaro can improve its financial standing by sustaining competitive performance within the industry. price earning ratio at pt adaro energy indonesia tbk in 2008-2023 table 4. price earning ratio at pt adaro energy indonesia tbk in 2008-2023 year stock price earning per share price earning ratio growth usd usd times % https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 769 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2023 0,15439 0,05309 2,91 -4,56 2022 0,24474 0,08032 3,05 -43,44 2021 0,15768 0,02927 5,39 -75,59 2020 0,10138 0,00459 22,07 160,73 2019 0,10697 0,01264 8,47 31,76 2018 0,08390 0,01306 6,42 -29,29 2017 0,13729 0,01511 9,09 -24,65 2016 0,12615 0,01046 12,06 53,94 2015 0,03733 0,00477 7,83 -47,89 2014 0,08360 0,00556 15,03 22,95 2013 0,08942 0,00731 12,23 -10,42 2012 0,16443 0,01205 13,65 20,31 2011 0,19519 0,01721 11,34 -69,09 2010 0,28362 0,00773 36,70 189,55 2009 0,18404 0,01452 12,68 -10,35 2008 0,04429 0,00313 14,14 source: researcher processed data (2024) table 4 shows that pt adaro energy indonesia tbk's per fluctuated from 2008 to 2023. company stock price and eps volatility induced this shift. higher per values mean higher stock prices, indicating market optimism about the company's prospects. conversely, a low per suggests a cheaper stock. according to carolina (2018), investors consider per below ten inexpensive, whereas a negative per signals losses and should be avoided. a high per suggests stock speculation. hence, it should be below 15 (sitorus & hutasoid, 2017). the industry's average per can be used to evaluate a company's per. an above-average per shows that the company's stock price is higher than competitors in the same sector. table 5. comparison of price earning ratio of pt adaro and industry average (in units of time) year adaro industry 2023 2,65 8,27 2022 3,39 6,45 2021 11,00 10,00 source: researcher processed data (2024) table 5 shows that in 2023, pt adaro's per (2.65) was below the energy sector average (8.27), making its shares cheaper. pt adaro's 2022 per was 3.39, below the industry average of 6.45. pt adaro's per (11.00) was slightly above the industry average (10.00) in 2021, indicating market optimism. thus, pt adaro's per varied but was typically below the industry average, making it a cheap energy stock. investors may consider this while assessing pt adaro energy indonesia tbk shares. the price-to-earnings ratio (per) of pt adaro energy indonesia tbk is favorable, as it aligns with the industry average benchmark and is perceived as appropriate by investors, neither too high nor too low from a fundamental analytical standpoint. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 770 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dividend payout ratio at pt adaro energy indonesia tbk 2008-2023 table 6. dividend payout ratio at pt adaro energy indonesia tbk 2008-2023 year dividend per share earning per share dividend price ratio growth usd usd % % 2023 0,02588 0,05309 48,74 21,51 2022 0,03222 0,08032 40,11 -42,39 2021 0,02038 0,02927 69,63 -30,32 2020 0,00459 0,00459 99,92 61,47 2019 0,00782 0,01264 61,88 29,10 2018 0,00626 0,01306 47,93 -7,38 2017 0,00782 0,01511 51,75 71,34 2016 0,00316 0,01046 30,21 -39,00 2015 0,00236 0,00477 49,52 16,70 2014 0,00236 0,00556 42,43 32,08 2013 0,00235 0,00731 32,13 5,75 2012 0,00366 0,01205 30,38 -35,47 2011 0,00810 0,01721 47,08 2,63 2010 0,00354 0,00773 45,87 106,91 2009 0,00322 0,01452 22,17 -50,21 2008 0,00139 0,00313 44,52 source: researcher processed data (2024) according to the statistics in table 6, pt adaro energy indonesia tbk continuously disbursed dividends to shareholders from 2008 to 2023 despite variations in the payment rate. this dpr modification signifies the company's internal policy, which may be affected by annual financial situations and financing priorities. consequently, while pt adaro energy demonstrates a commitment to distributing dividends, the dividend payment policy is contingent upon the company's economic success and long-term plan. stock price of pt adaro energy indonesia tbk in 2008-2023 table 7. stock stock market price of pt adaro energy indonesia tbk in 2008-2023 year exchange rate stock price stock price growth rp usd % 2023 15.416,00 2.380 0,15439 -36,92 2022 15.731,00 3.850 0,24474 55,21 2021 14.269,01 2.250 0,15768 55,53 2020 14.105,01 1.430 0,10138 -5,22 2019 13.901,01 1.487 0,10697 27,49 2018 14.481,00 1.215 0,08390 -38,89 2017 13.548,00 1.860 0,13729 8,83 2016 13.436,00 1.695 0,12615 237,92 https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 771 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2015 13.795,00 515 0,03733 -55,34 2014 12.440,00 1.040 0,08360 -6,51 2013 12.189,00 1.090 0,08942 -45,61 2012 9.670,00 1.590 0,16443 -15,76 2011 9.068,00 1.770 0,19519 -31,18 2010 8.991,00 2.550 0,28362 54,10 2009 9.400,00 1.730 0,18404 315,52 2008 10.950,00 485 0,04429 source: researcher processed data (2024) according to table 7, the peak stock price in 2022 was idr3,850, reflecting an increase of 55%. in 2009, the stock price had the most significant gain, rising by 316% relative to the previous year. the most critical loss was in 2015, when the stock price plummeted from idr1,150 the last year to idr515, indicating a decrease of 55%. the volatility of this stock price exemplifies market dynamics and variations in investment value affected by macroeconomic factors and the company's overall performance. the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk this study will evaluate how earning per share, price earning ratio, and dividend payout ratio affect pt adaro energy indonesia tbk stock prices. table 8 provides pt adaro energy indonesia tbk stock price data during 2008–2023 by earnings per share, price earning ratio, and dividend payout ratio: table 8. earning per share, price earning ratio, and dividend payout ratio on pt adaro energy indonesia tbk stock prices in 2008-2023 year earning per share price earning ratio dividend price ratio stock price usd times % usd 2023 0,05309 2,91 48,74 0,15439 2022 0,08032 3,05 40,11 0,24474 2021 0,02927 5,39 69,63 0,15768 2020 0,00459 22,07 99,92 0,10138 2019 0,01264 8,47 61,88 0,10697 2018 0,01306 6,42 47,93 0,08390 2017 0,01511 9,09 51,75 0,13729 2016 0,01046 12,06 30,21 0,12615 2015 0,00477 7,83 49,52 0,03733 2014 0,00556 15,03 42,43 0,08360 2013 0,00731 12,23 32,13 0,08942 2012 0,01205 13,65 30,38 0,16443 2011 0,01721 11,34 47,08 0,19519 2010 0,00773 36,70 45,87 0,28362 https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 772 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2009 0,01452 12,68 22,17 0,18404 2008 0,00313 14,14 44,52 0,04429 source: researcher processed data (2024) spss version 30.0 will be utilized to ascertain the statistical relationship between stock prices. 1. test of classical assumptions the multiple linear regression model is effective if it satisfies data normality and is free from conventional assumptions such as multicollinearity, autocorrelation, and heteroscedasticity (usman & akbar, 2017:107). a. normality test the dependent and independent variables in the regression equation are assessed for normal distribution by a normality test. a regression model is effective when applied to normal or almost normal data. statistical tests can determine normalcy. figure 2. one-sample kolmogorov-smirnov test ( source: researcher-processed data (2024) the one-sample kolmogorov-smirnov test indicates that the four variables are normally distributed, as seen by the asymptotic significance (2-tailed) above 5%. the four variables have a normal distribution, as indicated by the asymptotic significance (2-tailed) above 5%. four variables possess values exceeding 0.05, signifying a normal distribution. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 773 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3. p-p plot source: processed data by researcher (2024) another observation is that the residuals of eps, per, and dpr concerning the dependent variable of stock price and the independent variables eps, per, and dpr remain distributed around the diagonal line and adhere to the diagonal trajectory (p-p plot line). the study's results demonstrate that the research data follows a normal distribution. b. multicollinearity test the multicollinearity test of the regression model assessed the relationship among independent variables. multicollinearity is identified by computing the tolerance and variance inflation factor (vif) values in spss version 30.0. figure 4. results of the multicollinearity test (collinearity tolerance and vif statistics) source: researcher-processed data (2024) the spss findings indicate a tolerance value 0.730 for eps, 0.724 for per, and 0.987 for dpr, with corresponding vif values of 1.371, 1.382, and 1.013, respectively. the regression model test indicates no multicollinearity issues since the tolerance value exceeds 0.10 and the vif value is below 10. c. heteroscedasticity test https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 774 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the heteroscedasticity test assesses whether the residuals of the regression model exhibit uneven variance. the distribution picture of the model may suggest heteroscedasticity. if (1) the data points lack a discernible pattern, (2) the data points are distributed both above and below zero, and (3) the data points do not cluster exclusively above or below, then heteroscedasticity is absent. figure 5. results of heteroscedasticity test (scatterplot) source: researcher-processed data (2024) the scatterplot displays points positioned both above and below zero. the regression model exhibits no heteroscedasticity. d. autocorrelation examination autocorrelation arises in time series and cross-sectional data due to the dependence of residuals across observations. the durbin-watson (dw) test may be used to identify autocorrelation in time series data. figure 6. results of the autocorrelation test (durbin-watson) source: researcher analyzed data (2024) https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 775 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 7. durbin-watson table (α=5%) the durbin-watson (dw) test yielded a value of 1.706. according to the durbin-watson table, with a significance level of α = 5%, three independent variables, and a time series duration of 16 years (n = 16), the dl value is 0.85, and the du value is 1.727. the value of 4 du is 2.2723, whereas the value of 4 dl is 3.1428. according to the durbinwatson criterion, if dl < dw < du or 4 du < dw < 4 dl, the test findings indicate no definitive judgment concerning autocorrelation can be drawn. figure 8. autocorrelation test results (runs test) source: researcher processed data (2024) https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 776 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the runs test is employed to get conclusive findings, while the durbin-watson test does not yield definitive outcomes. in the runs test, decision-making relies on the asymp. sig (2-tailed) value; if this value surpasses the significance threshold of 0.05, it is inferred that autocorrelation is absent. per the testing requirements, the runs test findings demonstrate that there is an absence of autocorrelation in the data. 2. analysis of multiple linear regression multiple linear regression examines the predictive relationship between independent variables and a dependent variable. this study uses multiple regression analysis to forecast how two or more independent variables as predictive factors might be adjusted to enhance or diminish the dependent variable. sugiyono (2019:277) presents the following equation model: y = stock price a = intercept (constant) b1,2,3 = regression coefficient of each independent variable x1 = earning per share x2 = price earning ratio x3 = dividend payout ratio e = error, disturbance variable the calculation will use the spss 30.0 program figure 9. multiple linear regression analysis results source: researcher processed data (2024) the results of the spss version 30.0 calculations can be arranged into a regression equation: the constant of 0.041 indicates that if eps, per, and dpr are all zero, the stock price is usd 0.041. the eps regression coefficient (x1) of 2.962 indicates that a rise of usd 1 in eps would elevate the stock price by usd 2.962, while a reduction of usd 1 in eps will reduce the stock price by usd 2.962, providing per (x2) and dpr (x3) are constant. the per regression coefficient (x2) of 0.007 indicates that a rise of 1 in the per would elevate the stock price by usd 0.007, while a fall of 1 in the per will reduce the stock price by usd 0.007, providing eps (x1) and dpr (x3) remain constant. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 777 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the regression coefficient of dpr (x3) at -0.001 indicates that a 1% rise in dpr would result in a fall in the stock price by usd 0.001, provided eps (x1) and per (x2) are held constant. conversely, each 1% reduction in dpr will elevate the stock price by usd 0.001. 3. determination coefficient analysis of the determination coefficient, the square of the correlation value multiplied by 100%, determines how much the independent variable (x) affects the dependent variable (y). for information, see the determination coefficient formula: description: kd = determination coefficient r = correlation coefficient figure 10. determination coefficient test results source: researcher processed data (2024) the determination coefficient is 0.656 or 65.6%. thus, eps, per, and dpr explain the stock price of pt adaro energy indonesia tbk. the magnitude of the influence of eps (x1), per (x2), and dpr (x3) simultaneously on the stock price (y) of pt adaro energy indonesia tbk is 65.6%, and 34.4% is explained by other factors (not studied). 4. hypothesis testing hypothesis testing uses statistical tests to determine the applicable hypothesis. this study uses spss 30.0 to process data. a. simultaneous testing (f test) according to the f test, the stock price of pt adaro energy indonesia tbk is influenced by the earning per share, price earning ratio, and dividend payout ratio. anova calculations are used to calculate the f test and the probability of significance for this test. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 778 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 11. simultaneous test results (f test) source: researcher processed data (2024) the table findings indicate a significance value of 0.001, which is less than 0.05, leading to the rejection of h0 and the acceptance of ha. the stock price of pt adaro energy indonesia tbk is affected by earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr). pt adaro energy indonesia tbk had a decline in stock prices along with reduced eps, per, and dpr values in 2018. in contrast, eps, per, and stock prices rose in 2016. the stock price of pt adaro energy indonesia tbk influences eps, per, and dpr. eps, per, per, and dpr affect the pt adaro energy indonesia tbk stock price. rising eps, per, and dpr levels frequently lead to an appreciation in stock values. b. partial testing (t-test) individual significance testing (t-test) is used to determine whether there is a partial influence between the independent variables earning per share, price earning ratio, and dividend payout ratio on stock prices at pt adaro energy indonesia tbk. figure 12. partial test results (t-test) source: researcher processed data (2024) eps has a sig value of 0.000 <0.05, meaning ha is accepted or h0 is rejected. so, the pt adaro energy indonesia tbk stock price is partially influenced by eps. per of 0.001 <0.05 indicates that ha is accepted or h0 is rejected. this means that per partially affects the stock price of pt adaro energy indonesia tbk. dpr results were obtained with a sig value of 0.204> 0.05, meaning h0 is accepted, so ha is rejected. so, partially, the dividend payout ratio does not affect the stock price of pt adaro energy indonesia tbk. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 779 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the study results regarding the impact of earning per share (eps), price earning ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk for the period 2008-2023, several key conclusions can be drawn. first, the eps of pt adaro energy indonesia tbk overall demonstrated competitive performance with positive values, often exceeding the industry average, particularly in 2021 and 2022, when significant increases were observed. despite fluctuations, adaro's strong eps highlights the company's competitiveness. to ensure sustainable profitability, adaro must maintain stability and positive eps growth. second, the per of pt adaro energy indonesia tbk fluctuated during 2008-2023, often remaining below the energy industry average, which suggests that the company’s shares were relatively undervalued. this consistently lower-than-average per indicates stable investment appeal with promising long-term prospects. however, in 2021, the per slightly exceeded the industry average, reflecting heightened market optimism. overall, the per of pt adaro energy indonesia tbk remained reasonable from a fundamental analysis perspective, aligning with or slightly deviating from industry benchmarks. third, pt adaro energy indonesia tbk consistently distributed dividends to shareholders throughout 2008-2023, even though the dpr fluctuated. this reflects the company’s policy of adjusting dividend distribution based on financial conditions and annual funding priorities, demonstrating a commitment to rewarding shareholders while balancing financial performance and long-term strategies. fourth, the stock price of pt adaro energy indonesia tbk experienced significant fluctuations over the analyzed period. the stock peaked at idr 3,850 in 2022, while the highest annual growth of 316% occurred in 2009. conversely, the most significant decline was in 2015, when the stock dropped by 55% to idr 515. these variations reflect the impact of macroeconomic conditions and company performance on its investment value. fifth, statistical analysis using spss revealed that eps had a significant partial effect on the stock price of pt adaro energy indonesia tbk, as evidenced by a significance value of 0.000, which is below 0.05. this finding led to the acceptance of the alternative hypothesis (ha) and the rejection of the null hypothesis (h0). sixth, the per was also found to have a significant partial effect on the stock price, with a significance value of 0.001, less than 0.05. thus, the alternative hypothesis (ha) was accepted, and the null hypothesis (h0) was rejected, indicating a significant relationship. seventh, the dpr did not have a significant partial effect on the stock price, as noted in a significance value of 0.204, greater than 0.05. this result led to the rejection of the alternative hypothesis (ha) and the acceptance of the null hypothesis (h0). finally, when eps, per, and dpr were analyzed simultaneously, the study found a combined significant effect on the stock price of pt adaro energy indonesia tbk. the overall significance value of 0.001, below 0.05, supported the acceptance of the alternative hypothesis (ha) and the rejection of the null hypothesis (h0). the determination coefficient of 65.6% indicated that these three variables collectively explained the stock price, while other factors outside the scope of this study influenced the remaining 34.4%. https://www.ilomata.org/index.php/ijtc the effect of earnings per share (eps), price earnings ratio (per), and dividend payout ratio (dpr) on the stock price of pt adaro energy indonesia tbk feriadi, widjaja and evangelio 780 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the research conducted by the author, several suggestions are provided. pt adaro energy indonesia tbk's performance is recommended to be sustained and enhanced by boosting profitability through increased product sales, improved efficiency, business expansion, product diversification, and better services. maintaining strong performance is crucial to retaining investor interest and confidence, preventing a loss of trust, and attracting new investors to purchase the company's shares. this research suggests that the management should focus on improving eps and per to maintain the stock's appeal while optimizing dividend distribution policies to strengthen investor confidence. investors are advised to consider factors beyond just eps, per, and dpr when purchasing shares in a company. the findings of this study offer valuable insights for making investment decisions. a high eps indicates robust company performance, making such shares attractive for investors seeking growth opportunities. a per lower than the industry average signals undervaluation, making the stock more appealing. however, the research reveals that dpr has an insignificant impact on stock prices, suggesting that investors prioritize potential profit growth over dividends. therefore, investors are encouraged to evaluate shares from a dividend perspective by considering eps, per, and their comparison to industry averages. lastly, it is recommended that other researchers conduct further studies using additional independent variables and more extended research periods. this approach would enable a more comprehensive comparison of results and deeper insights into the same topic. reference antaranews. (2024, august 10). ojk: pasar modal sebagai alternatif pembiayaan bagi perusahaan dan ukm. antara news. https://www.antaranews.com/berita/4251167/ojkpasar-modal-sebagai-alternatif-pembiayaan-bagi-perusahaan-dan-ukm arifardhani, y. (2020). hukum pasar modal di indonesia : dalam perkembangan. kencana. azis, m., mintarti, s., & nadir, m. (2015). manajemen investasi : fundamental, teknikal, perilaku investor dan return saham. deepublish. carolina, d. (2018). analisis penilaian kewajaran harga saham dengan menggunakan pendekatan fundamental pada pt. panin sekuritas tbk. jurnal media wahana ekonomika, 15(2), 22–34. https://doi.org/10.31851/jmwe.v15i2.2405 darmawan. (2023). manajemen investasi dan portofolio. bumi aksara. desiyanti, r. (2017). teori investasi dan portofolio. bung hatta university press, 276. https://id.scribd.com/document/511938794/strategi-investasi-obligasi fahmi, i. (2020). analisis laporan keuangan. alfabeta. hantono. 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(2017). metodologi penelitian sosial. pt. bumi aksara. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 684-702 684 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective heriantonius silalahi1, budi kurnia2 1directorate general of taxes, indonesia 2padjajaran university, indonesia correspondent: heri.silalahi@gmail.com1 received : august 12, 2023 accepted : october 12, 2023 published : october 31, 2023 citation: silalahi, h., kurnia, b. (2023). fringe benefits in tax law: matching principle and tax justice perspective. ilomata international journal of tax and accounting, 4(4), 684-702. https://doi.org/10.52728/ijtc.v4i4.870 abstract: this study addresses a significant issue within indonesia's income tax policy, focusing on the taxation of fringe benefits and non-monetary compensations. fringe benefits, being non-monetary rewards granted to employees, have gained prominence in various sectors' remuneration structures. the evolving landscape of in-kind taxation, encompassing natural elements, prompts inquiries into the determinants of tax imposition choices and their equity ramifications. the study aims to explore the income tax perspective on fringe benefits and non-monetary gains, emphasizing the applicability of the matching principle and its implications for equitable taxation. despite the rising importance of fringe benefits, scholarly discourse on the alignment of conformity principles with in-kind taxes remains sparse. therefore, this study offers a fresh contribution in comprehending this matter. employing both a policy analysis and taxation approach, the study draws data from literature, tax statutes, and the latest economic reports. the findings underscore the significance of integrating the conformity principle in the taxation of fringe benefits and non-monetary rewards. this integration can augment the efficiency and transparency of state financial management, curbing detrimental tax avoidance practices that undercut state revenue. in summary, this study validates that adopting the conformity principle in taxing fringe benefits and nonmonetary gains holds the potential to bolster state revenue and enhance fiscal management efficiency. the research's implications can guide policy makers in refining the national tax framework and fostering equitable taxation in indonesia. keywords: fringe benefits, matching principle, tax justice, financial management this is an open access article under the cc-by 4.0 license. introduction the imposition of taxes on fringe benefits has become a significant concern and debate in income tax policies in indonesia. the concept of fringe benefits includes non-monetary compensation and https://www.ilomata.org/index.php/ijtc mailto:heri.silalahi@gmail.com1 https://doi.org/10.52728/ijtc.v4i4.870 fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 685 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc benefits received by employees or individuals, provided by employers or other entities. these benefits are often in the form of goods, services or other non-cash benefits, and have become an important part of employee remuneration packages in various industries. in indonesia, the treatment of fringe benefits for tax purposes has changed from time to time. initially, fringe benefits are not subject to income tax for individuals, but also cannot be considered as a deductible expense for employers. however, with the introduction of the new regulation, fringe benefits are now included as an object of income subject to tax, reflecting the government's efforts to optimize tax revenue and ensure tax equity. the application of taxes on fringe benefits raises several questions and critical concerns, including the factors behind tax imposition decisions, the application of the matching principle, and the implications for tax equity. understanding the factors that influence the taxation of fringe benefits is important for assessing the effectiveness of current tax policies in addressing potential loopholes and ensuring a fair and equitable tax system. this study aims to explore the perspective of income tax on fringe benefits and pleasure in indonesia, with a focus on exploring the basic principles of taxation, particularly the principle of conformity, and assessing their impact on tax equity. by investigating various aspects of taxation of fringe benefits and pleasure, this study seeks to provide valuable insights that can assist policy makers in making informed decisions to improve the country's tax system while promoting fairness and equity for all taxpayers. the application of the matching principle in the treatment of fringe benefits income tax can have a significant impact on global economic conditions which are currently facing severe challenges. the matching principle refers to the matching between income and expenses in the same time period to ensure compatibility and balance in tax payments. in a situation of limited global economic growth and high inflation, the application of the matching principle can help reduce the fiscal burden on the government and help overcome the budget deficit. by matching income from taxes on fringe benefits received by the government with expenditures to finance various development programs and projects, the application of the matching principle can increase the efficiency and transparency of state financial management. in addition, the matching principle can also help prevent tax avoidance practices that can harm state revenues (pu & syu, 2023). by requiring companies to report tax appropriately and accurately fringe benefits given to employees, the application of the matching principle can prevent manipulation or abuse in tax reporting. however, it is also important to consider that applying the matching principle in fringe benefits taxes can also pose some challenges. one of the main challenges is the complexity in the process of matching income and expenses, especially if there are different types of fringe benefits provided to employees. an efficient and accurate reporting system is needed to properly implement the matching principle. the global economy is projected to face a sluggish growth rate, comparable to historic downturns such as the 2007-2008 financial crisis and the height of the covid-19 pandemic (susila adiyanta, 2020). concerns over inflation and higher interest rates are expected to weaken private consumption and investment, possibly leading to mild recessions in certain countries before a forecasted growth recovery in the latter half of the year and into 2024. this economic outlook is set against a backdrop of ongoing challenges, including the pandemic, the conflict in ukraine with resulting food and energy crises, surging inflation, debt tightening, and climate emergencies. the report highlights the urgent need for robust fiscal measures and warns of the potential impact on https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 686 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc achieving the 17 sustainable development goals (sdgs) (moghavvemi et al., 2023). developing countries face slower job recoveries and persistent challenges, particularly in women's employment. the report calls for international collaboration, strategic investments in education, health, digital infrastructure, technology, and climate resilience, and emphasizes the necessity of urgent international commitment to mitigate the impact and promote sustainable global development (iswahyudi, 2021). the following shows a graph of the economic situation and its prospects based on the following data: graphic 1. world economic situation and prospects 2023 source : world economy report on https://news.un.org in addition, in an economic situation that has not fully recovered from the impact of the covid19 pandemic, the application of the matching principle must be applied carefully so as not to create additional burdens for companies and employees who may still experience financial difficulties. when connected with the current global economic conditions, it is important to maintain economic stability. this year, both developed and developing countries face the threat of recession, it was reported. growth momentum will weaken significantly in the united states, european union and other developed economies in 2022. this will have a detrimental effect on the global economy as a whole. tight global financial conditions coupled with the strengthening of the dollar exchange rate have resulted in increased fiscal and debt vulnerabilities in developing countries. analysis shows that more than 85 percent of central banks worldwide have rapidly increased monetary policy and interest rates since late 2021 to control inflationary pressures and avoid a https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 687 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc recession. global inflation, which hit its highest level in decades, around 9 percent in 2022, is projected to decline but remains high, around 6.5 percent in 2023. looking at the optimism of tax revenue, particularly income tax, we can observe a trend in the growth of state revenue in the income tax sector as shown in the following table: table 1. state revenue realization tax state revenue realization (billion rupiah) 2018 2019 2020 2021 2022 income tax 749.977 772.265 594.033 696.676 895.101 source: ministry of finance report 2022 this data reflects the fluctuation in income tax revenue over the given period. the revenue for the year 2020 appears lower, possibly due to the economic impact of the covid-19 pandemic, but there was a significant increase in 2022. this trend mirrors the dynamics of the economy and changes in tax policy that affect the country's income tax revenue (ministry of finance, 2022). a linear equation is a fundamental form in mathematics that describes a linear relationship between two variables. in the linear equation y=mx+b, y represents the dependent variable, x represents the independent variable, m represents the slope of the line, and b represents the intercept. the slope (m) indicates how much change in the dependent variable (y) is associated with a one-unit change in the independent variable (x). if m is positive, it means an increase in x is related to an increase in y, and conversely if m is negative (r.p. garcia, 2022). if depicted in a graph, it can be illustrated as follows: graphic 2. figure of state revenue realization source: modification of state revenue realization y = 21466x + 677213 r² = 0.0953 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 0 1 2 3 4 5 6 b ill io n year income tax income tax linear (income tax) https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 688 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the figures in the table can be correlated with the equation "y = 21466x + 677213 and r2 = 0.0953" in the context of analyzing the relationship between the years (x) and the state revenue realization from income tax (y). the equation suggests a linear model to predict the revenue based on the year. the positive coefficient (21466) indicates that there is an estimated increase of 21,466 billion rupiah in revenue for each year. however, the low r-squared value (0.0953) suggests that the linear model doesn't explain a significant portion of the variation in revenue, implying that other factors beyond just the year might be influencing the revenue trends. this visual representation showcases the fluctuating nature of income tax revenue over the years. the dip in 2020 could be attributed to the pandemic's economic impact, while the substantial increase in 2022 indicates a potential recovery and changes in tax policy. the graph provides a clear visual understanding of the trends in state revenue from income tax over the specified period. based on the description above, the problems of this study are focused on three main points: 1. tax imposition of fringe benefits in indonesia: this study will examine in depth how the taxation of fringe benefits in income tax policies in indonesia. this includes identifying the concept and scope of fringe benefits as non-monetary compensation and benefits received by employees or individuals from employers or other entities. 2. the matching principle in taxes in fringe benefits and its impact on tax equity: this study will explore the matching principle and how its application to fringe benefits taxes can affect tax equity in indonesia. factors influencing tax imposition decisions and the implications of applying the matching principle to the efficiency and transparency of state financial management will also be analyzed. 3. challenges and implications of applying the matching principle in natura taxes: this study will discuss the main challenges faced in implementing the matching principle in natural taxes, especially related to the complexity of matching income and expenses and their adaptation to the post-covid-19 economic situation. in addition, this study will explore the implications of applying the matching principle to state revenues and more efficient financial management in indonesia. by focusing on these three points, this study is expected to provide valuable insights for policy decision makers in developing a tax system that is fair, efficient, and in line with the challenging global economic conditions. the application of the matching principle in the fringe benefits income tax can potentially have a positive impact on state revenues and more efficient financial management, but it also requires a careful approach and is adapted to current global economic conditions. method the research method that will be used in this study involves a descriptive analysis approach, comprehensive literature research, comparative analysis, qualitative approach, and secondary data collection. descriptive analysis approach will help us to describe and analyze in depth the concept of taxation of fringe benefits in indonesia. this study will identify developments in tax regulations related to fringe benefits over time and analyze how the concept of fringe benefits has been applied in various industries. literature research will be the main basis for gathering information on the https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 689 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc matching principle in the context of fringe benefits taxes, both within the framework of indonesian taxation and international practices. this study will investigate studies and reports regarding the implementation of the matching principle in fringe benefits taxes and its effect on fiscal efficiency and transparency of state finances. through a comparative analysis, this study will compare the implementation of the matching principle in natura taxes in indonesia with practices in other countries (nguyen-hoang & zhang, 2022). this will give us insight into how this principle can be applied effectively in the indonesian tax context. the research uses a qualitative approach to explore the challenges and implications of applying the matching principle. this study will citate with tax experts, industry practitioners and relevant government representatives to understand their views and experiences regarding the application of the matching principle in daily practice. the research collects secondary data from various sources such as the latest tax regulations, government reports, academic studies, and publications related to taxation and economics. these data will support our analysis and provide a solid basis for formulating conclusions. by combining these various methods, we hope to provide an in-depth insight into the taxation of fringe benefits in indonesia, the conformity principle in fringe benefits tax, and its impact on tax efficiency and fairness. result and discussion 1. theoretical framework the theoretical framework of this study focuses on the tax concept of fringe benefits and the application of the conformity principle in taxation. this framework explores the concept of fringe benefits as a form of non-monetary compensation and privileges provided to employees by employers. by considering tax principles and policy objectives, this framework analyzes how the application of the conformity principle in tax fringe benefits can affect tax equity and efficiency. the challenges of implementing this principle and its adaptation to complex global economic conditions are also considered in this framework. can be described as follows https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 690 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc graphic 3. theoretical framework graphic 3 summaries some relevant previous studies other than studies already mentioned concerning tax amnesty and tax compliance, especially in indonesia. table 2. previous research no previous research researcher year method conclusion 1 incentive effects and the income tax treatment of employer-provided workplace benefits jan voßmerbäumer 2013 quantitative analysis, case studies taxes on fringe benefits can affect tax efficiency (voßmerbäumer, 2013) 2 the price of fringe benefits when formal and informal labor markets coexist david and jorge 2015 econometric analysis, surveys taxes on nonmonetary benefits have an impact on income distribution (argente & garcía, 2015) 3 optimal fringe benefit taxes: the implications of business use cullum butler and paul calcot. 2017 comparative study, legal analysis the principle of conformity in international taxation (butler & calcott, 2018) taxation of fringe benefits and matching principle 1. fringe benefits concept 2. taxation principles and policies 3. matching principle in taxation 4. impact on tax equity and efficiency 5. challenges and adaptation 6. global economic context https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 691 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4 self-enforcing capital tax coordination thomas eichner and rudiger petihg. 2018 longitudinal analysis, economic modeling changes in taxes on non-monetary income and their effects (eichner & pethig, 2018) 5 effectiveness of tax reform on entrepreneurship chigozie andy ngwaba and seyedsoroosh azizi. 2019 survey, qualitative interviews the tax on employee enjoyment affects talent retention (ngwaba & azizi, 2020) 6 accounting, tax compliance and new zealand indigenous entrepreneurs: a bourdieusian perspective sue yong and peni fukofuka. 2017 comparative analysis, literature review tax practices on welfare benefits in developed countries (yong & fukofuka, 2023) 7 natura dan kenikmatan sebelum dan sesudah undangundang harmonisasi peraturan perpajakan firmansyah and wijaya. 2022 comparative analysis this regulatory change also presents a valuation challenge for the tax authorities (firmansyah & wijaya, 2022) this study brings innovation by applying the principle of conformity in the context of taxes on fringe benefits in indonesia. this is a new contribution to understanding how this principle can be applied to measuring non-monetary income and benefits, as well as the implications for tax equity and efficiency in the indonesian tax system. in addition, this study analyzes the challenges of implementing the principles of conformity and adaptation in post-covid-19 economic conditions, providing new perspectives in overcoming obstacles and maintaining national economic stability. 2. fringe benefits concept based on minister of finance regulation number 66 of 2023, the concept of "fringe benefits" refers to goods or services provided by employers to their employees. this type of gift can be in the form of money, goods, services, rights or other benefits, but does not include income in the form of money received by employees on the basis of work or services performed. in this context, the definition of "fringe benefits" also includes various types of compensation or non-monetary benefits provided by the employer as part of remuneration or as a reward for services rendered by employees. furthermore, article 2 in minister of finance regulation number 66 of 2023 outlines the treatment of reimbursement costs or rewards fringe benefits and/or benefits. this article explains that reimbursement costs or compensation given fringe benefits and/or benefits related to work or services have the potential to be deducted from the gross income of the employer or reward https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 692 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provider. however, this deduction only applies if the costs are expenses related to efforts to obtain, collect and maintain income. the replacement costs or compensation related to work refer to expenses related to the employment relationship between employers and employees, while service relate costs refer to costs arising from service transactions between taxpayers (lokanan, 2023). furthermore, expenses for replacement costs or compensation fringe benefits and/or benefits that have a useful life of more than 1 year will be recognized through depreciation or amortization in accordance with the provisions of the income tax laws and regulations. however, if the expenditure is short term with a useful life of less than 1 year, then the expenditure will be recognized in the year it is incurred. the employer, giver of compensation, or reimbursement must report the cost of reimbursement or compensation fringe benefits and/or benefits along with information about employees or recipients of compensation in the annual income tax return. we can see on this illustration graphics: graphic 4. fringe benefits concept therefore, it is important to remember that minister of finance regulation number 66 of 2023 has a significant impact on the calculation of income tax relating to fringe benefits gifts and/or benefits to employees. since 1 july 2023, fringe benefits providers also have the obligation to deduct income tax on the value of compensation fringe benefits and/or benefits provided to employees. even so, there are eleven types of fringe benefits that are not counted as income tax objects, such as providing food or drink for all employees at work, health facilities, and communal housing facilities. even though the eleven types are not counted as income tax objects, the costs incurred for fringe benefits gifts cannot be considered as fiscal costs that can reduce taxable income. therefore, employers need to deduct income tax from employees and at the same time recognize the cost of fringe benefits gifts and benefits as a fiscal cost, unless otherwise specified in the regulations. the correct classification regarding the type of fringe benefits and the benefits provided is very important, considering that an error in this classification can have an impact on calculating gross income, recording fiscal costs, and the amount of tax that must be paid and reported through the income tax return. in this context, both companies and employees need to understand and comply with the provisions in minister of finance regulation number 66 of 2023 so that the process of calculating taxes and reporting taxes can be carried out correctly. the existence of this regulation also encourages transparency and accountability in the implementation fringe benefits non fringe benefits deductable non deductable https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 693 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of reimbursement or compensation fringe benefits, so that the tax system can run more efficiently and in accordance with applicable law (pu & syu, 2023). the following is a list of fringe benefits that is exempt from income tax objects based on minister of finance regulation number 66 of 2023: table 3. list of fringe benefits based on minister of finance regulation number 66 of 2023 no. fringe benefits limitation 1 a gift from the employer in the context of a large religious treasure food/drinks for all employees at work without any value limit 2 gifts from employers other than in the context of religious celebrations worth not more than idr 3,000,000.00 per tax year for each employee 3 equipment and work facilities from the employer supporting employees at work 4 health and medical service facilities from the employer in the context of handling work accidents, occupational diseases, etc 5 sports facilities from the employer other than certain sports facilities worth not more than idr 1,500,000.00 per tax year for each employee 6 communal living facilities from the employer utilized together 7 individual living facilities from the employer utilization rights are held by individuals 8 vehicle facilities from the employer received by employee 9 pension fund contribution facility from the employer borne by the employer for employees 10 religious facilities (musala, mosque, chapel, temple) for worship activities 11 all fringe benefits and/or benefits are accepted in 2022 all types of fringe benefits and/or enjoyment received by employees or service providers 3. taxation principles and policies in indonesia, tax principles and policies have a central role in supporting the collection of state revenues fairly and efficiently. these principles reflect the government's goal of managing a taxation system that suits the country's economic and social conditions. some of the main principles that form the basis of taxation in indonesia include the principles of fairness, simplicity, efficiency, paying capacity, elasticity and incentives. the principle of equity demands that the tax burden be distributed fairly, where individuals with higher economic ability are expected to contribute more. in addition, the principle of simplicity encourages the tax system to be easily understood by the public, avoiding complications that can make it difficult for taxpayers to report their obligations (crocker et al., 2022). https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 694 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc efficiency is one of the main foundations in designing an optimal tax system. this system should be able to collect and manage tax revenues efficiently, avoiding wastage of resources and excessive bureaucracy (zhao, 2020). the principle of paying capacity refers to the consideration of an individual's economic ability to pay taxes, so that individuals with higher incomes make a greater contribution. the principle of elasticity allows the government to adjust tax policies according to economic and social changes that occur. tax incentive policies are used to encourage investment and economic growth by providing tax facilities to certain sectors (downs & stetson, 2014a). the indonesian government is also committed to tackling unlawful tax evasion by implementing laws and regulations that protect the integrity of the tax system. transparency in the collection and management of tax revenues is also an important focus, accompanied by strong law enforcement against tax violations (avram & popova, 2022). 4. matching principle in taxation the matching principle is one of the basic principles in the tax regulation framework which has an important role in determining cost deductibility. this principle bases itself on the substance of the transaction and relates it to the consequences arising from the transaction (hsu & liu, 2023a). the implementation of this principle is reflected in the indonesian income tax law, which regulates taxable income, deductible expense and non-deductible expense in articles such as 4, 6 and 9. however, before the law on harmonization of tax regulations (hpp law) came into effect, the application of the matching principle in income tax is not absolute and there are deviations from the application of regulations, such as in the fringe benefits aspects. prior to the hpp law, the application of matching in the income tax law was not always consistent with principles in several cases, especially with regard to fringe benefits. article 4 paragraph (3) of the income tax law previously stated that giving fringe benefits to employees is not a tax object, and article 9 paragraph (1) letter e indicates that expenses for fringe benefits cannot be recognized as a deduction from gross income. however, article 4 paragraph (3) also stipulates that certain fringe benefits may be subject to income tax. the hpp law, which revokes several previous provisions, stipulates that fringe benefits are an object of income tax and in article 6 paragraph (1) letter n it stipulates that reimbursement costs or rewards fringe benefits are a deduction from gross income. although these changes indicate better consistency in the application of the matching principle, there are exceptions for certain types of fringe benefits that are not subject to tax. for example, the provision of food or drinks for all employees at work or fringe benefits in the context of carrying out work. these exemptions present variations in fringe benefits fiscal treatment. although this inconsistency can be seen as a form of deviation from the matching principle, it is largely recognized as a rational measure to achieve a more just and efficient taxation goal. the hpp law reflects efforts to adjust regulations related to fringe benefits with the matching principle. the classification of fringe benefits as an object of income tax and the arrangement of its fiscal costs in the relevant articles provide clarity and consistency in the application of this principle. although there are certain exceptions, this regulation is more based on the substance of income and contributions in business processes, and provides better legal certainty in the context of taxation. this regulatory change also raises considerations regarding the matching principal https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 695 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc concept which cannot always be applied in every situation. prior experience of the hpp law and the implementation of exceptions for certain types of fringe benefits shows that there are cases where the taxable-deductible principle cannot be applied perfectly. for example, the provision of food and drink for all employees at work, even though it is excluded as a tax object, is recognized as a deduction from gross income. this is an example of how non-monetary aspects that are regulated in the context of the matching principle still have implications for reducing fiscal costs. in tax regulations, the application of the matching principle is based on the principle that expenses must have a direct relationship with the income process. therefore, tax regulations must consider both aspects of income recipients and providers of expenditure holistically. although there are inconsistencies and exceptions, the steps towards harmonization of tax regulations and conformity with the matching principle are positive steps. in the midst of regulatory complexity and substantial changes in the hpp law, the implementation of the matching principle in it remains a challenge. harmonization between tax principles, economic goals, and tax policies is something that must be strived for. in this regard, improving regulations and increasing understanding of the basic principles of taxation are key in creating a fair, efficient and measurable tax framework. it is important to remember that tax arrangements are dynamically evolving. while there are efforts to adhere to existing principles, regulations must also be responsive to developments in the economic and social environment. therefore, sustainability in improving and harmonizing tax regulations, including aspects of tax imposition and fiscal charges related to fringe benefits, must be the main focus to achieve an optimal and fair tax system. the implementation of the matching principle in imposing fiscal costs fringe benefits in tax regulations is a complex effort and needs to be adapted to the dynamic tax context. thus, steps to achieve harmony between the basic principles of taxation, economic goals, and tax policies will continue to be a challenge and a demand in developing an efficient and fair tax framework. 5. impact on tax equity and efficiency the application of taxes on fringe benefits as well as the matching principle in the context of taxation has a significant impact on two important aspects: tax equity and tax efficiency. in terms of tax equity, the imposition of taxes on fringe benefits can contribute to a more equitable distribution of income. by imposing a tax on additional benefits such as company benefits or medical benefits, the gap between lowand high-income employees can be narrowed. in addition, the principle of conformity in the application of this tax also supports horizontal equity, by ensuring that individuals with similar situations and incomes are subject to a comparable tax burden. the existence of clarity in the application of taxes on fringe benefits can also increase public perceptions of fairness in the tax system. on the efficiency side of taxation, the implementation of taxes on fringe benefits needs to consider the impact on employee incentives and tax administration (saragih et al., 2022). taxes that are too high on fringe benefits can undermine incentives for employees to receive them, while moderate taxes can encourage the efficient use of this type of compensation. in addition, the principle of conformity requires careful administrative monitoring of additional payments, which can increase administrative complexity. nonetheless, the application of sophisticated tax information technology and systems can help maintain administrative efficiency (kuhn et al., 2021). https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 696 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 6. challenges and adaptations challenges in applying taxes on fringe benefits as well as the principle of conformity involve aspects of fairness, efficiency and adaptation. determining the appropriate tax rate needs to consider employee incentives without neglecting income distribution. administrative complexity can be overcome with technology and an integrated tax system. the potential for tax evasion requires close monitoring and collaboration with the private sector. societal changes and technological developments require flexibility in the definition and types of fringe benefits. in addition, in a global context, cross-border cooperation is important to overcome the challenges of technology and global mobility in tax regulation. can be explained in the following table: table 4. challenges and adaptation of fringe benefits challenge explanation adaptation tax rate determination determining appropriate tax rates for fringe benefits so as not to discourage incentives for employees adopt a tax differentiation approach based on the type of fringe benefits. education on the benefits of equal distribution of income through a fair tax system. administrativ e complexity taxes on fringe benefits can increase administrative complexity utilizing information technology and integrated systems to reduce administrative burden. potential tax avoidance risk of tax avoidance through setting up fringe benefits cooperation between tax authorities and the private sector in the development of strict guidelines and oversight. community change changes in work patterns and employee preferences can affect the types of fringe benefits flexibility in adjusting the definition and types of fringe benefits according to the changing dynamics of society. technology and globalization the use of technology and global mobility can complicate tax administration develop cross-border cooperation in setting taxes on fringe benefits. source: modification of some theories all of these adaptations must be directed towards creating a tax system that is efficient, fair and responsive to the dynamics of the economic and social environment. the application of taxes on fringe benefits in the real world faces a number of challenges that need to be overcome with smart adaptations. one of the main challenges is to determine a tax rate that is fair and does not hinder employee motivation. taxes that are too high can reduce incentives for employees to receive fringe benefits or additional income in non-monetary forms. in facing this challenge, the necessary adaptation is to adopt a tax differentiation approach based on the type of fringe benefits. for example, providing educational benefits to employees' children may be taxed less than luxury vacation benefits. administrative complexity is another challenge in applying taxes on fringe benefits. in contrast to ordinary monetary income, fringe benefits often have characteristics that are more complicated to calculate and report. to overcome this, the necessary adaptation is to utilize information technology and integrated systems in the taxation process. automation of calculations and https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 697 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reporting can reduce administrative burdens for both companies and tax authorities. another serious challenge is the potential for tax evasion through the dishonest arrangement of fringe benefits. employees or employers may try to manipulate the type or value of fringe benefits in order to reduce tax liability. to overcome this, adaptation is needed in the form of close cooperation between the tax authorities and the private sector. clear guidelines and strict oversight of the arrangement of fringe benefits are important to prevent tax evasion. in facing societal changes and technological developments, flexible adaptation is also needed (saragih et al., 2022). the types of fringe benefits that are relevant and desired by employees may change over time. therefore, the adaptation needed is flexibility in adjusting the definition and types of fringe benefits according to the changing dynamics of society. for example, by considering the types of incentives that are more in line with the lifestyle and needs of today's employees. in the era of globalization, challenges are increasingly complex with labor mobility and crossborder transactions. this requires adaptation in the form of cross-border cooperation in regulating taxes on fringe benefits (lazear, 2018). countries need to work together to develop consistent guidelines and ensure that cross-border tax evasion does not harm national income. these challenges not only affect aspects of taxation, but also have an impact on the economic, social and welfare of society. therefore, proper and planned adaptation is very important to ensure that the taxation system for fringe benefits remains efficient, fair, and relevant to the times. 7. global economic contexts in an era of increasingly connected globalization, the aspect of taxation has become an important element in responding to global economic challenges and opportunities. first of all, the phenomenon of tax shifts and fiscal competition between countries can influence how taxes on fringe benefits are applied. countries tend to compete to attract investment and labor through more attractive tax policies, including fringe benefits incentives (maria pavelea et al., 2022). therefore, this study can provide a deeper view of how countries can regulate taxes on fringe benefits in the context of fair and balanced global competition. second, in facing the digital economy and changes in global work patterns, tax arrangements on fringe benefits incentives and pleasures also need to accommodate this new reality. many workers work flexibly from a variety of locations, and the relevant fringe benefits incentives also change as technology evolves. this study can provide insights on how tax adaptations fringe benefits can be carried out to reflect an increasingly global and connected work environment. in the context of a rapidly changing global economy, income inequality and wealth distribution issues are a major concern. the application of taxes on fringe benefits can be a relevant instrument in efforts to reduce economic disparities (raihan, 2023). this study has the potential to provide insight into how taxes on fringe benefits can be directed to promote redistribution that is more equitable and sustainable. in a situation where many multinational companies operate in different countries, this study can also address global issues such as tax suppression and tax evasion. inconsistent regulation of taxes on fringe benefits and benefits between countries can create loopholes for tax avoidance that is detrimental to national income. therefore, this study can explore how international cooperation can be enhanced to address this kind of global challenge (kraemer & lehtimäki, 2023). it can be said that this study is not only relevant in the national context, but also has important implications in dealing with the current global economic dynamics (hsu & liu, 2023b). by understanding how the imposition of taxes on fringe benefits impacts the global economy as a whole, countries can take https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 698 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc more appropriate steps in dealing with the challenges and opportunities that arise from the changing global economic context. can be explained in the following table: table 5. global economic contexts of fringe benefits challenge description impact on research global fiscal competition countries compete to attract foreign investment by offering better tax incentives. in the case of taxes on fringe benefits, this could result in shifting lower taxes or exemptions, which in turn could hurt state revenues. this study analyzes how global fiscal competition influences the application of taxes on fringe benefits and pleasures in various countries. digital economy change the growth of the digital economy and remote work have changed the traditional way of working. relevant fringe benefits incentives have also changed, such as incentives supporting remote workers. this study can identify how changes in the digital economy have affected relevant fringe benefits incentives and how tax arrangements can adapt to these changes. economic inequality taxes on fringe benefits can be used as a tool to reduce income and wealth inequalities by redirecting income from higher to lower. this study can assess the extent to which taxes on fringe benefits have been used for redistribution purposes, and whether there is potential for increasing the role of taxes in reducing economic inequality globally. global tax avoidance multinational corporations can take advantage of differences in tax arrangements on fringe benefits in different countries to avoid tax globally. this study can investigate how differences in tax arrangements on fringe benefits between countries have been exploited by companies for tax evasion, and propose steps to enhance international cooperation in addressing this challenge. source: modification of some theories the table above illustrates how the challenges in applying taxes on fringe benefits relate to this study in the context of the global economy. each challenge has a brief description of what the challenge represents, followed by how this study might impact and provide solutions to the challenge. through this analysis, this study strengthens the relationship between taxation aspects and global economic dynamics that need to be considered in formulating relevant tax policies and adaptations. https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 699 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the research findings show the importance of applying the conformity principle in the imposition of taxes on fringe benefits, which can increase the efficiency and transparency of state financial management and prevent tax avoidance practices that are detrimental to state revenues. in the context of taxation of fringe benefits and fringe benefits in indonesia, this study has the main objective of providing a deeper understanding of this issue from an income tax perspective, taking into account the matching principle and tax fairness. the three focus points of this study are interrelated and provide a comprehensive view of the matter. taxation of fringe benefits in indonesia is examining the taxation of fringe benefits, this study provides in-depth insight into how the concept of fringe benefits acts as a significant form of nonmonetary compensation in the remuneration system. identifying the scope of taxable fringe benefits becomes essential in this context (downs & stetson, 2014b; min, 2022). the matching principle in taxes in fringe benefits and its impact on tax equity is the application of the principle of conformity to taxes on fringe benefits, this study explores its impact on tax equity. by considering the factors that influence tax imposition decisions, it is important to understand that the application of this principle can make a positive contribution to the efficiency of state financial management and prevent detrimental tax avoidance practices. challenges and implications of applying the matching principle in natura taxes is identified the main challenges associated with implementing the matching principle in natura taxes, including the complexity in matching income and expenses. what's more, the adaptation of this principle in the economic context after the covid-19 pandemic is an important thing to consider (barid & wulandari, 2021). the positive implications for state revenues and more efficient financial management can provide impetus for improving the tax system. this study underscores the importance of considering the conformity principle in the imposition of taxes on fringe benefits. in examining this issue, this study has provided an in-depth analysis of the concept and scope of fringe benefits as non-monetary compensation in the remuneration system in indonesia. in addition, this study also reviews the matching principle and the implications of its application for tax justice (pang, 2022). in conclusion, the application of the conformity principle in the fringe benefits income tax has the potential to increase state revenues and more efficient financial management. nevertheless, steps in implementing this principle need to be taken carefully to ensure that tax fairness is maintained and all taxpayers are treated equally. what's more, in a global economic situation that is still full of challenges, policy steps must be careful and directed. the results of this study have significant implications for policy decision makers. these implications can assist in formulating strategic steps to improve the state tax system, maintain fairness in taxation, and encourage efficiency in financial management in indonesia. it is hoped that the results of this study will provide further insight regarding the importance of applying the conformity principle in the imposition of taxes on fringe benefits. https://www.ilomata.org/index.php/ijtc fringe benefits in tax law: matching principle and tax justice perspective silalahi and kurnia 700 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference argente, d., & garcía, j. l. 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(2020). the influence and impact of the exchange rate on the economy. e3s web of conferences, 214. https://doi.org/10.1051/e3sconf/202021403007 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 488-502 488 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia nur arini1, baiq anggun hilendri lestari2, tri hanani3 12university of mataram, indonesia correspondent: nurarini125@gmail.com1 received : february 10, 2024 accepted : april 15, 2024 published : april 30, 2024 citation: arini, n., lestari, b, a, h., hanani, t. (2024). the determinants of mobile ewallet adoption across generation, a lesson learned from indonesia. ilomata international journal of tax and accounting, 5(2), 488-502. https://doi.org/10.61194/ijtc.v5i2.1132 abstract: the use of e-wallets has an impact on the ease of transactions. various kinds of transactions can be done through this application. however, despite the convenience offered, e-wallet adoption remains low. this study aims to determine what factors influence the determinants of mobile e-wallet adoption across generations in indonesia. the study was investigated using a composite model based on the diffusion of innovation theory (dit), technology acceptance model (tam) and information system success model (issm). data was collected from 200 e-wallet users in west nusa tenggara province and analyzed using multiple linear regression (pls-sem). the results showed that the use of e-wallets was not affected by observability, relative advantage, information quality and system quality. ease of use and perceived usefulness have a positive impact on the decision to use e-wallets in indonesia. the results of this study are very important to assess the situation and prospects of e-wallets in indonesia. the results of this study offer significant insights for policy makers and e-wallet service providers to develop appropriate strategies to increase e-wallet users in indonesia. keywords: e-wallet, adoption, across generation this is an open access article under the cc-by 4.0 license. introduction digital wallets or e-wallets have now become an essential need for almost everyone. digital wallets allow various transactions to be made, including online purchases, utility payments, money transfers, automatic and timely payments, and expense management (iman, 2018). digital wallets are increasingly popular among the general public, with 4 billion users and a market size of $7,580.1 billion by 2024 and 2027, respectively (sneha et al., 2020). digital wallets rank among the fastest https://www.ilomata.org/index.php/ijtc mailto:nurarini125@gmail.com https://doi.org/10.61194/ijtc.v5i2.1132 the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 489 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc growing areas regarding future mobile technology payment methods due to their convenience, ease of use, security and fast service delivery. digital wallets in indonesia such as ovo, go-pay, shopeepay, dana and linkaja. a majority of 68% of the younger generation in indonesia use digital wallets at least one to two times a week with an average top up of rp 140,663 each week (ipsos et al., 2020). in some developing countries such as thailand, vietnam and indonesia pwc (2019). based on the 2019 global consumer insight survey, there are 67% of users or 19% growth in thailand who have made mobile payment transactions, after vietnam and middle eastern countries at 24% and 20% respectively. unfortunately in indonesia, the use of digital wallets is still uneven, especially on small islands. the growth of digital wallets in five major cities in indonesia, namely jakarta, semarang, yogyakarta, palembang and manado is very significant, inversely proportional to the island of lombok which is still unevenly distributed (ipsos et al., 2020). the proliferation of digital wallet apps has increased in recent years, especially during the covid19 pandemic. before the pandemic, several studies suggested some critical barriers to digital wallet adoption such as anxiety, awareness, risk, technological skills, and complexity (sharma et al., 2018; zamani & giaglis, 2018). the first adoption factor of digital wallets in indonesia was due to promotions. some of the aspects that users want from digital wallets are convenience, promotion and security. referring to idc infogrief data (2021) in 2020 the total number of digital wallet users in indonesia reached 74.9 million. this figure is expected to increase to 132.5 million users by 2025 (idc infobrief, 2021). one of the active users of digital wallets is the younger generation, especially contemporary young people who grow and develop in the era of technological development. the katada insight center study (umaiyah, 2022) found that digital wallets are more widely used than other financial products, such as m-banking, bank atms, conventional and digital bank accounts. in fact, young people are also less likely to have m-banking than digital wallets. this research seeks to understand the determinants of cross-generational e-wallet adoption in indonesia. (al-saedi et al., 2019) suggested that further studies are needed to investigate the determinants of e-wallet adoption in small islands. factors influencing mobile payment acceptance in different contexts have been reported in the literature. however, studies on the enablers and barriers of digital wallet adoption in a cross-generational context in indonesia are limited. therefore, this study aims to answer the following research questions: what factors influence the determinants of mobile e-wallet adoption across generations in indonesia. to answer the research question, we derived a composite model with six components from three adoption theories, namely the diffusion of innovations theory (dit): (observability, and relative advantage) (rogers et al., 2014), technology acceptance model (tam): (perceived ease of use and perceived usefulness) (davis, 1989) and information system success model (issm): (information quality, and system quality) (delone & mclean, 1992). the composite model was applied to investigate the determinants of mobile e-wallet adoption across generations in indonesia. https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 490 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc diffusion of innovation theory the diffusion of innovations theory (dit) can be considered as one of the most popular theories that tries to explore the factors that influence a person to adopt an innovation or new technology. dit aims at the adoption of an innovation (science, technology, field of community development) by members of a particular social system. (rogers et al., 2014).it identifies several innovation attributes that are the main influences on adoption behavior including compatibility, observability and relative advantage. technology acceptance model technology acceptance model is one of the behavioral theories that explains the approach to the use of information technology. this model is designed to predict the acceptance or use of technology by users and benefits in work (davis, 1989). based on recent research that uses tam to determine factors that affect the adoption of wearable devices (gopinath et al., 2022) and to examine factors that influence the use of artificial intelligence sound agents. (balakrishnan et al., 2021). the variable used in this study is perceived ease of use and perceived usefulness. information systems succes model issm is a theory that is formed from interconnected and independent components. these components consist of system quality, information quality, and service quality. by studying the interaction of each component, then the success of an information system can be achieved (delone & mclean, 1992). the issm model is also seen as a theory that explains how the quality of the system, the information quality, and the service quality affect the desire and satisfaction of the user. (lin et al., 2020). this delone & mclean model can also be interpreted as an important tool to know the value and efficiency, as well as the management actions of the information systems implemented. the assessment is based on variables that interfere with the success of an information system(lazaroni ibrahim, 2017). the composite conceptual model this study is based on three well known frameworks for measuring technology adoption and use: dit, tam, and issm. there are six constructs in the model, namely: observability, relative advantage, perceived ease of use, perceived usefulness, information quality and system quality. these theories were chosen because they are well recognized and have good characteristics in explaining the determinants of mobile e-wallet adoption across generations in indonesia, using west nusa tenggara province as a case study. hypothesis development observability of an innovation describes the extent to which an innovation can be seen by members of a social system, and its benefits can be easily observed and communicated. (rogers et al., 2014). in the context of mobile e-wallets, observability is defined as the ability to access e-wallet services at any time and from any location without delay or delay, and see the impact of mobile transactions of ewallets immediately, and convey the benefits of accessibility to others. in line with previous research, the following hypotheses are proposed: https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 491 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h1: observability positively affects the adoption of cross-generation e-wallet in indonesia relative advantage is the extent to which a new innovation is considered superior to the innovation it replaces. research reveals that relative benefits have a positive impact on people's intentions to use e-wallet (lin et al., 2020; mombeuil, 2020). in line with previous research, the following hypotheses are proposed: h2: relative advantage positively affects the adoption of cross-generation e-wallet in indonesia perceived ease of use and usability are important factors predicting the adoption of technology (chen & aklikokou, 2020) and supporting mobile technology services (al-emran et al., 2020). previous studies showed that the usability factor is positively linked to mobile payments in hong kong (wong & mo, 2019). in line with previous research, the following hypotheses are proposed: h3: perceived ease of use positively affects the adoption of cross-generation e-wallet in indonesia perceived usefulness is similar to the relative advantage in dit, is an important driving force for the adoptation of mobile application services (tam et al., 2020) perceived usability suggests that using mpayment methods can benefit users who pay for certain goods. previous studies have shown that utility factors are positively linked to e-wallet acceptance among generation y in india. (trivedi, 2016). in line with previous research, the following hypotheses are proposed: h4: perceived usefulness positively affects the adoption of cross-generation e-wallet in indonesia it has been established that information quality affects users' intention to use mobile application services (azizah et al., 2018). concerning mobile payment services, high-quality content can improve the understanding, usability, and relevance of mobile wallets. in this case, information quality reflects how relevant, accurate, reliable, and useful information is to users (fmawati et al., 2022). in line with previous research, the following hypotheses are proposed: h5: information quality positively affects the adoption of cross-generation e-wallet in indonesia it has been established that system quality substantially affects satisfaction and intention to use mobile application services. system quality is a combination of quality between hardware and software used in an information system (agustina & sutinah, 2019). system quality affects customer happiness (sebetci, 2018). in line with previous research, the following hypotheses are proposed: h6: system quality positively affects the adoption of cross-generation e-wallet in indonesia method this research uses a quantitative approach involving primary data analysis accompanied by multiple linear regression tests using the sem-pls 3.3.5 analysis tool. using a quantitative approach, this research investigates the factors that influence the adoption of mobile e-wallets across generations in indonesia, with a special emphasis on generations x, millennials and z. this research aims to find out what factors influence the adoption of mobile e-wallets across https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 492 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc generations. this is an examination of the factors that influence the adoption of mobile e-wallets across generations in indonesia. this study uses primary data obtained from the results of questionnaires distributed online to respondents in west nusa tenggara province. the population in this study are generation x, millennial generation and generation z in west nusa tenggara province who use e-wallets. the research sample consisted of 200 respondents. the sample technique used is purposive sumpling, and is determined by the following criteria: (1) generation x, millennial generation and generation z in west nusa tenggara province, (2) using a digital wallet (e-wallet) as a payment method. the data analysis method used is a multiple linear regression test to see the effect of mobile ewallet adoption on each variable through validity tests, reliability tests, and goodness-fit model tests. validity test employed in this study by convergent validiity through the cross loading and average variance extracted (ave). convergent validity is conducted to reveals how an indicator correlates positively with another indicator of the same construct (j. f. hair et al., 2017). the ave score requirements is above 0.5 for convergent validity. the assesment of discriminant validity is conducted by formell an larcker criterion. if the square root of ave score is bigger than correlation value, it can be concluded that the instrument valid enough. result and discussion the sample consisted of 200 respondents. as table 1 shows, males accounted for 27% of the eligible respondents, while females accounted for 73%. most respondents (55%) were between 21 and 30 years old. the sample was dominated by university students (72%). table 1. demographic profile of respondents variable n (%) gender male 54 (27%) female 146 (73%) age 14-20 81 (40,5%) 21-30 110 (55%) 31-40 6 (3%) 41-50 2 (1%) 51-60 1 (0,5%) education level smp/mts 6 (3%) high school/smk/ma 24 (12%) bachelor 144 (72%) master 1 (0,5%) others 25 (12,5%) https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 493 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the theoretical framework was examined using pls-sem (partial least squares structural equation modeling) software from smartpls 3.3.5. pls-sem (variance-based sem) is a causal modeling technique that focuses on maximizing the variation of the dependent latent constructs explained by the independent variables. the reason why this study uses pls-sem is because it is examining the factors that affect mobile wallet adoption rather than confirming its adoption. pls-sem offer more appropriate technique for such a situation. the validity test was conducted by distributing the questionnaire to 200 respondents. the questionnaire consists of twenty-six (26) question items and the data obtained will be processed on an ordinal scale. the result is as follows: first, convergence validity can be seen from average variance extracted (ave) and cross loading values (j. hair et al., 2017). table 1 shows the cross loading outcome of each variable that meets the criteria. as for the smallest value indicated on the statement item inqu3 (information quality) is 0.613 and is still considered sufficient because it is still greater than the minimum value is 0.60. it's in line with previous research (sha et al., 2017). in addition, the ave value of each variable is above 0.5 with the smallest value found on the information quality variable being 0.567. finally, it can be concluded that overall the variables in this study have a good convergence validity. table 2. cross loading, ave, cronbach’s alpha and cr values items loadings ave cronbach’s alpha composite reliability adoption adop1 0.833 0.741 0.827 0.896 adop2 0.872 adop3 0.877 information quality inqu1 0.771 0.567 0.868 0.865 inqu2 0.650 inqu3 0.617 inqu4 0.747 inqu5 0.938 observability obser1 0.823 0.627 0.830 0.869 obser2 0.907 obser3 0.763 obser4 0.652 perceived ease of use peou1 0.915 0.828 0.792 0.906 peou2 0.904 perceived usefulness peus1 0.859 0.841 0.832 0.913 peus2 0.971 relative advantages read1 0.924 0.694 0.900 0.918 read2 0.871 read3 0.904 read4 0.655 read5 0.782 https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 494 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc system quality syqu1 0.753 0.682 0.782 0.865 syqu4 0.891 syqu5 0.829 secondly, discriminant validity can be seen from the root value of average variance extracted (ave) > cross loading variable correlation. when ave root value > variable correlation and cross load > 0.7, then the statement item is declared valid. table 1 explains that the indicator is more correlated with the variable than with the other variables. in addition, table 2 also shows that the ave root of each variable is higher than the correlation between the variables and the others. for example, the information quality variable (inqu) has an ave root value of 0.753 which indicates that the ave core value is higher than other variable correlations that have a value range of 0.462 to 0.699. finally, it can be concluded that the whole variable in this study has a validity of discrimination that is good and valid. table 3. fornell-larcker criterion value adop inqu obser peou peus read syqu adop 0.861 comp -0.041 inqu -0.085 0.753 obser 0.027 0.462 0.792 peou 0.039 0.54 0.479 0.910 peus 0.029 0.629 0.289 0.360 0.917 read -0.056 0.599 0.368 0.436 0.758 0.833 sequ -0.107 0.594 0.395 0.425 0.577 0.498 syqu -0.076 0.699 0.480 0.459 0.532 0.499 0.826 variables are reliable if the cronbach alpha value is> 0.70 and composite reliability> 0.70 (indonesia, n.d.). however, if the composite reliability or cronbach alpha value is 0.60 to 0.70 in early stage research, it is still considered feasible and acceptable (j. hair et al., 2017). table 2 shows that the value of cronbach alpha and composite reliability for each variable has met the requirements. the smallest value is shown in the cronbach alpha of the system quality variable, which is 0.782. this value is still acceptable because it ranges between 0.60 and 0.70. so it can be concluded that all variable indicators meet the reliability test. model goodness-fit test this test is conducted by looking at the r-square value to measure the level of variation in changes in the independent variable on the dependent variable. table 4 shows that the adoption variable has an r-square value of 0.065. this shows that 6.5% of this variable is explained by the variables of compatibility, observability, relative advantage, perceived ease of use, perceived usefulness, information quality, system quality and service quality. while the remaining 93.5% is explained by other variables. https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 495 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. r-square results variable r square adoption 0.065 hypothesis testing the next test is to see the level of significance between variables on path coefficients, in this study there are 2 constant variables namely compatibility dan service quality variables. figure 1 shows the result of the bootsrapping proceduce with the smart pls 3. hypothesis testing carried out includes testing the influence of 6 independent variables, namely information quality, observability, perceived ease of use, perceived usefulness, relative advantages and system quality as well as 2 control variables, namely comparability and service quality. based on the test results in table 5, it shows that there are 2 accepted hypotheses, namely h3 and h4, while the other five hypotheses are rejected. figure 1. pls results structural model observability refers to the extent to which the results of an innovation can be seen by others (rogers et al., 2014). observability has no significant effect on the adoption of e-wallet usage. the results of this study are in line with previous research by (krismawan, 2014) and contradict research (wiratno, 2020), and (sudarsono et al., 2022). when people will use a new electronic https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 496 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc money application, they believe they need to first see other people who use it think the electronic money is safe or not. this shows that people do not feel confident and motivated to adopt e-wallet payment systems, including recommending that e-wallet payment system services give the impression of positive responses regarding the experience of using e-wallet payment systems. relative advantage refers to an individual's intention to adopt and use mobile payment services. relative advantage has no significant effect on the intention to use an e-wallet. the results of this study are in line with previous research (gumilang & hidayatullah, 2018) and (a. r. hidayat, 2023) and contradict research (okonkwo et al., 2022). an innovation will be adopted or consumed by the community because it has an advantage or advantage over others. however, the more people start to switch to using these innovations, the benefits presented will decrease (reduction in the nominal discount), therefore high relative benefits do not necessarily make people so willing to adopt a new innovation. table 5. results of path coefficients variable hypothesis original sample p-value description inqu> adop -0.167 0.158 rejected obser -> adop 0.101 0.206 rejected peou -> adop 0.156 0.050 accepted peus -> adop 0.316 0.011 accepted read -> adop -0.195 0.095 rejected syqu -> adop -0.015 0.439 rejected perceived ease of use refers to the subjetive belief that individuals do not require significant physical or mental effort to use a new technology. perceived ease of use significantly influences the intention to use an e-wallet. the results of this study are also in line with previous research (wu et al., 2016) and (sun & havidz, 2019) which state that perceived ease of use affects the intention to use. the higher the perceived ease of use, the higher the intention to use it. these results provide an overview of the importance of perceived ease of use for e-wallet developers to maintain good consumer relationships. digital payments is an integrated effort to shift payment methods from cash to cashless based on digital platforms. some benefits are more convenient, cheaper or more efficient, transparent governance, less conflict, and more access or connectivity (marpaung et al., 2021). in addition, digital transactions can also increase business productivity by enabling business actors to track all transactions quickly. meanwhile, for the government, cashless transactions will promote economic efficiency and save on printing costs, cash distribution, cash handling, and administrative costs (sudarso et al., 2020). the government can also encourage state tax and non-tax revenues to record all transactions to make them more transparent and accountable. for consumers, non-cash transactions provide ease of transaction at low costs. perceived usefulness refers to the extent to which individuals believe that their performance will be improved by using certain technologies. perceived usefulness has a significant positive effect on the intention to use e-wallets. these results are the same as previous research (choi & kim, 2016). these results prove that the perceived usefulness aspect is an important factor in https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 497 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc encouraging the intention to use e-wallet products. payment and receipt of money from anywhere and anytime because it is digital, customers do not need to go to the counter to make payments (welly et al., 2020). generally, people forget written evidence of money that has been used. with the e-wallet application, this proof of payment is automatically recorded in it. digital payments make it easier for customers to save payment receipts, manage finances and manage budgets. in addition, using e-wallet can reduce the circulation of counterfeit money (halim et al., 2020). you don't need to think about giving change every transaction because the nominal transaction will follow what is needed. in terms of flexibility, an e-wallet is superior because it can be used in various online transactions (marketplaces, websites, and so on). meanwhile, e-money is mostly used in offline transactions at minimarket outlets, toll gates, public transportation, etc. information quality refers to the characteristics or characteristics that determine the value and usefulness of information in the context of its use. in this case, information quality reflects how relevant, accurate, reliable and useful information is to users (fatmawati et al., 2022). information quality has no significant effect on the intention to use e-wallets. users always expect to receive accurate, relevant, and up-to-date information from e-wallets and foster long-term relationships after receiving quality information. because high-quality information can improve customer experience, reduce operational difficulties, and strengthen long-term relationships. the quality of information in this study has not been able to act as a creative solution while not fostering satisfaction and sustainable intentions of e-wallet users by providing access to relevant information in real time. especially e-wallet users in west nusa tenggara province have not considered information quality as a major factor in sustainable use intentions. good or bad information does not affect users' intention to reuse it. users do not pay attention to the quality of information because they are more concerned with the basic needs of using technology, such as maintaining security (sukma et al., 2024). furthermore, payment systems that are integrated with e-wallets encourage the creation of habits to use them frequently. this study agrees with previous research (abidin et al., 2023) system quality refers to how well the characteristics of hardware, software, policies, and procedures of an information system can provide the information needed by users (d. hidayat et al., 2021). system quality does not significantly affect the intention to use e-wallets. if the quality of service from using e-wallets is getting lower, the lower the people who decide to use e-wallets in financial transactions. if the quality of service obtained when using an e-wallet decreases, then people's decisions to use e-wallets also decrease. this is caused by people who receive poor quality of service when making financial transactions with e-wallets. the use of e-wallets has poor service quality in making payments because it has not been able to provide good responsiveness regarding product or service information, has not had a variety of transaction services that can meet consumer needs, the features provided have not been able to fulfill transaction activities, and ewallets have not been able to continue to improve their service innovation. this research contradicts previous research by (setiawan et al., 2022), (endriyanto & indrarini, 2022) and (sulaiman et al., 2023). https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 498 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion this study aims to investigate and determine the factors that influence e-wallet adoption across generations in west nusa tenggara province. from previous research, six hypotheses were developed. the research model utilizes the dit, tam, and issm frameworks. a survey was used to collect empirical data from 200 e-wallet users in west nusa tenggara and test the model. the findings of this study indicate that three factors namely perceived ease of use, perceived usefulness and service quality have a positive effect on e-wallet adoption. conversely, observability, relative advantage, information quality, and system quality were found not to significantly affect e-wallet adoption in west nusa tengara. the limitations of the study are described as follows. (1) bias that may be obtained from filling out the questionnaire due to respondents who are less serious in giving their answers; (2) researchers did not conduct interviews with consumers so that the results obtained were only based on questionnaire items; (3) the study used a composite model so that it only discussed the variables that had been set in the model. the implications of other variables outside the study may refine the model used. from this series of research processes, researchers recommend several suggestions to several parties including further researchers, e-wallet organizing companies, government and banks. suggestions addressed to future researchers, namely further research is expected to add other determinants of technology adoption outside the combined conceptual model, further research is expected to use interview methods or open questionnaires, and further research is expected to research with a larger sample. furthermore, suggestions addressed to e-wallet organizing companies, namely e-wallet organizing companies are expected to offer services related to work or education because many consumers are also students and students so that they can encourage productivity and performance. then the e-wallet organizing company is expected to be able to formulate marketing strategies that encourage consumers to invite other individuals to use e-wallets. promos and discounts offered are expected to be more in line with consumer needs so that consumers will feel interested and enjoy the activities carried out. this will help increase the spread of e-wallets and convince consumers that the benefits obtained from using e-wallets are greater than the cost burden. it is intended that e-wallet adoption can become a habit in consumers' daily lives. suggestions addressed to the government, namely bank indonesia and the financial services authority are expected to provide strict regulations that are able to protect the interests of consumers and various parties and add facilities that support the use of e-wallets. then for the last suggestion addressed to the banking sector, namely the results of this study are expected to encourage banks to collaborate with e-wallet providers. https://www.ilomata.org/index.php/ijtc the determinants of mobile e-wallet adoption across generation, a lesson learned from indonesia arini, lestari and hanani 499 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference abidin, a., zahra, n. s., & yusuf, a. 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(2018). with a little help from the miners: distributed ledger technology and market disintermediation. industrial management & data systems, 118(3), 637– 652. https://doi.org/10.1108/imds-05-2017-0231 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 144-161 144 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia mohamad nor rizal1, supriyadi2, mohammad fachrudin3 1the directorate general of taxes, indonesia 23polytechnic of state finance stan, indonesia correspondent: mnrizal96@gmail.com1 received : november 4, 2023 accepted : december 31, 2023 published : january 31, 2024 citation: rizal, m, n., supriyadi, & fachrudin, m. (2024). the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia. ilomata international journal of tax and accounting, 5(1), 144-161. https://doi.org/10.52728/ijtc.v5i1.1031 abstract: this research aims to determine the effect of the dividend exclusion policy as a tax object as regulated in the undang-undang cipta kerja and its derivatives on dividends paid by companies. it is hoped that dividend payments can become a source of investment in indonesia so that an increase in the amount of dividends paid will increase investment in indonesia. this research also wants to know the effect of net profit, return on assets (roa), free cash flow (fcf), and debt-to-equity ratio (der) on the dividends paid by the company. the data used in the research is data from 2017 – 2022 which comes from 30 companies with the largest market capitalization on the idx. the analysis was carried out using multiple linear regression on panel data using the stata application version 16. based on the research results, it is known that the policy of excluding dividends as a tax object does not have a significant effect on the dividends paid by companies. meanwhile, net profit, roa, and fcf have a significant and positive effect on the dividends paid by the company. der is also known to have a significant and negative effect on the dividends paid by companies. the implication of this research is that to increase the dividends paid by the company, the policies implemented must be able to be utilized by the majority shareholders and there will be an increase in the company's net profit, roa, and fcf as well as a decrease in der. keywords: dividend exclusion policy, dividend payment, financial performance this is an open access article under the cc-by 4.0 license. introduction since the enactment of indonesia law (uu) number 11 of 2020 concerning job creation (job creation law) and government regulation (pp) number 9 of 2021 concerning tax regulations to support ease of doing business, there have been several specific regulations related to taxation in indonesia that have changed, one of which is related to tax. on dividends. with the enactment of the job creation law government regulation number 9 of 2021 which is then further regulated in the minister of finance regulation (pmk) number 18 of 2021, dividends paid or https://www.ilomata.org/index.php/ijtc mailto:mnrizal96@gmail.com https://doi.org/10.52728/ijtc.v5i1.1031 the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 145 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc distributed by companies may not be subject to (obligation to pay) tax or in statutory provisions it is called by being excluded as an object of income tax (pph). the policy of excluding dividends as an income tax object according to the director of tax regulation ii djp, yunirwansyah as quoted in ddtc is to increase and meet domestic investment needs (ddtc redaksi, 2020). the explanation by the director of taxation ii, djp, is in line with the research results of (prayogo & muhasan, 2022; rohali & utomo, 2022; wijaya & buana, 2021) which state that the implementation of the dividend exclusion policy as an income tax object will increase investment in indonesia. apart from being able to increase investment, the exemption for dividends as an income tax object according to (asshidiqi & irawan, 2021; baran et al., 2023; wafikhoh, 2022; xu, 2023) was also issued to minimize double taxation and increase legal certainty. even though it has several positive impacts, as mentioned in the previous paragraph, (prayogo & muhasan, 2022) in their research explain that in the short term the policy of excluding dividends as an income tax object can reduce state revenues. the reduction in state revenue is due to tax on dividends which previously had to be paid to the state, but with the enactment of the provisions on the exception of dividends as an income tax object, domestic taxpayers (wp) may not pay tax on dividends received or earned, resulting in what is known as revenue forgone. the loss or reduction of tax payment obligations by domestic taxpayers is an incentive that taxpayers are very likely to take advantage of. research by (alstadsæter et al., 2015; yagan, 2018; yu et al., 2021) show that after the implementation of the tax rate reduction on dividends paid or distributed to shareholders, dividend payments tend to increase. research by (yu et al., 2021) specifically explains that when the company's main controller or majority shareholder wants to take advantage of the incentive to reduce the tax rate on dividends, the company will pay larger dividends. factors that influence dividend payments by a company are certainly not only related to the tax rate on dividends. based on research that has been carried out in indonesia, as has been done by (hartanti et al., 2019; karjono, 2019; meidawati et al., 2020; sejati et al., 2020; seraj et al., 2022), factors that have a significant influence on dividends paid by companies in indonesia are more related to the company's profitability and liquidity. based on the research that has been carried out, almost all research related to the determinants of dividends for public companies in indonesia still focuses on aspects of profitability, liquidity, and liabilities. there has not been any research that specifically discusses the influence of tax policy, especially the exclusion of dividends as an income tax object, on a company's dividends. this is quite different from conditions in foreign countries where several studies have been found that have specifically discussed the effect of changes in dividend rates on dividends paid or distributed by companies. the absence of research as intended in indonesia is very likely due to the policy of excluding dividends as an income tax object, a provision that has only just been implemented in indonesia, unlike in several other countries where it was implemented several years ago. based on existing conditions and to add to the body of knowledge, especially regarding the impact of tax policy on the business world, research will be carried out to find out how the dividend exclusion https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 146 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policy as an income tax object and other factors affect the value of dividends paid by public companies in indonesia. dividend reeve et al. (2010) in prayogo & mhasan (2022) state that dividends are a distribution of profits to shareholders according to the proportion of their ownership. similar to the explanation of reeve et. al. in (fiqih, 2021; prayogo & muhasan, 2022; sugeng, 2017) explain that dividends are part of a company's profits for a period that is distributed to its shareholders. in general, according to fiqh (2021), companies will distribute dividends when the company has a profit, whereas if the company has a loss status, it is likely that the company will not distribute dividends unless the company still has cash reserves and profit balance to distribute dividends. the amount of net profit that will be distributed as dividends is determined by the shareholders. if the company has gone public, the amount of dividends will be determined at the annual gms. types of dividends based on their form, according to (sugeng, 2017), consist of cash dividends, share dividends, and property dividends. meanwhile, from a tax perspective, as stated in the explanation of the income tax law, there are also payments to shareholders that are not in the form of cash, shares, or property and are sometimes not referred to as dividends but are still considered dividends from a tax perspective. this is because the payments or gifts made are dividends to shareholders but the form and name are changed to avoid tax. in indonesian tax regulations, this type of dividend is known as a disguised dividend. dividend policy dividend policy according to (ovami & nasution, 2020; reysa et al., 2022) is the decisions of the company or the majority shareholder of the company in distributing the profits that have been obtained. as described by reysa et al. (2022) the profits earned by the company can be distributed directly into dividends or retained as additional capital often referred to as retained earnings. the dividend policy then gives rise to what is called the dividend payout ratio (dpr) or the percentage comparison between the amount of dividends and the profits earned in a period. the greater the dpr means the greater the percentage of dividends distributed compared to the profits earned. dividend tax dividend tax is a tax imposed on dividends received. as explained in research by rohali and utomo (2022), tax (income) on dividends is a collection or deduction made on profits obtained by shareholders, insurance policyholders, or cooperative members. in general, taxation on dividends is imposed in two types, namely the classical system and the one-tier system (ibfd international tax glossary, 2015 in prayogo and mhasan, 2022). it was explained that the classical tier is taxation on dividends which are imposed on company profits and will be charged (taxed) again when distributed to shareholders. meanwhile, the one-tier system is taxation that is imposed only at the company level. rohali and utomo (2022) explain that with the implementation of the https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 147 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dividend exclusion policy as an income tax object for domestic taxpayers, indonesia has adopted a single/one-tier tax system. wijaya and melati (2021) explain that referring to the income tax law before it was amended by the job creation law, dividends paid in indonesia were subject to a final rate of 10% for domestic individual taxpayers and corporate taxpayers, they were subject to a rate of 15% and could be credited as credit. pph article 23 in calculating current year tax. with the enactment of the job creation law and its practical derivative provisions, dividends earned/received by domestic taxpayers can be excluded as income tax objects. tax incentives wijaya and buana (2021) define tax incentives as encouragement given by tax institutions so that taxpayers are willing to fulfill their tax obligations. it was explained that the impact of tax incentives for taxpayers is the possibility of reducing the tax burden that must be met by taxpayers. as a result of the reduced tax burden as explained in the report (world bank, 2018), production costs are lower so that the profits obtained by business entities will increase. how tax incentives work to reduce production costs depends on the form or type of tax incentives provided. there are various types of tax incentives, in research by (dahliah & tjan, 2022) it is stated that tax incentives can be in the form of tax holidays, tax allowances, and tax exemptions. meanwhile, the components that make up tax incentives as mentioned by (wijaya & buana, 2021) consist of exemptions from taxation, reductions in the tax base, reductions in tax rates, and tax deferrals. apart from the four components that make up tax incentives as explained by (intan, 2016; wijaya & buana, 2021) in her research also explains that there are tax incentives that exclude an object as a tax object or can be called an exception as a tax object. exceptions as tax objects according to wafikhoh (2022), exemption as a tax object is the same as full exemption or exemption without progression, where an object (which can be a type of income) is excluded from the basis of tax calculation. the provisions of tax legislation in indonesia regulate things (which can be income) that are excluded as tax objects as stated in article 4 paragraph 3 of the income tax law as last amended by the law on harmonization of tax regulations. some income that is excluded as a tax object as stated in the income tax law includes assistance or donations with certain conditions, inheritance, dividends with certain conditions, etc. provisions regarding income that is excluded as a tax object have not changed much since the third amendment to the income tax law in 2008, but with the issuance of the job creation law, there have been several changes and additions to income that is excluded as a tax object. additional income that is excluded as a tax object includes bpih deposits and excess balances received by social and religious institutions that meet certain requirements. meanwhile, the income that changes the requirements to obtain exemption is dividends. https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 148 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the income tax law, as last amended by the law on harmonization of tax regulations, causes dividends paid to domestic taxpayers (dn taxpayers) to be excluded as tax objects. this is different from the previous provisions which stipulate that corporate taxpayers with share ownership of 25% or more or corporate taxpayers in the form of cvs or firms are not subject to tax on dividends received. meanwhile, since the enactment of the law on harmonization of tax regulations, dividends received by all corporate dn taxpayers are excluded as tax objects. apart from that, dividends received by domestic individual taxpayers if they are invested domestically are also excluded as a tax object, conversely if the dividends are not invested domestically then the dividends are still subject to tax. the effect of excluding dividends as a tax object on dividend payments the enactment of the job creation law and its derivative regulations means that dividends can be excluded as a tax object. dividends will be excluded as a tax object if they are received by domestic taxpayers and invested in the country within a certain period. however, if dividends are not invested domestically within a certain period, taxpayers are still required to pay tax on the dividends received. based on research by yu et al. (2021) and yagan (2018) explained that shareholders tend to take advantage of the reduction in dividend tax rates. as mentioned in yu et al. (2021) dividend payments increase when the majority shareholder feels they have benefited from a reduction in dividend tax and wants large dividend payments. meanwhile, yagan (2018) explains that the dpr of some companies in the united states experienced a significant increase in the initial phase of reducing the dividend tax rate in the united states in 2003. the same thing might also happen in indonesia, to take advantage of the reduction in tax rates, in the form of an exemption for dividends as an income tax object. , the company will pay or distribute larger dividends to its shareholders. therefore, the hypothesis that will be developed is that the dividend exclusion policy will have a significant and positive effect on dividends paid by the company. h1: the dividend exclusion policy will have a significant and positive effect on dividends paid by the company. effect of net profit on dividends fiqih (2021) explains that net profit and operating cash flow have a significant and positive effect on cash dividends paid by the company. it is explained that the higher the net profit, the greater the cash dividend distribution will be, and vice versa. widjanarko et al. (2021) also explain that a company's net profit has a significant and positive effect on a company's dividend policy. it is explained that an increase in a company's net profit can increase dividends because a company that has a larger net profit will have more profit to distribute to shareholders or retain to increase the company's equity. apart from (fiqih, 2021; meidawati et al., 2020; widjanarko et al., 2021) also found that the level of net profit shown through profitability has a positive and significant effect on the company's https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 149 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dividend policy. meidawati et al. (2020) stated that the higher a company's net profit will have a positive and significant effect on the dividends paid by the company. h2: net profit has a significant and positive influence on the dividends paid by the company. effect of roa on dividends in line with the influence of net profit on dividends paid by companies, sejati et al. (2020) in their research also found that dividend payments are greatly influenced by the company's roa and free cash flow. true et al. (2020) explain that roa is a variable that shows a company's ability to generate profits so when roa increases, this indirectly means it will increase the company's profits and dividends. apart from that, increasing roa, according to signal theory, can also be a signal that there will be an increase in dividends in the current year. ulfa et al. (2020) also found that profitability as measured by roa has a positive and significant effect on the dividends paid by the company. cahyadi et al. (2018) and safrida (2014) in ulfa et al. (2020) explained that the higher a company's roa the higher the company's internal budget so that it can finance the company's expenses, one of which is in the form of dividend payments to its shareholders. h3: roa has a significant and positive influence on the dividends paid by the company. effect of free cash flow on dividends free cash flow according to sejati et al. (2020), rachmah (2019), and masrifah (2015) in fiqh (2021) have a significant and positive effect on company cash dividends. (rachmah, 2019) explain that the remaining cash or excess cash from the company can be used to meet company financing, one of which is paying dividends to shareholders. jensen (1986) in sejati et al. (2020) specifically explain that companies that are no longer expansive but have large cash flows will pay or distribute high dividends to shareholders to prevent company managers from using company cash to invest in less profitable projects. therefore, the hypothesis developed is that free cash flow will have a significant and positive effect on dividends paid by the company. h4: free cash flow has a significant and positive influence on the dividends paid by the company. effect of der on dividends in contrast to net profit, roa and free cash flow which are considered to have a positive influence, der is mentioned in the research of widjanarko et al. (2021), sejati et al. (2020) and hanif and bustaman, (2017) have a negative effect on the dividends paid by the company. widjanarko et al. (2021) explains that the higher the der or debt, the greater the responsibility (debt) and burden (debt interest) that must be paid, which will reduce the cash available to be paid as dividends. therefore, the hypothesis developed is that the der value will have a significant and negative effect on the dividends paid by the company. https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 150 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h5: der has a significant and negative influence on the dividends paid by the company. method this is a quantitative research with data in the form of numbers. the data used is secondary data originating from the company's financial reports. the research period is from 2017 to 2017. 2022 and 2021 were chosen as the period when the dividend exclusion policy as a tax object came into effect, so that before 2021 dividends had not been excluded as a tax object, whereas since 2021 and 2022 the dividend exclusion policy as a tax object has been implemented. the research population consists of public companies listed on the indonesia stock exchange (bei). sample selection was carried out using a purposive sampling method, selecting 30 stocks with the largest capitalization listed on the idx as of january 25, 2023. the data obtained was analyzed using multiple linear regression analysis of panel data with the stata version 16 application. research population and sample the research population is public companies listed on the idx and whose financial performance data can be accessed from 2017 to 2017. 2022. the sample was selected using a purposive sampling method with the results of selecting 30 companies with the largest capitalization on the bei as of january 25 2023. these 30 companies were chosen because these companies can be considered to represent more than 700 companies listed on the bei. this is because the selected sample represents up to 61% of the capitalization of all companies listed on the idx so these thirty shares tend to be more capable of moving the indonesian stock price index (juwita & angela, 2016). the method should be well elaborated enhancing the model, the analysis approach and the steps taken. equations should be numbered as we illustrate. variable measurement the dependent variable in this research is the dividend paid by the company in a year. meanwhile, the independent variables used in this research consist of the dividend exclusion policy as an income tax object (dummy variable), net profit for the current year, roa, free cash flow, and der. following are the units and measurements for each variable. variable indicator dividend payment (y) dividend = total dividend paid in billions of rupiah dividend exclusion policy (x1) dep = dummy variable, 0 for the period before the policy comes into effect and 1 for the period after the policy comes into effect net income (x2) ni = amount of net profit generated by the company in billions of rupiah https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 151 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variable indicator return on asset (x3) roa = profit after tax / total assets free cash flow (x4) fcf = remaining amount of cash flow in billions of rupiah debt to equity ratio (x5) der = total liabilities / equity research framework research model this research uses descriptive statistical analysis and multiple linear regression analysis of panel data. linear regression analysis is used to determine the effect of independent variables on the dependent variable in research. linear regression analysis in this research was carried out by determining the best model, classical assumption testing, and hypothesis testing. the equation formula or regression model is as follows. dividendit = α + β1depit + β2niit + β3roait +β4fcfit + β5derit + ε… (1) keterangan: dividen : dividends paid by the company (dependent variable) α : constant β1 – 5 : coefficient of each independent variable kpd : dividend exclusion policy (dummy variable) independent variable dependent variable dividend exclusion policy (x1) net income (x2) roa (x3) free cash flow (x4) der (x5) dividend payment amount (y) https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 152 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ni : net income roa : return on asset fcf : free cash flow der : debt to equity ratio ε : standard error result and discussion statistical analysis results based on the data used, it is known that dividend payments by companies listed on the idx tend to continue to increase from year to year. apart from dividends which tend to continue to increase, the net profits of the thirty companies with the largest market capitalization on the idx also tend to continue to increase. the following is a graph of dividend payments and net profit of listed companies as a basis for dividend payments. the image above shows that in the period 2018 to. in 2022, the value of dividend payments is likely to continue to increase, as will the net profit generated by the thirty companies in the sample. the decline that occurred in 2021 was the impact of the covid-19 pandemic that broke out in indonesia. for information, the net profit paid or recognized as being paid in the current year is the net profit in the previous year, so the profit paid as dividends in 2021 is the profit generated in the 2020 financial year or when the pandemic was occurring. the growth in the value of dividends paid and the company's net profit from the test year as well as the impact of the covid-19 pandemic in 2020 can also be seen from the results of the descriptive statistical tests carried out. it is known that the largest dividend payment, the highest net profit and the highest roa occurred not in the 2020 financial year. meanwhile, the largest loss occurred 50,000 100,000 150,000 200,000 250,000 300,000 2018 2019 2020 2021 2022 m ili ar r u p ia h dividend payment year dividend payment net income https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 153 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the pandemic year, namely in the 2020 financial year. table below shows the results of the descriptive statistical tests that have been carried out. description unit average maximum minimum dividend payment million 3.794,98 26.407,00 net income million 7.399,47 34.414,00 4.690,00 roa (%) 7,63 49,83 13,43 der (%) 22,93 371,00 1.051,00 free cash flow million 9.827,31 126.368,00 35.256,00 the maximum dividend payment as shown in table 2 was made by bank bri in 2022, while the largest net profit was recorded by bank bri for the 2019 financial year. meanwhile, the highest roa was recorded by the coal company pt bayan resources in the 2021 financial year. minimum value of profit or loss the largest net contribution was made by the coal company pt bumi resources in the 2020 financial year. apart from recording the largest net loss, pt bumi resources in the 2018 financial year was also recorded as having the "worst" der because not only did it have a debt value that was greater than its equity, but pt bumi resources' equity has also reached a negative value or the value of the company's assets is smaller than the value of the company's debt. best model test results the best model test is carried out to determine the best model to be used in compiling the equation. using panel regression, a series of best model tests have been carried out consisting of the chow test, hausman test, and breusch pagan lagrange multiplier with the results as shown in table below. test prob. value α best model to use chow likelihood ratio 0,00 0,05 fe hausman 0,66 0,05 re lagrange multiplier breusch pagan 0,00 0,05 re the table above shows that the best panel data model for the data used to construct the equation is random effect (re). this is shown in the hausman and lagrange multiplier breusch pagan tests which show that the probability is not significant (hausman test) and significant (lagrange multiplier breusch pagan) so that according to the explanation of (sihombing, 2021) the best model used to compile the panel regression equation is random effect (re). assumption test results based on the best model selected, namely random effect (re), the assumption test will then be carried out to obtain good panel regression results. the classic assumption test for the re model https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 154 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as explained by sihombing (2021) consists of a normality test, multicollinearity test, and autocorrelation test with the results shown in table below. test unit prob. value result condition normalitas prob>chi2 0,00 signifikan tidak normal multikolinearitas vif 1,68 tidak signifikan non multikol autokorelasi prob>f 0,00 signifikan autokol the table above shows that the data used has passed the multicollinearity test but has not passed the normality and autocorrelation tests. to overcome normality in the data, the author refers to gujarati's (2004) explanation regarding the central limit theorem (clt) in the research of syah and fachrudin (2020) which states that based on clt, research with a large number of observations (more than 100 samples) tends to have a distribution normal data. then explained by ghozali and ratmono (2013) in (syah & fachrudin, 2020) that if the sample size is large, then the assumption of normally distributed residuals can be ignored. the data used in this research are 150 data samples originating from 30 companies over five years so that the residual data for this research can be considered normally distributed. to overcome violations of the autocorrelation assumption according to the explanation of (savitri et al., 2021) you can add lag data to the dependent variable as an additional independent variable in the model or use an ar (autoregressive) model. it is explained that the xtregar function or command can be used to overcome the problem of assuming autocorrelation. hypothesis testing results after the best model has been selected and has gone through classical assumption testing, hypothesis testing is carried out on the best model that has been selected. by using the stata 16 application, the re model was obtained with the xtregar command with an adjusted r2 of 0.91. this means that the dividends paid can be explained as 91% with the dividend exclusion policy as an object of pph, net profit, roa, free cash flow, and der. meanwhile, the remaining 9% is influenced by other variables outside the model. the following are the results of hypothesis testing on the best model that has been carried out: indicator prob value coefficient describe r2 0,909 significant f simultant test 0,000 significant dividend exclusion policy 0,274 314,815 not significant https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 155 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indicator prob value coefficient describe net income 0,000 0,495 significant roa 0,001 67,404 significant free cash flow 0,041 0,016 significant der 0,581 78,973 not significant apart from showing the adjusted r2 results, table above also shows that simultaneously the independent variables used can explain changes in the dependent variable. this is shown through the f test or simultaneous significance test which shows that the prob value > f = 0.00 or less than 0.05 and rejects h0 so that all or some of the independent variables have a significant effect on the dependent variable used. if the f test is used to test independent variables simultaneously, the t-test or individual (partial) significance test is used to determine the influence, significant or not, of each independent variable used on the dependent variable. based on the table above, at a significance level of 95%, the independent variable, the dividend exclusion policy as an income tax object, has an insignificant effect on the dividends paid by a company listed on the idx. meanwhile, other independent variables in the form of net profit, roa, and free cash flow individually have a significant effect on the dependent variable (α = 5%). it is noted that apart from the dividend exclusion variable as an income tax object, the der variable also partially has no significant effect on the dependent variable, with α > 5%, to be precise 58.1%. based on the results of determining the best model, classical assumption testing, and hypothesis testing, the best estimated equation obtained is as follows: 𝑌𝑖𝑡 = −741,339 + 0,495𝑁𝐼𝑖𝑡 + 67,404𝑅𝑂𝐴𝑖𝑡 + 0,016𝐹𝐶𝐹𝑖𝑡 (2) based on the results of the best model test, classical assumption test, and hypothesis test, in general, it can be stated that the dividend exclusion policy as an income tax object does not significantly affect dividend payments by the company. apart from these variables, other independent variables in the form of net profit, roa, and free cash flow of the company have a significant effect on dividends paid by public companies in indonesia. based on the research that has been conducted at a glance, it appears that the results of the research conducted are different from several previous studies, especially research related to the effect of reducing the dividend tax rate on dividends paid by companies and/or investments made by yu et al. (2021) and yagan (2018). however, the results of the research that has been carried out are actually in line with the research results of yu et al. (2021) and yagan (2018). the results of this research can also be explained by referring to the two studies used as references. firstly, it must be realized that the exception of dividends as an income tax object which can be said to be a reduction in the dividend tax rate requires certain conditions, one of which can only https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 156 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc be utilized by domestic taxpayers. apart from that, changes or reductions in rates only occur for individual taxpayers who were previously required to pay 10% final pph on dividends received or corporate taxpayers with ownership of up to 25% who were previously required to pay pph 23 (tax credit) of 15% since the enactment of the provisions. the job creation law and its derivative regulations exclude dividends as a tax object or dividends received by the two types of domestic taxpayers are excluded as income. meanwhile, foreign taxpayers and corporate (domestic) taxpayers with ownership above 25% do not benefit at all from the dividend exclusion policy as an income tax object. based on the conditions as mentioned in the previous paragraph, it is then linked to the conditions of companies listed on the idx. of the 30 listed companies in the sample, only two companies, namely pt bayan resources and pt barito pacific, whose shares are controlled or owned by individuals are listed as more than 50%. apart from that, the majority of companies listed on the idx are also controlled by corporate taxpayers with an ownership portion of more than 25% since several years ago. so it is worth noting that quite a few companies listed on the idx are owned by foreign taxpayers, and we cannot even be sure that the individuals who control pt bayan resources and pt barito pacific are domestic taxpayers. based on these conditions, it can be stated that the majority shareholders of most public companies in indonesia do not or do not benefit from the dividend exclusion policy as an income tax object. this is because the majority of companies registered on the idx are owned by corporate taxpayers (domestic) with ownership above 25% or foreign taxpayers. then it should be realized that dividend decisions or policies, including the dpr amount, are determined by the decisions or wishes of the majority shareholders through the gms. if the majority shareholder does not want to increase dividends because they do not benefit from the dividend exclusion policy as an income tax object, practically the dividends paid will not increase. this explanation is in line with the research results of yu et al. (2021) which state that company dividends will increase when the majority shareholder wants the dividend to increase to take advantage of the policy of reducing the dividend tax rate or it can be said that the company's dividend will not increase even though there is a policy of reducing the dividend tax because the majority shareholder does not want or cannot take advantage of the policy. the. this condition is in line with what is happening in indonesia, where the majority of shareholders of companies listed on the idx cannot take advantage of or do not benefit from the dividend exclusion policy. the results of the research that has been carried out are also in line with the results of yagan's research (2018). yagan (2018) in his research stated that companies that benefit from reduced dividend tax rates relatively pay or distribute higher dividends compared to companies that do not benefit from reduced dividend tax. the research results of yagan (2018) are in line with the results of this research which shows that because the majority shareholders of the listed companies in indonesia in the sample were unable to benefit from the dividend exclusion policy as a tax object, the value of dividends paid also did not increase. based on the sample used, it is known that most of the majority shareholders of public companies in the research sample are controlled by companies or corporate taxpayers so the application of the dividend exception does not cause the majority shareholders who are corporate taxpayers to be able to take advantage of the dividend https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 157 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc exclusion policy as a tax object. before the enactment of the law on harmonization of tax regulations, shareholders in the form of corporate taxpayers with ownership of 25% or more (majority) also had no tax obligations on dividends. in contrast to the dividend exclusion policy variable as an income tax object which does not have a significant effect on dividends paid, the net profit variable has a significant and positive effect on dividends paid by the company. this is in line with the explanation of reysa et al. (2022), fiqh (2021), meidawati et al. (2020), and sejati et al. (2020) which states that profits greatly influence the dividends paid or distributed by companies because dividends are almost always based on the profits earned by the company. meidawati et al. (2020) in their research stated that company profits are the basis of reference for companies in distributing company dividends. it is stated that the greater the level of profit, the greater the level of dividend payments that will be distributed to shareholders. similar to net profit, roa also has a significant and positive effect on dividends paid. the results of the research carried out are in line with the research results of ulfa et al. (2020), sejati et al. (2020), and meidawati et al. (2020) which states that a company's roa has a significant and positive effect on a company's dividend or dividend policy. it is explained that the greater the roa a company has, the higher the dividends the company may distribute or pay. (ulfa et al., 2020) explain that roa describes the company's ability to generate profits so that when the company's roa is high it means the profits generated will be high. the high profits generated according to ulfa et al. (2020) can be used to finance expenses, one of which is in the form of dividend payments. based on the research that has been carried out, the free cash flow variable also has a significance and influence similar to that of the net profit and roa variables on dividends paid, namely a significant and positive influence. the results of this research are in line with research conducted by sejati et al. (2020) and rachmah (2019) who state that a company's free cash flow has a significant and positive effect on dividend policy or dividends paid by a company. true et al. (2020) explain that companies that have high free cash flow are more likely to distribute dividends compared to companies that have low or even minus free cash flow. linked to the free cash flow hypothesis, jensen (1986) quoted in sejati et al. (2020) states that companies with low growth opportunities and large amounts of free cash flow will tend to pay high dividends. this is done to prevent managers from investing cash in projects that have a negative net present value. der as the last independent variable was also recorded as not having a significant effect on the value of dividends paid. if a direct comparison is made with the data used, it is known that the majority of companies that distribute dividends are companies that have low der but in some conditions, it is found that there are companies with negative der that do not distribute dividends such as pt bumi resources and there are companies with high der that are still able to pay dividends like pt barito pacific and pt sarana menara nusantara. https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 158 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the insignificance of der on dividends paid by companies is in line with the research results of rachmah (2019) and hanif and bustaman, (2017) who in their research also found that der did not have a significant effect on dividends paid by companies. (hanif & bustaman, 2017) stated that the insignificance of der on dividend policy is because shareholders or company owners represented by management sometimes have different points of view regarding the use of profits. on the one hand, they want profits to be divided into dividends, while on the other hand, they hope that profits will be used to pay off or pay off debt, so the effect is not so clear. conclusion the conclusion that can be drawn from the research that has been carried out is that the policy of excluding dividends as an income tax object has no (significant) effect on dividends paid. this is because the majority shareholders of most companies listed on the idx are owned by parties who cannot take advantage of the dividend exemption policy as a tax object, namely corporate taxpayers who since previous years have had share ownership of more than 25% and/or foreign taxpayers. country. therefore, the dividend exclusion policy as an income tax object cannot be utilized and makes the majority shareholders reluctant or do not feel the need to change the dividend policy by increasing the dividends paid. as is known, the dividend exclusion policy as a tax object can only be utilized by domestic taxpayers and will have an impact if before the enactment of this provision the taxpayer was a domestic individual taxpayer who paid a final income tax of 10% on dividends received or a domestic corporate taxpayer who before the enactment of these provisions has a pph 23 (tax credit) obligation of 15%. this is because, for the two domestic taxpayers, as mentioned in the previous sentence, the implementation of the dividend exclusion policy as an income tax object will mean that the tax obligations on dividends that previously had to be fulfilled become nonexistent. other variables that have a significant effect on the value of dividend payments are net profit, roa, and free cash flow. these three variables have a positive effect on dividends paid by public companies in indonesia. meanwhile, der does not have a significant effect on dividends paid by public companies in indonesia. the conclusion as previously mentioned implies that dividend payments made by public companies in indonesia will increase if the policy of reducing dividend tax rates or exemptions for dividends as an income tax object can be used or utilized by the majority shareholders of a company. apart from that, dividend payments will also increase when the value of net profit, roa and free cash flow of a company in a financial year increases. based on the results and discussion of the research along with the conclusions that have been presented, the following are things that can be used as suggestions and considerations for further research: https://www.ilomata.org/index.php/ijtc the influence of tax exclusion policies and other factors on the value of dividends paid by public companies in indonesia rizal, supriyadi, and fachrudin 159 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. further research can only focus on companies controlled or majority owned by domestic taxpayers which can take advantage of the dividend exclusion policy as a tax object. 2. further research can be carried out over a longer period to find out the impact of policies over a longer period. studies conducted abroad on the policy of reducing dividend tax rates were also carried out several dozen years after the policy took effect. 3. further research can map where dividends are paid by public companies in indonesia, by knowing where the dividends paid are used, we can find out what appropriate policies are to be set by the government. reference alstadsæter, a., jacob, m., & michaely, r. 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(2018). capital tax reform and the real economy: the effects of the 2003 dividend tax cut. https://doi.org/http://www.nber.org/papers/w21003 yu, x., wang, y., chen, y., & wang, g. (2021). dividend payouts and catering to demands: evidence from a dividend tax reform. international review of financial analysis, 77. https://doi.org/10.1016/j.irfa.2021.101841 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 28-43 28 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables shabira dwi anggraini1, eddy suranta2, pratana puspa midiastuty3 123bengkulu university, indonesia correspondent : shabiraanggraini@gmail.com1 received : october 1, 2023 accepted : december 25, 2023 published : january 31, 2024 citation: anggraini, s, d., suranta, e., midiastuty, p, p. (2024). the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables. ilomata international journal of tax and accounting, 5(1), 28-43. https://doi.org/10.52728/ijtc.v5i1.975 abstract: dividend policy is one of the important decisions of a firm where this dividend policy is an important consideration for shareholders as an indicator of the firms success in managing the capital invested by investors. this study aims to provide empirical evidence of how earnings management affects dividend policy, then whether concentrated ownership and audit committee expertise can affect the relationship between earnings management and dividend policy. the research sample is a manufacturing company with a period of 2018-2022. the sample selection used a purposive sampling approach so that the total observations amounted to 128 observations. the results showed that earnings management has a remarkable effect on dividend coverage, concentrated ownership and audit committee expertise can affect the relationship between earnings management and dividend policy in an effective way. the effect proves that managers have the discretion to choose accounting methods to file better earnings as a way to signal the success of the firms management and on the other hand earnings control benefits focused ownership so that earnings management and concentrated ownership are complementary. this observation contributes to signal theory and firm theory in explaining the earnings control movement and focused ownership as moderating variables in explaining the relationship between earnings management and dividend coverage. the real implication of this research is that it can be used as a consideration for firms in making decisions regarding the proportion of dividends distributed, and can be a review tool for investors in investing. keywords: earnings management, concentrated ownership, audit committee expertise, dividend policy this is an open access article under the cc-by 4.0 license. introduction a corporation needs to make four critical decisions, according to (kaźmierska & jóźwiak, 2015): (1) investment decisions, (2) funding decisions, (3) equity-based compensation/remuneration decisions, and (4) dividend decisions. these are the most critical choices the company has to make. https://www.ilomata.org/index.php/ijtc mailto:shabiraanggraini@gmail.com1 https://doi.org/10.52728/ijtc.v5i1.975 the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 29 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a business's dividend decision is critical (baker et al., 2018). when determining dividends, the corporation must consider various aspects to ensure that the policies put in place in this area do not have a detrimental effect on shareholders or the business overall. the manufacturing industry is one type of firm that usually distributes dividends to its shareholders. manufacturing is one of the highly valued sectors and controls the indonesia stock exchange (idx) (sari & masdupi, 2019). the two theoretical contributions—agency theory and signaling theory—that explain the connection between dividend policy and earnings management will be the main subjects of this investigation. agency theory primarily addresses issues related to the division of ownership and management responsibilities as well as the disparities in managers' and shareholders' priorities. (jensen & meckling, 1976) consequently, management wants to reduce agency disputes by providing assurances on the avoidance or postponement of dividend payments and revealing lower earnings figures. (smith, d.d., pennathur, a.k. and marciniak, 2017) dividend policy is one weapon in the agency theory arsenal for reducing agency conflicts between shareholders and management. the manager's job, as per agency theory, is to allocate dividends to maximize the transfer of benefits to shareholders. however, agency theory indicates that stockholders and management have different interests. the tendency of management to try to reduce the reported profit figure and prevent or postpone dividend distribution leads to more agency conflicts. a procedure for addressing agency issues that result in agency costs must be in place to reduce agency disputes and stop managers from avoiding or postponing dividend distribution. according to signal theory, a dividend policy demonstrates the standard of operational management that managers have implemented. the signal is a dependable and positive indication that the company provides to investors and the capital market, which will perceive companies that pay cash dividends as reputable enterprises, (booth, l. and zhou, 2017). the positive relationship between dividend payout and earnings management is further supported by (javaid et al., 2023) which suggests that companies manipulate earnings to signal to the market that they can maintain a smooth dividend distribution. several factors that influence dividend policy have been tested in the past using dividend proxies, such as institutional ownership (farooq et al., 2022) (c. arko et al., 2014), foreign ownership (farooq et al., 2022) (c. arko et al., 2014), managerial ownership (farooq et al., 2022) (c. arko et al., 2014), earnings management (gill et al., 2014) (srikanth & durga prasad, 2015) (ben amar et al., 2018) (javaid et al., 2023), liquidity (farooq et al., 2022), profitability (al-kayed, 2017) (farooq et al., 2022), growth opportunities (al-kayed, 2017) (farooq et al., 2022), leverage (al-kayed, 2017), and audit committee (buertey et al., 2023). and these studies' findings have yet to produce proof consistently. several subsequent research tested the impact of profits management on dividend coverage by the usage of impartial commissioners as a moderating variable. (javaid et al., 2023) and the test results prove that unbiased commissioners drastically modify between income management and dividend policy. (kenneth a. borokhovich & kelly r. brunarski & yvette harman & james b. kehr, 2005) testing institutional possession and majority possession concluded that the common stock price https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 30 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc response to dividend surprises became drastically lower in firms with predominantly out of doors boards and proved a wonderful dating with majority possession. the research by (ben salah & jarboui, 2022), which aims to investigate the impact of audit committee abilities and concentrated ownership in explaining the effect of profits management on dividend policy, is the basis for this study. ownership concentration is the term used to describe a controlling interest that oversees the operations and resources of the company. to profit from concentrated ownership, management may feel pressured to boost dividend payments to majority shareholders, while minority shareholders' interests could be subverted by dominating shareholders. nonetheless, managers can use their discretion to indicate to other players in the capital markets that they are capable of fulfilling their responsibilities, which include dispersing wealth in the company, as they are the ones who know it the best. this study uses the audit committee expertise variable – economic or accounting enjoy – to alter the affiliation between income control and dividend policy. this observe additionally modifications the extent of audit committee understanding, as growing the percentage of skilled administrators is visible as an important corporate governance tool that can lessen the need for better dividends. to limit the affiliation between possession concentration, audit committee enjoy and profits control, this examine targets to decide the impact of those factors on dividend policy. this study examines a sample of producing groups listed at the indonesia stock trade from 2018 to 2022. agency theory agency theory emphasizes the interaction between investors and management since, unlike shareholders, the former has complete knowledge of the company and wins investors' trust in its direction. this discrepancy in information could lead to arguments between the parties (nainggolan & karunia, 2022). moreover, (prabulana et al., 2021) state that corporate management usually aims to maximize profit at the expense of other parties, particularly shareholders. in this way, agency theory pushes managers to employ tactics for managing earnings to prioritize interests in increasing firm profits by legally using limited dividends. this supports the assertion (tjiang et al., 2018) that managers provide false information and statistics due to competing interests and incomplete knowledge, which reduces investor interest in making investments. signaling theory according to (suranta et al., 2023), signaling theory explains how companies try to provide investors with signals about how management views the company's future. dividend payments are a positive sign from the company that things are going well (bhattacharya, 1979a). businesses declare their dividend payments to demonstrate to prospective investors that they are a reputable company. according to (srikanth & durga prasad, 2015), while dividend payments usually show good profit reporting, they typically result in the realization of cash flow accruals to sustain cash dividends. to study earnings management, this study uses the concept of discretionary accruals. as illustrated by signaling theory, this concept is used by managers to control profits, allowing them to influence cumulative revenues and use them to achieve target revenues. https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 31 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dividend policy in line with (sutrisno, 2003) (hutami, 2012), dividend policy is a coverage associated with dividend payments by using the corporation, within the shape of determining the amount of dividends to be disbursed and the amount of retained earnings for the continuity of corporation sports. whilst related to business enterprise concept, dividends are one of the organization charges provided by using control to traders. (jensen & meckling, 1976) delivered the organisation principle where corporations pay dividends to reduce business enterprise expenses and transaction prices associated with newly issued equity. their observe concluded that higher dividend payout better dividend payout reduces company conflicts between managers and shareholders. within the catering theory, dividend payout is motivated by traders' demand for the dividend. managers will cater to buyers' demand to pay dividends, inside the desire that inside the coming duration the corporation's percentage fee will rise. consequently, to peer whether or not or now not there is a power of dividend catering at the tendency to pay dividends, dividend top class is used as a proxy that can give an explanation for this have an impact on (suranta, eddy, 2010). the rent extraction hypothesis would be supported if the market perceived a dividend increase from a controlling-owner corporation as a sign that the controlling shareholders were unwilling to exploit minority shareholders. the rent extraction theory states that market reactions to dividend reductions will be adverse, while news of dividend increases will result in favorable responses. however, the rent extraction hypothesis interprets a growth or decline in dividends in companies with concentrated ownership or under the management of a single shareholder. (midiastuty et al., n.d.) earnings management the motives riding profits management can be rooted within the flexibility supplied through accounting standards. (abuaddous et al., 2014). contextually, this pliability can permit managers to govern pronounced effects (riahi‐belkaoui, 2004); (nigrini, 2005). in reality, managers can exercise earnings control by means of offering a extra favorable economic repute of the enterprise's performance through discretionary accruals (aini aman et al., 2006). earnings management may be said to be an accounting sport in case you see that this engineering is an try to conceal and exchange data with the aid of gambling with the scale of the numbers of the components of the financial statements carried out whilst recording and compiling facts. this will have an impact on stakeholders, due to the fact they can't gain statistics that ought to be completed (agustia & suryani, 2018). according to (scott, 2003), one of the five types of earnings management is to ask for a bath when unavoidable adverse events arise. as a result, future profits will be significant even in the face of hardship. next are income maximization and smoothing, which report a steady trend of profit growth rather than a sharp increase or decrease in profits; income depreciation, which is applied when a business achieves high profitability to avoid attention from politicians; and income maximization. finally, allocating revenue and expenses establishing guidelines for transaction timing, such as early income recognition, is necessary in the recognition process. https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 32 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy we are able to focus at the contributions of corporation idea and signaling concept as theories that specify the connection among dividend policy and profits control. corporation concept offers with issues associated with the separation of ownership and control functions, as well as the variations between the priorities of managers and shareholders (jensen & meckling, 1976). signaling concept states that dividends are used as a tool to signal desirable commercial enterprise nice to the market (bhattacharya, 1979) (john & williams, 1985) (ross, 1977). that manner managers select to govern earnings, data or data so that it does now not fit the real reality which goals to advantage the business enterprise. in which profits management practices are concept to affect dividend policy. the developing hobby in the effect of income control on corporate dividend policy has caused many research investigating this relationship. some latest studies (haider et al., 2012) (chansarn & chansarn, 2016) (ben amar et al., 2018) (tjiang et al., 2018) (lopes, 2020) the existence of this superb courting states that the amount of dividend distribution is motivated by using income control conduct at the part of the agency. so that in this study the researchers formulated the subsequent speculation: h1: earnings management has a positive effect on dividend policy concentrated ownership moderates the relationship between earnings management and dividend policy from the agency hypothesis, an agency connection can be created. the goal of all parties involved is to maximize their interests. according to (zaenal fanani & sari, 2022), there are differences in the interests of majority and minority shareholders due to concentrated ownership of the company. for their gain, majority shareholders may abuse their authority over the company, frequently even acquiring minority stakes. if the votes of the minority differ from those of the majority, the majority owner can enforce his will. (nguyen et al., 2021) research from 2021 indicates that controlling profitability and concentrated ownership in a company are positively correlated. more precisely, according to (ben amar et al., 2018), managers are urged to exercise their accounting discretion when determining the amount to distribute as dividends to shareholders. thus, we're: h2: concentrated ownership moderates the relationship between earnings management and dividend policy audit committee expertise moderates the relationship between earnings management and dividend policy (yang & krishnan, 2005) (krishnan & lee, 2009) (baolei & xian, 2012) (badolato et al., 2014) (zalata et al., 2018) (noor laila fitriana, prof. indra wijaya kusuma, m.b.a., 2019) looked at the influence of the knowledge of audit committee members on income management. the knowledge of audit committee members is a critical factor in determining its efficacy, the https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 33 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc researchers determined. the empirical model's estimate effects really reveal that the knowledge of audit committee members has a detrimental influence on income control, suggesting that audit committees with accounting and financial expertise may be able to lessen control over profits. organisations are encouraged to improve their project management and effectiveness due to the requirement for directors who possess expertise, professionalism, and competence. controlling profits, which affects dividend payout coverage, is severely impacted by these kinds of governance structures. so that during this examine the researchers formulated the subsequent speculation: h3: audit committee member expertise negatively moderates the relationship between earnings management and dividend policy research framework table 1 framework of the research method research model and design this study is classified as empirical research since it uses descriptive quantitative research methodology, which is a technique for confirming statistical data tests that are used to evaluate hypotheses. about the effects of audit committee experience on dividend policy in manufacturing companies listed on the indonesia stock exchange (idx) and earnings management, which acts as a moderator of concentrated ownership, this study employs a methodology to assess theories and present empirical data. population and sample selection method the population in this study includes all manufacturing companies listed on the indonesia stock exchange (idx) with an observation period of 2018 to 2022, where the total population is 165 companies. the sample selection of this study used purposive sampling using several criteria, namely the company: (1) making dividend payments, (2) having concentrated ownership above 50%, (3) no listing during the observation period (4) reporting using rupiah currency. so that the number of samples used in this study amounted to 46 companies. https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 34 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data collection methods the facts in an effort to be used in this have a look at is secondary statistics with documentation techniques in the form of annual monetary reports of manufacturing agencies indexed on the indonesia inventory trade (idx) for the last 5 years (2018-2022) received from the indonesia inventory alternate internet site www.idx.co.id and several related employer respectable web sites. data processing method using ibm spss statistics 22, the multiple linear regression approach was employed in this investigation. using this approach, the link between the dependent variable (the variable on which the research is focused) and other variables that act as predictors or influences on the dependent variable can be ascertained. operational definition and measurement of variables tabel 2 describe the process of operationalizing andmeasurement the study variables variables measurement sources dependent variable dividend policy dividend policy (dpo) = total cash dividends total sales (hwang et al., 2013) (jabbouri, 2016) independe nt variable earnings management (the modified jones model) a. tacit = niit – cfoit b. tacit tait−1 = 𝛽1 [ 1 tait−1 ] + β2 [ δsalesit tait−1 ] + β3 [ ppeit tait−1 ] c. ndait = 𝛽1 [ 1 tait−1 ] + β2 [ δsalesit−δrecit tait−1 ] + β3 [ ppeit tait−1 ] d. dacit = tacit tait−1 − ndacit (sabrina et al., 2020) moderating variable concentrate d ownership concentrated ownership (con) is measured by the percentage of shares owned by the first shareholder above 50% (midiastuty et al., 2017) audit committee expertise the proportion of audit committee members who have expertise in accounting or finance (be´dard et al., 2004) control variable cash flow from operations (cfo) cfo = 𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤𝑠 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 (ben salah & jarboui, 2022) liquidity of firm (liq) liq = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 35 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion based on purposive sampling, there are 128 observations obtained from 46 manufacturing companies during the observation period from 2018-2022. no information amount 1 amount of manufacturing companies registered on the indonesia stock exchange (idx) from 2018-2022 165 2 companies that do not pay dividends (85) 3 companies the use foreign currency (20) 4 companies with concentrated ownership below 50% (10) 5 companies that do not have a listing during the observation period (4) amount of company samples 46 descriptive statistics table 3 descriptive statistics of research variables n minimum maximum mean std. deviation dpo 128 0.00000093 0.57 0.0606 0.08631 dac 128 -0.26 0.23 -0.0062 0.07176 con 128 0.50 1.00 0.7184 0.15801 expert 128 0.25 1.00 0.7949 0.23845 cfo 128 -0.23 0.44 0.1102 0.10334 liq 128 0.61 13.87 2.9373 2.45837 source: secondary data processed, 2023 table 3 shows that the company pays dividends of 6.06 percent of total sales on average, with the highest dividend payment being 57 percent of total sales and the lowest dividend payment being 0.00009 percent of total company sales. the average dividend policy variable, as proxied by dpo of 0.0606, indicates this. the standard deviation of the dividend policy is 0.08631 and when compared with the average value of 0.0606, it shows that the standard deviation value of the dividend policy variable is greater than the average value so that this illustrates that the dividend policy of the companies sampled in this study is varied. with an average value of -0.0062, table 3 demonstrates that the first independent variable in this study proxied by dac is earnings management. this indicates that, generally speaking, the organizations sampled in this study implement earnings management in a way that minimizes or decreases income. the highest value of positive earnings management shows that the businesses examined in this research use an income-maximization/income-increasing pattern for their earnings management. the standard deviation on this variable is 0.07176, compared to the average value of -0.0062, it shows that the standard deviation value of earnings management is greater than the average value, thus illustrating that the earnings management of the companies sampled in this study varies. https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 36 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc furthermore, the table displays the average value of 0.7184 for the concentrated ownership proxied by con. this indicates that, among the companies sampled in this study, the average concentrated ownership is 71.8%, with the lowest concentrated ownership being 0.50, indicating that some companies have the lowest concentrated ownership of 50%, and the highest value of 1.00, indicating that the company with the most significant concentrated ownership is 100%. the data from the con variable does not vary, as indicated by the standard deviation value of 0.15801, which is less than the average. the standard deviation of ownership concentration is 0.15801 and when compared with the average value of 0.7184, it shows that the standard deviation value of the dividend policy variable is greater than the average value so that this illustrates that the dividend policy of the companies sampled in this study does not vary. the ratio of audit committees with experience in finance or accounting to the total number of audit committees is connected to the audit committee expertise indicated by expert. according to the table, the research sample's lowest observation is 0.25, meaning that 25% of audit committee members have experience in finance or accounting. with an average value of 0.7949, the audit committee made up of financial accounting specialists represents 79.49% of the total audit committee. the expert of the research observations is constant, as indicated by the expert variable's standard deviation of 0.23845. the standard deviation on this variable is 0.23845, compared to the average value of 0.7949, it shows that the standard deviation value of earnings management is greater than the average value, thus illustrating that the earnings management of the companies sampled in this study does not vary. two control variables are looked at in this study. first is operating cash flow (cfo), which ranges from a minimum of -0.23 to a maximum of 0.44. furthermore, the study's sample of enterprises had an average operating cash flow of 11.02%, as indicated by the average figure of 0.1102. in contrast, the liquidity variable (liq) has a minimum of 0.61 and a maximum of 13.87. while the average value for liquidity was 2.9373 with a standard deviation of 2.45837, it shows that the liquidity of the companies sampled in the study does not vary. linear regression analysis test regression model the purpose of this study is to demonstrate how concentrated ownership and earnings management are impacted by each other, and how audit committee experience influences the link between the two. multiple linear regression analysis was used to evaluate each hypothesis, and the findings are shown in table 4 below: table 4 regression model variables coefficient t (sig) coefficient t (sig) coefficient t (sig) coefficient t (sig) constants 0.049 2.007 0.047 0.055 1.891 0.061 -0.052 -2.102 0.038 https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 37 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dac 0.279 2.664 0.009** 0.308 3.633 0.000** con -0.080 -2.461 0.015* -0.101 -2.599 0.011* expert 0.050 1.858 0.066 daccon 0.411 3.060 0.003** dacexpert 0.267 2.263 0.025* cfo 0.518 7.149 0.000** 0.511 8.687 0.000** 0.547 7.632 0.000** 0.489 6.864 0.000** liq 0.006 2.397 0.018* 0.004 1.845 0.068 0.007 2.626 0.010* 0.007 2.723 0.007** r square 0.340 0.415 0.380 0.346 adjusted r square 0.324 0.395 0.360 0.325 f 21.274 21.600 18.867 16.288 sig. 0.000 0.000 0.000 0.000 source: secondary data processed, 2023 table 4 above presents the results of the f test with sig values. 0.000 indicates that the model used is suitable for testing the hypothesis with the sig value criteria. < 0.05. first hypothesis testing and discussion the primary speculation testing is aimed at proving that profits control has an impact on dividend policy. based totally on the take a look at consequences in desk four, it provides the impact of income management which has a coefficient value of 0.308 with sig. 0.000 (0.000 < 0.050). this shows that earnings management has a wonderful and huge effect on dividend policy. this helps enterprise principle which states that the prevalence of facts asymmetry troubles reasons managers to have the discretion or discretion to apply accounting methods that boom earnings figures in which earnings figures emerge as the idea for supervisor reimbursement. as said via (la porta et al., 2000) that dividend payout policy can be explained in two fashions, considered one of which is final results. for this reason, according with signal principle, managers will distribute dividends as a shape of outcome to signal to traders the fulfillment of managers in coping with the agency. so it could be concluded that the primary hypothesis in this examine is accepted. the outcomes of this examine assist studies (lopes, 2020) in which there is a positive impact of income management on dividend policy in personal businesses, (tjiang et al., 2018) proved that profits management and profitability have a good sized and positive effect on dividend coverage. and studies (chansarn & chansarn, 2016) shows that earnings control has a effective impact on the dividend yield of companies indexed on mai. https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 38 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc second hypothesis testing and discussion the second hypothesis trying out is aimed at checking out focused possession to moderate the relationship among earnings management and dividend policy. based on the test consequences, it indicates that the moderating variable of focused ownership and earnings control (daccon) has a coefficient price of zero.411 with sig. 0.003 (0.000 <0.050). positive and large regression. with the direction of the positive and considerable regression coefficient, it can be concluded that the second hypothesis on this look at is usual. the results of this have a look at aid research (ben salah & jarboui, 2022) (rossi et al., 2018) (gopalan & jayaraman, 2012), as said via (la porta et al., 2000) dividend coverage in the substitution model explains dividend bills made to insiders with the aim of keeping market popularity and signaling about the situation of the enterprise at the same time as dividend bills defined via outcome fashions are the pressure exerted from shareholders on managers to keep away from cash go with the flow issues. accordingly, this look at explains the consequences version defined by (la porta et al., 2000) wherein earnings control and focused ownership play a complementary position because profits control and concentrated ownership have a nice impact on dividend coverage in order that income management carried out with the aid of managers with the aim of supplying alerts about the agency's circumstance is profitable for focused shareholders. third hypothesis testing and discussion the very last speculation test appears on the audit committee's capability to mediate disputes between dividend policy and earnings control. the check's results display that the audit committee's revel in can have an effect on how dividend coverage and profits control interact. with a vast superb route (sig. 0.025, 0.000 <0.050), its coefficient fee is 0.267. the 0.33 test is disqualified since the effects cross towards the suggested hypothesis. the direction of the advantageous regression coefficient suggests that managers' profits control is past the attain of an audit committee with out a background in finance or accounting. however, it might be greater powerful in decreasing activities related to profits control and improving managers' tactics to it. as said via (ben salah & jarboui, 2022) conclusion the purpose of this study is to offer extra empirical information concerning how dividend policy is impacted via profits management. the existing observe investigates the moderating results of focused ownership and audit committee revel in at the hyperlink among dividend policy and profits control. the effects of the speculation check imply that (1) profits control has a positive and extensive effect on dividend policy, (2) concentrated ownership moderates the relationship among profits control and dividend policy in a positive, and (3) course audit committee understanding moderates the relationship in a effective direction. these results reveal that audit committee understanding isn't a useful corporate governance tool because it's far unrealistic sufficient to steer managers not to engage in profits control. different audit committee attributes, along with the range of audit committees, the committee's time period, independence, and frequency of meetings, https://www.ilomata.org/index.php/ijtc the effect of earnings management on dividend policy: concentrated ownership and audit committee expertise as moderating variables anggraini, suranta, and midiastuty 39 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can be hired in next research. (ben salah & jarboui, 2022) and consist of additional factors of company governance, such as impartial commissioners. the take a look at's findings display that businesses pay dividends in an attempt to venture a fantastic photograph to buyers. but, managers are free to alter the stated profit figures to help concentrated ownership. additionally, the have a look at's findings assist agency theory and sign theory. this research can provide real implications where companies can utilize it as a consideration in determining decisions regarding the proportion of dividends to be distributed and as a review tool for investors in investing. reference abuaddous, m., hanefah, m., & laili, n. h. (2014). accounting standards, goodwill impairment and earnings management in malaysia. international journal of economics and finance, 6. https://doi.org/10.5539/ijef.v6n12p201 agustia, y. p., & suryani, e. 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(2022). pengaruh struktur kepemilikan, transaksi pihak terkait, dan reputasi perusahaan terhadap manajemen laba. akurasi : jurnal studi akuntansi dan keuangan, 5(1), 15–28. https://doi.org/10.29303/akurasi.v5i1.120 zalata, a. m., tauringana, v., & tingbani, i. (2018). audit committee financial expertise, gender, and earnings management: does gender of the financial expert matter? international review of financial analysis, 55, 170–183. https://doi.org/10.1016/j.irfa.2017.11.002 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 755-770 755 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area oktaviani silaen1, hisar pangaribuan2 12universitas advent indonesia, indonesia correspondent : 2032071@unai.edu1 received : august 20, 2023 accepted : october 17, 2023 published : october 31, 2023 citation: silaen, o., pangaribuan, h. (2023). the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area. ilomata international journal of tax and accounting, 4(4), 755-770. https://doi.org/10.52728/ijtc.v4i4.894 abstract: this research was conducted to determine the effect of tax socialization and the strictness of tax sanctions on compliance by taxpayers who own a business. the population in this study are taxpayers who have businesses in the lembang area. the quantitative method was used in this study, with primary data obtained from the questionnaire results. selection of the sample in this study using the method of purposive sampling, with a total sample of 50. descriptive statistical tests were carried out using the spss version 29 program. the results showed that tax socialization did not significantly affect the compliance of taxpayers who own businesses in the lembang area, with a test number of 0.432 < 2.01174. in contrast, the strictness of tax sanctions significantly affected the compliance of taxpayers who have businesses in the lembang area with a test number of 0.000 < 2.01174. this study shows that the socialization of taxation and the strictness of tax sanctions significantly affect the compliance of taxpayers who have businesses in the lembang area with a significance level of 0.000 <0.05. keywords: tax dissemination, firmness of tax sanctions, taxpayer compliance this is an open access article under the cc-by 4.0 license. introduction indonesia, one of the developing country and has made progress in sundry fields. the progress made to realize social welfare through public services such as upholding fair laws and maintaining comfort and national stability. development governance can only advance with financial support, especially through domestic revenues (anggraeni and lenggono 2021). indonesia relies on several government funding and development sectors, including government tax revenues, non-tax revenues, loans, and foreign aid. however, the largest state revenue comes from taxes, so the target level of tax revenue must be optimized (latofah and harjo 2020; nugraha and wijaya 2023; pangaribuan 2022; pascal and wijaya 2023). in the 2022 state budget, state revenue is idr 1,846.1 trillion, including tax receipts of idr 1,510 trillion, pnbp of idr 335.6 trillion, and collecting grants of idr 0.6 trillion (djpb.kemenkeu.go.id, 2022). taxation accounts for 81.7% of state revenue. taxes are still considered low, although they https://www.ilomata.org/index.php/ijtc mailto:2032071@unai.edu https://doi.org/10.52728/ijtc.v4i4.894 the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 756 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc have an important role. indonesia has the lowest tax ratio in southeast asia, namely 10.4% in 2022. indonesia's tax ratio position is still far behind thailand with a ratio of 14.5%, singapore’s 12.9%, and malaysia’s reaching 10.9% (economy.bisnis.com). taxpayer compliance which tends to be low is an obstacle preventing an increase in the tax ratio in indonesia. taxpayer compliance is crucial in ensuring that the state maintains a source of income. taxes can become a technique for the government to increase revenue. in this case taxpayer compliance refers to the submissive or obedient nature of a person in fulfilling their tax obligations dependent, such as reporting in terms of registration and payment taxes in line with applicable laws and regulations (nurdyastuti and penawan 2018; pangaribuan et al. 2021). in indonesian, the percentage of taxpayers who fulfill their tax obligations each year is relatively small. such a condition was concluded based on a comparison of all taxpayers who have good compliance in indonesia, and it turns out that the number is smaller than registered taxpayers (magribi and yulianti 2022). reflecting on the news quoted from cnbcindonesia.com, in indonesia, in 2015, only 60% of taxpayers were considered obedient in paying their taxes, namely 10.97 million taxpayers, which was around 60% of the 18.16 million registered as taxpayers. in 2016, the population who obeyed paying taxes only reached 61%, up 1% from the previous year, namely 12.25 million of 20.17 million taxpayers. however, in 2017, the number of taxpayers who pay taxes increased by 12%, from 61% to 73%. in 2018, the compliance ratio for paying taxes fell by 2% from the previous year to 71% or 12.55 million of those who obeyed paying taxes from 17.65 million registered taxpayers. then 2019 became a good year because the ratio of compliance with paying taxes increased by 2%, to 73% or 18.33 million of them registered taxpayers, and only 13.39 million of them obeyed paying taxes. after that, 2020 will be an even better year because the compliance ratio in paying taxes has increased again, namely 5%, and the compliance rate is at 78%. even so, the indicated amount of taxpayers registered to pay taxes has shown a slight increase; there are 14.76 million taxpayers who have paid, which is around 77% of the 19.07 million taxpayers. around 4 million taxpayers still have not carried out their obligations to contribute to the state in paying taxes. more tax-related problems cause the low tax ratio in indonesia. the problems exist because taxpayers still need to learn about the taxation system. misunderstanding makes many people, as tax objects, violate the law. one is the taxpayer, namely those classified as objects of private persons carrying out an activity, such as entrepreneurs and free workers. according to (yana et al. 2021), those in the commercial world or freelancers think that hiring other people to manage records or bookkeeping is still inefficient, especially for the most part. as a result, tax objects, namely taxpayers, still choose to keep records or bookkeeping independently, which makes them vulnerable to tax irregularities, potential errors, or dishonesty in tax reporting. perceptions of tax objects, namely the public, regarding taxation as a necessity, tax objects need to understand more about taxation (r. a. anwar and syafiqurrahman 2016). with that, in increasing taxpayer compliance, the government can provide tax socialization services to change the views of tax objects, namely those of the public about taxes. https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 757 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the directorate general of taxes carries out a program or activity known as tax socialization to support the implementation of tax services by helping the public understand more tax information. tax socialization has a very important meaning in changing the views of tax objects, namely business actors in paying taxes and the importance of applicable tax regulations (hura and molinda kakisina 2022). tax socialization must be done optimally and regularly with clear, correct, and comfortable delivery. in this way, tax socialization is expected to spread benefits and understanding to tax objects, namely the public, regarding the obligation to pay taxes in accordance with applicable tax rules (dewi and jati 2018). if not by spreading efficient socialization to tax objects, namely the public, especially business actors, non-compliance and difficulties may occur in fulfilling their tax obligations. this description shows that it agrees with previous research by (wardani and wati 2018), explains that taxpayer compliance is positively influenced by tax socialization. however, taxpayer compliance is not influenced by tax socialization (fitria and mildawati 2019; rahmi, selvi, and purwaningtyas 2022; rulandari and rahmayani 2023), which means there are differences between these studies. not only socialization, the application of sanctions by tax service officials is another important component that ensures that taxpayers who have paid taxes in a compliant and timely manner will be carried out. if carried out strictly, sanctions are tools that can control the behavior of tax objects, namely the public as taxpayers, and become the most appropriate in preventing tax noncompliance. the directorate general of taxes (dgt) imposes sanctions for taxpayers who intentionally or unintentionally violate tax regulations. taxpayers want to avoid applicable penalties, which can make the burden they incur more than being compliant when carrying out tax obligations (hartana and merkusiwati 2018). the strictness of tax sanctions is made to punish people who violate tax laws and increase tax compliance. in this way, sanctions can help tax objects, namely the public, learn to comply with tax rules and avoid the negative view that tax consequences can burden them. the research results by (kusumafanto and achyani 2018) explained that tax sanctions positively impact taxpayer compliance. because of this, they found that when the regulations in the form of sanctions that are enforced are stricter, then the tax object, namely the public, will be more obedient in implementing existing tax regulations, which will directly increase taxpayer compliance. however, research by (f. m. anwar and wijaya 2023; markumah, triyono, and sasongko 2020; wulandari and wijaya 2023) provided other inconsistent results, which explains that there is no demonstrated influence on taxpayer compliance from tax sanctions, tax reform, and knowledge about taxes. theoretical studies attribution theory by (kelley 1973) is a further development of the theory made in 1958 by fritz heider. according to theory, when someone sees another person, they will try to determine whether the behavior displayed by that person can occur due to internal or external groups (robbins et al. 2008). according to (robbins et al. 2008), three factors influence the method for assessing whether a behavior is caused internally (such as individual character or personality) or externally (such as the external situation or environment), namely as follows: https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 758 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. specificity specificity refers to the choice of behavior displayed by a person in various situations. if behavior is considered normal and consistent, it tends to be caused by internal factors. however, if behavior is perceived as unusual or different from usual, it is likely due to external factors. 2. consensus consensus means that people respond with similar actions to similar conditions. when sociability is low (few people respond in kind), behavior is conditioned internally. likewise, when there is high consensus (many people respond the same way), behavior tends to be influenced by external factors. 3. consistency consistency or what can be called consistency is when the person repeats the response in the same way. this means that if the consistency of a behavior, the more internal causes of the behavior. likewise, if the consistency of behavior is getting lower, then it is caused by external influences. these three factors explain the variables that influence the behavior of tax objects, namely the people who are taxpayers, and this can be used as a research model. public assessment of taxes can describe how it relates to taxpayer compliance. according to (jatmiko 2006), one's thoughts or observations can affect the perceptions of others, both internal and external factors. tax dissemination of taxpayer compliance tax socialization transforms the knowledge, attitudes, and skills of the general public and the commercial world to government or non-government institutions, namely through the provision of tax information so that it is understood, realized, maintained, and participates in carrying out applicable tax obligations. (sat circular no. : se-98/pj/2011). many researchers explain that tax socialization impacts taxpayer compliance; for example, (agun, datrini, and amlayasa 2022) explain that tax socialization points in a positive direction and can increase taxpayer compliance if the practices described are good and correct. this compliance requirement justifies another study by (nabilla and farah 2019), which found that compliance with tax objects, namely individuals, is affected by the application of electronic filing and socialization of taxation. hₐ1: tax socialization has a significant effect on taxpayer compliance with a business tax sanctions against taxpayer compliance sanctions are provisions imposed on those who break the rules. when someone does something that can and cannot be done, it must be based on enforced provisions, namely, an indication. therefore, sanctions are needed to ensure that the established laws or rules are not violated. tax sanctions prove that taxpayers will not miss their taxes because they are by tax standards or laws where taxpayers are willing to pay taxes based on applicable regulations (ariesta 2017). https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 759 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax sanctions are imposed on all taxpayers based on the class or form of violation committed. according to (mardiasmo 2018), several rules are classified into two types of sanctions: criminal and administrative. the imposition of punishments such as detention and confinement is a form of criminal sanctions. at the same time, administrative sanctions are the tools the tax authorities realize in enforcing tax standards by imposing fines and state losses paid with interest charged and increasing tax rates. previous research by (amalia and widyawati 2021) shows that the strictness of sanctions to a certain extent will affect taxpayer compliance because if the regulations, in this case, namely the sanctions set, are more disciplined and firm, it will increase taxpayer compliance. then reaffirmed through a search in the form of other research, which states a significant influence between tax sanctions and taxpayer compliance by (putri and nurhasanah 2019) hₐ2: the strictness of tax sanctions has a significant effect on the compliance of taxpayers who own businesses socialization of taxation and the strictness of tax sanctions against taxpayer compliance taxpayer compliance is a form of availability of tax objects; namely, they are taxpayers to register, notification in the form of a letter, namely in the form of spt, calculation of tax payable and its payment, as well as reporting tax bills based on existing tax regulations. material and formal compliance are two different forms of tax compliance (winerungan 2012). first material compliance can occur if the condition of the tax object is that the taxpayer fulfills the material tax provisions of taxation based on the existing tax provisions. second, formal compliance occurs when the taxpayer can officially participate in carrying out and fulfill its tax obligations based on the provisions stipulated by law. hₐ3: socialization of taxation and the strictness of tax sanctions have a significant effect on the compliance of taxpayers who have businesses. method this research used a descriptive decision-making model with a quantifable strategy, which collected data through a questionnaire. descriptive research methods are useful for determining the value of independent variables without comparing or combining them with other variables (tanjung et al. 2020). this study uses basic information from questionnaires or interviews as data to be processed. method purposive sampling was used to identify respondents, with the research population being taxpayers who run businesses in the lembang area. a total of 50 respondents were taken as a sample in this study, and they were interviewed using a questionnaire with a likert scale, in which numbers were used to indicate response levels. data is analyzed ordinal, not absolute (purwanto 2015). https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 760 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research, various statistical methods were used, including validity, reliability, descriptive analysis, correlation coefficient, f test, t-test, multiple linear regression analysis, and coefficient of determination. spss software version 29 is used to help process existing data. result and discussion validity test a method for verifying and demonstrating the correctness of research instruments to ascertain whether the information obtained after the research is correct or not usually use a validity test. this test is conducted by measuring the bivariate correlation (pearson correlation) across indicators in research tools, such as questionnaires or other instruments. table 2. validity test number r count r table decision 1 0,283 0,278 valid 2 0,348 0,278 valid 3 0,294 0,278 valid 4 0,386 0,278 valid 5 0,331 0,278 valid 6 0,483 0,278 valid 7 0,466 0,278 valid 8 0,309 0,278 valid table 1. operational research variables variable indicator scale questionnaire no tax socialization source: (wardani and wati 2018) implementation of socialization likert 1, 2, 3, and 4 media in carrying out socialization likert 5 & 6 the benefits of socialization. likert 7 & 8 firmness of tax sanctions source: (rusmawati and wardani 2016) tax sanctions are imposed on violators without tolerance likert 1 & 2 tax sanctions are well implemented by tax officers against tax violators likert 3 & 4 sanctions are applied as a means to educate taxpayers. likert 5,6,7, and 8 taxpayer compliance source: (wardani and wati 2018) taxpayer compliance in registering likert 1, 2, and 3 taxpayer compliance in calculating, paying, and reporting likert 4, 5, and 6 taxpayer compliance in notifying the confirmation of his business to the kpp. likert 7 & 8 https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 761 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 9 0,366 0,278 valid 10 0,477 0,278 valid 11 0,289 0,278 valid 12 0,441 0,278 valid 13 0,316 0,278 valid 14 0,372 0,278 valid 15 0,364 0,278 valid 16 0,282 0,278 valid 17 0,302 0,278 valid 18 0,384 0,278 valid 19 0,313 0,278 valid 20 0,479 0,278 valid 21 0,404 0,278 valid 22 0,367 0,278 valid 23 0,303 0,278 valid 24 0,489 0,278 valid source: processed data (2023) through the validity test of the variables, it also seen that the coefficient value (r count) of tax socialization variable, the strictness sanction of tax, and the indicators of taxpayer compliance are all larger than the r table of 0.278. which means that every indication shown in this study is valid and reliable for further analysis. reliability test reliability test are usually required in containing the suitability or stability of the data variable questionnaire instrument from time to time. a research instrument can be considered unreliable because cronbach's alpha shows a value of less than 0.6. conversely, an instrument can be considered reliable if the value is larger than 0.6 (ghozali 2016). the following is the reliability test of the three variables in this study: table 3. reliability table reliability statistics cronbach 's alpha n of items .831 3 based on the table above, this study proved to be very reliable because it has an alpha value of 0.831, and if cronbach's alpha shows a larger value than 0.6 then it can be declared reliable on all of these variables. https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 762 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc respondent data table 4. table of gender gender frequency percent valid percent cumulative percent valid man 28 56 56 56 woman 22 44 44 100 total 50 100 100 table 4 illustrates that taxpayers who own businesses in the lembang area pay more taxes, 28 men with a percentage of 56%. while the number of taxpayers who are female is less in paying taxes, namely as many as 22 people with a percentage of 44%. table 5. table of gender age frequency percent valid percent cumulative percent valid <26 years 18 36 36 36 26-35 years 8 16 16 52 36-45 years 4 8 8 60 46-55 years 14 28 28 88 >55 years 6 12 12 100 total 50 100 100 table 5 shows that the majority of taxpayers who own businesses in the lembang area have an age range of <26 years, with a total of 18 people. the second age range with the highest number is 46-55 years, with a total of 14 people. furthermore, there are 8 taxpayers aged between 26-35 years, followed by 6 people aged > 55 years. the age range with the least number of taxpayers is 36-45 years, only 4 people. descriptive test analysis table 6. table of descriptive analysis variable indicator mean max min tax socialization 1. implementation of socialization 3,63 5 1 2. the media in carrying out socialization 3,02 5 1 3. the benefits of socialization 4,46 5 3 firmness of tax sanctions 1. tax sanctions are imposed on violators without tolerance 2,83 5 1 2. tax sanctions are well implemented by tax officers against tax violators 3,01 5 1 3. sanctions are applied as a means to educate taxpayers 4,35 5 2 1. taxpayer compliance in registration 4,48 5 3 https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 763 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxpayer compliance 2. taxpayer compliance in calculating, paying, and reporting 3,44 5 1 3. compliance of taxpayers in notifying the confirmation of their business to the kpp 3,11 5 1 source: processed data (2023) table 6 shows the respondents' responses to variable x1, tax socialization. the highest indicator is the benefits of socialization which shows a value of 4.46, and the lowest indicator is the media in carrying out socialization with a value of 3.02. based on the table 6 above, respondents' responses to variable x2, the strictness of tax sanctions, show that the indicator with the highest score, namely sanctions applied as a means to educate taxpayers, has a value of 4.35, and the indicator with the lowest score, namely tax sanctions imposed on violators without tolerance, has a value of 2.83. according to table 6 above, indicators for variable y, taxpayer compliance received the highest and lowest average, namely, taxpayer compliance in registering, with a value of 4.48, and indicators for taxpayer compliance in notifying the confirmation of their business to the kpp with a value of 3.11. correlation coefficient the relevance between tax socialization variables also the strictness of tax sanctions can be measured using the correlation coefficient. analysis of the calculation of the correlation coefficient were carried out using spss version 29 software. the forms are shown in the following table: table 7. correlation table **. correlation is significant at the 0.01 level (2-tailed). table 7, between tax socialization and taxpayer compliance, 0.512 is the correlation coefficient indicated. with a significance level less than 0.05, namely 0.000, it shows a significant positive correlations tax socialization firmness of tax sanctions taxpayer compliance tax socialization pearson correlation 1 .613⁕⁕ .512⁕⁕ sig. (2-tailed) .000 .000 n 50 50 50 firmness of tax sanctions pearson correlation .613⁕⁕ 1 .734⁕⁕ sig. (2-tailed) .000 .000 n 50 50 50 taxpayer compliance pearson correlation .512⁕⁕ .734⁕⁕ 1 sig. (2-tailed) .000 .000 n 50 50 50 https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 764 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc relationship. therefore, the correlation shown by tax socialization is very strong and significant towards taxpayer compliance. on the other hand, the correlation coefficient among the strictness of tax sanctions and taxpayer compliance is 0.734, indicating a positive and significant relationship at a significance level of 0.000 which is less than 0.05. this concludes that a very strong and significant relationship among the strictness of tax sanctions and the level of taxpayer compliance. table 8. coefficients table coefficientsᵃ standardized coefficients unstandardized coefficients model b std. error beta t sig. 1 (constant) 10.249 3.337 3.071 .004 tax socialization .101 .128 .099 .793 .432 firmness of tax sanctions .589 .109 .647 5.409 .000 a. dependent variable: taxpayer compliance based on table 8 above, there is impact of the tax socialization variables, also the strictness of tax sanctions can be tested as follows: 1. the variable regression coefficient test (x1), how taxpayer compliance is affected by tax socialization, the results of t-test show that the t count obtained by the variable of tax socialization is 0.432 and the t table is 2.01174, namely (0.432 < 2.01174), the significance level is 0.432 > 0.05. therefore, the conclusion can be drawn that hₐ1 is rejected. it means, partially taxpayer compliance is not significantly influenced by tax socialization. 2. the variable regression coefficient test (x2), how taxpayer compliance is affected by the firmness of tax sanctions, the results of t-test showed that the t count obtained by the variable firmness of tax sanctions is 0.000 and the t table is 2.01174 (0.000 < 2.01174), the significance level is 0.000 < 0.05. therefore, the conclusion can be drawn that hₐ2 is accepted. it means that partially taxpayer compliance is significantly influenced by the strictness of tax sanctions. uji f table 9. anova table anovaᵃ model sum of square df mean square f sig. 1 regression 232.205 2 116.102 28.155 .000ᵇ residual 193.815 47 4.124 total 426.020 49 a. dependent variable: taxpayer compliance b. predictors: (constant), firmness of tax sanctions, tax socialization https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 765 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from the table presented, the test is carried out using (anova) test namely by making a comparison among the f value and the table f value. the results show that f count > f table (28.155 > 3.20) with a significance level of 0.000 less than 5%. therefore, hₐ3 is accepted, which indicates that taxpayer compliance is significantly and simultaneously affected by tax socialization and the firmness of tax sanctions. multiple linear regression analysis multiple linear regression equations can be obtained as shown in table 5.8, as follows: formula : y = a + bx1 + bx2 y = 10.249 + 0.101x1 + 0.589x2 information : y = taxpayer compliance x1 = tax socialization x2 = firmness of tax sanctions a) the value of the constant (a) is the value that represents taxpayer compliance (y) when the value of the tax socialization variable and the strictness of tax sanctions is found to be zero. that way, if tax socialization and strict tax sanctions are not enforced, the value that will be shown from taxpayer compliance is 10.249. b) the regression coefficient on the x1 variable, namely tax socialization, is equal to 0.101. this indicates that the tax socialization variable can show an influence on the level of taxpayer compliance. therefore, the more often the tax socialization is realized, the more it will positively affect the level of taxpayer compliance. c) the regression coefficient on the variable x2, namely the firmness of tax sanctions, is 0.589. this means that the level of taxpayer compliance can be affected by the level of strictness of tax sanctions. it means, the application of tax sanctions is emphasized, it can show a positive impact on the level of taxpayer compliance. determination coefficient table 10. determination table a. predictors: (constant), firmness of tax sanctions, tax socialization b. dependent variable: taxpayer compliance table 10 above shows a value of 0.545 or 54.5%. this means that taxpayer compliance is affected by 54.5% of the two variables, namely socialization and strictness of tax sanctions. meanwhile, the model summaryᵇ adjusted r std. error of model r r square square the estimate 1 .738ᵃ .545 .526 2.031 https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 766 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc remaining 45.5% is influenced by other factors not described in this study and not explained in the table effect of tax socialization on taxpayer compliance the regression test results, namely the t-test for the variable (x1), the socialization of taxation in this study, with a significance level of 0.432 where 0.432 > 0.05. thus, it is concluded that hₐ1 is rejected. this result means that tax socialization does not significantly affect taxpayer compliance; it is similar to the previous findings by (veronica 2015) and (ainul 2021). when we pay attention to the results of previous research, there are similarities with this study, namely, tax socialization does not significantly affect taxpayer compliance. this result proves that the socialization received by taxpayers who own businesses is still ineffective, so many do not feel compelled to become more aware of the taxation system and become more compliant in paying taxes. there needs to be further attention to increasing the effectiveness of socialization, in this case, the tax system; this is done so that it has a good influence on the level of taxpayer compliance. the reason for fulfilling tax obligations lies not in the frequent socialization, but awareness is the key that can influence it because with awareness the taxpayer will fulfill the tax obligations that must be fulfilled more obediently. therefore, it is hoped that local governments will increase awareness of fulfilling tax obligations for taxpayers, which can be achieved by increasing their performance in providing socialization about taxation for taxpayers by assisting in the form of direct education from tax officers who can clarify the importance of paying taxes. benefits will pay taxes, and give the view that compliance in paying their tax obligations is a good thing and is a must so that taxpayers in this case, namely the public become more obedient in complying with applicable tax rules. the effect of firmness of tax sanctions on taxpayer compliance the results of the regression test or t-test for the variable of firmness of tax sanctions (x2), which has been studied, have a significant value of 0.000 where 0.000 < 2.01174. thus, it can be concluded that hₐ2 is accepted, so the strictness of tax sanctions partially significantly affects taxpayer compliance. the results that have been studied show conformity with the results of previous research by (damayanti and fajriana 2021) and (hapsari and ramayanti 2022). when we pay attention to the results of previous studies, there are similarities with this research, namely, the strictness of tax sanctions significantly affects taxpayer compliance. this proves that the tax object is that the taxpayers already know the strictness of sanctions well enough so that they become obedient in making payments and reporting their tax obligations. this can be influenced by the strictness of the law stipulated by the dgt regarding quite heavy sanctions for those who violate it. the more severe the sanctions imposed, the more careful the taxpayers are in fulfilling their tax obligations. most of the people who participated in answering the questions in this study thought that tax sanctions were strict enough to provide a deterrent and burdensome effect for those who violated them. this is indicated by the fact that the number of taxpayers who comply is greater than those who do not comply. therefore, the only thing that needs to be stressed by the local government is that the imposition of sanctions given to violators https://www.ilomata.org/index.php/ijtc the impact of tax socialization and the stringency of tax sanctions on taxpayer compliance among business owners in the lembang area silaen and pangaribuan 767 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is carried out by force so that the compliance of taxpayers who own businesses can always be maintained properly. conclusion based on theory and hypothesis testing related to research on tax socialization and the strictness of tax sanctions on taxpayer compliance who own businesses in the lembang area, the researchers concluded that after testing the first variable hypothesis, namely tax socialization, no significant effect was found on taxpayer compliance, and testing the second variable hypothesis, namely the strictness of tax sanctions, was found to have a significant effect on taxpayer compliance. in addition, the researcher concludes that tax socialization and the strictness of tax sanctions simultaneously significantly affect the compliance of taxpayers who own businesses in the lembang area. the study results show that proper and equitable socialization is needed to increase the compliance of tax objects, namely those of the public as taxpayers in paying taxes. with that, the government can develop its performance by sending tax officials to taxpayers to show the importance of awareness of the tax system and encourage them to participate in complying with their tax requirements with strict consequences. it is hoped that the next researcher can do better research by adding more samples. in addition, researchers can add new variables that are not discussed in this study to provide new and interesting insights for readers. reference agun, w.a.n.u., l k datrini, and a a b amlayasa. 2022. “kepatuhan wajib pajak dalam memenuhi kewajiban perpajakan orang pribadi.” wicaksana: jurnal lingkungan dan pembangunan 6(1): 23–31. https://doi.org/10.22225/wicaksana.6.1.2022.23-31. ainul, n. 2021. ... “... sistem e-filling terhadap kepatuhan wajib pajak orang pribadi pada kantor pelayanan pajak pratama surabaya wonocolo.” jurnal pendidikan ekonomi: jurnal ilmiah ilmu 15: 9–19. 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pelayanan fiskus dan sanksi perpajakan terhadap kepatuhan wpop di kpp manado dan kpp bitung.” 1(3): 960–70. wulandari, destiny, and suparna wijaya. 2023. “the tax revenue from agriculture and manufacturing sectors in lower middle-income countries with exchange rate as a moderating variable.” ilomata international journal of tax and accounting 4(3): 508–23. yana, ema santika et al. 2021. “bangunan ( di kecamatan baradatu kabupaten way kanan.” https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 771-781 771 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on non-performingiloans in banking companies listed on thei indonesian stock exchangei rani safitri1, sulastri2, isni andriana3 123sriwijaya university, indonesia correspondent: sulastri@unsri.ac.id2 received : september 4, 2023 accepted : october 18, 2023 published : october 31, 2023 citation: safitri, r., sulastri., andriana, i. (2023). the influence of operational costs on operatingiincomeiand interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange. ilomata international journal of tax and accounting, 4(4),771-781. https://doi.org/10.52728/ijtc.v4i4.909 abstract: this study aims to analyze the effect of operational costs on operational income and interest rates on non-performingiloans in banking companies on the indonesian stock exchange. ithe population in this study are banking companies on the indonesia stock exchange for 2018 2022 with a totaliof 150 companies and a total sample of 30 companies. ithe sampling technique was purposive sampling. ithe data collection technique documentation is used from financial reports published on the idx's official website, namely www.idx.co.id. ithe analysis used is multiple linear regression analysis with panel data. the results of this research show that operational costs on operational income have a significant positive effect on nonperforming loans, this means that operational costs on operational income have not been able to minimize the level of non-performing loans, thus causing an increase in non-performing loans. while interest rates do not affect non-performing loans, which means that the interest rate position does not influence non-performing loans. keywords: operational costs on operating income (bopo), interest rates, non-performing loans this is an open-access article under the cc-by 4.0 license. introduction banking financial institutions have a big influence with the main role of collecting public funds in the formiof savings, current accounts, and deposits. then it is distributed back to the community in the form of credit (putri et al., 2022). banks provide profits that come from the difference between deposit interest collected from savings and loan interest distributed in the form of credit. therefore, ibanks must strive to place the funds they have in the most profitable form, namely credit (betz & kerner, 2016; mattingly, 2019; ranaldo et al., 2021). credit distribution can create quite large risks that will be faced by banks because large credit distribution can lead to problematic credit. thus, banks need to be careful in managing the funds they have in the form of credit (mattunruang & a., 2023). the https://www.ilomata.org/index.php/ijtc mailto:sulastri@unsri.ac.id https://doi.org/10.52728/ijtc.v4i4.909 the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 772 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc following is data on bank credit performance in credit distribution and growth for the period 2018 2022: table 1 banking credit performance 2018-2022 year banking credit performance credit (rp trillion) growth 2017 4.737,94 8,24% 2018 5.294,88 11,75% 2019 5.616,99 6,08% 2020 5.481,62 2,41% 2021 5.768,58 5,3% 2022 6.387 11,35% source: processed data (2023). based on the table above, the data shows that in 2018 banking credit performance grew by 11.75%. then in 2019, credit decreased by 6.08%, due to the first appearance of the pandemic in some countries. bank credit growth slowed during the covid-19 pandemic, in line with the national economic contraction in 2020 with growth of 2.41%. meanwhile, in 2022 banking credit will experience recovery from the impact of the pandemic, because growth has reached pre-pandemic levels as can be seen in the table. however, the value of bank credit still shows a growing trend in the last two years. this is reflected in the banking credit growth ratio which has increased in 2021 by 5.3% and in 2022 by 11.35%. based on bi regulation number 15 / 2 / pbi / 2013 of 2013, it is stated that banks have the potential to experience risk difficulties if the npl is more than 5% net of the total credit disbursed. if the npl value ratio is more than the set limit of 5%, banking health can be disrupted and must receive special attention from the government (putri et al., 2022). this also shows that banks cannot manage their loans well. high non-performing loans will cause banks to strengthen their capital structure (hamzah, 2018). if customers do not pay their obligations according to the specified time, it will increase problem loans, so that the impact of the bank will suffer losses because it makes profits from credit interest on loan funds (rabbanin et al., 2022). graph 1 development of banking npls 2018 – 2022 source: processed data, (2023). 2018 2019 2020 2021 2022 npl 2.33 2.5 3.06 3.004 2.438 2.33 2.5 3.06 3.004 2.438 0 0.5 1 1.5 2 2.5 3 3.5 p er ce n year npl npl linear (npl) https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 773 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc there are 3 (three) general factors that cause non-performing loans, namely internal factors of the debtor, internal factors of the bank, and external factors of non-banks and debtors. the debtor's internal factors include age, the debtor's character, and the decline of the debtor's business. internal bank factors can include operational costs to operating income (bopo), while external factors for non-banks and debtors are interest rates (barus & erick, 2016). for this research, we analyze operational costs against operating income (bopo) and interest rates. banking in carrying out its activities has expenses for operational costs. the level of efficiency and ability of banks to carry out their operational activities is necessary to maintain bank health. the indicator used by banks is operational costs to operating income (bopo). the level of bopo will affect the risk of problematic credit (soekapdjo et al., 2020). the bopo ratio is used to measure the level of efficiency and ability of a bank to carry out its operational activities. the greater these costs can encourage banks to increase interest rates so that debtors will have difficulty returning funds (rahmani, 2022; silbermayr & minner, 2016). meanwhile, interest rates have an impact on npl movements. increasing loan interest rates is very attractive to banks, because the income received is obtained from loans that have high yields, but on the other hand, high credit interest rates will pose a risk to banks because customers will experience difficulty in paying their obligations, so the risk of bad credit is high. the interest rate in this context is the loan interest rate based on conventional banks. (clichici & colesnicova, 2014) apart from that, research conducted by (wardani et al., 2021a) and (bengawan & ruslim, 2020) obtained results that bopo had a significant positive influence on npl. in contrast, research from (khan et al., 2020) states that it has a significant negative effect on npl. (cahyono et al., 2022) research shows that bopo affects npl. meanwhile, research by (wulandari et al., 2021) and (akbar & a., 2022) shows that bopo does not affect npl. research conducted by (dewanto, 2022), shows that international interest rates have a positive effect on npl. research conducted by (naibaho, 2018) shows that interest rates influence npls, while (laskarsari, 2021) in his research has the results that interest rates do not influence nonperforming loans (npls). signaling theory according to (brigham & houston, 2018), signals are actions taken by company management to provide clues or signals to investors about how management views the company's prospects. signal theory in this case explains how banks should provide signals to financial institution users. a good signal is a signal that can be taken and perceived by the market well and is also not easily imitated by other companies that have poor quality. thus, a bank must also provide a positive signal to its customers and the public so that the public has confidence in the bank regarding the funds stored in the bank (mattunruang & a., 2023). non-performing loans (npl). performing loans is the ratio between the amount of credit given and the level of collectability (problem loans) compared to the total credit given by the bank. credit risk is caused by debtors not being able to repay loans on time (akbar & a., 2022).the npl ratio is used to measure how https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 774 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc much credit risk occurs in banking. the higher the npl ratio, the higher the risk experienced by the bank, and conversely, the lower the npl level, the better the condition of the bank (ozili, 2019). operational costs to operating income (bopo) operating costs to operating income is a ratio that measures operational costs to operational income. operational costs themselves are costs used by banks in carrying out their main business activities, namely labor costs, marketing costs, interest, and other costs that cannot be separated from capital costs which are obligations that must be paid by the bank. the higher the deposit interest rate, the higher the cost of capital, and vice versa. this has an impact on bank income because the main bank profit comes from deposit interest minus loan interest (rosita & musdholifah, 2018). interest rate interest is defined as a fee that must be paid to people who deposit their funds in the bank and that must be paid by customers to the bank (customers who receive loans). apart from that, interest can also be interpreted as remuneration provided by banks to customers who pay or sell their products (kasmir, 2015). the interest rate is a component that determines whether someone will invest or save which will provide benefits for investors who invest their funds. operational costs to operating income (bopo) to non-performing loans the bopo ratio illustrates whether the bank has utilized its production factors well or not. if it is appropriate, it means that the bank can provide credit or loans well because its financial performance is also good. the bopo ratio is used to estimate the level of bank efficiency in terms of its operational activities. the lower the value, the more efficient the bank is in paying operational costs. bank efficiency will influence on bank performance. bopo or efficiency ratio functions to determine the size of banking management's ability to control operational costs relative to operational income (kingu et al., 2017). if the bopo ratio is low, the bank's operational costs will be more efficient. however, on the contrary, there is potential for credit problems if the bank's operational performance or credit does not run efficiently (wardani et al., 2021a). in reality, there is uncertainty related to banking business activities or banking operational activities where losses are likely to occur, causing a reduction in profits that can be obtained by the bank. the results of research conducted by (cahyono et al., 2022), (khan et al., 2020) show that bopo has a positive effect on non-performing loans. based on the description above, the following hypothesis can be formulated: hypothesis 1: operating costs operating income (bopo) has a positive effect on nonperforming loans interest rates on non-performing loans interest is defined as fees that must be paid to people who deposit their funds in banks and fees that must be paid by customers to banks (customers who have credit). apart from that, interest https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 775 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can also be interpreted as remuneration provided by banks to customers who pay or sell their products (kasmir, 2015) the higher the bank interest rate, the higher the npl value will be. this is because when bank interest rates rise, deposit interest rates also indirectly rise. rising deposit interest rates will cause the costs of collecting third-party funds to also increase. if that happens, bank credit interest rates will also increase so that the risk of problematic credit will increase (akbar & a., 2022). the results of research conducted by (dao et al., 2020; dewanto, 2022; zariyawati1 et al., 2021) show that credit interest rates have a positive effect on non-performing loans. based on the results of the description above, the following hypothesis can be concluded: hypothesis 2: credit interest rates have a positive effect on non-performing loans. method the type of data used in this research is quantitative data, sourced from secondary data, namely data originating from financial reports that have been processed by each banking company starting from 2018 2022. data was obtained from sources: the financial services authority and data bank indonesia. this research uses multiple linear regression analysis techniques with panel data and uses eviews 10 software. research data was obtained from purposive sampling results by research criteria. independent (independent) variables are variables that influence or cause the emergence or change in the dependent variable. meanwhile, the dependent variable is a variable that is influenced or is the result of the existence of an independent variable (sartono, 2015). in more detail, the operationalization of the independent and dependent variables in this research is as follows: table 2 operational definition of variables source: data processed, author (2023) variable definition scala indicator operating costs on operating income (bopo) (x1) a ratio that compares the total operational costs and operational income of the bank. ratio bopo = operating costs operating income interest rate (x2) the interest rate reference rate has been set by bank indonesia and has been published to the public. ratio bi rate nonperforming loan (npl) (y) the ratio between the amount of credit given and the level of collectibility (problem loans) compared to the total credit given by the bank. ratio npl= problem loans total credit https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 776 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results and discussions the data used is 30 banking companies with a period of 5 years 2018 – 2022, so the observation data is 150 data. table 3 research descriptive statistics explanation npl bopo interest rate mean 0.489702 1.942555 0.433683 median 0.467607 1.941585 0.434569 maximum 1.959566 2.459181 0.741152 minimum 0.021189 1.667826 0.225309 std. dev. 0.281843 0.115611 0.183904 observations 150 150 150 source: data processing results, eviews (2023) based on table 3 shows the descriptive statistical output of research variables using reviews. the npl variable has an average of 0.49, with a standard deviation of 0.28 which shows that the average npl deviation in banking is low, thus indicating good results because there are no data deviations, a maximum value of 1.96 which means the greatest collectibility level (problem loans). and a minimum value of 0.02 which means the lowest collectability level (problem loans). the bopo variable has an average of 1.94, with a standard deviation of 0.11 which shows that the average bopo deviation in banking is low, thus indicating good results because there are no data deviations, a maximum value of 2.46 which means that the amount of operational costs is greater than the bank's operating income, and a minimum value of 1.66 which means that the amount of operational costs is less than the bank's operating income. the interest rate variable has an average of 0.43, with a standard deviation of 0.18 which shows that the average deviation in banking interest rates is low, thus indicating good results because there are no data deviations a maximum value of interest rate is 0.74, and a minimum value of interest rate is 0.22. table 4 t-test results source: data processing results, eviews (2023) the variable operational costs to operating income (bopo) in table 4 has a coefficient value of 0.700552 and the (t) p-value is 0.0000 < 0.05, so it can be interpreted that operational costs to operational income (bopo) has a significant positive effect on non-performing loans ( npls). the interest rate variable in table 4 has a coefficient value of 0.005645 and a (t) p-value of 0.9363 > 0.05, so it can be interpreted that the interest rate has no significant effect on non-performing loans (npl). variable coefficient std. error t-statistic prob. c 0.315519 0.460084 0.685787 0.4939 bopo 0.700552 0.166622 4.204448 0.0000 sb -0.005645 0.070527 -0.080033 0.9363 https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 777 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of operational costs to operating income (bopo) on non-performing loans (npl) the research results support the first hypothesis which states that operational costs on operational income have a positive effect on non-performing loans. this shows that the panel data output with a random effect model on the operational cost variable on operational income has a coefficient value of0.700552and (t) p-value is 0.0000 < 0.05, meaning that operational costs on operational income have a significant positive effect on non-performing loans. as for value 𝑅2ie 0.455699 which means this variable can influence performing loans only 45.57%, the remaining 54.43% is influenced by other variables not examined in this research such as reputation. banks that can be effective and efficient in carrying out their operations are those that can minimize operational costs by getting the maximum operational income possible. one source of operational income for banking businesses is by distributing credit. if a bank wants to get a large income, of course, one way is to distribute large amounts of credit. disbursing large amounts of credit can result in the possibility that banks will experience the risk of bad credit (suryani et al., 2021). in reality, there is uncertainty related to banking business activities or banking operational activities where losses are likely to occur, causing a reduction in profits that can be obtained by the bank (mattunruang & a., 2023). a higher bopo ratio indicates that the operational costs incurred are not used efficiently. bank inefficiency occurs due to the low quality of management so that supervision and control are not carried out properly which will result in a poor credit management process which can increase npl (wardani et al., 2021b). the results of this research are in line with research conducted by (cahyono et al., 2022; mattunruang & a., 2023; suryani et al., 2021; wardani et al., 2021b) which shows the results that bopo has a positive effect on nonperforming loans. the effect of interest rates on non-performing loans (npl) the research results do not support the second hypothesis which states that interest rates have a positive effect on non-performing loans. this shows that the panel data output with the random effect model on the interest rate variable in table 4 has a coefficient value of 0.005645, and (t) pvalue is 0.9363 > 0.05, so it can be interpreted that interest rates do not affect non-performing loans. as for value 𝑅2 ie 0.455699 which means this variable can influence performing loans only 45.57%, the remaining 54.43% is influenced by other variables not examined in this research, such as the rupiah exchange rate. interest rates have no effect because the influence caused by interest rates does not increase or decrease npl directly. because the decline in npls is not influenced only by reducing interest rates, but rather by handling credit risk management (syahid, 2016). this happens because interest rates can put pressure on customers who borrow funds from banks. after all, with high-interest rates, only customers can borrow and repay at that interest rate. however, demand for bank credit will decrease because customers prefer to borrow from other than banks such as cooperatives, and in the end, non-performing loans will decrease. this shows that increasing interest rates will limit the rate of non-performing loans at commercial banks in indonesia (zariyawat, 2021) the results https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 778 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of this research are in line with research conducted by (dao et al., 2020; zariyawati1 et al., 2021) showing the results that interest rates do not affect non-performing loans. conclusion operational costs on operational income have a significant positive effect on non-performing loans in banking companies listed on the indonesia stock exchange. interest rates have no effect on non-performing loans in banking companies listed on the indonesia stock exchange. the practical implications in this research can cover three aspects, namely practical implications for customers, debtors and banks. for customers, always be careful when saving funds, investing and making credit loans. based on this research, customers can conduct an analysis of operational cost variables on operational income and interest rates. in looking at which banks have the highest nonperforming credit scores, npls affect the bank's health and operational activities in the future. so that customers have a greater sense of security when making transactions at the bank. for debtors, debtors need to have the ability to analyze the extent of the bank's ability to provide loans. therefore, debtors must be able to analyze the health of the bank. healthy banks tend to be more active in providing credit because they have a good credit portfolio (low npl). for banks, banks must be able to maintain the value of non-performing loans which in this research can be reduced by analyzing loan quality, increasing capital and reducing the number of high-risk assets and reducing operational expenses as efficiently as possible. suggestion a. the research variables are limited, then other determinant variables can be studied such as the rupiah exchange rate, return on assets, and gross domestic product. b. the period for this research was only 5 years so future researchers can extend the research period to a period of 8 to 10 years. c. the research data used is the annual report of each sample company for the 2018-2022 period. for a more in-depth search, it is best to use the most recent year to get more accurate and representative results. d. the use of samples is not only limited to national government and private banks, it would be better to use all banks in indonesia. https://www.ilomata.org/index.php/ijtc the influence of operational costs on operating income and interest rates on nonperforming loans in banking companies listed on the indonesian stock exchange safitri, sulastri, and andriana 779 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc references 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(2021b). analisis faktor – faktor yang mempengaruhi non performing loan (npl) di indonesia pada bank umum konvesnsional yang terdaftar di bi tahun 2019-2020. diponegoro journal of management, 10(3), 2337–3792. wulandari, b., khetrin, seviyani, k., operasional, b., operasional, p., suryani, i., africa, l., & a. (2021). pengaruh loan to deposit ratio (ldr. jurnal ecopreneur, 14, 202–209. zariyawati1, m., a., h., m, t., mujb, k., & a, m. (2021). determinant factors of non-performing loan among non-bank financial intermediaries in malaysia. international journal of business and management, 16(8). https://doi.org/10.5539/ijbm.v16n8p48 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 322-337 322 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesia trinandari prasetya nugrahanti¹, shanti lysandra² ¹sekolah pascasarjana abfi perbanas institute, indonesia ²sekolah pascasarjana universitas pancasila, indonesia correspondent: trinandari@perbanas.id1 received : january 2, 2024 accepted : march 30, 2024 published : april 30, 2024 citation: nugrahanti, t, p., lysandra s. (2024). environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesia. ilomata international journal of tax and accounting, 5(2), 322-337. https://doi.org/10.61194/ijtc.v5i2.1024 abstract: by employing environmental audits, businesses can meticulously assess environmental risks, fortify sustainability practices, and foster enhanced stakeholder trust. concurrently, the adoption of csr practices emerges as a driving force behind improved financial performance, operational efficiency, and long-term sustainability. this study investigates the profound impact of environmental audit and corporate social responsibility (csr) practices on the financial performance of small and medium manufacturing companies in indonesia. this research uses quantitative methods with primary data obtained through a questionnaire. the sample selection from the population of manufacturing companies in indonesia was carried out purposefully. the data that has been collected will be analyzed by regression to be able to answer existing hypotheses. the results showed that environmental audits and csr can have a positive and significant effect on their financial performance. this means that financial performance and crs will increase along with improvements in financial performance. these findings carry substantial implications for the manufacturing sector, advocating for responsible business practices and making theoretical strides by emphasizing the integration of sustainability into financial theories and models, specifically within the context of indonesia's industrial landscape. keywords: environmental audit, financial performance, csr this is an open access article under the cc-by 4.0 license introduction indonesia's manufacturing industry is expected to drive the country's economic growth to achieve the targeted average growth of 6% per year in the next five years (saptioratri budiono et al., 2021). according to the report published by statista in 2023, the manufacturing sector in indonesia has played a crucial role in the country's economic and social development. in recent decades, the government has given high priority to this sector to harness its potential for advancing industrialization. today, the manufacturing sector stands as the largest contributor to indonesia's gdp and plays a dominant role in the country's exports. key industries such as food and https://www.ilomata.org/index.php/ijtc mailto:trinandari@perbanas.id https://doi.org/10.61194/ijtc.v5i2.1024 environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 323 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc beverages, coal and refined petroleum, chemicals, transportation, as well as metals and electronics, are the primary contributors to indonesia's gdp within the manufacturing sector. moreover, this sector has also generated a substantial number of job opportunities. with a vision to become one of the world's largest economies by 2030, indonesia's manufacturing sector offers significant opportunities and potential for both the country and its international partners. figure 1. gdp share of indonesia in 2022 by sector source: statista, 2023 this research highlights the financial performance of manufacturing companies in indonesia in relation to the environmental audits and csr practices they carry out. environmental audit helps companies identify potential environmental risks and opportunities that can impact their operations and bottom line. by conducting an audit, companies can assess their environmental performance and identify areas where they can improve their sustainability practices. environmental audit also helps companies demonstrate their commitment to sustainability and environmental responsibility. this can enhance stakeholder trust and reputation, and attract socially responsible investors and customer (meiwanto doktoralina et al., 2018) s. environmental audit is aligned with sustainability reporting, which is becoming increasingly important for companies. sustainability reporting helps companies communicate their environmental, social, and https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 324 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc governance (esg) performance to stakeholders, and environmental audit can provide the data and information needed for such reporting (jati et al., 2023; nareswari et al., 2022). on the other hand, csr practices are also important in discussing the performance of manufacturing companies. there is evidence that csr practices can positively affect a company's financial performance. for example, a study found that csr not only improves a firm's social value and reputation but also improves profitability and performance (cherian et al., 2019). this research aims to bridge existing gaps in the literature by providing a comprehensive exploration of the financial implications of environmental audit and csr practices within the unique context of small and medium manufacturing companies in indonesia. the significance of this study lies in its potential contributions to both academia and industry. by shedding light on the financial performance outcomes associated with environmental audit and csr practices, the research seeks to inform stakeholders, policymakers, and industry players about the tangible benefits of sustainable business practices. furthermore, the study aims to contribute to the theoretical landscape by emphasizing the integration of sustainability considerations into financial models and theories specific to the indonesian manufacturing sector. this research not only aligns with the current trajectory of indonesia's economic ambitions but also addresses a critical gap in the literature by examining the nuanced interplay between environmental responsibility, csr practices, and financial performance in small and medium manufacturing companies within the indonesian context. thus, this research was conducted to uncover and answer the question "what is the impact of environmental audit and csr practices on the financial performance of manufacturing companies in indonesia?”. it is hoped that this research can provide material for stakeholders to consider these two aspects in an effort to develop the performance of the manufacturing sector in indonesia. environmental audit environmental audit is an independent evaluation of policy and principles, systems, procedures, practices, and performance, and other elements of a business relating to the environment. it aims at verification and validation to ensure that various environmental laws are complied with and adequate care has been taken toward environmental protection and preservation (pahuja, 2013). several studies have explored the relationship between environmental audit and company performance. one study found that environmental auditing could improve company performance, and this effect was more significant in state-owned and private companies than in foreign and other companies. the study also found that environmental auditing had a more significant impact on companies with low technical levels than high technical levels (liu, 2023). another study explored the moderating role of audit quality in the relationship between environmental, social, and governance (esg) factors and corporate financial performance. the study found that audit quality played a moderating role in this relationship (zahid et al., 2022). from the explanation above, a hypothesis can be built that will be used in this research as follows: h1: environmental audit have a significant impact on financial performance of manufacturing industry in indonesia. https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 325 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate social responsibility the term corporate social responsibility (csr) refers to a company's obligation to its stakeholders, the environment, and the larger community. it can be used as an ideal, a research program, a theory, or even a corporate practice. it is a flexible idea that has developed in response to new situations and shifting social norms. the idea first surfaced in the 1950s as a business-for-society ideology that included ideas of corporate philanthropy. then, as a result of social rights movements and legislative changes, it grew in the 1960s to include greater demands on businesses with regard to larger social problems (such as the environment and human rights). the relationship between corporate social responsibility (csr) and firm performance has been a topic of debate in academic literature. csr can have a positive impact on a company's financial performance (coelho et al., 2019; nasir et al., 2023). this impact may depend on the life cycle stage of the firm and its corporate governance structure (jihwan yeon, 2021). however, some studies have found inconsistent results and argue that csr has no effect on financial performance (sameer, 2021). from the discussion above, the following research hypothesis can be drawn: h2: csr practices have a significant impact on the financial performance of manufacturing companies in indonesia. financial performance of small and medium manufacturing companies in indonesia according to (fahmi, 2014), financial performance analysis is used to determine which organization has correctly and correctly followed financial implementation guidelines. from the definition, it is clear that financial performance is something that the management of the firm has accomplished, using financial analysis techniques as a foundation for understanding and assessing the organization's degree of success (tanasal). the manufacturing industry is an important sector in indonesia's economy, and its financial performance can have a significant impact on the country's long-term sustainability and ability to create positive social and environmental results (meiryani et al., 2023). h3: environmental audit and csr practices have a significant impact on the financial performance of manufacturing companies in indonesia method the research approach for this study will be quantitative in nature, as it aims to examine the relationship between environmental audit and csr practices and the financial performance of manufacturing companies in indonesia. the sample selection from the population of manufacturing companies in indonesia was carried out purposefully. purposive sampling is a nonprobability sampling technique that involves selecting participants based on specific criteria, such https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 326 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as their relevance to the research question or their availability (maryani). several criteria for selecting samples in this research are as follows: 1. manufacturing companies are small and medium sized companies. 2. manufacturing companies that have implemented environmental audit practices. 3. manufacturing companies that comply with indonesian regulations on csr initiatives. 4. manufacturing companies that prioritize csr initiatives to avoid legal and financial risks. according to (jenkins & quintana-ascencio, 2020), the recommended sample size for regression analysis is greater than or equal to 25. one common rule of thumb is to have at least 10 observations per independent variable, which means that in this study at least 20 samples were studied. going beyond these criteria, this research selected 30 samples as respondents from 30 small and medium enterprises in the manufacturing sector from several cities in indonesia such as sukabumi, bekasi, karawang and purwakarta. the primary data will be collected through structured survey questionnaires that will be distributed to manufacturing companies in indonesia. the questionnaires will include both closed-ended and likert-scale questions, focusing on the companies' environmental audit practices, csr practices, and financial performance metrics. secondary data will be collected through the analysis of annual reports, sustainability reports, and financial statements of the selected manufacturing companies. this data will help validate the information obtained through the survey and provide additional context (sajid et al., 2019). the data that has been collected will be analyzed by regression to be able to answer existing hypotheses using a supporting application in the form of spss. before the questionnaire is distributed to respondents via online networks or in person, testing is first carried out as an initial stage in an effort to ensure the accuracy of the questionnaire used, namely by conducting a pretest. it is important to pretest the questions to ensure that they are clear and unambiguous (boateng et al., 2018). the second stage is measuring classical assumptions which consist of the normality test, heteroscedasticity test, multicollinearity test, and autocorrelation test. assumption testing is an important step in statistical analysis that is often overlooked in research. meeting the assumptions of statistical tests is crucial to reporting valid results and assuring the scientific community of the accuracy of the findings (patino & ferreira, 2018). the next stage is testing the coefficient of determination and ends with hypothesis testing. result and discussion validity test result according to (ghozali, 2013b), validity and reliability tests are important to ensure the quality of data. in order to determine the validity of a questionnaire, researchers can use the pearson product moment formula with the help of spss (statistical product and service solution). a questionnaire https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 327 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is considered valid if it meets the following criteria: (1) results r count > r table, or (2) significance value (p) <0.05 (tanjung et al., 2020). table 1 below shows the significance values for all questionnaire items used. all items have a value below 0.05 so that the questionnaire used is valid and can be used to measure the construct. table 1. validity test item questionnaire sig. value ea.1 0,000 ea.2 0,000 ea.3 0,000 csr.1 0,000 csr.2 0,000 csr.3 0,000 fp.1 0,000 fp.2 0,002 fp.3 0,002 source: data analysis result, 2023 reliability test result reliability is defined as the extent to which test scores are free from measurement error (ghozali, 2013a). in order to determine the reliability of an instrument, there are various types of reliability that can be measured, including test-retest reliability, alternate forms reliability, internal consistency reliability, and inter-rater reliability (hasnida & ghazali, 2016). in (ghozali, 2013b), internal consistency reliability was used to measure the reliability of the instrument, as the study involved only one version of the instrument administered once to all respondents. the cronbach's alpha coefficient was used to measure internal consistency reliability, and a variable is considered reliable if it gives a cronbach's alpha value greater than 0.6. table 2. reliability test result cronbach's alpha cronabach’s alpha based on standardized items n of items 0,945 0,947 9 source: data analysis result, 2023 according to table 2, the chronbach's alpha value of the questionnaire used in this study meets the required criteria, namely >0.60 (ca=0.945). thus, the questionnaire is appropriate and can be used because it meets the required validity and reliability rules. normality test result after the questionnaire has good validity and reliability. next is the classical assumption test which consists of normality, heteroscedasticity, multicollinearity and autocorrelation tests. the normality https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 328 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc test results with the spss program are presented in table.3, which shows whether the sample data originates from populations that are normally distributed or not. the normality test aims to test whether in the regression model, confounding or residual variables have a normal distribution. if this assumption is violated, then the statistical test becomes invalid for a small sample size ((aditi et al., 2019; ghasemi & zahediasl, 2012; tanjung et al., 2020). table 3. normality test result kolmogorov smirnov shapiro-wilk statistics df sig statistics df sig ea 0,285 30 0,215 0,794 30 0,331 csr 0,339 30 0,192 0,794 30 0,425 fp 0,334 30 0,293 0,804 30 0,291 source: data analysis result, 2023 a p-value less than or equal to 0.05 indicates that the null hypothesis can be rejected, and the data do not follow a normal distribution. on the other hand, a p-value greater than 0.05 means that there is not enough evidence to reject the null hypothesis, and the data are consistent with a normal distribution. table 3. table 3 shows how the data obtained is normally distributed with a p value >0.05. heteroscedasticity test result according to (ghozali, 2013a), the heteroscedasticity test is used to evaluate whether there is any variance similarity in the regression model, which is the residual from one observation to another. if the variance of residual from one observation to another is unchanged, it is homoscedasticity, but if it is changed, it is heteroscedasticity. the test is carried out to determine whether there are any deviations from the classical assumption of heteroscedasticity, namely the variance in residual variance for all observations in the regression model. according to ((ghozali, 2013a), the result of the heteroscedasticity test can be seen in the spss output in the p value table (on the sig. column) for each independent variable, where if the p-value is smaller than the significance level (usually 0.05), then the null hypothesis of homoscedasticity is rejected, and the alternative hypothesis of heteroscedasticity is accepted. table 4 below illustrates how the p value for each independent variable in this research, namely environmental audit and csr practices, is >0.05 so that the existing data is free from heteroscedasticity and the analysis can continue. table 4. heteroscedasticity test result model sig. 1 ea 0,200 csr 0,205 source: data analysis result, 2023 https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 329 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multicollinearity test result according to (ghozali, 2013b), the multicollinearity test can be conducted by analyzing the correlation matrix of independent variables or by calculating tolerance and vif (variance inflation factor) values through spss. the values used to indicate the presence of symptoms of multicollinearity are the vif value < 10.00 and the tolerance value > 0.10 (ghozali, 2013b). table 5 shows that the data is free from multicollinearity with a tolerance value for each independent variable of 0.483 and a vif value of 2.069. table 5. multicollinearity test result model collinearity statistics tolerance vif 1 ea 0,483 2,069 csr 0,483 2,069 source: data analysis result, 2023 autocorrelation test result the durbin-watson test is one of the most frequently used statistical tests for detecting autocorrelation (fadila et al., 2022; uyanto, 2020). if du < d < 4 – du means there is no positive or negative autocorrelation and the decision is not rejected (ghozali, 2013b). table 6 below shows the watson durbin value from the model, which is 2.240. this value meets the criteria with a du value of 1.650 for a sample size of 30. 2,240 is a value that lies between 1,650 (du) and 2,350 (4du). table 6. autocorrelation test result model durbin watson value 1 2,240 source: data analysis result, 2023 coefficient determination the coefficient of determination (r2) is used to describe how much the dependent variable variation can be explained by the independent variable (nur achmad & setyo witiastuti, 2018). the coefficient of determination is between 0 and 1, where 0 indicates that the model shows that prices are not a function of dependency on the index, and 1 indicates a 100% price correlation and is thus a reliable model for future forecasts. the value of r2 which is large or close to one means that the independent variable is able to provide almost all the information needed in explaining the change of the dependent variable (nur achmad & setyo witiastuti, 2018). table 7. coefficient determination model r r square https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 330 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1 0,765 0,627 source: data analysis result, 2023 based on table 7 above, it can be seen that the r square value listed is 0.627, which means that this model is able to explain the dependent variable, namely financial performance, by 62.7% while the remaining 37.3% is explained by other variables outside the research. this figure is included in the moderate category according to the explanation (hair & alamer, 2022) because the value is close to 0.5. hypothesis test result table 8. hypothesis test result model unstandardi zed b coefficients std. error standardized coefficient beta t sig 1 (constant) 1,333 0,460 2,896 0,007 ea 0,328 0,249 0,302 1,315 0,002 csr 0,475 0,212 0,299 1,300 0,000 source: data analysis result, 2023 finally we arrive at the final stage of data analysis, namely hypothesis testing. the first hypothesis (h1) and second hypothesis (h2) can be answered with the information in table 8 above, while for the third hypothesis (h3) the answer is listed in table 9 below with reference to the p-value which must be smaller than 0.05 so that the hypothesis can be accepted. table 9. hypothesis test result model sum of squares df mean square f sig 1 regression 5,640 2 2,820 6,978 0,007 residual 12,527 27 0,464 total 18,167 29 source: data analysis result, 2023 based on the information in table 8, it can be concluded that both hypothesis 1 (h1) and hypothesis (2) can be accepted on the basis that the p value of both is below 0.05, namely 0.000 and 0.002. meanwhile, the third hypothesis (3) can also be declared accepted on the basis of a p value of no more than 0.05, namely 0.007. thus, there is a significant influence, both partially and simultaneously, between environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesia. regression equation from the regression equation formed above, several information can be drawn, namely as follows: https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 331 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc y=a+bx1+cx2+e y=1,33+(0,475)x1+(0,328)x2+e 1) an increase of one unit in environmental audit (x1) will contribute to an increase of 0.475 (47.5%) units to financial performance. 2) an increase of one unit in environmental audit (x1) will contribute to an increase of 0.328 (32,8%) units to financial performance. impact of environmental audit on financial performance of small and medium manufacturing companies the results of tests carried out on 30 samples of small and medium manufacturing companies in indonesia show that environmental audits can have a positive and significant effect on their financial performance. this means that financial performance will increase along with improvements in financial performance. these results support and are in line with several previous studies which explored how environmental aspects influence financial performance. a systematic review of barriers in adoption of environmental management accounting in chinese smes for sustainable performance concludes that strict legislation and the availability of flexible financing options for smes can promote the adoption of ema by smes (javed et al., 2022). besides that, a study on the effects of energy management practices on environmental performance of indian smalland medium-sized enterprises found that among the manufacturing sme firms investigated, emps positively influence the energy audit of the firm (patel et al., 2022) s. an analysis of extreme tail dependency in the european manufacturing sector investigated the impact of environmental performance on financial performance. additionally, the study argued that environmental performance heterogeneously affects financial performance, depending on the industry and country (tzouvanas et al., 2020). this influence can occur in several ways that have been analyzed by previous studies. first, improved esg performance, environmental, social, and governance (esg) factors can impact corporate financial performance. a study found that audit quality can moderate the relationship between esg factors and corporate financial performance (zahid et al., 2022). therefore, an environmental audit can help improve esg performance, which can lead to better financial performance. second, lower probability of issuing a modified audit opinion, a company's esg performance can affect the issuance of an audit opinion. a better esg performance can lead to a lower probability of the auditor issuing a modified audit opinion, which can improve the quality of financial reporting (nugrahanti & jahja, 2018; wang et al., 2023). third, consideration of environmental regulations, the audit of financial statements requires the auditor to consider environmental regulations as part of the audit, and in particular environmental issues and matters if they have a material effect on the financial statements. therefore, an environmental audit can help ensure compliance with environmental regulations, which can avoid potential financial penalties. lastly, assessment of future events caused by environmental factors, an audit approach that considers environmental matters in relation to financial statements can assess the reliability of https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 332 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reporting information about future events caused by environmental factors. this can help improve the accuracy of financial reporting and avoid potential financial losses (eremeeva, 2020) impact of csr practices on financial performance of small and medium manufacturing companies the research results show that corporate social responsibility practices carried out by small and medium manufacturing companies in indonesia have a positive and significant impact on their financial performance. this finding is in line with several previous studies such as those conducted by (kurniawati & fauzi, 2021; meiryani et al., 2023; yulianty & nugrahanti, 2022) adopting csr initiatives, such as sustainable practices or responsible supply chain management, can improve a company's operational efficiency, reduce costs, and increase productivity. this can improve profitability and financial performance, which are critical in indonesia's highly competitive manufacturing sector (meiryani et al., 2023). another study explored empirical data on the orientation of csr practices to smes in solo city, indonesia, and found that csr practices related to employees, market, and environment have a positive impact on the company's financial performance (kurniawati & fauzi, 2021). prioritizing csr can help companies meet regulatory requirements and avoid legal and financial risks. adopting csr initiatives, such as sustainable practices or responsible supply chain management, can improve a company's operational efficiency, reduce costs, and increase productivity, which can ultimately contribute to improved financial performance and long-term sustainability (meiryani et al., 2023). the relationship between corporate social responsibility (csr) practices and financial performance is a topic of debate in the academic literature. some studies suggest that csr contributes to a better image and greater consumer satisfaction, positively impacting financial performance (coelho et al., 2019). however, other studies have found that csr does not directly lead to shortterm profitability financial performance (profitability, sales, roa, roi, ros, and total assets) through enhanced corporate reputation and brand equity. instead, csr improves the reputation of a firm contributing to increased stock returns and long-term financial performance (meier, 2018). the mechanisms through which csr practices can impact financial performance include enhanced firm reputation, increased innovation capabilities, customer loyalty, and customer satisfaction (meier, 2018). some studies have also found that csr initiatives can enhance employee organizational commitment and organizational performance, and most workers like to work and can attract more potential employees for an organization that has an excellent reputation for being socially responsible (sameer, 2021). industry implications the research findings that environmental audits and corporate social responsibility (csr) practices have a positive and significant impact on the financial performance of small and medium manufacturing companies in indonesia carry significant industry implications. these companies https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 333 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can gain a competitive edge by emphasizing these practices, attracting environmentally conscious consumers, and opening up new market segments. ensuring compliance with environmental and social regulations becomes easier, reducing the risk of fines and legal issues. additionally, implementing strong environmental and social responsibility measures enables better risk mitigation, access to capital, brand enhancement, cost reduction, and the development of a sustainable supply chain. it also enhances employee engagement and attracts top talent. overall, these findings highlight the potential for long-term sustainability and prosperity in the manufacturing sector in indonesia through the adoption of responsible business practices. theoretical contributions the research findings, which highlight the positive and significant impact of environmental audits and corporate social responsibility (csr) practices on the financial performance of small and medium manufacturing companies in indonesia, make a noteworthy theoretical contribution to the fields of sustainability and corporate governance. these results expand our understanding of the relationship between sustainable business practices and financial outcomes, particularly within the unique context of smaller enterprises operating in a developing economy. these findings underscore the necessity of integrating sustainability considerations into financial theories and models. they challenge the traditional separation of environmental and social responsibility from financial performance evaluation, emphasizing the need for a more holistic approach to business analysis. the theoretical implications of this research align with the resourcebased view (rbv) theory, suggesting that sustainability practices can be viewed as valuable and rare resources for firms. this extends our comprehension of how these resources can contribute to a firm's competitive advantage and ultimately influence its financial performance. furthermore, the research supports stakeholder theory by demonstrating that a firm's responsiveness to the demands and expectations of various stakeholders, including customers, regulators, and the environment, can lead to enhanced financial results. this highlights the importance of considering a broader set of stakeholders in strategic decision-making processes. from an institutional theory perspective, the study sheds light on how institutional pressures and norms related to environmental and social responsibility can shape the behavior of small and medium manufacturing companies in indonesia. this contributes to our understanding of how institutions influence corporate practices and strategic decision-making.additionally, the research provides valuable insights into sustainability and csr practices within the context of an emerging market. it offers a deeper understanding of the dynamics and challenges specific to such economies, contributing to the broader body of knowledge on sustainable business practices in diverse global settings. this research also has limitation that can be used as material for future research. this research uses a sample of 30 small and medium businesses, while the number of manufacturing companies in indonesia is very large and at various different levels. future research can be directed to target more samples with different categories, such as large-scale and multinational companies. thus, it is believed that the research results can show more interesting and broader results, especially in terms of research implications for the indonesian economy in general. https://www.ilomata.org/index.php/ijtc environmental audit and csr practices on the financial performance of small and medium manufacturing companies in indonesi nugrahanti and lysandra 334 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion this comprehensive study delves into the nuanced impact of environmental audits and corporate social responsibility (csr) practices on the financial performance of small and medium manufacturing companies situated in indonesia. the examination of each variable in isolation reveals a noteworthy impact on financial performance. environmental audits, when analyzed independently, exhibit a capacity to positively influence financial outcomes. similarly, isolated scrutiny of csr practices reveals a distinct positive effect on financial performance. notably, the research establishes that these influences persist even when both environmental audits and csr practices are concurrently in play, emphasizing the multifaceted nature of their impact. the research employs a meticulous approach to assess the combined effect of environmental audits and csr practices on financial performance. the findings of this research bring to light that these two variables, when considered individually (partially) or collectively (simultaneously), wield a discernible influence on the financial performance of the targeted companies. the analysis reveals a moderate, yet significant, influence, as elucidated by the existing coefficient of determination value. this value underscores the shared variance between the considered variables and financial performance, providing valuable insights into the comprehensiveness of their impact. in essence, the research goes beyond a mere acknowledgment of the influence of environmental audits and csr practices on financial performance by meticulously examining their partial and simultaneous effects. the findings not only affirm their individual contributions but also shed light on the nuanced interplay when these variables coalesce. the moderate influence, as evidenced by the coefficient of determination, serves as a quantitative testament to the comprehensiveness of their impact on the financial dynamics of small and medium manufacturing companies in the indonesian context. reference aditi, b., hafizah, & muda, i. 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(2023). how does a company’s esg performance affect the issuance of an audit opinion? the moderating role of auditor experience. international journal of environmental research and public health, 20(5). https://doi.org/10.3390/ijerph20053878 yulianty, r., & nugrahanti, t. p. (2022). pengaruh sustainability reporting terhadap nilai perusahaan dengan kinerja keuangan sebagai variabel intervening. zahid, r. m. a., khan, m. k., anwar, w., & maqsood, u. s. (2022). the role of audit quality in the esg-corporate financial performance nexus: empirical evidence from western european companies. borsa istanbul review, 22, 200– 212. https://doi.org/10.1016/j.bir.2022.08.011 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1 january 2025 page no. 60 -74 60 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax impact analysis in the telecommunications industry among southern african countries queen mpofu1, odette swart2, tariro masunda3 12university of south africa, south africa 3postal and telecommunications regulatory authority of zimbabwe, zimbabwe corresponding author: mpofuq@unisa.ac.za 1 received : october 25, 2024 accepted : january 17, 2025 published : january 31, 2025 citation: mpofu, q., swart, o., & masunda, t. (2025). tax impact analysis in the telecommunications industry among southern african countries. ilomata international journal of tax & accounting, 6(1), 60 – 74. https://doi.org/10.61194/ijtc.v6i1.1471 abstract: developing countries apply numerous sectorspecific taxes to the telecommunications industry. this paper analyses the impact of multiple taxes on the telecommunications industry’s performance among southern african countries. the telecommunications industry in southern african countries faces a significant tax burden due to numerous sector-specific taxes. these taxes vary from country to country and present a critical issue. the paper contributes by offering an in-depth discussion of the impact of multiple taxes on telecom industry performance, a topic that has received limited attention in existing literature. it assesses the tax policies comprehensively and proposes practical recommendations for regulatory authorities to navigate the associated challenges effectively. previous researchers have not adequately addressed this issue due to the complexity and variability of tax regimes across different countries. a qualitative systematic literature review approach was utilized to establish the impact of multiple taxes on the telecoms in the southern african region. the paper found that multiple taxes significantly increase costs, reduce investments, and slow down the expansion of telecom companies. multiple taxes present substantial challenges for the telecoms industry in southern africa, affecting costs, investments and consumer prices. the paper recommends tax incentives and regulatory stability to minimize these adverse effects, aiming to foster a more favorable environment for telecom companies to thrive and contribute to economic growth. keywords: multiple taxes. tax burden, telecoms industry, tax policies, southern african countries this is an open access article under the cc-by 4.0 license introduction the telecom industry is a cornerstone of economic development, playing a critical role in connecting communities, fostering innovation, and driving growth across various sectors (jung, 2022); (alex ezeigweneme et al., 2024a) therefore, digitization has been identified as a key driver of productivity and economic development, with the mass adoption of telecommunication networks and high-speed internet connectivity undoubtedly lying at the core of the digital revolution (jung & melguizo, 2022). the fact that a third of the world population still lags behind technological use, policymakers, especially in developing countries, are prioritizing the development and launching of suitable frameworks and national digital agendas to spur the https://www.ilomata.org/index.php/ijtc mailto:mpofuq@unisa.ac.za https://doi.org/10.61194/ijtc.v6i1.1471 tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 61 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc development and adoption of digital technologies by consumers, enterprises, and governments, thus facilitating closing the digital divide and accelerating the economic impact of digitization. nevertheless, as the market penetration rate for customers is still relatively low, it has a significant potential to grow. in 2017, the average percentage in africa was over 45 percent, but in other developing nations, it was over 60 ([gsma], 2018) according to (sawadogo, 2022), southern africa's telecoms sector has also experienced remarkable growth over the past two decades, participating in regional economic development and market efficiency. regulatory reforms, technological advancements, and an increasing demand for digital services have driven this. as nations within this region continue to embrace digital transformation, the demand for robust telecom infrastructure and services has surged (adewara et al., 2023). the expansion of mobile networks, the proliferation of internet access, and the introduction of innovative products and services have all contributed to the sector's success. resultantly, the region's governments have recognized the strategic importance of telecoms, not only as a key enabler of socio-economic development but also as a significant source of revenue oladele (2024). however, a complex and burdensome tax environment has increasingly hampered the industry's potential to contribute to sustainable development. the imposition of multiple taxes on telecoms operators, ranging from import duties, consumer taxes, corporate and employment taxes, regulatory fees, industry-specific levies, and excise taxes, presents significant challenges that could undermine the sector's ability to fulfill its role as a driver of economic progress (slemrod, 2019); (tuerck et al., 2007) the southern african development community (sadc) is a regional economic community comprising 16 member states: angola, botswana, comoros, democratic republic of congo, eswatini, lesotho, madagascar, malawi, mauritius, mozambique, namibia, seychelles, south africa, united republic of tanzania, zambia, and zimbabwe. however, this study will concentrate on five countries (zimbabwe, zambia, mozambique, botswana, and south africa). the justification for using a sample of these five countries is the need for a representative study with practical considerations, ensuring the research is impactful and feasible. much research has been done on how taxes affect the telecom sector, especially in developing nations. numerous scholarly investigations have highlighted the significance of a steady and foreseeable fiscal landscape in stimulating investment and inventiveness inside the industry, matheson & petit (2021). one report from the (gsma, 2015)for example, highlights how tax rates that are too high or too variable might deter investment, resulting in inferior network coverage, higher consumer pricing, and slower uptake of new technologies. the empirical study by matheson & petit (2017) which demonstrates a negative association between high taxes and the uptake of telecoms in developing nations, lends credence to this viewpoint. scholars have also examined the difficulties that the various forms of taxation in southern africa present to the region's telecoms sector. according to (ndung’u, 2019) analysis of the effects of taxes on mobile operators in sub-saharan africa shows that the region's operators face a disproportionately high tax burden due to various levies that surpass those imposed on other companies. researchers believe that a tax climate like this might discourage investment in vital https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 62 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc infrastructure, restrict the introduction of new services, and ultimately impede the digital transformation of the area (sebele-mpofu et al., 2021) in addition, the imposition of various taxes has been a focal point of discussion and debate, potentially hindering the industry's development, matheson & petit (2021). multiple taxation in the telecommunication sector is a topical issue and is still under-researched. this research seeks to analyze and investigate the tax burden and implications of various taxations in the telecoms industry in southern african countries. the goal is to evaluate the taxation policies on the performance and sustainability of the telecoms sector in the identified countries and develop potential solutions. the article further contributes to the practical aspect of the incidence of the tax burden in the sector by offering a valuable examination of the consequences of the existing structure and model of taxes as they relate to the telecommunication industry, and this can support policymakers in appraising their policies to enhance sector performance in the long term. types of taxes imposed on the telecoms industry many taxes, fees, and levies characterize the fiscal environment in which the telecom industry operates. these include but are not limited to, corporate income tax, pay as you earn (paye), value-added tax (vat), sales tax, excise duties, import duties as well as sector-specific charges, which include spectrum fees, numbering fees, initial license fees and in some jurisdictions universal service fees alm (2021). this results from the highly fragmented state of the telecoms sectors, which is caused by the disparate national tax and regulatory regimes. the findings of faccio & zingales (2017) state that the management of the telecoms industry comprises fees collected by the national telecommunication regulatory agency, in addition to regular and unique taxes managed by the ministry of finance (mof). the two entities might even compete with one another when it comes to taxing mobile network operators (mnos) activities. furthermore, the "digital divide" is lessened by the regulatory agency's (ra) independence, yet its complete depoliticisation negatively impacts the ra's ability to successfully regulate and create information infrastructure. as a result, operators in this industry face complexity and a tax burden due to the range of specific taxes and regulatory fees levied by the telecoms regulatory authority as well as the ministry of finance (jung, 2022). while taxes and regulatory fees are intended to generate public revenue and regulate the industry, their cumulative effect has raised concerns among industry players, policymakers, and analysts about their potential to stifle investment, reduce profitability, and ultimately slow the sector's growth. moreover, the complexity and variability of tax regimes across southern african countries add another challenge. mobile network operators (mnos) must navigate different market tax laws and compliance requirements (michael, 2014); (kgonare, 2017). https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 63 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1: taxes levied on telecommunication companies in african countries source: author's compilation according to matheson & petit (2017), developing country governments impose relatively heavy tax burdens on telecom companies, usually among their largest taxpayers. in affirmation, the government tends to view the sector as a booming sector, and mobile phones are especially a lucrative sub-sector that is easy to tax due to the increasing turnover of transactions and the formal nature of such transactions by both formal and informal enterprises. literature reveals that telecom companies are subject not only to standard income, consumption, and trade taxes but also to a variety of sector-specific taxes such as corporate income tax (cit) or vat surcharges, service and handset excises, and elevated customs charges on capital equipment. in addition, there may also be substantial regulatory charges, such as operator license and spectrum fees, number fees, and universal services fund (matheson & petit (2021), anon (2018) sector-specific taxes on telecoms average approximately 30 percent of tax payments from the sector (gsma 2019), but in some countries, they account for more than 50 percent. altogether, taxes and regulatory charges on the telecom sector can yield more than one percent of the gross domestic product (gdp). matheson & petit (2017) adduce three existing primary reasons why governments in developing countries pursue the telecoms industry for sector-specific taxes. first, there is a tremendous desire for telecom services, fuelling sector expansion and revenue growth. furthermore, economies of scale and the restricted quantity of spectrum licenses in each market restrict competition by increasing the possibility that mobile phone companies will make earnings or "rent." following that, authorities in emerging economies typically depend on revenue taxes on big, formal-sector companies (like financial institutions and telecom providers) and consumption taxes like excise duties or vat. this is because these nations typically have poor tax systems. previous studies on the taxation of the telecommunication sector by (jung and katz, 2023) mainly focused on indirect taxation, such as vat, excise taxes, and unique mobile network taxes, such as fees or surtaxs on smss, sim cards, and incoming international calls. however, in studying the tax burden of multiple taxes on the telecommunication sector, this study considers all direct and indirect taxes a firm must pay to operate its mobile network license. these include direct taxation such as cit and some indirect taxes, which unambiguously increase the production cost and service provision of mobile phone services. consequently, some telecom companies do not consider vat, and the final consumer bears some expenses collected by the firm. however, the choice remains subjective given the potential incidence of any tax on the consumer price. therefore, assessing the tax burden faced by the telecoms industry in southern africa and exploring its implications for industry direct and indirect taxies levied on telecommunication companies value added tax customs duty excise duty universal service fund fees(usf) special excise on airtime number fees spectrum fees initial license fees research and development fund digital services tax (dst) taxes on international and national traffic income tax https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 64 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc stakeholders and broader economic outcomes is critical for the following reasons. firstly, this article contributes to the theoretical literature on the tax burden and impact of multiple taxes on the telecoms industry's performance among southern african countries. secondly, this paper seeks to provide evidence to policymakers on how multiple taxes affect service adoption, pricing, and investment decisions. policymakers can adopt this paper when making informed decisions that foster growth. thirdly, to the accounting profession: the paper offers valuable insights for professionals in the telecoms industry in terms of tax planning and compliance. in addition, understanding the impact of multiple taxes on financial performance can improve the accuracy and transparency of financial reporting in the telecoms sector. unpacking multiple taxes businesses often pass on the cost of multiple taxes to consumers, resulting in higher prices for goods and services, hence the pass-through effect. this may result in lower demand, especially in areas where prices are sensitive, and make it more challenging to obtain necessities like telecoms) gillwald et al. (2018). according to lichter et al. (2021), several taxes can reduce profit margins, which deters businesses from investing in growth or innovation. this is particularly true in capitalintensive sectors with significant upfront expenses, such as telecoms. multiple taxes, as noted by (slemrod, 2019) encourage businesses to change their activities to minimize their tax liability rather than to maximize profits, which causes economic distortions. this can lead to inefficient resource allocation, where companies may choose less productive investments simply because they are taxed at a lower rate. moreover, a sector's many taxes may have a regressive effect, raising issues with equity in the end lichter et al. (2021). this implies that several taxes may occasionally have a regressive impact, disproportionately affecting those with lower incomes who spend a larger share of their income on taxable goods and services. this is especially troubling in critical industries like telecoms, where access is crucial for economic participation. according to adewara et al. (2023) multiple taxation is a phenomenon that describes an income that is subjected to tax more than once, often by two or more different authorities in a way that may be unfair or illegal. it can also refer to the imposition of more than one type of tax on a single entity or transaction (sars, 2024) sutherland (2023). furthermore, sars (2024) avers that illegality and unfairness distinguish multiple taxation from double taxation. the former often have the characteristics of being unfair and illegal. a multiplicity of taxes connotes paying similar taxes on the same or substantially identical tax base. this can involve different levels of government (e.g., federal, state, and local taxes) or various types of taxes, such as income tax, vat, excise taxes, property taxes, and sector-specific levies. in telecom industries, multiple taxes can include regulatory fees, license fees, and other charges targeted explicitly at the sector matheson & petit (2021). multiple taxes should be distinguished from numerous taxes, which means many but different taxes on different tax bases. okunogbe & santoro (2023) adduce the multiple taxations concerning a company or individual in a situation where the same profit or income, respectively, which is liable for tax in a country, has been subjected to tax by another tax authority in that same country or outside. in such situations, relief is usually granted to that taxpayer for the earlier tax paid or to which he may be liable. sars (2024)submits that multiple taxation could be counterproductive if it is excessively applied. https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 65 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc notably, taxation is the life wire of government expenses from which a responsible government provides for the welfare of its people, gsma, (2018). in addition, the issue of the power to impose tax should not be allowed to degenerate into desperate extortion, usurpation and illegitimate exploitation of the public by the said government (jung & katz, 2022). it can be concluded that the multiplicity of taxes is one of the country's major problems. corporate entities and individuals often complain about the ripple effects associated with it. organization for economic co-operation and development [oecd] (2019) avers that general corporate taxes, sector-specific taxes, excise taxes, customs charges, and import taxes are the different categories into which multiple taxes in the telecommunication industry fall. vat and cit are examples of general corporate taxes applicable to telecoms firms' revenue or profit like they are to other industries. sector-specific taxes, such as spectrum fees, license fees, and regulatory costs, are levied with a specific focus on the telecoms sector ( (gsma, 2015)for example, spectrum fees are the costs of using radio frequencies necessary for wireless communication. those granted licenses are required to pay a once-off initial license fee for the use of the license and subsequently monthly remit a percentage of a levy on the gross turnover of operators in the ict sector. in the context of the telecoms industry, multiple taxes indicate the several taxation levels enforced on telecoms providers and services. in affirmation, the postal and telecommunications regulatory authority of zimbabwe [potraz] (2022) adduces that such taxes might influence everything from service pricing to infrastructure investment, significantly impacting the financial viability of telecoms firms. therefore, assessing these taxes' combined effect is crucial to ensure they do not impede the growth and spread of telecom services. this is especially true for emerging regions like africa, where the charging of multiple taxes may adversely affect pricing, cost structures, and quality of service. method this paper analyses the impact of multiple taxes among telecom companies in the southern africa region. the researchers adopted a qualitative systematic review approach, providing valuable overviews and integrating knowledge of various taxes and their impact on the economic growth of the telecoms industry. a systematic literature review ensures that a research phenomenon undergoes in-depth analysis, synthesis and rigour. this cannot be achieved through reviewing and analyzing research findings from snyder (2019). in agreement, mpofu (2021) articulates that a systematic review approach focuses on identifying, evaluating thoughtfully, and synthesizing all literature on the topic instead of a narrative approach, where the summary is done for many studies. taking a leaf from the studies by mpofu (2021) and snyder (2019), researchers followed a highly standardized research protocol to identify and select relevant studies and evaluate them in quality and relevance. this enabled researchers to delve into the multiple-specific taxes by selected countries in southern africa and the challenges associated with these identified taxes. also, the standardisation of the systematic research protocol increases credibility, trustworthiness, and confirmation of the results (mpofu & nemashakwe, 2023) conducting an in-depth analysis across all 16 sadc countries would require substantial resources, time, and logistical coordination. conversely, focusing on five countries makes the study more https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 66 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc manageable, allowing for a deeper, more comprehensive analysis without sacrificing quality. the countries under study include zimbabwe, mozambique, botswana, zambia, and south africa and were chosen for their strategic and economic significance. the world bank (2019) states that the largest economy in the continent is south africa, which has a big say in regional telecom regulations. the distinct economic issues that zimbabwe, mozambique, and zambia present render them valuable case studies. in addition, botswana's stable economy and administration offer a counterpoint. this selection provides information about the region's prospects and challenges. also, these five nations differ significantly in terms of market circumstances, governance, and regulatory frameworks. examining them enables investigating the effects of several taxes on the telecom sector in various settings, potentially yielding more broadly applicable results for other sadc nations. the chosen nations, particularly those in sadc, have varied influence over regional affairs. examining the effects of various taxes in these nations may yield information that directly affects the development of regional policies and frameworks for telecoms, which might positively impact the sadc area. since data gathering and analysis are essential to this research, concentrating on just five nations allows for more efficient resource allocation and guaranteed access to data and dependability. the results from this research will be strengthened by the fact that these nations probably have additional complete and readily available information on taxes and telecoms. databases such as google scholar, elsevier, science direct, springer, and scopus were searched for relevant literature. the key terms used during the search process were: “impact of multiple taxes, challenges associated with multiple taxes in the telecoms industry, types of taxes imposed in the telecoms industry, and so on.” it was necessary to unpack these themes so that recommendations could be given to regulatory bodies and other key stakeholders. the exclusion and inclusion criteria of papers were based on the publication year, language and journal databases, and relevance to the study. the researchers reviewed papers written using english instruction and published in the last 10 years. only peer-reviewed journals published in the databases were used. also, authoritative reports and working documents were accessed from development units such as the world economic forum (wef), united nations, oecd, imf, etc. moreover, researchers included only articles accessed in full text. result and discussion this section presents the paper's results and provides detailed discussions on the impact of multiple taxes on financial performance and economic growth among telecom companies in the southern africa region. https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 67 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc taxes impact on telecom infrastructure development the telecoms industry in southern african countries, including zimbabwe, south africa, zambia, botswana, and mozambique, has been negatively and significantly impacted by multiple taxes. the effects on operations differ depending on each nation's unique tax laws, prevailing economic conditions, and regulatory frameworks. higher operating costs, poorer profit margins, a delay in the development of infrastructure, and higher consumer pricing are some of the impacts foster et al. (2023) & (gsma, 2017) below is a detailed analysis. extant literature underscores the need for tax reform in these countries to balance revenue generation with promoting investment and accessibility in the telecoms sector. multiple taxes lead to increased costs, reduced investment, slower expansion, consumer impact, and so on. these effects are explained in detail below. figure 2: effects of multiple taxes (source: researchers’ compilation) increased costs as mentioned above, multiple taxes imposed on the telecoms sector in southern african nations result in a substantial tax burden by raising operating costs, making adherence more difficult, discouraging investment, restricting consumer accessibility, and eventually hindering the expansion of the economy okunogbe & santoro (2023). the idea that taxes are essential but that the present tax arrangements in the region might be ineffective in maximizing the advantages of having a more vibrant and inclusive telecoms industry is supported by academic research matheson & petit (2021). in addition, (gsma, 2015) adduces that the operating cost for telecoms firms is significantly increased by introducing several taxes, such as vat, excise fees, and sector-specific levies (nominal amount based on some activity measures such as minutes, data, and sms). research studies have indicated that costs are often passed on to consumers in southern africa, leading to higher telecom service prices. in the ict sector in africa, particularly in southern african countries, for instance, effects of multiple taxes increased costs reduced investments slower expansion consumer impact https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 68 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gillwald et al. (2018) point out that several taxation levels raise the cost of services, which lowers consumer demand and restricts digital inclusion. these complex tax structures require significant administrative resources to manage. it can be concluded that the multiple taxes have significant implications on capital expenditures and operational costs. capital expenditures are payments made for goods or services that are recorded or capitalized on a company's statement of financial position rather than expensed on the income statement. spending is essential for companies to maintain existing property and equipment and to invest in new technology and other assets for growth. in addition, taxes on capital equipment, such as elevated customs charges, increase the cost of importing necessary infrastructure components like towers, cables and switches. on the other hand, operational costs and an ongoing tax on services and corporate income can reduce the funds available for maintenance and upgrades. reduced investments it is generally known that multiple taxes harm industry-level investment. they reduce investments, hampering the growth of many companies and leading to low profit margins. matheson & petit (2017) attest that high tax burdens can reduce the profitability of telecom companies, making them less attractive to investors. this means that investors may be wary of committing funds to markets with unpredictable or high tax rates, leading to reduced capital for infrastructure projects. in addition, heavy tax burdens raise the cost of capital, which reduces investment and could increase output prices (alex ezeigweneme et al., 2024)in affirmation, taxes reduce investment by expanding the user cost of capital. as a result, the effect of taxes leads to risk aversion, which reduces investors' confidence, attracts low investments, and yields low profit margins. slower expansion multiple taxes also have significant implications for network coverage and technology upgrades. according to matheson & petit (2021) high taxes can limit telecom companies' ability to expand their networks, particularly in rural or underserved areas where the return on investment is lower. in addition, the rollout of new technologies like 5g can be delayed if companies are burdened with high taxes, as they may prioritize maintaining existing infrastructure over investing in new technology. consumer impact lastly, the paper looks at the consumer impact of the multiple taxes in the telecom industries among the five countries under the study. excise taxes are often imposed on telecom services, particularly mobile phone services and internet usage (gsma, 2015). these taxes are usually passed on to consumers, increasing the cost of these services. as a result, this can reduce the affordability and accessibility of telecom services. in addition, customs charges may also apply to telecom businesses when they import technology and equipment required to run their networks. these responsibilities raise the capital expenses related to network modernization and extension. the universal service fund (usf), which is intended to finance the expansion of telecom services to https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 69 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc underserved areas, is mandated in many nations for telecom companies to make contributions. despite their good intentions, these contributions cost operators extra money gillwald et al. (2018) it also follows those high taxes lead to a digital divide (cirera et al., n.d.). this implies that the increased costs can exacerbate the digital divide, particularly in low-income areas where consumers are sensitive to price changes. research by nene & moraka (2023) underscores that excessive taxation in developing regions can undermine efforts to increase digital access and economic inclusion. the telecoms sector is a key driver of broader economic growth in southern african countries, (fink et al., 2002). nonetheless, the multiplicity of taxes can impede the industry's growth and, in turn, its potential to support wider economic prosperity. the high tax rates severely limit the telecoms industry's ability to spur economic growth, which results in less-than-ideal gdp growth and employment creation. the following table presents the types of taxes imposed on the five countries under the study. table 1: taxes imposed on the countries under study (source: researchers' compilation comparisons of taxes-imposed country-by-country zimbabwe) country name type of taxes imposed botswana corporate income tax: 22% value added tax (vat): 12% (increased to 14% in 2021) universal service fund (usf) levy: 1% of gross revenues spectrum fees: considered moderate but still a significant cost mozambique corporate income tax: 32% value added tax (vat): 17% custom duties: high duties on improved telecom equipment regulatory fees: high spectrum and licensing fees south africa corporate income tax: 27% (as of 2022) value added tax (vat): 15% universal service and access fund (usaf) levy: 0,2% of annual turnover spectrum fees: substantial costs associated with spectrum licenses zambia corporate income tax: 35% for telecommunication (higher than other sectors) value added tax (vat): 16% excise duties: 17,5 on mobile services regulatory fees: high fees imposed by the zambia information and communication technology authority (zicta) zimbabwe corporate income tax: 24,72% (as of 2021) value added tax (vat): 15% licence fees and spectrum charges: high and often unpredictable universal service fund (usf) levy: 1,5% annual gross revenue zimbabwe has a heavy tax burden on the telecommunications industry, including a 15% vat on mobile airtime, a 5% excise duty on airtime sales, a 25% tax on handsets, and various levies on mobile money transfers. (makochekanwa, 2020 )adduces that high excise taxes and vat have increased telecom businesses' operating expenses, frequently passed on to customers, lowering service demand. the potraz said in its 2021 annual report that the high and numerous taxes https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 70 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc have deterred investment in network growth, especially in rural regions. a decrease in service accessibility is also noted in the research; mobile penetration rates fell from 90.5% in 2017 to 84.1% in 2020. in conclusion, the taxes have increased costs for telecom companies and consumers, hindering infrastructure development and making services less affordable. the high tax burden has also strained the financial health of telecom operators, limiting their ability to invest in network upgrades. this makes it challenging for telecom companies to invest in rural infrastructure, resulting in poor connectivity. also, high tariffs and economic instability further exacerbate the issue, making it difficult to maintain and expand rural networks. south africa south africa imposes various taxes on the telecommunications sector, including corporate income tax, value-added tax (vat), and spectrum license fees. (makibela, 2020) cites that the country also has a digital services tax to capture revenue from digital transactions. according to gillwald and mothobi (2018) in south africa, telecom businesses' profitability has been stretched by the high tax burden, especially the spectrum fees and usaf levy, resulting in lower profits and less investment in 5g and fiber-optic infrastructure. prices for consumers have gone up because of the more significant cost structure. data costs in south africa rank among the highest in the region, according to a 2021 report by research ict africa, partly because of the country's heavy tax burden. additionally, the effectiveness of telecom operations has decreased due to increasing administrative costs brought on by the requirement to comply with numerous tax regimes. the study also considered the impact of tax policies on rural connectivity. according to faccio & zingales (2017) taxes on telecom services and equipment can increase the cost of deploying infrastructure in rural areas. this can make it less attractive for telecom companies to invest in these regions, leading to slower expansion and limited connectivity. considering the above, the tax burden can increase operational costs. however, south africa’s relatively stable regulatory environment and advanced infrastructure support continued investment and growth in the sector. zambia from table 1, zambia has a corporate income tax rate of 35% for the telecoms sector, replacing the previous dual tax rate system. the country also exempts telecom equipment from vat on imports to attract investment. the high corporate tax rate can deter investment ( gsma, 2018), but the vat exemption on telecom equipment helps reduce costs and encourages infrastructure development. this balance aims to make rural connectivity projects more feasible. (gsma, 2015)affirm that the high corporate tax rate, combined with vat and excise duties, has significantly reduced profit margins for telecom companies in zambia, leading to a slowdown in investment, particularly in rural areas. the ordinary consumer now finds telecom services more expensive due to high taxes on mobile services, which has reduced mobile penetration rates, which fell from 83.5% in 2018 to 77.2% in 2021. according to the zicta annual report for 2021, the high tax burden has made it more difficult for telecom businesses to invest in infrastructure, which has slowed the adoption of cutting-edge technology like 4g. https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 71 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc botswana contrary to the above findings for south africa and zimbabwe, the tax burden in botswana is relatively moderate compared to other southern african countries. table 1 shows that botswana’s telecommunications sector is subject to corporate income tax, vat, and spectrum license fees. the government has also implemented a harmonized model for determining service tariffs. (lesetedi, 2020) attests that there has been a modest increase in consumer pricing because of the combined effect of usf taxes and vat, with mobile data charges increasing by 5% between 2019 and 2021. rural telecoms infrastructure has benefited in part from usf funding. however, telecom companies have stated that the charge lowers their net revenue, making it more difficult to finance network expansions independently. some telecom providers in botswana have expressed concerns about potential competitive disadvantages when compared with businesses in nations with lower tax rates, notwithstanding the country's moderate tax rates. in conclusion, botswana’s relatively moderate tax burden and supportive regulatory environment have enabled steady growth in the telecom sector, and investments in broadband infrastructure have improved service quality and coverage. even though botswana has a relatively moderate tax burden, the cost of extending services to rural areas remains high adewara et al. (2023)this is due to the geographical challenges and the need for significant infrastructure investment. to address the challenges, the government of botswana is actively working on expanding connectivity through initiatives aimed at connecting rural villages and reducing tariffs for consumers. mozambique in mozambique, (chavula, 2019) found that increasing operations expenses have resulted in more expensive pricing for customers. a mixture of high vat, cit, and customs taxes on telecom equipment causes these costs. the development of network infrastructure has slowed because of the high cost of importing equipment because of customs duties, especially in rural areas where the return on investment is already low. managing numerous regulatory fees has challenged telecommunications firms operating in mozambique. these fees take a substantial chunk of their earnings and restrict their ability to invest in new technologies such as 5g and 4g (gsma, 2015). it can be inferred that the high cost of devices and services, exacerbated by taxes, limits access to telecommunications, particularly in rural areas. this means that the high cost of services relative to income levels makes it difficult for rural populations to afford telecom services. however, ongoing investments in ict infrastructure, supported by international grants, aim to improve connectivity. conclusion considering the above, it is apparent that most nations compel telecommunications operators to pay various taxes and levies, which usually include general taxes that apply to all businesses in the economy and sector-specific taxes or levies that result in multiple taxes from telecommunications operators. research has shown that primary networks are concentrated in cities for financial motives related to provider expenses and client demand. service providers primarily focus on commercially desirable cross-border links and intraand inter-urban markets. because they reside https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african countries mpofu, swart, and masunda 72 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc outside of these networks' coverage areas, a sizable section of the rural population currently does not profit from this competition, and operators, whether government-sponsored or private, seem to have little interest in expanding services to more remote rural areas. a percentage of the monthly gross income of each licensed operator is contributed to the universal service fund, which has been established in many countries. the purpose of this grant is to extend services to remote areas. it's unknown how much assistance this fund has been able to provide to these areas. furthermore, compared to systems for service provision driven by commerce, experience with such funds in other sub-saharan african nations suggests that this mechanism has had little success. a percentage of the monthly gross income of each licensed operator is contributed to the universal service fund, which has been established in many countries. the purpose of this grant is to extend services to remote areas. it's unknown how much assistance this fund has been able to provide to these areas. furthermore, compared to systems for service provision driven by commerce, experience with such funds in other sub-saharan african nations suggests that this mechanism has had little success. governments might incentivise the private sector to lower taxes and levies (such as universal service fees) for operators who construct backbone networks in unprofitable areas as long as the operators meet predetermined goals. operators will be directly incentivised to serve rural areas by setting targets for universal service coverage, which will also help promote universal service access. this may be done competitively, where only a few companies would be eligible for the levy reduction and need to submit a bid, or it could be available to all companies. the telecoms sector will witness a rise in investment due to the lower tax burden connected with these "pay-or-play" plans, encouraging innovation and growth. the legislative framework for information communication technology, referred to as (ict) regulation, needs to be visited in these countries to ensure that the tax laws align with the current digital space. most tax laws are rarely updated, may be outdated and not applicable to the prevailing ict environment, and do not accommodate rapid technological change and emerging competition. resultantly, this erodes revenues from operators, which could otherwise be used to enhance the sector through infrastructure development. therefore, regulators must embrace change and avoid the old-fashioned practice of believing that high and multiple taxes drive economic growth and increase revenue. https://www.ilomata.org/index.php/ijtc tax impact analysis in telecommunications industry among southern african 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(2007). #113-taxes and fees on communication services. www.heartland.org https://www.ilomata.org/index.php/ijtc https://doi.org/10.1007/s10797-020-09621-6 https://doi.org/10.5901/ajis.2014.v3n1p121 http://www.techniumscience.com/ https://doi.org/10.22495/cbsrv4i4siart17 https://www.researchgate.net/publication/384964715 http://www.gsma.com/ http://twitter.com/sutherla http://www.gsmaintelligence.com/ the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 813-831 813 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange khairul azwar1, elly susanti2, supitriyani3 123sekolah tinggi ilmu ekonomi sultan agung, indonesia correspondent : khairulazwar513@gmail.com1 received : august 8, 2023 accepted : october 19, 2023 published : october 31, 2023 citation: azwar, k., susanti, e., supitriyani (2023). financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange. ilomata international journal of tax and accounting, 4(4), 813-831. https://doi.org/10.52728/ijtc.v4i4.896 abstract: taxes are the main source of revenue in the state budget (apbn) which accounted for 73% of all state revenue in 2019. taxes have such an important role in sustaining the continuity of government and development. however, realized tax receipts never reached the target level between 2009 and 2020.this is because there are companies that carry out tax avoidance actions. the purpose of this study is to specifically analyze the variables that affect tax evasion in the lq45 index companies of the indonesian stock exchange. this research was conducted during the period 2017 –2022. the sampling technique used in this study is purposive sampling, in which criteria are determined based on the variables studied. the data analysis technique used is multiple simple linear regression analysis and a residual test for moderating variables. the f-test results show that institutional ownership, sales growth and ln_total assets have a positive and insignificant effect on tax evasion. t-test results show that institutional ownership and sales growth have a negative and insignificant effect on tax evasion. however, lntotal_asset has a negative and significant effect on tax evasion. keywords: gcg, sales growth, firm size, financial performance, tax avoidance this is an open access article under the cc-by 4.0 license. introduction in a country, taxes become one of the revenues that have a very large contribution to the development of the country. however, in reality, the realization of tax revenue has never reached the targeted figure since 2009 2020. the government of indonesia has made various efforts so that tax revenues can achieve the targets launched by implementing tax incentive policies (ardhi & lubis, 2023; nugraha & wijaya, 2023; rulandari & rahmayani, 2023). however, this policy is used as an opportunity for companies as a loophole in carrying out tax avoidance practices (anwar & wijaya, 2023; wibawa & tobing, 2023). based on the tax justice network report, indonesia is expected to face losses of us $ 4.86 billion per year or equivalent to rp68.7 trillion due to tax avoidance. the loss is caused by corporate taxpayers who engage in tax avoidance in indonesia https://www.ilomata.org/index.php/ijtc mailto:khairulazwar513@gmail.com https://doi.org/10.52728/ijtc.v4i4.896 financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 814 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (herman & chaidir, 2023; lestari & fauzi, 2023; mwenda et al., 2023). based on information from the ministry of finance of the republic of indonesia, there were fluctuations in the realization of tax revenues to the tax revenue target in 2017-2022. the purpose and realization of tax revenue is given in table 1. table 1. target and realization of tax revenue in indonesia (in trillion rupiah) years target tax recipients realization of tax recipients tax achievement (%0 2017 1.283,5 1.151,1 89,4% 2018 1.424,0 1.315,9 92,41 2019 1.577,5 1.332,0 84,44 2020 1.198,8 1.069,9 89,25 2021 1.229,6 1.231,8 100,19 2022 1.485,0 1.716,8 115,60 source : (www.kemenkeu.go.id, 2023) based on table 1, the realization of tax revenues in 2018 2020 was not realized according to the target of tax revenue. in 2019, the realization of tax receipts did not reach the target set by the government. this condition is caused by one of the companies in indonesia, namely pt. adaro energy tbk, which is suspected of tax avoidance practices by conducting transfer pricing carried out in 2019. where, pt. adaro energy tbk, has paid taxes of rp1.75 trillion or us$125 million less than the amount it should have paid in indonesia. in 2020, the realization of tax revenue decreased drastically by 19.6% from the previous year. this is due to the practice of tax avoidance during the covid-19 pandemic has increased, resulting in decreased state tax revenue during 2020. the problem formulation of this study is whether gcg, sales growth and firm size affect tax evasion and the effect of financial performance on tax evasion as mediators of gcg, sales growth and firm size. the novelty of the present study is profitability as a moderating variable, whereas in the previous study the moderating variable was firm size. method research design this study is a quantitative study that includes a type of causality study, namely studies that aim to determine the effect between two or more variables. the scope of this study is limited to tax evasion. in this study, the type of relationship is causal because it seeks to find the causal relationship (effect) of the independent variable (x) with the dependent/related variable (y). https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 815 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc time and location of research the research period used is 5 years, from 2017 to 2022. this study uses up to date data so that it is expected to be able to describe current conditions that are more relevant to the research year. this study was conducted on lq45 company in indonesia stock exchange. variable operational definition the denpendent variable (y) in this study is tax avoidance: 𝐶𝑎𝑠ℎ 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 = tax payment profit before tax independent variable (x) gcg as measured by institutional ownership (ip) institutional ownership (ip) = number of institutional shares 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑥 100% sales growth 𝑆𝑎𝑙𝑒𝑠 𝐺𝑟𝑜𝑤𝑡ℎ = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠𝑡 − 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠𝑡−1 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠𝑡−1 firm size is proxied by: financial performance which is the ratio of profitability by proxy: 𝑅𝑒𝑡𝑢𝑟𝑛 𝑂𝑛 𝐴𝑠𝑠𝑒𝑡 = profit after tax total assets population and sample the main population of this study is all lq45 companies in indonesia stock exchange from 2017 2022, which is 67 populations which can be shown in table 2. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 816 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 list of study populations source: (idx.co.id, 2022) https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 817 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in this study, the sampling technique is purposive sampling based on the criteria given in table 3. table 3 list of research sample criteria source : (data processed, 2023) based on table 3 there are 22 companies in the study sample whose data are presented in table 4. table 4. research sample no issuer code company name 1 adro pt adro energy indonesia,tbk 2 akra pt akr corporindo,tbk 3 antm pt aneka tambang,tbk 4 asii pt astra international,tbk 5 bsde pt bumi serpong damai,tbk 6 excl pt xl axiata,tbk 7 ggrm pt gudang garam,tbk 8 hmsp pt hanjaya mandala sampoerna,tbk 9 icbp pt indofood cbp sukser makmur,tbk 10 inco pt vale indonesia,tbk 11 indf pt indofood sukses makmur,tbk 12 intp pt indocement tunggal perkasa,tbk 13 jsmr pt jasa marga,tbk 14 klbf pt kalbe farma,tbk 15 pgas pt perusahaan gas negara,tbk 16 ptba pt tambang batubara bukit asam,tbk 17 ptpp pt pembangunan perumahan (persero),tbk 18 smgr pt semen indonesia (persero),tbk 19 tlkm pt telekomunikasi indonesia,tbk 20 untr pt united tractors,tbk 21 unvr pt unilever indonesia,tbk https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 818 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 22 wika pt wijaya karya (persero),tbk source : (data processed, 2023) data types and data sources the data used is secondary data from the idx website, the details of which are given in table 5. table 5 types of research data and data sources variable data analyzed data sources gcg (ki) number of institutional shares and number of outstanding shares for the period 2017-2022 indonesia stock exchange and financial statements sales growth net salest – net salest-1 for the period 2017-2022 indonesia stock exchange and financial statements firm size total assets for the period 20172022 indonesia stock exchange and financial statements financial performance (roa) net profit after tax and total assets for the 2017-2022 period indonesia stock exchange and financial statements tax avoidance payment of tax and profit before tax for the period 2017-2022 indonesia stock exchange and financial statements source : (data processed, 2023) data analysis techniques 1. the classical assumption test is performed to assess whether an ordinary least squares (ols) linear regression model has classical assumption problems. normality, multicollinearity, autocorrelation and heteroskedasticity tests were used in this study. 2. test the correlation coefficient (r) and determination (adjusted r square), used to measure how much ability all independent variables have in explaining their dependent variables (ghozali, 2016). 3. first hypothesis testing 1) a simultaneous significance test (f-test) is performed to show whether all the independent variables simultaneously or together have a significant effect on the dependent variable. when using an alpha of 5%, the test criterion is sig. of α, then reject h0. this means that simultaneously gcg, sales growth and firm size have a significant impact on tax evasion and vice versa. 2) an individual significance test (t-test) is performed to show whether individual or partially independent variables have a significant effect on the dependent variable. when using an alpha of 5% or 0.05, the test criterion is whether the sig. of α, then reject h0. this means that gcg, sales growth and firm size significantly affect tax evasion and vice versa. 4. testing the second hypothesis in this study, the residual test is used to test the second hypothesis. the residual test is performed by transferring the dependent variable to the absolute value of the residual regression of the independent variable on the hypothesized variable as a moderating variable. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 819 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc if the regression results are significant and the regression coefficient is negative, it can be concluded that the variable hypothesized as a moderating variable is actually capable of regulating the relationship between the independent variable and the dependent variable. with the residual model, the regression equation can be formulated as follows: m = a + b1x1 + b2x2 + e.................................... (suliyanto, 2011) ǀeǀ = a + b1 y the criteria in the residual test include: 1) if the significance of ≤ 0.05, then h0 is rejected, meaning that financial performance is able to moderate the effect of gcg, sales growth and firm size on tax avoidance. 2) if the significance > 0.05, then h0 is accepted, meaning that financial performance is unable to moderate the effect of gcg, sales growth and firm size on tax avoidance. result and discussion test classical assumptions before transformation 1) normality test table 6 normality test results one-sample kolmogorov-smirnov test ki sg ln_tota l_aset roa ta n 132 132 132 132 132 normal parametersa,b mean 6207.1515 15 1312.9621 21 317291.5 75758 878.363636 5598.393939 std. deviation 1235.6266 666 3589.7639 196 7693.639 5304 889.3797159 8916.0957958 most extreme differences absolute .129 .186 .171 .171 .274 positive .129 .186 .171 .171 .274 negative -.098 -.168 -.138 -.138 -.253 kolmogorov-smirnov z 1.487 2.133 .815 1.965 3.151 asymp. sig. (2-tailed) .024 .000 .520 .001 .001 source : (data processed, 2023) from table 6, it is explained that the variable of managerial ownership has a value of 0.024, sales growth is 0.000, return on assets is 0.001, and tax evasion is 0.001, which shows that the value is lower at α = 0.05, while ln_total. assets is higher at α = 0.05, namely 0.520, so it can be concluded that the data is not normally distributed. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 820 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) multicollinearity test table 7 multicollinearity test model collinearity statistics tolerance vif 1 (constant) ki .918 1.089 sg .994 1.006 ln_total_aset .923 1.083 source : (data processed, 2023) from table 7, it can be concluded from table 7 that the tolerance value of each variable is greater than 0.1, namely 0.918 (institutional ownership), 0.994 (sales growth) and 0.923 (ln_total assets). in addition, the vif value of each research variable shows that it is less than 10, namely 1.089 (institutional ownership), 1.006 (sales growth), and 1.083 (ln_total assets). thus, it can be concluded that this study did not show multicollinearity. 3) heteroscedasticity test source : (data processed, 2023) figure 1 heteroscedasticity test if you look at figure 1, the points are not randomly distributed and do not form a specific pattern, so this regression model has a heteroskedasticity problem. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 821 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4) autocorrelation test table 8 autocorrelation test results model r r square adjusted r square std. error of the estimate durbinwatson 1 .229a .052 .030 8780.1624103 2.181 source : (data processed, 2023) from the results of table 8 provides information that du < d < 4 du or 1.7624 < 2.181 < 2.2376 deciding that there is no positive or negative autocorrelation does not reject the conclusion. 1. test classical assumptions after transformation 1) normality test table 9 normality test results one-sample kolmogorov-smirnov test unstandardized residual n 101 normal parametersa,b mean .0000000 std. deviation .70692951 most extreme differences absolute .113 positive .076 negative -.113 kolmogorov-smirnov z 1.138 asymp. sig. (2-tailed) .150 source : (data processed, 2023) from table 9 it is explained that the value of asymp. sig. (2 tailed) is at 0.150 which is greater α = 0.05 so that the data is normally distributed. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 822 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) multicollinearity test table 10 multicollinearity test model collinearity statistics tolerance vif 1 (constant) ln_kepemilikan_institusional .902 1.109 ln_sales_growth .973 1.027 ln_total_aset .922 1.084 source : (data processed, 2023) from table 10, it can be concluded that the tolerance value for each variable is greater than 0.1, namely 0.902 (institutional ownership), 0.973 (sales growth), and 0.922 (asset ln_total). furthermore, the vif value of each research variable shows smaller than 10, namely 1,109 (institutional ownership), 1,027 (sales growth), and 1,084 (ln_total assets). so it can be concluded that this study did not occur multicollinearity. 3) heteroscedasticity test source : (data processed, 2023) figure 2 heteroscedasticity test https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 823 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc if you look at figure 2 that the dots spread randomly above or below the zero number and do not show a certain pattern. so that this regression model does not occur heteroscedasticity problems. 4) autocorrelation test table 11 autocorrelation test results model r r square adjusted r square std. error of the estimate durbinwatson 1 .260a .067 .039 .83482 2.031 source : (data processed, 2023) from the results of table 11, provides information that du < d < 4 du or 1.7624< 2.031< 2.2376 so that with the decision there is no positive or negative autocorrelation with conclusions not rejected. 2. analysis of correlation coefficient (r) and correlation of determination (r) table 12 results of correlation coefficient and coefficient of determination analysis model r r square adjusted r square std. error of the estimate 1 .260a .067 .039 .83482 source : (data processed, 2023) from table 12, the result of the r correlation coefficient value of 0.260 is obtained, which means that there is a low correlation between the tax avoidance variable and the independent variables of institutional ownership, sales growth, and asset ln_total. while the value of the coefficient of determination (r square) of 0.067 which means 6.7% high and low tax avoidance can be explained by institutional ownership, sales growth, and ln_total asset while the remaining 93.3% is influenced by other factors that were not included in this study. 3. test the first hypothesis 1) simultaneous test (test f) table 13. f test results anovaa `1model sum of squares df mean square f sig. 1 regression 4.887 3 1.629 2.338 .078b residual 67.601 97 .697 total 72.488 100 a. dependent variable: ln_tax_avoidance b. predictors: (constant), ln_ukuran_perusahaan, ln_sales_growth, source : (data processed, 2023) https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 824 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on table 13, it is known that the fcount value is 2.338 while ftable with df = (132-3-1=128) is 2.68. it can be concluded that fcount < ftable or 2.338 > 2.68 or significance level 0.078 > 0.05 then h0 is rejected, meaning that institutional ownership, sales growth, and ln_total assethave a positive and insignificant effect on tax avoidance. 2) partial test (test t) table 14. test results t coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 107.622 46.391 2.320 .022 ln_kepemilikan_institusio nal -.893 .468 -.197 -1.908 .059 ln_sales_growth -.090 .069 -.130 -1.307 .194 ln_total_aset -7.190 3.557 -.206 -2.022 .046 source : (data processed, 2023) based on table 14, for each t-test result can be described as follows: (1) the calculated value of institutional ownership is -1.908 while the ttable with df = (132-3=129) is 1.97852. it can be concluded that tcount < ttable or -1.908 > 1.97852 or significance level 0.059 > 0.05 then h0 is accepted, meaning that institutional ownership has a negative and insignificant effect on tax evasion. (2) the calculated value of sales growth is -1.307 while the ttable with df = (132-3=129) is 1.97852. it can be concluded that tcount < ttable or -1.307 < 1.97852 or a significance level of 0.194 > 0.05 then h0 is accepted, meaning that sales growth has a negative and insignificant effect on tax avoidance. (3) the calculated value of ln-total_aset is -2.022 while the ttable with df = (132-3=129) is 1.97852. it can be concluded that t count > ttable or -2.022 > 1.97852 or a significance level of 0.046 < 0.05 then h0 is rejected, meaning that ln-total_aset has a negative and significant effect on tax evasion. https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 825 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. test the second hypothesis table 15 regression analysis with moderating variables with residual test model unstandardized coefficients standardized coefficients b std. error beta 1 (constant) 61.515 65.631 ln_kepemilikan_institusion al .686 .662 .109 ln_sales_growth -.030 .097 -.032 ln_total_aset -4.807 5.031 -.100 source : (data processed, 2023) based on table 15, the multiple linear regression equation model obtained is: m = 61.515 + 0.686x1 0.030x2 4.807x3 this means that institutional ownership has a positive effect on tax evasion, while the sales growth and ln_total assets has a negative effect on the financial performance (roa) of the company lq45 in the indonesian stock market. furthermore, table 16 is presented, the results of the abs_residual test on lq45 companies on the indonesia stock exchange. table 16 moderating variable analysis with abs_residual test coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .595 .727 .818 .415 ln_tax_avoidance .031 .089 .033 .343 .733 source : (data processed, 2023) based on table 16, the linear regression equation model with moderating variables using abs_residual test is: abs_res = 0.595+ 0.031y this means that the value of the regression coefficient is 0.031 and the significance level is 0.733. because the regression coefficient is positive and insignificant, it can be concluded that financial performance (roa) is not a moderating variable because it is unable to strengthen or weaken the influence of institutional ownership, sales growth, and ln_total asseton tax evasion. the effect of institutional ownership on tax avoidance the calculated value of institutional ownership is -1.908 while the table with df = (132-3=129) is 1.97852. it can be concluded that t count < ttable or -1.908 > 1.97852 or significance level 0.059 > https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 826 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 0.05 then h0 is accepted, meaning that institutional ownership has a negative and insignificant effect on tax evasion. this means that there will be more ownership in the company, the smaller the company will take tax avoidance actions because the company will maintain the good name of the company with the aim that stakeholders believe in the progress of the company in the future. in addition, according to (charisma & dwimulyani, 2019), the size or size of institutional ownership affects companies or management to minimize tax evasion practices. institutional ownership will always supervise and encourage management to do its duties correctly and convey true information so that the company can increase its profits. this study is inconsistent with the study (kristiani et al., 2020) with the results of research that institutional ownership (inst) has a significant effect on tax evasion (etr). the greater the share ownership of institutions, the greater the opportunity to reduce corporate tax avoidance practices. these results suggest that these governance characteristics have a stronger association with more extreme tax avoidance, which is more likely a symptom of managerial overand under-investment (armstrong et al., 2015). the effect of sales growth on tax avoidance the results of the previous analysis show that the calculated sales growth value was -1.307 while the table with df = (132-3=129) was 1.97852. it can be concluded that t count < ttable or -1.307 < 1.97852 or a significance level of 0.194 > 0.05 then h0 is accepted, meaning that sales growth has a negative and insignificant effect on tax evasion. this means that with increasing sales, the company will not do tax evasion with the aim of being able to contribute to management that the company has good performance. this study is inconsistent with the study (ainniyya et al., 2021), (suryani, 2021) and (suteja et al., 2022) by obtaining the results that sales growth significantly affects tax evasion in nature, this means that high sales growth indicates an increase in tax avoidance rates, so that sales growth has a positive effect on tax evasion. changes in the value of company sales will directly change profits so that it will also affect the amount of tax. high growth requires new investment and funding, so companies will have more options to achieve low etr. the results of this study are consistent with studies (putri et al., 2021) and (sembiring & sa’adah, 2021) which states that sales growth and tax evasion have a significant negative influence. the effect of firm size on tax avoidance based on the study of the analysis that the calculated value of ln-total_aset is -2.022 while the ttable with df = (132-3=129) is 1.97852. it can be concluded that t count > ttable or -2.022 > 1.97852 or a significance level of 0.046 < 0.05 then h0 is rejected, meaning that ln-total_aset has a negative and significant effect on tax evasion. this means that if the company has a lot of assets, it will illustrate a high company size so that the tax evasion action taken by the company is lower. conversely, the smaller the value of the size of the company, the more it will have an impact on increasing the amount of tax avoidance. this research showed that size, significantly affected tax avoidance practices (pratama, 2017), (richie & triyani, 2021) and (adegbite & bojuwon, 2019). in contrast to research (aulia & mahpudin, 2020) with the result that the larger the total assets indicate the larger the size of the company, and each increase in company size will increase tax avoidance. the results (firmansyah & bahri, 2022) showed that sales growth and company size did not affect tax avoidance. this is possible because large companies are able to manage taxation by doing tax planning so that optimal tax saving can be achieved. in this case, tax saving describes https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 827 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax avoidance that companies do in a legal way. this study is consistent with research (sunarsih et al., 2019) and (rinaldi & cheisviyanny, 2015) the research results show that the company size variable has a significant negative effect on tax evasion. the effect of managerial ownership, sales growth, and company size on tax avoidance from the results that the fcalculate value is 2.338 while ftable with df = (132-3-1=128) is 2.68. it can be concluded that fcalculate < ftable or 2.338 > 2.68 or significance level 0.078 > 0.05 then h0 is rejected, meaning that institutional ownership, sales growth, and ln_total assethave a positive and insignificant effect on tax avoidance. this means that when the number of shares owned by institutions increases, the level of management control is tightened, which prevents tax evasion. however, companies that experience increased sales growth are likely to carry out tax avoidance with the aim that the tax burden is paid with a small amount. in addition, the size of the company cannot influence the company to take tax avoidance actions because the company must maintain the company's good name for the continuity of business development in the future. this research is not in line with research (prastiyanti & mahardhika, 2022) showing that management ownership and firm size have significant effects on tax evasion. in addition, research (wahyuni & wahyudi, 2021) shows differences with this study, according to the results of this study, company size and sales growth do not affect tax evasion. our additional regression results demonstrate that corporate governance controls related to board independence, institutional ownership and the use of big-4 auditors are significantly negatively associated with firms using capital-intensive tax avoidance structures. (taylor & richardson, 2013). financial performance (roa) moderates the effect of managerial ownership, sales growth, and company size on tax avoidance based on the results of the analysis presented in table 16, the linear regression equation model with moderating variables using the abs_residual test is: abs_res = 0.595+ 0.031y this means that the value of the regression coefficient is 0.031 and the significance level is 0.733. because the regression coefficient is positive and insignificant, it can be concluded that financial performance (roa) is not a moderating variable because it is unable to strengthen or weaken the influence of institutional ownership, sales growth, and ln_total asseton tax evasion. this means that with the increase in company profits proxied by roa, it gives an idea that companies that have institutional ownership with a large number of shares and increased sales growth and large size of ownership do not necessarily take tax avoidance measures. this research is different from the results of research (manik & darmansyah, 2022), (sunarto et al., 2021) and (mu’minah et al., 2023) that the moderating variable, i.e. profitability, is able to slow down the effect of liquidity, sales growth and financial leverage on tax evasion, because profitability is the profit belonging to taxpayers, which of course also affects the amount of the taxpayers tend to avoid and so is research (sunarto et al., 2021) https://www.ilomata.org/index.php/ijtc financial performance as a mediation of tax avoidance determinants in lq45 companies on the indonesia stock exchange azwar, susanti, and supitriyani 828 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion based on the results of the analysis, the author concludes that the institutional ownership variable has a negative and insignificant effect on partial tax evasion. this means that the more shares ownership in the company, the smaller the company will take tax avoidance actions because the company will maintain the good name of the company with the aim that stakeholders believe in the progress of the company in the future. research (2) notes that the higher the share of institutional ownership, the lower the tax avoidance efforts of the company. fluctuating sales growth has a negative and insignificant effect on partial tax evasion. this means that with increasing sales, the company will not do tax avoidance with the aim of being able to contribute to management that the company has good performance. the variable ln-total_aset has a negative and significant effect on tax avoidance partially. that is, if a company has many assets, it indicates a large size of the company, in which case the company's tax avoidance measures are less. on the other hand, the smaller the value of firm size, the greater the effect on the amount of tax evasion. institutional ownership, sales growth, and ln_total assethave a positive and insignificant effect on tax avoidance simultaneously. this means that with the increase in the number of institutional ownership shares, the tighter level of supervision of management so as to prevent tax avoidance actions. however, companies experiencing sales growth avoid taxes by trying to pay a small portion of the tax burden. in addition, the size of the company cannot influence the company to take tax avoidance actions because the company must maintain the company's good name for the continuity of business development in the future. financial performance (roa) is not a moderating variable because it cannot strengthen or weaken the effects of institutional ownership, sales growth and ln_total value tax avoidance. this is because it cannot strengthen or weaken the effects of institutional ownership, sales growth and asset tax avoidance.. this means that with the increase in company profits proxied by roa, it gives an idea that companies that have institutional ownership with a large number of shares and increased sales growth and large size of ownership do not necessarily take tax avoidance measures. reference adegbite, t. a., & bojuwon, m. 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(2021). pengaruh profitabilitas, leverage, ukuran perusahaan, sales growth, dan kualitas audit terhadap tax avoidance. kompak : jurnal ilmiah komputerisasi akuntansi, 14(2), 394–403. https://doi.org/https://doi.org/10.51903/kompak.v14i2.569 wibawa, a. t., & tobing, a. n. l. (2023). maturity level of fraud risk management in tax institutions in indonesia. ilomata international journal of tax and accounting, 4(3), 584–598. https://doi.org/10.52728/ijtc.v4i3.765 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 2, april 2025 page no. 1-11 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance for the construction companies in indonesia: a study financial factor yuni ekawarti1, sari mustika widyastuti2, yeni alfiana3, lia summagat4 1234tamansiswa university, indonesia correspondent: yunieeka0713@gmail.com1 received : january 25, 2025 accepted : april 12, 2025 published : april 30, 2025 citation: ekawarti, y., widyastuti, s, m., alfiana, y., summagat, l. (2025). dynamics of tax avoidance for the construction companies in indonesia: a study financial factor. ilomata international journal of tax and accounting, 6(2), 1-11. https://doi.org/10.61194/ijtc.v6i2.1433 abstract: this study examines tax avoidance in indonesia’s construction sector, focusing on the influence of profitability, capital intensity, and sales growth. using data from 15 publicly traded construction firms on the indonesia stock exchange (2020–2022), multiple linear regression analysis was applied to assess the relationship between these financial factors and tax avoidance, measured by the effective tax rate (etr). the research utilizes quantitative techniques to examine information from 15 construction firms that are publicly traded on the indonesia stock exchange during the period of 2020-2022. multiple linear regression analysis was used to analyze the data and examine the correlation between profitability, capital intensity, sales growth, and tax avoidance represented by the effective tax rate(etr). these findings highlight the need for stricter monitoring of asset-intensive firms, as they tend to exploit tax-saving opportunities. policymakers should evaluate depreciation-related tax benefits to ensure fair tax contributions and introduce enhanced disclosure requirements for high-growth firms. strengthening regulatory oversight can prevent aggressive tax planning and promote equitable tax compliance. future research could explore the role of corporate governance and industry-specific tax incentives in shaping tax behavior. expanding the analysis to other sectors and regions would provide a broader understanding of corporate tax strategies. ultimately, this study underscores the importance of balancing tax efficiency with regulatory compliance to ensure fiscal sustainability and a fair tax system. keywords: capital intensity, construction sector, tax avoidance, profitability, sales growth this is an open-access article under the cc-by 4.0 license. introduction tax avoidance is prevalent throughout multiple sectors, including the construction industry. while not legally forbidden, this behaviour poses a significant problem as it may diminish the potential state revenue intended for public welfare (aydoğmuş & gülay, 2022; mokhtar et al., 2024; shams et al., 2022). in this context, the government and other stakeholders must comprehend the determinants influencing corporations’ tax avoidance actions. this study analyzes many financial https://www.ilomata.org/index.php/ijtc mailto:yunieeka0713@gmail.com1 https://doi.org/10.61194/ijtc.v6i2.1433 dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 2 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc parameters significantly impacting tax avoidance techniques, particularly within the construction sector. this study analyses the effects of profitability, capital intensity, and sales growth on tax avoidance within indonesia’s construction sector. tax avoidance, although legal, presents a barrier to government income, especially in a nation where tax collection is essential for financing national development (moore & prichard, 2020; paramita & ali, 2023). this study seeks to elucidate the impact of financial metrics, including profitability, capital intensity, and sales performance, on corporate strategies to reduce tax liabilities (santini & indrayani, 2020; sumantri et al., 2022). this research elucidates the fundamental determinants of tax avoidance and provides actionable insights for enhancing tax policy in emerging nations. this study is motivated by the construction industry’s substantial impact on indonesia’s economy, catalyzing infrastructure development and a primary source of tax revenue (riani & rusydiana, 2022). nonetheless, the sector is characterized by capital-intensive operations, variable profitability, and intricate financial transactions, rendering it vulnerable to tax avoidance tactics. governments worldwide, especially in indonesia, aim to mitigate tax avoidance to secure sufficient funds for public initiatives (faisal et al., 2023). this study is fundamentally justified by the necessity to comprehend how organizations in this field navigate their tax obligations via financial strategies such as asset allocation and revenue management. moreover, the current research presents inconclusive findings regarding the associations between profitability, capital intensity, and sales growth in tax avoidance. it underscores the need for more context-specific analyses, especially in emerging countries like indonesia. this article examines the correlations between essential financial metrics and tax avoidance in publicly traded construction firms from 2020 to 2022. prior studies have yielded inconclusive findings on the significant impact of profitability, capital intensity, or sales growth on tax avoidance (salim, 2023). this study concentrates on indonesia’s construction sector to address a literature gap, providing theoretical and practical contributions. this study employs quantitative methods, analyzing data from 15 publicly traded companies on the indonesia stock exchange. the study utilizes multiple linear regression to examine the correlation between the independent variables—profitability, capital intensity, and sales growth— and the dependent variable, tax avoidance, as indicated by the effective tax rate (etr). this method facilitates the detection of statistically significant patterns that elucidate company behaviour about tax avoidance (bosua & evans, 2024; huang & huang, 2020; matute et al., 2021). the results indicate that capital intensity and sales growth substantially affect tax avoidance, with firms possessing more significant asset investments and accelerated growth and more inclined to adopt strategies that minimize their tax liabilities. notably, profitability does not exhibit a substantial impact, indicating that companies in this sector may prioritize asset-oriented strategies over profit-driven tax minimization (girasa, 2022). these findings provide significant insights into how financial frameworks within the construction sector facilitate tax avoidance and may guide future tax policy modifications in indonesia. https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 3 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc tax avoidance constitutes a significant challenge for governments globally, compromising their capacity to generate sufficient revenue for public services and national development (hossain et al., 2024). this study aims to analyze the impact of profitability, capital intensity, and sales growth on tax avoidance among publicly listed construction firms in indonesia from 2020 to 2022. by employing multiple linear regression analysis on financial data from 15 firms, this research seeks to provide empirical evidence on how these financial factors influence tax minimization strategies. unlike previous studies, this research focuses on an industry-specific context in an emerging market, offering insights into the financial mechanisms that drive tax avoidance in asset-intensive sectors. the complexity of this problem lies in the interplay between corporate financial decisions and legal tax strategies. companies aim to optimize their profits while adhering to tax regulations, yet many exploit legal loopholes to reduce their taxable income (saeed, 2023). profitability, capital investments, and growth dynamics create layers of complexity, as firms must balance the cost of tax compliance with the benefits of minimizing taxes (ali et al., 2022). the construction sector, in particular, presents a challenging case due to its reliance on fixed assets, which provide opportunities for depreciation-based tax reductions, and the cyclical nature of its revenue, which can fluctuate with market conditions (hofmann et al., 2022). the findings contribute both theoretically and practically. theoretically, this study enhances the understanding of corporate financial behavior in tax planning, particularly in developing economies. practically, the results offer valuable implications for policymakers to design more effective tax regulations tailored to industries with high capital investment and revenue volatility. by addressing these gaps, this research provides a fresh perspective on corporate tax strategies in indonesia’s construction sector. while many studies have examined tax avoidance in developed economies, limited research has been conducted in developing countries, particularly within the construction sector (sebele-mpofu et al., 2021). by addressing this gap, the research contributes to the empirical, theoretical, and methodological understanding of how financial characteristics influence corporate tax behavior. the paper synthesizes theories from corporate finance and tax planning to analyze the relationships between profitability, capital intensity, and sales growth. the findings will be linked to the literature review, which explores previous research on tax avoidance and discusses how this study provides a fresh perspective on the issue. methodologically, the use of multiple linear regression offers a robust framework for testing the hypotheses, ensuring that the results are statistically sound and applicable to the broader context of tax policy in developing markets. method this study examines the correlation between profitability (x1), capital intensity (x2), and sales growth (x3) as independent variables and tax avoidance (y) as the dependent variable. the research analyzes construction and building firms listed on the indonesia stock exchange (idx) from 2020 to 2022. the financial reports of these companies serve as secondary data. a quantitative research strategy was employed to analyze the associations between variables https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 4 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc systematically through statistical methods. sugiyono (2017) articulated that quantitative research entails collecting and analyzing numerical data to evaluate hypotheses. this study used multiple linear regression analysis to examine the relationships between the independent and dependent variables. this study’s population comprises construction and building enterprises listed on the idx from 2020 to 2022. twenty-two companies were discovered in this sector. purposive sampling was utilized, selecting companies according to these criteria: listed on idx from 2020 to 2022, published audited financial reports for three consecutive periods, supplied comprehensive required financial data for calculating the study variables, and reported positive net income throughout the study period. fifteen companies were identified as the sample based on these criteria. secondary data from the official idx website (www.idx.co.id) comprised audited financial records for 2020 to 2022. the data documentation approach correctly recorded essential variables, including net income, total assets, and tax expenses. tax avoidance (y) was quantified by the effective tax rate (etr), determined by dividing income tax expense by pre-tax income (elvira, 2021). profitability (x1) was assessed by return on assets (roa), capital intensity (x2) was determined by the ratio of fixed assets to total assets, and sales growth (x3) was quantified as the percentage increase in sales relative to the prior period. table 1. presents the operational definitions and measurement scales for each variable variable indicator measurement formula scale profitability (x1) roa net income / total assets ratio capital intensity (x2) fixed assets / total assets fixed assets / total assets ratio sales growth (x3) (current sales previous sales) / previous sales percentage ratio tax avoidance (y) effective tax rate (etr) tax expense / pre-tax income ratio the research utilizes multiple linear regression to examine the impact of independent factors (x1, x2, x3) on the dependent variable (y). the regression equation is articulated as follows: y = a + b1x1 + b2x2 + b3x3 + e, where y denotes tax avoidance, a signifies the intercept, b1, b2, and b3 are coefficients corresponding to profitability, capital intensity, and sales growth, respectively, x1, x2, and x3 are the independent variables, and e represents the error term. assumption tests were performed to verify the robustness of the regression model. the kolmogorov-smirnov test confirmed data normality (significance > 0.05 denotes a normal distribution). variance inflation factor (vif) and tolerance values were assessed to identify multicollinearity (vif < 10; tolerance > 0.1 signifies the absence of multicollinearity) (chiadmi, 2021; firdaus, 2020; gujarati & dawn, 2013). the durbin-watson (dw) test revealed autocorrelation problems, whereas the glejser test was utilized to identify heteroscedasticity in the residuals (firdaus, 2020; gujarati & dawn, 2013). hypothesis testing was conducted using the thttps://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 5 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc test to evaluate the individual significance of each independent variable, the f-test to analyze the collective impact of independent variables on the dependent variable, and the coefficient of determination (r2) to quantify the proportion of variance in the dependent variable accounted for by the independent variables. this methodological technique guarantees a complete, advanced analysis that effectively addresses the study objectives (firdaus, 2020; firdaus et al., 2013). this transformation helps ensure that the regression estimates remain unbiased and efficient. additionally, the impact of autocorrelation on the regression model was considered when interpreting the results, as it could lead to underestimated standard errors and inflated test statistics if not properly handled. heteroscedasticity was assessed using the glejser test, where a significance value greater than 0.05 indicated the absence of heteroscedasticity. to ensure the reliability of hypothesis testing, multiple statistical tests were conducted: first the t-test was used to determine the individual significance of each independent variable, second step the f-test evaluated the joint significance of all independent variables on tax avoidance so the coefficient of determination (r²) measured the proportion of variance in tax avoidance explained by profitability, capital intensity, and sales growth (m.firdaus, 2020; m.firdaus et al., 2013; sugiyono, 2017). by addressing these statistical assumptions and applying necessary corrections, the regression model provides more reliable and interpretable findings regarding the relationship between financial indicators and tax avoidance in the indonesian construction sector. result and discussion comprehensive statistical analyses accompany the study’s results to substantiate the conclusions reached. the analysis encompasses 15 construction and building firms listed on the indonesia stock exchange (idx) from 2020 to 2022. the relationships among profitability, capital intensity, sales growth, and tax avoidance are evaluated through descriptive statistics, assumption tests, and hypothesis testing. descriptive statistics offer a summary of the data, encompassing the minimum, maximum, mean, and standard deviation for the variables: profitability (x1), capital intensity (x2), sales growth (x3), and tax avoidance (y). for instance, profitability exhibited a mean of -0.45955 and a standard deviation of 1.716531, signifying variability in firms’ capacity to leverage their assets for profit generation. capital intensity averaged 3.65619, indicating the firms’ investment in fixed assets with total assets. the average sales growth was 2.94917, indicating differing levels of revenue fluctuation, whereas tax avoidance, assessed through the effective tax rate (etr), averaged 0.45639, reflecting a range of practices among companies. assumption tests were performed to validate the regression model. conformity the kolmogorovsmirnov test confirmed that the residuals are normally distributed (asymp. sig. = 0.200 > 0.05). the multicollinearity test indicated that tolerance values for all independent variables surpassed 0.10, and vif values remained below 10, thereby confirming the absence of multicollinearity. the https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 6 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc glejser test for heteroskedasticity revealed significance values exceeding 0.05 for all variables, signifying the lack of heteroskedasticity. the durbin-watson statistic (0.822) indicated the existence of autocorrelation, necessitating a cautious interpretation of the results. the subsequent results were derived from multiple linear regression analysis. profitability (x1), with a coefficient of 0.014 (t = 0.134, sig. = 0.894 > 0.05), demonstrates no significant effect on tax avoidance. it suggests firms with higher profitability do not necessarily engage in more tax avoidance. capital intensity (x2), a negative coefficient of -2.065 (t = -9.392, sig. = 0.000 < 0.05) signifies a significant inverse relationship. firms with higher fixed asset investments exhibit reduced effective tax rates, likely due to depreciation benefits. sales growth (x3), the coefficient of 0.299 (t = 3.530, sig. = 0.001 < 0.05) demonstrates a significant positive impact. firms with higher revenue growth tend to use tax avoidance practices to maximize retained earnings. the f-test confirmed that profitability, capital intensity, and sales growth influence tax avoidance significantly (f = 214.506, sig. = 0.000 < 0.05). the adjusted r-squared value of 0.827 indicates that the independent variables explain 82.7% of the variance in tax avoidance, with the remaining 17.3% attributed to other factors. the minimal impact indicates that less profitable enterprises in the sample may prioritize compliance over tax-minimizing measures. this discovery is consistent with the research conducted by (rabbi & almutairi, 2021) and (gavious et al., 2022), but it contradicts the results of (blaufus et al., 2023), which identified a substantial influence. a probable explanation is that enterprises with diminished profitability may lack the financial resources or motivation to pursue proactive tax planning (traini et al., 2024). furthermore, firms with elevated profitability frequently encounter increased regulatory oversight, deterring them from participating in tax avoidance strategies. the substantial inverse correlation supports the idea that fixed asset investments facilitate tax reduction via depreciation. depreciation allowances diminish taxable income, hence decreasing the effective tax rate. companies with significant capital assets, such as machinery or infrastructure, can utilize these deductions to reduce tax obligations. this discovery aligns with the research conducted by (rabbi & almutairi, 2021). moreover, the findings indicate that capital-intensive enterprises may prioritize investments in long-term assets rather than short-term tax advantages, strengthening their strategic standing in competitive marketplaces. the favourable correlation corresponds with the anticipation that increased sales growth motivates companies to optimize tax obligations to safeguard cash flows. as companies experience revenue growth, they face heightened tax liabilities, leading them to implement tactics for tax efficiency. it is especially pertinent for construction companies functioning in unstable markets, where preserving liquidity is essential. the results corroborate the conclusions of (gavious et al., 2022) and enhance the comprehension of the influence of sales growth on financial decisionmaking. this study underscores the dynamic interplay between financial performance metrics and tax avoidance behavior. the findings suggest several theoretical and practical implications: https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 7 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc 1. for policymakers: tax authorities should consider revising tax incentives to promote equitable tax contributions across firms with varying profitability levels. high-profit firms should be monitored closely to ensure compliance without discouraging legitimate tax planning. 2. for capital-intensive industries: policies encouraging transparent reporting of depreciation and asset utilization could enhance tax compliance. increased tax incentives for asset-heavy industries may further encourage reinvestment in infrastructure and equipment. 3. for regulators: authorities should monitor rapidly growing firms more closely to prevent aggressive tax avoidance strategies that could undermine tax revenue collection. implementing stricter reporting requirements for high-growth firms may help maintain tax fairness. the research highlights the interactive relationship between financial performance indicators and tax evasion practices. policymakers might contemplate amending tax incentives to foster equal tax contributions among enterprises with differing profitability levels. regulations promoting transparent disclosure of depreciation and asset usage in capital-intensive sectors may improve tax compliance. furthermore, tax authorities may require increased scrutiny of quickly expanding enterprises to deter aggressive tax avoidance tactics. conclusion this study examined the correlation between profitability, capital intensity, and sales growth concerning tax avoidance among idx-listed construction companies from 2020 to 2022. the results offer empirical insights into business tax tactics and enhance the theoretical comprehension of the impact of financial performance indicators on tax evasion behaviour. the results indicated that profitability did not significantly influence tax avoidance, suggesting enterprises with elevated profitability levels do not inherently pursue more aggressive tax planning strategies. it corresponds with prior research indicating that regulatory oversight on highly profitable companies may restrict their tax reduction capacity. nonetheless, it prompts inquiries regarding the efficacy of current tax regulations in identifying enterprises according to profitability indicators. capital intensity exhibited a notable adverse correlation with tax evasion. this discovery underscores asset depreciation’s function as a tax reduction mechanism. capital-intensive enterprises gain substantial depreciation deductions, reducing their taxable income and effective tax rates. this finding is especially pertinent for policymakers to prevent the disproportionate use of depreciation regulations. sales growth significantly influenced tax avoidance, indicating that rapidly expanding enterprises may pursue tax-saving techniques to improve cash flow. this discovery highlights the necessity of scrutinizing high-growth enterprises, as their assertive tax strategies may impact fair tax contributions. sales growth, on the other hand, has a significant positive impact on tax avoidance. rapidly expanding firms may adopt aggressive tax strategies to optimize cash flow, which can lead to inequitable tax contributions. this finding underscores the importance of strengthening monitoring mechanisms for high-growth companies to ensure compliance with tax regulations. https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 8 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc policymakers could introduce more stringent disclosure requirements for firms experiencing rapid revenue expansion to enhance tax transparency and prevent aggressive tax planning. from a theoretical perspective, this research enriches the understanding of how financial performance metrics shape corporate tax behavior. it demonstrates that profitability, capital intensity, and sales growth play distinct roles in tax avoidance, adding complexity to existing frameworks. the study also emphasizes the interplay between operational decisions and fiscal policies, suggesting that a more dynamic and adaptive tax system could improve compliance and equity. policy implications 1. refining profitability based tax regulations , given the lack of a significant relationship between profitability and tax avoidance, tax authorities should reconsider how corporate tax rates are structured to ensure fair contributions from firms across profitability levels. introducing alternative tax assessment measures, such as industry-specific benchmarks, could improve compliance. 2. reevaluating depreciation tax benefits, while depreciation deductions support long-term investment, excessive tax reductions may create imbalances. the government should assess whether existing depreciation policies disproportionately benefit certain industries and consider policy adjustments to prevent unintended tax loopholes. 3. strengthening oversight for high growth firms, firms experiencing rapid sales growth tend to engage in tax avoidance strategies. enhancing transparency requirements, such as mandatory tax disclosure for high-growth companies, could deter aggressive tax planning and promote fair tax contributions. this research contributes to the literature on business tax avoidance by elucidating the intricate roles of profitability, capital intensity, and sales growth. it offers empirical evidence that financial performance measurements affect tax strategies in distinct ways. it theoretically enhances the comprehension of the intersection between operational decisions and fiscal policies. the results indicate that amending tax incentives and depreciation regulations may result in more equitable tax regimes. enhanced oversight may guarantee adherence to regulations and fair tax contributions for fast-expanding enterprises, stabilizing government income streams. this study reveals the divergent influences of profitability and capital intensity on tax avoidance, thereby complicating established hypotheses. nevertheless, the analysis possesses shortcomings, including its dependence on secondary data from financial statements, which may inadequately reflect the complexities of tax tactics. the emphasis on construction enterprises restricts the applicability of the findings to other sectors. subsequent research could examine the influence of governance frameworks or managerial incentives on tax evasion. broadening the sample to encompass firms from other industries or geographic regions may yield a more comprehensive insight. future studies may also investigate the impact of technical improvements on facilitating or hindering tax avoidance strategies. the research design facilitated rigorous statistical analysis; nonetheless, the conclusions may be affected https://www.ilomata.org/index.php/ijtc dynamics of tax avoidance in the construction sector: the role of profitability, capital intensity, and sales growth ekawarti, widyastuti, alfiana and summagat 9 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc by the accuracy of financial statements and external economic conditions throughout the study period. these aspects require careful interpretation and highlight the necessity for extensive, longitudinal research. this study provides significant insights into the relationship between financial performance and tax tactics, establishing a basis for future research and policy development to improve tax compliance and equity. reference ali, s., rangone, a., & farooq, m. 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(2024). aggressive tax planning and labor investments. journal of accounting, auditing & finance, 39(3), 697–725. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no.77-96 77 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance alfiyyah nuur fadhilah1,, eddy suranta2 12bengkulu university, indonesia correspondent : alfiyyahnuurfadhila@gmail.com1 received : october 27, 2023 accepted : december 30, 2023 published : january 31, 2024 citation: fadhilah, a, n., suranta, e. (2024). the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance. ilomata international journal of tax and accounting, 5(1), 77-96. https://doi.org/10.52728/ijtc.v5i1.1001 abstract: this research aims to offer empirical insights into variations in earnings management within companies categorized in the environmental, social, and governance (esg) score ranking, and seeks to establish a correlation between earnings management practices and environmental, social, and governance (esg) performance. the study scrutinizes accrual earnings management alongside real earnings management. the environmental, social, and governance (esg) score ranking comprises four categories: low, medium, high, and severe. accrual earnings management is gauged through the modified jones model, while real earnings management is assessed using three proxies abncfo, abnprod, and abndisc. the research focuses on manufacturing companies possessing environmental, social, and governance (esg) scores and adopts a purposive sampling approach. the outcomes reveal distinctions between abncfo and abnprod real earnings management in the severe and low esg rating groups, whereas no differences exist in accrual earnings management and abnprod real earnings management. additionally, the study establishes that abncfo and abndisc real earnings management significantly influence environmental, social, and governance (esg) performance positively. conversely, accrual earnings management shows no adverse impact on environmental, social, and governance (esg) performance, and abnprod real earnings management exhibits a positive albeit insignificant effect on environmental, social, and governance (esg) performance. the practical implication of this research is that when the company has a high esg score which reflects the uncertainty of the company's future operations, the company tends to carry out real earnings management in the form of abnormal cash flow operations (abncfo) and abnormal discretionary expenses (abndisc). keywords: accrual earnings management, real earnings management, enviromental social governance this is an open access article under the cc-by 4.0 license. https://www.ilomata.org/index.php/ijtc mailto:alfiyyahnuurfadhila@gmail.com https://doi.org/10.52728/ijtc.v5i1.1001 the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 78 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction environmental, social, and governance (esg) is an interesting topic to research, as esg has become popular at the national and international levels in recent years. esg is an interesting topic because in the early days esg was the center of attention of many empirical and research studies, so research topics that discuss esg are often related to many perspectives within the company. initially, only large companies adopted esg because, on the one hand, esg implementation is an expensive cost for a company to incur. on the other hand, the attention given by investors is still quite low, because esg is a long-term investment. environmental, social, and governance itself is a standard and strategy commonly applied in evaluating company performance and predicting future financial performance by investors (li et al., 2021). esg also has an esg risk assessment, which is grouped into five categories in the esg score assessment. the lowest esg risk assessment category is called negligible, meaning that negligible is a category where the esg risk owned by the company is considered negligible, because the impact on the environment and society is low, allowing the risk to be ignored by the company. the highest category is called severe. in the severe classification, it denotes that the company's environmental, social, and governance (esg) risks are notably critical. consequently, these severe risks hold substantial implications for both the environment and society. within this category, business risks elevate to a critical level, prompting management to potentially resort to earnings management as a strategy to mitigate these risks. environmental, social, and governance remains a compelling subject, particularly in emerging nations like indonesia. esg is an interesting topic to discuss in indonesia because, the understanding of esg is not yet optimal in indonesia so that research on esg is also still limited, and in indonesia there are still few studies that discuss esg with company performance and esg with competitive advantage. some previous studies that discuss how much influence esg has on financial performance still do not provide consistent evidence. for example, the study (lubis & rokhim, 2021a; nollet et al., 2016; pertiwi & hersugondo, 2023; ruan & liu, 2021) the findings indicate that the performance related to environmental, social, and governance (esg) had an adverse and inconsequential impact on the company's overall performance. subsequently, research conducted by (febry antonius, 2023; ghazali & zulmaita, 2020; junius et al., 2020; martha & khomsiyah, 2023; tao, 2023) revealed that environmental, social, and governance (esg) had a concurrent positive and noteworthy impact on company performance. conversely, the study by (husada & handayani, 2021; nabilah nurdiati, dewi susilowati, 2020) indicated that esg did not exert any influence on financial performance. various prior studies examining the performance of companies regarding environmental, social, and governance (esg) on the indonesia stock exchange (idx) have failed to present consistent evidence, mainly due to the inefficiencies observed in indonesia's capital market. so, the reason for wanting to re-examine esg performance is not only because there are different results, but because the capital market in indonesia is not efficient so that the ability of capital market players to process information and the amount of information is also still very limited. in addition, a previous study (lubis & rokhim, 2021b) it also elaborated on the competitive advantage that https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 79 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc could strengthen the correlation between esg disclosure and company performance. thus, companies that disclose higher levels of esg aim to attain a more significant competitive edge compared to those revealing fewer esg aspects. although all companies have considered esg as one of the key indicators in explaining the progress of the company, so that by disclosing esg it is an effort to reduce information asymmetry and solve agency problems. investors utilize esg disclosure and financial statements as key indicators for evaluating company performance. however, while financial performance stands as one measure, esg disclosure is also considered pivotal. the attention a company allocates to esg practices serves as an essential metric for investors assessing its performance alongside financial aspects. nonetheless, there's a conflict concerning financial performance, where the interests of company management often lead to misleading financial statements. these statements might not accurately portray the company's actual condition due to manipulation, predominantly through earnings management. earnings management serves the purpose of enhancing the appearance of financial statements. essentially, it aligns the company's financials with management's preferences, aiming to present an improved economic position. the research by (almubarak et al., 2023) indicates a substantial and positive link between earnings management practices and esg. this suggests that disclosing environmental, social, and governance data heightens the likelihood of successful earnings management. fundamentally, managers use esg disclosures to manage stakeholders' perceptions and conceal their underlying intentions. esg disclosures create a better level of transparency in the financial statements, which supports the match between the expectations desired by investors and those desired by the company. for example, a business organization with weak corporate governance will normally attempt all actions that harm shareholders, which results in earnings management being the center of attention or the main spotlight. this is reinforced by the condition that the company has a fairly weak corporate governance, so that management tends to be able to take all actions that will harm shareholders, by focusing more attention on efforts to carry out earnings management. there are two methods for conducting earnings management: accrual-based earnings management and tangible/real earnings management. the aim of this investigation is to explore potential variances in accrual-based earnings management and tangible earnings management practices among companies listed in the esg score rankings. additionally, it seeks to analyze the impact of both accrual-based and tangible earnings management on the environmental, social, and governance (esg) performance. this study mirrors a prior research endeavor by (khuong et al., 2023), wherein the findings indicated a positive correlation between real earnings management and corporate social responsibility (csr), while accrual earnings management exhibited a negative association with csr. however, this study diverges from the previous research by focusing on companies specifically assessed through environmental, social, and governance (esg) scoring. the rationale for using companies with https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 80 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc esg scores lies in their higher level of financial transparency, which aids in aligning investor expectations with those of the company. agency theory agency relationships are formed through contractual agreements in which one or more individuals (principals) request the services of another individual (agent) to perform a specific task on their behalf. the agent is granted decision-making authority for the task. in situations where both parties aim to maximize their individual profits, the agent may act in ways that don't align with the principal's interests (jensen & meckling, 1976). agency problems stem from the divide between the principal and agent, creating a discrepancy in information. this information gap allows managers to possess more insights into the company's internal conditions and future prospects compared to the owners (septiadi et al., 2017). agency theory highlights differing interests between owners and management, leading management to engage in real and accrual earnings management to achieve predetermined financial targets (syahrani, 2021). however, these strategies could negatively affect a company's esg performance. esg establishes investment practice guidelines for companies that harmonize and execute their policies in line with environmental, social, and governance principles (gustin ningwati, ratna septiyanti, 2022). in the context of esg performance, agency theory explains the link between earnings management and esg. companies should prioritize social, environmental, and governance responsibilities to bolster credibility regarding their actions and concerns. this fosters increased trust and societal backing, ultimately benefiting the company's long-term sustainability. research findings underline a distinct and substantial correlation between social performance and financial outcomes. specifically, improved social performance can improve financial performance, while improved financial performance can motivate companies to improve their social performance. appropriately assessing and improving these interconnected aspects is critical to overall success. differences in accrual earnings management by companies on environmental, social, and governance (esg) score ratings esg utilizes an esg risk assessment score, which categorizes risk assessments. these groups include the severe-to-high group, severe-to-medium group, and severe-to-low group. within this research, dac (discretionary accruals) serves as a measure for accrual earnings management. in the severe-to-high dac group, companies face severe esg risks, impacting both the environment and society. these risks pose significant threats to business, leading management to employ accrual earnings management to mitigate these risks. this aligns with agency theory, which highlights the divergent interests between owners and management, permitting the use of accrual earnings management (araújo mendes et al., 2012; sunarto, 2009; susanto, 2017). in companies that have an esg score that is included in the severe group, it contains heavy risks, thus reflecting the uncertainty over the company's business operations, so that managers will take advantage of this uncertainty for their personal interests, one of which is by doing earnings management, so that the company looks in good condition. earnings management will be higher https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 81 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc when companies have information asymmetry problems, where company owners cannot access information about the company's actual performance, thus companies that have a higher esg score, the earnings management carried out by the company tends to be higher (adams, 1994; donaldson & davis, 1991). companies that are included in the high esg group mean that they have high risk, high risk can also be caused by the high level of debt owned by the company, so that managers can take advantage of this to expand their discretionary power and carry out earnings management to produce positive net income in accounting (chouaibi & zouari, 2022). when managers control more company information, this encourages management to gain their own benefits (previlage), so that it can lead to information asymmetry. the existence of this information gap can motivate and create opportunities for managers to carry out earnings management, as well as optimize utility and benefit management. this is done solely to make the company's condition look good, because the condition of the company is used as a reference or basis for investors to make an assessment (karin et al., 2016). this study will explore the accrual earnings management practices among companies in relation to their environmental, social, and governance (esg) score rankings. as such, the hypothesis for this investigation can be stated as follows: hypothesis 1 (h1): there are differences in accrual earnings management carried out by companies on the environmental, social, and governance (esg) score rankings. differences in real earnings management performed by companies on environmental, social, and governance (esg) score ratings real earnings management, like accrual earnings management, is assessed based on the esg risk scores across various groups. within this evaluation, it confronts agency problems that can potentially ignite conflicts of interest between shareholders and management. this management prioritization of personal interests over shareholders' interests often leads to the implementation of real earnings management practices (ningsih & wiyadi, 2012; vakilifard & mortazavi, 2016; yanti, 2020). real earnings management encompasses three proxies: abnormal cash flow operations (abncfo), abnormal production costs (abnprod), and abnormal discretionary expenses (abndisc), segmented into distinct groups—severe and high, severe and medium, and severe and low. concerning abncfo, severe-rated companies tend to engage in real earnings management through cash flow transactions linked to heightened sales (herlina wijayanti, 2014; trisnawati & suhestiningsih, 2012). conversely, those in the low category refrain from reporting increased profits linked to reduced sales-related cash flow transactions. in abnprod, firms categorized as severe tend to execute real earnings management by ramping up production to reduce production costs and inflate profit figures (hapsoro & bahantwelu, 2020; trabelsi & chalwati, 2023). in contrast, those rated low struggle to boost profits through mass production. for abndisc, companies in the severe group tend to manipulate expenses like advertising, cost of revenue, https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 82 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc administrative costs, and research expenses to inflate profit figures (simamora, 2021). on the contrary, low-rated companies do not escalate profits by increasing these expenses. this study aims to explore the practice of real earnings management across companies aligned with their esg score ratings. hence, the formulated hypothesis for this study is: hypothesis 2 (h2): there are differences in real earnings management carried out by companies on the environmental, social, and governance (esg) score rankings. accrual earnings management and environmental, social, and governance (esg) performance accrual earnings management involves manipulating earnings through the company's accrual activities, like selective accounting methods, particularly via discretionary accruals (suhesti, 2015). consequently, using accrual earnings management may lead to future problems, impacting longterm earnings negatively. despite this, companies often enhance their financial statements annually without contemplating the long-term repercussions. they tend to continuously employ tactics like "cooking the books" via accrual earnings management to present a more favorable performance picture. the objective of accrual earnings management is to mislead users of financial statement information. additionally, it contributes to information asymmetry due to agency issues arising from the separation between principal and agent. this asymmetry enables managers to possess more insights into the company's internal conditions and future prospects compared to owners (septiadi et al., 2017). this agency theory offers insight into the relationship between earnings management and esg. earlier studies have explored the link between accrual earnings management and csr, like the work of (khuong et al., 2023), indicating low csr disclosure participation linked with higher possibilities of accrual earnings management manipulation. this reveals the negative impact of accrual earnings management on csr. further investigations have attempted to examine the connection between accrual earnings management and esg. research by (amertha, 2013; andriani & arsjah, 2022; velte, 2019) suggests that esg performance negatively influences accrual earnings management. for instance, (vincentia anindha primacintya, 2023) study demonstrates that companies with higher esg performance engage less in accrual earnings management activities. this study will delve into accrual earnings management and its impact on esg performance. therefore, the formulated hypothesis for this study is: hypothesis 3 (h3): accrual earnings management has a negative impact on environmental, social, and governance (esg) performance. real earnings management and environmental, social, and governance (esg) performance real earnings management refers to the strategic manipulation of earnings through day-to-day company operations within the current accounting period (yuniatmoko, 2018). it involves three methods: sales manipulation, overproduction, and discretionary cost reduction (roychowdhury, https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 83 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2006a). the primary aim of real earnings management is to attain the company's targeted profit by tweaking profits through ongoing operational activities. the pursuit of real earnings management aligns with a fundamental distinction in agency theory: management performance is evaluated based on profits, prompting principals to anticipate high earnings. however, implementing real earnings management can lead to unforeseen long-term repercussions. sustained low prices might condition customers to resist higher prices, even with valid justifications. moreover, incentivizing soft credit sales can rapidly escalate risky debts. arbitrarily cutting advertising and r&d expenses can compromise the company's market position. studies exploring the link between accrual earnings management and esg, like (farha et al., 2022), discovered a positive and substantial correlation between environmental disclosure and real earnings management activities, particularly those involving abnormal production costs. increased corporate environmental disclosure often motivates managers to engage in real earnings management, specifically overproduction, as a means to drive such activities. overproduction is utilized to reduce generated revenue, leading to abnormal production costs. this research will delve into real earnings management and its association with esg performance. therefore, the formulated hypothesis for this study is: hypothesis 4 (h4): real earnings management positively impacts environmental, social, and governance (esg) performance. method research model and design the study employs a quantitative methodology to facilitate hypothesis testing, aiming to establish connections among the variables outlined in the research model. this investigation focuses on exploring accrual earnings management, real earnings management, and their relationship with environmental, social, and governance (esg). population and sample selection method the study's population encompassed all manufacturing firms listed on the indonesia stock exchange (idx). sample selection criteria included manufacturing companies meeting specific qualifications: being listed on the idx before 2019, having esg scores, utilizing the rupiah currency, and include managerial ownership the period from 2019 to 2023, with 2018 serving as the reference year. the samples were selected using a purposive sampling method. https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 84 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1 criteria for sample selection sample selection criteria total companies engaged in manufacturing that are publicly listed on the indonesia stock exchange (idx) in the period from 2019 to 2023. 183 less: manufacturing companies that are publicly listed on the indonesia stock exchange (idx) in the period between 2019 and 2023 that do not report esg scores. (137) less: manufacturing companies publicly listed on the indonesia stock exchange (idx) in the period between 2019 and 2023 that do not have managerial ownership. (35) final sample 11 data collection method this research relies on secondary data sourced from the esgi dataset available on the indonesia stock exchange (idx) and annual financial statements retrieved from both the idx website (www.idx.co.id) and the official websites of the respective companies. data processing method the study employed the independent samples t-test technique to examine variations in accrual earnings management and real earnings management among companies based on their esg score ratings. additionally, it utilized linear regression analysis to explore how accrual earnings management and real earnings management impact esg performance. these analyses were performed using ibm spss statistics 21 software. operational definition and measurement of variables table 2 describe process of operationalization and measurement of research variables variables measurement source dependent variable esg score esg score criteria risk score category description 0-10 negligible considered to have negligible esg risks 10-20 low considered to have low esg risk 20-30 medium considered to have medium esg risk 30-40 high considered to have high esg risk >40 severe considered to have severe esg risks www.idx.co.i d https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ http://www.idx.co.id/ the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 85 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc independe nt variable accrual earnings managemen t  tacit = niit – cfoit  tacit tait−1 = 𝛽1 [ 1 tait−1 ] + β2 [ δsalesit tait−1 ] + β3 [ ppeit tait−1 ]  ndait = 𝛽1 [ 1 tait−1 ] + β2 [ δsalesit−δrecit tait−1 ] + β3 [ ppeit tait−1 ]  dacit = tacit tait−1 − ndacit the modified jones model (arbi et al., 2022; suranta et al., 2010) real earnings managemen t cfot at − 1 = α1 [ 1 at − 1 ] + α2 [ sales at − 1 ] + α3 [ 𝛥sales at − 1 ] abn_cfo = cfot cfot at−1 prodt at − 1 = α1 [ 1 at − 1 ] + α2 [ sales at − 1 ] + α3 [ 𝛥sales at − 1 ] + α4 [ 𝛥sales − 1 at − 1 ] abn_prod = prodt prodt at−1 disexpt at − 1 = α1 [ 1 at − 1 ] + α2 [ sales at − 1 ] abn_disexp = disespt disexpt at−1 (roychowdh ury, 2006b) control variable leverage 𝑳𝑬𝑽 = 𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒚𝒊𝒕 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔𝒊𝒕 (sabrina et al., 2020) return on asset (roa) 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 × 100% (marietza et al., 2020) size 𝑆𝑖𝑧𝑒 = 𝐿𝑛 (𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝑖𝑡) (lestari et al., 2020) age 𝐴𝑔𝑒 = 𝑌𝑒𝑎𝑟 𝑜𝑓 𝑅𝑒𝑠𝑒𝑎𝑟𝑐ℎ − 𝑌𝑒𝑎𝑟 𝑜𝑓 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝐸𝑠𝑡𝑎𝑏𝑙𝑖𝑠ℎ𝑚𝑒𝑛𝑡 (ida & magdelena, 2020) managerial ownership 𝑀𝑎𝑛𝑎𝑔𝑒𝑟𝑖𝑎𝑙 = 𝑇𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒𝑠 ℎ𝑒𝑙𝑑 𝑏𝑦 𝑚𝑎𝑛𝑎𝑔𝑒𝑚𝑒𝑛𝑡 𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 × 100% (nansi ria nandita, saiful, 2017) https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 86 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion in line with the predefined purposive sampling criteria, 44 sets of observation data were collected. these observations encompassed information from 11 manufacturing firms listed on the indonesia stock exchange (idx), meeting the criteria of possessing environmental, social governance (esg) scores within the 2019 to 2023 observation period. descriptive statistics the descriptive analysis outcomes of the dependent, independent, and control variables in this research are detailed in the table below: table 3 descriptive statistics of all research variables source: secondary data processed, 2023 in table 1, the analysis reveals the specifics of the dependent variable, esg. the lowest recorded esg score stands at 17.56, classifying companies into the low group, while the highest score is 52.80, indicating placement in the high group. the average esg score across the sample companies is 38.2570. the standard deviation of the esg score is 9.75103, portraying relatively minor variations among the sampled companies in terms of their esg scores. regarding the independent variables, this study examines accrual earnings management (dac) and real earnings management (abncfo, abnprod, and abndisc). the mean for accrual earnings management (dac) stands at -0.0048745136, suggesting that the sampled companies tend to reduce their earnings figures by following an income minimization pattern. the maximum dac value, however, showcases a positive figure, indicating that certain sample companies increase earnings figures, pursuing an income maximization approach. as for real earnings management (abncfo), the average is -0.0037733523, signifying an inability to boost profits by increasing sales volume. the average value of real earnings management (abnprod) at 0.8543393969 demonstrates that companies engage in real earnings management by mass producing goods, thus reducing the cost of goods to augment profit figures. the average real earnings management (abndisc) value, at 0.0165086850, indicates that companies in the sample minimum maximum mean standar deviation esg 17.56 52.80 38.2570 9.75103 dac -0.12580855 0.12318859 -0.0048745136 0.05217937890 abncfo -0.20295800 0.16733276 -0.0037733523 0.07278387043 abnprod -0.82145640 9.05615179 0.8543393969 1.77566475952 abndisc -0.68199864 0.24447389 0.0165086850 0.17772935945 age 8 90 43.95 19.786 lev 0.00000000 1.00403284 0.3223902956 0.25298871613 roa 0.00416021 0.35801754 0.0964212773 0.09382038716 size 29.46277748 33.65518758 31.6426956123 1.10054902146 manajerial 0.00000362 0.25241976 0.0466256408 0.07820267188 https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 87 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc engage in real earnings management by cutting costs related to advertising, revenue, administration, and research to augment profit figures. hypothesis testing the hypotheses in this study are examined through independent samples t-test, assessing variations within each esg score group concerning accrual earnings management (dac) and real earnings management (abncfo, abnprod, and abndisc). the outcomes of these tests are outlined in table 2 provided below. table 4 independent sample t-test of accrual earnings management and real earnings management dac n mean f sig. t sig. (2-tailed) severe 28 -0.001799 1.188 0.282 1.185 0.242 high 18 -0.019494 severe 28 -0.001799 1.027 0.320 -0.790 0.436 medium 2 0.024834 severe 28 -0.001799 0.186 0.669 -0.0586 0.562 low 7 0.010437 abncfo n mean f sig. t sig. (2-tailed) severe 28 0.004733 0.007 0.932 0.144 0.886 high 18 0.001803 severe 28 0.004733 0.137 0.714 -0.157 0.876 medium 2 0.012690 severe 28 0.004733 0.003 0.957 2.671 0.012 low 7 -0.073774 abnprod n mean f sig. t sig. (2-tailed) severe 28 0.906696 0.492 0.487 0.260 0.796 high 18 0.801379 severe 28 0.906696 0.453 0.506 -1.252 0.221 medium 2 2.044323 severe 28 0.906696 13.441 0.001 -1.688 0.101 low 7 2.242247 abndisc n mean f sig. t sig. (2-tailed) severe 28 0.027659 0.913 0.345 -1.275 0.209 high 18 0.080540 severe 28 0.027659 0.732 0.399 -0.410 0.685 medium 2 0.076273 severe 28 0.027659 2.775 0.105 3.467 0.001 low 7 -0.234623 source: secondary data processed, 2023 https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 88 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc first hypothesis differences in accrual earnings management among companies ranked by esg score the presented table above outlines the results of the difference test conducted across various groups based on esg scores. in the severe and high groups, both groups (severe and high) have an average value of negative discretionary accruals, which means that companies that fall into both groups carry out accrual earnings management by reducing the number of earnings with income minimization/income decreasing patterns. the test between these groups does not demonstrate a significant difference (ρ value > 5%), thus rejecting the initial hypothesis of distinct accrual earnings management. consequently, it's concluded that there's no divergence in accrual practices between these esg groups. in the comparison between severe and medium groups, the severe group have a negative average discretionary accrual value, which means that the company performs accrual earnings management by lowering the profit figure with an income minimization/income decreasing pattern, while for companies included in the medium group the average is positive, indicating that the companies in the group perform accrual earnings management by increasing the profit figure with an income maximization/income increasing patterns. however, the medium group exhibits positive averages, illustrating income increment practices. yet, the test doesn't display a notable difference (ρ value > 5%), leading to the rejection of the hypothesis stating differences in accrual earnings management. thus, it's inferred that there's no distinct variance in accrual practices between these esg groups. upon assessing the severe and low groups, both categories exhibit negative average value of discretionary accruals, which means that the companies included in the group perform accrual earnings management by lowering earnings figures with income minimization/income decreasing patterns, while for companies included in the low group have a negative average value of discretionary accruals, which means that companies perform accrual earnings management by lowering earnings figures with income minimization/income decreasing patterns. however, the comparison between these groups does not reveal a significant difference (ρ value > 5%). consequently, rejecting the hypothesis of divergent accrual earnings management, it's concluded that there's no disparity in accrual practices between these two esg groups. second hypothesis differences in real earnings management among esg score ranked companies the findings from table abncfo demonstrate that companies falling within both severe and high esg score groups display positive averages in abnormal cash flow operations. this indicates that these companies engage in real earnings management by conducting cash flow transactions linked to escalated sales. however, the comparison between these groups doesn't exhibit a significant difference (ρ value > 5%). hence, the hypothesis suggesting a divergence in real earnings management is refuted, concluding no variance in real management practices between these esg groups. regarding the severe and medium groups, both segments present positive average values in abnormal cash flow operations, signifying real earnings management through increased sales transactions. yet, the comparison between these groups doesn't reveal a significant difference (ρ https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 89 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc value > 5%). consequently, the hypothesis of divergent real earnings management is rejected, establishing no difference in real management practices between these esg groups. in the comparison between severe and low groups, the severe group exhibits a positive average value in abnormal cash flow operations, indicating real earnings management via increased sales transactions. conversely, the low group showcases a negative average, suggesting real earnings management through decreased sales. this comparison presents a notable difference (ρ value < 5%). therefore, accepting the hypothesis of varied real earnings management, it's concluded that there are indeed differences in real management practices between these two esg groups. moving to table abnprod, the findings indicate that companies within both severe and high groups display positive average values in abnormal production costs, implying real earnings management through cost reduction in production. however, the comparison between these groups doesn't reveal a significant difference (ρ value > 5%). thus, rejecting the hypothesis of distinct real earnings management, it's concluded that there's no variance in real management practices between these esg groups. similarly, the comparison between severe and medium groups showcases positive average values in abnormal production costs for both segments. however, this comparison doesn't exhibit a significant difference (ρ value > 5%). hence, rejecting the hypothesis of distinct real earnings management, it's concluded that there's no difference in real management practices between these esg groups. upon comparing severe and low groups, the severe group exhibits a positive average value in abnormal production costs, indicating real earnings management through cost reduction. conversely, the low group displays a negative average, suggesting real earnings management through increased costs. this comparison demonstrates a significant difference (ρ value > 5%). therefore, accepting the hypothesis of varied real earnings management, it's concluded that there are differences in real management practices between these two esg groups. table abndisc portrays companies in both severe and high groups with positive average values in abnormal discretionary expenses, indicating real earnings management via cost reduction. however, the comparison between these groups doesn't reveal a significant difference (ρ value > 5%). consequently, rejecting the hypothesis of distinct real earnings management, it's concluded that there's no variance in real management practices between these esg groups. likewise, the comparison between severe and medium groups illustrates positive average values in abnormal discretionary expenses for both segments, yet doesn't exhibit a significant difference (ρ value > 5%). therefore, rejecting the hypothesis of distinct real earnings management, it's concluded that there's no difference in real management practices between these esg groups. conversely, comparing severe and low groups, the severe group showcases a positive average value in abnormal discretionary expenses, indicating real earnings management through cost reduction. in contrast, the low group displays a negative average, suggesting real earnings management through cost increment. this comparison demonstrates a significant difference (ρ value < 5%). hence, accepting the hypothesis of varied real earnings management, it's concluded that there are differences in real management practices between these two esg groups. https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 90 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accrual earnings management, real earnings management, and enviromental social governance (esg) table 3 is designed to demonstrate the impact of accrual earnings management on esg performance and the influence of real earnings management on esg performance. the test outcomes are displayed in the following table 3. tabel 6 ordinary least square (ols) results source: secondary data processed, 2023 variabel koefisien t sig koefisien t sig koefisien t sig koefisien t sig konstanta 2.994 4.439 0.000 2.928 4.435 0.000 2.587 4.495 0.000 3.768 5.424 0.000 dac 1.061 2.723 0.010 abncfo 0.612 2.438 0.021 abnprod 0.008 0.895 0.378 abndisc 0.259 2.270 0.031 age -0.008 -6.358 0.000 -0.009 -6.749 0.000 -0.010 -8.692 0.000 -0.007 -4.820 0.000 lev -0.371 -4.400 0.000 -0.371 -4.525 0.000 -0.376 -5.278 0.000 -0.427 -5.053 0.000 roa -0.592 -2.144 0.040 -0.454 -1.590 0.122 -0.312 -1.271 0.214 -0.739 -2.713 0.011 size 0.037 1.740 0.091 0.040 1.900 0.067 0.050 2.757 0.010 0.012 0.536 0.0596 manajerial 0.599 2.512 0.017 0.399 1.745 0.091 0.529 2.376 0.025 0.377 1.622 0.115 r square 0.863 0.883 0.912 0.880 adjusted r square 0.837 0.860 0.893 0.856 f 33.486 37.716 48.095 36.775 sig. 0.000b 0.000b 0.000b 0.000b https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 91 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc third hypothesis the effect of accrual earnings management on environmental, social, and governance (esg) performance examining the third hypothesis aims to establish a negative impact of accrual earnings management on esg performance. the test outcomes reveal a positive regression coefficient of accrual earnings management at 1.061, significant at the 0.01 level. this significant and positive coefficient suggests that increased accrual earnings management by a company correlates with higher esg performance. consequently, the study's findings contradict the initial hypothesis, leading to the rejection of the third hypothesis. thus, it can be concluded that accrual earnings management does not have a negative impact on esg performance. fourth hypothesis the effect of real earnings management on environmental, social, and governance (esg) performance the fourth hypothesis assessment aims to demonstrate the influence of real earnings management using various proxies on esg performance. for abncfo (abnormal cash flow operation), the examination unveils a positive and significant regression coefficient of 0.612, with statistical significance at the 0.02 level. this significant coefficient indicates that heightened real earnings management correlates with increased esg performance. consequently, this study validates the proposed hypothesis, affirming the positive impact of real earnings management on esg performance. thus, the fourth hypothesis is confirmed, suggesting a positive association between real earnings management using abncfo and esg performance. regarding abnprod (abnormal production costs), the findings reveal a positive regression coefficient of 0.008, which lacks statistical significance at the level of 0.378. this insignificant coefficient implies that real earnings management using abnprod does not significantly affect esg performance. hence, the study's results do not support the proposed hypothesis concerning abnprod. consequently, the fourth hypothesis is rejected, signifying an absence of a substantial relationship between real earnings management through abnprod and esg performance. as for abndisc (abnormal discretionary expenses), the analysis displays a positive and significant regression coefficient of 0.259 at the 0.03 level. this significant coefficient indicates that increased real earnings management via abndisc corresponds to heightened esg performance. thus, this study corroborates the proposed hypothesis, suggesting a positive connection between real earnings management using abndisc and esg performance. consequently, the fourth hypothesis is upheld, asserting that real earnings management has a positive effect on esg performance. conclusion this research aims to scrutinize variations in earnings management, gauged through both accrual and real earnings management practices adopted by companies ranked based on their esg scores. moreover, it seeks to examine whether accrual earnings management adversely affects esg https://www.ilomata.org/index.php/ijtc the effect of accrual earnings management and real earnings management on environmental, social, and governance (esg) reporting performance fadhilah and suranta 92 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance and if real earnings management positively influences esg performance. the findings from the conducted tests yield significant insights: (1) accrual earnings management, represented by the dac proxy, shows no variance among companies across different esg score rankings. (2) there's a contrast in real earnings management, using abncfo and abndisc proxies, between severe and low esg groups among companies, but no difference was observed using the abnprod proxy between severe and low esg groups. (3) surprisingly, accrual earnings management, as indicated by dac, exhibits a positive impact on esg performance. (4) real earnings management, specifically via abncfo and abndisc proxies, significantly enhances esg performance. however, employing the abnprod proxy demonstrates a positive yet insignificant effect on esg performance. the theoretical implications of this study provide additional empirical evidence related to agency theory, emphasizing the divergence of interests between owners and management. it underlines that management resorts to both real and accrual earnings management to achieve predetermined financial targets. moreover, agency theory elucidates the interplay between earnings management and esg, emphasizing that companies should prioritize their social, environmental, and governance responsibilities to establish credibility and demonstrate concern for societal interests. such initiatives foster trust and support from society, ultimately bolstering the company's longterm viability. the practical implication of this research is that when the company has a high esg score which reflects the uncertainty of the company's future operations, the company tends to carry out real earnings management in the form of abnormal cash flow operations (abncfo) and abnormal discretionary expenses (abndisc). companies tend to carry out real earnings management on abnormal cash flow operations (abncfo) related to the uncertainty about the company's cash flow that will be received in the future, while real earnings management in the form of abnormal discretionary expenses (abndisc) is carried out as an effort by the company to increase profit figures when the company has high uncertainty, by reducing advertising costs, cost of revenue, general and administrative expenses and research costs. this study is also expected to provide evidence of differences in accrual earnings management and real earnings management in the esg score criteria group by companies on the esg score ranking. where it can be a consideration for companies that have not reported esg scores, to immediately report esg scores, because companies that report esg scores have a better level of transparency in their financial statements, which can support to bring together the expectations desired by investors and those desired by the company. reference adams, m. b. 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(2023). pengaruh kinerja environmental, social, and governance terhadap manajemen laba dengan keragaman gender pada dewan komisaris sebagai variabel pemoderasi tesis untuk memenuhi sebagian persyaratan mencapai derajat sarjana s2 prodi studi magister akuntansi. universitas gajah mada. yanti, v. l. s. h. w. (2020). mendeteksi earnings management perusahaan melalui aktivitas riil. jurnal ekonomi, 25(1), 66. https://doi.org/10.24912/je.v25i1.627 yuniatmoko, i. (2018). pendeteksian manajemen laba riil pada perusahaan publik di indonesia yang melakukan right issue. 1. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 692-708 692 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse uchock pandapotan raja salomo sinaga1, dudi rudianto2 12universitas bakrie, indonesia correspondent: uchock.sinaga@gmail.com1 received : may 30, 2024 accepted : july 12, 2024 published : july 31, 2024 citation: sinaga, u, p, r, s., rudianto, d. (2024). impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse. ilomata international journal of tax and accounting, 5(3), 692-708. https://doi.org/10.61194/ijtc.v5i3.1322 abstract: the coal industry is a pillar of the indonesian economy as the main energy source and an important contributor to the country's foreign exchange. coal companies in the kompas100 index show significant stock performance measurements, giving rise to the need to understand the factors that contribute to variations in stock returns, both in terms of internal and external factors. this research aims to analyze the influence of internal factors (current ratio, net profit margin, debt to equity ratio) and external factors (inflation, interest rates, currency exchange rates) on stock returns of coal companies listed on the kompas100 index on the indonesia stock exchange. this research method uses a quantitative approach, purposive sampling is used to select samples based on the availability of complete financial data and relevant historical stock price data. the analysis shows that in this study, the current ratio (cr) has a significant positive influence on stock returns, while the net profit margin (npm) also has a significant positive influence. on the other hand, the debt to equity ratio (der) has a significant positive influence. externally, inflation has a significant negative impact on stock returns, while interest rates also have a significant negative impact, but the exchange rate does not affect stock returns. overall, internal factors influence stock returns, and external factors also influence stock returns. additionally, the combination of internal and external factors collectively affects stock returns with significant interaction complexity. keywords: current ratio (cr), net profit margin (npm), and debt to equity ratio (der), stock returns inflation, interest rates and exchange rates this is an open access article under the cc-by 4.0 license. introduction the coal industry is vital in the indonesian economy as a primary energy source and a significant contributor to the country's currency. the coal companies listed in the kompas100 index at the indonesian stock exchange (bei) attracted the attention of investors because of their highly fluctuating share performance. although some companies show high share returns, some others https://www.ilomata.org/index.php/ijtc mailto:uchock.sinaga@gmail.com https://doi.org/10.61194/ijtc.v5i3.1322 impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 693 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc experience low returns. this condition raises questions about what factors influence the return on the stock, especially in the context of internal and external factors of the company. the capital business sector permits the organization to enter the capital and allows financial support to participate in monetary development through corporate securities. the shares of coal companies, especially those listed in the compass 100 file on the indonesian stock exchange, are encouraging investment instruments. nevertheless, the share returns of these companies showed enormous variations. some organizations recorded significant profits while others recorded low profits, thus raising concerns about the elements affecting those profits (t. brown et al., 2020; karjono, 2019; u. et al., 2016). corporate internal factors, especially financial performance, are often regarded as the primary determinants of share returns. the economic performance of a company can be measured through several financial ratios, including the current ratio (cr), which describes the liquidity of the company; the net profit margin (npm), which reflects profitability; and the debt to equity ratio (der) that shows the corporate solvency (jensen & meckling, 2018). several investigations show that sustainable proportion (cr) impacts stock returns. a study led by (bhunia & mukhuti, 2018) found that organizations with high crs would generally have better share returns because ample liquidity indicates the organization's ability to meet temporary commitments without problems, thereby increasing financial support certainty. similar results were also announced by (al-khazali & zoubi, 2018), who stated that high cr reflects the board's productive resources, thereby increasing share returns. another study by (m. johnson & lee, 2019) in the assembly field also found that companies with higher crs showed higher share returns because sufficient liquidity was seen as a sign of good financial well-being. however, another study showed different results by (c. brown & al, 2019), showing that the relationship between cr and share returns is only sometimes positive. they found that in some industries, crs that are too high reflect less efficient working capital management, which can hurt share returns. another study by (bodie et al., 2018) found that an increased cr value could also indicate an increase in the liquid assets that should be reinvested, thereby reducing potential profits and hurting share returns. in addition, a study by (jung & kim, 2020). (2020) found that in some emerging markets, the relationship between cr and stock returns is insignificant, indicating that other factors may be more dominant in influencing stock returns in the market. research by (t. brown et al., 2020) finds that the impact of cr on stock return is contextual and can vary depending on market and industry conditions. in stable market conditions, a high cr can give a positive signal to investors. still, a higher cr may not convince investors about the company's stability in unstable market circumstances. this is also supported by findings from research by(r. a. johnson et al., 2018) that show that the impact of cr on share returns can vary significantly between different industry sectors. net profit margin (npm) is an indicator of profitability and significantly influences stock returns. net profit margin measures the ability of a company to generate net profit from total revenue. a high npm indicates operational efficiency and good profitability, which attract investors seeking high returns (lim & rokhim, 2020). research by (cheba et al., 2021)found that higher npms are significantly linked to higher share returns, as larger profit margins indicate the company's https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 694 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operational efficiency and ability to turn revenues into tangible profits, which are attractive to investors. similar findings were also by (ahmed, 2019), which showed that companies with high npms tend to generate better share returns because stable and high profits reflect effective management and solid business strategies. however, other studies show different results. research by (r. a. johnson et al., 2018) suggests that the relationship between npm and share returns can be harmful in some contexts. they found that high-profit margins in highly competitive industries can raise too high expectations from investors, which may only sometimes be met, potentially lowering share returns. furthermore, (jung & kim, 2020) found that high npms sometimes translate into high share returns in some emerging markets. this can happen because external factors such as macroeconomic conditions and political risks are more influential than corporate profit margins (betz & kerner, 2016; mattingly, 2019; ranaldo et al., 2021). overall, this study shows that although high npms are generally considered an indicator of good company performance, their impact on share returns can vary depending on the industry context and market conditions. in their research, (m. johnson & lee, 2019) concluded that the relationship between npm and share returns is non-linear and influenced by various external factors such as economic stability and regulatory changes. therefore, investors need to consider npms and other contextual factors when making investment decisions (beaupain & braouézec, 2017; nguyen et al., 2023). the equity ratio (der) measures the corporate capital structure by comparing total debt to total equity. low der indicates lower financial risk, which can be a positive factor for investors who avoid high risk (mankiw, 2019). several studies found a positive influence between der and stock returns. for example, research by (nguyen, 2021) found that higher ders can increase share returns in the manufacturing sector in vietnam. they concluded that the wise use of leverage could help companies harness profitable investment opportunities, increasing share returns. similar findings were by (ahmed, 2019), which showed that in emerging markets, moderate leverage can boost company performance and increase share returns as companies can use borrowed funds to expand operations and increase profitability. for example, a study by (r. johnson, 2019) showed that a high der can increase the risk of bankruptcy, ultimately reducing share returns. they found that companies with high leverage tend to have greater share return volatility, which can reduce investor confidence and lower share prices. research by (jung & kim, 2020) also supports this finding, suggesting that in markets with high economic uncertainty, companies with high ders face higher interest costs, which reduce net profits and ultimately lower share returns. this research shows that the relationship between der and share returns is complex and contextual. factors such as economic conditions, market stability, and corporate management strategies play an essential role in determining the impact of leverage on stock performance. therefore, investors should consider der and other factors when evaluating the potential return on corporate stocks. according to a study by (davis & schoorman, f. d. donaldson, 2019), rising interest rates can increase the company’s borrowing costs and reduce net profit, which can lower share returns. by https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 695 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc contrast, research by (jensen & meckling, 2018) suggests that some coal companies can take advantage of low interest rates for expansion and investment, which ultimately increases share return. the exchange rate of currencies also plays an important role. a study by (m. johnson & lee, 2019) found that depression of exchange rates can increase the cost of importing raw materials and reduce profitability, thereby lowering share returns. however, research by (connelly et al., 2019; go et al., 2020; li & nakagawa, 2022) suggests that export-oriented companies such as coal companies can benefit from currency depression by increasing the price competitiveness of their products in international markets. although many studies show the significant influence of internal and external factors on share returns, the findings still need to be more certainty and consistency. therefore, this study aims to further study the influence of internal and external factors of the company on the return on shares of coal companies listed in the kompas100 index on the indonesian stock exchange. the research is expected to provide a more comprehensive understanding of the factors influencing share returns and help investors make better investment decisions. the interest of this exploration lies in the importance of understanding the impact of internal and external variables on the share returns of coal companies recorded in the compass100 file in indonesia securities trading. the coal sector is one of the critical sectors in the indonesian economy that has essential commitments to the national income. nonetheless, stock price fluctuations in this area indicate high vulnerabilities, which can affect business choices. given that a company's financial and macroeconomic conditions can affect share returns, this examination will provide essential insight for investors to make more accurate and informed speculative choices. besides, this exploration will help executives plan more attractive monetary techniques to increase share returns and speculative attractiveness. a deeper understanding of the impact of these elements is also essential for capital market controllers in developing strategies that help market solidity and flexibility. therefore, these checks are essential not only for investors and financial organizations but also for the progress of capital markets and the indonesian economy. method the study used the entire coal companies listed in the compass100 index on the indonesian stock exchange in 2019-2023 as a population. purposive testing is selected because it allows experts to select tests based on specific attributes relevant to the purposes of exploration, particularly distinguishing the impact of internal and external factors on coal company share returns. the operational definition and measurement of the dependent variable variable in this study is the share return. in contrast, the independent variable consists of internal factors such as current ratio, net profit margin, debt to equity ratio and external factors such as inflation, interest rates, and rates. https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 696 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. operationalization of research variables variable operational definition how to obtain data scale current ratio (cr) the ability of the company to meet shortterm obligations data on smooth assets and liabilities of the company's annual financial statements rasio (angka desimal) net profit margin (npm) efficiency of the company in generating profit from sales data of net profit and total income from the company's annual financial statements persentase (%) debt to equity ratio (der) the rate of use of debt in operational financing long-term debt and equity data from the company's annual financial statements rasio (angka desimal) inflasi the rate of increase in prices of goods and services in general in the economy inflation data from the central statistical authority (bps) or other statistical agencies indeks (misal: 100 = basis) suku bunga the loan fee charged to the company to borrow money interest rate data from bank indonesia or related financial institutions persentase (%) nilai tukar/kurs the value of a country's currency compared to the currency of another country exchange rate data from bank of indonesia or related financial institutions angka (misal: idr/usd) return saham performance or return on the investment of the company's shares historical data on stock prices and dividends issued by the indonesian stock exchange persentase (%) atau angka data analysis in this study, data analysis will be carried out through several stages, namely descriptive statistical analysis, analysis prerequisite testing, and hypothesis testing using regression. https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 697 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion descriptive statistics in discryption of each variable in this study, descriptive analysis is used. a summary of the statistical discryptive analysis that has been carried out is as follows: table 2 variable descriptive analysis variabel n minimum maximum mean sr 50 56.700000 -15600000 6.2226000 cr 50 3.0000000 1.5000000 1.9240000 npm 50 34.900000 0.0560000 3.4228800 der 50 0.6000000 0.1000000 0.4028000 in 50 6.3900000 1.6800000 3.8584000 ir 50 7.5000000 3.5000000 5.3300000 er 50 15303.000 12440.000 14034.860 source: data sekunder 2023 on the basis of table 2, it is known that the variable sr obtained the mean value of 6.222600. the variable cr obtains the average value (mean) of 1,924000. the npm variable obtaining the mean of 3.422880. analysis prerequisite test results normality test this test is to test whether the observations are distributed normally or not. the results of the normality test can be seen in the table below. table 3 normality test results 0 1 2 3 4 5 6 7 8 9 -0.4 -0.2 0.0 0.2 0.4 0.6 series: residuals sample 1 50 observations 50 mean 1.25e-16 median -0.011043 maximum 0.575163 minimum -0.422484 std. dev. 0.172568 skewness 0.668450 kurtosis 4.594816 jarque-bera 0.022375 probability 0.10985 https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 698 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from the table above it can be concluded that the value of significance 0.109 > 0.05 used is out of normality. heteroscadastisity test based on the breusch-pagan-godfrey test, the probability value is significant more than 5%. the results of the heterocedastasis test can be seen in the table below: table 4 heteroshedisity test results heteroskedasticity test: glejser f-statistic 1.195481 prob. f(6,43) 0.3270 obs*r-squared 7.148170 prob. chi-square(6) 0.3074 scaled explained ss 7.942724 prob. chi-square(6) 0.2423 the results of the heterocadastisity test in table 4 show that the prob.chi-square value of obs*r-squared= 0.3074 ≥ 0.05, so the assumption of homocadestisity is fulfilled. in other words, there are no symptoms of heterocadastasis on the residual. multicolinearity test the results of the multicolinearity test can be seen in the table below: table 5 multicolinerity test results coefficient uncentered centered variable variance vif vif c 0.075633 111.4372 na cr 0.064559 113.7076 1.274632 npm 0.001677 1.999431 1.156804 der 0.004144 10.33915 1.748089 in 0.001518 3.574462 1.737878 ir 0.002451 5.392057 1.266751 er 0.001053 1.634656 1.255897 the multicolinearity test band in table 5 showed that the centered vif value was less than 10 so it could be concluded that there were no symptoms of multicolinarity between independent variables. https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 699 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc autocoleration test durbin-watson test results in this study are as follows: table 6 results of the regression model test r-squared 0.015344 mean dependent var 1.25e-16 adjusted r-squared -0.176784 s.d. dependent var 0.172568 s.e. of regression 0.187201 akaike info criterion -0.351715 sum squared resid 1.436818 schwarz criterion -0.007551 log likelihood 17.79287 hannan-quinn criter. -0.220655 f-statistic 0.079865 durbin-watson stat 1.974608 prob(f-statistic) 0.999576 the above calculation that the dw value of 1.974 lies between the du and (4-du) values of 1.770 and 2.230 (du < dw < 4-du) can be concluded that there is no autocorrelation in the regression model used in this study. best model selection the results of the chow test were performed to determine the more accurate regression model used between the common effects and the fixed effects models, for the hausman test was conducted to determine which regression models were more accurately applied between the random effects model and the fixed effects model. the fundamental rejection of the hypothesis is to compare the calculation of the statistics f with the tables f. comparison is used when the result of counting f is more significant (>) than table f, and then h0 is rejected, which means that the most accurate model used is the fixed effect model. similarly, if the count of f is smaller (<) than that of table f, then the accepted model is h0, and the model used is the common effect model. (widarjono, 2009). table 7 chow test results with reduced test redundant fixed effects tests equation: untitled test cross-section fixed effects effects test statistic d.f. prob. cross-section f 1.529656 (16,27) 0.1603 cross-section chi-square 32.262479 16 0.0092 based on the results of the chow test with the redundancy test, they obtained a transverse f value of 1.529656 with a probability of 0.1603 (more than 5%). since all test models have a statistical probability f greater than alpha 0.05, the cross-sectional model cannot be used, so the correct https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 700 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc model is the fixed effect model. from the test results above, the hausman test will be carried out to determine whether to use a fixed or random effect model. hausman test the test used to choose the best model between a fixed effect and a random effect model is based on the following hypothesis: h0: choose the random effect model if the chi-square value is insignificant at ɑ= 5%. h1: choose the fixed effect model if it is substantial in ɑ= 5%. the choice between a random effect model or a fixed effect model can be made by looking at a significant p value (less than α = 5%). then, the model used is an estimate of fixed effects and the opposite if the p-value is non-significant (larger than α= 5%). table 8 hausman test results correlated random effects hausman test equation: untitled test cross-section random effects test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 7.958822 6 0.2411 based on the above table, a chi-square distribution value of 7.958822 is obtained with a 0.2411 probability of 0.2411, more significant than the alpha 0.05 (0.2411 > 0.05), so the correct model is to use the random effect model. thus, based on the hausman test, the suitable model for analyzing the data is a random effect model rather than a fixed effect model. lagrange multiplier test the lagrange multiplier test is a test to choose whether the model used a common or random effect. this test is done with the following assumption: h0: select the standard effect model h1: choose the random effect model. the lm test is based on the probability of breusch-pagan; if the probability value of breusch–pagan is less than the alpha value, then ho is rejected, which means that the correct estimate for the regression of panel data is the model of random effects and vice versa. https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 701 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 9 lagrange multiplier test results lagrange multiplier tests for random effects null hypotheses: no effects alternative hypotheses: two-sided (breusch-pagan) and onesided (all others) alternatives test hypothesis cross-section time both breusch-pagan 0.286929 1.232070 1.518999 (0.5922) (0.2670) (0.2178) based on the results of the test, a cross-section value of 0.286929 is obtained with a probability of 0.5922 (more than 5%). since the test model has a statistical f-probability greater than alpha 0.05, the correct model is to use the common effect model. hasil uji common effects from the results of the tests carried out on the chow test, the hausman test, and the lagrange multiplier test above, it is possible to identify and select the best model for analysis. the model used is the regression of the common effect model. table 10 common effects test results dependent variable: sr method: panel least squares date: 07/17/24 time: 11:24 sample: 1 50 periods included: 3 cross-sections included: 17 total panel (unbalanced) observations: 50 variable coefficient std. error t-statistic prob. c -0.584179 0.275014 -2.124180 0.0394 cr 0.607502 0.254084 2.390951 0.0213 npm 0.282399 0.040949 6.896352 0.0000 der 0.378801 0.064373 5.884449 0.0000 in -0.124813 0.038960 -3.203594 0.0026 ir -0.134356 0.049508 -2.713843 0.0095 er -0.044421 0.032456 -1.368660 0.1782 r-squared 0.847474 mean dependent var 0.969200 adjusted r-squared 0.826192 s.d. dependent var 0.441865 https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 702 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc s.e. of regression 0.184215 akaike info criterion -0.416252 sum squared resid 1.459208 schwarz criterion -0.148569 log likelihood 17.40629 hannan-quinn criter. -0.314316 f-statistic 39.81995 durbin-watson stat 2.146680 prob(f-statistic) 0.000000 random effect regression model on y: sr = β0+ β1cr + β2npm + β3der + β4in + β5ir + β6er + 𝜀 sr = -0.584179 + 0.607502 cr + 0.282399 npm + 0.378801 der + -0.124813 in + -0.134356 ir + -0.044421 er + 𝜀 notes : β0-β6 = coefiscient 𝜀 = standard error 1. the cr variable has a probability value of 0.0213 < 0.05; this shows that cr has a positive effect on sr; if cr increases by 1, it will increase sr by 0.607502, so it can be concluded that hypothesis 1 is accepted. 2. the npm variable probability value is 0.0000 < 0.05; this shows that npm has a positive effect on sr; if npm increases by 1, it will increase sr by 0.282399, so it can be concluded that hypothesis 2 is accepted. 3. the der variable has a probability value of 0.0000 < 0.05; this shows that der has a positive effect on sr; if the der increases by 1, it will increase the sr by 0.607502, so it can be concluded that hypothesis 3 is accepted. 4. the in variable has a probability value of 0.0026 < 0.05; this shows that in hurts sr, if in increases by 1, it will increase sr by -0.124813, so it can be concluded that hypothesis 4 is accepted. 5. the ir variable probability value is 0.0095 < 0.05; this shows that ir hurts sr; if ir increases by 1, it will increase sr by -0.134356, so it can be concluded that hypothesis 5 is accepted. 6. the er variable has a probability value of 0.1782 < 0.05; this shows that er hurts sr; if the er increases by 1, it will increase the sr by -0.44421, so it can be concluded that hypothesis 6 is rejected. 7. the f-test is used to determine whether the variables used together affect the dependent variable. based on the above results, a statistical f of 39.81995 was obtained with a statistical probability of 0.00000 < α 5%, meaning ho was rejected. the independent variables, namely cr, npm, der, in, ir, and er, together have a significant effect on the dependent variable, namely sr. hypothesis 9 is accepted. 8. the regression results above show the value of the adjusted coefficient r2 of 0.826192, which means that the independent variables cr, npm, der, in, ir, and er can explain the https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 703 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dependent variable, namely sr, of 82.6%. at the same time, the remaining 17.4% is explained by other variables outside the model. hypothesis test results test f influence of internal factors on stock returns table 11. test results f influence of internal factors on stock returns model sum of squares df mean square f sig. 1 regression 2893.404 3 964.468 9.388 .000b residual 4725.803 46 102.735 total 7619.207 49 the anova analysis shows a significant influence of the internal factor on the dependent variable y. the regression model that has been constructed indicates that the variables x1, x2, and x3 together make a significant contribution to the variability y, with a f value of 9,388 and a significance of less than 0.001 (p < 0.001). in this context, internal factors such as the current ratio (cr), the net profit margin (npm), and the debt to equity ratio (der) play an important role in explaining variations in y. the current ratio (cr) describes a company's ability to meet short-term obligations, the net profit margin (nps) reflects efficiency in generating net profits, and the debt to equity ration (der), indicates the degree of company dependence on the source of loan funds compared to own capital. the combination of these factors provides a comprehensive insight related to the performance and internal financial conditions of the company, which influences the variable y in the regression analysis of this 7 accepted hypothesis. table 12. results of the f-test internal factor impact on share return model sum of squares df mean square f sig. 1 regression 1665.453 3 555.151 4.289 .009b residual 5953.754 46 129.429 total 7619.207 49 the results of anova analysis in table 12 show that internal factors have a significant influence on share returns. the built regression model indicates that the variables x4 (inflation), x5 (interest rate), and x6 (exchange rate) together make a significant contribution to the variability of share return. the obtained f value is 4.289 with a significance rate of 0.009. since this significance value is less than 0.05, we can conclude that there is a significant influence of the variables x4, x5, and x6 on the return on shares of the accepted hypothesis 8.based on the tests that have been carried https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 704 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc out, the probability value of the cr is 0.0213 which is smaller than 0.05, indicating that the cr has a significant positive effect on the sr. this means that if the cr rises 1 unit, the sr will increase by 0.607502. thus, hypothesis 1 is accepted. this indicates that the current ratio (cr) affects the return on shares in coal companies listed on the compass100 index on the indonesian stock exchange. the npm variable shows a probability value of 0.0000 smaller than 0.05, indicating that npm has a significant positive effect on sr. this means that if npm rises 1 unit, sr will increase by 0.282399. thus, the hypothesis 2 is accepted. this indicates that coal companies listed in the compass 100 index have significant positive influence of npm on stock returns. the der variable indicates a probability value of 0.000 smaller than 0.05, suggesting that the der has a positive effect significantly on sr. this means if the der rises one unit, the sr will rise by 0.378801. thus the hypothetic 3 is acceptable. it shows that the debt to equity ratio (der) has significant positive impact on the share returns of coal firms listed on the compasso 100 index on the indonesian stock exchange. the in variable shows a probability value of 0.0026 smaller than 0.05, indicating that the in has a significant negative effect on the sr. this means that if the in rises 1 unit, the sr will decrease by 0.124813. thus, hypothesis 4 is accepted. this indicates that inflation has a significant negative impact on the share returns of coal companies listed on the compass100 index on the indonesian stock exchange. the ir variable shows a probability value of 0.0095 that is less than 0.05, indicating that the ir has an significant negative effect on the sr. this means that if the ir rises 1 unit, the sr will decrease by 0.134356. thus, hypothesis 5 is accepted. this indicates that interest rates have a significant negative impact on the share returns of coal companies listed on the compass100 index on the indonesian stock exchange. the er variable shows a probability value of 0.1782 greater than 0.05, indicating that er has no significant influence on sr. this means hypothesis 6 is rejected. this suggests that changes in exchange rates have no significant influence on share returns in coal companies listed on the compass100 index on the indonesian stock exchange. the regression model that has been constructed indicates that the current ratio variables (cr), net profit margin (npm), and debt to equity ratio (der) together contribute significantly to the variability of the share return, with a value of f of 9.388 and a significance of less than 0.001 (p < 0.001). the results of the anova analysis in table 12 show that the external factors have a significant influence on the share returns of the coal companies listed in the compass100 index on the indonesian stock exchange. since this significance value is less than 0.05, we can conclude that there is a significant influence of inflation variables, interest rates, and exchange rates on share returns. (glebocki keefe & saha, 2022; kumeka et al., 2022; ma & wang, 2019; shi, 2019) based on the above results obtained f statistic of 39.81995 with a statistical probability of f of 0.00000 < α 5%, which means ho rejected. the independent variables cr, npm, der, in, ir, er together have a significant influence on the dependent variable sr in the compass100 records of coal organizations listed in the indonesian impact stock exchange. this hypothesis emphasizes that assets within an organization (such as monetary and functional administration) are combined with the ability to anticipate and adapt to external elements, (e.g. economic situation https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 705 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and financial strategy) that can be managed. proper exploration supports these discoveries. for example, a study conducted by (pujiharto & abdul’aziz, 2023) revealed that organizations that can coordinate profitable financial management with critical transformations of external change, for example, increasing loan costs and trade interest rates, will often have better stock execution in unpredictable business sectors. this research adds empirical evidence that there is an influence of independent variables cr, npm, der, in, ir, er on sr on compass100 records of coal organizations listed on the indonesian stock exchange. the results of this research still have research limitations, namely that there are several companies that do not publish reports financial statements according to the year of research required by the researcher. there are outliers so that there is a reduction in the number (n) of company data with the aim of ensuring that the data is normally distributed. conclusion 1. impact of current ratio (cr) on share return: the current ratio has a significant positive effect on the share return. this means that companies with high liquidity tend to have better share performance because investors believe that the company is able to meet its short-term obligations. 2. effect of the net profit margin (npm) on share return: the net profit margin has a significant positive effect on the return on the stock. this suggests that increased overall revenue has the potential to increase the share returns. 3. effects of the debt equity ratio (der) on the return of the stock: the debt equity ratio has a major positive impact on the share return. this means that companies with high leverage often have better share performance because investors believe that the company is able to use the loan fund effectively to increase profits. 4. inflation has a significant negative influence on the return. stock returns tend to decrease as the inflation rises. 5. the influence of flowers on stock return: interest rates have a significantly negative effect on the share return. this suggests that the rise in interest rates can lower the stock return. 6. the exchange rate has a significant negative impact on the share return. 7. analysis showed that current ratio (cr), net profit margin (npm), and debt to equity rasio (der) significantly influenced share return. this ratio reflects the liquidity, profitability, and capital structure of the company, which collectively provides a comprehensive insight into the company's financial health and performance in the stock market. 8. inflation, interest rates, and exchange rates have also been found to have a significant influence on stock returns. these variables reflect macroeconomic conditions that can affect investment decisions and stock market performance as a whole. 9. impact of stimulus between inward and external factors on share return overall, internal factors (cr, npm, der) and external factors (inflation, interest rates, exchange rates) have a significant influence on the return. https://www.ilomata.org/index.php/ijtc impact of internal and external factors of a company facing the return of the company with a compas100 indeks noted on the indonesia shipping borse sinaga and rudianto 706 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 10. future researchers are advised to use other variables that may have an influence on stock returns, for example accounting profits, leverage, exchange rates (exchange rates). and it is recommended to expand the sectors in the sample selection criteria. reference ahmed, i. a. 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(2016). analisis pengaruh net profit margin (npm), return on asset (roa) dan current ratio (cr) terhadap harga saham emiten lq 45 yang terdaftar di bursa efek indonesia padatahun 2010-2014. journal of accounting, 2(2). https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 646-666 646 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy nurlisti azahra¹, lusiyanawati², nanik leanikha puriayu3, agung yulianto4 ¹²³4universitas swadaya gunung jati correspondent : agung.yulianto@ugj.ac.id4 received : march 8, 2024 accepted : april 28, 2024 published : july 31, 2024 citation: azahra, n., lusiyanawati., puriayu, n, l., yulianto, a. (2024). good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy. ilomata international journal of tax and accounting, 5(3), 646-666. https://doi.org/10.61194/ijtc.v5i3.1155 abstract: the decline in financial performance in a company is often caused due to a weak corporate governance system. therefore, this research aimed to assess the implementation of good corporate governance, profitability and institutional ownership on corporate financial performance with dividend policy as a moderating variable. this research was conducted over a 4-year period, namely 2019-2022. the research population consists of stateowned public enterprise companies that are listed on the idx during the period of 2019-2022. a sample of stateowned enterprises companies listed on the idx that satisfy all the criteria for this research is selected using purposive sampling. the data analysis method used uses a panel data regression model to test the effect of each variable on the company's financial performance. the research findings show that, while profitability does influence the financial performance of a company, the presence of an audit committee, an independent board of commissioners, or institutional ownership does not have a significant impact. in addition, when adjusted for dividend policy, the influence of the audit committee, profitability, and institutional ownership on the financial performance of the company is not significant. conversely, the dividend policy adhered to by the independent board of commissioners impacts the financial performance of the company. the implication of this study for state-owned enterprises can utilize this research to be wiser in choosing corporate governance policies that are in accordance with the company so that there is no decline in the company's financial performance. keyword: good corporate governance, profitability, institutional ownership, dividend policy, financial performance this is an open access article under the cc-by 4.0 license https://www.ilomata.org/index.php/ijtc mailto:agung.yulianto@ugj.ac.id https://doi.org/10.61194/ijtc.v5i3.1155 good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 647 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction in running its business, the company must have several goals. one of them is to make a profit. to achieve these goals, the company requires good performance and management, in order for the company to be able to produce revenues that rise annually and for the business's existence to likewise improve (hanisah et al., 2019). one of the numerous indicators of a company's efficacy and capacity to reach its target market is its financial performance (maridkha & himmati, 2021). one of the phenomena experienced by state-owned enterprises is the poor financial performance that has been going on for a long time and exacerbated by the covid -19 pandemic. currently, state-owned enterprises face challenges caused by two main factors. first, entire industry performance adversely affected by covid -19 pandemic including state-owned public bodies, the second condition, indeed before the pandemic broke out at the end of 2019, the performance of these state-owned public bodies was already bad. the covid-19 pandemic has caused financial difficulties for a number of large state-owned companies, including pt angkasa pura i and pt kereta api indonesia (persero). this condition eroded the company's revenue and profit until it was forced to print a red report card for the first time (monica wareza, 2021). to provide progress to the performance of a company, making the company long-lived and trustworthy, it is necessary to implement good corporate governance (gcg). good corporate governance is a concept that plays an important role in shaping the culture of transparency, responsibility, and awareness in companies (al-ahdal et al., 2020). company management based on gcg is an effort to make gcg a standard used by company management in behaving. currently, the business world requires the implementation of gcg principles in order to maintain a healthy, transparent and efficient business climate and ensure its sustainability and resilience in the face of increasingly fierce competition. according to (aldila septiana m, 2019) “profitability is a ratio that aims to determine the company's ability to generate profits during a certain period’’. good corporate governance is one strategy to boost the company's profitability so that it can be attained. institutional ownership according to (ardiani et al., 2021), the percentage of the business's shares held by institutions at the end of the year, which indicates that institutional investors often invest a larger portion of their funds. this represents the level of institutional ownership in the company. this indicates that institutional investors invest more of their funds, so as to equip themselves with sufficient capital for it. this research is a development of research (u. yanti et al., 2023) by adding profitability variables. (l. d. yanti & hartono, 2019) defines profitability as the capacity of an organization to generate financial returns. research from (u. yanti et al., 2023) has limitations, namely not expanding the sample criteria. the similarity between this research and research conducted by (u. yanti et al., 2023) is that the research subjects are both focused on companies bumn which are listed on the idx. however, there are differences between this research and that research, namely the research period and the addition of profitability variables. in order to achieve transparency in company management for all users of financial statements and https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 648 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strengthen the research to be carried out, the authors use dividend policy variables as moderating variables. external parties such as shareholders, creditors, and other parties with an interest in the information disclosed by the company consider dividend policy as the focus of their attention (lestari et al., 2024). since state-owned enterprises consume government funds that should be allocated to humanitarian services, this research focuses on this particular subject, improvements in stateowned enterprises contributed to the reduction of the fiscal deficit, despite the fact that they emit more pollution than private industry. as well as the weakening of the corporate governance system (good corporate governance) in business entities and protection for investors so as to encourage company owners to increase their supervision. from the background, the researchers are interested in raising and discussing these issues with the title ‘‘implementation of good corporate governance, profitability and institutional ownership on corporate financial performance with dividend policy as a moderating variable in stateowned companies listed on the idx for the 2019-2022 period”. agency theory agency theory is still a key theory in corporate governance issues. (said et al., 2022) said, agency theory is a correlation from two individuals, specifically the principal and the agent; the principal is the one who gives the management instructions, the principal has given the management complete authority to handle funds. principal parties typically give management incentives, both monetary and non-monetary (smulowitz et al., 2019). therefore, by applying good corporate governance principles, the hoped-for outcome is manipulative impulse of agents or managers will be reduced and the reported performance will be in accordance with reality. corporate governance can serve as a medium to limit managers and reduce the possibility of agency problems, thereby improving company performance (ramadhani & agustin, 2021). good corporate governance achieve long-term corporate value, maximise responsibility and commercial performance, and take stakeholders' interests into consideration in compliance with legal and ethical business practices, a process and mechanism known as “good corporate governance’’ is necessary. good corporate governance, grounded in agency theory, is intended to serve as a mechanism that instills investors with confidence regarding the potential return on their invested capital (jatiningrum et al., 2021). effective corporate governance is intricately linked to the means by which investors can have faith that managers will act in their best interests and provide them with benefits (mustapha et al., 2020). independent board of commissioners members of the board of commissioners are known as independent commissioners which consists of one person or several people who have no relationship with the company's operations and are able to be independent in supervising management, one of which is related to performance in the financial statements' preparation reporting (setyani & suhaili, 2023). https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 649 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit committee the audit committee is an entity established by the board of commissioners with the purpose of exercising oversight over management (ishaka et al., 2023). the count of members in the the audit committee must to have a minimum of three members, who are assigned to be the chairman, namely an impartial company commissioner (apriliana & fidiana, 2021). profitability profitability is a financial indicator that evaluates the ability of the business to generate profits (pambudi & meini, 2023). it can be considered as a metric to evaluate the management's proficiency in overseeing the organization's activities (mayasari et al., 2018) (lailiyah et al., 2024). an important metric for investors to evaluate the future potential of the company is to ensure the level of expansion of the company's profitability. according to (pratiwi et al., 2023) profitability is a metric that can show return on investment, thus affecting the value of the company through increasing internal resources. institutional ownership the share of company shares owned by investors from other institutions that serve as management monitors is the definition of institutional ownership (budiadnyani, 2020). institutional ownership possesses the capacity to diminish the incentives of self-interested managers by means of incentivized levels of oversight. so that institutional ownership is expected to suppress the tendency of management to manipulate financial statements. (wardhani & samrotun, 2020). institutional ownership is an important aspect that can bring responsibility and integrate financial reports (meng et al., 2022). dividend policy the dividend policy is a financial policy carried out by the company to be able to determine the profit generated which is given to shareholders or will be retained as retained earnings (pangestu, 2022). companies that pay dividends will certainly make investors feel encouraged to invest their capital. according to (sintyana & artini, 2019) shareholders will be more interested in the dividends distributed by the company because for some investors prefer dividends when compared to capital gains because dividends are more fixed of course. the effect of good corporate governance proxied by the independent board of commissioners on the company's financial performance the independent board of commissioners is a supervisory agent that is not closely related to the company's shareholders who oversee and protect minority shareholders and play an important role in the decision-making process (intia & azizah, 2021). with an independent board of commissioners, it can prevent management actions that are not transparent. the larger the size of the independent board of commissioners in the company, the better the company's performance. this is supported by research conducted (riantiarta a et al., 2020) which states that the independent board of commissioners has a positive effect. the greater the proportion of independent commissioners, the better the supervision so that the company's performance will https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 650 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc improve. in line with research (intia & azizah, 2021). based on the above arguments, the first hypothesis can be built, namely: h1: the independent board of commissioners' proxied good corporate governance impacts the financial performance of the company the effect of good corporate governance proxied by the audit committee on company financial performance the audit committee is responsible for assisting the implementation of the board of commissioners' duties to carry out internal control over audits, risk management, financial reporting processes and the implementation of corporate governance in the company (riantiarta a et al., 2020). the relationship between the audit committee and the company's financial performance can be seen from the audit committee's supervisory function. the audit committee has an independent obligation to ensure that the financial statements that have been prepared by the manager and the board of commissioners are fair and accountable. the more audit members will provide protection to shareholders, so the supervisory function of the accounting and financial processes will be maximized (titania & taqwa, 2023). based on the above arguments, the second hypothesis can be built, namely: h2: the audit committee's proxied good corporate governance impacts the financial performance of the company the effect of profitability on corporate financial performance profitability is a ratio used as a measurement of overall management effectiveness. measurement is shown from the level of profit / profit generated from sales or investment (hunafah et al., 2022) based on research conducted by (setyawan, 2019), it was found that profitability has a promising influence on the performance of a company's financial sector. this study shows that businesses with higher profitability are usually doing well. a high level of profitability indicates the operational effectiveness and capacity of the business to make money from each unit of activity carried out. based on the above arguments, the third hypothesis can be built, namely: h3: profitability impacts the financial performance of the company the effect of institutional ownership on corporate financial performance the existence of ownership by institutional investors by other institutions will encourage an increase in more optimal supervision of management performance because share ownership represents a source of power that can be used to support or vice versa against the existence of management and financial performance can improve if the institution is able to act as an effective monitoring tool, because the higher the institutional ownership, the more external party supervision of the company will increase (sitanggang abdonsius, 2021). based on the above arguments, the fourth hypothesis can be built, namely: h4: institutional ownership impacts the financial performance of the company https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 651 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of good corporate governance proxied by the independent board of commissioners on corporate financial performance moderated by dividend policy the board of commissioners is a corporate organ whose task is to carry out general and special supervision in accordance with the articles of association. research conducted by (cahyadi et al., 2018) found that the independent board of commissioners has a negative effect on dividend policy because the composition of too many independent commissioners will cause the coordination carried out to run less effectively, causing problems that reduce shareholder welfare in this case dividend policy. meanwhile, (malavia mardani et al., 2018) found that the independent board of commissioners has a positive effect on dividend policy because an increase in the independent board of commissioners will encourage investees to pay greater dividends, this is based on the increase in the independent board of commissioners will improve investee good governance practices with good investee governance, the dividend policy will increase. based on the above arguments, the fifth hypothesis can be built, namely: h5: good corporate governance proxied by the independent board of commissioners affects corporate financial performance moderated by dividend policy the effect of good corporate governance proxied by the audit committee on corporate financial performance moderated by dividend policy the audit committee is a committee formed by the board of commissioners with the aim of assisting the board of commissioners in supervising. the duties of the audit committee have an impact on the preparation of financial statements, because the proportional number of audit committees will tighten the supervision of the company. with strict supervision, the company's performance will run well and efficiently. this will affect company profits and dividend policy (setiyowati & sari, 2017). based on the above arguments, the sixth hypothesis can be built, namely: h6: good corporate governance proxied by the audit committee affects the company's financial performance moderated by dividend policy the effect of profitability on the company's financial performance moderated by dividend policy the purpose of investors investing their capital in the form of shares in public companies is to get dividends because the higher the profitability, the greater the dividends that will be distributed to shareholders so as to increase the value of the cash flow obtained by the company, so the company's opportunity to pay dividends is also higher (yuni, 2022). this is also proven in research (alamsyah, 2017) that profitability has a positive and significant effect on dividend policy. based on the above arguments, the seventh hypothesis can be built, namely: h7: profitability affects corporate financial performance moderated by dividend policy https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 652 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of institutional ownership on corporate financial performance moderated by dividend policy one of the dividend agency models is that if the company pays a smaller dividend, it will cause management to invest resources into unprofitable projects, but with higher institutional ownership it will encourage management to invest in profitable projects, thus, the company will be able to pay a larger dividend (rahmah & nurhalis, 2019). this statement is in line with research conducted by (narindro & basri, 2019) which found a positive and significant relationship between institutional ownership and dividend policy. based on the above arguments, the eighth hypothesis can be built, namely: h8: institutional ownership affects the financial performance of companies moderated by dividend policy table 1. thinking framework method in this research, a quantitative research design was adopted. sekaran (2017:76) said, quantitative research is ‘‘scientific methods whose data are in the form of numbers or numbers that can be processed and analyzed using mathematical calculations or statistics”. research with a the quantitative method places a strong emphasis on numerical data analysis and then analyzed using appropriate statistical methods. this research uses associative quantitative research method, by which the correlation from two or more the variable is ascertained. for the duration 2019-2022, the sample for this research consists of state-owned public agency organisations indexed on the idx. the study's population comprises 24 state-owned public agency entities that are listed on the idx during the period of 2019-2022. the sample for this good corporate governance (x1) profitability (x3) institutional ownership (x4) company financial performance (y) dividend policy (z) audit committee (x2) h1 h2 h3 h4 h5 h6 h7 h8 https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 653 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research was selected using purposive sampling, which involved the following criteria: 1) stateowned companies that were listed on the idx between 2019 to 2022; 2) state-owned companies that released yearly and financial reports throughout the same period; 3) state-owned companies that comprised an independent commissioners' board, audit committee and board of directors in 2019 to 2022; and 4) state-owned companies that failed to generate profits consecutively from 2019 to 2022. this research uses secondary data, is information-related data that has been collected from previous sources (sekaran, 2017:130). with documentation techniques as yearly financial statements reports of state-owned public bodies institutions indexed on the idx for the last 4 years (2019-2022) received, from the alternative indonesian stock website www.idx.co.id as well as several other esteemed websites of related companies. using eviews 12, a the method of the use of multiple linear regression was used in this research. implementing this method, it is possible in order to ascertain the correlation between the dependent variable, which is the subject of the study, and other variables that have an impact on it or serve as predictors of it. definition and measurement of operational variables table 2: explain the procedure for measuring and operationalizing the research variables. no variables indicator 1 good corporate governance (x1) 𝐷𝐾𝐼 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑚𝑒𝑚𝑏𝑒𝑟𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑏𝑜𝑎𝑟𝑑 𝑜𝑓 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑥 100 2 audit committee (x2) audit committee = number of audit committee members 3 profitability (x3) 𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠′ 𝑒𝑞𝑢𝑖𝑡𝑦 4 institutional ownership (x4) 𝐾𝐼 = 𝑆ℎ𝑎𝑟𝑒𝑠 ℎ𝑒𝑙𝑑 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 5 company financial performance (y) 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 6 dividend policy (z) 𝐷𝑃𝑅 = 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 654 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion based on purposive sampling, 60 observations were obtained from 24 state-owned public enterprise companies during the observation period 2019-2022. no criteria amount 1 state-owned enterprises listed from 2019 to 2022 on the idx 24 2 state-owned businesses that made their financial and annual reports available at the same time (0) 3 state-owned businesses with an independent audit committee, board of directors, and commissioners from 2019 to 2022 (0) 4 state-owned businesses that did not turn a profit in a row between 2019 to 2022 (9) number of company samples 15 number of samples during the study year (2019-2022) (15*4) 60 the financial performance variable (y) supplied by roa has a range of 0.000168 (low) to 0.281738 (high), a median of 0.018026, a mean value of 0.036442 (or 03.6442%), and a standard deviation of 0.054571. gcg (x1): this variable is represented by the gcg score (dki), which ranges in value from 0.285714 (high) to 0.700000 (high). the standard deviation is 0.119945, and the median value is 0.444444. (45.9147 %) or 0.459147, is the mean value. audit committee (x2): measured using (ki), this variable ranges from 2.000000 (high) to 10.00000 (high). 4.000000 is the median value, while 1.925960 is the standard deviation. the average is 4.450000 or equivalent to 4.45000%. profitability (x3): provided (roe): this variable has a range of 0.000720 (low) to 0.441949 (high), with a mean of 0.091262 (or 09.1262%) and a median of 0.072487. its standard deviation is 0.086958. institutional ownership (x4): provided (ki) this variable has a range of 0.000000 (low) to 0.008557 (low), with a median of 0.000067; its mean value is 0.000396 (or 00.0396%), and its standard deviation is 0.001481. moderating variable: dividend policy (z) has a median of 0.329180 and a range of 0.000000 (low) to 285719.7 (high). the mean is 4762.428 (or 4762.428%), and the standard deviation is 36886.20. table 3. the descriptive statistic y x1 x2 x3 x4 x5 mean 0.036442 0.459147 4.450000 0.091262 0.000396 4762.428 median 0.018026 0.444444 4.000000 0.072487 0.000067 0.329180 maximum 0.281738 0.700000 10.00000 0.441949 0.008557 285719.7 minimum 0.000168 0.285714 2.000000 0.000720 0.000000 0.000000 std. dev. 0.054571 0.119945 1.925960 0.086958 0.001481 36886.20 skewness 2.615679 0.380830 1.210819 1.605475 4.597389 7.550957 https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 655 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc kurtosis 10.25213 2.074836 3.381980 6.378884 23.33233 58.01695 jarque-bera 199.9012 3.590137 15.02560 54.31764 1244.869 8137.331 probability 0.000000 0.166116 0.000546 0.000000 0.000000 0.000000 sum 2.186512 27.54881 267.0000 5.475739 0.023744 285745.7 sum sq. dev. 0.175702 0.848827 218.8500 0.446139 0.000129 8.03e+10 observation s 60 60 60 60 60 60 model of panel data regresion chow test chow's test is utilised to ascertain whether a prevalent or fixed effect exists effects to apply in the study statistical model, this test's underlying hypothesis is as follows: table 4. results of the chow test the optimal model is the fixed effect model (fem), as the chow test findings above indicate that the probability value of the cross section f is 0.000 ≤ 0.05, then h0 is rejected. hausman test the hausman measurement method is utilized to ascertain the appropriate methodology to be chosen and employed in research, specifically between the fem and the rem. table 5. the hausman test's result https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 656 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc assuming the cross-section probability value of 0.0000 ≤ 0.05. indicates that h0 is rejected according to the findings of the hausman test, the fem is the most acceptable model to adopt. classical assumption test test of multicollinearity table 6. test of multicollinearity result dki ka roe ki dki 1.000000 0.361598 0.032350 -0.086962 ka 0.361598 1.000000 0.478296 -0.135336 roe 0.032350 0.478296 1.000000 -0.129411 ki -0.086962 -0.135336 -0.129411 1.000000 because the correlation analysis results are <1, hence there is no multicollinearity in the any of the independent variables. test of heteroscedasticity table 7. test of heteroscedasticity: result in light of the above table, the r-squared probability value is 0.514587> 0.05, so h0 is denied, indicating that the heteroscedasticity issue does not exist. https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 657 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis test test t (partial) table 8. t test result variable coefficient std. error t-statistic prob. c -0.003186 0.017266 -0.184535 0.8545 dki 0.034621 0.026530 1.304952 0.1992 ka -0.003850 0.002536 -1.518453 0.1366 roe 0.441955 0.033436 13.21776 0.0000 ki 1.341992 1.829780 0.733417 0.4675 1. 1. the effect of dki variable (x1) on roa (y) in light of the test, it is evident that the probability level is 0.1992 where the value is greater than 0.05. with these results, in light of this, it can be said that the dki variable (x1) has no bearing on roa (y), and the study's hypothesis h1 is rejected. 2. the effect of variable ka (x2) on roa (y) in light of the test, it is evident that the probability level is 0.1366 where the value is greater than 0.05. with these results, in light of this, it can be said that the ka (x2) variable has no bearing on roa (y) and the study's hypothesis h1 is rejected. 3. effect of roe variable (x3) on roa (y) in light of the test, it is evident that the probability level is 0.0000 where the value is smaller than 0.05. with these results, in light of this, it can be said that the roe variable (x3) has an impact on roa (y) and hypothesis h3 in this research can be accepted. 4. effect of variable ki (x4) on roa (y) based on the test results, it is evident that the probability level is 0.4675 where the value is greater than 0.05. with these results, it can be concluded that the ki variable (x4) has no effect on roa (y) and hypothesis h4 in this research is rejected. https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 658 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc test determination coefficient r2 table 9. r2 test result for coefficient of determination in light of the test findings, evidently, concurrently, the probability value displays a value of 0.000000, which is <0.05. hence, the variables dki (x1), ka (x2), roe (x3) and ki (x4) concurrently influence roa (y). moderation regression analysis table 10. results of the moderation regression test variable coefficient std. error t-statistic prob. c -0.000421 0.019657 -0.021416 0.9830 dki 0.020491 0.023891 0.857702 0.3967 ka -0.004959 0.003911 -1.267848 0.2130 roe 0.502001 0.035403 14.17980 0.0000 ki -0.401439 4.274669 -0.093911 0.9257 dpr -0.028205 0.011891 -2.371981 0.0232 dki*dpr 0.065698 0.029338 2.239346 0.0314 ka*dpr 0.002568 0.002443 1.051458 0.3001 roe*dpr -0.039020 0.020919 -1.865310 0.0703 ki*dpr -0.263262 2.073042 -0.126993 0.8997 effects specification cross-section fixed (dummy variables) root mse 0.007648 r-squared 0.980025 mean dependent var 0.036442 adjusted r-squared 0.967263 s.d. dependent var 0.054571 s.e. of regression 0.009874 akaike info criterion -6.108694 sum squared resid 0.003510 schwarz criterion -5.270957 log likelihood 207.2608 hannan-quinn criter -5.781009 f-statistic 76.79255 durbin-watson stat 1.901871 prob(f-statistic) 0.000000 https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 659 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 1. dividend payout ratio (dpr) as a moderator between the probability value of 0.0314 is less than 0.05, as determined by the independent board of commissioners (dki) on financial performance (roa), for the interaction correlation from dki and dpr. the conclusion that can be drawn is that the correlation from the independent the commissioners' board (dki) and financial performance can be moderated by the ratio of dividend payouts 2. ratio of dividend payout (dpr) as a moderator between the audit committee (ka) on financial performance (roa) indicates that the interaction between ka and dpr has a probability value of 0.3001, which is > 0.05. the conclusion that the ratio of dividend payout does not moderate the correlation from financial performance and the audit committee is as follows. 3. dividend payout ratio (dpr) as a moderator between return on equity (roe) on financial performance (roa) shows the interaction correlation from roe * dpr 0.0703 is a likelihood that is higher than 0.05. it's possible to conclude that the ratio of dividend payout does not moderate the correlation from return on equity on financial performance. 4. dividend payout ratio (dpr) as a moderator between the interaction the connection that institutional ownership (ki) and financial performance (roa) indicates that the probability value for ki * dpr is 0.8997, which is > 0.05. based on the findings, it can be inferred that the connection between institutional ownership and financial performance is not moderated by the ratio of dividend payouts the impact on corporate financial performance of good corporate governance proxied by the independent board of commissioners the calculated t value for the independent board of commissioners (dki) is 1.304952, and its significance level is 0.1992, where 0.1992 is greater than 0.05. this implies that the independent board of commissioners (x1) does not exert a significant influence on the financial performance (y) of the company, thus h1 is rejected in this research. these results are supported by research conducted by (monica & dewi, 2019) the insignificant effect of the independent board of commissioners can be caused by the small percentage of the existence of an independent board of commissioners in increasing the company's return on asset. the impact on corporate financial performance of good corporate governance proxied by the audit committee the calculated t value for the audit committee (ka) is -1.518453, and its significance level is 0.1366 (where 0.1366 is greater than 0.05). this implies that the audit committee (x2) does not exert a significant influence on the financial performance (y) of the company, thus h2 is rejected in this research. this is in line with research (titania & taqwa, 2023) that increasing the audit committee does not necessarily improve the company's financial performance. this shows that the large or small number of audit committees does not affect the company's financial performance. https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 660 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impacts of profitability on corporate financial performance the calculated t value for profitability (roe) is 13.21776 with a significance level of 0.0000, where 0.0000 is less than 0.05. this indicates that profitability (x3) influences corporate financial performance (y) to some degree; therefore, h3 can be accepted in this research. this is in line with research (zahwa & soedaryono, 2023) which also states that profitability affects the company's financial performance, in accordance with these results. the impacts of institutional ownership on corporate financial performance the calculated t value for institutional ownership (ki) is 0.733417, and its significance level is 0.4675, where 0.4675 < 0.05. this implies that institutional ownership (x4) does not have a significant impact on corporate financial performance (y), leading to the rejection of h4 in this research. institutional ownership can be in the form of government institutions, private institutions, domestic or foreign, in line with research (mattiara et al., 2020) which states that institutional ownership has a positive and insignificant effect on financial performance. the impact of good corporate governance proxied by the independent board of commissioners on corporate financial performance moderated by dividend policy the dividend payout ratio (dpr) moderates the correlation from the independent board of commissioners (dki) and financial performance (roa). the calculated t value for this relationship is 2.239346, and the probability value for dpr is 0.0314, where 0.0314 is less than 0.05. this implies that the dpr moderates the correlation from the independent board of commissioners (x1) and financial performance (y), thus supporting the acceptance of h5 in this research. based on the findings, it can be inferred that the correlation from the independent board of commissioners and financial performance may be moderated by the dpr. this research can be said to be in line with research conducted by (anam & hendra, 2020) which states that the relationship between the independent board of commissioners and the company's financial performance moderated by dividend policy has no significant effect. the impact of good corporate governance proxied by the audit committee on corporate financial performance moderated by dividend policy the dpr moderates the relationship of interaction between the audit committee (ka) and financial performance (roa). the calculated t value for this relationship is 1.051458 and the probability value is 0.3001, where 0.3001 is greater than 0.05. this indicates that the dividend payout ratio (dpr) has no effect on financial performance (y) when used as a moderator between the audit committee (x2) and the dpr; therefore, h6 is rejected in this research. the conclusion that can be drawn is that the correlation from the audit committee and financial performance is not moderated by the dividend payout ratio. this research is in line with the results of research conducted by (fitriani, 2020), concluding that there is no significant relationship between the audit committee and the company's financial performance moderated by dividend https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 661 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policy. this is because the size of the audit committee has no direct impact on the amount of dividends paid to shareholders. the impact of profitability on corporate financial performance moderated by dividend policy the dpr moderates the correlation from return on equity (roe) and financial performance (roa). the calculated t value for this relationship is -1.865310, and the corresponding probability value is 0.0703. it is important to note that 0.0703 is greater than the significance level of 0.05. this indicates that the dpr does not moderate the correlation from return on equity (x3) and financial performance (y), which leads to the rejection of h7 in this research. based on the findings, it can be inferred that the dividend payout ratio does not help moderate the association between return on equity and financial performance. this research can be said to be in line with research conducted by (budiasih et al., 2023) (lestari et al., 2024), dividend policy cannot affect the impact of profitability on the financial performance of a company. if the dividend policy becomes moderation, it is expected to moderate profitability on the company's financial performance. this means that the company will maximize the performance of a company in order to get a rate of return in the form of cash dividends in accordance with the expectations of investors. the impact of institutional ownership on corporate financial performance moderated by dividend policy the dpr moderates the correlation from institutional ownership (ki) and financial performance (roa). the calculated t value for this relationship is -0.126993, and the probability value is 0.8997, where 0.8997 is greater than 0.05. this implies that the dpr does not moderate the correlation from institutional ownership (x4) and financial performance (y), thus h8 is rejected in this research. based on the findings, it can be inferred that the correlation from institutional ownership and financial performance is not moderated by the dividend payout ratio. the results of this study are said to be in line with research conducted by (lestari et al., 2024) (wijaya & purnawati, 2019). shows that the relationship between institutional ownership and corporate financial performance moderated by dividend policy cannot be strengthened by greater investment decisions. conclusion this research empirically investigates the correlation from good corporate governance, with dividend policy acting as a moderating factor in the correlation from profitability and institutional ownership on corporate financial performance state-owned businesses that are listed on the idx for the 2019-2022 period. independent board of commissioners, audit committee, institutional ownership do not exert a significant influence on the financial performance. profitability influences corporate financial performance. dpr moderates the correlation from the independent board of commissioners and financial performance. audit committee and financial https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 662 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance is not moderated by the dividend payout ratio. dividend payout ratio does not help moderate the association between return on equity and financial performance. dpr does not moderate the correlation from institutional ownership and financial performance. based on the findings of this study, profitability and the independent board of commissioners moderated by dividend policy have a considerable influence on the company's financial performance. therefore, the implication for state-owned enterprises is advised to be wiser in choosing good corporate governance policies that suit the company, and must also pay attention to the company's ability to generate profits. in conclusion, this study shows how important good corporate governance is for the running of a company so that there is no decline in financial performance and fraud in financial statements. future researchers are expected to use samples from all soes and an extended observation period to enable the generalization of the study findings the level of company profitability. in addition, future it is also expected that researchers would measure variables using additional proxies and further researchers are also advised to add other factors to be used as independent variables which are expected to explain and also predict and study the financial performance variables of the company. reference al-ahdal, wm, alsamhi, mh, 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(2023). pengaruh profitabilitas, leverage dan pertumbuhan https://www.ilomata.org/index.php/ijtc good corporate governance, profitability and institutional ownership on corporate financial performance moderated by dividend policy azahra, lusiyanawati, puriayu, and yulianto 666 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc perusahaan terhadap kinerja keuangan perusahaan (studi empiris pada perusahaan sektor transportasi dan logistik yang terdaftar di bursa efek indonesia) pada periode 20202021. jurnal ekonomi trisakti, 3(2), 3863–3872. https://doi.org/10.25105/jet.v3i2.18136 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 453-464 453 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds s. prasanna kumar subramaniam loyola college, india correspondent: drprasannakumar@loyolacollege.edu received : february 10, 2024 accepted : april 12, 2024 published : april 30, 2024 citation: kumar, s, p. (2024). risk-return analysis of select tax saving mutual funds. ilomata international journal of tax and accounting, 5(2), 453-464. https://doi.org/10.61194/ijtc.v5i2.1137 abstract: the indian stock market has been in existence since 1875 bestowing lesser range of instruments from companies to invest their money through general public. since then, the awareness of investment has gained momentum amongst the general public and investors have become curious and intuitive to park their funds in some instrument to attain or gain profit or handsome returns from companies and the market. with the advent of unit trust of india (uti) being formed during 1964 by a special legislature to function under the regulatory and administrative control of reserve bank of india (rbi) , it brought an innovative financial thought to the mechanism of investment by investors. mutual fund industry boosted the investors’ confidence that upheld capital appreciation, protection, tax burden and promoted financial stability. the researcher attempted to analyse the risk and returns of select tax savings scheme of mutual funds and point out the best tax saving mutual fund amidst the 11 selected funds using parameters like standard deviation, beta, sharpe ratio and treynor ratios for a period of 90 months from 2016 to 2023 taking net asset values published by amfi and the closing values of bombay stock exchange standard & poor (bse s & p) sensex and also by using ms excel for computing all the parameters manually rather than the already published data by many other sources. it was examined that quant tax direct plan (growth option) has good indicators to prove its performance. the research findings can aide investors’ decision with numerous benefits ranging from savings, returns, gains and risk management. keywords: mutual funds, performance analysis, risk and return analysis, sharpe ratio, tax saving scheme, treynor ratio this is an open access article under the cc-by 4.0 license. introduction savings have become key financial commitment of the income earning individuals exclusively among the middle-class income earning societal background. finance is not only considered as the lifeblood for a business set-up of any nature and kind (kumari, 2013) but for income earning individuals as well (narendra singh bohra, 2021). similarly, for a small to moderate income class https://www.ilomata.org/index.php/ijtc mailto:drprasannakumar@loyolacollege.edu https://doi.org/10.61194/ijtc.v5i2.1137 risk-return analysis of select tax saving mutual funds kumar 454 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc individual his significant task would be to invest considerably a minor quantum of their income in a venture which would give them moderate returns on the investment in comparison to fixed deposits with bank. among various sources of investment and instruments available in the finance market, mutual fund investment is considered as a vital instrument in common parlance with insurance policies and fixed deposits (panpaliya et al., 2020). mutual fund is a financial apparatus where it contains a mixture of or a combination of varied securities and it permits investors to pool their money for any pre-determined time period to achieve their investment goal (udhayasankar & maran, 2018). mutual fund is an organisation established in the nature of trust or a company which receives or accumulates money from various individual who are intending to save some money on a regular basis with an investment goal (babbar & sehgal, 2018). the mutual fund would also involve themselves in the role of an intermediary providing all kinds of services to the investor ranging from opening of mutual fund account, portfolio management, advisory services, creating awareness and so on. investing in mutual fund brings out various benefits (das, 2018) for the investor in the following manner: • providing wider arena of schemes to invest; • involvement and management by professionally trained personnel; • maintaining safety and credibility of funds by highly intellectual fund managers; • diversification of risk taken by investors; • protecting the interest of the investors – thereby attracting prospective investors; • automatic collection and reinvestment of dividend pay-out; • ensuring transparency in all transactions; • providing information at all times which enables in timely decision; • enabling timely liquidity of the investment made. types of mutual funds: (ratnaraju & madhav, 2016) according to the association of mutual funds in india (amfi), on the wholesome mutual fund schemes can be of the following: 1. open ended schemes – the investor can subscribe / purchase units of any type of mutual fund and can also redeem / sell the units at any point of time. open ended schemes do not have a fixed closure date and relies upon the mindset of the investor. these funds give an edge over other schemes as they provide higher level of liquidity to the investor (prem shankar maurya, 2014). 2. close ended schemes – unlike the open-ended scheme, close ended schemes have an inbuilt or a structured time frame upon which an investor can subscribe or purchase the units of mutual funds during a new fund offer and can redeem after the fixed time frame as laid down in the scheme. 3. actively managed funds – a professionally experienced manger (usually fund manager) takes care of the mutual fund and makes timely decisions on the stocks that needs to be bought or sold or held depending upon his rationale and analytical research. this mechanism https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 455 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc helps the investor to gain with maximum returns from fund that out-performs the benchmark returns (shreekant et al., 2020). 4. passively managed funds – the fund performs in accordance with the index of the market. the net asset value of the fund moves in proportion to the rise or fall in the market index. these funds generate the same level of returns as the market (hada et al., 2016). 5. there are few other types of mutual fund which are categorised on the basis of risk-return trade off. they are: a. liquid fund; b. ultra-short-term fund; c. arbitrage fund; d. capital protection orientation fund; e. short term income fund; f. fixed maturity plan; g. long term income fund; h. gilt-edged fund; i. monthly income plan; j. balanced fund; k. gold etf; l. index fund; m. equity fund; n. tax saving fund, and o. thematic / sectoral fund. tax saving mutual fund famously or alternatively known as equity linked savings scheme predominantly invests the resources pooled from the general public to gain dual benefit of reducing tax burden to a restricted limit and gives a potential appreciation in the capital invested (panigrahi. et al., 2020). as per securities board of exchange of india, 80% of the amount pooled shall be put in equities and which has a lock-in period of three years (mishra & mishra, 2020). every financial instrument performs in a significant manner. the relationship between the expected return generated by a fund or instrument and the risk of investing in the same is generally measurable and done using capital asset pricing model (capm). this study uses capm approach which explicitly tenders the relationship between risk and return (pramono et al., 2022). statement of the problem: mutual funds are the most sought after investment among the salaried class people in india (thomas et al., 2018). among the various types of mutual funds that are available in the market, investors opting to invest in tax saving equity linked savings scheme (elss) enjoy a higher edge over other kind of mutual funds with time ability of timing the market and power of compounding in the long run. these funds usually generate higher returns over the long-term and also provide the benefit of reduction in taxable income as investment in elss attracts deduction under section 80c. this study envisions to analyse the risk and returns of tax saving equity linked saving scheme among the selected 11 schemes for a period of 90 months. https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 456 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc review of literature a critical analysis comparing the performance of top 10 equity mutual fund schemes predicted hdfc mid cap opportunities fund (g), birla sun life mnc fund (g) and quantum long term equity (g) as the best mutual fund schemes and birla sun life mnc fund (g) had the highest expense ratio. hdfc mid cap opportunities fund (g) had the least expense ratio and was also declared less risky when standard deviation, beta and r-square values were taken into consideration (pal & chandani, 2014). the risk-return relationship for 10 years from april 2005 to march 2015 analysed using monthly adjusted nav, return of the scheme with funds return and market return pictured that 10 out of 20 schemes showed good performance and only a few mutual fund schemes proved contrasting performance on account of unprofessional management, inability of the fund manager to read the market conditions, selection of stock being poor and inadequate diversification and so on (chauhan, 2020). performance and evaluation of sbi mutual funds (equity and debt schemes) portrayed good performance in schemes like sbi magnum global fund, sbi tax advantage fund and sbi monthly income fund are the front runners compared to other similar funds wherein sbi infrastructure fund, sbi magnum children benefit and sbi insta cash fund were lagging behind due to lower navs, value addition and deviation (madhavi, 2019). risk and return analysis of select equity linked savings schemes for the period from 2012 to 2017 using standard deviation, co-efficient of variation, beta values, sharpe ratio, treynors ratio and jensen’s alpha showed that majority of the selected schemes exceeded the benchmark indexes due to professionally managed scheme and efficient handling by fund managers. it was purported that indian asset management companies had the capacity to earn higher returns in comparison with the benchmark returns on an average (pratap, 2020). the annualised returns of growth schemes in comparison with other select mutual fund schemes during the years 2010 to 2019 envisaged that growth and balanced schemes of hdfc, aditya birla and nippon india showed outstanding performance vis a vis other amcs and in the case of debt schemes nippon india and sbi mutual fund has outperformed other funds. as far as the return comparison of growth scheme, aditya birla ranked first, followed by sbi focussed fund, nippon india and icici prudential value discovery fund has outperformed during the research period (m. v. sharma, 2020). (ahmad pandow & ahmad butt, 2017) found from their study carried out on risk and return analysis of mutual funds india that, performance of fund managers is considered as the prime factor on the investors interest and growth of mutual fund industry as well. it is the aim and goal of all the fund managers to work for the promotion of investors’ interest by considering higher returns with minimum risk. their research also laid that the performance of mutual funds is defined in terms of returns, risk adjusted returns or benchmark comparisons. https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 457 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an article scripted by (sahai, 2020) about the variations in the performance of mutual funds by taking into comparison a few selected 34 equity schemes in india for the period between 1995 to 2020 using tools like average returns, standard deviation, beta, coefficient, sharpe ratio, treynor ratio and jensens alpha. the findings revealed that 32 equity schemes have shown returns higher than the average returns, 31 schemes were found to be less risky, 15 schemes have a positive beta less than one and overall, all the schemes provided higher returns according to sharpe and treynor. they also depicted that investor should revisit or tune their financial goal from time to time according to the market movement and government regulations. the risk-return evaluation of the select eight equity mutual funds envisages that their performance in the highly volatile market is noticeably good and investors should consider risk and return primary as the important factor for investment followed by safety and liquidity (murthy et al., 2022). the usefulness of sharpe ratio will substantiate investors decision towards choosing the mutual fund scheme that generates higher returns with diversified investment and less risky investment using treynors ratio. the returns produced by mutual funds are in correlation with the volatility of the market as the index movement significantly impacts the performance of all mutual funds in india. investment in equity based mutual funds are most preferred by investors who tend and have the ability to take more than moderate risk in-order to gain from the advantage of the index volatility as depicted for icici blue chip fund among the five selected large cap and blue chip funds taken for analysis (khurana & bhatia, 2023). objectives of the study the researcher has undertook to carry the study on the following objectives: 1. examining the risk and returns of select equity linked savings schemes of mutual fund. 2. comparing the performance of the select tax savings schemes according to the selected performance parameters. 3. identify the best tax savings scheme among the 11 select shemes. method research methodology is usually understood as an approach used to solve a problem or to find a solution to a defined problem in a systematic manner. the approaches to each and every problem depends upon the type of study undertaken by researchers (dewasiri et al., 2018). descriptive research method is used in this study. to observe and scrutinise the performance, 11 equity linked savings scheme of mutual funds across different asset management companies are selected, and the net asset values (navs) are collected using secondary data sources. the daily navs are used to find out the returns and comparing the same with various other performance parameters for evaluation. https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 458 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data sample this study is carried out for a period of 90 months or 7.5 years starting from 1st april 2016 to 31st october, 2023 which is understood as long-term and only the following 11 schemes were selected for further analysis: 1. quant tax direct plan – growth; 2. axis long term direct plan – growth; 3. kotak tax saver direct plan – growth; 4. invesco india tax direct plan – growth; 5. dsp tax saver direct plan – growth; 6. franklin india taxshield direct plan – growth; 7. hdfc tax saver direct plan – growth; 8. mirae asset tax saver equity direct – growth; 9. icici prudential long term equity fund direct – growth; 10. tata india tax savings direct – growth; 11. nippon india tax savings direct – growth; data collection method: in order to arrive at a comparative judgement on the returns, data has been collected from the websites of amfi, rbi, s&p bse sensex and other reliable online open source like value research online website, yahoo finance, investopedia and so on. the daily navs of each of the selected mutual funds are collected in order to compute the returns of the mutual funds and for other comparison parameters. tools / parameters for analysis: in order to understand, study, identify and analyse the risk and returns of selected tax savings mutual funds, the following financial tools are used: 1. return of the product / portfolio (rp): any profit or gain that is earned over and above the amount invested is perceived as returns. here, in this research, the return of all the schemes is determined by dividing the closing nav for the study period with the opening nav for the study period minus 1 (k. sharma & tripathi, 2023). returns are always expressed in terms of percentage. the returns are annualised to determine the average returns of the mutual fund. formula = ((𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝑁𝐴𝑉)/(𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝑁𝐴𝑉)) − 1 * 100 2. standard deviation (sd): standard deviation is used to measure the level of risk of a fund. alternatively, it also helps the investor to understand the volatility of the fund / the investment he has made (sei, 2014). it is a performance indication in correlation to that particular mean of the fund / scheme. this tool helps to evaluate and understand how the returns would vary (rise higher or fall lower) from the mean. the standard deviation for the entire returns of the product / fund is determined by using stdev.p formula in ms excel by taking the square root for the average number of trading days in a year. formula = [1/𝑛 (𝑋𝑖 − 𝑋)^2] ^ ½ https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 459 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc formula in ms excel = stdev.p(daily_returns)*sqrt(avg_no_of_trading_days_in_a_year) 3. beta: the beta value of a mutual fund generally indicates the risk of an investment made in financial instrument in relation to the benchmark market of that investment (chong et al., 2018). it also indicates the volatility level of the mutual fund in relation to the benchmark market. if the determined value of beta is more than 1, then the scheme is said to be more volatile than its benchmark and vice versa. formula = (𝑅𝑝 − 𝑅𝑓)/ (𝐵𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝑅𝑒𝑡𝑢𝑟𝑛 − 𝑅𝑓) formula in ms excel = slope(known_ys,known_xs) wherein, known_ys are the daily returns of the benchmark (i.e.,) s & p bse sensex. known_xs are the daily returns of the fund / scheme 4. risk free rate (rf): investment in any financial asset carries risk depending upon the nature of the asset. there are very few assets that carry very minimal amount of risk or at times no risk namely fixed deposits, bonds, treasury bills, commercial papers, government securities, etc., here the researcher, has considered the 365-day treasury bill (primary) yield issued by rbi as the riskfree rate. as the rate of interest varied on a monthly basis the rates so collected is annualised and the average annualised rate of interest for the bill is taken into consideration as the riskfree rate for the purpose of this analysis. 5. sharpe ratio: sharpe ratio evaluates the risk and returns together of a mutual fund and helps in selecting / choosing a fund that generates higher returns with optimal amount of risk taken by the investor (pav, 2016). formula = (𝑅𝑝 − 𝑅𝑓)/ 𝜎𝑝 rp = average returns on a portfolio rf = average risk-free return 𝜎p = standard deviation of a portfolio 6. treynor ratio: treynor ratio is used to measure the excess returns attained per unit or risk on a portfolio / mutual fund (hubner, 2005). higher the ratio has to be understood as the investment / portfolio fetching good returns for the investor. the formula for determining treynor ratio is as follows: formula = (𝑅𝑝 − 𝑅𝑓)/ 𝛽𝑝 rp = average returns on a portfolio rf = average risk-free return 𝜎p = beta value of a portfolio https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 460 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion analysis on the select 11 mutual funds was carried taking into the consideration all the tools and parameters enlisted above and using microsoft excel spreadsheet. the tools measure the risk, volatility, return, benchmark returns with the intention to determine the performance of tax savings mutual funds. the average annualised risk-free rate of interest for the 365-day treasury bill (primary) yield was collected from the published secondary source (i.e.,) from the website of rbi. the monthly rate of interest declared by rbi is collected and the average risk-free rate for the 90 months period is determined as 5.78%. it has to be understood that risk-free rate is that rate at which an investor earns a return on his investment without much risk or no risk. table no.1 mutual fund analysis using performance parameters name of the mutual fund cagr (rp) sd beta sharpe ratio treynor ratio quant tax direct plan 30.18% 17.29% 0.83 1.41 0.30 axis long term direct plan 17.26% 15.66% 0.80 0.73 0.14 kotak tax saver direct plan 21.69% 15.13% 0.85 1.05 0.19 invesco india tax direct plan 19.69% 15.65% 0.90 0.89 0.15 dsp tax saver direct plan 21.55% 15.88% 0.29 0.99 0.55 franklin india tax shield direct plan 18.06% 15.77% 0.90 0.78 0.14 hdfc tax saver 18.53% 15.99% 0.90 0.80 0.14 mirae asset tax saver equity 25.75% 16.27% 0.94 1.23 0.21 icici prudential long term equity fund 18.61% 15.10% 0.85 0.85 0.15 tata india tax savings 20.35% 16.41% 0.94 0.89 0.16 nippon india tax savings 14.35% 17.65% 0.96 0.49 0.09 source: https://www.bseindia.com/, https://www.amfiindia.com/net-asset-value/nav-history, computation done using ms excel spreadsheet. table no.2 average number of trading days year 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 average trading days 247 245 247 245 248 247 248 142 233.625 source: computed data using ms excel spreadsheet. https://www.ilomata.org/index.php/ijtc https://www.bseindia.com/ https://www.amfiindia.com/net-asset-value/nav-history risk-return analysis of select tax saving mutual funds kumar 461 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc chart no.1 line chart showing returns, sd and sharpe ratio source: computed using ms excel chart no.2 line chart showing returns, beta and treynor ratio source: computed using ms excel the benchmark returns are computed by taking the daily closing indices of bse s & p sensex for 90 months from 1st april 2016 till 31st october, 2023. it is evident from table no.1 that 10 out of 11 mutual funds outperformed the benchmark / expected return. based on the returns, it can be understood that quant tax direct plan – growth has outperformed among the select 11 mutual funds while nippon india tax savings scheme has underperformed in comparison with the benchmark returns. the standard deviation of mutual fund indicates the returns, a fund may go up or down in correlation with its average returns. table no.1 says that kotak mahindra tax saver mutual fund and icici prudential tax saving mutual fund are having a lower standard deviation which 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 0 5 10 15 20 25 30 35 returns sd 0.3 0.14 0.19 0.15 0.55 0.14 0.14 0.21 0.15 0.16 0.09 0 0.2 0.4 0.6 0.8 1 1.2 0 5 10 15 20 25 30 35 returns beta treynor ratio https://www.ilomata.org/index.php/ijtc risk-return analysis of select tax saving mutual funds kumar 462 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc denotes that the fund is less volatile wherein nippon india tax saving fund and quant tax plan is more volatile. sharpe ratio usually denotes the additional return generated for every 1% of risk taken by the investor. quant tax direct plan (1.41) and kotak mahindra tax saver plan (1.05) has the highest sharpe ratio which denotes that the fund has the ability to outperform among the select 11 funds, wherein, franklin templeton tax shield plan (0.78) and hdfc tax saver mutual fund (0.8) has the ability to generate more than 0.75% of the returns for every 1%. also, it depicts that nippon india tax savings scheme (0.49) generate less than 0.5% of returns for 1% risk taken. when only market risk is taken into consideration to evaluate the risk and returns performance of mutual funds, treynor ratio helps the investor to understand the returns generated by a fund with the amount of systematic risk taken by him. table no.1 indicates that quant tax direct plan generates 0.30% of returns for every 1% of systematic risk taken by the investor, whereas franklin india tax shield (0.14%), hdfc tax saver (0.14%) and nippon india tax savings fund (0.09%) generates lesser returns. conclusion mutual funds are always considered as a lucrative investment instrument for investors, who do not have time or interest or knowledge towards investing in stock market (manjunatha, 2019). investors who enter into mutual fund market to invest look into various factors such as capital protection, risk bearing capacity, returns, investment range, time period, tax savings before investing their hard-earned money in mutual funds. the launch of mutual fund sahi hai initiative launched by association of mutual funds in india and the regulation by sebi has given confidence among the investors to invest in mutual funds (sharmacharjee, 2014). this miniature effort was taken to examine, understand and identify the performance of tax saving / elss mutual fund which can be an aide to investors in decision-making process. the findings highlighted that among the select mutual funds nippon india tax savings scheme is found to reach the beta level and can be chosen by investors who wish to take risk over a period of time. the beta of dsp tax saver denotes that the fund is less volatile and only renders moderate returns. finally, it was evident from the parameters / tools used like standard deviation, beta, sharpe ratio and terynor ratio quant tax direct plan has given higher returns, performed well with both systematic and unsystematic risk among the select 11 mutual funds vice versa nippon india tax savings scheme depicted to be more volatile, generating lesser returns taking into consideration systematic and 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(2018). mutual fund investors perception in india a study. international journal of engineering and technology(uae), 7(1.1), 60–61. https://doi.org/10.14419/ijet.v7i1.1.8924 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 928-950 928 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach wiwik sugiarti1, nikmah2 12university of bengkulu, indonesia correspondent: wiwiksugiartill11@gmail.com1 received : september 15 2023 accepted : october 25, 2023 published : october 31, 2023 citation: sugiarti, w., nikmah. (2023). the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach. ilomata international journal of tax and accounting, 4(4), 928-950. https://doi.org/10.52728/ijtc.v4i4.969 abstract: this research aims to predict the potential financial distress in companies with special notation on the indonesia stock exchange during the period from january 1, 2021, to december 2022, using the modified altman model (z-score) and the springate model (s-score) approaches. data for the study were obtained from the official website of the indonesia stock exchange, employing purposive sampling as the sampling technique. based on the criteria, a total of 280 research observations were obtained. the results indicate that both models can predict the potential financial distress of companies using financial ratios. furthermore, the research findings reveal differences in the accuracy level of predicting potential financial distress between the modified altman z-score and springate models. the modified altman z-score model demonstrates higher accuracy compared to the springate model in predicting the potential financial distress of companies with special notation. this research provides important information for companies with special notation codes that experience financial distress, to immediately improve financial conditions, and provides a basis for strategic decision making to ensure the sustainability of the company and for investors and other interested parties can be used as a basis for investment decision making. keywords: potential financial distress, special notation companies, altman z-score, and springate this is an open access article under the cc-by 4.0 license. introduction improving the welfare of shareholders and maintaining the continuity of business operations are the main objectives of the company. to achieve this goal, companies must maintain their financial performance in order to remain competitive and avoid potential bankruptcy (kisman & krisandi, 2019). a company can go bankrupt for various reasons, one of which is financial distress (cındık & armutlulu, 2021; dudley et al., 2022). financial distress can be caused by internal factors, such as ineffective management of assets and liabilities, and external factors such as inflation, tax regulations, laws, and changes in foreign currencies (kisman & krisandi, 2019b) https://www.ilomata.org/index.php/ijtc mailto:wiwiksugiartill11@gmail.com https://doi.org/10.52728/ijtc.v4i4.969 the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 929 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial distress is something that must be anticipated immediately because it can hamper the smooth running of a company's operational activities (eliu, 2014; kartika et al., 2020; lópezgutiérrez et al., 2015; nuswantara et al., 2023) a strategy that can be used to increase anticipation of financial distress is the financial distress prediction (fdp) approach. the fdp approach can help company management control financial risk, and help them modify investment plans to minimize risk as well as help investors understand the profitability of the company, (li & wang, 2023a). financial distress conditions faced by a company can be a signal to investors that the company is experiencing serious problems that if allowed to continue can lead to bankruptcy. in december 2018, the indonesia stock exchange has introduced a "special notation" feature that can be utilized by potential investors to find out the state of a company. this notation can provide clues about the initial condition of a company based on evaluations conducted by the indonesia stock exchange. research on the potential for financial distress has been conducted with varied results but is more focused on companies in certain industrial sectors in general (lestari et al., 2021) (munira et al., 2021)(martini et al., 2023)(effendi, 2018); (pulungan & hartini, 2018); (suidarma et al., 2022) (zhu et al., 2023); (tan & wibisana, 2020). this study differs from previous studies as it predicts the potential for financial distress in companies included in the group of companies with a 'special notation' that have been evaluated by the indonesia stock exchange, and the evaluation results indicate that the company is in trouble. the fdp approach in this study uses two models, namely the modified altman model (z-score) and the springate model (s-score). the main objectives of this study are (1) predicting the potential for companies with special notations on the indonesia stock exchange to experience financial distress; (2) compare the two models to determine which model is more accurate in predicting financial distress. signalling theory signalling theory was first introduced by (spence michael, 1973) in his research entitled job market signaling. the information that the company discloses signals to investors about the condition of the company and can reduce information asymmetry. quality and integrated financial reporting information will reduce information asymmetry for principals, agents, and third parties. (suranta et al., 2023) outsiders will also react positively to good signals because market reaction depends heavily on the fundamental signals of the company. investors will only invest in a company if they believe that it can generate more value for their money than if they put it elsewhere. therefore, investors' focus will be on the company's performance presented in the company's financial statements. signal theory that explains how companies provide positive and negative signals from financial statements (gandhy & fardinal, 2019). based on signal theory, financial distress conditions experienced by companies can be a signal to investors that the company is experiencing serious problems that if allowed to continue can lead to bankruptcy. financial distress financial distress is generally understood to be the state in which a business is unable to pay its creditors and satisfy its own requirements(friedl & drescher, 2013) financial distress occurs when a company faces financial problems and faces financial risks (li & wang, 2023b). financial distress has a different meaning from bankruptcy, where financial distress conditions in companies occur https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 930 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc before bankruptcy and become the cause of bankruptcy. so not all companies that experience financial distress will end in bankruptcy (nikmah & sulestari, 2021). financial distress can be caused by internal and external factors, such as long-term losses in the company's operational activities and government policies that can increase business expenses (purwaningsih & aziza, 2019). (sari et al., 2021) claimed that financial hardship may arise from a company's inability to control and sustain stable financial performance and that financial crisis and bankruptcy scenarios can be anticipated from the company's financial statements by producing financial ratio analysis that is pertinent to the business. research (widarjo & setiawan, 2009) proves that a business is in financial distress if it experiences losses in two consecutive fiscal years (periods). information about financial distress is used by companies to accelerate management actions in preventing problems before bankruptcy such as mergers or takeovers so that companies can pay off debts and improve company performance, as well as early warnings before bankruptcy (piatt & piatt, 2002). altman model (z-score ) edward i. altman originally presented the altman model in 1968. this model is designed to assess a company's bankruptcy risk and can also be used to measure its overall financial performance. (sari, 2016). altman's z-score is a multivariate formula utilized to gauge financial distress and evaluate a company's financial well-being. to make his model applicable to all types of firms, including both manufacturing and non-manufacturing ones, altman made modifications to it. the formula of the modified altman z-score model (altman,1995) is called the modified altman (zscore): information: x1 = working capital / total assets x2 = retained earning / total assets x3 = earnings before interest and taxes / total assets x4 = book value of equity / total liabilities springate model (s-score) according to (denhas & subroto, 2014) gorgon l.v. springate created this model for the first time in 1978. in its formulation, by employing four out of the 19 financial parameters and the multiple discriminant analysis formulation approach, springate assessed the company's level of financial distress (mda). the model can predict financial distress with an accuracy rate of 92.5%, with the formula: information: x1 = working capital / total assets https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 931 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc x2 = profit before interest and tax / total assets x3 = profit before tax / current debt x4 = sales / total assets (lestari et al., 2021) analyzed financial distress in tourism, hospitality and restaurant sub-sector companies with altman (z-score), springate (s-score), zmijewski (x-score), and grover (gscore) analysis methods, the results of the study proved that several companies experienced financial distress and the springate (s-score) model has the highest accuracy rate, reaching 68.75%. in line with (effendi, 2018b) research on issuers in the transportation service sector using the altman, springate, zmijewski, foster, and grover methods, and proved that the majority of issuers experienced financial distress and the springate model showed the highest prediction model accuracy results. (munira et al., 2021b) measured the potential for bankruptcy in mining companies using the altman modified z-score and springate methods, and the results proved that there were several companies that experienced financial distress, and overall the altman z-score method had a higher accuracy rate of 66.49%. (martini et al., 2023b) examined the comparison of financial distress predictions using altman, springate, zmijewski, and grover models at pt garuda indonesia (persero) tbk, and the results indicated that pt garuda indonesia (persero) experienced financial distress, and prediction models gave varying results. previous research has produced a variety of findings and levels of accuracy, depending on a number of specific factors and variables used in each industry or company studied. conceptual framework and hypothesis figure.1 conceptual framework based on the conceptual framework and research objectives that have been described earlier, hypotheses can be developed from this study as follows: h1: altman model modified by z-score is able to predict the potential for financial distress in companies in a special notation of the indonesia stock exchange h2 : springate s-score model is able to predict potential financial distress in companies in a special notation of the indonesia stock exchange companies in idx special notation prediction of financial distress potential for financial distress not potentially for financial distress altman (z-score) springate (s-score) https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 932 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h3: there is a difference in the accuracy of financial distress prediction models between altman prediction models modified z-score and springate s-score method this research uses secondary data in the form of company financial statements obtained from through www.idx.co.id website. sampling using purposive sampling techniques, namely: companies are listed in the special notation of the indonesia stock exchange during the year from january 1, 2021 to december 2022; the company obtains special notation codes except with l and s codes; have complete financial statements that have been audited and published during the 2018-2022 observation period and can be accessed and financial statements are presented in rupiah. this research uses secondary data in the form of company financial statements with special notation codes obtained through www.idx.co.id website. companies with special notation are companies that receive warnings from the indonesia stock exchange because they have problems that are not in accordance with existing regulations. special notation is marked by several codes in the form of letters totaling 17 codes that have different meanings according to the company's problems. sampling using purposive sampling techniques, with the following criteria: 1. the company is listed in the special notation of the indonesia stock exchange during 20212022 2. the company gets special notation codes except with l and s codes (they cannot be used as samples because they do not meet the requirements of both analysis models to be used) 3. have complete financial statements that have been audited and published during the observation period 2018-2022 and can be accessed 4. financial statements using rupiah currency 5. have all the data needed for each prediction model. the analysis method involves the application of the modified altman z-score model and the springate model, with the analysis process conducted in the following stages: 1) z-score calculation using altman modified z-score method : z’’ = 6,56x1 + 3,26x2 + 6,72x3 + 1.05x4 table 1. altman model modified z-score altman modifikasi z-score keterangan > 2,6 non distress 1,1 2,6 grey area <1,1 distress https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 933 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2) s-score calculation using springate model : s-score = 1.03 x1 + 3.07 x2 + 0.66 x3 + 0.4x4 table 2. model springate s-score 3) accuracy testing of the prediction mode testing the accuracy of prediction models is used to determine valid estimates and errors in the results of calculating the score of each prediction model, this stage is a way to determine which model is more precise in forecasting financial trouble for businesses listed on the idx with specific note between 2018-2022, the accuracy level is calculated as follows (munira et al., 2021b): information: a. the number of correct predictions is the number of companies in the special notation of the indonesia stock exchange that are predicted to experience financial distress and indeed experience financial distress, and if calculated using the modified altman model (zscore), and the springate model states the same thing as the statement of the indonesia stock exchange. b. the number of samples is the number of companies sampled multiplied by the length of the year of observation. 4) calculate the error rate of a prediction model after calculating the accuracy rate, the prediction error rate for each model used is calculated. error types are divided into two types, namely type i and type ii errors. the error rate is calculated as follows, (munira et al., 2021) information: a. type i error is an error that occurs when a model predicts that the sample studied is not experiencing financial difficulties, but in fact the sample is recorded as a company experiencing financial difficulties. springate s-score keterangan > 1,062 non distress 0,862 – 1,062 grey area <0,862 distress accuracy rate = number of correct predictions x 100% number of samples error type i = number of errors i x 100% number of samples error type ii = number of errors ii x 100% number of samples https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 934 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. type ii error is an error that occurs when a prediction model estimates that the sample studied has financial difficulties, but in fact the sample is recorded as a company that does not experience financial difficulties. result and discussion there are 125 companies included in the special notation of the indonesia stock exchange (idx) from january 1, 2021 to december 2022, and based on the criteria, 56 sample companies or 280 observations were obtained. there were 125 companies included in the special notation of the indonesia stock exchange (idx) from january 1, 2021 to december 2022, and only 56 companies met the criteria sampled during the 5-year observation period or as many as 280 observations. descriptive statistics the results of descriptive statistical tests in this study can be seen in the following table: a. modified altman model (z-score) table 3. altman descriptive statistics modification (z-score) descriptive statistics n minimum maximum mean std. deviation working capital to total assets (x1) 280 -73.91 .95 -.8356 604.904 retained earnings to total assets (x2) 280 -126.68 .76 -37.102 1.591.732 earnings before interest and tax to total assets (x3) 280 -15.19 3.82 -.2766 140.954 book value of equity to book value of total debt (x4) 280 -.99 431.53 5.422 2.910.697 valid n (listwise) 280 source : data processed by the author (2023) b. springate model table 4. springate descriptive statistics descriptive statistics n minimum maximum mean std. deviation working capital to total assets (x1) 280 -73.91 .95 -.8356 604.904 earnings before interest and tax to total assets (x2) 280 -15.19 3.82 -.2766 140.954 net profit before taxes to current liabilities (x3) 280 -71.04 15.89 -.7178 549.840 sales to total assets (x4) 280 -1.03 28.82 .8795 225.790 valid n (listwise) 280 source : data processed by the author (2023) https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 935 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc working capital to total assets (wcta) is a ratio that reflects a company's net working capital to total assets. the minimum value range from -73.91 to a maximum of 0.95 showed a significant variation of 604.9 in the study sample. the average wcta ratio of -0.83 indicates an unfavorable value distribution. this indicates that the likelihood of financial distress increases with an average that is close to the minimum value. retained earnings to total assets is a ratio that describes a company's ability to generate retained earnings from total assets. the minimum range from -126.68 to a maximum of 0.76 showed a significant variation of 1.59 in the study sample. the average of this ratio of -37.1 indicates an unfavorable distribution of profitability. companies tend to be less efficient in generating enough revenue to cover their costs. earnings before interest and tax to total assets is a productivity indicator that shows the distribution of earnings before interest and tax to total assets. the minimum value range from 15.19 to a maximum of 3.82 showed a significant variation of 140.9 in the study sample. this average ratio of -0.27 indicates that most companies in the sample have low levels of productivity, indicating inefficiencies in managing their assets. book value of equity to book value of total debt, this ratio indicates the maximum amount of asset loss that can occur before total liabilities exceed the book value of equity. the minimum value range of -0.99 to a maximum of 431.53 shows a significant variation of 2.91 in the research sample. the average of this ratio of 5.42 indicates a poor distribution value, as there is quite a lot of debt compared to the company's capital.. earnings before interest and tax to total assets is a productivity indicator that shows the distribution of earnings before interest and tax to total assets. the minimum value range from 15.19 to a maximum of 3.82 showed a significant variation of 140.9 in the study sample. this average ratio of -0.27 indicates that most companies in the sample have low levels of productivity, indicating inefficiencies in managing their assets. sales to total assets is a ratio that describes the efficiency of using assets to generate sales. the minimum value range from -1.03 to a maximum of 28.82 showed a significant variation of 225.7 in the study sample. an average of 0.87 indicates an under-distribution of value, indicating potential financial distress due to low sales compared to asset usage. data testing and hypothesis testing the following are the results of calculations (z-score) and s-score as well as predictions of financial distress using both the modified altman model and the springate model in companies included in special notation from january 1, 2021 to december 2022 with a period of 5 years (2018-2022). https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 936 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a. modified altman model (z-score ) table 5. altman calculation results modification (z-score ) altman (z-score) no company code 2018 2019 2020 2021 2022 zscore kategori zscore kategori zscore kategori zscore kategori zscore kategori 1 kias 4,12 non-fd -1,72 fd 2,09 grey area 3,40 non-fd 1,99 grey area 2 rmba 1,21 grey area 1,74 grey area 4,20 non-fd -0,06 fd 2,74 non-fd 3 akku 3,88 non-fd -0,54 fd 3,30 non-fd -3,19 fd -2,49 fd 4 hdtx -19,13 fd -18,84 fd -21,16 fd -23,89 fd -32,31 fd 5 wsbp 3,17 non-fd 2,90 non-fd -4,86 fd -12,32 fd -9,36 fd 6 bima -8,31 fd -1,68 fd -4,66 fd -5,43 fd -3,19 fd 7 talf 7,89 non-fd 5,67 non-fd 4,15 non-fd 3,95 non-fd 3,80 non-fd 8 lmsh 10,81 non-fd 7,47 non-fd 7,68 non-fd 9,56 non-fd 11,04 non-fd 9 arka -2,05 fd 0,47 fd -0,95 fd -0,09 fd 0,54 fd 10 ikai 0,28 fd 0,31 fd -0,41 fd -0,39 fd 0,54 fd 11 inta -0,72 fd -1,68 fd -11,02 fd -12,68 fd -5,37 fd 12 tirt -0,48 fd -1,15 fd -17,35 fd -15,93 fd -16,31 fd 13 jgle 2,81 non-fd 2,93 non-fd 2,69 non-fd 2,83 non-fd 0,76 fd 14 jspt 4,36 non-fd 3,23 non-fd 2,16 grey area 1,69 grey area 2,18 grey area 15 mira -8,79 fd -9,55 fd -11,66 fd -12,52 fd -16,58 fd 16 mknt 1,68 grey area 3,07 non-fd 2,58 grey area 2,32 grey area 1,06 fd 17 mdia 4,91 non-fd 3,57 non-fd 3,36 non-fd 4,35 non-fd 2,58 grey area 18 mdrn -12,26 fd -11,85 fd -32,45 fd -26,33 fd -25,32 fd 19 lckm 14,57 non-fd 15,13 non-fd 17,04 non-fd 17,83 non-fd 20,54 non-fd 20 safe -11,88 fd -10,82 fd -12,78 fd -16,19 fd -14,38 fd 21 posa -4,45 fd -4,89 fd -6,73 fd -9,71 fd -11,77 fd 22 pnse 2,22 grey area 1,91 grey area 0,41 fd -0,20 fd 0,03 fd 23 andi 0,42 fd 1,63 grey area 0,68 fd 1,21 grey area 1,19 grey area 24 bika 3,83 non-fd 3,40 non-fd 0,13 fd 0,95 fd -0,96 fd 25 cmpp -15,52 fd -10,96 fd -14,15 fd -18,93 fd -19,89 fd 26 cnko -11,10 fd -11,03 fd -22,19 fd -18,48 fd -24,56 fd 27 ctth 0,74 fd 0,01 fd -1,33 fd -1,51 fd -2,20 fd 28 dada 4,15 non-fd 2,45 grey area 2,96 non-fd 4,68 non-fd 4,07 non-fd 29 dpum 3,74 non-fd 1,79 grey area -2,76 fd 0,59 fd 0,46 fd 30 deal 1,72 grey area 0,87 fd -2,76 fd -7,06 fd -6,07 fd 31 btek 1,52 grey area 0,99 fd -1,04 fd -0,55 fd -0,76 fd 32 buva 0,30 fd -0,56 fd -9,30 fd -9,93 fd -10,66 fd 33 gmtd 4,47 non-fd 4,20 non-fd 3,39 non-fd 3,60 non-fd 3,03 non-fd 34 iikp 10,63 non-fd 18,11 non-fd 13,74 non-fd 11,30 non-fd 7,84 non-fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 937 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 35 glob 133,62 fd 687,79 fd 630,13 fd 583,35 fd 1000,88 fd 36 hade 39,76 non-fd -48,97 fd -34,32 fd -34,52 fd -35,02 fd 37 tops 2,55 grey area 3,07 non-fd 2,08 grey area 2,36 grey area 1,30 grey area 38 trio 157,46 fd 233,44 fd 323,41 fd 383,69 fd -395,95 fd 39 viva -1,07 fd -3,36 fd -5,18 fd -6,39 fd -9,00 fd 40 smru 0,56 fd -1,44 fd -5,15 fd -9,33 fd -8,60 fd 41 sona 7,03 non-fd 9,59 non-fd 10,20 non-fd 13,39 non-fd 5,58 non-fd 42 tara 15,87 non-fd 15,28 non-fd 23,81 non-fd 49,79 non-fd 54,10 non-fd 43 taxi -13,54 fd -22,00 fd -33,85 fd -21,74 fd -47,83 fd 44 digi 20,67 non-fd 12,37 non-fd 1,48 grey area -4,30 fd -14,83 fd 45 tama -0,62 fd -1,96 fd -2,28 fd -2,29 fd -1,36 fd 46 tira 2,06 grey area 2,21 grey area 1,73 grey area 1,32 grey area 1,53 grey area 47 wows -0,57 fd 5,16 non-fd 5,86 non-fd 5,69 non-fd 5,30 non-fd 48 nasa 13,83 non-fd 19,25 non-fd 19,24 non-fd 18,53 non-fd 19,76 non-fd 49 real 6,31 non-fd 102,25 non-fd 144,17 non-fd 151,33 non-fd 456,48 non-fd 50 ppro 2,92 non-fd 1,57 grey area 1,19 grey area 2,06 grey area 2,09 grey area 51 kbag -1,57 fd 3,63 non-fd 8,68 non-fd 8,87 non-fd 11,79 non-fd 52 kren 9,20 non-fd 9,60 non-fd 8,89 non-fd 6,73 non-fd 6,40 non-fd 53 kota 3,11 non-fd 7,64 non-fd 4,23 non-fd 4,18 non-fd 4,29 non-fd 54 agar 2,43 grey area 3,60 non-fd 4,33 non-fd 4,21 non-fd 3,16 non-fd 55 sbat 0,35 fd -0,48 fd -1,25 fd -0,80 fd -3,74 fd 56 scpi 5,36 non-fd 7,07 non-fd 5,33 non-fd 10,53 non-fd 9,44 non-fd source : data processed by the author (2023) based on table 5. above shows that the results of the analysis using altman modified z-score in 2018 there were 24 companies experiencing financial distress, there were 8 companies in gray areas, and 24 other companies were included in the category of companies that were nonfinancial distress. in 2019, there were 26 companies experiencing financial distress. meanwhile, 7 companies are in the grey area stage, and 23 other companies are included in the category of healthy companies or non-financial distress. in 2020, there were 29 companies experiencing financial distress. there are 7 companies that are in the grey area stage. while 20 other companies are included in the category of healthy companies (non financial distress). in 2021, there were 31 companies experiencing financial distress, and there were 6 companies that were in the gray area. meanwhile, as many as 19 companies are included in the category of healthy companies (non financial distress). furthermore, in 2022 there are 32 companies that are declared to be experiencing financial difficulties, and 7 companies that are at the stage (gray area). while the other 17 companies are healthy companies (non financial distress). these results show that the altman model modified z-score is able to predict financial distress in companies with a special notation code of the indonesia stock exchange, thus the first hypothesis (h1) is accepted. https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 938 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc b. springate model table 6. springate model calculation results springate (s-score) no company code 2018 2019 2020 2021 2022 sscore kategori sscore kategori sscore kategori sscore kategori s-score kategori 1 kias -0,072 fd -2,129 fd -0,245 fd 0,405 fd 0,401 fd 2 rmba 0,709 fd 0,780 fd -0,354 fd 0,585 fd 1,045 grey area 3 akku -1,670 fd -1,817 fd -0,354 fd -2,452 fd -0,971 fd 4 hdtx -4,294 fd -0,794 fd -0,735 fd -0,622 fd -1,163 fd 5 wsbp 0,736 fd 0,648 fd -2,241 fd -2,009 fd -0,418 fd 6 bima 0,244 fd 0,323 fd -0,995 fd -0,726 fd -0,117 fd 7 talf 1,015 grey area 0,729 fd 0,543 fd 0,542 fd 0,610 fd 8 lmsh 1,352 non-fd -0,072 fd 0,374 fd 1,253 non-fd 0,667 fd 9 arka 0,001 fd 0,259 fd -0,267 fd 0,210 fd 0,451 fd 10 ikai 0,319 fd -0,487 fd -0,537 fd -0,291 fd -0,288 fd 11 inta -0,076 fd -0,487 fd -2,179 fd -1,793 fd -0,248 fd 12 tirt 0,258 fd -0,024 fd -4,469 fd -2,506 fd -1,950 fd 13 jgle 0,258 fd -0,134 fd -0,154 fd -0,064 fd -2,638 fd 14 jspt 1,001 grey area 0,351 fd -0,303 fd -0,423 fd 0,071 fd 15 mira 0,374 fd 0,101 fd -0,392 fd -0,282 fd -0,791 fd 16 mknt 2,262 non-fd 1,869 non-fd 2,520 non-fd 1,716 non-fd 1,736 non-fd 17 mdia 0,459 fd 0,366 fd 0,366 fd 0,411 fd 0,147 fd 18 mdrn -0,990 fd -0,630 fd -3,239 fd 1,324 non-fd 1,004 grey area 19 lckm 1,423 non-fd 1,155 non-fd 1,397 non-fd 1,154 non-fd 1,061 grey area 20 safe -1,006 fd -0,491 fd -0,941 fd -1,175 fd -0,469 fd 21 posa -3,859 fd -1,140 fd -1,234 fd -1,580 fd -1,744 fd 22 pnse 0,008 fd -0,034 fd -0,967 fd -0,778 fd -0,188 fd 23 andi 0,231 fd 0,421 fd -0,132 fd 0,140 fd 0,007 fd 24 bika 0,438 fd 0,298 fd -0,033 fd 0,409 fd -0,364 fd 25 cmpp -1,746 fd 0,439 fd -2,798 fd -2,740 fd -2,371 fd 26 cnko -1,987 fd -0,364 fd -2,218 fd -1,276 fd -1,320 fd 27 ctth 0,304 fd 0,086 fd -0,105 fd 0,001 fd -0,176 fd 28 dada 0,792 fd 0,575 fd 0,318 fd 0,560 fd 0,430 fd 29 dpum 0,792 fd -2,243 fd -5,765 fd -1,034 fd -0,250 fd 30 deal 0,470 fd 0,167 fd -1,122 fd -1,028 fd -0,417 fd 31 btek 0,282 fd -0,137 fd -1,960 fd -0,491 fd -0,589 fd 32 buva -0,157 fd -0,387 fd -2,896 fd -1,878 fd -1,718 fd 33 gmtd 0,447 fd -0,127 fd -0,347 fd 0,049 fd 0,181 fd 34 iikp -0,657 fd 3,321 non-fd 28,594 fd 18,935 fd -13,449 fd 35 glob -4,881 fd 55,772 fd 67,513 fd 66,375 fd 119,959 fd 36 hade 4,187 non-fd 56,085 fd -2,168 fd -0,111 fd 0,126 fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 939 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 37 tops 0,415 fd 0,105 fd 0,063 fd 0,396 fd 0,150 fd 38 trio -1,126 fd -7,166 fd 20,633 fd 20,669 fd -4,592 fd 39 viva -0,622 fd -0,654 fd -0,998 fd -1,141 fd -1,738 fd 40 smru -0,169 fd -0,809 fd -1,657 fd -1,487 fd -0,647 fd 41 sona 1,794 non-fd 1,886 non-fd -0,890 fd -0,758 fd 0,174 fd 42 tara -0,025 fd -0,015 fd -0,254 fd 0,732 fd -0,100 fd 43 taxi -3,661 fd -2,529 fd -2,847 fd 17,387 non-fd -0,915 fd 44 digi 0,712 fd 0,726 fd -2,217 fd -2,660 fd -3,573 fd 45 tama 0,060 fd -0,323 fd -0,562 fd -0,418 fd -0,450 fd 46 tira 0,476 fd 0,483 fd 0,376 fd 0,223 fd 0,398 fd 47 wows 0,012 fd 0,511 fd 0,351 fd -0,116 fd 0,043 fd 48 nasa 0,048 fd 0,021 fd -0,089 fd -0,020 fd 0,049 fd 49 real 1,206 non-fd 0,792 fd 0,829 fd 0,949 grey area 0,722 fd 50 ppro 0,497 fd 0,319 fd 0,196 fd 0,286 fd 0,302 fd 51 kbag -0,162 fd 0,103 fd 0,609 fd 0,559 fd 0,896 grey area 52 kren 2,701 non-fd 2,117 non-fd 1,335 non-fd 1,336 non-fd 1,932 non-fd 53 kota 0,288 fd 0,026 fd -0,182 fd -0,100 fd -0,174 fd 54 agar 1,419 non-fd 1,042 grey area 1,093 non-fd 1,261 non-fd 1,306 non-fd 55 sbat 0,142 fd -0,334 fd -0,268 fd -0,471 fd -0,986 fd 56 scpi 1,629 non-fd 2,170 non-fd 1,733 non-fd 2,132 non-fd 2,177 non-fd source : data processed by the author (2023) table 6. above is the result of calculations using the springate method in 2018 there were 45 companies experiencing financial distress, and 2 companies were in gray areas. while 9 other companies are included in the category of non-financial distress companies. in 2019, there were 49 companies experiencing financial difficulties, with 1 company being in the grey area. while 6 other companies are included in the category of non-financial distress companies. in 2020, there were 51 companies experiencing financial difficulties. while the other 5 companies are included in the category of non-financial distress companies. in 2021, there were 47 companies experiencing financial difficulties, and 1 company was in the grey area stage. while 8 other companies are included in the category of non-financial distress companies. furthermore, in 2022, there are 48 companies experiencing financial difficulties, and 4 companies are in a gray area. while 4 other companies are included in the category of healthy companies (non financial distress). these results show that the springate model is able to predict financial distress in companies with a special notation code of the indonesia stock exchange (h2: accepted). comparison of company health status based on prediction results the two models were then compared to the company's actual health status. the company's financial condition is actually seen from the main factors that can cause financial distress, namely liquidity crisis, negative retained earnings, negative equity and ongoing losses experienced by the company. the following is the result of a comparison of financial distress prediction models with the actual state of the company: https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 940 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7. company status analysis results no comp any code ye ar altm an zscor e spring ate sscore conclus ion n o comp any code year altm an zscor e spring ate sscore conclus ion 1 kias 201 8 nonfd fd fd 2 rmba 2018 grey area fd fd 201 9 fd fd fd 2019 grey area fd fd 202 0 grey area fd fd 2020 nonfd fd fd 202 1 nonfd fd fd 2021 fd fd fd 202 2 grey area fd fd 2022 nonfd grey area fd 3 akku 201 8 nonfd fd fd 4 hdtx 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd 202 0 nonfd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 5 wsbp 201 8 nonfd fd non-fd 6 bima 2018 fd fd fd 201 9 nonfd fd non-fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 7 talf 201 8 nonfd grey area non-fd 8 lmsh 2018 nonfd nonfd non-fd 201 9 nonfd fd non-fd 2019 nonfd fd fd 202 0 nonfd fd non-fd 2020 nonfd fd fd 202 1 nonfd fd non-fd 2021 nonfd nonfd non-fd 202 2 nonfd fd non-fd 2022 nonfd fd fd 9 arka 201 8 fd fd fd 10 ikai 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 941 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 11 inta 201 8 fd fd fd 12 tirt 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 13 jgle 201 8 nonfd fd fd 14 jspt 2018 nonfd grey area non-fd 201 9 nonfd fd fd 2019 nonfd fd non-fd 202 0 nonfd fd fd 2020 grey area fd fd 202 1 nonfd fd fd 2021 grey area fd fd 202 2 fd fd fd 2022 grey area fd fd 15 mira 201 8 fd fd fd 16 mknt 2018 grey area nonfd non-fd 201 9 fd fd fd 2019 nonfd nonfd fd 202 0 fd fd fd 2020 grey area nonfd fd 202 1 fd fd fd 2021 grey area nonfd fd 202 2 fd fd fd 2022 fd nonfd fd 17 mdia 201 8 nonfd fd fd 18 mdrn 2018 fd fd fd 201 9 nonfd fd non-fd 2019 fd fd fd 202 0 nonfd fd non-fd 2020 fd fd fd 202 1 nonfd fd non-fd 2021 fd nonfd fd 202 2 grey area fd non-fd 2022 fd grey area fd 19 lckm 201 8 nonfd nonfd non-fd 20 safe 2018 fd fd fd 201 9 nonfd nonfd non-fd 2019 fd fd fd 202 0 nonfd nonfd non-fd 2020 fd fd fd 202 1 nonfd nonfd non-fd 2021 fd fd fd 202 2 nonfd grey area non-fd 2022 fd fd fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 942 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 21 posa 201 8 fd fd fd 22 pnse 2018 grey area fd fd 201 9 fd fd fd 2019 grey area fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 23 andi 201 8 fd fd fd 24 bika 2018 nonfd fd fd 201 9 grey area fd non-fd 2019 nonfd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 grey area fd fd 2021 fd fd fd 202 2 grey area fd fd 2022 fd fd fd 25 cmpp 201 8 fd fd fd 26 cnko 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 27 ctth 201 8 fd fd fd 28 dada 2018 nonfd fd non-fd 201 9 fd fd fd 2019 grey area fd non-fd 202 0 fd fd fd 2020 nonfd fd non-fd 202 1 fd fd fd 2021 nonfd fd non-fd 202 2 fd fd fd 2022 nonfd fd non-fd 29 dpum 201 8 nonfd fd non-fd 30 deal 2018 grey area fd non-fd 201 9 grey area fd fd 2019 fd fd non-fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 31 btek 201 8 grey area fd non-fd 32 buva 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 943 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 33 gmtd 201 8 nonfd fd non-fd 34 iikp 2018 nonfd fd fd 201 9 nonfd fd fd 2019 nonfd nonfd fd 202 0 nonfd fd fd 2020 nonfd fd fd 202 1 nonfd fd fd 2021 nonfd fd fd 202 2 nonfd fd non-fd 2022 nonfd fd fd 35 glob 201 8 fd fd fd 36 hade 2018 nonfd nonfd fd 201 9 fd fd fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 37 tops 201 8 grey area fd non-fd 38 trio 2018 fd fd fd 201 9 nonfd fd fd 2019 fd fd fd 202 0 grey area fd fd 2020 fd fd fd 202 1 grey area fd fd 2021 fd fd fd 202 2 grey area fd fd 2022 fd fd fd 39 viva 201 8 fd fd fd 40 smru 2018 fd fd fd 201 9 fd fd fd 2019 fd fd fd 202 0 fd fd fd 2020 fd fd fd 202 1 fd fd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 41 sona 201 8 nonfd nonfd non-fd 42 tara 2018 nonfd fd fd 201 9 nonfd nonfd non-fd 2019 nonfd fd fd 202 0 nonfd fd fd 2020 nonfd fd fd 202 1 nonfd fd fd 2021 nonfd fd non-fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 944 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 202 2 nonfd fd fd 2022 nonfd fd fd 43 taxi 201 8 fd fd fd 44 digi 2018 nonfd fd fd 201 9 fd fd fd 2019 nonfd fd fd 202 0 fd fd fd 2020 grey area fd fd 202 1 fd nonfd fd 2021 fd fd fd 202 2 fd fd fd 2022 fd fd fd 45 tama 201 8 fd fd fd 46 tira 2018 grey area fd non-fd 201 9 fd fd fd 2019 grey area fd non-fd 202 0 fd fd fd 2020 grey area fd non-fd 202 1 fd fd fd 2021 grey area fd fd 202 2 fd fd fd 2022 grey area fd non-fd 47 wows 201 8 fd fd fd 48 nasa 2018 nonfd fd fd 201 9 nonfd fd non-fd 2019 nonfd fd fd 202 0 nonfd fd non-fd 2020 nonfd fd fd 202 1 nonfd fd fd 2021 nonfd fd fd 202 2 nonfd fd fd 2022 nonfd fd fd 49 real 201 8 nonfd nonfd fd 50 ppro 2018 nonfd fd non-fd 201 9 nonfd fd non-fd 2019 grey area fd non-fd 202 0 nonfd fd non-fd 2020 grey area fd non-fd 202 1 nonfd grey area non-fd 2021 grey area fd non-fd 202 2 nonfd fd non-fd 2022 grey area fd non-fd 51 kbag 201 8 fd fd fd 52 kren 2018 nonfd nonfd non-fd 201 9 nonfd fd non-fd 2019 nonfd nonfd non-fd 202 0 nonfd fd non-fd 2020 nonfd nonfd fd 202 1 nonfd fd non-fd 2021 nonfd nonfd fd 202 2 nonfd grey area non-fd 2022 nonfd nonfd fd 53 kota 201 8 nonfd fd non-fd 54 agar 2018 grey area nonfd non-fd https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 945 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 201 9 nonfd fd fd 2019 nonfd grey area non-fd 202 0 nonfd fd fd 2020 nonfd nonfd fd 202 1 nonfd fd fd 2021 nonfd nonfd non-fd 202 2 nonfd fd fd 2022 nonfd nonfd fd 55 sbat 201 8 fd fd fd 56 scpi 2018 nonfd nonfd non-fd 201 9 fd fd fd 2019 nonfd nonfd non-fd 202 0 fd fd fd 2020 nonfd nonfd non-fd 202 1 fd fd fd 2021 nonfd nonfd non-fd 202 2 fd fd fd 2022 nonfd nonfd non-fd source : data processed by the author (2023) table 7. above presents information on the financial health of companies included in the special notation of the indonesia stock exchange, the results of analysis using altman approaches modified by z-score and springate. the table also shows the real state of the company from 20182022. table 8. analysis results no methode year prediction result total financial distress non financial distress financial distress non financial distress 1 altman modified zscore 2018 32 24 37 19 56 2019 33 23 39 17 56 2020 36 20 46 10 56 2021 37 19 45 11 56 2022 39 17 46 10 56 2 sprinagte 2018 47 9 37 19 56 2019 50 6 39 17 56 2020 51 5 46 10 56 2021 48 8 45 11 56 2022 52 4 46 10 56 source : data processed by the author (2023) table 8. shows the results of comparative analysis between two methods namely altman modification z-score and springate. the comparison results show that there are several differences between the results of the analysis using the two methods and the actual state of the company. accuracy of prediction models here's a comparison of the accuracy of the prediction model and the error rate: https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 946 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 9. comparison of the accuracy of financial distress prediction models analysis method accuracy calculation method sample (total company x 5 years) total observation year (2018-2022) altman modified z-score accuracy level 280 213 70% eror i type 280 50 18% eror ii type 280 16 6% springate accuracy level 280 213 60% eror i type 280 14 5% eror ii type 280 45 16% source : data processed by the author (2023) based on the table. 9 it is seen that there is a difference in the accuracy of financial distress prediction models between the altman and springate models. the accuracy rate of both models is obtained from the number of samples that are predicted to be true to experience financial distress divided by the total sample and multiplied by one hundred percent, then reduced by the type two error rate. the results of the calculation of the accuracy level obtained the results of the accuracy rate of the altman model of 70%, with error type 1 of 18% and error type 2 of 6%. while the springate model has an accuracy rate of 60%, with error type 1 of 5% and error type 2 of 16%. based on these calculations, it can be concluded that the model that has the highest level of accuracy in predicting financial distress in companies with a special notation of the indonesia stock exchange (idx), is altman modified z-score with an accuracy rate of 70%. these results show that there is a difference in the level of accuracy between the modified altman z-score model and the springate model, so that the third hypothesis in this study (h3) is accepted. type 1 errors occur when the prediction model states the company does not experience financial dsitress but actually the company experiences financial distress and type 2 errors occur when the prediction model states the company experiences financial dsitress but it turns out that the company does not experience financial. knowing the difference between error type 1 and type 2 helps investors understand how well the model is at signaling a company's financial condition. the theoretical foundation of this research includes the principles of signal theory, where investors look for indicators or signals to make better investment decisions. by understanding the difference between error type 1 and type 2, investors can optimize their investment decisions by considering the risk of errors that may occur in the interpretation of statistical models such as altman modified z-score and springate. based on these calculations, it can be concluded that the model that has the highest level of accuracy in predicting financial distress in companies with a special notation of the indonesia stock exchange (idx), is altman modified z-score with an accuracy rate of 70%. these results show that there is a difference in the level of accuracy between the modified altman z-score model and the springate model, so that the third hypothesis in this study (h3) is accepted. the statistical analysis with signal theory indicates that companies with specific notation codes can convey negative signals to management, investors, and other stakeholders through financial https://www.ilomata.org/index.php/ijtc the potential financial distress in special notation companies on the indonesia stock exchange: prediction model approach sugiarti and nikmah 947 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc statement analysis using the altman modified z-score and springate models. from the analysis results, it is found that the majority of companies in the sample are experiencing financial distress. the analysis was conducted over the past five years, providing a current overview of the financial condition of these companies. positive signals, as detected by the statistical models, can serve as a serious warning for the company's management to promptly address the financial condition. these findings also provide a robust foundation for strategic decision-making that can help ensure the company's sustainability in the future conclusion the results of this study indicate that companies with special notation codes on the indonesia stock exchange may potentially experience financial distress based on the analysis methods of the modified altman z-score and springate s-score models. both models have proven to be capable of predicting the health condition of the company using established financial ratios. the results of these two models show significant differences in analyzing the potential financial distress of companies with special notation. there are several predictions that are in accordance with the actual financial situation. but there are also those whose prediction results are not in accordance with the actual financial condition of a company. although there are some prediction errors, the prediction results can still be used as indicators to see the sustainability of the company in the future and can be used as an indicator a signal for company management to immediately improve the company's financial condition, and can be used as a signal for investors and other interested parties in making decisions. the results of the analysis predicting the potential financial distress using altman modified zscore and springate indicate that both methods have different criteria and limitations in determining the financial condition of a company. indicated by the results of different levels of accuracy of the two models. the altman model has an accuracy rate of 70%, with error type 1 at 18% and error type 2 at 6%. while the springate model has an accuracy rate of 60%, with error type 1 of 5% and error type 2 of 16%. from these results, it can be concluded that the model with a higher level of accuracy is the altman model modified z-score with an accuracy rate of 70%, which means the altman model has better performance in predicting financial distress of a company. this result is in line with research (munira et al., 2021), (ridhawati & suryantara, 2023) which found that the accuracy of the altman z-score model is higher than the springate method. this research provides important information for companies with special notation codes that experience financial distress, to immediately improve financial conditions, and provides a basis for strategic decision making to ensure the sustainability of the company and for investors and other interested parties can be used as a basis for investment decision making. this study has several limitations such as the analysis in this study considers more internal company factors. the analysis 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(2023). a dynamic prediction model of financial distress in the financial sharing environment. 2023. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 747-763 747 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index abigail dwi pangestu setiadi1, francis m. hutabarat2, judith t. gallena sinaga3 123 indonesian adventist university, indonesia correspondent: 2334005@unai.edu1 received : june 5, 2024 accepted : july 17, 2024 published : july 31, 2024 citation: setiadi, a, d, p., hutabarat, f, m., sinaga, j, t, g. (2024). the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index. ilomata international journal of tax and accounting, 5(3), 747-763. https://doi.org/10.61194/ijtc.v5i3.1415 abstract: profitability plays an important role in reflecting a company's performance in generating profits. therefore, this study was conducted to demonstrate the effects of corporate governance, green accounting, and leverage on company profitability. this study utilizes a quantitative approach with secondary data. the research population comprises companies listed on the pefindo igrade index. the sample size is 30 companies over a 5-year period, resulting in 150 samples. over a period of five years, data was collected from various companies, resulting in a total of 150 samples. a regression analysis was conducted, and the findings from this test indicate that corporate governance and green accounting do not have impact on company profitability, whereas the leverage ratio has a negative and significant effect on company profitability. keywords: corporate governance, green accounting, leverage, profitability this is an open access article under the cc-by 4.0 license. introduction for companies conducting their operations, achieving targets and maximizing profits are key objectives. especially after the covid-19 pandemic, many companies are striving to recover from difficult times, stabilize their operations, and compete effectively in the market (nur ilham et al., 2022a). cnbc indonesia reported on december 28, 2023, that seven well-known companies— rite aid, bed bath & beyond, wework, tuesday morning, party city, smile direct club, and lordstown motors—declared bankruptcy in 2023 due to continuous losses, leading to significant branch and store closures and eventual insolvency. to avoid ongoing losses and prevent potential bankruptcy, companies must improve their performance to ensure sustainability and achieve their goals. by enhancing performance, companies can achieve a competitive edge in the current market (aminuddin hamdat et al., 2023a). one indicator of a company's success in achieving its vision and mission is its financial performance. financial performance plays a crucial role as it serves as an assessment for stakeholders managing the company and for investors monitoring the company for investment decisions (hernandez et al., 2022) https://www.ilomata.org/index.php/ijtc mailto:2334005@unai.edu https://doi.org/10.61194/ijtc.v5i3.1415 the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 748 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the performance of a company can be evaluated in various ways using different methods. one commonly used method is profitability ratios. profitability acts as a measure of a company's ability to generate profits and a metric for evaluating overall financial performance. (anisa et al., 2021). company profitability refers to the comparison of generated profits to the assets or capital utilized to create those profits. thus, profitability provides an indication of an ability to earn profits over a specific year. the importance of profitability for a company lies in its function as a principle in evaluating the company's status (afritenti et al., 2020). the level of profitability reflects the company's performance by showing how well it can generate profits. the company's capability to achieve profits indicates its future sustainability prospects. monitoring company profitability is crucial to prevent potential bankruptcy. understanding the factors that may influence profitability is also key to improving company performance. corporate governance is an independent variable. corporate governance is a framework that governs the interactions between various company stakeholders, involving the rights and responsibilities of each party (almashhadani et al., 2022). essentially, corporate governance directs and controls the operations the application of good corporate governance (gcg) is anticipated to have a favorable impact, given its essential role in promoting transparency, accountability, and public trust in business operations. additionally, gcg is a factor that can affect a company's financial performance or profitability. effective company management is a system that organizes and oversees company operations. this system includes the management structure, board of directors, and various other stakeholders, including non-shareholder groups (ahmed et al., 2020). good corporate governance enhances the effectiveness of oversight and management within a company, which contributes to improved profitability. strong governance ensures that management makes better, higher-quality decisions, minimizing the risk of fund mismanagement, wastage, and unnecessary expenses. this results in better company performance and profitability, as greater oversight leads to more prudent and efficient operations (pendong et al., 2022a). another independent variable used is green accounting. the adoption of green accounting by companies is an attempt to fulfill stakeholders' expectations, which not only present the company's financial factors but also take into account the environmental effects of its operations (sukmadilaga et al., 2023a). the effective implementation of environmental accounting by companies is viewed positively by stakeholders because it demonstrates the company's awareness of the environment, not just focusing on profits. although achieving environmental performance is desirable, companies still aim for improved financial performance as the main goal (sulistiyana et al., 2023a). today, industries are increasingly paying attention to environmental aspects as they believe this can impact the company's finances and profitability. incorporating environmental and social considerations into a company's economic activities, such as reducing waste or carbon emissions, can lower long-term costs through increased energy efficiency and reduced waste management expenses. green accounting also enhances a company's reputation among consumers, investors, and regulators, potentially leading to increased sales, access to lower-cost capital, and improved policy support. overall, adopting green accounting https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 749 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc practices can boost a company's profitability by promoting sustainability and better financial outcomes (nilla & slamet, 2023a). leverage appertains to a company's strategy of using assets and sources of funds that have fixed costs to increase the profitability of shareholders (syahzuni & florencia, 2023). if the leverage proportion is not well considered, it can lead to a decrease in profitability due to fixed interest expenses. high debt can reduce profitability because the company must shift focus from increasing productivity to paying off debt (nailufaroh et al., 2022a). therefore, leverage becomes an independent variable to be investigated. leverage is a financial indicator that measures a company’s debt relative to its assets, reflecting how the company funds its operations and the risks it faces. if leverage is not managed carefully, it can hurt profitability due to fixed interest obligations. high debt levels force companies to prioritize debt repayment over productivity improvements, reducing overall profitability. therefore, excessive leverage can hinder a company’s ability to efficiently maximize profits (nailufaroh et al., 2022b). the author will use companies listed on the pefindo i-grade 2023 index as research objects. the pefindo i-grade index is a stock market index comprising companies listed on the indonesia stock exchange (idx) that have been awarded an investment grade rating by pefindo, an indonesian information and securities rating agency (fhuspa, 2023). with a good rating, companies in this index are likely to strive for good profitability, making this index an interesting research object for the researcher. there is limited research focusing on how these factors affect different industries within the pefindo i-grade index, especially for green accounting variables, so that researchers are interested in conducting this research. based on the explanation above, the researcher poses the following research question: do corporate governance, green accounting, and leverage influence the profitability of companies on the pefindo i-grade index for the 2018-2022 period? through the identified problem, the researcher is motivated to conduct a study titled "the influence of corporate governance, green accounting, and leverage on company profitability on the pefindo i-grade index" to prove the effects generated by these factors. this research is expected to provide benefits to expand understanding of corporate governance, green accounting, and financial leverage by analyzing their joint influence on company profitability and provide companies with guidelines to balance governance, sustainability, and financial structure for profit maximization. profitability profitability is a concept that refers to the ratio used to compare a company's efficiency in generating profits from its revenue. the purpose of profitability ratios is to evaluate how effectively management generates profit levels from the company's asset base. a company is considered to have good performance if it has high profitability values, reflecting its capability to generate substantial profits. key indicators used to assess profitability ratios include gpm (gross profit margin), npm (net profit margin), roa (return on assets), and tato (total asset turnover) https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 750 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (setiowati et al., 2023). this study focuses on the roa indicator, which aims to evaluate managerial ability in generating profits through the utilization of the company's total assets. (nur ilham et al., 2022) defined profitability as the final outcome resulting from a series of company policies and decisions, representing the company's agility in accumulating profits. thus, profitability analysis is important for investors as it allows shareholders to see the potential dividends they can receive from their investment in the company. profitability needs to be considered by companies because it determines how well a company can sustain itself. profitability describes how well a company can generate profits that set a higher success standard for better company sustainability (kaunang et al., 2023). corporate governance corporate governance was introduced in the uk through the cadbury committee in 1992, via the report known as the cadbury report. despite various definitions by experts, gcg fundamentally refers to principles that underpin the rights and obligations of related parties within a company and promote transparency in all company processes. key principles of gcg include openness, accountability, responsibility, independence, and fairness (sinaga et al., 2022). the ratio of independent commissioners, who are members of the board not affiliated with the company, is crucial for corporate oversight. a sufficient number of independent commissioners ensures effective oversight in accordance with legal regulations. at least one member of the independent commissioners must have an accounting or financial background, as per the 2006 knkg guidelines. bapepam mandates that 30% of the total board members must be independent. independent commissioners are appointed based on the conclusions of the general meeting of shareholders (rups) and must have no ties to major shareholders, directors, or other board members. the board of commissioners fulfills its responsibilities by holding regular meetings to review decisions made by the directors. these meetings serve as a platform for communication, coordination, and policy review, including strategic and operational company issues (nur ilham et al., 2022b). the presence of good corporate governance is expected to enhance the effectiveness of company oversight and management, ultimately contributing to increased profitability. stronger management oversight should result in better company performance, positively impacting profitability (pendong et al., 2022b). implementing good corporate governance allows companies to make superior and high-quality decisions, preventing fund misuse, waste, and unnecessary expenditures. thus, the higher the level of good corporate governance in a company, the greater the potential for increased profitability. h1: corporate governance has a positive effect on profitability. https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 751 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc green accounting according to the legitimacy theory, companies will strive to operate within the norms and regulations accepted by society. in their operations, companies will adhere to the applicable rules and norms, one of which is by paying attention to and taking responsibility for the surrounding environment. by implementing environmental accounting, companies can avoid legal sanctions and gain support from the community (alfian sayuti, 2024). environmental accounting, known as green accounting, emerged in europe around the in response to pressure from non-governmental organizations and increasing environmental consciousness among the public, companies were encouraged to not only concentrate on their business operations but also to adopt environmental management practices. the goal is to improve environmental management efficiency by assessing environmental activities in terms of costs (environmental costs) and economic benefits, as well as providing positive impacts on environmental protection (shofa allina & abdul aris, 2022). environmental accounting is defined as an effort to prevent, reduce, or avoid negative impacts on the environment by improving events that can cause environmental damage (sukmadilaga et al., 2023b). environmental impact is the burden caused by business operations or human activities on the environment, potentially hindering good environmental preservation. green accounting, also referred to as environmental accounting or sustainable accounting, is a method of accounting that considers the environmental and social impacts of a company's economic activities. the primary objective of green accounting is to assess and report the environmental impacts of a company's business operations and to account for the economic value of natural resources used or exploited. the concept of environmental performance indicates the level of negative impact on the environment caused by company activities. the indonesian national standard agency (2005) stated that organizations are increasingly aware of obtaining and reporting favorable environmental performance by controlling the environmental impact of their activities, products, and services, in accordance with the organization's environmental policies and objectives. environmental performance measurement is applied through environmental accounting, which recognizes and integrates environmental issues into the company's conventional accounting system (susanti et al., 2023). environmental performance refers to the results visible through the environmental management system, which pertains to managing environmental factors. this concept is influenced by the degree of negative environmental impacts stemming from the company's operations. a low environmental impact signifies good environmental performance, whereas a higher impact denotes poor environmental performance. environmental performance evaluation depends on the company's environmental strategy and includes environmental targets and objectives according to iso 14001 standards. iso 14001 is a global standard that establishes criteria for an environmental management system, helping companies improve their environmental performance by using resources more effectively, minimizing waste, and adhering to environmental regulations. (kusuma et al., 2023a). https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 752 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc environmental performance refers to a company's ability to foster and maintain a healthy environment. the ministry of environment conducts environmental performance evaluations of companies through proper (company performance rating program in environmental management), which was first initiated in 1995 and developed in 2002 (muanifah & cahyani, 2024). environmental disclosure represents a corporate commitment to environmental responsibility, intended to promote investor engagement and derive advantages for the company. it involves including environmental information in the company's annual report. green accounting is defined as an accounting approach that takes into account the environmental and social dimensions of a company's economic activities. by reducing the environmental impact of company operations, such as minimizing waste or carbon emissions, companies can reduce long-term operational costs, such as through energy efficiency or reduced waste management costs. additionally, the use of green accounting can improve a company's standing in the view of consumers, investors, and regulators (nilla & slamet, 2023b). this can result in additional benefits such as increased sales, access to lower-cost capital, and better policy support. overall, implementing green accounting can enhance a company's profitability. h2: green accounting has a positive impact on profitability. leverage leverage ratios are metrics that show how much a company depends on debt to fund its activities. leverage illustrates the correlation between debt and its assets of the company, showing how much the company is funded by creditors compared to its own assets (prasetyo & wulandari, 2021). according to (aminuddin hamdat et al., 2023), the purpose of using leverage ratios by companies is to understand the company's obligations to others, especially creditors; determine the company's capacity to meet fixed obligations, such as loan and interest payments; measure the balance of asset values, especially fixed assets, and equity; leverage ratios evaluate the proportion of a company's assets financed by debt, the effect of debt on asset management, the extent to which equity is used as collateral for long-term debt, and the immediate obligations in comparison to the company's equity. the factors that form the leverage ratio consist of two components, namely debt and assets. assets are resources owned by the company, obtained through debt or the company's equity. debt refers to the company's financial obligations to others that must be repaid and serves as the source of funds provided by creditors (nailufaroh et al., 2022b). debt is categorized into current liabilities and long-term liabilities. current liabilities are financial obligations that need to be paid within a short timeframe, typically within one year from the balance sheet date, using the company's current assets. long-term liabilities, on the other hand, are financial obligations with repayment terms extending beyond one year from the balance sheet date (amin & khilmi, 2023). https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 753 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc leverage is a financial metric that indicates the ratio of a company's debt to its assets. through the leverage ratio, it can be seen how the company obtains funding for its operations. additionally, the leverage ratio also provides an overview of the level of risk faced by the company (ningrum & suyadi, 2023a). if the proportion of leverage is not well-considered, it can lead to decreased profitability due to fixed interest payments. high debt levels can reduce profitability because the company must shift its focus from increasing productivity to debt repayment. thus, high leverage levels can negatively impact efficient profit maximization. h3: leverage negatively impacts profitability. the developed hypotheses lead to the following conceptual framework: the picture above shows the independent variables used include three: corporate governance, green accounting, and leverage. meanwhile, the dependent variable used is profitability. method this study was carried out using a quantitative method aimed at finding the relationships between variables. it is considered quantitative because it uses empirical data and the variables have measurable units, which are derived from the financial statements of companies sourced from the official website www.idx.co.id, representing secondary data. the regression method is appropriate in this research, the study aims to examine the relationship between multiple independent variables and a dependent variable. by using regression analysis, the research can quantify the influence of each independent variable on profitability and assess their combined effect. this method is suitable for hypothesis testing in quantitative studies involving measurable financial data. the study uses secondary data from the financial statements of companies listed in the pefindo i-grade index, sourced from the official website of the indonesia stock exchange (idx). the observation period covers five years (2018–2022), and the sample consists of 30 publicly listed companies that are part of the pefindo i-grade index in 2023. the companies listed in the pefindo i-grade index in 2023 include 30 companies: bbca, adhi, akra, bbni, bbri, bjbr, bmri, bmtr, bnga, brpt, bsde, dsng, elsa, heal, hrta, inkp, isat, jsmr, mdka, medc, mfin, myor, pnbn, ptpp, smdr, smgr, smra, tins, tlkm, tpia. https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 754 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these 30 companies are publicly listed (tbk), so their annual report data can be obtained through the official idx website. this research uses 3 independent variables: corporate governance, green accounting, and leverage, while the dependent variable used is profitability. profitability can be illustrated by several ratio formulas, one of which is return on (afrianti & purwaningsih, 2022a). profitability is calculated using the return on assets (roa) ratio: 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 total asset in this study, corporate governance is measured by the proportion of independent commissioners. this ratio is determined by dividing the number of independent commissioners by the total number of commissioners within the company. (riyandika & saad, 2023a). information on commissioners is obtained from the company's annual report. 𝐶𝐺 = 𝐼𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟 total board of commissioners green accounting in this study is a dummy variable measured by 1 and 0. companies that implement iso 14001 are given a value of 1, and a value of 0 is given to companies that do not implement iso 14001 (hadriyani & dewi, 2022a). information about the implementation of iso 140001 can be found in the company's annual report. leverage can be measured using several ratio formulas (afrianti & purwaningsih, 2022b). in this study, leverage is measured using the debt to asset ratio, which has the formula: 𝐷𝐴𝑅 = 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 total asset regression analysis is the analytical technique used in this study. the regression equation used is: 𝑌 = α + β1x1 + β2x2 + β3x3 + 𝑒 description y : profitability α : constants β1β4 : regression coefficient x1 : corporate governance x2 : green accounting x3 : leverage e : error https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 755 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion descriptive statistics tabel 1. descriptive statistics n mean std dev minimum maximum cg 150 .43 .12 .23 .75 ga 150 .45 .50 .00 1.00 lev 150 .64 .63 .04 7.75 valid n (listwise) 150 source: spss output (2024) corporate governance (cg) in this study, represented by the proportion of independent commissioners, has 150 data points processed in spss. the average value is 0.43 with a standard deviation of 0.12. the lowest value of cg used in this study is 0.23, and the highest value is 0.75. green accounting (ga) in this study has 150 data points processed in spss. the average value is 0.45 with a standard deviation of 0.50. the lowest value of ga used in this study is 0.00, indicating that the company does not implement ga, and the highest value is 1.00, meaning the company implements ga. leverage (lev) in this study, represented by the debt to asset ratio, has 150 data points processed in spss. the average value is 0.64 with a standard deviation of 0.63. the lowest value of lev used in this study is 0.04, and the highest value is 7.75. so that the reader can see which statistical analysis was conducted and why, and later to justify the conclusions. table 2. green accounting frequency frequency percent valid percent cumulative percent valid .00 83 55.33 55.33 55,33 1.00 67 44.67 44.67 100 total 150 100 100 source: spss output (2024) table 2 shows that there are 83 company-years, or 55.33% of the sample companies, that do not implement iso 14001, and 67 company-years that do implement iso 14001 in pefindo igrade companies from 2018 to 2022. https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 756 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc f-test results table 3. f test result sum of squares df mean square f sig. regression .02 3 .01 3.47 .018 residual .28 146 .00 total .30 149 source: spss output (2024) the research findings indicate that the f-test is 3.47 with a probability value of 0.018. this shows a significant influence of corporate governance, green accounting, and leverage on the profitability in the pefindo i-grade index. regression analysis and hypothesis testing table 4. hypothesis testing result unstandardized coefficients standardized coefficients t sig. b std. error beta (constant) .07 .02 .00 4.82 .000 cg -.04 .03 -.11 -1.35 .179 ga -.01 .01 -.14 -1.67 .198 lev -.01 .01 -.18 -2.21 .028 source: spss output (2024) the regression equation obtained from the statistical results above is as follows: roa = 0.07 – 0.04cg – 0.01 ga – 0.01 lev from this equation, it is known that every additional 1 unit of corporate governance can reduce profitability by 0.04. and every additional 1 unit of green accounting can reduce profitability by 0.01. also, every additional 1 unit of debt ratio can reduce profitability by 0.01. the results showed that the t-test was -1.35 for the corporate governance variable, with a probability value of 0.179, this figure illustrates that there is no influence between corporate governance on the profitability in the pefindo i-grade index. the t-test figure was -1.67 for the green accounting variable, with a probability value of 0.098, this data indicates that green accounting has no impact on the profitability of companies listed in the pefindo i-grade index on the indonesia stock exchange. the t-test figure produced was -2.21 for the leverage variable, with a probability value of 0.028, this indicates a significant influence between leverage and company profitability in the pefindo i-grade index on the indonesian stock exchange. https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 757 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc determination coefficient table 5. model summary r r square adjusted r square std error of the estimate .26 .07 .05 .04 source: spss output (2024) the r-square value in the model summary is 0.07, which indicates that only 7% of the variation in profitability can be explained by corporate governance, green accounting, and leverage. this suggests that the model has a low explanatory power, and the remaining 93% of the variability in profitability is influenced by other factors not included in this study. some of these factors may include market conditions, operational efficiency, management practices, and external economic factors. a low r-square is not necessarily uncommon in studies dealing with financial performance, as profitability can be influenced by a multitude of factors, many of which are difficult to capture in a single model. corporate governance and profitability hypothesis 1 posits a significant relationship between corporate governance and profitability. the research results show a t-test value of -1.35 and a significance level of 0.179, indicating a negative but not significant impact of corporate governance on profitability. therefore, h1 is rejected, and ho is accepted. this result also suggests that increased oversight by independent commissioners may reduce company profits. the insignificance of the relationship between corporate governance and profitability in the pefindo i-grade sample could stem from a weak commitment to governance principles, which prevents these practices from being fully integrated into business strategies and enhancing operational efficiency and transparency. without a genuine, organization-wide dedication, governance measures may remain superficial, serving more as a formality than as drivers of performance improvements. additionally, structural inefficiencies in implementing good corporate governance, such as inadequate enforcement mechanisms, misalignment with business practices, or resistance from internal stakeholders, may further hinder the effectiveness of governance reforms. these barriers compromise the potential impact of governance on profitability, suggesting that the weak correlation is more a reflection of poor adoption and execution rather than a limitation of corporate governance itself. this finding is supported by previous research by (puspaningsih & ristya, 2022), which found no significant effect of corporate governance on the profitability of companies in the trade, services, and investment sector listed on the idx from 2016 to 2019. (riyandika & saad, 2023) also found similar results, indicating that corporate governance does not affect the profitability of banking companies listed on the idx from 2017 to 2019. this research contradicts the research of https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 758 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (purnama & trisnaningsih, 2022) who conducted research with the same results that corporate governance has an influence on profitability in lq-45 indexed companies in 2016-2018. (pendong et al., 2022) strengthens the conclusion that corporate governance has an influence on profitability in manufacturing companies listed on the idx in 2016-2020. green accounting and profitability hypothesis 2 posits that green accounting affects profitability. the research results show a t-test value of -1.67 and a significance level of 0.098, indicating a negative but not significant impact of green accounting on profitability. therefore, h2 is rejected, and ho is accepted. this result also suggests that increased implementation of green accounting may reduce company profits. the insignificant relationship between green accounting and profitability can be explained by the high implementation costs that yield long-term, rather than immediate, financial benefits. adopting eco-friendly technologies, improving waste management, and complying with environmental regulations require significant upfront investment, which can reduce short-term profitability. however, the financial returns from these initiatives, such as improved efficiency and enhanced reputation, typically emerge over time. this delayed benefit leads to an initially weak correlation between green accounting and profitability, despite its potential for long-term value creation. this finding is supported by (kusuma et al., 2023), who found that green accounting does not significantly affect the profitability of manufacturing companies listed on the idx from 2018 to 2020. (sulistiyana et al., 2023) also found similar results, indicating no significant impact of green accounting on the profitability of pt unilever indonesia. the results of this study contradict the results of research by (goldie kelly & deliza henny, 2023) which found that green accounting has an influence on profitability in food subsector companies listed on the idx in 2019-2021. the same results were also obtained by (hadriyani & dewi, 2022) who examined the effect of green accounting on profitability in manufacturing companies on the idx in 2015-2019 which concluded the results that green accounting was able to influence profitability. leverage and profitability hypothesis 3 posits a significant relationship between leverage and profitability. the research results show a t-test value of -2.21 and a significance level of 0.028, indicating a negative and significant impact of leverage on profitability. therefore, h3 is accepted, and ho is rejected. this result also suggests that higher debt levels may reduce company profits. this finding is supported by (suryaman et al., 2023), who found a significant impact of leverage on the profitability of automotive and component companies listed on the idx from 2017 to 2022. similar results were also found by (ningrum & suyadi, 2023), who analyzed the impact of leverage on the profitability of food and beverage companies listed on the idx from 2015 to 2019, indicating that leverage significantly affects profitability. different results were obtained by (wahyuni et al., 2023) who conducted research on the effect of profitability by leverage on real estate companies listed on the indonesia stock exchange and obtained insignificant results from leverage in influencing profitability. (sury & saleh, 2021) https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 759 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research also concluded that leverage has no effect on profitability in mining companies listed on the idx 2013-2018. the findings of this study provide insights for company managers and policymakers. the lack of significant influence of corporate governance and green accounting on profitability suggests that companies may need to enhance their commitment to these practices. for corporate governance, firms should focus on improving the effectiveness of their independent commissioners by providing them with more decision-making power and ensuring that governance practices are not merely symbolic but lead to real improvements in performance. for green accounting, the negative relationship with profitability highlights the potential shortterm costs associated with implementing environmentally responsible practices. however, managers should view these costs as investments that may yield long-term benefits in the form of enhanced corporate reputation, customer loyalty, and compliance with regulatory requirements. thus, while green accounting may not lead to immediate profitability gains, it remains a critical component of sustainable business practices. the significant negative impact of leverage on profitability underscores the importance of prudent debt management. managers should carefully evaluate their company’s capital structure and avoid excessive reliance on debt financing, as high leverage can reduce profitability and increase financial risk. this finding suggests that maintaining a balanced approach to debt and equity financing is crucial for sustaining long-term profitability. conclusion based on the results obtained, this study concludes the following: there is no significant effect of corporate governance on company profitability, and green accounting does not significantly affect company profitability. conversely, it was found that the leverage ratio has a negative and significant impact on the profitability of companies in the pefindo i-grade index. from these conclusions, this study suggests that company managers should pay attention to factors that have the potential to improve the company's profitability. given the negative association between leverage and profitability, managers need to reduce the use of debt in the company's operational funding to enhance profitability. the improvement of company debt can be assessed by examining the use and benefits of the debt; if there is unnecessary debt, it should be evaluated and reduced or eliminated. additionally, managers should focus on strategic operational activities that require effective funding for the company's sustainability and success. for future researchers, it is recommended to use other variables that may affect the company's profitability, such as company ownership, liquidity, tax avoidance, company size, and others, to broaden and enrich research on companies in the pefindo i-grade index. https://www.ilomata.org/index.php/ijtc the effect of corporate governance, green accounting and leverage on company profitability on pefindo i-grade index setiadi, hutabarat, and sinaga 760 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference afrianti, d., & purwaningsih, e. 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(2023). determinan leverage dan intangible asset terhadap profitabilitas dengan komite audit sebagai variabel moderating. jurnal akuntansi, keuangan, perpajakan dan tata kelola perusahaan, 1(2), 224–231. https://doi.org/10.59407/jakpt.v1i2.203 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 1-14 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi polytechnic of state finance stan, indonesia correspondent: priesoekarno@pknstan.ac.id received : october 12, 2023 accepted : december 20, 2023 published : january 31, 2024 citation: supriyadi. (2024). what do we know about cooperative compliance? insights from literature review in transfer pricing supervision. ilomata international journal of tax and accounting, 5(1), 1-14. https://doi.org/10.52728/ijtc.v5i1.956 abstract: cooperative compliance is often defined as a framework for trust-based relationships in which tax authorities and taxpayers work together to establish and uphold mutual understanding. the main reported areas of tax compliance risks and disputes in indonesia include profit shifting and transfer pricing. through a literature review, we attempt a stocktake of the cooperative compliance literature in this review about transfer pricing supervision. a comprehensive literature search identified 17 studies published between 2014 and 2023. two key types of interventions were identified: cooperative compliance and transfer pricing supervision. according to the review's findings, cooperative compliance research should focus more on using cooperative compliance as a strategic tool in business than just on tax compliance. this evaluation concludes with recommendations for future cooperative compliance research. keywords: cooperative compliance, transfer pricing supervision, literature review this is an open-access article under the cc-by 4.0 license. introduction unresolved issues with tax collection performance have persisted for a long time, especially in developing nations that frequently experience low tax ratios, high compliance costs, inadequate revenue collection from personal income taxes, and slow digitalization. (eberhartinger & zieser, 2021a). multinational enterprises (mnes) carry out more than 60% of all international trade transactions, the majority of which are cross-border transactions within mnes (dunning & lundan, 2008) (sun et al., 2012). this demonstrates that transfer pricing models are becoming increasingly significant in establishing transfer prices across borders (bartelsman & beetsma, 2003; mcmahon et al., 2013; nguyen et al., 2020) (chen et al., 2015; löffler, 2019). main reported areas of tax compliance risks in indonesia include profit shifting/transfer pricing, other tax avoidance schemes, value added tax fraud, unpaid tax debts and non filing of returns. (bank, 2016). as of my last knowledge update in september 2021, tax compliance risks in indonesia could vary and change over time due to evolving regulations and enforcement https://www.ilomata.org/index.php/ijtc mailto:priesoekarno@pknstan.ac.id https://doi.org/10.52728/ijtc.v5i1.956 what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 2 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc priorities. however, some main reported areas of tax compliance risks in indonesia. the number of transfer pricing conflicts has been rather high, and they are regarded as a significant problem in indonesia's tax system (m. r. u. d. tambunan, 2022). the findings from the hypothesis testing indicate a significant relationship between transfer pricing and tax planning practices (e. w. sari & markhumah, 2023). according to our estimates, a company that prioritizes tax minimization has a gaap effective tax rate that is 6.6 percentage points lower and, on average, saves around $43 million more in taxes than a company that prioritizes tax compliance (klassen, 2017) the indonesian tax authority, directorate of general of taxes (dgt) has been increasingly focused on transfer pricing issues (susanti & firmansyah, 2018). companies operating in indonesia must ensure that their transfer pricing policies are in line with arm's length principles and are properly documented. (d. sari et al., 2021). aggressive transfer pricing is a reflection of actions that are designed specifically to evade paying corporation taxes. that investigations were made to look into important factors that affect transfer price hostility in indonesia, in particular the elements that facilitate transnational businesses to carry out those actions (smolarski et al., 2019; waworuntu & hadisaputra, 2016). the process of resolving transfer pricing requires significant resources, compliance costs, and a lengthy timeframe. it need more three years for transfer pricing dispute resolution, frm audit process until supreme court decision. process of resolving transfer pricing practices, from the submission of the annual tax return and transfer pricing documentation to the decision of a review, can be presented in the following diagram. (source: itf 2023) the proposed approach posits that through the integration of complementary investments in enforcement, facilitation and trust . taxpayers submit annual report and tp doc to report tax obligations and transfer pricing documentation. furthermore, dgt supervises the spt reporting before the inspection is carried out. taxpayers who have undergone the audit, objection, appeal and reconsideration process are continued to undergo transfer pricing supervision. reformers have the potential to enhance both enforced compliance and quasi-voluntary compliance, provide https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 3 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc enduring political backing for reform and generate conditions that are more conducive to the construction of stronger fiscal contracts (prichard et al., 2019). using communication, transparency requirements, transfer pricing documentation and penalties, it is possible to effectively encourage taxpayer compliance with transfer pricing policies. (cooper et al., 2017). when imposing disclosure requirements, the tax authorities must: consult taxpayers at the development stage to secure support from all stakeholders; give taxpayers enough information (and training, if applicable) and prompt notification of any planned changes to encourage awareness and buy-in (cooper et al., 2017). cooperative compliance in transfer pricing supervision is a collaborative approach between tax authorities and multinational corporations to ensure compliance with transfer price rules (rossing, 2013). the background of this approach can be explained as follows: 1. the complexity of transfer pricing (holtzman & nagel, 2014). transfer pricing involves the internal pricing of transactions between subsidiaries or divisions within a multinational company. this can be very complex and requires proper assessment to avoid inequalities in income allocation that may lead to tax evasion. 2. low compliance (chan et al., 2006) with increasing globalization and the complexity of international business, tax authorities often face difficulties in monitoring and ensuring compliance of multinationals with transfer pricing rules. 3. international cooperation (borkowski, 1997) in an effort to address this problem, many countries are working together to develop international guidelines and standards related to transfer pricing. cooperative compliance is an approach in which multinationals are committed to working proactively with tax authorities in managing their transfer pricing (kumar, 2021). it involves open communication, the provision of accurate information, and joint agreement on the right taxation approach. cooperative compliance benefits can benefit both sides. for companies, they can reduce tax uncertainty and the risk of expensive tax disputes. developing a cooperation model: several countries have developed a cooperative compliance model in which companies and tax authorities agree on a transparent and collaborative audit process. this creates confidence between both sides. the cooperative compliance approach in transfer pricing oversight is a joint effort to create a more open and trustworthy environment in which companies and tax authorities work together to ensure compliance with transfer price rules, reduce the risk of tax disputes, and improve tax compliance (klassen, 2017). the purpose of this paper is to describe the application of cooperative compliance in a transfer pricing supervision. we examine its theories, strengths and providing examples on content and context. we present the rationale for our design based on theoretical principles of cooperative compliance. we reflect on the pros and benefit of utilizing this type of cooperative approach and consider implications for future compliance. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 4 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc method the objective of this study is to assess the efficacy of implementing cooperative compliance practices within the directorate general of taxes of the republic of indonesia in transfer pricing supervision. the analytical techniques employed in this work encompass a comprehensive review of relevant literature and the application of descriptive statistical analysis based on secondary data and qualitative analysis. the research approach used in this study, the findings indicate that there is a significant correlation between the variables being examined. the secondary data, which was collected from various sources, was subjected to qualitative analysis in order to gain a deeper understanding of the phenomenon under investigation. the results gained from this analysis provide evidence to support the existence of a strong relationship between the variables. the methodology employed in this study is the utilization of literature review. the study employs a qualitative research approach characterized by inductive reasoning. the objective of researchers is to elucidate social phenomena by giving precedence to the social realities identified in their investigation. thorough analysis and examination, it has been observed that in employing a qualitative methodology, the researcher aims to concentrate on the contextual factors that contribute to the development of a comprehensive comprehension of the subject at hand. the research under consideration involves the examination and formulation of theoretical frameworks. researchers aim to utilize inductive reasoning this paper aims to assess cooperative compliance implemented at the directorate general of taxes of the republic of indonesia and other countries. tabel 1. list of literature study no name and title methodology result 1 cooperative tax compliance: from detterance to defference (kirchler et al., 2014) qualitative this study discusses slipperyslope tax compliance, which integrates economic and psychological factors. two variables that affect tax compliance are power and trust. the results consistently show the influence of the trust factor which is greater than the power 2 cooperative compliance, tax control frameworks and perceived certainty about the quantitative the results show that the need for certainty and the importance attached to tax compliance have positive effects on the quality of an https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 5 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc tax position in large organisations (goslinga et al., 2021) internal tax control framework. moreover, both studies find the quality of a tax control framework has a positive effect on perceived certainty about the tax position. 3 risk management, internal control and cooperative compliance in taxation (ronald russo, 2019) qualitative cc faces big challenges and should continue to be developed. one area of development is providing more guidance by tax authorities on the tcf, for instance (but not limited to) in the points i mention in 14.2.3 4 innovations in tax compliance conceptual framework (prichard et al., 2019) policy research working paper a key challenge for governments lies in finding the right combination of these three measures-enforcement, facilitation, and trust-to achieve revenue and broader development goals. 5 taxing large businesses: cooperative compliance in action (larsen & oats, 2019) quantitative a key ambition for the cooperative compliance measures has been to increase efficiency and effective use of resources for tax administration and many stakeholders demand ‘proof’ of efficient resource usage, especially the taxpayers themselves. 6 pengaruh digitalisasi layanan pajak dan cooperative compliance terhadap upaya pencegahan tax avoidance dimoderasi kebijakan fiskal di masa pandemi (tambun et al., 2020) kuantitatif hasil penelitian membuktikan bahwa digitalisasi layanan pajak dan cooperative compliance berpengaruh terhadap upaya pencegahan tax avoidance. selain itu kebijakan fiskal selama pandemi covid 19 mampu memoderasi pengaruh dari cooperative compliance terhadap upaya pencegahan tax avoidance. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 6 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc 7 model cooperative compliance terhdapat kepercayaan wajib pajak dan kepatuhan wajib pajak (haniv, 2020) kuantitatif cooperative compliance merupakaan suatu paradigma hubungan otoritas pajak dengan wp, keduanya saling menaruh kepercayaan satu sama lain dan memiliki keinginan saling 8 the effects of cooperative compliance on firms’ tax risk, tax risk management and compliance costs (eberhartinger & zieser, 2021b) quantitative results show that horizontal monitoring firms perceive a significantly higher increase in tax certainty, which is associated with significant relative decreases in tax risk and compliance costs. furthermore, while the quality of tax risk management upon entering the pilot project appears significantly higher for horizontal monitoring firms, they do not report greater improvement in tax risk management compared to the control group. these results are relevant for the development of cooperative compliance programs and the decision to participate in them. 9 cooperative compliance programmes: who participates and why? (goslinga et al., 2021) quantitative we conclude that large organisations may benefit from ccp participation in terms of gaining more certainty about their tax position, whereas the tax authority may benefit because the organisation displays greater transparency. both parties may benefit from the development of a better working relationship, but it appears that both parties need to continuously invest time and effort into the programme in order to actively maintain the cooperative relationship. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 7 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc 10 cooperative compliance: swot analysis for the brazilian confia program (martinez, 2021) quantitative cooperation between taxpayers and tax administration should be based on the responsibility of both, supported by mutual trust, which does not tolerate opportunistic behavior on both sides of the tax relationship. 11 keterterapan konsep cooperative compliance pada aktivitas pengawasan wajib pajak (maulana & abbas, 2021) kualitatif hasil penelitian ini menunjukkan bahwa pilar cooperative compliance belum terterapkan sepenuhnya karena beberapa hambatan. pengaturan lebih lanjut mengenai komitmen, pengungkapan dan transparansi informasi, mekanisme pemberian kepastian, dan keterbukaan mengenai pendekatan manajemen risiko diperlukan untuk penerapan cooperative compliance secara optimal. 12 developing a cooperative compliance model for developing economies (flanagan, 2018) qualitative the implementation of cooperative compliance is still evolving and will need to adapt to the changing landscape of taxation and business. thus, to sustain it in the long run, tax authorities must preserve the essence of cooperative compliance through continuous adaptations and prioritize trust as the basis for exchanging transparency with certainty to taxpayers. 13 pelaksanaan konsep cooperative compliance di beberapa negara oecd: australia, italia, belanda dan amerika serikat. bagaimana di indonesia? (m. tambunan, n.d.) kualitatif cooperative compliance adalah mendorong adanya kepatuhan yang berkualitas; ditandai dengan pembayaran utang pajak dan penyampaian segala https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 8 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc jenis dokumen dengan cara yang efektif dan efisien 14 nudges, boosts, and sludge: using new behavioral approaches to improve tax compliance (james alm, lilith burgstaller, arrita domi, amanda märz and matthias kasper, 2023) qualitataive closer cooperation between administrators and academics should thus be facilitated and encouraged. 15 cooperative versus adversarial tax audits: implications of transparency for tax compliance and financial reporting quality (adams & bauer, 2023) quantitative we also compare the potential for an externality of higher financial reporting quality. our findings support cooperation: firms under cooperative audits i) have lower differences between their effective tax rate and their size-industry peers and ii) display a modest spillover benefit in terms of a lower risk of subsequent financial. we design our study with this specific comparison in mind to better understand which of cooperative and adversarial audits have better outcomes. in that sense, we have a strong test of these audit options, bolstered by our consideration of endogenous treatment. overall, our study generates important insights on the benefits of cooperative audits for corporate tax compliance and the potential, albeit modest, spillover to nontax objectives. source: previous research this study explores slippery-slope tax compliance (kirchler et al., 2008) , a complex process involving economic and psychological factors. it reveals that trust is a more influential factor than power in determining tax compliance. the need for certainty and the importance of tax compliance positively affect the quality of an internal tax control framework. the study also highlights the importance of cooperative compliance measures, which aim to increase efficiency and effective use of resources for tax administration. horizontal monitoring firms perceive a higher increase in tax certainty, which is associated with significant decreases in tax risk and compliance costs. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 9 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc however, they do not report greater improvement in tax risk management compared to the control group. the study concludes that large organizations may benefit from cooperative compliance participation in terms of gaining more certainty about their tax position, while tax authorities may benefit from greater transparency. both parties need to continuously invest time and effort into the program to actively maintain the cooperative relationship. the study also highlights the potential for higher financial reporting quality through cooperative audits. results and discussions there are four pillars that taxpayers must follow in order to increase tax compliance: registration, filing, reporting and payment (sub-group, 2004). cooperative compliance can be implemented before an inspection through transfer pricing risk analysis is conducted, that is, during transfer pricing monitoring (rossing, 2013). a letter asking for an explanation of data and information about risks and non-compliance with transfer pricing policies may be given to taxpayers who face transfer pricing risks. the findings of this study suggest that the implementation of cooperative compliance is not yet fully realised in various aspects, including business awareness, openness through disclosure and transparency, responsiveness, and disclosure and transparency by taxpayers (maulana & abbas, 2021). finding the ideal mix of these three strategies—enforcement, facilitation, and trust—to generate income and advance more general development objectives is a major problem for government (prichard et al., 2019). cooperative compliance programs were developed as a result of the search for new and efficient means of enhancing taxpayers' compliance behavior and risk management techniques. taxing bodies. oecd is an acronym for the organisation for economic co-operation and development. prominent proponent of cooperative compliance initiatives and a catalyst for the growth of these programs on a global scale (colon & swagerman, 2015). the theory of cooperative compliance is a framework that describes how cooperation between tax authorities and taxpayers (companies or individuals) can improve tax compliance. this theory encompasses the concept that by encouraging collaboration, communication, and transparency between the two sides, the level of fiscal compliance can be enhanced without having to rely on severe sanctions or punishment. here are some theories underlying cooperative compliance: 1. trust theory: this theory argues that a good collaboration between tax authorities and taxpayers can build trust. by having trust, taxable persons are more likely to comply with tax rules voluntarily, and taxation authorities will be more confident that the information provided by the taxpayer is accurate. 2. social norms compliance theory: this theory focuses on how social norms and expectations can influence tax behavior. in the framework of cooperative compliance, collaboration https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc between tax authorities and taxpayers can help build social standards that promote tax compliance. 3. transaction cost theory: cooperative compliance reduces transaction costs in tax surveillance and enforcement. by sharing information and mutual understanding, both sides can avoid the costs associated with costly disputes and litigation. 4. voluntary compliance theory: this theory states that when taxpayers feel that the tax system is fair and that they have the ability to understand and obey tax rules, they are more likely to obey voluntarily. cooperative compliance seeks to create an environment in which taxation is considered more fair and understandable. 5. positive incentive theory: cooperative compliance can provide a positive incentive for taxpayers to comply with tax rules. the theories above help explain why cooperative compliance is seen as an approach that can enhance tax compliance in a more efficient and effective way. it also emphasizes the importance of building mutually beneficial cooperation between tax authorities and taxpayers to better tax goals. cooperative compliance is an approach to tax administration that encourages collaboration and transparency between taxpayers and tax authorities. this approach has several strengths, including: 1. enhanced taxpayer compliance: cooperative compliance fosters a culture of voluntary compliance by promoting open communication and trust between taxpayers and tax authorities. this can lead to increased compliance and reduced tax evasion. 2. efficiency: the cooperative compliance model reduces the need for extensive audits and investigations, which can be time-consuming and resource-intensive for tax authorities. this leads to greater efficiency in tax administration. 3. predictability: taxpayers benefit from greater predictability in tax matters. they can have a clearer understanding of how their tax obligations are determined, reducing uncertainty and the risk of disputes. 4. cost savings: both taxpayers and tax authorities can save money by avoiding the costs associated with lengthy tax disputes, audits, and litigation. this makes more resources available for other essential government services. 5. fairness and consistency: cooperative compliance promotes fairness and consistency in tax administration. it helps ensure that taxpayers with similar circumstances are treated similarly, reducing the likelihood of arbitrary or unfair assessments. 6. improved tax authority capabilities: tax authorities benefit from a more detailed understanding of the industries and sectors they regulate. this information can be used to better target their enforcement efforts and adapt tax policy as needed. 7. risk mitigation: for businesses, cooperative compliance provides a proactive way to identify and manage tax risks. by working closely with tax authorities, they can reduce the likelihood of costly surprises in the form of unexpected tax liabilities. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? insights from literature review in transfer pricing supervision supriyadi 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 8. reputation and trust: engaging in cooperative compliance can help build a positive reputation for businesses and foster trust between taxpayers and tax authorities. this can be valuable in business relationships and public perception. while cooperative compliance has several strengths, it also requires a high degree of transparency, mutual trust, and communication between taxpayers and tax authorities. its success depends on the commitment of both parties to work together for the common goal of achieving a fair and efficient tax system. once the data from the field has been obtained. researchers engage in the process of gathering and analyzing literature as a means to accomplish this task. examples of sources commonly used in academic research include books, scholarly journals, scientific publications, newspaper stories, legislative documents, governmental regulations, and the act of doing searches. the acquisition of pertinent knowledge pertaining to design through electronic mass media, specifically television and internet news sources, is being sought. this paper examines the management of compliance risk in the specific setting of tax audits within the directorate general of taxes. the user's text is not provided. please provide the text that needs to be rewritten in data are utilized to supplement data obtained from field studies in order to enhance the understanding of ideas pertinent to the research issue. researchers have demonstrated a comprehensive understanding of the subject matter prior to doing fieldwork, starting with the initial stages of the research process. as one of the instruments employed in the analysis of data derived from field research. conclusion the diretorate general of taxes through transfer pricing supervision has been able to improve taxpayer compliance and tax revenue and reduce collection costs in cooperative compliance program. there are three things that must be promoted with cooperative compliance in transfer pricing supervision in indonesia. the cooperative compliance theory suggests that collaboration between tax authorities and taxpayers can enhance tax compliance without severe sanctions or punishments, promoting communication and transparency. cooperative compliance in transfer pricing supervision is an approach to tax administration that encourages collaboration and transparency between taxpayers and tax authorities. in the future, dgt is expected to regulate transfer pricing supervision dan expand the database with tax control framework tools. cooperating with authorities that affect taxpayers such as tax consultants, legal consultants, etc. in this way, it is hoped thatthe plan to accelerate the core tax system can be implemented and have an impact at the level of taxpayer confidence in the tax authorities, and result in high taxpayer compliance. https://www.ilomata.org/index.php/ijtc what do we know about cooperative compliance? 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(2016). determinants of transfer pricing aggressiveness in indonesia. in pertanika j. soc. sci. & hum. psasir.upm.edu.my. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 266-279 266 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia dwi suhartini1, monika indah cahyani2, sofie yunida putri3 1,2,3 universitas pembangunan nasional “veteran” jawa timur, indonesia correspondent: dwisuhartini.ak@upnjatim.ac.id received : november 25, 2023 accepted : january 22, 2024 published : january 31, 2024 citation: suhartini, d., cahyani, m, i., putri, s, y. (2024). examining the sustainability report, financial performance, and value of mining companies in indonesia. ilomata international journal of tax and accounting, 5(1), 266-279. https://doi.org/10.52728/ijtc.v5i1.1064 abstract: this study employs a quantitative approach to explore the intricate interplay among sustainability reports, financial performance (measured by return on assets roa), and firm value (quantified by tobin's q) in indonesia's dynamic mining industry. employing purposive sampling, data from 75 samples encompassing 25 mining businesses listed on the indonesia stock exchange (idx) is examined over the 2020-2022 period. utilizing statistical analysis, the study employs the partial least squares (pls) data processing application for partial regression analysis. the findings highlight a substantial and favorable impact of sustainability reports on firm value, underscoring the growing acknowledgment within indonesian mining firms of the pivotal role played by both financial and non-financial disclosures. intriguingly, the study uncovers that financial performance, as gauged by roa, lacks a discernible influence on firm value. this nuanced insight suggests a shifting landscape where stakeholders increasingly prioritize comprehensive reporting beyond conventional financial metrics. the research sheds light on the evolving nature of the indonesian mining sector, emphasizing companies' recognition of the significance of transparent reporting practices. these revelations align with global sustainable development goals, emphasizing the central role played by mining companies in advancing these objectives. in navigating this complex dynamic, the study underscores the crucial role of sustainability reports in shaping perceptions and values of mining firms in indonesia. keywords: financial performance; firm value; roa; sustainability report; tobins q this is an open access article under the cc-by 4.0 license. introduction indonesia is one of the countries that has the largest natural resource wealth in the world. one of indonesia's abundant natural resources is mining. indonesia is ranked as the ninth largest gold producer in the world with 70 tons by 2022 (binekasri, 2023). apart from gold, indonesia is also ranked as the country that produces the world's largest nickel, with 800,000 tons in 2019 (cnn tim, 2023). https://www.ilomata.org/index.php/ijtc mailto:dwisuhartini.ak@upnjatim.ac.id https://doi.org/10.52728/ijtc.v5i1.1064 examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 267 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the mining sector in indonesia also has a large total investment. according to badan pusat statistik indonesia (bps) in 2022 until the beginning of 2023 the mining sector was ranked as the third largest foreign direct investment (pma) which had 1,045 projects with a total investment of $ 6,064,847.3 thousand and was second in domestic direct investment (pmdn) which had 7,264 projects with a total investment of rp.82,360,230.3 million. investment realization in the mining sector in 2022 reached $5.69 billion and non-tax state revenue (pnbp) deposited to the state amounted to idr 183.35 trillion which exceeded the target based on the adjustment of the presidential regulation of the republic of indonesia number 98 of 2022 (kemenesdm, 2023). figure 1. indonesia minning investment source: bps indonesia, 2023 based on statistics from bps indonesia, the investment value in the mining industry of indonesia has consistently risen each year, as depicted in the aforementioned graph, spanning from 2020 to 2022. both pma (foreign direct investment) and pmdn (domestic direct investment) have witnessed an increase in investment volume. the significant interest in investment in the mining sector, encompassing both pma (foreign investment) and pmdn (domestic investment), serves as evidence of the substantial value of mining firms in indonesia, given the considerable number of investors involved. prior to allocating their capital, investors must carefully evaluate various factors to maximize the returns on their investment. (hidayah, 2020). companies want to enhance their company value to attract investors, as a high company value indicates a strong likelihood of achieving its objectives. (pujiningsih & virgoria, 2020). stakeholder theory was initially introduced by stanford research institute (sri) in 1963. stakeholder theory posits that a firm has a responsibility towards all individuals associated with it. stakeholder theory posits that businesses must prioritize the concerns of stakeholders and offer advantages that go beyond mere goal attainment. (suhartini & megasyara, 2019). the selection of tobin's q as a proxy for firm value is based on its ability to incorporate both the external financial aspect of market value and the internal financial aspect of corporate debt. tobin's q has a broader measuring foundation as it takes into account both the market and https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 268 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accounting basis. by incorporating the debt component into the calculation, tobin's q takes into account not only the equity worth of investors but also the interests of creditors (okafore et al., 2021). in addition to financial criteria, there are several elements that might enhance the value of a firm. in 1994, john elkington proposed the concept of triple bottom line (tbl), which emphasizes the need to consider not only financial issues (profit), but also the environment (planet) and society (people). elkington argues that organizations aiming for long-term sustainability must prioritize profit, people, and the earth (ratna & hasanah, 2019). john elkington coined the term triple bottom line in his 1998 book cannibals with forks. the triple bottom line is a concept that encompasses three key dimensions: profit, people, and planet, which are represented as three distinct lines. the triple bottom line idea prioritizes firm performance based on both financial and non-financial variables (putra & larasdiputra, 2020). companies that utilize natural resources, like the mining industry, must consider environmental factors and the local community in their commercial operations. many companies exploit natural and human resources to maximum profits (irene & paramitha, 2022). in 2020, the jaringan advokasi tambang indonesia (jatam) documented a total of 45 mining conflicts. these conflicts consisted of 22 instances of environmental pollution and destruction, 13 cases of land grabbing, 8 cases of discrimination against residents who opposed mining activities (affecting 69 individuals), and 2 cases of employment termination. (lumbanrau, 2021). the resolution of this mining dispute is crucial to ensure the company's valuation remains steady and to uphold positive investor relations. the utilization of natural resources in mining operations must be carefully evaluated, as their continual exploitation may lead to their depletion and eventual extinction. the preservation of sustainable development is crucial to prevent its eventual extinction. at the un headquarters on 25 september 2015, global leaders approved the sustainability development goals (sdgs) agenda, which aims to eradicate poverty, address social inequality, and safeguard the environment from extinction. the global reporting initiative (gri), an autonomous worldwide organization, has formulated standards for sustainability reports that aid governments and corporations globally. the gri standard, published in 2009, mandates that firms submit not just their financial reports but also non-financial disclosures in the form of sustainability reports, which detail their company activities. (lyan et al., 2021). a sustainability report is a systematic process of quantifying, revealing, and ensuring responsibility for sustainability initiatives, with the objective of attaining sustainable development encompassing economic, social, and environmental dimensions (siregar & safitri, 2019). john elkington (1997) defines a sustainability report as a comprehensive report that encompasses both financial and nonfinancial performance statistics, specifically focusing on the environmental and social activities that contribute to the long-term viability of a corporation. stakeholders require non-financial information to assess the extent to which the company engages in environmentally and socially responsible practices. sustainability reports include comprehensive data on a company's measurement, disclosure, and initiatives to promote sustainable development (siregar & safitri, 2019). in line with the objectives of the sustainable development goals (sdgs), the indonesian https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 269 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial services authority (idx) has implemented rule no. 51 of 2017. this legislation mandates enterprises in indonesia to publicly disclose a sustainability report that details their sustainable development initiatives. furthermore, idx has also established transparency criteria that necessitate reporting by all companies operating in indonesia. companies must prioritize sustainability reports in order to address environmental and social concerns. the disclosure of a sustainability report has the potential to enhance the value of a company as it demonstrates the company's commitment to environmental and social responsibility. this is supported by research by natalia & soenarno (2021) and agung et al (2022) which state that sustainability reports have a positive effect on increasing firm value but inversely proportional to research conducted by irene & paramitha (2022) that sustainability reports have no effect on increasing firm value. economic considerations are likewise a matter of worry when it comes to enhancing the worth of a firm. investors require financial performance data to assess the extent to which a company effectively manages its money. investors are more inclined to spend their resources when a company has strong financial success, as they seek to reap the benefits. return on asset (roa) is used as a proxy for financial success as it demonstrates the company's capacity to earn profits via the utilization of all owned assets. a higher return on assets (roa) indicates a greater level of efficiency in the company's ability to make profits by utilizing its assets (zurriah, 2021). the value of a firm is a direct reflection of its performance in effectively managing its commercial activities. stakeholders think that investing should take into account not just the company's current performance but also its future potential, due to the company's significant value (hadisurja & apriwenni, 2020). there are several alternative measurements of firm value, namely price earning ratio (per), price book value (pbv) and tobin's q. in this study, company value is measured by tobin's q. the research done provides by nurahma & budiharjo (2022) gives evidence that an improvement in a company's financial performance, as measured by return on assets (roa), can lead to a rise in the company's value, as measured by tobin's q. roa has a significant positive effect on tobin's q. in addition, there is research conducted by indriana (2023) and dhae (2023) that roa has a significant positive effect on company value proxied by price book value (pbv). return on assets (roa) is a financial metric used to measure the profitability of a company's assets. it calculates the net profit created by the assets and adds it to the total assets (pertiwi & triyonowati, 2022). investors utilize return on assets (roa) as a metric to assess the company's efficiency in terms of its financial performance and overall operational activities. the roa ratio quantifies the company's proficiency in utilizing invested cash in assets for generating profits through its operational activities. contrary to the findings of yulfitri et al., (2021), who concluded that roa does not affect firm value as measured by pbv, the research done by yahya & fietroh (2021) found a considerable negative impact of roa on firm value. further investigation of this topic utilizing the tobin's q proxy would be highly intriguing. investors in this scenario want comprehensive information on both internal and market finance, as well as financial data including both internal and external sources. the research framework draws on tbl, stakeholder theory, financial performance theory, and https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 270 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agency theory to comprehensively understand the dynamics between sustainability reporting, financial performance, and firm value in the context of the indonesian mining industry. the study contributes to theoretical advancements by exploring these multifaceted relationships. method the current research uses a quantitative methodology. the sampling approach employs purposive sampling, which involves selecting samples based on specific criteria. data analysis involves the use of statistical methods to examine and evaluate the formulated hypothesis. this study utilizes a data processing application called partial least squares (pls) for doing partial regression analysis. this study employs mining businesses that are listed on the indonesia stock exchange (idx) and meet the specified criteria: 1) indonesia stock exchange (idx) listed mining businesses from 2020 to 2022.. 2) publish complete financial reports in 2020-2022. 3) companies that have profits during the observation year. 4) publish a sustainability report and can be accessed from each company's official website. in this research, a tailored set of analytical tools has been strategically chosen to align with the specific variables under investigation—sustainability reports, return on assets (roa), and firm value (tobin's q). to evaluate the extent of sustainability reporting, the sustainability report disclosure index (srdi) accompanied by dummy variables provides a structured and quantifiable measure, offering insights into the comprehensiveness of disclosed items. for the financial performance metric, return on assets (roa), traditional financial ratio analysis is deemed appropriate, involving the calculation of net profits divided by total assets, yielding a percentage that indicates the efficiency of profit generation from assets. the analysis of complex relationships between sustainability reports, roa, and firm value employs partial least squares (pls), recognized for its suitability in multivariate models. statistical tools, including descriptive statistics, correlation analysis, and regression analysis, contribute to hypothesis testing and understanding the interplay among variables. sensitivity analysis ensures the robustness of findings by assessing the impact of key parameters. additionally, data visualization through graphs and charts aids in the interpretation and communication of intricate relationships, enhancing the clarity of results for stakeholders. this comprehensive analytical framework ensures a thorough exploration of the research variables and facilitates meaningful insights into the dynamics within the indonesian mining industry. the study employs the sustainability report as the independent variable, which is a reporting mechanism encompassing both financial and non-financial aspects of economic, social, and environmental performance. sholikhah & khusnah (2020) utilize the sustainability report disclosure index (srdi) along with dummy factors to assess the measurement of a sustainability report. the dummy variable assigns a score of 1 if the disclosed item is included in the report, and 0 if it is not. the total score is then calculated using the srdi method. https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 271 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the variables examined in this study are the sustainability report and financial performance. supriadi (2021) states that the financial statements often serve as a reflection of a company's financial performance. the financial performance ratio utilized in this study, specifically return on asset, is a tool for financial ratio analysis that quantifies the company's capacity to earn profits from its assets. this calculation may be determined using the following formula: the study will utilize firm value as the dependent variable. the company's high valuation instills confidence in investors regarding its success. firm value, serving as the dependent variable, is quantified using tobin's q, a ratio analysis tool that takes into account accounting and market aspects. the ratio is derived by dividing the market value of a company's tangible assets by its replacement cost (nasir, 2019). then the computation can be computed using the formula: once the data is acquired and gathered, its accuracy (quality of data) is evaluated using tests for data validity and dependability. meanwhile, hypothesis testing in this study was conducted by examining the path coefficient, which seeks to assess the link between the independent variable and the dependent variable through the use of pls (partial least squares) partial regression analysis and the smart pls program. result and discussion the data selection process obtained 25 companies that met the sample criteria, so that the data that could be collected into the sample was 75 observational data, while 38 companies did not meet the criteria because they had not published a sustainability report during the study period. the data obtained by adjusting the purposive sampling criteria can be seen in detail in the following table: https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 272 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. research sample determination process source: data processed (2023) the assessment of pls analysis involves two stages of data testing: the outer model stage, which evaluates the accuracy of the data through validity and reliability tests, and the inner model stage, which examines the relationships between variables and conducts hypothesis testing to assess the model's fit. during the outer model testing step, an assessment is conducted to evaluate the validity and reliability of the indicators derived from partial least squares (pls) analysis. indicator validity is assessed by the examination of convergent validity and discriminant validity, whereas reliability can be evaluated by analyzing the composite reliability test score. convergent validity can be evaluated by examining the table of outer loadings. the maximum loading factor is 0.70. if the loading factor value is greater than 0.70, it indicates that convergent validity has been achieved. conversely, if the loading factor value is less than 0.70, the construct must be excluded from the study (hair et al., 2019: 112-113). the following are the results of convergent validity testing: table 2. results of convergent validity value calculation source: smart pls 3.0 processed data (2023) table 2 displays the results of the conducted tests, indicating that the variables of company size, profitability, leverage, environmental performance, environmental disclosure, and financial https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 273 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance achieved a convergent validity value of 1.000>0.70, satisfying the predetermined criteria thresholds. the last phase of testing, namely discriminant validity, is conducted to verify that each concept inside each latent variable is distinct from other variables (hair et al., 2019: 114-114). the requirement for this test is that the crossing loading value must exceed the value of other constructs. table 3. results of discriminant validity value calculation source: smart pls 3.0 processed data (2023) table 3 illustrates that each latent variable displays adequate discriminant validity, as there are no significant correlations seen between the evaluations of distinct constructs. discriminant validity can be evaluated by comparing the square root of the average variance extracted (ave) value of each construct with the correlation between other constructs in the model. the ave value must be more than 0.50 or have a p-value lower than the 5% significance criterion (hair et al., 2019: 114-115). the results of measuring discriminant validity in this study can be seen in the following table: table 4. calculation results of ave value source: smart pls 3.0 processed data (2023) according to the findings presented in table 4, the average variance extracted (ave) values for all variables exceed 0.50, indicating that they possess discriminant validity. based on these findings, it may be inferred that all factors are reliable and can instill confidence. the composite reliability value is used as a measure of reliability in this study. the determination of the dependability of a measuring device is accomplished by calculating the reliability coefficient. the dependability coefficient must exceed 0.70 (hair et al., 2019: 111-112). the table below displays the results of measuring composite reliability: https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 274 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. calculation results of composite reliability value source: smart pls 3.0 processed data (2023) table 5 shows that all variables have a composite reliability value greater than 0.70. these findings suggest that all variables investigated in the study are reliable and may be relied upon for use in further analytical tests. conducting a test of the structural model or inner model is carried out to evaluate the overall link between the variables in this study. the r2 coefficient was employed to quantify the correlation between variables in the inner model of the study. r square (r2), or the coefficient of determination, measures the extent to which a model precisely corresponds to the data. the r2 coefficient varies between 0 and 1, with a greater value indicating a more accurate fit for the model. (hair et al., 2019: 114-115). a model's strength can be determined based on its r2 value, with values < 0.70 categorized as strong, ≤ 0.45 as medium, and ≤ 0.25 as weak. table 6. calculation results of r square value (r2) source: smart pls 3.0 processed data (2023) the data in table 6 indicates that the r2 value for the company value (y) is 0.153, which is equivalent to 15.3%. the environmental performance (x1) and financial performance (x2) variables explain 15.3% of the variability in the company value (y) variable. the remaining 84.7% is attributed to additional variables that are not incorporated in the research model. the result suggests that the model fit value is weak (≤ 0.25), indicating that there are many other variables beyond the research model that can be explained and have an impact on the company value (y) variable. the pls regression approach can offer valuable information into the significance of the association. the calculated value is the t-score, which is then compared to the t-table. if the tcount value exceeds the t-table value (1.96) at a significance level of 5%, then the path coefficient value is deemed to be statistically significant (hair et al., 2019: 120). this study posits two test hypotheses. the outcomes of each examination are displayed in the subsequent table: https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 275 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 7. hypothesis testing results source: smart pls 3.0 processed data (2023) the study reveals important information on the indonesian mining industry, specifically focusing on the connection between sustainability reporting, financial performance, and business value. sustainability reports have a significant and beneficial impact on the value of a company, underscoring the increasing significance of non-financial disclosures in shaping stakeholders' views and assessments of mining businesses. traditional financial indicators, such as roa, do not show a clear effect on firm value, indicating a change in stakeholders' focus towards broader sustainability factors. the results highlight the changing nature of corporate reporting in indonesia, stressing the importance for mining companies to adopt transparent reporting procedures that cover both financial and non-financial aspects. furthermore, the correlation of these discoveries with worldwide sustainable development goals highlights the crucial responsibility of mining firms in promoting sustainability objectives. the study recommends increasing the focus on sustainability reporting in the indonesian mining industry to improve stakeholder trust, competitiveness, and long-term value generation. conclusion this study provides a thorough analysis of how financial performance, sustainability reporting, and company value interact in the evolving context of the indonesian mining sector. this study's findings provide important insights that have ramifications for stakeholders, investors, and governments. the main finding of the study indicates that the financial performance, measured by return on assets (roa), does not have a substantial influence on the value of firms in the indonesian mining sector. fluctuations in roa do not significantly impact the total value of mining firms. conversely, sustainability reporting is identified as a crucial aspect that considerably impacts corporate value. this indicates a change in perspective where stakeholders are increasingly acknowledging the significance of non-financial disclosures in influencing views and assessments of mining companies. investors are increasingly interested in evaluating investment potential in the business by analyzing both financial and non-financial data, with a special focus on sustainability reports. the study emphasizes the changing environment in indonesian mining businesses, as they are recognizing the importance of non-financial reporting standards. this acknowledgment not only increases the value of the company but also corresponds with wider global sustainability goals, such as the sustainable development goals (sdgs). mining businesses in indonesia are enhancing their long-term viability and appeal to investors by focusing on environmental and https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 276 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc social factors, therefore contributing to sustainable development. this research supports stakeholder theory by emphasizing the significance of thorough information disclosure in investment decision-making. it is important to recognize the limits of the study, especially regarding the model's capacity to produce strong 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(2019). pengaruh corporate social responsibility disclosure terhadap nilai perusahaan dengan profitabilitas sebagai variabel intervening pada perusahaan sektor https://www.ilomata.org/index.php/ijtc examining the sustainability report, financial performance, and value of mining companies in indonesia suhartini, cahyani, and putri 279 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pertambangan yang terdaftar di bursa efek indonesia tahun 2012-2016. in 129 equity : jurnal ekonomi, manajemen, akuntansi | (vol. 21, issue 2). supriadi, y. (2021). peningkatan kapabilitas umkm binaan rumah kreatif bogor dalam melakukan analisa laporan keuangan. jurnal abdimas dedikasi kesatuan, 103–112. yahya, k., & fietroh, m. n. (2021). pengaruh return on asset (roa) return on equity (roe) terhadap nilai. jurnal manajemen dan bisnis, 4(2). https://doi.org/10.33395/remik.v4i2 yulfitri, r., sutarjo, a., & putri, s. y. a. s. (2021). pengaruh debt to equity ratio (der), earning per share (eps) dan return on asset (roa) terhadap nilai perusahaan perbankan yang terdaftar di bursa efek indonesia periode tahun 2013-2017. pareso jurnal, 3. zurriah, r. (2021). pengaruh return on asset (roa) terhadap nilai perusahaan (vol. 2, issue 3). https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 254-265 254 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances muhamad syahwildan1, zulfa zakiatul hidayah2 12universitas pelita bangsa, indonesia correspondent: muhamad.syahwildan@pelitabangsa.ac.id1 received : november 20, 2023 accepted : january 15, 2024 published : january 31, 2024 citation: syahwildan, m., hidayah, z, z. (2024). the influence of financial literacy, self-efficacy, and coping strategies on students' finances. ilomata international journal of tax and accounting, 5(1), 254-265. https://doi.org/10.52728/ijtc.v5i1.1056 abstract: students with financial behavior that tends to be consumptive have a negative impact on financial behavior, new experiences as students and employees with limited income and various expenses must be able to be managed properly to be able to produce good financial behavior. this study aims to determine the effect of financial literacy on financial management behavior and to analyze the psychological effect of self-efficacy and self-coping on financial management behavior of undergraduate students in the management study program at pelita bangsa university. the research method used is quantitative with data sources taken by distributing questionnaires. sampling used is by simple random sampling method. the population in this study were all students of the management study program in 2022 with a total of 4995, with a sample of 98 respondents obtained from the slovin formula. the results of the research tested with smartpls 3.0 show that financial literacy, selfefficacy, and self-coping have a significant effect on financial behavior. keywords: financial literacy, self-efficacy, self-coping, financial bahavior this is an open access article under the cc-by 4.0 license. introduction consumptive behavior in society has a positive or negative influence on financial behavior to manage their daily finances. consumptive use of finances can lead to poor financial behavior such as the lack of awareness to save and the desire to credit consumptive goods. meanwhile, in meeting the needs of life, one must manage their finances so that they run effectively and efficiently. one of the largest components of indonesian society is students. according to the ministry of education and culture, it was recorded that until january 2023 indonesia had 9,542,688 students. students in general are first released to plan and allocate their own finances. this is a new and challenging experience that students have never experienced before (ratnaningtyas et al., 2022). it is important for a student to have the knowledge and ability to manage finances in order to make the right financial decisions (maharani, 2021). before going to college, in general, someone will be given daily pocket money. however, at this time students are given the trust by their respective https://www.ilomata.org/index.php/ijtc mailto:muhamad.syahwildan@pelitabangsa.ac.id1 https://doi.org/10.52728/ijtc.v5i1.1056 the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 255 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc parents to be able to manage their own finances (maharani, 2021). the amount of allowance given by parents has generally been calculated by parents according to the parents' own abilities. apart from sourcing income from parents, it is not uncommon to find students who work while studying, especially students at pelita bangsa university. pelita bangsa university stands in the middle of the jababeka and delta silicon industrial areas, most of pelita bangsa university students are students who have worked in companies in the area. thus, most pelita bangsa university students already have income from monthly salaries to meet their needs. students will begin to think about financial management of their income both from parents and from salaries. managing monthly money for living expenses, paying boarding house bills, electricity and water, to buying personal needs such as books, toiletries, food, and other needs (maharani, 2021). these expenses should be managed properly so that they do not exceed income and can even set aside savings. students are at an unstable age, namely the range of 18-25 years when entering college (hanum et al., 2017). at this age, students are often unsure in making financial plans. sometimes they have compiled a list of expenses but they are not sure they can carry out their plans effectively (chong et al., 2021). confidence is very necessary in a person because it can affect how people feel, think, act, and act to motivate themselves (fatimah et al., 2021). financial literacy has been shown to significantly influence financial behavior across multiple studies (asyik et al., 2022; lee et al., 2023; seraj et al., 2022). according to (henager & cude, 2016), higher financial literacy translates to positive financial behaviors like budgeting, saving, and investing as it equips individuals with the knowledge and skills to make informed financial decisions. similarly, people with lower financial literacy tend to engage more in poor financial habits like impulse purchases, overspending, and lack of retirement planning (de bassa scheresberg, 2013; harun et al., 2021a). however, (rooij, 2011) note that while literacy provides the foundation, additional factors like self-control and psychological traits also impact behavior. as such, initiatives to improve financial literacy must be supplemented with policies that encourage sound financial decisions (lusardi & mitchell, 2014). ultimately, nurturing financial literacy from a young age can help build responsible spending, borrowing and managing habits over the longterm (grohmann, 2018; harun et al., 2021b; sharma & johri, 2014). this contributes to the financial well-being and security of individuals (harun et al., 2021c; li et al., 2023; stylianou et al., 2019). students who have high self-confidence or self-efficacy, will be much more optimistic about their financial future. this is in line with the investigation conducted by (paramita et al., 2022). when a person has a high level of self-confidence, he is motivated to engage in behaviors that will help him achieve his goals. as a result, the higher the students' self-efficacy, the more responsible they are in managing their finances appropriately (s. i. chiu, 2014; liang & chen, 2021; novitasari et al., 2021). self-efficacy, defined as the belief in one's own ability to accomplish tasks, has been linked to financial behaviors (s.-i. chiu, 2014; iddris et al., 2023; liang & chen, 2021). according to (farrell, https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 256 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2016), higher financial self-efficacy encourages positive financial practices like budgeting, saving regularly and paying credit card bills in full. in contrast, those lacking confidence in their financial skills are less likely to carefully consider long-term implications of monetary decisions, often resulting in poor outcomes (lim, 2014). however, self-efficacy requires relevant domain knowledge in order to translate to better habits (arifin, 2018). as such, initiatives focused solely on improving confidence without imparting literacy are unlikely to sustain behavioral change (aydin sayilir & özşahin, 2022). instead, multifaceted programs that combine financial education, coaching and access to resources can help individuals master skills needed to effectively manage money (karagiannidis, 2021). nurturing self-efficacy alongside literacy can thus catalyze responsible financial behaviors (fong et al., 2017; gunawan et al., 2019; jäkel, 2019; yu et al., 2020). then another psychological aspect that can affect financial management behavior is self-coping. limited income and many expenses can make students feel hectic and can cause stress in managing finances. when someone faces higher demands than the resources they have, it will cause stress (chong et al., 2021). this is in accordance with the psychological condition of students who have begun to manage their own finances but students start their studies with or without knowledge of personal money management (serido et al., 2014). an individual's coping strategies and skills have been found to impact their financial behaviors. according to (jonathan, 2020), positive coping abilities like financial planning and responsible spending can effectively mitigate adverse events and improve monetary management. on the other hand, avoidance coping through strategies like impulsive purchasing, gambling or substance use can intensify financial distress over the long run (kempson, 2017). however, the efficacy of coping also depends on available resources and psychological factors like self-control (despard, 2020). as such, policies aimed at nurturing positive coping skills along with facilitating access to support networks can foster resilience and stability (netemeyer, 2018). overall, adaptive coping capacities enable informed financial decision making, especially during crises, reducing negative cascading effects (harries, 2019). adequately equipping individuals with proactive coping techniques through guidance and social protection programs is thus critical for encouraging healthy financial in light of these observations, the following hypotheses are proposed: h1 : financial literacy affects student finance h2 : self efficacy affects student finances h3 : coping strategies affect student finances method this study uses a quantitative method by providing a description of an object through a certain analysis, this is based on the title studied, namely "analysis of the effect of financial literacy, selfefficacy, and self-coping on the financial behavior of undergraduate students of the pelita bangsa university management study program". the author wants to know whether there is an influence between financial literacy, self-efficacy, and self-coping on financial behavior. quantitative research methods can be interpreted as research methods based on the philosophy of positivism https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 257 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that examine certain populations or samples. sampling is usually done randomly, data collection uses a questionnaire, and data analysis is quantitative / statistical. the research was conducted at pelita bangsa university. the population consists of 4995 students in the pelita bangsa university management study program in 2022, with a sample of 98 respondents obtained from the slovin formula with a 10% margin of error. probability sampling technique with simple random sampling technique to provide equal opportunities for each member of the population. data were collected through questionnaires. the questionnaire was used to collect primary data, which was distributed to 98 students using a likert scale. data analysis using path analysis. path analysis aims to explain the direct and indirect effects between independent variables (financial literacy, self-efficacy, and self-efficacy) on the dependent variable (financial behavior). result and discussion respondent the respondents in table 2 are undergraduate students from the pelita bangsa university management study program. there was a balance of research respondents between genders, with more female respondents than male respondents, most of the respondents were aged between 20 and 25 years. table 1. characteristics of respondents characteristics total percent gender female 62 62,6% male 36 36,3% age <20 years old 3 3% 20 sd 25 years old 77 79% >25 years old 18 18% source: data processed by researchers, 2023 outer model test convergent validity test convergent validity test based on the picture below, it is known to show that all variables have an outer loading value of > 0.5. individual indicators are said to be valid if they correlate more than 0.50 (wijaya, 2019). then it can be concluded that all question items are valid. https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 258 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. loading factor source: data processed by researchers, 2023 discriminant validity test based on table 3, the results of the discriminant validity test show that the cross loading value of the indicator factor is greater than the other variables, so it is declared valid (ghozali & latan, 2015). table 2. cross loading values indikator financial literacy (x1) self-efficacy (x2) self-coping (x3) financial behavior (y) fl1 0.833 0.702 0.599 0.721 fl2 0.855 0.728 0.582 0.740 fl3 0.794 0.560 0.496 0.657 fl4 0.847 0.695 0.537 0.780 se1 0.656 0.777 0.568 0.683 se2 0.697 0.842 0.580 0.766 se3 0.662 0.783 0.560 0.712 se4 0.610 0.850 0.628 0.720 se5 0.549 0.819 0.557 0.686 se6 0.758 0.809 0.620 0.801 sc1 0.604 0.629 0.776 0.661 sc2 0.487 0.560 0.645 0.508 sc3 0.575 0.678 0.807 0.725 sc4 0.341 0.308 0.748 0.400 sc5 0.387 0.384 0.762 0.434 https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 259 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fb1 0.612 0.565 0.471 0.718 fb10 0.673 0.775 0.617 0.818 fb11 0.595 0.615 0.631 0.691 fb12 0.768 0.742 0.611 0.840 fb13 0.763 0.763 0.623 0.847 fb2 0.713 0.742 0.556 0.773 fb3 0.751 0.725 0.597 0.811 fb4 0.793 0.759 0.615 0.863 fb5 0.470 0.540 0.533 0.600 fb6 0.553 0.560 0.547 0.627 fb7 0.744 0.772 0.710 0.864 fb8 0.716 0.765 0.623 0.856 fb9 0.666 0.754 0.631 0.821 source: data processed by researchers, 2023 average variance extracted (ave) based on the table below, showing the results of the average variance extracted or ave having a value greater than 0.50, it can be said that it has met the requirements for discriminant validity. table 3. average variance extracted (ave) variabel ave akar kuadrat ave financial literacy (x1) 0.694 0.833 selfefficacy (x2) 0.615 0.784 self coping (x3) 0.562 0.749 financial behavior (y) 0.662 0.813 source: data processed by researchers, 2023 composite reliability the table below shows that the reliability value is above 0.70, so it can be said that all variables are reliable. table. 4 composite reliability variabel reliabilitas komposit financial literacy (x1) 0.900 selfefficacy (x2) 0.953 self coping (x3) 0.865 financial behavior (y) 0.922 source: data processed by researchers, 2023 https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 260 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cronbach’s alpha tabel 5. cronbach’s alpha variabel cronbach's alpha financial literacy (x1) 0.853 selfefficacy (x2) 0.946 self coping (x3) 0.809 financial behavior (y) 0.898 source: data processed by researchers, 2023 based on the data in the table above, it shows that all variables have a cronbach alpha value greater than 0.7, so it can be concluded that all variables meet the cronbach's alpha requirements. hypothesis test table 7 shows the results of hypothesis testing using the boostraping technique, it is known that all p-value values for all variables are smaller than 0.05 (<0.05), meaning the hypothesis is accepted, apart from that the t-statistic value must be more than 1.96 to be accepted. , and the results show that all three hypotheses are accepted. table 6. hypothesis test results original sample (o) sample average (m) standard deviation (stdev) t statistic (| o/stdev |) p values x1 -> y 0.382 0.380 0.066 5.781 0.000 x2 -> y 0.461 0.467 0.075 6.180 0.000 x3 -> y 0.177 0.174 0.054 3.305 0.001 source: data processed by researchers, 2023 r-square test (r2) tabel 8. r square (r2) r square adjusted r square financial behavior (y) 0.882 0.878 source: data processed by researchers, 2023 based on the data in table 8, it shows that the r square value of the financial behavior variable (y) is 0.882 (88.2%) this value is included in the strong measurement standard, thus it can be interpreted that there is a strong relationship of 88.2% between financial literacy (x1), selfefficacy (x2) and self coping (x3) on the financial behavior of indonesian students (y) and the remaining 11.8% is influenced by other variables outside this study. https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 261 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on the results of the instrument test and the results of the data analysis above, a discussion related to leadership and work motivation on employee work discipline can be explained as follows: the effect of financial literacy on financial behavior the results of this study indicate that financial literacy has an effect on the financial behavior of undergraduate students of the management study program of pelita bangsa university, meaning that the better the financial literacy rate among students, the better the student's financial behavior, especially in undergraduate students of the management study program of pelita bangsa university. this is in line with the results of research by (chong et al., 2021), (nicolini & haupt, 2019), (zainul arifin, 2018), and (gunawan et al., 2020) which also concluded that financial literacy affects financial behavior. the effect of self-efficacy on financial behavior the results showed that self-efficacy affects the financial behavior of students in the s1 management study program at pelita bangsa university, meaning that the better the level of selfefficacy, the better the financial behavior of students, especially s1 management study program students at pelita bangsa university. this is in line with the results of research by (chong et al., 2021), (arofah, 2019), and (khalisharani et al., 2022) which also concluded that self-efficacy affects financial behavior. the effect of self-coping on financial behavior the results showed that self-coping affects the financial behavior of undergraduate students of the pelita bangsa university management study program, meaning that the better the level of student self-coping, the better their financial behavior. this is in line with the results of research by (chong et al., 2021) and (lim, 2014) which also concluded that self-coping affects financial behavior. conclusion based on the results of the research conducted, it can be concluded that financial literacy, selfefficacy, and coping strategies significantly have a positive effect on student finances. the higher the financial literacy, self-efficacy, and coping strategies of students, the better their finances. financial literacy provides financial knowledge, self-efficacy provides confidence to manage finances, and coping strategies provide skills to overcome financial problems. all three complement each other in shaping the responsible financial management behavior of students. for further research, it is recommended to expand the sample not only to one university but several universities so that the research results are more representative. in addition, mediating or moderating variables such as self-regulation, social support, or demographic factors can be added to see their influence on the relationship between financial literacy, self-efficacy, coping strategies and student finance. research methods can also be developed, not only quantitative but also https://www.ilomata.org/index.php/ijtc the influence of financial literacy, self-efficacy, and coping strategies on students' finances syahwildan & hidayah 262 | ilomata international journal of tax & accounting 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(2018). influence of financial attitude, financial behavior, financial capability on financial satisfaction. 186(insyma), 100–103. https://doi.org/10.2991/insyma-18.2018.25 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4 october 2024 page no. 1-16 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance majeed ajibola ibrahim1, sherifdeen adebola rabiu2, ibrahim yinka agbeyinka3 1federal college of land resources technology, nigeria 2taj bank ltd, nigeria. 3walter sisulu university, south africa. correspondent: ibrahim.yadeyinka@gmail.com1 received : july 31, 2024 accepted : october 1, 2024 published : october 30, 2024 citation: ibrahim, m.a., rabiu, s.a., & agbeyinka, i.y. (2024). the impact of contribution density, size, idle contributions, and pension funds’ performance. ilomata international journal of tax and accounting, 5(4), 175-183. https://doi.org/10.61194/ijtc.v5i4.1564 abstract: management of pension funds is crucial to ensure that the funds yield better returns. this study offers answers to three issues based on evidence from nigeria: (a) to what extent has the density of pension contribution influenced the investment performance of pfas? (b) to what extent has idle contribution affected the investment performance of pfas? (c) to what extent does the pension contribution size induce the investment performance of pfas? pension fund administrators (pfas) are reliable catalysts for steady economic growth. effective we applied the generalized least square (gls) regression based on pfas performance between 2014 and 2023 to evaluate the connection between four financial assets that the pfas invest in and the investment returns. contribution density, idle contribution, contribution size, total pension fund assets, and leverage are critical factors in determining investment performance. a positive coefficient for contribution density was reported for the adopted regressors. this implied that the pfas could improve their performance if credence is given to their contribution density because of contribution density. we recommend measures that would boost the sustainability of pension funds, securing better retirement outcomes for contributors and strengthening the financial ecosystem. keywords: pension fund administrators, generalized least square, economic growth and development this is an open-access article under the cc-by 4.0 license. introduction the need to ensure the management of pension funds in the best possible ways or most “effective manner was borne out of the need to ensure that they yield better returns on investment, a move capable of improving the fortunes of the pensioners who seem to be the beneficiaries because of interest generated by these funds. pension funds and assets are a reliable catalyst for steady economic growth and development and development. this is because the relevance of pension administration goes far beyond old-age support mechanisms. at the same time, targeted macroeconomic benefits include but are not limited to aiding labor, development of money markets, and capital markets, among https://www.ilomata.org/index.php/ijtc mailto:ibrahim.yadeyinka@gmail.com https://doi.org/10.61194/ijtc.v5i4.1564 the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc others (zubair, 2016). before the 2004 pension reforms, the federal and state government's failure to pay pensions and gratuities on time or at all was one of the many problems that plagued nigeria's pension fund administration. as of december 2005, for example, the backlog of pensions was estimated to be at n2.56 trillion. millions of former nigerian workers live in extreme poverty and are frequently neglected and underprovided after retirement, making pension fund management a difficult problem. (iwegbu, 2020). it is no gainsaying that before the enactment of the pension reform act 2004, the country had operated a defined benefit scheme that was largely unfunded and non-contributory, and at the same time, led to massive accumulation of pension debt over time. the scheme to this end became unsustainable essentially because of the inability of the government to provide timely and adequate budgetary provisions and increases in salaries and pensions (ajibola, 2021). pension funds must be prudently administered firstly because of the need to ameliorate the conditions of the would-be beneficiaries, who, after serving their fatherland in various possible ways or after rigorous and active services for decades, deserve to get something reasonable to fall back to and sustain their economic or financial needs for the rest of their lives, secondly, because of the tendencies of these funds to be invested in strategic sectors of the country’s economy, to ensure steady development in critical sectors of the economy. several studies have examined how pension funds affect economic growth and development and impact investment performance. most of the previous studies, such as adesodun and rapheal (2020), iwegbu (2020), apriyanto and firdiansjah (2021), fapohunda (2021), eme and uche (2021), zubair (2023), abubkar (2023), ibrahim et al. (2024) and others that examined the subject matter in nigeria did not specifically study the impacts of contribution density, idle contribution and contribution size about pension administrators performance. this leaves the subject matter in nigeria unresearched. ezugwu and itodo (2020) investigated equity, which accounted for the largest percentage of the portfolio and yielded the highest return of n2.8528 billion. they note that the steady rise in return over time as the weight of the portfolio's asset classes increases points to a strong correlation between the magnitude of an asset and its return. past studies on the subject matter did not specifically study the implications of pension contribution density, pension idle contribution, and pension contribution size on the investment performance of pension fund administrators (pfas) in nigeria. this study attempts to answer three issues based on evidence from nigeria. 1. to what extent does the pension contribution density affect pfas’s performance in nigeria? 2. to what extent has idle contribution affected the performance of pfas in nigeria? 3. to what extent does the pension contribution size induce the performance of pfas in nigeria? the research has objectives as follows: 1. show how the density of pension contributions affects the pfas’ performance in nigeria. 2. analyse how idle contribution affected the performance of the pfas in nigeria. https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. demonstrate how the pension contribution size induces the performance of pfas in nigeria. this study examines how pension contribution density, idle contribution, and contribution size have induced the investment performance of pfas in nigeria. we depict the conceptual framework that shows how the investment in securities” (independent variable) connects with the pfas’ financial performance (dependent variable). source: researchers (2024) theory of capital accumulation capital is defined essentially as economic or commercial asset value that is derived, “in this case, from infrastructural development. capital incorporates both power and productivity (nitzan & bichler, 2000). marx (1867) defines capital as the means of production and does not undergo any quantitative alteration of value in the production process. oluitan and falode (2020) adopted karl marx’s capital accumulation as the operation whereby profits are reinvested into the economy, increasing the total quantity of capital. marx stressed capital as the expanding of value, which means a sum of capital, usually expressed in money, that is transformed through human labor into a larger value and extracted as profits. marx defined capital accumulation as employing surplus value and reconverting it to capital; marx further explained that the accumulation of surplus value indicates the appropriation of unpaid labor to extend the appropriation of unpaid labor. marxian theories of accumulation and crisis cannot be based on real forces alone but need to consider the interaction of monetary and real forces in a concrete historical analysis, eckhard (2002). the real analysis is based on the development of the technical conditions of production, and the development of distribution determines the accumulation path. it is assumed that capitalist profits limit accumulation, and the rate of capitalist savings determines the accumulation rate. marx (1894) marx’s theory of capital accumulation and growth should be based on the principle of effective demand. nitzan and bichler (2000) termed capital a function of factor inputs, which is the number of different factors of production labor, raw materials, and capital goods used to produce that output. capital accumulation is an income-generating fund or financial wealth; these have the stock of physical https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc instruments or capital goods. capital goods are funds or advances whose principal role is to 'assist' with the original factors of production labor and land. the neoclassicist or marxist could not clearly define what is being accumulated, which is a problem, but it is assumed that accumulation could be measured in material terms. the development of the profit share positively influences capital accumulation and capacity utilization and negatively influences the development of the capital potential output-ratio eckhard (2002). the profit share will, therefore determine the rate of capital accumulation, the rate of capacity utilization, and the interest rate. the long-run accumulation rate is measured as the rate of growth of the capital stock (k), g= ∆k/k determined by the development of the rate of profit defined as the ratio of annual profits (π) to the capital stock r=π/k, and capitalist’s propensity to accumulate out of profits a= ∆k/ π. marx's theory accumulates capital through a circulation scheme, (m-g-p-p'-c'-m'), where financial capital (money m), turns into commercial capital (commodities c), to be made into industrial capital (work in progress, or productive capital p), producing more industrial capital (p'), converted again into commercial capital (more commodities c') and finally into financial capital (more money m') (nitzan & bichler, 2000). the circulation scheme describes accumulation in backward working terms because profit is earned because of production, making accumulation the end of the process, to be measured in units of 'dead labor.' absentee ownership reversed this order, turning accumulation into a forward-looking process. the value of a corporation, measured by its capitalization on the bond and stock markets, reflects not its past profit and interest, but what it is expected to earn in the future (nitzan & bichler, 2000). to demonstrate this, we adopt the capital accumulation theory, according to past studies, including venkatesh and vanishree (2021) and hassanudin et al (2023). we find that the contribution density, idle contribution, contribution size, total pension fund assets, and leverage are critical in determining investment performance. a positive coefficient for contribution density was reported for the adopted regressors. this implies that the selected pfas could considerably improve their performance if credence is given to their contribution density because contribution density is a key driver of a pfa's performance. the growth opportunities of pfas depend to some extent on contribution density. we recommend measures that would boost the growth and sustainability of pension funds, securing better retirement outcomes for contributors and strengthening nigeria’s financial ecosystem. the following is how the other sections are presented: section 2 is the method, section 3 presents the result, and section 4 presents the conclusions. hypothesis development ibish et al. (2020) examine the evaluation of the financial performance of pension funds in kosovo, albania, and north macedonia. the paper revealed that increases in gross domestic product (gdp) and return on investment have positively influenced the performance of pension funds for the countries. krishna (2020) examined the performance of the listed pfas in india using sharpe, treynor, and jensen’s alpha as risk-adjusted measures. they found that the pension funds ltd has https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dominated and performed better than other pfas under sharpe ratio & jensen’s performance measures. bojana et al. (2019) examined the performance of pension funds in croatia and discovered that the efficiency of the pension system has a significant impact on economic growth and social cohesion. the paper only focused on the technical efficiency of mandatory pension funds and failed to consider other factors that may influence the performance of pension funds. benedictus (2020) examined the factors that hinder pension fund investment in infrastructure in namibia. he discovered that the lack of expertise, regulation, financial instruments, and assets that march pension funds are the barriers to pension fund investment in infrastructure. kennedy (2021) examined the effect of real estate investments on the financial performance of pension funds in kenya and found that assets such as real estate fixed income and equity had a positive and significant effect on the performance of pension funds. h1: the density of pension contributions dos does not influence the performance of pfas in nigeria. olweny (2021) examined the impact of capital structure theories on the management of pension funds in kenya, concentrating on stanbic bank group securities company limited. the study's conclusions indicate that desirable ratios and propositions are not directly correlated with the firm's size or value. additionally, the report suggests that the tax impact be considered and that the pension plan is not doing anything that the shareholder could do directly and more tax-efficiently by investing in stocks. nwanna and ogbonna (2022) also investigated the development of pension management in nigeria and its economic significance. the study found that pension management, as measured by the number of retirement savings accounts, total pension assets, and pension contributions, significantly enhanced nigeria's economic growth. the report also suggests that pension management be effectively addressed to address the comparatively small number of retirement savings accounts in nigeria. adesodun and raphael (2022) report pointed out that the reform mandates that all employers with five or more workers sign up for the program, that the number of formal and informal sector members should not fall below 25 million, that pencom as it currently stands is unable to collect and handle the necessary data, and that an independent central data management authority must be established. additionally, it was recommended that pencom focus solely on its regulatory role and guarantee the compliance of all parties involved, establish a basic registration system, revisit service records in the federal and state civil services, military, and paramilitary, verify membership records for other formal sectors, conduct a census of all informal employers and contributors, and verify retiree records. h2: the idle contribution does not affect the performance of pfas in nigeria. ndum and okoye (2022) revealed a significant positive relationship between pension fund assets, contribution, investment, and gross domestic product at a 5% significance level. ogungbade et al. (2022) assessed significant differences between the asset classes and investment income components. they found that the accumulation of assets by the pfas impacts the financial performance of the pension funds. handoko (2023) shows that the size of the asset and the kind of pension fund has a major impact on the investment portfolio in indonesia, and all the independent factors have a large impact on the pension fund at the same time. additionally, the kind of pension fund positively and https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc substantially impacts the investment portfolio. in contrast, the asset size of the pension fund has a positive and large impact on” the investment portfolio. h3: the pension contribution size does not affect the performance of the (pfas) in nigeria. methods the paper follows a normal procedure to evaluate hypotheses. to describe the variables, we show basic statistics, including mean, standard deviation, minimum, and maximum. we present correlations to define the direction and strength of the relationship among the variables. the estimated coefficient would lie between –1 and +1, with a mid-point at 0, showing the non-existence of linear evidence. the correlation coefficient (denoted 𝑟𝑥1𝑥2 ) between a data pairs (𝑥𝑖 , 𝑥𝑗 ), with n-set [(𝑥1,1, 𝑥2,1), 𝑥1,2, 𝑥2,2), …, (𝑥1,𝑛, 𝑥2,𝑛)], is computed from equation (1). 𝑟𝑥1𝑥2 = ∑ (𝑥1,𝑡 − �̅�1)(𝑥2,𝑡 − �̅�2)𝑛 𝑖 [√(𝑥1,𝑡 − �̅�1)2√(𝑥2,𝑡 − �̅�2)2] −1 (1) the paper follows modeled according to the work of eme et al. (2014), venkatesh and vanishree (2021), and hassanudin et al. (2023). this study adapted the model of abubakar (2023) which examined pension fund investment in nigeria from an islamic perspective. the study adopts the theory of capital accumulation theory as a theoretical framework. the performance of the selected pfas was proxy by return on assets (roa), while the contributory pension scheme was depicted with the density of the contribution (𝐶𝑂𝑁𝑇𝑖,𝑡), idle contribution (𝐼𝐷𝐿𝐸𝐶𝑖,𝑡), contribution size ( 𝑆𝐼𝑍𝑖,𝑡 ), total pension fund assets ( 𝑇𝑃𝐹𝐴𝑖,𝑡 ) and leverage ( 𝐿𝐸𝑉𝑖,𝑡 ). therefore, equation 2 (functional form) and equation 3 (linear form) provide the model showing how the contributory pension scheme impacts the investment performance of the selected pfas. roa𝑖,𝑡 = 𝑓(𝐶𝑂𝑁𝑇𝑖,𝑡, 𝐼𝐷𝐿𝐸𝑖,𝑡, 𝑆𝐼𝑍𝑖,𝑡, 𝑇𝑃𝐹𝐴𝑖,𝑡, 𝐿𝐸𝑉𝑖,𝑡) (2) roa𝑖,𝑡 = β0 + β1𝐶𝑂𝑁𝑇𝑖,𝑡 + β2𝐼𝐷𝐿𝐸𝐶𝑖,𝑡 +β3𝑆𝐼𝑍𝑖,𝑡 + β4𝑇𝑃𝐹𝐴𝑖,𝑡 +β5𝐿𝐸𝑉𝑖,𝑡 +μ𝑖,𝑡 (3) β𝑖 (𝑓𝑜𝑟 𝑖 = 0 𝑡𝑜 5) are parameters of estimation, μ𝑖,𝑡 is the error term, i = cross-sectional variable, and t = time series variable. we estimated the model using the panel data regression, based on the random effects generalized least square (gls) regression based on pfas performance between 2014 and 2023. it was accepted because the panel data estimate technique addresses the heterogeneity related to individual variables. the outcome is more variability due to less collinearity among variables, more degrees of freedom, greater efficiency, and more relevant information by combining time series of cross-sectional observations. panel data reduces the potential bias from aggregating individual pension administrators (gujarati, 2015). it also enriches empirical analysis in a way that may not be possible if only time series or cross-sectional data were used. https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion table 1 presents the descriptive statistics for selected pension administrators' dependent and explanatory variables. the table presents information on the character that each collected data exhibits concerning the average value of the series, the rate of dispersion, and minimum and maximum values for individual series. table 2 presents the correlation analyses among the adopted variables specifically to establish whether the level correlations between each pair of the dependent and independent variables do not pose the threat of multicollinearity to avoid the problem of wrong model specification. the logic behind the assumption of no multicollinearity is that if the correlation coefficient between two variables is greater than 0.70, it could be interpreted and concluded that the variables have a multicollinearity problem. the solution to the multi-collinearity problem is to drop one of the collinear variables. this is supported by (gujarati, 2015). it is worthy of note by implication that all adopted variables were not significantly correlated with each other from the pairwise correlation results in the table above, evidenced by the range value of variables correlation, which lies between -0.206 and 0.6838, suggesting the absence of multi-collinearity among the adopted variables for the model. table 3 provides statistical information on the estimated panel's random and fixed effects. critical observation of the estimated panel's random and fixed effect shows that the random effect estimated panel is more robust than the fixed effect. based on the result of the hausman test that was conducted to decide on the best estimates from both the random and fixed effect model results. the result reveals a chi2 value of 6.71 with 0.0818 probability, which is above the 0.0500 significant margin, which suggests that the random effect is the best model to be estimated for objective three. therefore, the random effect was selected and interpreted as the appropriate model. table 1. descriptive statistics variables 𝛍 𝛔 𝐦𝐢𝐧imum 𝐦𝐚𝐱imum roa 0.005 0.003 0.060 0.704 cont 0.016 0.002 0.025 0.062 idlec 0.030 0.010 0.038 0.081 siz 0.003 0.001 0.061 0.090 tpfa 0.017 0.040 0.046 0.045 lev 0.036 0.015 0.015 0.041 source: authors (2024) note: table 1 shows the sample statistics ( 𝜇, 𝜎, 𝑚𝑎𝑥, 𝑚𝑖𝑛 ), where 𝜇 ≡ mean, 𝜎 ≡ standard deviation table 2. pairwise correlation analysis variables roa cont idlec tpfa siz lev roa 1.0000 cont 0.102 1.0000 idlec 0.304 0.038 1.0000 https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc siz 0.410 0.159 0.294 1.0000 tpfa 0.602 0.041 0.402 0.063 1.000 lev 0.052 0.061 0.518 0.662 0.402 1.000 source: authors (2024) note: table 2 shows the pearson correlation coefficients, 𝑟𝑥1𝑥2 , defined for linear correlation between a pair, 𝑥𝑖and 𝑥𝑗 , having 𝑛-set [(𝑥1,1, 𝑥2,1), (𝑥1,2, 𝑥2,2), …, (𝑥1,𝑛, 𝑥2,𝑛)] with 𝑟𝑥1𝑥2 = ∑ (𝑥1,𝑡 −𝑛 𝑖 �̅�1)(𝑥2,𝑡 − �̅�2) [√(𝑥1,𝑡 − �̅�1)2√(𝑥2,𝑡 − �̅�2)2] −1 , and the value lies between –1 and +1. table 3. hausman specification result variables fixed random difference s.e. cont 0.004 0.012 -0.008 0.005 idlec 0.298 0.320 0.023 0.011 siz -0.039 -0.101 0.063 0.022 tpfa 0.297 0.299 -0.002 0.021 lev 0.025 0.032 -0.007 0.011 source: authors (2024) table 4 presents the result of the panel data regression (random-effects), which reveals that the coefficient of r2 has a value of 0.48. this suggests that the adopted explanatory variables were able to explain 48% of the total variation in the performance of the sampled pension administrators depicted by return on assets (roa), implying that the remaining 52%, which was not accounted for were the stochastic element of the model which represent the error terms. the f-statistics is significant at 1% considering its probability value of 0.0000, which posits that all the adopted independent variables were jointly substantial in explaining return on assets (roa). because of this, the model could exhibit a reasonable level of goodness of fit. the coefficients of the constant (c) have a value of 0.0518. this suggests that if all the explanatory variables are held constant, the explained variable, depicted by return on assets (roa), will surge by 0.0518 units. this shows that regardless of the change in the explanatory variables of the sampled pension administrators, return on assets (roa) will respond accordingly. the density of the contribution as part of the adopted regressors shows a positive coefficient of 0.0681, and it was statistically significant at a 10% level, as contained in the table above. this posits that in a situation where other predictor variables are held constant, by implication, a unit change in the density of the contribution will account for a 0.0681 unit increase in the return on assets. this agreed with the apriori expectation that was early made for this study. idle contribution as part of the adopted regressors reveals a positive coefficient of 0.2992 with return on assets but is not statistically significant, as contained in the table above. this suggests that where other regressors are held constant, a unit increase in the idle contribution will account for an increment of 0.2992 units in the return on assets of the population under study. the contribution size had a positive coefficient of 0.0320 with roa, which was statistically significant at 5%, as in the table above. this suggests that where other regressors https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc are held constant, a unit change in the contribution size will account for an increase of 0.0320 units in roa. total pension fund assets have a control variable showing a positive coefficient of 0.502, and it was statistically significant at a 1% level, as contained in the table above. this posits that in a situation where other predictor variables are held constant, by implication, a unit change in total pension fund assets will account for a 0.502 unit decline in the roa. this is in line with the adopted theory. leverage as a control variable also shows a positive coefficient of 0413 but is not statistically significant. this posits that in a situation where other predictor variables are held constant, by implication, a unit change in leverage will account for a 0.0413 unit increase in the roa of the selected pension administrators. the outcome provides policymakers and regulators with a comprehensive overview of the entire performance of administrators. table 4. random-effects gls regression variable coef. std. err. z p>|z| [95% conf. interval] cont 0.068 0.035 1.980 0.008 0.001 0.136 idlec 0.299 0.048 6.250 0.103 0.205 0.393 siz 0.032 0.029 1.100 0.004 0.025 0.089 tpfa 0.502 0.038 4.20 0.000 -0.173 0.411 lev 0.041 0.022 0.317 0.430 0.248 0.003 cons 0.052 0.005 11.560 0.000 0.043 0.061 r-square 0.480 f-statistics 0.000 source: authors (2024) conclusions the study revealed that contribution density, idle contribution, contribution size, total pension fund assets, and leverage are critical in determining the investment performance of the population under study. this offers insights into how contribution density, idle contribution, contribution size, total pension fund assets, and leverage impact the optimized return. we recommend measures that would boost the growth and sustainability of pension funds, securing better retirement outcomes for contributors and strengthening nigeria’s financial ecosystem. we suggest that the pfa strengthen policies that encourage employers and employees to contribute regularly, enhancing fund inflows' stability and positively impacting pfa performance. since idle contributions detract from the potential growth of pension assets, the pfas should implement agile investment strategies to minimize idle time by swiftly allocating incoming contributions to highperforming assets, such as government securities, corporate bonds, or diversified equity portfolios. pfas should implement policies that encourage higher contributions through incentives that could increase the fund size, thus enabling pfas to pursue broader investment avenues and potentially higher returns. https://www.ilomata.org/index.php/ijtc the impact of contribution density, size, idle contributions, and pension funds’ performance ibrahim, rabiu, and agbeyinka 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference abubakar, y. 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(2000). a critique on the theory of financial intermediation. journal of banking and finance, 24 (2000) 1243-1251. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 742-754 742 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance of nagari owned enterprises wiwik andriani1, rangga putra ananto2, zahara3, dandi aprila4 1234politeknik negeri padang, indonesia correspondent: wiwikandriani@pnp.ac.id1 received : september 5, 2023 accepted : october 17, 2023 published : october 31, 2023 citation: andriani, w., ananto, r, p., zahara., aprila, d. (2023). the influence of financial literacy and educational background on the financial governance of nagari owned enterprises. ilomata international journal of tax and accounting, 4(4), 742-754. https://doi.org/10.52728/ijtc.v4i4.928 abstract: initial observations carried out at nagariowned enterprises (bumnag) in nagari z found that bumnag managers' understanding of good financial governance still needed to be improved, causing the financial governance of bumnag in nagari z not to be improved. this is due to a need for more training regarding financial literacy and a mismatch in the educational background of the bumnag managers. this research aims to determine and analyze the influence of financial literacy and educational background on financial governance in nagari-owned enterprises (bumnag) in nagari z. the approach used in this research is quantitative with a survey method. the data used in this research is primary data obtained from distributing questionnaires to managers of nagari-owned enterprises in nagari z with 83 respondents. the sampling method used in this research is the stratified random sampling method. the research results show that financial literacy and educational background partially influence the financial governance of bumnag in nagari z. in line with these results, financial literacy and educational background simultaneously influence the financial governance of bumnag in nagari z. keywords: financial literacy, educational background, bumnag, bumdes this is an open access article under the cc-by 4.0 license. introduction nagari-owned enterprises (bumnag) are nagari business institutions formed based on the needs and potential of the nagari and managed by the nagari government and the community to strengthen the nagari economy. the government's establishment of bumnag is an effort to ensure that nagari is independent in managing its economy (aprila et al., 2023). increasing welfare through empowering the community is one of the missions of the preamble to the 1945 constitution 1945 (oktaviona et al., 2022). however, in practice, there are still many obstacles faced by bumnag, one of which is limitations in managing finances caused by the low quality of human resources. https://www.ilomata.org/index.php/ijtc mailto:wiwikandriani@pnp.ac.id1 https://doi.org/10.52728/ijtc.v4i4.928 the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 743 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial literacy is an aspect that includes knowledge, skills and a person making decisions regarding finances as the use of financial resources in life (ahmad et al., 2023). according to ulkhair et al. (2023), financial literacy is society's knowledge and skills that can provide confidence regarding financial institutions and the various products and services within them to achieve economic and financial stability. based on the pojk, financial literacy is defined as knowledge, skills and beliefs that influence attitudes and behaviour to improve the quality of decision-making and financial management to achieve prosperity (2019). based on this understanding, financial literacy is closely related to knowledge and skills and is the basis for someone to carry out good financial governance. education is needed in human life because there is education wherever and whenever in the world (uemura & comini, 2022). education is a human effort to humanize humans themselves (wamsler, 2020). education is an essential means of creating quality human resources. all countries consider education variables important (xin et al., 2018). likewise, indonesia considers education the main thing in creating quality human resources (fontanella et al., 2020). education is a process where non-physical cultural wealth is maintained or developed in raising children or caring for adults (salovaara & soini, 2021). this opinion states that education is a nurturing process for children and adults, whereas this opinion still assumes that education is only a teaching process. learning is both a means and an effort to achieve the ultimate goal of human existence. learning that takes place in schools is generally intended to encourage students to acquire knowledge in a structured manner. learning is considered an effort to achieve the goals of human existence supported by abilities that can be obtained from understanding, knowledge and discovery (mahdzan et al., 2020). based on the explanation regarding education, an educational background is essential for realizing good financial governance. suppose an organization's finances are handled by people with an educational background in finance. in that case, this will increase the opportunity for the financial governance of the organization to be maximized in its implementation so that effectiveness and efficiency can be achieved. bumnag in nagari z has been around for quite a long time. however, its financial governance still needs to be more cohesive due to the low understanding of bumnag managers regarding good financial governance. based on observations and information provided by the management of bumnag nagari z, it is stated that the financial management of bumnag nagari z is still terrible because they need to understand how to manage finances well. it was also discovered that there needed to be more financial-related training that could increase their insight and understanding of good financial governance. apart from that, some findings show that the managers of bumnag nagari z have an educational background that needs to be more relevant to the field they are working in. for example, the treasurer of bumnag nagari z has an educational background in the field of sports education, even though the educational background of a treasurer should be in the financial field, such as accounting, economics, management or finance so that the implementation of the performance given by the management can be carried out more optimally. financial management skills are closely related to financial literacy (singh & singh, 2023). the financial literacy level of bumnag managers currently needs to be higher. this is in line with a survey conducted by the financial services authority (ojk) in 2019, which showed that the percentage of financial literacy among indonesian people was 38.03%. this percentage shows that indonesian people's financial literacy level is still low compared to other asean countries, so it needs to be improved. the low level of financial literacy itself is also felt by the https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 744 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management of bumnag nagari z, causing the financial governance of this bumnag to be poor in reporting and accountability. the problem of a lack of financial literacy and the incompatibility of the educational background of bumnag nagari z managers with their duties means that the financial governance of bumnag in nagari z needs to be running optimally. the nagari z government also complicated this problem because the government was not responsive enough to facilitate the management of bumnag nagari z to participate in training related to increasing the understanding of finance. this was proven by the initial interview conducted with the head of bumnag nagari z, who stated that nagari had very little training in the field of finance, so they hoped that such training would help them realize good financial governance so that it could have implications for improving the village economy. based on the problems found in bumnag nagari z, through interviews conducted with the director of bumnag nagari z, he said that the financial governance problems of bumnag were caused by a lack of human resources who knew about finance. apart from that, the director of bumnag also stated that when preparing bumnag financial reports, they are always made and not routinely because those who do the financial reports are people who are not educated in the field of accounting and therefore, have a poor understanding of how to make sound financial reports. apart from these interviews, we also searched related documents and found that the financial reports of this bumnag were prepared simply without paying attention to general accounting rules. through this phenomenon, this research aims to analyze the extent of the impact of financial literacy and educational background on the financial governance of bumnag in nagari z. previous research by aprila et al. (2023) only looked at the impact of bumnag's financial management on community welfare. it should have examined in more depth the financial governance of bumnag. apart from that, previous research conducted by rahayu et al. (2022) examined the influence of financial literacy on the management of nagari-owned enterprises (bumnag) in west sumatra and looked at what factors influenced it. agency theory agency theory explains the relationship between principals, namely shareholders or owners of a company, and management or agents (melin & gaddefors, 2023). this theory arises when the principal appoints another party to manage the company. principals and agents are two different camps (beal partyka, 2022). with this theory, principals may not interfere in the work carried out by their agents, even though they are the ones who appoint and employ members of the management. this is because both of them already have their duties and responsibilities, which are separate from each other (matinheikki et al., 2022). governance governance is a series of policies, rules, or frameworks that a company uses to achieve its business goals (andriani, 2023). governance defines the responsibilities of key stakeholders. good corporate governance supports the team, including corporate social responsibility policies in the plan (sofia et al., 2023). https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 745 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research framework figure 1. research framework the influence of financial literacy on bumnag financial governance financial literacy is people's knowledge and skills that can provide confidence regarding financial institutions and their various products within index size parameters (kakinuma, 2022). bumnag managers must pay attention to the level of financial literacy so that management can be implemented well. that sound financial governance will be achieved by what the community expects. the better financial literacy of bumnag managers will undoubtedly impact the better the financial governance of bumnag itself (rosalina et al., 2022). understanding finances will be directly proportional to how a person manages those finances. the better the understanding of bumnag managers, the more steps can be taken to make bumnag financial governance efficient and effective. in line with agency theory, bumnag managers, as parties who are trusted by the public, must be able to demonstrate to the public the excellent performance through bumnag financial management that is expected at the time of establishing bumnag. agency theory emphasizes the agent being able to provide real accountability to the principal. through sound financial governance, bumnag is a form of accountability the management gives to the community. of course, to realize good bumnag financial governance, bumnag managers need an understanding of finances so that they can manage bumnag finances well and carry out good accountability. previous research conducted by rahayu et al. (2022) shows that there is an influence of financial literacy on the financial performance of bumnag. apart from that, research conducted by artha and wibowo (2023) and atikah and kurniawan (2021) shows that financial literacy influences financial governance. the better financial literacy, the better financial governance will be because managers' better understanding of financial knowledge will undoubtedly make their actions in managing finances good. h1 : financial literacy influences the financial governance of bumnag the influence of educational background on bumnag financial governance education is forming fundamental intellectual and emotional skills towards nature and fellow humans (awwad et al., 2023). forming skills built through education will make someone an expert https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 746 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in doing something according to their field. the longer a person studies a field of science, the more adept the individual will be at working in that field (ma, 2021). that is why the bumnag management in nagari z needs to be able to appoint the right person for each position in the bumnag management so that they can provide exemplary performance based on what the community expects. the more appropriate the educational background of bumnag managers to the field of work entrusted to them, the more the individual's performance will improve so that it will have implications for good financial governance of bumnag and in line with community expectations. if someone works in a field they already understand, there will undoubtedly be many innovative steps that that individual can take. on the other hand, if an individual works outside his field of expertise, it will undoubtedly cause the individual to be hampered in developing ideas that can provide progress to the organization (tuor sartore & backes-gellner, 2020). in line with agency theory, agents must be able to provide maximum performance as a form of seriousness regarding the trust given by the principal (andriani et al., 2023). in this case, bumnag managers as agents must be able to meet these demands by placing administrators according to their educational background to impact bumnag's development positively. if bumnag managers are placed according to their educational background, this will impact the innovation these managers provide. that is why the educational background can influence the financial governance of bumnag. research by rahayu et al. (2022) states that demographic factors influence financial performance, one of which is educational background. besides that, previous research by khusaini et al. (2022) showed that educational background influences financial governance. financial governance will be more focused and run well if the managers who carry out bumnag financial management come from the accounting sector. the results of this research are also strengthened by research conducted by izzalqurny et al. (2022), which revealed that the educational background of bumdes managers will have an impact on improving good financial governance. h2 : latar belakang pendidikan berpengaruh terhadap tata kelola keuangan bumnag the influence of financial literacy and educational background on bumnag financial governance every individual must improve financial literacy to increase their abilities regarding understanding and managing finances properly and correctly (hussain et al., 2021). education is one place to provide financial literacy development to society (hasan et al., 2021). through education, people can learn lessons related to finance, both in terms of understanding and practice. education is fundamental for placing someone in a field to perform well in an organization (lusardi, 2019). the link between education and financial literacy shows these two things can influence financial governance. the better the level of individual financial literacy, the more it will encourage the realization of good bumnag financial governance. likewise, education will be directly proportional to a person's performance regarding the financial governance of bumnag. this is in line with the concept of agency theory, which states that, essentially, the people in an organization are individuals who have been selected by the goals of an organization (andriani et https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 747 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc al., 2022). this means that bumnag managers should be people who have been selected according to their field so that they can produce a good performance in managing bumnag, following research conducted by rahayu et al. (2022), which shows a simultaneous influence of demographic factors and financial literacy on the performance of bumnag. h3 : financial literacy and educational background simultaneously influence the financial governance of bumnag method this research uses a quantitative approach with survey methods. the data used in the research is primary data obtained through questionnaires to bumnag managers in nagari z with 83 respondents using the stratified random sampling sample determination method. several tests are carried out in this research, including the validity and reliability test, the classic assumption test, the normality test and the heteroscedasticity test. then, this research uses the determining coefficient test, t-test, and f test to answer the proposed research hypothesis. table 1. operational variables variable indicator scale financial literacy (x1) (rahayu et al., 2022) 1) financial knowledge 2) financial understanding 3) financial experience 4) financial planning 5) financial management procedures likert (1-4) educational background (x2) (rahayu et al., 2022) 1) suitability of education to position 2) understanding of the task 3) availability of job-related training 4) perceived workload 5) regulations regarding the requirement for relevant educational diplomas likert (1-4) financial governance (y) (kusmayadi et al., 2019) 1) cash flow management 2) credit management 3) investment 4) saving 5) consumption likert (1-4) result and discussion based on the questionnaire that was distributed in this research, 83 respondents filled out the questionnaire and validity and reliability tests were carried out as listed in the following table: https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 748 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. validity test results variable sig. (2tailed) probability pearson correlation conclusion financial literacy 0,000 0,050 0,831 valid educational background 0,000 0,050 0,799 valid financial governance 0,000 0,050 0,756 valid source: data processed, 2023 table 3. reliability test results variable cronbach’s alpha n of items conclusion financial literacy 0,811 7 reliable educational background 0,841 7 reliable financial governance 0,799 7 reliable source: data processed, 2023 based on table 2 and table 3, all question items in this research are suitable for research instruments because they have shown valid and reliable values. table 4. t-test results variable coef tvalue ttable sig. hypothesis financial literacy 0,993 2,643 1.988 0,000 accepted educational background 0,982 2,928 1.988 0,000 accepted source: data processed, 2023 financial literacy the statistical test results in table 4 show that the first hypothesis is accepted. this is because the significant value of financial literacy is below the probability value, namely 0.000 < 0.050. apart from that, the t-value value shows that the value is greater than the t-table value, namely 2.643 > 1.988, which further strengthens the evidence that the first hypothesis is accepted. the better level of financial literacy of bumnag managers will influence the financial governance of bumnag in nagari z. this research results align with the agency theory, which assumes that bumnag managers are competent parties and can carry out good financial governance (safitri et al., 2023). this assumption certainly supports the results of this research because to form good bumnag financial governance, and individuals need understanding regarding the tasks they hold. if bumnag managers have worked according to the field they specialize in, this will positively impact the financial governance of bumnag itself. this research implies that it can be used as input for the bumnag in nagari z, that basically, it is essential for bumnag managers to increase the understanding of bumnag staff regarding financial literacy. the increasing understanding of bumnag managers regarding finance will https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 749 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc undoubtedly have implications for improving the financial governance of bumnag. this is not only the responsibility of bumnag managers, but there is also a role for the nagari z government to provide training related to financial literacy such as financial management, investment, etc. suppose the nagari z government has facilitated these trainings, of course. in that case, it must also be taken seriously by bumnag managers to be able to participate in these activities optimally to increase their understanding of financial literacy. the expected output from this program is the establishment of sound financial governance of bumnag to improve its performance of bumnag and impact nagari z's progress so that the community can feel it. the results of this research are also in line with research conducted by rahayu et al. (2022), which shows that financial literacy influences the performance of bumnag. apart from that, research conducted by artha and wibowo (2023) and atikah and kurniawan (2021) shows that financial literacy influences financial governance. the better financial literacy, the better financial governance will be because managers' better understanding of financial knowledge will undoubtedly make their actions in managing finances good. educational background the statistical test results in table 4 show that the second hypothesis is accepted. this is because the significant value of education background is below the probability value, namely 0.000 < 0.050. apart from that, if you look at the t-value value, it shows that the value is greater than the t-table value, namely 2.928 > 1.988, which further strengthens the evidence that the second hypothesis is accepted. if bumnag managers are placed in the field of education they have specialized in, and it will certainly make the individual more optimal in carrying out their work. the more appropriate the educational background of bumnag managers to their positions, the more opportunities they will have to work more optimally, especially in carrying out bumnag financial management. if someone has worked in their field, their understanding of their duties will improve. this will later have an impact on improving the financial governance of bumnag in nagari z. the research results align with the agency theory, which states that to form an organization that can realize common goals, one can start by placing individuals according to the field in which they are working (andriani et al., 2021). through this, an organization will be created that can have good performance. although, in practice, a person's abilities can be trained with experience outside of formal education, people who carry out tasks in the field they specialize in will be much better and faster at overcoming problems that arise within an organization. this is in line with the results of this research, where educational background influences financial governance at bumnag in nagari z. the more the educational background matches the tasks held, the more excellent the opportunity for improving bumnag's financial governance. the implications of this research can provide a reference for the nagari z government to be able to recruit bumnag administrators based on their educational background. however, the financial governance of bumnag will undoubtedly be influenced by this, considering that the nagari z government is the party that determines who is suitable to be the manager of bumnag in nagari. a concrete step that the nagari z government can take is to clarify the compensation someone receives if they are willing to become a bumnag manager. compensation is one of the things that is considered for someone who wants to become a manager of the bumnag. apart from that, it https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 750 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is hoped that the nagari z government will be able to select prospective bumnag managers strictly. through strict selection, we will be able to get employees who suit the expected fields to provide progress to the bumnag. if bumnag already has good financial governance, this will help the village's economic progress. the results of this research are in line with rahayu et al. (2022), who states that there is an influence of demographic factors, one of which is proxied by educational background on the performance of bumnag. besides that, previous research by khusaini et al. (2022) showed that educational background influences financial governance. financial governance will be more focused and run well if the managers who carry out bumnag financial management come from the accounting sector. the results of this research are also strengthened by research conducted by izzalqurny et al. (2022), which revealed that the educational background of bumdes managers will have an impact on improving good financial governance. table 5. f-test results model sum of square df mean square f sig hypothesis regression 311.376 2 993.300 10.498 0.000 accepted residual 1194.090 81 17.431 total 1505.466 83 source: data processed, 2023 based on the results of statistical tests, namely the f test in table 5, financial literacy and educational background influence financial governance. this is proven by a significant value smaller than the probability, 0.000 < 0.050, which means the third hypothesis is accepted. this means that educational background and financial literacy are things that will influence financial governance because these two variables are two things that are interrelated with each other. if someone has an excellent educational background, they will gain financial literacy in that education. this is in line with agency theory, which states that the education of the managers of an organization will follow their level of understanding of financial management. this means that these two things will significantly influence the financial governance of bumnag because these factors are highly emphasized by bumnag managers in nagari z based on initial interviews conducted with bumnag managers. the nagari z government needs to pay attention to the results of this research as a basis for determining who should become bumnag managers in nagari z. the results of this research are also in line with previous research conducted by rahayu et al. (2022), which shows the results that together there is an influence from financial literacy and demographic factors to the performance of bumnag. table 6. r square results n r square adjusted r square 83 0,432 0.413 source: data processed, 2023 based on the results of the coefficient of determination test listed in table 6, it can be seen that financial literacy and educational background can influence the financial governance of bumnag https://www.ilomata.org/index.php/ijtc the influence of financial literacy and educational background on the financial governance. andriani, ananto, zahara, and aprila 751 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in nagari z with a percentage of 41.3% and the rest is influenced by other variables not included in this research. conclusion based on the presentation of the results of the research that has been carried out, the following conclusions can be drawn: 1) financial literacy influences financial governance in bumnag in nagari z. the better the financial literacy of bumnag managers in nagari z, the more the financial governance of the bumnag will improve. 2) educational background influences financial governance at bumnag in nagari z. the more the educational background of bumnag managers in nagari z matches the duties they hold, the more excellent the opportunity to improve the financial governance of bumnag in nagari z. 3) financial literacy and educational background simultaneously influence financial governance at bumnag in nagari z. this shows that there must be special attention from the government of nagari z to make these two things the basis for selecting bumnag managers. apart from these conclusions, there are also limitations to this research, namely that the answers to the questionnaire filled out by respondents cannot be said to be absolute because when filling out the questionnaire, there are other factors that influence someone in answering the question so that the answer to the question could change if asked again. that person. the following are some suggestions proposed from the results of this research: 1) for the nagari z government, it is hoped that it will facilitate bumnag managers by providing training related to increasing financial literacy. apart from the nagari z government, it is hoped that it will be able to select bumnag managers according to each candidate's educational background. 2) it is hoped that future researchers can add other variables not included in this research related to factors that influence financial governance in bumnag management. considering that based on the results of the coefficient of determination test, there are still 58.7% of other variables that have yet to be included in this research. reference ahmad, z., sharif, s., ahmad, i., abbas, s. m. w., & shaheen, m. 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(2018). research on the construction of seamless learning platform based on open education. asian association of open universities journal, 13(1), 88–99. https://doi.org/10.1108/aaouj-01-2018-0005 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 846-862 846 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 redho rahcmatulloh1, eddy suranta2 12bengkulu university, indonesia correspondent : redho34@gmail.com1 received : september 10, 2023 accepted : october 20, 2023 published : october 31, 2023 citation: rachmatulloh, r., suranta, e. (2023). the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid– 19. ilomata international journal of tax and accounting, 4(4), 846-862. https://doi.org/10.52728/ijtc.v4i4.937 abstract: the primary goal of this research is to elucidate the influence of environmental, social, and corporate governance (esg) performance on a company's overall performance. the research employs the esg level as the independent variable for evaluation, which is the novelty of the study. the performance of the corporation is evaluated using various indicators, including financial performance (roa), profitability (roe), and tobin's q, which are regarded as reliant variables. additionally, the study introduces the modified by jones model of earnings management as a moderating factor. the analytical approach encompasses the application of multiple linear regression techniques. to ensure a representative sample, we conducted purposive sampling to select 120 observations from manufacturing companies listed on the indonesian stock exchange that consistently maintained their esg index during the period spanning from 2018 to 2022, including the turbulent period of the covid-19 pandemic. the findings of this research reveal that the esg index exerts a positive and statistically significant influence on roa, roe, and tobin's q. furthermore, it is noteworthy that earnings management does not possess the capacity to moderate the relationship between esg and company performance. the implications of this study are substantial, as it lends support to the application of legitimacy theory and agency theory in the context of esg and corporate performance. however, it's important to acknowledge that the study's scope is limited to indonesia, and consequently, the findings may not be directly applicable to other developing nations. keywords: environmental social governance, corporate performance, earnings management, covid 19 this is an open access article under the cc-by 4.0 license. introduction the global outbreak of the covid-19 pandemic, which commenced in early 2020, has led to substantial disruptions across multiple sectors of the economy. the impact is not only limited to health aspects but also includes significant changes in firms performance. covid–19 has changed https://www.ilomata.org/index.php/ijtc mailto:redho34@gmail.com https://doi.org/10.52728/ijtc.v4i4.937 the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 847 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the way companies operate, affected financial markets, and presented new challenges for management. the outbreak of the coronavirus pandemic has led to a significant downturn in the worldwide stock market. it is imperative to adopt strategic measures aimed at safeguarding and sustaining the performance of these businesses, thereby assisting them in surmounting the adversities presented by this crisis (qiu et al., 2021). many companies experienced a decline in revenue and net profit due to the economic impact of this pandemic (chudik et al., 2020). as a result, the role of environmental, social, and governance (esg) in firms' performance is becoming increasingly important. the impetus for this research stems from a recognition of evolving business dynamics, where environmental, social, and governance (esg) performance has assumed an increasingly pivotal role in organizational practices and investment strategies over the pandemic period before and still ongoing. the novelty of this research lies in its approach to assessing esg using a level scale based on an esg index categorized into five sections, as accessible on the official indonesia stock exchange (idx) website. esg includes an understanding of how esg factors, such as sustainable environmental practices, social responsibility, and good governance, can influence a firm's performance. recent research indicates that companies with lower esg ratings tend to exhibit improved financial performance (cheng et al., 2023; chininga et al., 2023). moreover, this study introduces earnings management as a moderating variable, deepening and broadening the examination of the relationship between esg and corporate performance before and during the pandemic. in recent times, the performance concerning environmental, social, and governance (esg) has garnered growing interest from investors as they seek to ensure the long-term sustainability of businesses. in an increasingly complex business context, esg management is not only a social responsibility but also has significant implications for a firm's performance (aqabna et al., 2023) as well as attracting investors to make investment decisions in companies that have social responsibility (de lucia et al., 2020). firm performance describes how the business activities are carried out and what is achieved from each of these business activities. firm performance itself is a measure of the success or failure of the firm in managing its business to generate profits. companies are progressively acknowledging that robust social and environmental responsibility can yield long-term advantages, including enhanced performance. the pandemic has further wrought changes that have a bearing on the manner in which companies execute earnings management practices to navigate their esg performance and corporate performance amidst the challenging circumstances. as per findings by (azizah, 2021), it was observed that the covid-19 pandemic had an influence on earnings management within the realm of manufacturing companies in indonesia during the first quarter. managers exhibited greater caution in overseeing their companies, refraining from drawing attention to underperformance amid the pandemic. this reluctance could stem from their desire not to reveal their firm's actual performance. previous research has explored accrual earnings management as a variable affecting esg performance and as a variable moderating the connection between esg and corporate performance (aqabna et al., 2023; kolsi et al., 2023). the outcomes revealed that earnings management had an insignificant positive impact on financial performance, signifying that companies may resort to earnings management to mask the adverse consequences of unsustainable practices in pursuit of long-term advantages. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 848 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the overarching objective of this study is to elucidate the repercussions of environmental, social, and governance performance on corporate performance. it also seeks to investigate the role of esg performance in the context of the pandemic, scrutinize the impact of esg performance on corporate performance both before and during the pandemic, and elucidate the moderating influence of accrual earnings management within this nexus. from a theoretical perspective, this study offers valuable insights for those who rely on legitimacy theory, enhancing their comprehension of the influence of esg performance on corporate performance. likewise, it benefits proponents of agency theory by providing a more comprehensive understanding of the moderating function of earnings management in the context of environmental, social, and governance (esg) performance, particularly within the framework of the covid-19 pandemic. on a practical level, companies stand to gain considerable advantages, such as the ability to make more informed strategic decisions concerning esg management, which can in turn lead to enhanced corporate performance. furthermore, the research delves into the nuances of how earnings management can temper the consequences. this knowledge proves invaluable for investors and policymakers alike, empowering them to more effectively assess and evaluate companies. legitimacy theory legitimacy is a firm's effort to develop the firm in the future to gain legitimacy by positioning itself on the social values and norms that apply in the community (andriani & arsjah, 2022). this theory can clearly explain esg, firm performance, and earnings management. according to this theory, it is postulated that an organization endeavors to align its operations consistently with established societal norms and values. the core objective of these organizational endeavors is to secure the acceptance of its business activities by the local community, thereby establishing them as legitimate and non-detrimental. the culmination of these efforts is anticipated to contribute significantly to the long-term sustainability and enhanced performance of the organization. agency theory agency theory emerged because of the division of roles between business owners as principals and business managers or management as agents. a consequence of agency issues that manifest within corporate entities involves the incorporation of social and environmental responsibilities, as per the tenets of agency theory (jensen & meckling, 1976). in agency theory, the argument is that it is management's job to achieve maximum profits for shareholders. therefore, if the costs of investing in corporate social responsibility practices exceed the maximum benefits that can be obtained in terms of increasing firm value, then these costs will be passed on to shareholders (husada & handayani, 2021). environmental, ocial, and governance (esg) the esg framework, encompassing environmental, social, and corporate governance (qodary & tambun, 2021), plays a pivotal role in investment practices. esg functions as a guiding framework or metric for evaluating a company's performance. the esg rating relies on numerical values drawn from the indonesia stock exchange's (idx) official website. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 849 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of environmental, social, and governance (esg) on corporate performance the disclosure of environmental, social, and governance (esg) information plays a pivotal role in the communication efforts of companies. it functions as a vital conduit through which organizations disseminate crucial information to a diverse range of stakeholders. this strategic approach to disclosure, underpinned by the principles of the legitimacy theory, is a conscious choice made by companies to nurture and fortify a positive reputation. through esg disclosure, companies seek to garner support and recognition from not only the broader society but also from the various stakeholders who have a vested interest in the organization's activities and impact on the environment, society, and corporate governance. in essence, this practice aims to demonstrate transparency, responsibility, and a commitment to addressing and integrating esg factors into the core of the company's operations. it reflects a proactive approach toward engaging with stakeholders and fostering a sense of trust and credibility, which can be instrumental in sustaining the organization's long-term viability and success. this approach seeks to cultivate a positive image for the company (zahroh & hersugondo, 2021). furthermore, prior research findings demonstrate a favorable correlation between the esg index and various performance metrics, including return on assets (aqabna et al., 2023), return on equity (aouadi & marsat, 2018), and tobin's q (melinda & wardhani, 2020). in accordance with the principles of legitimacy theory, companies are expected to contribute added value to all stakeholders, going beyond a sole focus on profits, and operating in accordance with societal values and norms. consequently, the research hypothesis can be formulated as follows: h1: esg positively influences corporate performance the moderating role of earnings management in the relationship between esg and corporate performance earnings management can be defined as a deliberate sequence of actions undertaken by an entity, both within the framework of generally accepted accounting principles and beyond, with the purpose of managing or influencing financial reports in a specific manner (indriani et al., 2022). furthermore, as indicated by (aqabna et al., 2023), the moderating influence of earnings management demonstrates that corporate social responsibility has an impact on financial performance. this study also seeks to assess whether earnings management acts as a moderating factor in the relationship between esg and corporate performance. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 850 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h2: earnings management moderates the relationship between esg and corporate performance. research framework table 2. framework of the research method model and research design this research uses a quantitative type of research with a focus on explanatory studies through causality design to explain causal relationships between research variables in order to test hypotheses. this study unveils the impact of environmental, social, and governance (esg) performance on the performance of companies, with the moderating role of earnings management taken into account. population and sample selection method the research encompasses all manufacturing enterprises that are publicly listed on the indonesia stock exchange (idx) for the duration spanning from 2018 through 2022, utilizing 2017 as the baseline year. purposive sampling was chosen as a sample selection method for manufacturing companies that have an esg index throughout the observation period. data collection method this research uses secondary data from the esgi dataset for manufacturing companies listed on the indonesia stock exchange (idx) which have esg scores for the last five years (2018 – 2022) as well as annual reports from the website www.idx.co.id and the official websites of related companies. for financial reports using foreign currency, convert them to local currency according to the selling rate on the official bank indonesia website at the end of each year. data processing method in this research, the multiple linear regression method was used with ibm spss statistics 25 software. this method was applied to find out the relationship between the variable in focus https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 851 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (dependent variable) and other variables that function as predictors or factors that influence the focus variable. definition operational and variable measurement table 3 describe the process of operationalizing and measurement the study variables variables measurement sources dependent variable roa roa = niit / tait-1 (marietza et al., 2020) roe roe = niit / teit (alareeni & hamdan, 2020) tobin’s q (bv of assetsit – bv of equityit – mv of equityit) / tait (chancharat & kumpamool, 2022) independent variable esg score level of esg score esgi dataset moderating variable earnings management (dac) the modified by jones (1) tacit = niit cfoit (2) tacit / tat-1 = β1 (1/tait) + β2 (δsalesit/tat-1) + β3 (ppeit/tat-1) + εit (3) nda = β1 (1/tait) + β2 (δsalesit – δrecit/tat-1) + β3 (ppeit/tat-1) + εit (4) dacit = (tacit / tat-1) ndait (sabrina et al., 2020) control variable covid19 dummy, variable (0) for before pandemic covid 19 and (1) for during the pandemic (aqabna et al., 2023) big 4 dummy variable (1) for companies audited by the big 4 {pwc, deloitte, ey, and kpmg} and (0) for otherwise. (hamdan et al., 2017) leverage lev = total liabilitiesit / total assetsit (ruchiatna et al., 2020) firm size fsize = ln (total assetsit) (suranta et al., 2014) https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 852 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion following the application of specific purposive sampling criteria, a dataset comprising 120 observations was compiled. these observations were drawn from a pool of 22 manufacturing firms that are listed on the indonesia stock exchange (idx) and maintained a consistent esg index throughout the observational span of 2018 to 2022. descriptive statistics the outcomes of the descriptive analysis pertaining to the dependent variable, independent variable, and control variables within this research are presented in the subsequent table: table 4 descriptive statistics of dependent, independent, and control variables minimum maximum mean standard deviation before pandemic during pandemic roa −0.030 0.467 0.098 0.085 0.107 0.095 roe −0.146 1.451 0.398 0.514 1.249 0.185 tobin's q 0.677 18.355 2.636 2.858 3.149 2.508 esg 1.000 4.000 1.892 0.951 1.750 1.927 dac −0.462 0.370 0.013 0.120 0.020 0.012 covid19 −14.035 18.401 0.697 4.692 0.910 0.644 big4 0.000 1.000 0.600 0.492 0.000 0.750 fsize 0.000 1.000 0.833 0.374 0.833 0.833 lev 28.836 33.655 31.173 0.999 30.998 31.217 source: secondary data that has been processed in 2023 presented within table 4, we find the descriptive statistics outlining the parameters for the dependent, independent, and control variables within the observed dataset. in terms of return on assets (roa), as showcased in table 4, the data portrays a spectrum of roa values ranging from -0.030 to 0.467, with a mean value of 0.098. the standard deviation for roa is 0.085, implying a relatively restrained extent of diversity within the roa variable dataset. notably, the table underscores the phenomenon of reduced roa levels among companies in the study sample during the covid-19 period. in the context of return on equity (roe), the table displays a range of values, featuring the lowest recorded observation at -0.146, the highest value at 1.451, and an average of 0.398. the standard deviation associated with the roe variable stands at 0.514, indicating a heightened level of fluctuation within the roe values across the study observations. correspondingly, the table reflects the substantial decline in roe during the covid-19 period. further, the table unveils insights into tobin's q, pertaining to the companies under scrutiny, encompassing values spanning from a minimum of 0.677 to a maximum of 18.355, with a mean value of 2.636 and a standard deviation of 2.858. this underscores the considerable diversity evident in the tobin's q dataset. nevertheless, the table highlights a discernible reduction in tobin's q values during the covid-19 period. as for the independent variable, table 4 provides a snapshot of the esg index's variability, spanning a range from 1 to 4, or, when expressed as scores, with the lowest score at 17.56 and the highest score reaching 63.25, and an average value of 1.892, or, when assessing the esg score, it equates to 37.534. the standard deviation linked to this independent variable stands at 0.951, signifying a relatively limited degree of variance, suggesting that the employed esg variables maintain a stable profile. interestingly, https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 853 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the table highlights an increase in esg disclosure levels observed during the covid-19 period. with regard to earnings management, referred to as dac, the table outlines data encompassing a minimum value of -0.462, a maximum value of 0.370, and an average value of 0.013. the standard deviation for dac surpasses the mean value by 0.020, signifying the variability discerned across the research observations. the table shows that profit management practices experienced a decline before and during the covid–19 period. hypothesis test tabel 5 the results of multiple linear regression of return on assets (roa) dependent : roa unstandardized coefficients b t sig. 1 (constant) .015 2.002 .048 esg .031 4.441 .000 dac -.047 -.633 .528 dac_esg -.001 -.380 .704 r square adjusted r square f sig. .175 .153 7.906 .000b dependent : roa unstandardized coefficients b t sig. 1 (constant) .019 1.351 .180 esg .032 3.828 .000 dac -.022 -.214 .835 dac_esg .000 -.099 .921 covid_19 -.018 -1.610 .110 big4 .017 .729 .467 r square adjusted r square f sig. .142 .104 3.729 .004b dependent : roa unstandardized coefficients b t sig. 1 (constant) .423 4.158 .000 esg .034 4.993 .000 dac -.088 -1.270 .207 dac_esg .001 .485 .629 lev .017 .410 .682 firmsize -.033 -3.945 .000 r square adjusted r square f sig. .280 .247 8.544 .000b dependent : roa unstandardized coefficients b t sig. 1 (constant) .449 3.998 .000 esg .034 5.019 .000 https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 854 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dac -.090 -1.214 .227 dac_esg .001 .449 .654 covid19 -.001 -.437 .663 big4 .002 .089 .929 lev .015 .374 .709 firmsize -.032 -3.829 .000 r square adjusted r square f sig. .286 .240 6.183 .000b dependent : roa unstandardized coefficients b t sig. 1 (constant) .132 1.303 .195 covid19 -.002 -.354 .724 big4 -.003 -.229 .820 lev -.102 -3.149 .002 firmsize -.004 -.661 .510 r square adjusted r square f sig. .134 .100 3.934 .005b source: secondary data that has been processed with ibm spss statistics 25 (2023) in light of the information provided in table 5, the results of the f-test reveal a significance (sig.) value of 0.000. given that this sig. value is less than the established threshold of 0.05, it indicates that the model employed to evaluate the hypothesis is both valid and appropriate. regarding the results derived from the coefficient of determination test provided in table 5, it elucidates an adjusted r square value of 0.240, equivalent to 24%. this conveys that approximately 24% of the variations observed in the return on asset (roa) variable can be accounted for by factors such as esg performance, earnings accrual management (dac), the presence of covid-19, engagement with prominent entities (commonly known as "big 4"), company size, and leverage. nevertheless, it is imperative to acknowledge that the remaining 76% of the variability remains unexplained within the framework of the factors encompassed by this model. this shortfall in explanation is likely attributable to external variables that were not integrated into the model. table 6 the results of multiple linear regression of return on equity (roe) dependent : roe unstandardized coefficients b t sig. 1 (constant) .057 .564 .574 esg .133 2.933 .004 dac -1.331 -.862 .391 dac_esg .041 1.038 .302 r square adjusted r square f sig. .079 .053 3.079 .031b https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 855 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dependent : roe unstandardized coefficients b t sig. 1 (constant) .594 4.426 .000 esg .056 1.299 .197 dac -.033 -.036 .971 dac_esg -.067 -.142 .887 covid_19 -.562 -6.850 .000 big4 .045 .408 .684 r square adjusted r square f sig. .298 .267 9.680 .000b dependent : roe unstandardized coefficients b t sig. 1 (constant) 4.655 3.041 .003 esg .036 .765 .446 dac -.347 -0.357 .772 dac_esg .153 -.296 .769 lev .558 2.163 .033 firmsize -.147 -2.944 .004 r square adjusted r square f sig. .099 .058 2.429 .040b dependent : roe unstandardized coefficients b t sig. 1 (constant) 1.730 2.334 .021 esg 0.066 2.104 .038 dac -0.524 -0.590 .556 dac_esg 0.010 0.443 .658 covid_19 -1.062 -19.384 .000 big4 0.019 0.224 .823 lev 0.357 2.000 .048 firmsize -0.048 -1.390 .167 r square adjusted r square f sig. .343 .301 8.335 .000b dependent : roe unstandardized coefficients b t sig. 1 (constant) 3.925 3.075 .003 covid_19 -.565 -7.118 .000 big4 .070 .664 .508 lev .483 2.110 .037 firmsize -.110 -2.646 .009 r square adjusted r square f sig. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 856 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc .335 .312 14.505 .000b source: secondary data that has been processed with ibm spss statistics 25 (2023) drawing insights from the data presented in table 6, the results of the f test reveal sig values of 0.000. this outcome underscores the suitability of the employed model for hypothesis testing, given that the sig value adheres to the criterion of being less than 0.05. concerning the coefficient of determination test within table 6, it unveils an adjusted r square value of 0.301, equivalent to 30.1%. this implies that approximately 30.1% of the variation observed in the return on equity (roe) variable can be accounted for by factors including esg performance, accrual earnings management (dac), the presence of covid-19, the involvement of big 4 entities, company size, and leverage. nonetheless, it is essential to acknowledge that the remaining 69.9% of the variance remains explicable by external factors not incorporated within this equation. tabel 7 the results of multiple linear regression of tobin’s q dependent : tobinsq unstandardized coefficients b t sig. 1 (constant) .496 3.538 .001 esg .443 3.046 .003 dac -.301 -.134 .893 dac_esg .010 .009 .992 r square adjusted r square f sig. .083 .058 3.296 .023b dependent : tobinsq unstandardized coefficients b t sig. 1 (constant) .201 1.460 .147 esg .427 3.284 .001 dac .868 .484 .540 dac_esg -.559 -.615 .349 covid_19 .141 .940 .251 big4 .414 1.155 .251 r square adjusted r square f sig. .121 .078 2.826 .020b dependent : tobinsq unstandardized coefficients b t sig. 1 (constant) 9.004 4.732 .000 esg .510 3.796 .000 dac -.280 -.141 .888 dac_esg -.005 -.005 .996 lev -.438 -.485 .628 firmsize -.762 -4.288 .000 r square adjusted r square f sig. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 857 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc .286 .253 8.585 .000b dependent : tobinsq unstandardized coefficients b t sig. 1 (constant) 8.287 4.278 .000 esg .525 3.905 .000 dac .026 .013 .989 dac_esg -.167 -.170 .865 covid19 -.316 -1.731 .086 big4 .004 .018 .986 lev -.633 -.696 .488 firmsize -.682 -3.703 .000 r square adjusted r square f sig. .308 .261 6.662 .000b dependent : tobinsq unstandardized coefficients b t sig. 1 (constant) .001 3.503 .001 covid19 -.289 -1.502 .136 big4 -.061 -.258 .797 lev -1.433 -1.550 .124 firmsize -.529 -2.791 .006 r square adjusted r square f sig. .201 .171 6.789 .000b source: secondary data that has been processed with ibm spss statistics 25 (2023) f test results from table 6 with sig value. 0.000, then the model used is a good model for testing hypotheses (sig. < 0.05). the results from the coefficient of determination test in table 6 reveal an adjusted r square value of 0.261, equivalent to 26.1%. this suggests that approximately 26.1% of the variability observed in the tobin's q variable can be accounted for by the assortment of independent, moderating, and control variables included in the model. nonetheless, it's crucial to recognize that the remaining 73.9% of the variance can be attributed to external variables that exist beyond the scope of this particular equation. testing and discussion from first hypothesis results from the hypothesis testing and analysis are as follows: hypothesis 1: influence of esg on company performance the primary hypothesis aims to explore the impact of environmental, social, and governance (esg) performance on a company's overall performance, utilizing return on assets (roa), return on equity (roe), and tobin's q as surrogate indicators. the findings presented in table 5 unveil a constructive and statistically significant connection between esg and firm performance: the roa measure demonstrates a coefficient of 0.031, accompanied by a sig. value of 0.000 (0.000 < 0.050), indicating that enhancements in esg performance contribute positively to companies' https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 858 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial performance, particularly concerning roa. these outcomes are consistent with the conclusions drawn by safriani & utomo (2020), which assert that higher esg ratings are linked to improved asset returns. likewise, roe reveals a coefficient of 0.133, with a sig. value of 0.004 (below 0.050), providing confirmation that esg performance substantially elevates return on equity. these results is support the prior studies (zhao et al., 2018). parallel to the trends observed in roa and roe, esg also exerts a constructive and significant impact on tobin's q, as evidenced by a regression coefficient of 0.443 and a sig. value of 0.003 (0.003 < 0.050). in essence, the initial hypothesis is substantiated. this investigation sets itself apart from prior research (aqabna et al., 2023; atan et al., 2018; kamatra & kartikaningdyah, 2015), which did not uncover a connection between esg and an upsurge in roe. consequently, it validates that esg has a positive and noteworthy influence on company performance, as evidenced by roa, roe, and tobin's q. moreover, even amid the challenges of the covid-19 pandemic, esg scores continue to exert a positive influence on company performance. the research outcomes elucidate: roa displays a significant and positive impact, characterized by a coefficient value of 0.034 and a sig. value of 0.000 (0.000 < 0.050). roe similarly exhibits a favorable influence with a regression coefficient value of 0.066 and a significance level of 0.038 (0.038 < 0.050). likewise, tobin's q maintains consistent findings, with a regression coefficient value of 0.525 and a significance level of 0.000 (0.000 < 0.050). this underscores the positive impact of esg on firm performance during the covid-19 pandemic, aligning with the research results observed both before and during the pandemic. hypothesis 2: earnings management moderation of esg and company performance the second hypothesis investigates the potential moderating role of earnings accrual management (dac) in the correlation between esg and firm performance. the outcomes unveil the following: earnings management diminishes the connection between esg and financial performance (roa). the regression coefficient holds a value of -0.001, accompanied by a sig. value of 0.704 (0.704 > 0.050), indicating a lack of significance. in the case of roe, moderation strengthens the bond between esg and firm performance, as evidenced by a regression coefficient value of 0.291 and a significance level of 56.5% (0.565 > 0.050). earnings management also does not emerge as significant in this context. similarly, tobin's q exhibits non-significant moderation, characterized by a regression coefficient value of 0.010 and a significance level of 0.992 (0.992 > 0.050). hence, tobin's q fails to demonstrate significance in moderating the link between esg and firm performance. in light of these findings, the second hypothesis is refuted, signifying that earnings accrual management (dac) does not exert a moderating influence on the relationship between esg and firm performance, aligning with the research conducted by (aqabna et al., 2023), which similarly reported no impact of earnings management on the association between esg and firm performance. this study underscores the significance of companies striving to present a favorable image amidst the challenges of the covid-19 pandemic, despite its detrimental effects on their performance. management frequently employs earnings management as a tactic to enhance their attractiveness to investors. nevertheless, the results demonstrate that during the covid-19 pandemic, earnings management failed to yield a substantial impact on a company's performance. https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 859 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the primary goal of this research is to assess the potential influence of environmental, social, and governance (esg) performance on the overall performance of companies. furthermore, this study delves into the possible role of earnings management in shaping the connection between esg performance and firm performance. earlier research has demonstrated the effect of esg on firm performance (aqabna et al., 2023; buallay et al., 2020). following an extensive data analysis, the results undeniably validate that esg performance exerts a positive and statistically significant impact on firm performance, as measured by key indicators such as return on assets (roa), return on equity (roe), and tobin's q. these findings are aligned with the principles of esg performance, consistent with the legitimacy theory, which posits that companies aligning their operations with prevailing societal norms and values tend to achieve greater sustainability and improved overall corporate performance (lelkes, 2016). remarkably, even in the challenging context of the covid-19 pandemic, esg performance maintains a noticeable, positive, and statistically significant influence on financial performance metrics, including roa, roe, and tobin's q. conversely, the introduction of accruals earnings management, as a moderating variable in this study, does not appear to have a significant impact on firm performance. this observation holds true even under the adverse conditions of the covid-19 pandemic, where earnings management fails to moderate the relationship between esg and firm performance. the outcomes of this study are consistent with the fundamental principles of agency theory, which propose that a company's efforts to optimize resource allocation for cost efficiency could potentially lead to unfavorable outcomes for firm wealth and shareholder profitability (xaviera & rahman, 2023). drawing from these conclusions, the research team suggests numerous potential avenues for future exploration. these include broadening the spectrum of variables under scrutiny, encompassing aspects tied to corporate governance, like the dimensions of the board (e.g., its size and independence). additionally, extending the research timeline is advisable, enabling the exploration of esg performance in the context of a company's performance across periods that precede, coincide with, and follow the covid-19 pandemic. reference alareeni, b. a., & 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(2021). pengaruh kinerja environmental, social, dan governance terhadap kinerja keuangan dengan kekuatan ceo sebagai variabel moderasi. diponegoro journal of management, 10(3), 1–15. http://ejournal-s1.undip.ac.id/index.php/accounting https://www.ilomata.org/index.php/ijtc the effect of environmental, social, and governance (esg) on firm performance with earnings management as a moderation: empirical evidence around covid–19 rahcmatulloh and suranta 862 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc zhao, c., guo, y., yuan, j., wu, m., li, d., zhou, y., & kang, j. (2018). esg and corporate financial performance: empirical evidence from china’s listed power generation companies. sustainability (switzerland), 10(8), 1–18. https://doi.org/10.3390/su10082607 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 913-927 913 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ahmad ikbal1, abdullah2 12bengkulu university, indonesia correspondent : iqbalahmad0749@gmail.com1 received : september 10, 2023 accepted : october 24, 2023 published : october 31, 2023 citation: ikbal, a., abdullah. (2023). the influence of intellectual capital, and capital structure on financial performance. ilomata international journal of tax and accounting, 4(4), 913-927. https://doi.org/10.52728/ijtc.v4i4.959 abstract: the primary aim of this study is to investigate how capital structure and intellectual capital affect the financial performance of banking institutions that are publicly traded on the indonesia stock exchange over the period from 2018 to 2022. the research employed a purposive sampling approach to select its sample, resulting in the collection of 180 data observations from 36 companies over a five-year span. the analysis in this study was conducted using multiple linear regression techniques, utilizing ibm spss software for the analysis. the research findings indicate that capital structure does not exert a substantial impact on financial performance. in contrast, intellectual capital exhibits a notably positive influence on financial performance. keywords: financial performance, capital structure, intellectual capital this is an open access article under the cc-by 4.0 license. introduction an organization's financial performance over a specific period reflects its financial health. it showcases the effectiveness with which the business utilizes its resources to generate profits. to achieve profitability, valuable resources that contribute to the organization are essential. the objective is to optimize the company's economic well-being and deliver advantages, ensuring a faithful reflection of its financial status. intellectual capital encompasses intangible assets like copyrights, patents, franchises, and intellectual property rights that have the potential to benefit both society and other enterprises (andriana, 2014; nikmah & apriyanti, 2019). in indonesia, intellectual capital began gaining prominence, particularly with the introduction of statement of financial accounting standards (psak) no. 19, addressing intangible assets. capital structure, in addition to intellectual capital, is another factor affecting financial performance. capital structure involves the funding of activities through a blend of debt and equity. a well-balanced capital structure can boost an entity's revenue, provided the earnings surpass the interest paid on debt. however, if the profits from utilizing debt fall short of the interest payments, it could lead to a decline in both profit and profitability. https://www.ilomata.org/index.php/ijtc https://doi.org/10.52728/ijtc.v4i4.959 the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 914 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the return on equity (roe) ratio serves as a metric for assessing a company's financial performance, offering insights into its capacity to generate profits for both common and preferred stockholders. when roe is computed based on owner's equity, it represents the proportion of net profit that can be achieved. given the substantial utilization of human capital, closely interconnected with intellectual capital, in the banking sector, and its significant reliance on intellectual capital due to its service-oriented nature, this sector was selected for the study (farih, 2010). in 2022, (irsyahma, 2016; marietza & simbolon, 2021; nurhaliza, 2022) found a favorable connection between intellectual capital and financial performance, whereas (ting et al., 2020; yuniasih et al., 2011) did not find any substantial effect of intellectual capital on financial performance. on the other hand, (azis & hartono, 2017; ningsih & utami, 2020) highlighted the importance of capital structure in influencing financial performance, while (ritonga et al., 2021; tambunan, 2018) noted a lack of apparent impact on financial performance. considering the contrasting results obtained by various researchers, the researcher intends to carry out further investigations to explore the influence of these variables on a company's financial performance. in light of this, scholars are motivated to delve deeper into the subject of "the impact of intellectual capital and capital structure on financial performance." resource-based theory resource-based theory (rbt), as elucidated by (ulum, 2017), posits that organizations equipped with resources gain a competitive edge and experience sustained, superior performance. efficiently managed resources contribute value to the enterprise, enhancing its competitiveness and overall financial performance. when it comes to intellectual capital, rbt offers an apt framework, particularly concerning its relationship with financial performance. intellectual capital can be categorized into three dimensions: human, structural, and customer capital. (ulum, 2013). trade-off theory the trade-off theory, as explained by (umdiana & claudia, 2020), posits that a company will seek external debt until a point where the tax advantages of additional debt are balanced with potential losses. the trade-off theory considers factors like taxes, agency costs, and financial distress costs in determining the optimal capital structure, all while maintaining market efficiency and symmetric information assumptions. according to (wardani d. k. & christiyanti, 2018), the trade-off theory aims to strike a balance between the benefits and sacrifices associated with using debt. financial performance financial performance, as defined by (brigham & houston, 2019), signifies a company's ability to generate revenue and earnings over a specific period. it serves as a key measure for evaluating managerial proficiency and the company's potential for growth and resource utilization. stakeholders rely on financial performance reports to make investment decisions. financial https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 915 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance reflects a company's ability to achieve its objectives and gain a competitive edge (isbanah, 2015). intellectual capital intellectual capital, as explained by (bellucci et al., 2021; setiawan & prawira, 2018; wang & juo, 2021), encompasses intangible assets like knowledge, information, human resources, and organizational structure. it holds a central role in creating sustainable competitive advantage, contributing to added value and competition in the market. in a knowledge-based economy, there is a requirement for precise measurement of two key aspects: physical capital, which relates to financial resources, and intellectual potential, represented by employees and their capabilities (cindiyasari et al., 2023; ramírez et al., 2022; ulum et al., 2008). bontis et al. (2000) has outlined three primary elements of intellectual capital, which encompass human, structural, and customer capital. capital structure capital structure refers to the allocation of debt and equity that a company employs to fund its operations. as defined by (harjito & martono, 2014), it represents the ratio of long-term financing to equity. the debt-to-equity ratio (der) serves as a metric for evaluating capital structure, offering insights into the level of risk associated with a company. an ideal capital structure is one that balances risk and return effectively, thereby benefiting the company, as highlighted by (budiman, 2014). the influence of intellectual capital on financial performance (setiawan & prawira, 2018) argue that intellectual capital, categorized as intangible assets, has the potential to generate a beneficial effect on financial performance. this viewpoint is further supported by (devi et al., 2017; habibah & riharjo, 2016), who underscore the favorable impact of intellectual capital on financial performance. as a result, the hypothesis put forward in this research asserts that h1: intellectual capital exerts a positive influence on financial performance. the influence of capital structure on financial performance the structure of capital plays a crucial role in molding a company's financial performance, ultimately affecting its competitive standing and overall efficiency. as per the research conducted by (komara et al., 2016), capital structure is associated with a positive influence on financial performance. consequently, the hypothesis related to this aspect asserts that h2: capital structure exerts a positive impact on financial performance. https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 916 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. research framework method model and research design this research employs a quantitative methodology, which involves the utilization of secondary data gathered from annual financial reports covering the time frame extending from 2018 to 2022. the data utilized in this study were extracted from the financial statements of companies that are publicly traded on the indonesia stock exchange. additionally, information was also sourced from the official websites of the pertinent companies. definition operational research variables that can be used in this research consist of independent variables and dependent variables a) dependent variable in this research, the dependent variable under investigation is the financial performance, which is quantified through the return on equity (roe). the calculation method for roe is as follows: b) independent variable the research focuses on the independent variable, which is the intellectual value added coefficient (vaic™). vaic™ offers the benefit of being readily accessible as the necessary data can be acquired from diverse sources and various company types. the data needed for computing these ratios consists of conventional financial metrics typically found in a company's financial statements (wijayanti, 2011). 1) intellectual capital the variable employed in this research pertains to intellectual capital, quantified using pulic's model, specifically the intellectual value added coefficient (vaic™), which is intellectual capital capital structure financial performance https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 917 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc computed based on the concept of value added. this particular variable constitutes a composite construct, amalgamating various components of intellectual capital. specifically, it comprises three key constituents, which are intricately interconnected: value-added human capital (often denoted as vahu or human capital), value-added structural capital (referred to as stva or structural capital), and value-added applied capital (commonly labeled as vaca or applied capital). these delineations and interrelations are expounded upon by (pulic, 2004) in his work, emphasizing the comprehensive nature of this variable and its incorporation of these constituent elements to provide a holistic understanding of intellectual capital. the process to compute the vaic™ value involves the following steps: 1. computation of value added (va) the calculation of value added (va) entails discerning the discrepancy between outputs and inputs, a concept elucidated by (pulic, 1998). this mathematical relationship can be expressed as follows: va = out in herein: va stands for value added, out represents the total sales, equivalent to the output, in encompasses various expenditures and costs, excluding employee-related expenses. 2. evaluation of value added human capital (vahu) the estimation of value-added human capital (vahu) involves quantifying the extent of value augmentation achievable with the allocation of resources designated for employeerelated needs. to derive this measure, the ensuing formula is applied: vahu = va / hc where: vahu signifies value added human capital, va represents the value added, hc refers to human capital, encompassing the financial commitment in employee expenses. 3. computation of structural capital value added (stva) stva quantifies the value enhancement attributed to structural capital, comprising assets such as patents, company policies, technology systems, organizational culture, or trademarks that contribute to the overall value creation within the company. the determination of stva is facilitated through the following formula: stva = sc / va herein: stva denotes the value added to structural capital, sc represents structural capital, computed as the difference between va and hc, va stands for value added. https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 918 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4. calculation of value added capital employed (vaca) the calculation of value added capital employed (vaca) assesses the degree to which the company generates added value in relation to its applied capital (ce) or capital employed. applied capital, expressed as the ratio of va to ce, allows for the computation of vaca as follows: vaca = va / ce where: vaca symbolizes the value added to capital employed, va represents the value added, ce corresponds to capital employed, defined as the total equity and net profit. 5. determination of value added intellectual coefficient (vaic™) the value added intellectual coefficient (vaic™) serves as an indicator of an organization's intellectual capacity and can be considered a business performance indicator (bpi). it encompasses the amalgamation of the three preceding components, namely vaca, vahu, and stva: vaic™ = vaca + vahu + stva 2) capital structure: capital structure, as elucidated by harjito and martono in 2014, pertains to the composition of a company's financial resources, specifically the proportion of total debt in comparison to equity. this ratio signifies the equilibrium or relationship between the company's long-term financial liabilities and its equity. the calculation of this ratio can be achieved through the application of the subsequent formula: der = (total liabilities) / (total equity) × 100 population: the scope of the study encompasses all banking institutions that were publicly traded on the indonesia stock exchange during the timeframe spanning from 2018 to 2022. the requisite information regarding these entities is accessible on the official website, www.idx.co.id. the process of selecting the sample for this research adhered to a purposive sampling approach, guided by specific criteria, which encompassed the following: 1. the inclusion of banking companies that maintained their listing on the indonesia stock exchange for the entire duration from 2018 to 2022. 2. the availability of audited financial statements and annual reports for the years 2018 to 2022 on either the official company website or the indonesia stock exchange's platform, ensuring accessibility to the necessary data for the study. 3. ongoing listing status without delisting while publishing financial statements from 2018 to 2022. 4. provision of complete data required for the period from 2018 to 2022. 5. present financial reports using rupiah currency. https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 919 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion descriptive statistical analysis table 1. descriptive statistic descriptive statistics n minimum maximum mean std. deviation roe 180 -95.00 23.00 1.8278 17.86818 vaic 180 -677.00 648.00 180.4833 183.21534 der 180 6.00 969.00 411.3111 238.49318 valid n (listwise) 180 the findings from the computation of descriptive statistical data are succinctly summarized in table 1. as per the information presented in table 1, the evaluation of financial performance, conducted through the return on equity (roe) method, indicates a range spanning from a minimum of -95.00 to a maximum of 23.00. the mean roe is 1.8278, accompanied by a standard deviation of 17.86818. furthermore, the analysis of value-added intellectual capital (vaic™) discloses a diverse spectrum, with a minimum value of -677.00 and a maximum value of 648.00. the average vaic™ is computed to be 180.4833, and the standard deviation is reported at 183.21534. regarding the examination of capital structure, which is derived using the debt-toequity ratio (der), the recorded values span from a minimum of 6.00 to a maximum of 969.00. the mean der stands at 411.3111, and the standard deviation is documented as 238.49318. in response to the non-normal distribution of the data, this study adhered to the central limit theorem's assumption, which posits that for sufficiently large samples, especially those exceeding 30 (n>30), the sample distribution approximates a normal distribution. this signifies that while the tests initially indicated non-normal data distribution, the sample size in this study surpasses 30 (n>30), thereby warranting the assumption of normal data distribution. consequently, the data in this study is considered to be normally distributed. normality test table 2. normality test result one-sample kolmogorov-smirnov test unstandardized residual n 162 normal parametersa,b mean .0000000 std. deviation 5.00355853 most extreme differences absolute .084 positive .084 negative -.079 test statistic .084 asymp. sig. (2-tailed) .007c a. test distribution is normal. b. calculated from data. c. lilliefors significance correction. https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 920 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the kolmogorov-smirnov (k-s) test was employed to execute assessments for normality, and the outcomes are comprehensively documented in table 2. it is noteworthy that the asymp. sig value obtained from the normality test falls below the significance level of 0.05. this observation serves as a strong indicator that the dataset under investigation does not conform to a normal distribution. consequently, proactive measures were instigated to rectify this situation by engaging in a meticulous case diagnosis process. this procedure entailed the meticulous identification and subsequent treatment of aberrant data points, which are commonly referred to as outliers, in an endeavor to restore the data to a state of normality. despite the measures taken to enhance data normality by addressing outliers, the data still deviated from a normal distribution, as reflected by the significance values of the variables falling below 0.05. auto correlation test table 3. auto correlation test result model summaryb model durbin-watson 1 2.106 a. predictors: (constant), vaic, der b. dependent variable: roe the examination of autocorrelation through the durbin-watson method yields the results presented in table 3. as indicated in table 3, the durbin-watson statistic is computed as 2.106. by referring to the durbin-watson (dw) table appropriate for 163 data points and 3 variables, we determine the critical values, with dl = 1.7191 and du = 1.7687. in order to satisfy the condition of no autocorrelation, it is necessary for dw to meet the criteria of dw > dl and dw < 4 du. the computed durbin-watson statistic is found to be 2.106, which exceeds 1.7191 and is less than 2.281. hence, it can be concluded that no significant autocorrelation is present in the data. multicollinearity test table 4. multicollinearity test result coefficientsa model collinearity statistics tolerance vif 1 vaic .999 1.001 der .999 1.001 a. dependent variable: roe the evaluation of multicollinearity, carried out using the variance inflation factor (vif) method along with the tolerance test, has produced a set of results, which are meticulously presented in table 4. in the realm of assessing multicollinearity, a vif value below 10, coupled with a tolerance value exceeding 0.01, is indicative of the absence of multicollinearity concerns. as meticulously outlined in table 4, the cumulative vif value consistently registers below the established threshold of 10, and the tolerance values consistently maintain levels above 0.01. this collective set of https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 921 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc observations and data points collectively leads to the definitive conclusion that there are no overt signs or indications of multicollinearity within the dataset. the dataset remains free from the interference of multicollinearity issues, ensuring the reliability and accuracy of the analysis. heteroscedasticity test table 5. heteroscedasticity test result coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.788 .350 10.812 .000 vaic -.002 .002 -.087 -1.111 .268 der .001 .001 .084 1.061 .290 a. dependent variable: absres the examination of heteroscedasticity through the utilization of the glejser method has yielded specific outcomes, which are methodically presented in table 5 for comprehensive evaluation. upon a meticulous scrutiny of table 5, it becomes evident that the calculated values pertaining to the intellectual capital variable amount to 0.268, whereas the values associated with the capital structure variable stand at 0.290. this particular set of observations is pivotal for determining the presence or absence of heteroscedasticity. in the context of statistical analysis, it is established practice that if the overall significance value, often denoted as p-value, surpasses the conventional significance level of 0.05, it serves as an indication that heteroscedasticity is not prevailing within the dataset. in this case, the overall significance value indeed exceeds the 0.05 threshold. consequently, it is unequivocally deduced that heteroscedasticity does not manifest within the dataset, bolstering the integrity and reliability of the analysis conducted. multiple linear regression test below are presented the results of multiple liner regression: (table 6). based on table 6, the following equation is obtained: table 6. multiple linier regression test coefficientsa model unstandardiz ed coefficients standardi zed coefficie nts t sig. correlations collinearity statistics b std. error beta zeroorder partial part toleranc e vif 1 (constant) .181 .555 .326 .745 vaic .025 .002 .628 10.237 .000 .628 .630 .628 1.000 1.000 der .002 .002 .083 1.350 .179 .087 .106 .083 1.000 1.000 a. dependent variable: roe 𝑌 = 0,181 + 0,025 𝑋1 + 0,002 𝑋2 + 𝑒 https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 922 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information: y = financial performance x1 = intellectual capital x2 = capital structure e = standard error table 6 presents the results, indicating a constant value of 0.181, which is positive. in the absence of the intellectual capital and capital structure variables, the financial performance variable is estimated at 0.181. specifically, the intellectual capital variable, denoted as x1, is assigned a coefficient of 0.025, signifying that a 1% increase in the intellectual capital variable will result in a corresponding 0.025 increase in financial performance. similarly, the capital structure variable, referred to as x2, holds a coefficient of 0.002, indicating that a 1% increase in the capital structure variable will lead to a 0.002 increase in financial performance. partial test (t-test) table 7. partial test result (t-test) the findings derived from the partial tests, meticulously presented in table 7, offer valuable insights into the relationships under examination. first and foremost, when scrutinizing the intellectual capital variable (denoted as x1), we observe a regression coefficient of 0.025, accompanied by an associated significance value of 0.000. the significance value related to the assessment of the research hypothesis pertaining to intellectual capital is clearly below the conventional significance level of 0.05. this outcome signifies that the intellectual capital variable (x1) holds a statistically significant influence on financial performance (y), supporting the initial research hypothesis. on the other hand, the capital structure variable (referred to as x2) exhibits a regression coefficient of 0.002, coupled with a significance value of 0.179. the significance value corresponding to the investigation of the research hypothesis concerning capital structure exceeds the 0.05 threshold. as a result, it can be concluded that capital structure (x2) does not exert a substantial impact on financial performance (y), in alignment with the research hypothesis. these detailed findings provide a nuanced understanding of the relationships between these variables and financial performance, contributing to the robustness of the research conclusions. coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .181 .555 .326 .745 vaic .025 .002 .628 10.237 .000 der .002 .002 .083 1.350 .179 a. dependent variable: roe https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 923 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc simultaneous test (f test) table 8. simultaneous test (f test) anovaa model sum of squares df mean square f sig. 1 regression 2707.817 2 1353.908 53.408 .000b residual 4030.731 159 25.351 total 6738.548 161 a. predictors: (constant), vaic, der b. dependent variable: roe the outcomes stemming from the concurrent test are thoroughly detailed and elaborated in table 8. an in-depth examination of the table reveals a set of critical findings. specifically, the f test results in an f statistic value of 53.408, accompanied by an f significance level of 0.000. concurrently, the critical f-table value stands at 2.660. these particular observations offer valuable insights into the overall model's aptness for further hypothesis testing within the context of this study. in essence, the f value surpasses the critical f-table value, which underscores the statistical significance of the model as a whole. furthermore, the observed f significance level falls below the predetermined alpha threshold of 0.05, affirming the model's suitability for subsequent hypothesis testing, as it indicates the presence of a statistically significant relationship. these robust findings affirm the model's appropriateness and reliability in facilitating further analysis within this study. test of the coefficient of determination r2 table 1. test of the coefficient of determination r2 model summaryb model r r square adjusted r square 1 .634a .402 .394 a. predictors: (constant), vaic, der b. dependent variable: roe the outcomes of the r2 coefficient of determination test are provided in table 9. as displayed in table 9, the r2 value, located in the r square section, is found to be 40.2%. it should be noted that the remaining variability in the data can be attributed to other variables not covered within the scope of this study. the influence of intellectual capital on financial performance: building upon the initial hypothesis (h1), which asserts a positive relationship between intellectual capital and financial performance, the outcomes derived from the partial testing unequivocally validate the assertion that intellectual capital exerts a significant and discernible influence on financial performance. the rigorous examination of the data underscores the statistical significance of this association, providing robust support for the initial hypothesis positing a positive impact of intellectual capital on the financial performance of the studied entities. this substantiates the https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 924 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc original premise of h1, suggesting that as intellectual capital increases, financial performance likewise experiences a noticeable improvement. when a company effectively manages its intellectual capital, through strategies such as employee development, maintaining technological excellence, and nurturing relationships with suppliers, it gains a competitive edge over other companies, ultimately bolstering its financial performance. this congruence with the principles of the resource-based theory, which underscores the pivotal role of resource-rich companies and their sustained success in attaining competitive advantages, is prominently manifested. the conclusions drawn in this study harmonize seamlessly with the existing body of research, as exemplified by the work of (asfarawenti & saiful, 2019; cindiyasari et al., 2023). their previous investigations also underscored and accentuated the beneficial influence of intellectual capital on a company's financial performance, affirming the consistency and continuity of this observed relationship. these collective findings reinforce the notion that intellectual capital plays an integral role in driving enhanced financial performance, a principle that is further corroborated by the resource-based theory. the influence of capital structure on financial performance: subsequent to an exhaustive analysis of the data, the results reveal that the capital structure, as measured by the debt-to-equity ratio (der), does not exert a significant influence on financial performance. consequently, the second hypothesis (h2) in this study is rejected. this suggests that the level of debt within a company's capital structure does not significantly determine the quality of its financial performance. these results diverge from the expectations of the trade-off theory, which suggests that the choice of capital structure should consider the various trade-offs between benefits and costs. consequently, companies should ideally select the most suitable capital structure. in this context, a company's solid financial performance is not inherently associated with a reduced reliance on debt. these research findings concur with the conclusions reached in prior studies by (oktaviyana et al., 2023; w. k. wardani et al., 2023), both of which similarly assert that capital structure does not exert a substantial impact on a company's financial performance. conclusion after conducting extensive and meticulous examinations to assess the effects of intellectual capital and capital structure on the financial performance of banking firms listed on the indonesia stock exchange during the period from 2018 to 2022, the subsequent findings can be articulated as follows, intellectual capital exerts a significant and favorable impact on return on equity (roe). capital structure, as represented by der, does not exert a significant influence on roe proven by a significance value of more than 0.05. and simultaneously intellectual capital and capital structure show a significant influence on financial performance. the results of this research provide information for banking companies in indonesia that intellectual capital has a significant effect on financial performance and capital structure as proxied by der has no effect on financial performance. due to the limitations of this research, it is recommended that further researchers expand the research sample because this research only took samples from the banking sector and the researcher suggests that future researchers add other variables so that financial performance can be projected widely and the results are more concrete. https://www.ilomata.org/index.php/ijtc the influence of intellectual capital, and capital structure on financial performance ikbal and abdullah 925 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference andriana, d. 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(2011). pengaruh intellectual capital terhadap harga saham melalui kinerja keuangan pada perusahaan perbankan yang terdaftar di bursa efek indonesia pada tahun 2009-2011 (vol. 11, issue 2, pp. 10–14). https://doi.org/10.16194/j.cnki.31-1059/g4.2011.07.016 yuniasih, n. w., wirama, d. g., & badera, i. d. n. (2011). pengaruh modal intelektual pada kinerja pasar perusahaan (studi empiris pada perusahaan keuangan yang terdaftar di bursa efek indonesia. jurnal ilmiah akuntansi dan bisnis, 6(2), 1–24. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 234-253 234 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency juliansyah roy1, eny rochaida2, rahcmad budi suharto3 123universitas mulawarman, indonesia correspondent: juliansyah.roy@feb.unmul.ac.id1 received : november 13, 2023 accepted : january 13, 2024 published : january 31, 2024 citation: roy, j., rochaida, e., suharto, r, b. (2024). economic growth model with regional expenditure as a moderation variable: scale in berau regency. ilomata international journal of tax and accounting, 5(1), 234-253. https://doi.org/10.52728/ijtc.v5i1.1043 abstract: the motivation of this paper aims to investigate the relationship between local taxes, dau, and dbh on the economic growth of berau regency. apart from that, the paper also identifies the relationship between regional taxes, dau, and dbh on economic growth which interacts with regional expenditure in berau regency. government revenue is an important instrument for regions to foster economic growth. at the same time, government spending is used as a fiscal support to review the degree of budget absorption. with surplus revenue performance, it will generate financing which also plays a vital function in boosting economic growth. secondary data for 2013–2022 was collected from government budget documents. then, the data is tabulated using a time-series linear regression model with moderating variables. the statistical output finds that regional taxes and dbh have a negative effect on economic growth. however, dau actually has a positive effect on economic growth. uniquely, the interaction between regional taxes and dau which is moderated by regional spending has a positive influence on economic growth. then, regional spending plays a negative role in the relationship between dbh and economic growth. future implications of considering practical regulations that do not only depend on income from the dau side, but must focus on the existence of regional taxes in berau regency. by optimizing regional taxes, it also allows for a large fiscal gap in terms of regional spending. financing the development of berau regency requires adequate expenditure allocation. keywords: regional taxes, regional spending, economic growth, time-series linear regression this is an open access article under the cc-by 4.0 license. introduction economic growth is one of the most essential indicators for diagnosing the development output of a nation or region, especially in the economic sector (dragoi, 2020; nuraini & hariyani, 2019). the existence of economic growth data shows the government's performance in various economic activities that produce added value or public income in a certain period. easterlin (2023), kapsos (2006), mahmood & ahmad (2018) and rahman & alam (2021) state that positive growth https://www.ilomata.org/index.php/ijtc mailto:juliansyah.roy@feb.unmul.ac.id https://doi.org/10.52728/ijtc.v5i1.1043 economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 235 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indicates economic intensity, and conversely, negative growth represents a decline in economic aggregates. in the national context, economic growth is defined as an increase in gross domestic product (gdp) regardless of whether the increase is greater or smaller than the population or whether changes in economic structure occur or vice versa (brinkman & brinkman, 2011; kaminitz, 2023; leamer, 2009). meanwhile, explicitly, regional economic growth is defined as the rate of increase in output per capita in the long term as measured by gross regional domestic product (grdp) at constant prices (buan et al., 2021). proxy economic growth refers to grdp which is extracted from the total value of goods and services obtained from various economic activities in the region. meanwhile, regional economic growth rates are calculated based on grdp at constant prices. like gdp, according to amalia et al. (2020) and landefeld et al. (2008), there are three types of scenarios for predicting grdp, including the following: (1) production, (2) income, and (3) expenditures. first, the production format is estimated based on the total value of services and final goods produced from various production units within one period. broadly speaking, production units are classified into seventeen economic structures. second, the income format is calculated through the amount of remuneration received by input factors that play a role in the production process within one period. what is included in production payment includes: wages and salaries, land rent, capital interest, and profits. in an implicit articulation, grdp is also reflected in depreciation and net indirect taxes (indirect taxes minus subsidies). third, the expenditure format is projected based on all components of final demand which are reflected in the consumption expenditure of households and non-profit private institutions, gross domestic fixed capital formation and stock changes, and government consumption expenditure and net exports (export value minus import value) for one period of time. specifically, grdp is called an economic total which is determined by the size of economic achievement in a region. as mentioned above, the grdp value was developed to assess the level of economic growth. on the other hand, to compile real economic growth, the effects of price changes that are attached to aggregate economic figures according to current prices must be removed. losing the influence of price changes, economic aggregates will be formed according to constant prices. since january 2001, regional autonomy began to be implemented to accommodate the wishes of each region towards comprehensive government decentralization. siddiquee et al. (2012) emphasized that granting regional autonomy is projected to provide flexibility to regions in managing regions through potential businesses, so that it is useful in optimizing active community participation. in addition, by channeling authority such as regional autonomy, it will also increase efficiency, accountability and effectiveness in the indonesian public sector. this is motivated by demands for regions to look for other alternative sources of financing that can support development routines without reducing or having to depend on transfer funds from the central government. autonomous regions have the authority and ability to explore, use and manage their financial resources competently for the benefit of government administration. with such complex responsibilities, local governments are able to manage local wisdom sources. https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 236 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc talking about decentralization, to see its relationship to public services, camões (2020) and goel et al. (2017) differentiate decentralization into three criteria, i.e: (1) political decentralization, (2) administrative decentralization, and (3) fiscal decentralization. the first category is the delegation of higher authority to regions regarding various aspects of decision making, including setting standards and various regulations. in the second category, administrative decentralization revolves around the redistribution of authority, responsibility and resources between various levels of government. administrative requirements can be fulfilled according to the adequate capacity of each institution at each level. the third category, as access to authority to explore sources of income, the right to receive transfers from larger government, determine routine expenditure, and investment governance. canare (2021), matete (2022), and ozmen (2014) highlight that by choosing a decentralized design, it is hoped that two balances will be created. first, bridging the participation, initiative and creativity of the population in development which leads to reducing the gap in equitable development results in all regions by empowering resources and involving local wisdom. second, improve the allocation of productive resources by shifting public decision making to the lowest level of government with complete, accurate information. basically, decentralization policies are aimed at improving past centralized programs (undang et al., 2023). rapid development involving fiscal matters certainly requires the allocation of funds from the government to absorb financing for expenditure items which include routine expenditure and development expenditure (tenrinippi, 2020). roy et al. (2022) revealed that local government spending is reported in the regional income and expenditure budget (apbd) as a routine obligation for regional cash expenditures, for example realizing various operational agendas in government. with the proportion of expenditure increasing, large funds are needed so that this expenditure can be met. when regional autonomy was implemented, the role of regional governments in managing their own government system became greater. this demand to finance government affairs has the consequence that government officials must work hard and independently, in order to be able to carry out a transition that is oriented towards public services. the function of fiscal decentralization itself is to achieve prosperity for the entire population and give autonomous regions the authority to regulate and manage public interests. fiscal policy is a mechanism for improving economic conditions or known as economic regulation which aims to strive for a more ideal economy through government expenditure and revenue channels. another understanding of fiscal policy is the government's decision to facilitate state spending and taxation to stabilize a more inclusive economy (nikolov & pasimeni, 2023; nkalu & agu, 2023; tcherneva, 2012). from a macroeconomic perspective, fiscal policy is a part of it that plays a crucial scheme as follows: (1) helping to minimize fluctuations in the business cycle, (2) maintaining sustainable economic growth and high employment opportunities, and (3) releasing from high inflation or turbulent. from the three points above, the direction of fiscal policy is to strengthen the macro economy. in a detailed pattern, fiscal policy is aimed at reducing the budget deficit by regulating or stimulating the country's economy through government spending and revenues. zeyneloğlu & koenig (2016) explain six important lessons from the foundations of fiscal policy: (1) guaranteeing real economic growth that matches the potential growth rate by maintaining full employment opportunities, (2) https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 237 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc keeping the economy away from recession by implementing reasonable commodity prices, (3) prioritizing potential growth rates without disrupting the achievement of other population goals, (4) encouraging national production (gdp) through a conducive economic climate, (5) expanding employment opportunities to reduce unemployment by opening employment opportunities across business fields, and (6) overcoming hyper-inflation. here, apbd is a form of decentralization that is implemented in fiscal policy to demonstrate the capability of government authority. surjaningsih et al. (2012) presents that there are two fiscal pillars in the federal government system, namely taxes and intergovernmental grants (such as revenue sharing). regional government as stipulated in law of the republic of indonesia no.: 32 of 2004 states that for the implementation of regional government authority, the central government transfers balancing funds consisting of: (1) general allocation funds/dau, (2) special allocation funds/ dak, (3) and profit sharing funds/dbh from both taxes and natural resources. apart from assistance from the central government, regional governments also have their own main sources of funding, such as local original income/pad which includes: (1) regional taxes, (2) regional levies, (3) management of separated regional assets, and (4) other-other legitimate regional original income. this transfer fund from the central government is a means of reducing financial inequality between regions, both at the regency and city or provincial levels (wijaya et al., 2019). the main aim is to stimulate the regional economy (roy et al., 2020). funds received by regions, whether self-generated such as regional taxes and regional levies or originating via central government transfers, will be a source of further financing and implementation of regional economic development activities. activities that are actualized routinely or non-routinely are useful for creating and stimulating the welfare of the population. one of the parameters for determining economic development is the economic growth trend. azizah et al. (2022), sima et al. (2023), and yushkov (2015) emphasize that economic growth can be realized through fiscal decentralization. with the encouragement of fiscal decentralization, regional economic growth can continue. economic growth in an area is generally measured by referring to the volume of production of goods and services or what is known as "grdp". as a preference to see whether economic development is successful or not, the majority of grdp in various regions of indonesia has not been maximized. berau is one of the districts that has great potential in carrying out economic development because it is supported by natural wealth and infrastructure. regional taxes in berau regency are the largest component in forming pad, where revenue is relatively positive from time to time. in principle, this is a regional government strategy to encourage regional taxes. with the enthusiasm of the residents of berau regency who obediently pay taxes, the final contribution is pad. this also creates urgency in choosing regional taxes as a dimension that has implications for economic growth moderated by regional spending. take for example past papers that similarly highlight causality between the proposed variables, where there is a systematic linkage of local taxes in increasing economic growth through the role of government spending (amri et al., 2023; lubis, 2023; nguyen et al., 2022; nguyen & darsono, 2022). but, balancing funds and regional expenditures in berau regency have also continued to show positive signals in recent years, especially for balancing funds sourced from dau and dbh. yet, this actually contradicts the fact https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 238 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that economic growth fluctuates every year. surprisingly, in 2022, berau regency's grdp growth will be 3.95 percent or down 1.41 points from the previous period which reached 5.36 percent (bps-statistics of berau regency, 2023). this effort can be operated by allocating regional spending under regional needs and conditions. if the program implemented using regional expenditure, such as capital expenditure, can be realized well, then the regional economic development process will spur impressive economic growth. even though the regional income received is quite large, if the region cannot allocate it into expenditure carefully, then the effectiveness of fair development will not be optimal. adefolake & omodero (2022), balasoiu et al. (2023), basheer et al. (2019), ha et al. (2022), and maganya (2020) claim that state or regional tax revenues are one element that has the potential to reduce economic growth. the logical reason is that with taxes, public consumption will decrease, which is triggered by a decrease in the production of goods and services in the market. to overcome this problem, the government implemented regional expenditure or expenditure policies. to test the extent of the quality of berau regency's regional autonomy, the focus of this paper is to analyze the effect of regional revenue on economic growth which is controlled by regional spending. by studying the relationship of the components of government revenue (regional taxes, dau, and dbh) to economic growth through the role of regional spending, the research contribution focuses on two sides. first, it is an alternative for government management to highlight regional revenues and commit to sustainable economic growth. second, as a solution in advancing future scientific work by considering and adopting existing variables based on case studies elsewhere. method data collection and sources the collection technique for study purposes is library research. the library research approach processes and documents data attributes and all types of information related to needs. the secondary data sources are sorted via annual government publications throughout 2013–2022. this secondary data is in quantitative form. in preparing this paper, extra data was also collected through searching for supporting literature from various publications. locations for archiving data collected from berau regency government agencies include: (1) regional revenue service, (2) bps-statistics, and (3) regional planning and development agency. key variables the target of this paper is to describe the influence of a set of independent variables on the dependent variable and test the integration of moderating variables in the causality between the independent variables and the dependent variable. in social sciences, moderator variables are classified as part of a class of variables and are often called specification variables (magill, 2011). specification variables are variables that reflect the relationship between the predictor (independent variable) and the criterion (dependent variable). by means, specification or https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 239 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc moderator variables can be developed using two dimensions or constructivities. the key variables in this study are illustrated in figure 1. figure 1. conceptual framework as explained above, the dependent variable is played by economic growth, while regional taxes, dau, and dbh are set as independent variables, and regional expenditure is positioned as a moderating variable. to identify the composition of each variable, table 1 below summarizes the variable units, classifications and units of account. table 1. arrangement of variables type variable name indicator unit independent variables local tax realization of government tax revenues nominal (rp.) general allocation fund/dau realization of government general allocation fund revenues nominal (rp.) profit sharing fund/dbh realization of government revenue sharing funds nominal (rp.) moderator variable regional expenditure realization of government expenditure nominal (rp.) dependent variable economic growth grdp growth at constant 2010 prices percentage (%) analysis tools empirical methods are applied to test the proposed hypothesis using moderated regression analysis (mra) with time-series data. ratnasari et al. (2022) explained that mra is suitable for studies that use moderating variables. in relevance to this paper, there is one moderating variable, i.e regional spending. moderator variables can weaken or strengthen causality between the independent variable and the dependent variable (king, 2013; söderlund, 2023). thus, the benefits of the local tax regional expenditure general allocation fund economic growth profit sharing fund https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 240 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc moderator variable in the interaction of this relationship can have a positive or vice versa impact. the general model formulation is written as follows: ŷ = f (x1, x2, x3, ….n) from the basic equation above, the function form of the first equation without the moderating variable is as below: ŷ =  + 1x1 + 2x2 + 3x3 +  where: ŷ = economic growth; α = intercept or constant;  = regression coefficient; x1= local tax; x2 = dau; x3 = dbh; and  = residue. for the equation function in multiple linear regression with moderating variables, edit as follows: ŷ =  + 1x1z + 2x2z + 3x3z +  where: ŷ = economic growth; α = intercept or constant;  = regression coefficient; x1z = interaction of regional taxes with regional spending; x2z = interaction of dau with regional spending; x3z = interaction of dbh with regional spending; and  = residue. result and discussion descriptive statistics after calculating the data selected through spps, it is necessary to describe some data output objects including the average value (mean) and standard deviation (s.d). for results without using moderation, a description of the resulting data is explained in table 2. table 2. descriptive statistics without moderating variable (n = 10) variables mean s.d economic growth 5.0211 5.04650 local tax 23.3601 1.57254 dau 24.1067 6.44119 dbh 27.2128 3.53026 source: secondary data is processed (2023). table 2 above verifies that economic growth is the dependent variable as well as regional taxes, dau, and dbh as independent variables with case studies in berau regency throughout 2013– 2022. if broken down by variable, it is known that the mean and sd scores for economic growth are 5.0211 and 5.04650. in local taxes, the average score is 23.3601 with an s.d of 1.57254. other results recapitulate that dau has a mean and s.d score of 24.1067 and 6.44119. from dbh, the https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 241 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc average score is 27.2128 with s.d of 3.53026. then, for the equation after the moderating variable involving regional spending, the descriptive statistics are displayed in table 3. table 3. descriptive statistics with moderating variable (n = 10) variables mean s.d economic growth 5.0211 5.04650 local taxes and regional expenditure 51.4232 1.85023 dau and regional expenditure 50.4013 13.29539 dbh and regional expenditure 54.8444 7.09565 source: secondary data is processed (2023). from table 3, it is concluded that the mean and sd scores for economic growth are 5.0211 and 5.04650. on the one hand, the interaction between regional taxes and regional expenditure has a mean score of 51.4232 with s.d reaching 1.85023. uniquely, the interaction between dau and regional expenditure produces a mean and sd score of 50.4013 and 13.29539. finally, the interaction of dbh and regional expenditure found that the mean and s.d scores reached 54.8444 and 7.09565. classic assumption test a scientific study with testing based on a regression approach can be carried out after fulfilling the requirements of classical assumptions. the classical assumption tests applied in this paper are normality and multicollinearity. first, calculating the classical assumptions serves as a signal whether the residual values in the regression model have exceeded the normal distribution. if initial data is used, the results obtained in this test are classified as abnormal. the main reason is because there is a large gap between one variable and another, so data transformation needs to be carried out to make it normal via natural logarithm (ln). in the following, the normal probably plot of standardized residual will be displayed as a form of synchronization through the normality test, both before there is a moderating variable and after it is entered using a moderating variable. figure 2. normality test without moderating variable source: secondary data is processed (2023). https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 242 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2 above validates the normal distribution pattern which shows that the data distribution points are close to a diagonal line. after transformation, this regression model is suitable for use in research. next, figure 3 below validates the normality test for data that includes moderating variables. figure 3. normality test with moderating variable source: secondary data is processed (2023). from figure 3, it can be concluded that the data with the moderating variable produces a pattern that spreads close to the diagonal line. through data transformation, the existing regression model is suitable for use in research. second, a good study model can be detected by collinearity statistics of each independent variable. to find out, multicollinearity testing is implemented. table 4. multicollinearity test without moderating variable variables collinearity statistics tolerance vif local tax .592 1.691 dau .749 1.335 dbh .663 1.509 source: secondary data is processed (2023). table 4 indicates that the tolerance and vif scores for the three variables (regional tax, dau, and dbh) are 0.592, 0.749, and 0.663 (>0.1) with vif values reaching 1.691, 1.335, and 1.509. from these results, it was concluded that all existing variables without using moderation had a tolerance score greater than 0.1 (>0.1) with a vif smaller than 10 (vif <10). that way, the data in this paper does not contain symptoms of multicollinearity. table 5. multicollinearity test with moderating variable variables collinearity statistics tolerance vif interaction of local tax and regional expenditure .410 2.437 https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 243 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc interaction of dau and regional expenditure .753 1.328 interaction of dbh and regional expenditure .619 1.615 source: secondary data is processed (2023). evaluation of the multicollinearity assumption refers to the tolerance scores for all independent variables, namely regional taxes, dau, and dbh which interact with regional expenditure, which are 0.410, 0.753, and 0.619, where the vif values reach 2.437, 1.328, and 1.615, respectively. in line with the previous multicollinearity test without the moderating variable, even by including the moderating variable, these three independent variables have a tolerance greater than 0.1 (>0.1) with a vif smaller than 10 (vif <10). thus, the data in this study also does not contain symptoms of multicollinearity (see table 5). model feasibility in this session, there were two classes in assessing the feasibility of the model being prepared. first, is the coefficient of determination. wijayanti et al. (2022) stated that the coefficient of determination (r2) is focused on measuring the ability and strength of the model in explaining variations in the dependent variable. in general, there is a change in the results of the determination test, before the moderating variable and after the moderating variable, where based on the r2 score, the model without the moderating variable is better than including the moderating variable. table 6. coefficient of determination without moderating variable model r square adjusted r square 1 .681 .521 source: secondary data is processed (2023). table 7. coefficient of determination with moderating variable model r square adjusted r square 2 .622 .434 source: secondary data is processed (2023). in the first equation, the r2 coefficient shows 68.1%, which indicates that the economic growth variable is reflected by regional taxes, dau and dbh. then, the remaining 31.9% is influenced by other variables outside the model design (see table 6). in the second equation, the model that influences the economic growth variable actually only reaches 62.2%. even though there is a strong interaction between regional taxes, dau, and dbh with regional expenditure, there are still 37.8% of other variables that are not part of the research model (see table 7). second, the simultaneous test or what is often known as the "anova test" is intended to examine whether the model used is appropriate or vice versa. in the first and second equations, the respective f-calculated score and probability are obtained with a threshold of 5% (ρ <0.05) as follows: https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 244 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 8. simultaneous effects without moderating variable model f sig. 1 5.213 .001b source: secondary data is processed (2023). table 9. simultaneous effects with moderating variable model f sig. 2 5.068 .001b source: secondary data is processed (2023). using a significance level of 5%, it appears that for the first equation which does not include the moderating variable, the f test is found to be 5.213 with a probability below the provisions (ρ = 0.001). with a probability value smaller than the specified alpha value, the model in this study is fit (see table 8). in the second equation involving the moderating variable (regional spending), table 9 finds that the f test is 5.058 with a probability score also below the alpha standard (ρ = 0.001). therefore, involving moderation is able to support the second model. hypothesis test by the motivation of the paper, the basic objective to be achieved is the relationship between regional taxes, dau, and dbh on economic growth and secondly examining the interaction between regional taxes, dau, and dbh on economic growth which is modified through the role of regional spending. among the three variables, only dau has positive implications for economic growth. meanwhile, although found to be significant, regional taxes and dbh actually influence economic growth negatively. when dau increases by 1%, economic growth increases by 12.4%. surprisingly, when regional taxes and dbh increased by 1%, it further reduced economic growth to 173.3% and 36.1% (see table 10). table 10. partial effects without moderating variable linkages coefficient t-statistics sig. local tax → economic growth -1.733 -3.786 .000 dau → economic growth .124 1.253 .215 dbh → economic growth -.361 -1.574 .066 source: secondary data is processed (2023). table 11. partial effects with moderating variable linkages coefficient t-statistics sig. local tax → regional expenditure → economic growth -1.934 -4.121 .000 dau → regional expenditure → economic growth .065 1.354 .181 dbh → regional expenditure → economic growth -.214 -2.148 .036 source: secondary data is processed (2023). https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 245 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc referring to table 11, there are similarities between statistical findings from time-series models without moderation paths and those operated via moderation paths. through the role of regional spending, dau has a positive interaction with economic growth, while regional taxes and dbh have a negative interaction with economic growth. if dau increases by 1%, it can increase economic growth to 6.5%. yet, the more local taxes and dbh increase by 1%, the more economic growth decreases by 193.4% and 21.4%. figure 4. analyzed model source: secondary data is processed (2023). overall, dau is the only variable that has a positive impact on economic growth, either without regional spending or with the role of regional spending. from the opposite side, although the probability level of regional taxes and dbh shows a significant relationship to economic growth naturally or through regional spending, it does not have a systematic impact in increasing economic growth. the probability of dau does show an insignificant effect on economic growth, even though it is through regional spending. even so, dau is able to boost economic growth positively in the long term. lokal taxes without and with the role of regional expenditures on economic growth authentic facts justify that regional taxes have a negative impact on economic growth, either directly without regional spending or indirectly through regional spending. it is often found that the majority of district/city regional taxes in indonesia have a positive effect on the level of economic growth. the reason is that regional tax flows are used to finance physical and nonphysical development processes. however, some local taxes in some cases actually have a negative impact on economic growth. this is because public or corporate funds that should be used for consumption are deducted to pay taxes, so that the ability to buy goods/services. as a result, if the tax proceeds obtained from the mobility of people's consumption are not optimally allocated for development, this will trigger a slowdown in economic growth. the results of the study also prove that after the interaction between regional taxes and regional expenditure, the effect on the level of economic growth in berau regency is negative. the local tax regional expenditure general allocation fund economic growth profit sharing fund noted: * significant level in 5% ** significant level in 10% -1.934* .065 -.214* -1.733* .124 -.361** https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 246 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inclusion of a moderating variable, namely regional spending, is projected to reduce the negative influence. cutting public consumption to pay taxes if allocated for better development changes through regional spending can stimulate economic growth. with an insignificant probability, it is triggered by the fact that tax funds obtained by berau regency are dominantly less than optimal than other income, including sources outside regional taxes. take, for example, other sources of government income such as balancing funds and other components of pad, i.e regional levies and separate management of regional assets. for example, stoilova (2017) reveals that the tax structure in the european union relies on increasing consumption taxes and at the same time reducing taxes on capital and labor which is useful in stimulating the strength of economic growth. during 1996–2013, the state tax burden tended to be directed towards property taxes, personal income taxes, and selective consumption with properties that are conductive to supporting economic growth. theoretically, countries that drastically reduce private incentives to boost investment will greatly harm economic growth performance. in the model proposed by jaimovich & rebelo (2017), the priority of taxation towards desired growth is sometimes non-linear. low tax rates increasingly have very little impact on long-term economic growth. but, in the short term, along with the increase in tax rates, it will have a negative effect on economic growth. the dramatic, minimal impact of tax rates on growth prospects is difficult to develop using an empirical approach. facts using panel data (city and regency) in central java, susanto & sugianto (2019) authenticate that the tax structure built by pad is one-way towards grdp growth. apart from that, tax revenues show a significant influence on gdp growth. in comparison, the financial impact since the enactment of the state tax regime has had a negative contribution to the local economy in the united states (chairassamee et al., 2023). the complex relationship of several tax groups, such as property tax, sales tax, payroll tax, income tax, and other tax sources triggers economic growth in local communities at the state level. with tax increases that are not balanced with an inclusive labor market, entrepreneurship and innovation, it is detrimental to job owners engaged in the nonagricultural sector and produces new problems such as local unemployment. dau without and with the role of regional expenditures on economic growth empirical results show that dau has a positive impact on economic growth, either directly without regional spending or indirectly through regional spending. the striking difference from the existing findings emphasizes that although the probability level does not appear to have a significant effect on economic growth, it can increase positively without and with the role of regional spending. the realization of dau can influence economic growth because the allocation of dau funds first goes to employee expenditure items. it is relevant to what was mentioned in the previous chapter, that allocation to employee expenditure items will stimulate positive economic growth. the reason is, government employees channel and spend their wages for daily needs. indirectly, this has an impact on increasing purchasing power, prosperity and happiness per capita across sectors. dau and regional expenditure in berau regency have a strong interaction with economic growth. the main purpose of including regional expenditure variables is to see the moderating effect. with an impressive dau allocation to support regional spending, at least the local government's efforts to encourage decentralization can be developed independently. https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 247 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc most recently, a scientific magazine highlighted by wahyuni (2020) emphasized that surakata's economic growth cannot be separated from fiscal policy. apart from pad, dau also has a partial effect on economic growth. one of the levels of regional government financial independence can be determined by dau. sulangi et al. (2022) observed thirty-one samples to test the causality between dau and fiscal independence. during 2018–2019, it was proven that dau had an influence on the fiscal independence of all provinces in indonesia. automatically, with good financial independence, a region also has the opportunity to improve its economy. especially in west java, the roots of economic problems such as unemployment can be prevented with appropriate budget policies. a pro-active development agenda towards alleviating unemployment requires expanding employment opportunities through the reallocation of government spending (holik, 2020). alvaro (2022) understands that the fiscal ratio (including dau and government spending therein) has a significant effect on the economic growth of one hundred and twenty-two districts confirmed as underdeveloped regions in indonesia. in the case of the malang government, adur et al. (2019) highlighted that dau contributes significantly to economic growth or capital expenditure. tests based on path analysis also confirm that dau has no effect on economic growth through government capital expenditure. interestingly, cahyaning (2018) thinks about the causality between dau and capital expenditure allocation through grdp growth. here, grdp growth acts as a moderating variable. since the 2013–2015 era, governments in cities and districts throughout east java have relied heavily on dau and pad to encourage capital expenditure rather than dbh. other statistics actually say something different, where gdp growth is able to positively moderate dbh on capital expenditure. meanwhile, grdp growth was unable to moderate dau or pad towards capital expenditure. dbh without and with the role of regional expenditures on economic growth existing reality shows that dbh has a negative effect on economic growth. also, it was confirmed that dbh had no impact on economic growth even though it was supported by regional spending. in that context, if there is a shift in the situation in dbh revenues in berau regency, it will actually be in the opposite direction or there will be no change at all in economic growth. the capacity of the berau regency government in the economy has proven to be weak. in line with an investigation that shared findings about dbh having a negative effect on economic growth. this difference is caused by the realization that the dbh received by the government is not directly used for the development process of berau regency, so that even though the dbh allocation is large, it does not have a direct impact on economic growth. likewise, the mismatch with dbh produces a negative influence on the level of economic growth even though it includes regional expenditure elements as a moderating variable. therefore, rejecting the initial hypothesis that the inclusion of regional spending will increase the influence of dbh on economic growth systematically. empirical reality shows that the interaction between dbh and regional expenditure in berau regency has a negative influence on the level of economic growth. the primary concern for including regional spending elements is to boost the dbh function for economic growth. the existence of an effect termed "crowding out" illustrates that revenue in terms of dbh in the regional development phase in bridging economic growth is a failure. the high government budget https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 248 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc deficit, which originates from taxes and natural resources, actually reduces the purchasing power of the population. in turn, weakening macroeconomic activity. the latest study by yanti & nurtati (2020) concluded that the intensity of regional balancing funds partially has no effect on district and city capital expenditure in west sumatra province. also, regional balancing funds actually have a simultaneous impact on economic growth. likewise, capital expenditure on economic growth mediated by regional balancing funds is insignificant. likewise, dbh competency shows a negative slope towards unemployment and economic growth in east kalimantan. another truth also represents that dbh has an indirect effect on unemployment through economic growth (pinem et al., 2021). anggraini et al. (2023) focuses on determining economic growth based on aspects of government revenue in jambi province. since 2017–2021, it shows an insignificant effect of dbh on the rate of economic growth in the eleven regions that are the focus of the data. at the scale of cities and districts throughout east java, the impact of regional autonomy policies examined based on shows the flypaper effect between revenue sharing on government spending. on the other hand, kurniana et al. (2017) detect that government spending has a negative effect on economic growth. revenue sharing through regional spending also contributes negatively to economic growth, so that regional spending does not succeed as an intermediary variable. from eastern indonesia, specifically south sulawesi, salmawati & junaidi (2023) discussed the causality between the allocation of city and district government expenditure on grdp. compared to dau and dak, the diagnosis results show that dbh has a significant effect on grdp. conclusion through a series of existing identification stages, this paper indicates six important pillars, including the following: (1) regional taxes have a negative relationship to economic growth because they are triggered by the effect of high taxes further reducing the level of public consumption which has implications for the macro economy; (2) dau is positively related to economic growth because dau is predominantly channeled to pay employee salaries and its usefulness is automatically felt in real terms; (3) dbh actually has a negative relationship to economic growth, where the allocation of dbh itself does not create conducive economic growth; (4) the interaction of regional taxes and regional expenditure is positively related to economic growth, so that regional expenditure is an essential instrument in initiating the function of regional taxes to support economic growth; (5) the interaction of dau and regional spending is positively related to economic growth as shown by the distortion of dau as one of the indicators of regional spending; and (6) the interaction between dbh and regional expenditure is negatively related to economic growth because it is triggered by an increase in sources of development financing from regional expenditure that does not depend on dbh. the berau regency government is advised not only to rely on regional financial sources outside pad (such as balancing funds and remaining regional budgets), but to focus on pad, especially regional taxes. moreover, regional independence is reflected in the management and strategies for obtaining sustainable pad. the regional economy can be seen from fiscal consistency as the main https://www.ilomata.org/index.php/ijtc economic growth model with regional expenditure as a moderation variable: scale in berau regency roy, rochaida, and suharto 249 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corridor for development financing. for this reason, future regulations can prioritize more priority regional spending. this paper pioneers an empirical case that not only concentrates on the impact of regional taxes, dau, and dbh on economic growth, but also includes regional spending as a fundamental thing in bridging the effects of income allocation to support grdp. given the existing weaknesses, future studies could consider including types of balancing funds (apart from dau and dbh), including dak and other pad components outside regional taxes (such as other legitimate pad, results of separated regional wealth management, and regional levies). the aim is that empirical investigation allows for a more actual space. furthermore, the analytical model can be expanded to include more than one moderating variable other than capital expenditure. references adefolake, a. o., & omodero, c. o. 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(2016). recent economic developments and the implications for fiscal policy in open economy macroeconomics. revue d'économie politique, 126(6), 1023-1056. https://doi.org/10.3917/redp.266.1023 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4, october 2024 page no. 1-20 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting madeline renata1, luky patricia widianingsih2, cliff kohardinata3 123universitas ciputra surabaya, indonesia correspondent: luky.patricia@ciputra.ac.id2 received : august 20, 2024 accepted : october 2, 2024 published : october 31, 2024 citation: renata, m., widianingsih, l, p., kohardinata, c. (2024). banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting. ilomata international journal of tax and accounting, 5(4), 726-745. https://doi.org/10.61194/ijtc.v5i4.1372 abstract: sustainability reports have become essential for stakeholders in various industries. however, a concerning lack of transparency persists, where reported information may not reflect actual practices. this study examines the influence of three key banking industry stakeholders employees, government, and customers on the transparency of sustainability reports. transparency is measured by the frequency of sustainability reporting (sr) and the level of sr assurance. the study analyzes 38 banking companies listed on the indonesia stock exchange (idx) between 2018 and 2022. multiple linear regression is employed as the analytical method. findings reveal that employee pressure significantly positively impacts the frequency of sr reporting, while public and government pressure shows no such effect. interestingly, both employee and government pressure positively influence the level of sr assurance, while public pressure again demonstrates no significant impact. this research contributes to a deeper understanding of stakeholder influence on transparency in banking industry sustainability reporting. the findings can assist companies in enhancing their reporting transparency and better meeting stakeholder expectations. keywords: banking industry, stakeholder pressure, sustainability report, transparency this is an open access article under the cc-by 4.0 license. introduction the imperative of sustainability has risen to the forefront of global conversations. focusing on short-term profit maximization has given way to a strategic emphasis on environmental, social, and governance (esg) factors. this shift acknowledges the growing recognition of esg as a material risk to long-term financial performance and profitability (widianingsih et al., 2024). corporate social responsibility (csr) provides a variety of functional, psychosocial, and value alignment benefits that can strengthen the quality of stakeholder relationships with companies (bhattacharya et al., 2009). companies communicate their csr programs through sustainability reports, which provide an overview of the impact of company activities on economic, social, and environmental aspects (lusy & devina, 2021). internally, companies can utilize sustainability reports as an internal control tool to enhance employee engagement in corporate action (searcy & buslovich, 2014). from an external perspective, sustainability reports function as a strategic communication apparatus, enabling corporations to promulgate their environmental and social https://www.ilomata.org/index.php/ijtc mailto:luky.patricia@ciputra.ac.id https://doi.org/10.61194/ijtc.v5i4.1372 banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance metrics. this transparency fosters a reputation for responsible conduct, potentially engendering a competitive advantage in the marketplace (glass, 2012). in indonesia, the sustainability report has become one of the reports required to be prepared by listed companies since 2019 (arifianti & widianingsih, 2023). this requirement stems from the issuance of peraturan otoritas jasa keuangan (pojk) nomor 51/pojk.03/2017 regarding implementing sustainable finance for financial services institutions, issuers, and public companies. the regulation allows companies to report sustainability in quantitative and qualitative terms encompassing economic, environmental, and social aspects (arifianti & widianingsih, 2022). notably, article 3 stipulates that the banking industry was the first to be obliged to prepare sustainability reports, starting on january 1, 2019. however, because indonesia was affected by the covid-19 pandemic, ojk provided a policy to postpone the deadline for submitting the first sustainability report for public companies until 2022. based on the asia pacific sustainability counts ii report released by pwc (2023), companies that have compiled sustainability reports by 2022 are 88% of all listed companies in indonesia. the enactment of the pojk certainly has a positive impact on stakeholders, particularly on the banking industry, which is the earliest required to release sr. stakeholders will likely trust companies with complete and transparent sustainability reports (sudiartama et al., 2022; triyani et al., 2020). as one of the industries most regulated by the government, the banking industry must prepare a transparent sustainability report. however, it was found that as many as 15 banks publicised csr activities aimed at greenwashing as a marketing approach to attract new customers (sari et al., 2022). a recent investigation by fossil free kampus indonesia, a civil society organisation advocating for clean energy adoption, revealed a potential dissonance between the sustainability pronouncements and the activities of a state-owned indonesian bank (cahyadi, 2021). bank negara indonesia's (bni) sustainability report emphasizes its commitment to sustainable practices through greenhouse gas reduction initiatives. however, a contrasting narrative emerged from a report by the german urgewald institute, which identified bni as one of six indonesian banks still financing coal companies (the prakarsa, 2021). this incident underscores the critical need for enhanced transparency and accountability in sustainability reporting, particularly within the banking sector. ernst & young also expressed the lack of transparency in sustainability reports issued by companies. through the ey 2022 global climate risk barometer research conducted on 1500 companies spread across 47 countries, it can indeed be found that there is an increase in companies disclosing climate risk aspects (ernst & young, 2022). however, these disclosures are not accompanied by more meaningful disclosures of the challenges faced. this lack of transparency can lead to a decline in stakeholder trust. extant research suggests a compelling link between stakeholder pressures and the degree of transparency in sustainability reports. these pressures can emanate from diverse stakeholder groups, including shareholders, environmental ngos, the public, employees, and the government. this investigation will focus on three key stakeholder groups within the banking industry: employees, government, and the public. in various studies, employee pressure is measured using the natural logarithm of the number of employees in the company and provides varying results. alfaiz & aryati (2019) and fernandez-feijoo et al. (2014) show the results that employee pressure has a significant positive effect on the quality of sustainability reports. several previous studies have also studied government pressure. adriani & mahayana (2021) uses government share ownership to measure government pressure, which will also be used in this study. the result shows that government pressure on the quality of sustainability report disclosures is found to be influential but with a lower level of confidence when compared to pressure from the public, environmental https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc activists, and consumers. adriani & mahayana (2021) examined the effect of community pressure on the quality of sustainability reports by using the amount of csr expenses as the value of investment in society. the results obtained significantly positively affected the quality of report disclosure. to get a different point of view, this study will use the proportion of public share ownership as a measurement of public pressure variables in the banking industry (adnantara, 2014; szustak & szewczyk, 2020). sustainability report transparency is measured using two parameters: the level of sustainability report reporting (pojk nomor 51/pojk.03/2017) and the presence of sustainability report assurance (fernandez-feijoo et al., 2014). this study investigates the impact of stakeholder pressures (employees, government, and public) on the transparency of sustainability reports in the indonesian banking industry. while previous research has explored stakeholder influence in other sectors, such as mining (arifianti & widianingsih, 2023), the unique context of the banking industry remains understudied given the critical role of banks in indonesia’s economy. banks in indonesia play a crucial role in the economy by facilitating financial intermediation, supporting economic stability, and promoting growth (rizky et al., 2024). conventional commercial banks raise and distribute funds, provide financial services, and influence profitability. state-owned banks mobilize public funds and align with national interests (purnamasari et al., 2022). bank indonesia maintains economic stability, especially during crises, through its policies (afifah et al., 2022). these actions stimulate economic growth, especially given indonesia's relatively low growth performance compared to its neighbors (wijaya et al., 2023). this research addresses the gap in the literature by examining how these three key stakeholder groups influence the level of transparency in sustainability reporting within the banking sector. it employs a novel research framework incorporating these stakeholder groups as independent variables and net interest margin (nim) as a control variable to specifically address profitability calculations relevant to the banking sector. this research endeavors to offer a comprehensive insight into the banking sector's distinctive traits and operational dynamics, thereby advancing the strategic domain of sustainability accounting. doing so sets the stage for fostering a more resilient and environmentally conscious business environment. this research also presents a valuable opportunity for companies to self-assess their sustainability reporting practices and stakeholder engagement strategies. by critically evaluating these areas, companies can identify opportunities for improvement and strengthen their relationships with key stakeholders. ultimately, this can lead to the development of more transparent and impactful sustainability initiatives. stakeholder theory stakeholders are "any group or individual who can affect or be affected by the achievement of organizational goals" (freeman et al., 2010). this concept, popularized by freeman, explores the relationship between individuals and other groups. the banking industry's stakeholders are management, employees, customers, shareholders, government, and society. for this study, the employees, society, and government stakeholders were chosen for further research. stakeholder theory assumes that companies must manage their relationships with stakeholders to survive. companies should not only focus on their relationship with customers as they are the main source of revenue, but also need to consider their relationship with employees and the government. companies must identify and provide appropriate disclosures since each stakeholder has objectives and needs. in addition to financial reports, stakeholders now consider sustainability reports essential (bradford et al., 2014; şahin & çankaya, 2020). with companies disclosing economic, environmental, and social aspects in sustainability reports, stakeholders can use the https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information as a decision-making tool. in another sense, the company can improve its relationship with stakeholders with the sustainability report. employee pressure and the frequency of sustainability reporting employee pressure is one of the results of the employee's role in the company. employees are also among the most important stakeholders in the company because of the company's responsibility to fulfill the rights of each employee. the greater the number of employees in a company, the higher the frequency of sr reporting. the research by fernandez-feijoo et al. (2014) also, the greater the number of employees, the higher the level of transparency they need. alfaiz & aryati (2019) and yosua & tundjung (2022) their research found a positive effect of employee pressure on a related aspect of sustainability: report quality. therefore, the following hypothesis is obtained: h1: employee pressure has a significant positive effect on the frequency of the sustainability report. government pressure and the frequency of sustainability reporting the government and banking companies have a very close relationship. banking companies need to comply with government regulations. at the same time, the government also needs banks as a medium for extending credit to the community for economic development. if the pressure exerted by the government on bank companies is higher, companies will be more compelled to disclose transparent sustainability reports, especially regarding their social responsibility initiatives (qisthi & fitri, 2021). furthermore, nugrahani et al. (2022) examined the same variable, and the results showed that government pressure significantly positively affected the frequency of sr reporting. therefore, the following hypothesis is obtained: h2: government pressure has a significant positive effect on the frequency of the sustainability report. public pressure and the frequency of sustainability reporting public ownership in consumer-proximity industries, like banking, acts as a pressure gauge for sustainability reporting. research shows a positive correlation between consumer-proximity industries and the quality of sustainability reports (branco & rodrigues, 2008; fernandez-feijoo et al., 2014). consumers increasingly assess a company's environmental impact, labor practices, and other sustainability factors (sriningsih & wahyuningrum, 2022). banks, reliant on public trust for deposits and loans, are particularly sensitive to this heightened scrutiny. disclosing sustainability efforts becomes a way to enhance brand reputation and meet public demand for transparency (anisa, 2012). therefore, the extent of public shareholding reflects the public's desire for detailed information on corporate social responsibility. thus, the following hypothesis is obtained: h3: public pressure has a significant positive effect on the frequency of the sustainability report. employee pressure and sustainability report assurance to maintain the transparency of sustainability reports, employees, as internal stakeholders of the company, also expect the involvement of an external party. a study conducted by fernandez-feijoo et al. (2014) states that pressure from stakeholder groups, including employees, can affect the level of transparency of sustainability reports. the higher the number of employees in the company, the higher the need for guarantors who can verify the information presented in the sustainability report, especially in the manpower aspect. previous research also showed a significant positive effect of employee pressure on the quality of https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sustainability reports (alfaiz & aryati, 2019; yosua & tundjung, 2022). therefore, the following hypothesis is obtained: h4: employee pressure has a significant positive effect on the assurance of the sustainability report. government pressure and sustainability report assurance the proportion of government ownership shares in the company characterises government ownership. government pressure significantly shapes sustainability report assurance. it dictates regulatory mandates, compliance needs, and stakeholder expectations (westergren & hasselgren, 2020). this, in turn, drives companies towards transparent sustainability reporting with external assurance, enhancing the overall credibility of the practice. the higher the government ownership in a company, the higher the potential for companies to use assurance as a form of transparency. eryadi et al. (2021) found that government pressure has a significant effect on sr assurance. therefore, the following hypothesis is obtained: h5: government pressure has a significant positive effect on the assurance of the sustainability report. public pressure and sustainability report assurance sustainability reporting is no longer sufficient; reports themselves must be transparent. transparency fosters increased accountability and builds stakeholder confidence. transparent reporting empowers stakeholders to make informed decisions based on the information provided. research suggests that a positive correlation exists between public scrutiny and adopting sustainability reporting and assurance (sra) practices (shum et al., 2009). heightened societal expectations, public pressure, and stakeholder demands drive corporate engagement with sra. companies facing a more pronounced stakeholder environment demonstrate a greater tendency to produce higher-quality reports and undergo independent verification through assurance services. adriani & mahayana (2021) also found that public pressure significantly positively affects the quality of sustainability report disclosure. therefore, the following hypothesis is obtained: h6: public pressure has a significant positive effect on the assurance of the sustainability report. method data type and source this research is a quantitative study using secondary data. it was conducted on bank companies listed on the indonesia stock exchange (idx) from 2018 to 2022. the data comes from the annual report and sustainability report obtained through the company's and/or idx's official websites, namely www.idx.co.id. population and sample the population in this study was 43 bank companies listed on the idx in 2018-2022. the sample was taken using a purposive sampling method whose criteria are as follows: 1. bank companies were listed on the idx consecutively from 2018 to 2022. 2. publish stand-alone sustainability reports or incorporate them into the annual report. https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. publish annual reports which can be accessed through the company's official website and/or the idx official website, namely www.idx.co.id operational definition and measurement of variables dependent variables employee pressure is one of the results of the employee's role in the company. employees are also among the most important stakeholders in the company because of the company's responsibility to fulfill the rights of each employee. through alfaiz & aryati (2019) research, the following employee pressure measurements were obtained: employee pressure = ln (number of employees) government pressure is present due to government intervention in formulating regulations related to sustainability reports and the presence of government share ownership in banks within indonesia. in this study, the measurement of government pressure uses a ratio scale of the government ownership amount to the company's total outstanding shares (hunardy & tarigan, 2017). government pressure = (number of government shares)/(total company shares outstanding) the public is a crucial stakeholder for banking companies due to their high trust and confidence in these institutions. public trust is a significant non-financial capital for banks, which affects their success and ethical behavior toward customers and other external stakeholders (szustak & szewczyk, 2020). based on adnantara (2014) research, the following is a measurement of community pressure: public pressure = (number of public shares)/(total company shares outstanding) independent variables the reporting frequency is one factor that reflects the transparency of sustainability reporting. companies demonstrate transparency in their csr efforts by publishing csr reports detailing their initiatives, performance, and impact in these areas (dubbink et al., 2008). the reporting frequency variable measures the times each company presents sr reports during the evaluation period over the total number of possible disclosures (fernandez-feijoo et al., 2014). reporting frequency = number of sr reports published through 2018-2022 sr assurance is now a more commonly used service. the presence of independent assurance is a credibility and transparency tool for sustainability reports (fernandez-feijoo et al., 2014). referring to previous research, this variable is measured using the ratio of the times the company presents sr assurance to the number of srs presented in the study period. sr assurance = number of sr assurance attendance through 2018-2022 https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc control variables profitability is presented as a control variable in this study. while traditional profitability metrics like roe and roa provide valuable insights, this study incorporates net interest margin (nim) to offer a more nuanced perspective tailored to the banking industry context. nim's focus on core banking activities strengthens the analysis and enables a more precise evaluation of a bank's financial performance. nim is an important indicator of banks' health and economic sustainability because it reflects their ability to generate profits through lending (lestari et al., 2021). nim = ((interest earned – interest expended))/(total assets) the second control variable is company size. company size significantly and positively influences sustainability reports (fadilah et al., 2022; fadillah & susilowati, 2023). therefore, referring to previous research, the following measurements are used: company size = ln (total asset) data analysis methods descriptive statistics this test evaluates the data based on the number of observations, mean (average), standard deviation, maximum value, and minimum value. this method provides an overview of the variables studied: employee pressure, government pressure, community pressure, sr reporting frequency, sr assurance, profitability, and company size. classical assumption test this study uses the skewness and kurtosis statistical tests to determine data normality. if the skewness and kurtosis test results get a significance value above 0.05 or 5%, then the regression model is said to fulfill the normality test (ghozali, 2018). multicollinearity testing is intended to see if there is a correlation between the independent variables. it is good if the regression model does not correlate with independent variables (ghozali, 2018). if the vif (variance inflation factor) test value is 1, it does not indicate the presence of multicollinearity symptoms. if the vif (variance inflation factor) test value is above 5, it indicates the presence of multicollinearity symptoms (studenmund, 2017). the heteroscedasticity test is used to determine whether the error in the model influences the independent variable. the test that was used was the breusch-pagan test. using a significance value of 5%, it can be said that if the p-value exceeds 0.05, there is no heteroscedasticity in the regression model. if the p-value is below 0.05, then there is heteroscedasticity in the regression model (studenmund, 2017). multiple linear regression the regression equation in this study is as follows: model 1: fr = ɑ + 𝛽1 emp + 𝛽2 gov + 𝛽3 public + 𝛽4 nim + 𝛽5 size + ɛ https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc fr is sr reporting frequency, emp is employee pressure, gov is government pressure, public is public pressure, nim is net interest margin, and size is company size. model 2: ar = ɑ + 𝛽1 emp + 𝛽2 gov + 𝛽3 public + 𝛽4 nim + 𝛽5 size + ɛ ar is sr assurance, emp is employee pressure, gov is government pressure, public is public pressure, nim is net interest margin, and size is company size. hypothesis testing f statistical test (p-value) is a model test used to assess significance. suppose the p-value is less than the alpha (significance) value, usually 0.05. in that case, it means that the model can explain the dependent variable, rejecting the null hypothesis that no independent variable has an effect, and accepting the alternative hypothesis that there is at least one of the independent variables that has a significant impact on the dependent variable (mehmetoglu & jakobsen, 2022). the coefficient of determination (r2) measures the ability of the independent variables to explain the dependent variable in the regression model. it ranges from zero to one. getting closer to one means that the independent variables have almost all the information needed to estimate the variation in the dependent variable (ghozali, 2018). the t-statistical test is used to determine whether the population mean (average) of a variable in two independent (unpaired) samples/groups significantly affects each other. a p-value of less than 0.05 indicates a significant effect between variables, while a p-value that exceeds 0.05 indicates no significant impact between variables (mehmetoglu & jakobsen, 2022). results and discussion descriptive statistics through purposive sampling with predetermined criteria, observational data were found as many as 39 companies during the five-year research period (2018-2022) that met the sampling criteria. however, outlier data was found after all the data was regressed for the normality test. outlier data has an extreme range of differences compared to other observation data. therefore, an outlier elimination mechanism is needed by paying attention to the normality test boxplot. the normality boxplot shows that there is one outlier data point. so the total number of observations in the years and companies is 190. table 1. descriptive analysis variable mean std. dev. min max employee pressure 7.754595 1.557991 5.4424 11.3556 government pressure .1021868 .2393828 0 .7953 public pressure .2347474 .1627456 .0271 .5719 frequency of sr 3.921053 .8816931 2 5 assurance of sr .7894737 1.630087 0 5 nim .0439553 .0168728 .013 .0806 size 17.66064 1.664322 15.2944 21.1766 https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc employee pressure as measured using the natural logarithm of the number of employees has an average of 7,754 with a standard deviation of 1,557, a minimum value of 5,442, and a maximum value of 11,355. the company with the highest number of employees is bank rakyat indonesia, while the company with the lowest is allo bank indonesia. there is a significant gap between the number of employees of the two companies, which will influence the pressure exerted by employees. government pressure as measured using government share ownership in the company has an average of 0.102 with a standard deviation of 0.239, a minimum value of 0, and a maximum value of 0.795. the financial institution with the highest degree of government ownership is the bank pembangunan daerah jawa timur. this signifies that the government holds a majority stake in the bank, granting it significant influence over its operations. conversely, entirely private banks exist, indicating an absence of government control through shareholding. community pressure as measured using community/public share ownership has an average of 0.234 with a standard deviation of 0.162, a minimum value of 0.027, and a maximum value of 0.571. bank maybank indonesia exhibits the lowest level of public shareholding among indonesian banks, while bank artha graha internasional boasts the highest proportion. this disparity in public ownership translates into differing pressure exerted by shareholders. with its high public shareholding, bank artha graha internasional will likely face greater scrutiny and pressure from public investors than bank maybank indonesia. transparency as measured by sr reporting frequency and sr assurance has an average of 3.921 and 0.789, with standard deviations of 0.881 and 1.630, minimum values of 2 and 0, and maximum values of 5 and 5 respectively. the indonesian government mandated that banks issue sustainability reports (srs) starting in 2019. however, due to the pandemic, a grace period was extended until 2022 for report publication. consequently, some banks only have srs available for the most recent two years (2022 and 2021). conversely, institutions like bank central asia and bank negara indonesia have consistently published srs throughout the research period (2018-2022). sustainability report assurance is currently voluntary in indonesia. consequently, some banks choose not to utilise these services, while others, such as bank negara indonesia and bank rakyat indonesia, have consistently engaged external assurance providers throughout the research period (2018-2022). profitability as measured using net interest margin (nim) has an average of 0.043 with a standard deviation of 0.016, a minimum value of 0.013, and a maximum value of 0.080. company size (size) as measured using the natural logarithm of total assets has an average of 17,660 with a standard deviation of 1,664, a minimum value of 15,294, and a maximum value of 21,176. model 1 model 1 is used to test hypothesis 1, hypothesis 2, and hypothesis 3. classical assumption test 1. normality test table 2. normality test model 1 variable p-value residual 0.6952 the p-value obtained for model 1 is 0.6952, above 0.05 or 5%. then regression model 1 is said to fulfill the normality test. https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. multicollinearity test table 3. multicollinearity test model 1 (1) variable vif employee pressure 18.87 government pressure 1.32 public pressure 1.10 nim 1.57 size 16.21 mean vif 7.81 the mean vif shows 7.81, which indicates the presence of multicollinearity symptoms. traced further, two variables are strongly correlated: employee pressure and company size, so the information provided overlaps. therefore, the company size control variable will be removed from model 1 because employee pressure has provided similar information. table 4. multicollinearity test model 1 (2) variable vif employee pressure 1.59 government pressure 1.31 public pressure 1.10 nim 1.32 mean vif 1.33 after the control variable company size is excluded, model 1 shows no multicollinearity symptoms. 3. heteroskedasticity test table 5. heteroskedasticity test model 1 variable p-value fitted values of fr 0.2235 in the heteroskedasticity test, the p-value is 0.2235, which exceeds 0.05. this means that the regression model does not exhibit heteroscedasticity. https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multiple linear regression and hypothesis testing table 6. summary of regression testing results model 1 model 1 fr = ɑ + 𝛽1 emp+ 𝛽2 gov + 𝛽3 public + 𝛽4 nim + ɛ variable coef. std. err. t-test (p-value) employee pressure .3552798 .0934886 0.001 government pressure .5528857 .5518597 0.324 public pressure -.6535002 .7438744 0.386 nim -3.419718 7.844057 0.666 cons 1.413226 .6352577 0.033 f test (p-value) 0.0007 r-squared 0.4353 model 1 has an f test value of 0.0007. data requirements are suitable for research if they have a p-value of less than 0.05. this means the data is feasible, and model 1 can explain the sr reporting frequency dependent variable. r-squared shows 0.4353, meaning that 43.53% of the independent variables can explain the dependent variable in model 1. the other 56.47% is explained by independent variables not examined in this study. the analysis yielded a statistically significant p-value of 0.001 for employee pressure. a significance level (alpha) of 0.05 is used for hypothesis testing. therefore, we can reject the null hypothesis (h0), which typically posits no relationship between the variables. this outcome supports h1, indicating a statistically significant influence of employee pressure on the dependent variable, sr reporting frequency. the analysis of government pressure yielded a p-value of 0.324, which exceeds the commonly applied significance level of 0.05 (or 5%). this suggests that government pressure does not significantly influence the frequency of sustainability reporting (sr). as a result, h2 is rejected. the p-value for public pressure was 0.386, exceeding the established significance level of 0.05. therefore, h3 is rejected. this indicates that based on the data analysed, public pressure does not have a statistically significant effect on the frequency of sr reporting. the control variable profitability (nim) gets a p-value of 0.742, which is above 0.05 or 5%. this means that net interest margin could not act as a control variable in this study. model 2 https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc model 2 is used to test hypothesis 4, hypothesis 5, and hypothesis 6. classical assumption test 1. normality test table 7. normality test model 2 variable p-value residual 0.1693 the p-value obtained for model 2 is 0.1693, above 0.05 or 5%. then regression model 2 is said to fulfill the normality test. 2. multicollinearity test table 8. multicollinearity test model 2 (1) variable vif employee pressure 18.87 government pressure 1.32 public pressure 1.10 nim 1.57 size 16.21 mean vif 7.81 like model 1, the mean vif shows 7.81, indicating multicollinearity symptoms. the employee pressure and company size variables have a strong correlation, so the information provided overlaps. therefore, the company size control variable will be removed from model 2 because employee pressure has provided similar information. table 9. multicollinearity test model 2 (2) variable vif employee pressure 1.59 government pressure 1.31 public pressure 1.10 nim 1.32 mean vif 1.33 after removing the company size control variable, model 2 shows no multicollinearity symptoms. 3. heteroskedasticity test https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 10. heteroskedasticity test model 2 variable p-value fitted values of ar 0.0044 in model 2, the p-value obtained for the heteroskedasticity test is 0.0044. this is lower than 0.05, indicating the presence of heteroscedasticity in the regression model. therefore, robust regression was performed to analyse the data contaminated by outliers. multiple linear regression and hypothesis testing table 11. summary of robust regression testing results model 2 model 2 ar = ɑ + 𝛽1 emp+ 𝛽2 gov + 𝛽3 public + 𝛽4 nim + ɛ variable coef. robust std. err. t-test (p-value) employee pressure .4182258 .1345474 0.004 government pressure 3.02863 1.04397 0.007 public pressure .6293618 1.028388 0.545 nim 16.27265 12.73355 0.210 cons -3.626194 1.099712 0.002 f test (p-value) 0.0000 r-squared 0.6625 model 2 has an f test value of 0.0000, which meets the data eligibility requirements with a p-value of less than 0.05. therefore, model 2 can explain the dependent variable sr reporting assurance. r-squared shows 0.6625, meaning that the independent variables' ability to explain the dependent variable in model 1 is 66.25%. at the same time, the other 33.75% is explained by independent variables not examined in this study. employee pressure gets a p-value of 0.004. the h1 hypothesis requirement is accepted if the significance value is below 0.05 or 5%. this means that employee pressure significantly influences the dependent variable sr reporting assurance. therefore, h1 is accepted. like employee pressure, the p-value for government pressure was 0.007, also below the established significance level of 0.05 or 5%. this result allows for the rejection of the null hypothesis (h0). thus, the data suggest a statistically significant influence of government pressure on sr reporting assurance. public pressure has a p-value of 0.545, above 0.05 or 5%. this means that public pressure does not significantly influence the dependent variable of sr reporting assurance. hence, h3 is rejected. the control variable profitability (nim) gets a p-value of 0.210, above 0.05 or 5%. this means that net interest margin could not act as a control variable in this study. https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the following is a discussion of each of the related variables: 1. employee pressure and the frequency of sustainability reporting this research investigates the significant influence of employee pressure on the frequency of sustainability reporting (sr). the findings align with previous studies by fernandez-feijoo et al. (2014) and alfaiz & aryati (2019), which identified a positive correlation between employee pressure and sr reporting prevalence. such pressure serves as a driving force for releasing sr reports, highlighting the importance of transparency and accountability towards the workforce. furthermore, the sheer size of an organisation's employee base can amplify the need for robust sr practices. larger companies, with a broader employee demographic, have a greater responsibility to demonstrate their commitment to social and environmental sustainability. transparent sr reports become crucial in this context, allowing employees to evaluate the company's progress on these vital issues. this, in turn, fosters a sense of trust and shared purpose within the organisation (pucikova et al., 2013). the importance of employee pressure extends beyond simply influencing reporting frequency. employees are a key stakeholder group, driving the company's success through their contributions to performance and achievement (pucikova et al., 2013). therefore, companies need to demonstrate a commitment to reciprocity. publishing sr reports that address employee welfare concerns represents a tangible way to recognise this value. by showcasing responsible management practices and a dedication to employee well-being, companies position themselves as attractive employers and cultivate a more engaged workforce. 2. government pressure and the frequency of sustainability reporting government pressure gets a p-value of 0.324, above 0.05 or 5%. this means that the government does not exert a statistically significant influence on the frequency of sr reporting. this finding might seem counterintuitive considering pojk number 51/pojk.03/2017 mandates sr reporting for financial institutions, issuers, and public companies. however, it's important to acknowledge the regulation's implementation timeline. while mandatory since 2019, the government provided leeway for compliance until 2022. this extended timeframe, coupled with companies without government ownership (as shown in table 1 of the descriptive analysis), could explain the persistence of nonreporting companies observed between 2018 and 2021. this study's findings align with previous research which employed dummy variables to examine the influence of government ownership (dummy 1 for state-owned companies, dummy 0 for private companies). their results suggest that government pressure may not directly translate to higher-quality sr reporting (sawitri & ardhiani, 2023). this could be attributed to the lack of specific regulations on individual disclosure indicators within the regulation. in essence, the regulation mandates sr disclosure, but without detailed guidance on the content and format, companies might interpret reporting requirements differently, leading to sr quality inconsistencies. 3. public pressure and the frequency of sustainability reporting the analysis yields a p-value of 0.386, exceeding the conventional significance level of 0.05. this suggests that public pressure, as measured by public share ownership, does not significantly influence https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the frequency of sr reporting. this finding contradicts the initial hypothesis, which posited a positive relationship between public pressure and sr reporting frequency. several factors might explain this unexpected result. firstly, while sustainability reporting is increasingly prevalent in annual reports, its connection to financial performance remains inconclusive due to challenges like inconsistent comparability and verification methods (mynhardt et al., 2017). consequently, investors primarily rely on financial statements for investment decisions (staszkiewicz & werner, 2021). this suggests that even though share ownership, public pressure might not translate directly into increased sr reporting frequency until the value proposition of sr for investors becomes clearer. additionally, the credibility of sustainability disclosures remains a concern, potentially hindering investors from integrating sr into their decision-making processes. 4. employee pressure and sustainability report assurance this finding aligns with previous research by fernandez-feijoo et al. (2014) and alfaiz & aryati, (2019) who identified a positive correlation between employee pressure for transparency and adopting external assurance practices. external assurance plays a vital role in enhancing the credibility of srs. companies demonstrate a higher level of accountability and transparency by engaging an independent third party to verify the accuracy and completeness of reported information. this, in turn, fosters trust with stakeholders, including investors, customers, and regulatory bodies. the size of a company can also be a contributing factor. larger organizations with a potentially more complex and geographically dispersed workforce may experience heightened employee pressure for responsible business practices. this pressure can then translate into a greater emphasis on robust sr reporting procedures, including adopting external assurance. by demonstrating a commitment to employee concerns regarding sustainability, companies can foster a sense of ownership and engagement within their workforce. this, in turn, can lead to improved environmental and social performance, ultimately contributing to the company's long-term success and positive societal impact. 5. government pressure and sustainability report assurance government pressure gets a p-value of 0.007, below 0.05 or 5%. this means that government pressure has a significant influence on sr reporting assurance. this result is following the research of eryadi et al. (2021) which found that government pressure significantly affects sr assurance. government pressure does not affect the sr reporting frequency variable but significantly affects sr assurance. this finding suggests that government intervention plays a crucial role in encouraging companies to enhance the credibility of their srs. governments can promote greater transparency and accountability within the corporate sector by mandating or incentivising external assurance. an interesting observation is the higher prevalence of sr assurance among state-owned banks than private banks. this potentially reflects a greater susceptibility to government pressure within the public sector. private banks could benefit from emulating these practices to demonstrate transparency and alignment with evolving stakeholder expectations. moving forward, governments can further strengthen the impact of their efforts by developing comprehensive sustainability reporting frameworks and promoting stakeholder engagement in the process. this will enhance the credibility of srs and https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc encourage companies to translate their sustainability commitments into tangible actions with positive environmental and social outcomes. 6. public pressure and sustainability report assurance public pressure gets a p-value of 0.545, above 0.05 or 5%. this means that public pressure does not significantly influence the assurance of sr reporting. this suggests that while sustainability reporting has gained importance, the public may not yet actively utilize these reports for decision-making. this lack of current utilization may contribute to a diminished public demand for external assurance of sr. while financial information remains paramount for shareholder value, sustainability reporting, despite its role in increasing transparency, often lacks universally accepted accounting standards. this impedes its effectiveness for performance evaluation and comparisons across companies (xie et al., 2023). furthermore, the prevalence of "greenwashing" within sustainability reporting undermines its ability to demonstrably create value in capital markets, highlighting the detrimental effects of misleading information (xu et al., 2023). in developing economies, the absence of public pressure can be a substantial barrier to implementing sustainability reporting and assurance (sra) practices (shum et al., 2009). conversely, fostering a robust civil society that actively advocates for and monitors corporate social responsibility (csr) initiatives, establishing effective legal frameworks, and creating a more competitive market environment can be critical drivers for propelling sra in these economies. conclusions employee pressure has a significant influence on the frequency of sr reporting. at the same time, company and public pressure do not affect the frequency of sr reporting. employee pressure and government pressure have a significant influence on sr reporting assurance. meanwhile, public pressure does not significantly influence the assurance of sr reporting. the control variables in this study are company size and nim. the company size variable is not used in the model because it is closely related to the dependent variable of employee pressure. nim could not act as a control variable in this study. the theoretical implications of this study are that the findings provide empirical evidence strengthening the dependent variable stakeholder pressure and the independent pressure on sustainability report transparency. this research underscores the critical role of employees and government entities as stakeholders in driving transparency within sustainability reports. companies can foster a more collaborative and impactful approach to sustainable business practices by prioritising stakeholder needs and incorporating transparent information. the author encounters several limitations in the study, such as that some company data cannot be obtained through the official website or idx site and that one outlier data point is not included in the sample. this research lays the groundwork for future investigations by identifying additional independent variables, particularly within the banking sector, that may significantly influence the dependent variable. furthermore, the potential utility of alternative data access methods, such as refinitiv, to acquire comprehensive company https://www.ilomata.org/index.php/ijtc banking on transparency: the role of stakeholders pressure in indonesian sustainability reporting renata, widianingsih, and kohardinata 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc data warrants exploration. future studies could also revisit 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(2022). pengaruh pemangku kepentingan dan pemegang saham terhadap kualitas laporan berkelanjutan. jurnal multiparadigma akuntansi, 4(3), 1312–1321. https://journal.untar.ac.id/index.php/jpa/article/view/19997 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 280-291 280 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions meidy lieke karundeng1, valentine siagian2, francis hutabarat3, hisar pangaribuan4 1234universitas advent indonesia, indonesia correspondent: meidy.widijanto@unai.edu1 received : november 10, 2023 accepted : january 24, 2024 published : january 31, 2024 citation: karundeng, m, k., siagian, v., hutabarat, f., pangaribuan, h. (2024). the impact of financial literacy and digital awareness on investment intentions. ilomata international journal of tax anad accounting, 5(1), 280-291. https://doi.org/10.52728/ijtc.v5i1.1014 abstract: investment intention is one important thing in life. this study investigates the impact of financial literacy and digital awareness on investment intentions. questionnaires was given to potential and active small medium micro enterprises owners collected via an online survey. the questionnaires were analyzed using descriptive statistics and hypotheses was tested using multiple linear regression the results reveal a positive and significant correlation (0.018) between the two independent variables and investment intentions. the results highlight the importance of financial and digital education in enhancing individuals' propensity to invest, suggesting that improved literacy in these areas can foster greater investment activity. these insights are particularly valuable for policymakers and practitioners looking to bolster investment participation through educational initiatives, underscoring the need to integrate financial and digital literacy into public learning frameworks. keywords: financial literacy, digital awareness, investment intention this is an open access article under the cc-by 4.0 license introduction in the midst of the rapidly developing digital era, consumer behavior, especially in the context of shopping, has experienced significant changes. the peak was seen during the pandemic, where online purchases became the main choice for many people(rossolov et al., 2021). having easy access to information through digital technology has not only changed the way we shop but also how we make decisions, especially those related to financial decisions (bellini et al., 2016) today, with so much information accessible, consumers have the freedom to evaluate risks before making important decisions. for example, in business, with digital technology, a person can easily obtain reference knowledge about an investment(maharani & saputra, 2021), understand potential profits and losses, and evaluate whether the risk is within the individual's risk tolerance or not(bayar et al., 2020). https://www.ilomata.org/index.php/ijtc mailto:meidy.widijanto@unai.edu https://doi.org/10.52728/ijtc.v5i1.1014 the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 281 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an individual's ability to make wise financial decisions, of course, cannot be separated from their understanding (financial literacy) and awareness of technology (digital awareness) (hastings & mitchell, 2020; moenjak et al., 2020). good financial literacy will help a person manage their income wisely, while digital awareness ensures that the individual is able to use technology safely and understands the potential privacy risks that may exist. the digital revolution has transformed many aspects of our lives(imamov & semenikhina, 2021; korte, 2020; pencarelli, 2020) , and consumer behavior is no exception (giza & wilk, 2021). in recent years, particularly during the pandemic, there was a notable shift in how people engaged with financial services and investment opportunities. the widespread adoption of online shopping set a precedent, demonstrating the broader changes in consumer habits (frank & peschel, 2020). as physical markets shuttered, digital platforms surged in popularity, indicating a fundamental shift in purchase behaviors and decision-making processes. this transition has significant implications for financial decision-making, where the ease of accessing information and executing transactions online has redefined what it means to be a savvy consumer or investor. despite the increased availability of digital tools, there is an observed discrepancy in investment intentions among different demographics. while some embrace the digital age's opportunities, others remain hesitant, underscoring a complex interplay between digital literacy, financial understanding, and investment behaviors. a deeper look into these patterns over the last three years shows variations in investment intentions across communities(hamad et al., 2021; silalahi et al., 2020), often correlating with levels of financial and digital literacy. concerns about online security, privacy risks, and the ability to discern credible financial advice online further exacerbate this issue, suggesting a gap between digital accessibility and its practical, beneficial use in personal finance. figure 1. internet utilization index by workers/msmes based on region (2022) source: databoks, 2023 https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 282 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure one shows the internet utilization index among msme's owners by region on 2022. previous studies offer a baseline for comparison, but they also present conflicting findings or lack the specificity needed for a targeted approach. some research indicates a general increase in digital engagement but doesn’t necessarily translate to higher investment activities (jiang & stylos, 2021; oberländer & bipp, 2022) , while others suggest that improved financial literacy does not always lead to better investment decisions(garcía & vila, 2020). these mixed results highlight the need for current research to dissect the nuances of investment intentions in the digital age more accurately. by doing so, it can illuminate the underlying causes of reluctance or eagerness to invest, providing a roadmap for more effective financial education and digital tool development. the current research seeks to bridge this gap, aiming to provide a comprehensive analysis of investment intentions and the factors influencing them. by integrating real-world evidence with the theoretical underpinnings of consumer behavior, financial literacy, and digital awareness, this study will contribute valuable insights into how individuals can be better supported in making informed investment decisions. it will also offer guidance to policymakers and financial educators on developing strategies to enhance the financial well-being of individuals in the digital era, where technology and finance are increasingly intertwined. additionally, as the economy grows, more and more people are seeing opportunities to invest their money. however, how much influence does financial literacy and digital awareness have on investment intentions? this research will further investigate how financial literacy and digital awareness influence a person's intention to invest, based on findings from research by (onasie & widoatmodjo, 2020). behavioral finance behavioral finance is an intriguing subfield of economics that scrutinizes the junction where human psychology meets financial decision-making. the seminal work by (ross et al., 2022) in "fundamentals of corporate finance" provides a foundational understanding of how traditional finance principles can be reframed within the behavioral finance paradigm. the authors elucidate the cognitive and emotional factors that can cause investors to deviate from the rational decisionmaking process as posited by classical financial theories. they illustrate with practical examples how heuristics and biases, such as overconfidence and loss aversion, can lead to systematic errors in judgment. furthermore, the text delves into the effects of such psychological influences on market outcomes, including pricing anomalies and patterns of investment behavior. this critical perspective underscores the importance of financial literacy that encompasses not only the mastery of financial tools and principles but also an awareness of the intrinsic human tendencies that can affect financial decision-making. the integration of these concepts into the broader investment framework suggests that a more nuanced approach to understanding market dynamics and investor behavior is necessary, one that accounts for the complex interplay between rational analysis and psychological predisposition. https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 283 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial literacy financial literacy is a person's ability to understand, manage and make wise decisions in managing personal or business finances. this ability is very important because it can influence a person's financial life, from income management, debt management, to retirement preparation. lack of financial literacy can result in individuals making less wise financial decisions (nirmala et al., 2022). (khoirunnisa & rochmawati, 2021) lack of knowledge about financial concepts, such as interest, inflation and investment risk, can hinder a person's ability to make the right decisions and have an impact on long-term financial life(compen et al., 2019) digital awareness digital awareness refers to a person's ability to understand and use digital technology wisely and safely. this ability is very important in the current digital era, where digital technology increasingly dominates almost all aspects of human life. digital awareness relates to a person's ability to manage privacy and personal information in a digital environment. a person's ability to understand the privacy policies and privacy controls available on various digital platforms will help them to protect their personal information from unauthorized access(chen et al., 2021). furthermore, digital awareness is related to a person's ability to use digital technology to increase creativity and innovation(lee et al., 2021). a person's ability to understand new features and applications of digital technology will help them to develop new ideas and expand each individual's creative skills (mutohhari et al., 2021) investment intention investment intention is a person's tendency to invest in a product or financial instrument. several previous studies stated that factors such as knowledge about investment, self-confidence in making investment decisions, and perceptions about investment risks and returns have a significant influence on investment intention (sadiq & khan, 2019) (akhtar & das, 2019). apart from that, social factors such as the influence of friends and family can also influence a person's investment intentions (lai, 2019) aren) (aren & hamamci, 2020). they are also influenced by adaptability factors(jahanmir et al., 2020). furthermore, investment intention can be influenced by psychological factors such as attitudes and personal values regarding money and investment(yang et al., 2019). research by (osman et al., 2019) shows that environmental factors such as economic conditions and government policies can also influence investment intention. economic uncertainty and changes in government investment policies can reduce a person's investment intentions. hypothesis development financial literacy and investment intention low levels of financial literacy are associated with a tendency to use expensive and high-risk financial options, such as using high-interest credit cards or payday loans(pitthan & witte, 2021). financial literacy has a positive relationship with long-term financial well-being, such as retirement https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 284 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc preparation, long-term investment, and debt reduction. this is further supported by (samsuri et al., 2019), who found that financial literacy, along with risk tolerance, significantly affects investment intentions, suggesting that a deep understanding of financial concepts empowers individuals to make more strategic and risk-adjusted investment decisions. financial literacy also has a positive impact on society's overall financial health. (tanuwijaya & setyawan, 2021)add to this by proposing financial literacy as a potential mediator for investment intention, indicating that the knowledge of financial concepts can serve as a bridge between an individual's financial awareness and their proactive engagement in investment activities. a higher level of financial literacy, on the other hand, is associated with wiser and more effective decision-making in financial management, thereby increasing investment interest. these relationships highlight the critical role that financial literacy plays not only in personal financial outcomes but also in fostering a more financially literate society that is capable of making informed investment choices. h1: financial literacy has a positive effect on investment intention digital awareness and investment intention digital awareness has a positive relationship with wise and safe internet use. a person's ability to recognize digital security risks and threats, such as computer viruses or online fraud, will help them to avoid risky practices and protect their personal data. a higher level of digital awareness will help a person to avoid digital security risks and threats, protect their personal information, and increase creativity and innovation through the use of digital technology. (seiler & fanenbruck, 2021)highlight the growing acceptance of digital investment solutions, such as robo-advisors in germany, which indicates a shift towards trust in digital financial services when coupled with increased digital awareness. chen, et al (2021) provide an analytical perspective on how digital awareness plays a role in the finance industry, particularly in how risk awareness models and digital economic growth are interconnected. furthermore, the work of baweja, sangpetch, and sangpetch (2023) underscores the importance of digital awareness in the context of ai for fraud awareness, suggesting that technology can be a double-edged sword — while it introduces new risks, it also provides innovative ways to mitigate them. investment intentions are shaped by this complex web of factors, where knowledge about investments, perceptions of investment risks and returns, social factors, personal attitudes, and values, as well as economic conditions and government policies, all interplay. in this evolving digital landscape, the investor's awareness and understanding of digital tools and the associated risks become as crucial as their financial literacy. h2: digital awareness has a positive effect on investment intention financial literacy and digital awareness and investment intention financial literacy and digital awareness play critical roles in shaping investment intentions. financial literacy equips individuals with the understanding necessary to make informed investment decisions, a competence increasingly important in a complex financial marketplace (sadiq & khan, 2019).coupled with digital awareness, it empowers individuals to navigate online investment platforms effectively, significantly affecting their investment behaviors and intentions (yang et al., 2019). the relationship between financial literacy and investment intention can be https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 285 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc nuanced by behavioral biases, suggesting that even well-informed individuals may deviate from optimal decision-making due to psychological factors (pitthan & de witte, 2021). (zhao & zhang, 2021) contribute to this discourse by examining the relative influence of financial literacy versus investment experience in the context of cryptocurrency investments, highlighting the nuanced dynamics of financial knowledge and its practical application. additionally, (shaik et al., 2022)underscore the significance of financial literacy in shaping the investment behavior of it professionals in india, indicating the specialized impact of literacy in technology-driven sectors. furthermore, the interplay of ai in enhancing fraud awareness presents an intersection where digital literacy can augment financial decision-making(baweja et al., 2023). enhancing financial literacy and digital awareness could thus serve as a buffer against behavioral biases, promoting a more rational approach to investment.h3: financial literacy and digital awareness has a positive effect on investment intention. method this research aims to analyze the influence of financial literacy and digital awareness on individual investment intentions. data was collected through questionnaires distributed online via social media and other digital platforms. the questionnaire consists of questions that measure the level of financial literacy, digital awareness and intention to invest using likert scale. the data collected was analyzed using multiple linear regression analysis with the help of statistical software, spss. we delineate the framework and methodology for identifying and selecting participants for the study. the target population encompasses alumni of a specified university, providing a rich context for investigating the long-term impacts of higher education on career trajectories. within this population, a total of 238 individuals were selected using stratified sampling techniques to ensure representation across graduation years, programs of study, and demographic factors. detailed profiles of these respondents were compiled, capturing variables such as current employment status, sector of employment, and further educational pursuits post-graduation. table 1. dimension and indicators variable dimension indicator financial literacy understanding of financial concepts knowledge of basic economic concepts such as interest rates, inflation, and diversification. understanding of the time value of money and compound interest. ability to apply financial knowledge proficiency in calculating returns on investments. ability to read and comprehend financial statements. understanding of risk and return and their application in investment decisions. financial decisionmaking ability to make informed choices regarding credit, savings, and investment vehicles. https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 286 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc awareness of cognitive biases like overconfidence and loss aversion that affect financial decisions. digital awareness knowledge of digital tools familiarity with online investment platforms and financial services. understanding of the functionalities and limitations of various digital financial tools. skill in using digital platforms proficiency in executing financial transactions online. skill in using digital tools for portfolio management and financial analysis. awareness of digital risks recognition of online financial scams and fraud. understanding of cybersecurity measures to protect financial data. investment intention attitude towards investing personal predisposition towards or against investing based on perceived risks and benefits. expectations of future financial performance and market conditions. subjective norms influence of social circle and cultural background on investment decisions. impact of media and social media on personal investment trends. perceived behavioral control self-assessed competence in managing investments. confidence in using digital tools to aid investment decisions. perception of control over financial outcomes. data collection was meticulously conducted through a quantitative surveys a to gather comprehensive data. the measures section elaborates on the specific tools and instruments utilized to assess the variables of interest. likert-scale items were employed to measure subjective elements such as satisfaction and perceived value, while objective measures included factual data such as income brackets and employment status. together, these measures provided a robust framework for analyzing the correlation between university education and career outcomes among the alumni. https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 287 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion t-test table 2. coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .238 .118 2.010 .046 financial literacy .046 .046 .066 1.017 .310 digital awareness .263 .103 .165 2.556 .011 a. dependent variable: investment intention the coefficients table shows the direction of the relationship and the significance of the relationship between the variables studied. the table shows that even though there is no significant influence of financial literacy on investment intentions (the b value is positive 0.046), the two variables have a positive relationship, which means that the respondent's perception shows that a good understanding of financial literacy will be able to increase good investment intentions as well (significance level of 0.310). this finding backs up what pitthan and de witte (2021) said about how people who do not know much about money tend to use expensive and risky ways to make money. financial knowledge is believed to lead to better long-term financial health and helps people make better decisions when managing their money. furthermore, it was found that digital awareness had a positive relationship (b value was positive 0.263) and had a significant effect (significance level of 0.011) on investment intentions. respondents believe that digital awareness from now on and in the future will be beneficial or can significantly help make sound investment intentions. previous research has also shown that understanding new features and how to use digital technology will help someone come up with new ideas, even when making business decisions. f-test table 3. anovaa model sum of squares df mean square f sig. 1 regression 1.970 2 .985 4.067 .018b residual 56.925 235 .242 total 58.895 237 a. dependent variable: investment intention b. predictors: (constant), digital awareness, financial literacy the anova table has explained the simultaneous influence of financial literacy and digital awareness variables on investment intentions, with a magnitude of 0.018; this shows that the model formed in this research is excellent. https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 288 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc coefficient determination table 4. model summary model r r square adjusted r square std. error of the estimate 1 .183a .033 .025 .49217 a. predictors: (constant), digital awareness, financial literacy the model summary table shows an r-value of 0.183 or an r square of 0.033. this finding shows that the contribution of the financial literacy and digital awareness variables to investment intention is relatively low, even though the model has been formed from the anova results with a significance level of 0.018. this finding provides input for further research to find other variables influencing investment intention. conclusion based on the data analysis and discussions that have been carried out, the following conclusions are obtained: financial literacy: there is a positive relationship between financial literacy and investment intentions, though there is no significant effect. this means that the higher a person's level of understanding of financial principles, ability to manage finances, and knowledge of investment products, doesn't really contribute to their intention to invest. this shows the importance of financial education for the public to increase participation in investment. digital awareness: digital awareness shows a positive and significant relationship with investment intentions. individuals who have a good understanding of digital technology, including the risks and opportunities that exist in the digital world, tend to be more confident and braver enough to invest through digital platforms. this awareness allows individuals to utilize technology to make informed investment decisions. in the contemporary context, where digital technology increasingly dominates various aspects of our lives, the combination of strong financial literacy and digital awareness is key to guiding individuals in making informed and wise investment decisions. to increase investment intentions among the public, related parties such as the government, financial institutions and educational organizations should focus their efforts on increasing financial literacy and digital awareness. structured educational programs and information campaigns can be the first step in encouraging people to invest wisely. thus, this research contributes to the financial and digital literature by highlighting the importance of financial literacy and digital awareness as supporting factors in increasing investment intentions in society. along with technological developments, it is hoped that society will be increasingly ready to take advantage of investment opportunities with full awareness and policy(harfrank & peschel, 2020). https://www.ilomata.org/index.php/ijtc the impact of financial literacy and digital awareness on investment intentions karundeng, siagian, hutabarat, and pangaribuan 289 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference akhtar, f., & das, n. 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(2021). financial literacy or investment experience: which is more influential in cryptocurrency investment? international journal of bank marketing, 39(7), 1208– 1226. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4, october 2024 page no. 1-20 1 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword masibulele phesa1, sithandiwe mgoyana2 1university of kwazulu natal, south africa 2university of south africa, south africa correspondent: phesam@ukzn.ac.za1 received : september 1, 2024 accepted : october 5, 2024 published : october 31, 2024 citation: phesa, m., mgoyana, s. (2024). assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword. ilomata international journal of tax and accounting, 5(4), 90-109. https://doi.org/10.61194/ijtc.v5i4.1548 abstract: the study delves into the strategic use of impression management within south african district municipalities, examining how this phenomenon manifests in their annual reports, particularly in the mayor’s foreword. these forewords, being the first statement in the annual report, often employ opportunistic and overly optimistic language that can obscure the true state of municipal performance, creating ambiguity for the public. using quantitative content analysis, the research scrutinized annual reports from a sample of 34 district municipalities. the findings revealed significant evidence of impression management tactics. notably, non-performing municipalities tended to produce lengthier mayor’s forewords compared to their performing counterparts. both categories frequently employed passive constructions and personalized references, aiming to shape perceptions and claim credit selectively. by shedding light on these practices, the study adds to the growing discourse on transparency in local governance. it underscores the need for vigilance, warning the public about how such rhetorical strategies can conceal service delivery shortcomings. this research also contributes valuable insights into the mechanisms of self-attribution in government communications, urging citizens to critically evaluate municipal reports. keywords: local government, district municipalities, impression management, audit outcomes this is an open access article under the cc-by 4.0 license. introduction district municipalities are an integral part of the local government in south africa as they are responsible for the proper and effective service delivery not only for themselves but for the local municipalities in their jurisdiction too. district municipalities have been failing to adhere to the mandate of the service delivery due to misuse of resources and political interferences. given the pressure to be seen by the public as delivering services, municipalities tend to engage in impression management to hide their ineffective service delivery. impression management is the way of https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg mailto:phesam@ukzn.ac.za1 https://doi.org/10.61194/ijtc.v5i4.1548 assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 2 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc managing perception of others which can be consciously or unconsciously (landtsheer et al., 2008). this is possible in the annual reports’ narrative disclosures like mayor’s foreword as they are a narrative disclosure which are not audited or have any reporting framework. furthermore, this makes it easy for municipalities to engage in impression management as they know the information, they disclose will not be verified. given that the way and the choice or method of communicating information in the mayor’s foreword is at the discretion of municipalities further exacerbates the issue. use of impression management makes the information communicated to the stakeholders through the annual report unclear and ambiguous. further, the information communicated to the stakeholders becomes inaccurate and incomplete. this weakens the stakeholder’s decision-making process as they will be making decisions based on incomplete and inaccurate information. it is for this reason that this paper intends to assess the use of impression management in mayor’s foreword through length, passive voices, and personal references in south african district municipalities based on attributions theory lens. this study is significant as it is the first of its kind in the local government in south africa. impression management through length, personal references and passive voices has not been done in south africa. this study therefore brings insights into the phenomenon of impression management in south africa to make the users, stakeholders and co-ordinating departments like treasury, office of the premier, department of cooperative government and traditional affairs aware of the use of impression management tactics. hypothesis development impression management is the subject matter of many researchers in different disciplines (phesa, 2021; yasseen et al., 2017). the phenomenon called impression management refers to how organisations make the public perceive them through selective presentation and disclosure of information (leung et al., 2015). organisations want to be perceived as doing great things in the communities they operate in, and they therefore try to impress those communities and societies. organisations portray images expected of them by using tactics of impression management and, as such, stakeholders, the public, and users sit with the impression that the performance of the organisations is within their expectations (hossain et al., 2022). some organisations do this in their annual reports under narrative disclosures. preparation of the annual report is mandatory for municipalities in south africa. the national treasury issued guidance on what should be covered in the annual report, one of the guidelines is that there must be the mayor’s foreword (statement). the mayor’s foreword (statement) is a narrative disclosure. in the national treasury guidelines, there is nothing that guides or governs what should be written or reported in the mayor’s foreword. this leaves the municipality with an option to include anything they want in the mayor’s foreword and not include anything they do not want included. this then makes the mayor’s foreword subject to the tactics of impression management. this paper concentrates on narrative disclosure called mayor’s foreword (statement) found in the annual reports of municipalities in south africa. south african municipal structures act of 1998 categories municipalities into metropolitan municipalities, district municipalities and local municipalities. south africa has 44 district municipalities, and each district municipality has some local municipalities it monitors and assists with service delivery to the public, which makes district https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 3 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc municipalities have significant role in the local government space. municipalities fall under local government. the mandate to respond and act on the community’s needs directly is what makes local government crucial (notsi, 2012). municipalities therefore have a huge responsibility to deliver services to the people, but this has not been happening effectively, given the service delivery protests by communities (nzama, 2019). municipalities are then expected to account to the stakeholders on how they have delivered the services. the municipal council, including the mayor, who plays oversight role over the municipality, is voted for by the people and would therefore do anything possible to impress the people who have voted them into the municipality so that they can elect them again (tagesson et al., 2013). in the local government sphere, stakeholders use the audit outcomes to assess the performance of the municipalities rather than profitability, as the mandate of the municipality is proper service delivery to the public and account for it rather than making profit (mamogale, 2014). the outcomes of the audit are given by the auditor general-south africa(agsa), an audit institution mandated to perform audits in public sector institutions in south africa. stakeholders and the public hold good audit outcomes in the highest regard and they do not take lightly any poor audit performance (sigcau, 2013). poor audit outcomes lead to the stakeholders losing hope and trust in the municipalities. according to the auditor general (2023), district municipalities have improved their audit performance, but their local municipalities have regressed. according to notsi (2012), public sector institutions lack accountability and service delivery and, as such, communities demand greater value for money allocated for service delivery. the institutions trying to address the matter use annual reports to report or to account on what they have done. some of the district municipalities are struggling when it comes to audit performance, and they struggle to deliver the services as they should, owing to misuse of money and, in most cases, poor financial management. as a result, municipal management may employ impression management tactics to omit or include ambiguous information in the annual report, and this can easily be done in the mayor’s foreword (statement). municipalities with poor audit performance may use the mayor’s forward to infuse tactics of impression management to elude from the poor audit outcomes by attributing poor performance to external factors. this paper is based on attribution theory with the intention to see how municipalities attribute unfavourable audit outcomes to external factors and favourable audit outcomes to themselves and how they impress the stakeholders and the users of annual reports. given the challenges that municipalities face, such as poor audit performance, poor financial management and lack of accountability, it is likely that narrative disclosures may contain information that is not complete and accurate (phesa, 2021). this study adopted the honeycomb model for research, which was propounded by (wilson, 2014). the honeycomb model brings differentiation of research methodology and research design, and the latter is described as data collection and analysis frameworks, while research methodologies refer to the ways in which data are collected. impression management tactics involves the manipulation of information to one’s favour making it incomplete and inaccurate. impression management usage causes ambiguity in corporate https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 4 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc reporting, which consequently compromises the user’s decision making abilities (phesa, 2021). the annual report is a tool used as a channel to communicate information to stakeholders and it is generally approved by stakeholders as a channel for the disclosure of information by organisations (moloi & adelowotan, 2018). a municipality may find it convenient to use impression management in the mayor’s foreword as users rely on annual report. in the mayor’s foreword municipalities may disclose information in a way that will position itself favourably even though it is contradictory to the true state of that organisation (roman et al., 2019). as radebe (2021) shows, certain municipalities’ annual reports contained ambiguous terms which were not explained. it is apparent that organisations (including municipalities) manipulate narrative information disclosed in the mayor’s foreword in annual reports, making the information inaccurate and incomplete. this positive bias leads to deception and concealment of information (dhludhlu et al., 2022a). as a result of inaccurate and incomplete information disclosed in mayor’s foreword, the big question is whether the impression management tactics are present in the mayor’s foreword of district municipalities in south africa. accordingly, the paper examined the impression management tactics usage by district municipalities in south africa through the length, the use of passive voice and the use of personal references in their mayor’s foreword (phesa (2021). the paper aimed to expose tactics of impression management used by district municipalities in mayor’s foreword through textual characteristics. to fulfil this, we evaluated the following: • length of the mayor’s foreword • use of passive voices in the mayor’s foreword and, • use of personal references. hypothesis this paper was explanatory; accordingly, it had a hypothesis not the research question. phesa (2021)’s study that observed impression management usage in the top 40 companies listed on the jse was replicated by this paper. the null hypothesis below was followed: h1: “there is no difference in the textual characteristics of the information disclosed in the mayor’s foreword of performing and non – performing south african district municipalities”. the following characteristics are used to analyse the hypothesis in mayor’s foreword, the length, passive voice, and personal reference. below relates to the sub – null hypothesis to be tested in this paper: 1. length of the mayor’s foreword: h.1.1 performing and non-performing south african district municipalities’ mayor’s foreword will have similar length 2. use of passive voice: h1.2 performing and non-performing south african district municipalities’ mayor’s foreword will have similar percentage of passive voice 3. use of personal references: h.1.3 performing and non-performing south african district municipalities’ mayor’s foreword will have similar number of personal references https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 5 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc this paper contributes to the literature by exposing impression management tactics used by south african district municipalities in mayor’s foreword. the paper opens the eyes of the users and stakeholders of the district municipalities to question when reading the mayor’s foreword in the annual report and to always confirm completeness and accuracy of disclosed information. experimental section attribution theory this paper is based on attribution theory. attribution theory has its origins from social psychology (dhludhlu et al., 2022b). it speaks to the description of conduct and the assignment of blame to a person (malle, 2011). attribution theory talks to the allotment of good results to the entity’s own doing and distancing the entity from the bad results, allotting them to external situations (yasseen et al., 2017). organisations management, including the public sector, uses attribution bias to escape the blame for the unfavorable results detailed in the annual report (rodrigues et al., 2021). moreover, organisations management engage in the promotion of positive results and demotion of negative results (beattie & jones, 2000). organisations’ or companies’ outcomes that are not favorable are more assigned to events or situations which are outside the control of the organisation; meanwhile, those that are favorable are attributed to the know-how of the organisation (beattie & jones, 2000). allotting of good results to an entity’s competence and bad results to external situation is considered self-centred, as it describes results in a manner which is only beneficial to the entity (rodrigues et al., 2021). seemingly, organisations intend to be perceived favourably by participating in attributional bias through allotting positive results to their competence and negative results to conditions beyond their control. conversely, it can be argued that attributional bias cannot only be assigned to impression management but can also be assigned to “informational model” and the informational model which shows that people’s nature is always expectant of good results to an extent that when talking about positive results, they will naturally put more praise to themselves as evidence of their good decision making and actions rather than outside help (yasseen et al., 2017). attribution theory goes hand in hand with the impression management psychological and sociological perspective (yasseen et al., 2017). psychological perspective brings into light that management uses tactics of impression management by allotting favourable outcomes to their competence and unfavorable outcomes external conditions since they expect stakeholders to assess decision making ability and actions, whereas the sociological perspective views impression management as response to issues stakeholders or public at large may have about certain outcomes concerning the organisation (dhludhlu et al., 2022b). allotment of positive results to an entity’s own competence is a positive (favourable) attribution bias, and the allotment of negative results to outside situation is a negative (unfavourable) attribution bias (moola, 2016). unfavourable attribution bias can be seen in the form of excuses (attributional), defending innocence, and justifying (brennan & merkl-davies, 2013). attribution excuses relate to organisations bringing to light the unfavourable outcome but never taking responsibility for the outcome but instead attributing it to external issues that they https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 6 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc have no control over (aerts, 2001). defending innocence depicts that the company or organisation is not the cause of the unfavourable outcome; rather, the external conditions are the cause of the unfavourable outcome (yasseen et al. (2017), implying that the organisation wants to be seen as innocent of the unfavourable outcome. justifications depict that organisations or companies acknowledge the responsibility for the unfavourable outcome but reduce its effect by shying away from the unfavourable outcome and focusing on the processes or strategies implemented for the company to achieve favourable outcomes (dhludhlu et al., 2022b) companies employ these kinds of attributional bias to be seen doing well even if in true sense they are not. empirical literature district municipalities district municipalities in south africa are the second biggest in terms of the size after the metropolitan municipalities, which are in eight big cities. however, district municipalities deliver services to many citizens compared to others as south africa is divided into district and local municipalities (magagula et al. (2022), except in only eight cities where there are metropolitan municipalities. every district municipality has some local municipalities that operate under it and these can sometimes be 5 or 6. local municipalities are smaller in size than the district and metropolitan municipalities. district municipalities in south africa have the legislative and executive power in more than one municipality (magagula et al., 2019). district municipalities capacitates local municipalities in their jurisdiction as part of their mandate to ensure proper service delivery at local municipality level which is indirect responsibility of district municipality (magagula et al., 2019). district municipalities are the co-ordinators in a strategic way of the programmes of their local municipalities to ensure proper service delivery (pretorius & schurink, 2007). district municipalities provides capacity building along with integrated district planning and some direct service delivery of water and sanitation for municipalities within their jurisdiction (atkinson et al., 2003). district municipalities have the mandate of developing the bulk infrastructure for the whole district, including local municipalities under their jurisdiction, to ensure proper rendering of services to the public and to enhance the socio economic development of the district (magagula et al., 2022). district municipalities have a very essential role in the enhancement of proper service delivery in local municipalities and have a dominant and significant effect in the local government (magagula et al., 2022). some of the council members in the local municipalities form part of the district council as representatives of their local municipalities so that their local municipalities are represented in the district, which shows that district municipalities have a significant role in local government (scheepers, 2015). seemingly, district municipalities have a bigger mandate compared to the local municipalities as they still need to perform certain service delivery and ensure capacitation on all local municipalities in their jurisdiction, which makes district municipalities more important in the local government. considering the above, district municipalities have https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 7 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc significant role in local government hence this paper focuses on impression management in district municipalities in south africa. annual report annual report is a report that shows the connection between the strategy, governance, performance, and environmental and social and economic state in which an organisation operates (surty et al., 2018). the need for annual report was necessitated by the need of management accountability to the stakeholder (surty et al., 2018). likewise, the demand for accountability, transparency, and stakeholders’ interest on social and environmental matters from management necessitated the need for annual reports (tagesson et al., 2013). there seems to be agreement from the scholars on what an annual report is and why it was introduced. annual report objective is the connection of entity’s financial and non-financial information so that it does not only report on historical financial information but also on the future prospects to give stakeholders adequate information for the assessment of the entity’s performance in the future (cheng et al., 2014). annual reports help the entities to have more organized strategy to corporate reporting in the sense that all problems that may inhibit the entity from reaching its objectives or better performance are covered in the annual report (cheng et al., 2014). similarly, annual reports assist entities in making sustainable decisions and provide stakeholders with information and understanding about the entity’s performance (adams & simnett, 2011). annual reports are well recognized in south africa even in public sector. municipalities are compelled to prepare and publish annual reports on a yearly basis. mayor’s foreword the mayor’s foreword is a narrative disclosure which is in the first chapter of the annual report containing the message from the mayor to the public which makes it significant statement. the mayor’s foreword is important to the public and the municipal stakeholders as it reveals how municipalities conducted their affairs and what their prospects are (radebe, 2021). in south africa, narrative disclosures contained in the annual report like mayor’s foreword in municipalities, are not audited by auditors, auditors only performs a review to confirm consistency with the financial information audited (yasseen et al., 2017). management has the disposition of what to disclose in the narrative disclosures which makes them choose to disclose only information that will posit them favourably (leung et al., 2015). consequently, management disposition is the perpetrator for impression management tactics usage in the mayor’s foreword. this paper therefore examines the presence of impression management tactics in the mayor’s foreword of district municipalities in south africa. impression management the exploration of impression management through research has been executed in different disciplines and industries using different perspectives (beattie & jones, 2000; clatworthy & jones, 2006; phesa, 2021). impression management has its origins from “social psychology” and refers https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 8 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc to the way they present themselves favourably to others so they can be favourably perceived; it is a bias in communities aiming at managing the impressions of how other people see them (yasseen et al., 2017). impression management suggests that entity’s management seeks to ensure they are perceived favourably (leung et al., 2015). sociological literature reveals that impression management is when people respond to the status and compulsion of society to posit themselves favourably. this is the case with entities management when they want to be seen for good results (clatworthy & jones, 2003). beattie and jones (2000) reveals that management magnify good results and demote negative results. management may partake in impression management by obfuscation that is making readability of narrative disclosures poor when the performance is poor (leung et al., 2015). the management of a company may hide bad performance by presenting in the annual report information that is difficult to read and which is not necessarily needed; they can achieve the same effect by making the narratives longer so that the reality of poor performance is lost in the reader’s mind (mankayi et al., 2023). organisations employ assertive impression management strategies to signal and put an emphasis on their favorable performance or good earnings on twitter and they assign the good earnings to themselves through multiple self-presentation sequences (yang & liu, 2017). the study reveals that positive information on social media receives much more engagement than negative news, which makes companies disclose more positive news and less negative news on twitter. the study brings to light that tweets about positive news or tweets about favorable earnings or performance are presented in a larger font size to draw people’s attention. those organisations whose performance has improved or is improving are more triumphed on establishing a positive perception about the organisation on twitter as they successfully mesmerise stakeholders’ attention to take part in their communication on twitter about the favorable financial performance or good earnings (yang & liu, 2017). in addition to this revelation, organisations whose performance has declined are also triumphing in engaging defensive impression management strategies to circumvent stakeholders’ focus on their unfavorable performance and keep their positive reputation or image (yang & liu, 2017). yang and liu (2017) conclude that firms use social media as an opportunity to present themselves in a positive image. this corresponds with jung et al. (2015), who did a study on the corporate use of social media and revealed that organisations use social media platforms as opportunities to portray themselves in a favorable image. inline with the hypothesis we investigated the following variables: length of the mayor’s foreword length of the mayor’s foreword was assessed by looking at the number of words used as well as the number of pages it contains as textual characteristic of impression management (dhludhlu et al., 2022a; phesa, 2021). https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 9 | ilomata international journal of tax & accountinghttps://www.ilomata.org/index.php/ijtc use of passive voice use of passive voice refers to a purposeful or intentional selection of use of sentences in passive form, contrary to active voice, leading to massive ambiguity to the reader. this ambiguity seems to be planned to influence the decisions of the reader. in employing this textual characteristic, a correlation between performing and non-performing district municipalities is established (moola, 2016; yasseen et al., 2017). use of personal reference personal reference use includes the use of “i”, “me”, “my”, “our”, “us”, and “we”. a study by yasseen et al. (2017) has revealed that there is no correlation between companies that made profits and those that did not make profit in relation to the personal reference use. however, phesa (2021) concluded that companies that are not profitable used personal reference more than companies that are profitable. in the current study, use of personal reference was evaluated on the mayor’s foreword in district municipalities in south africa. method research strategy this paper followed the quantitative research method. statistical methods were used to bring about the results on tactics of impression management used on the district municipalities annual reports in south africa, specifically on the mayor’s foreword. quantitative content analysis was used to examine whether district municipality’s performance is in line with the positive or negative attribution to the municipality. the mayor’s foreword was scrutinised to unearth its characteristics in both the performing and non-performing district municipalities in south africa. computerassisted data methods were used. data type and sources the paper used secondary data. annual reports for the 2021/2022 financial period of south african district municipalities were used, and they contained the mayor’s foreword and the audit outcomes amongst other details which were extracted from the websites of the municipalities. to ensure that the study is contemporary, the 2021/2022 financial year was used. the 2021/2022 municipal financial period is from 1-07-2021 to 30-06-2022 for all the municipalities in south africa. audit outcomes were extracted from 2022 general report for municipalities which is found in the auditor general south africa website. annual reports of district municipalities in south africa for the 2021/2022 financial period were extracted from the municipal websites with the mayor’s statement to test the variables together with the audit outcomes to identify both performing and non-performing district municipalities in terms of audit performance. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc population and sampling the population of the study was 44 south african district municipalities. out of the 44 district municipalities, two had no audit outcomes as their audits were not finalised when the general report was issued; therefore, do not have an annual report for 2022 and, as such cannot be part of the analysis. annual reports of the eight municipalities were not found in their websites. the request of their annual reports was done; however, it was also not successful. therefore, the researcher could not get the mayors’ forewords, and they could thus not form part of this analysis. there were 34 district municipalities that that were eventually subject of the study. classification of performing and non-performing district municipalities this paper used audit performance to classify performing and non-performing district municipalities. in local government, stakeholders are concerned about delivery of quality services which is in line with the municipality’s mandate unlike profitability which is the case with companies. according to mamogale (2014), stakeholders measure the performance of municipalities by audit outcomes. the performance of all municipalities including the district ones has empirical essence to public service delivery (mamogale, 2014). clean audit outcomes are perceived by stakeholders as indicators of municipal effectiveness (craig, 2017). seemingly audit performance is a measure for municipal performance. the specific criterion below was used to classify a performing and non-performing district municipality: • district municipalities with clean audit outcomes were classified as performing and • district municipalities with disclaimer audit outcomes, adverse audit outcomes, and qualified audit outcomes were classified as non-performing. further analysis of district municipalities with unqualified outcomes was done based on whether they had improved from the preceding year. consequently, district municipalities with unqualified audit outcomes and have improved from the preceding year were classified as performing meanwhile those who have not improved were classified as non-performing. there were 12 district municipalities with clean audit outcomes, and 5 with unqualified audit outcomes and improved from the preceding year adding up to 17. these were classified as performing district municipalities as specified in the model specification above. district municipalities with disclaimer or adverse or qualified audit outcomes were 8, and there were 9 district municipalities with unqualified with findings audit outcomes and did not improve from the preceding year and were classified as non-performing as specified in model specification. these also added up to 17. annexure of the general report from the auditor general south africa’s website shows improved and not improved municipalities. therefore, analysis of district municipalities was performed on the 17 performing south african district municipalities and 17 non – performing south african district municipalities. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc justification of variables and choice of analysis method below is the description of the variables used and how data were collected and interpreted for each variable. length of the mayor’s forewordthe number of pages and number of words were examined to establish the length of the mayor’s foreword. microsoft word version 365 was used to count the number of words and the number of pages were determined as an absolute number. use of passive voice analysis of passive sentences was done to get percentage of passive sentences in relation to the total sentences in the mayor’s foreword. the percentage was determined using the proofing tool in microsoft word version 365. use of personal referencesmicrosoft word version 365 was used to count the frequency of predefined personal references, which were “i”, “me”, “my”, “our”, “us”, and “we” in the major’s foreword of district municipalities in south africa. a non-parametric test called mann-whitney u test was used. this is because the data were not normally distributed. secondly it was used to test the significant of the difference between performing and non-performing district municipalities. performing and non-performing district municipalities are two independent variables in this study which makes mann-whitney u test appropriate for data analysis in this study. mann-whitney test has been used by many scholars in the impression management research area for instance (clatworthy & jones, 2006; dhludhlu et al., 2022a; phesa & sibanda, 2023; yasseen et al., 2017) result and discussion in this chapter, we present the results of the study from descriptive statistics to the man-whitney u test. the results are presented according to each textual characteristic and relevant hypothesis. length of the mayor’s foreword the hypothesis below was tested through analysing mayor’s foreword for its length: h1.1 the mayor’s foreword of performing and non-performing south african district municipalities will have similar length the length of the mayor’s foreword was considered in terms of number of words and pages. as shown in table 1 below, on average, performing district municipalities had 834 words and 2,3 pages in length, whereas non-performing district municipalities on average had 848 words and 2,2 pages in length. this means non-performing district municipalities had an average of 1,68% more words than performing district municipalities, whereas performing district municipalities had an average of 4,55% more pages than non-performing district municipalities. these results mean that non-performing district municipalities had many words to explain their results to the users of annual reports attributing their bad performance to external factors, concealing the real issues https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc which led to non-performance. stakeholders should therefore be aware of these tactics used by district municipalities as they discourage transparency, stewardship, and accountability of the municipal management to the stakeholders. table 1: length of the mayor’s foreword based on number of words as well as pages n mean standard deviation cv minimum maximum length of the mayor’s foreword in number of words performing 17 834 334 0,400344 404 1 761 nonperforming 17 848 472 0,556479 248 1 960 total 34 1 682 806 0,956823 652 3 721 length of the mayor’s foreword in number of pages performing 17 2,3 1,1 0,480825 1 6 nonperforming 17 2,2 1,4 0,647901 1 6,5 total 34 4,5 2,5 1,128726 2 12,5 source: compiled by researcher mann-whitney test – based on number of words mann-whitney u test, a non-parametric test was used to assess the hypothesis. the analysis, as shown in table 2 beneath, reveals that mayor’s foreword length in words for performing district municipalities had mean rank of 17,94 which is marginally above that of non-performing district municipalities which is 17,06 which is the difference of 5,16%. in addition, performing district municipalities had a sum of ranks equivalent to 305, which is marginally higher than that of nonperforming district municipalities which was equivalent to 290 with the difference of 0,52%. mannwhitney test, as revealed by the statistics u=137.000, z=-0,258, asymp.sig. (2-tailed), had a pvalue of 0,796. accordingly, the p-value of 0,796 (p>0,05) is greater than 0,05, meaning that the variation between these two groups based on length of the mayor’s foreword in words is not significant. hypothesis therefore is acceptable. these results are in line with those of dhludhlu et al. (2022b), who concluded that there was no variation on chairman statements length in words between profitable and non-profitable companies. this is also in line with the results of (yasseen et al., 2017). these results mean that both groups of district municipalities do partake in impression management using many words in the mayor’s foreword either to magnify their performance or to conceal the real issues leading to their poor performance. mann-whitney– length based on number of pages analysis of mayor’s foreword length in pages as shown in table 2 reveals performing district municipalities as having the mean rank of 18,71, which is higher by 14,86% compared to nonperforming, which is 16,29. the analysis further reveals sum of 318 for the performing district municipalities, which is higher by 14,80% compared to non-performing of 277. mann-whitney test statistics revealed that u=124,000, z=-0,717, p=0.473. accordingly, the difference between these two groups based on mayor’s foreword length in pages is not significant. hypothesis https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: researcher’s compilation therefore is accepted. the results align with phesa (2021), who showed no significant difference between profitable and unprofitable companies in terms of chairman statement length in pages. these results mean that municipalities write long pages of mayor’s foreword to sway away user’s attention from non-performance and to over emphasize performance to cover negative aspects so that they are perceived favourably. this has a negative influence on the users of the annual report as it affects their decision making. table 2: length of the mayor’s foreword in words and pages: mann-whitney u test n mean rank sum of ranks length of the mayor’s foreword in number of words performing 17 17,94 305 non-performing 17 17,06 290 mann-whitney u wilcoxon w z asymp.sig. (2tailed) 137,000 290,000 -0,258 0,796 length of the mayor’s foreword in number of pages performing 17 18,71 318 non-performing 17 16,29 277 mann-whitney u wilcoxon w z asymp.sig. (2tailed) 124,000 277,000 -0,717 0,473 source: researcher’s compilation use of passive voice the second hypothesis was tested through passive voice usage analysis: h1.2 performing and non-performing south african district municipalities’ mayor’s foreword will have similar percentage of passive voice the results reveal that both groups used passive voice in their mayor’s foreword. as shown by table 3 below, performing district municipalities’ mayor’s foreword consisted of 17% passive voice usage on average, compared to 24% of non-performing. performing therefore used fewer passive voices than non-performing. performing district municipalities had a maximum of 32% passive voice whereas non-performing consisted of a maximum of 40%. these results mean that non-performing district municipalities wanted the reader to be lost in reading the mayor’s foreword by putting a lot of occurrences and events without attaching to the subject. they are distancing themselves from the message communicated since they have not performed well. table 3: use of passive voice in the mayor’s foreword n mean standard deviation cv minimum maximum use of passive voice in the mayor’s foreword performing 17 17% 9% 49% 0% 32% nonperforming 17 24% 10% 41% 5% 40% total 34 41% 19% 90% 5% 72% https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mann-whitney test – passive voice analysis of the use of passive voice as depicted in table 4 reveals that the mean rank of performing district municipalities is 14,44, which is lower compared to non-performing of 20,56. performing district municipalities had sum of ranks 245,50, which is lower compared to non-performing of 349,50. mann-whitney test statistics revealed that u=92,500, z= -1,794,p= 0,073, as indicated by p greater than 0,05, it means the use of passive voice between these two groups is not significant. hypothesis therefore is accepted. the results are in line with those of yasseen et al. (2017), showing insignificant difference between profitable and unprofitable companies on passive voice usage. these results mean that both groups engaged in impression management even though nonperforming engaged more than performing the difference was not significant between the two. these results are in the same line with those of (moola, 2016). this is against the concept of transparency in which the management of the municipalities needs to be transparent with the stakeholders about the affairs of the municipality. table 4: use of passive voice in the mayor’s foreword mann-whitney u test n mean rank sum of ranks use of passive voice in the mayor’s foreword performing 17 14,44 245,50 non-performing 17 20,56 349,50 mann-whitney u wilcoxon w z asymp.sig. (2tailed) 92,500 245,500 -1,794 0,073 source: researcher’s compilation use of personal references third hypothesis below was tested through personal reference usage analysis: h.1.3 performing and non-performing south african district municipalities’ mayor’s foreword will have similar number of personal references district municipalities’ mayor’s foreword was analysed for use of personal references. these are words like “me, i, us, my, we, our”. the results reveal both groups participated in the use of personal references in their mayor’s foreword. “our” and “we” were the most used personal references in the mayor’s foreword, with an average of 17,8 for performing district municipalities and 24,5 for the non-performing district municipalities. as demonstrated in table 5 below, performing district municipalities used an average of 23,4 personal references in their mayor’s foreword, which is lower compared to the non-performing of 28,4 on average. performing district municipalities had a mayor’s foreword that had maximum of 56 personal references compared to the maximum of 58 in non-performing district municipalities. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5: use of personal reference in the mayor’s foreword n mean standard deviation cv minimum maximum use of personal references in the mayor’s foreword performing 17 23,4 15,2 0,649934 1 56 nonperforming 17 28,4 11,6 0,408202 10 58 total 34 51,8 26,8 1,299867 11 114 source: researcher’s compilation mann-whitney testpersonal references analyses of the use of personal reference as depicted in table 6 reveals the mean rank of 16,09 for performing district municipalities , which is comparatively lower by 17,53% to non-performing of 18,91. performing district municipalities’ sum of ranks was 273,50, which is lower by 17,55% compared to non-performing of 321,50. mann-whitney u test statistics revealed that u=120.500, z=--0,827, p=0,408, given that p is greater than 0,05, the difference between these two groups on the use of personal references is insignificant. hypothesis therefore is accepted. the results are similar to pasko et al. (2020) which revealed that the difference between good performing companies and bad performing companies on the use of personal reference is insignificant. these results are also inline with those of (phesa & sibanda, 2022). these results mean that both groups of district municipalities use personal references to attribute good performance to themselves. municipalities use this strategy so that stakeholders perceive them as doing good which is not good stewardship of the public resources meant for service delivery. the coordinating departments and stakeholders need to be aware of these impression management tactics so that they do not get swayed away from the municipal core issues. table 6: use of personal references, mann-whitney u test n mean rank sum of ranks use of personal references in the mayor’s foreword performing 17 16,09 273,5 non-performing 17 18,91 321,50 mann-whitney u wilcoxon w z asymp.sig. (2tailed) 120,500 273,500 -0,827 0,408 source: researcher’s compilation the results showed that both groups did partake in impression management through textual characteristics by way of length of the mayor’s foreword, use of passive voice in the mayor’s foreword, use of personal references in the mayor’s foreword. the results revealed that mayor’s foreword length for both groups is the same based on number of words and number of pages. this was confirmed through the mann-whitney test, which revealed insignificant variation. the results are similar to yasseen et al. (2017) which indicated insignificant difference on the length of chairman statements. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc both groups used similar percentage of passive voice as there was no significant variation identified through the mann-whitney test. the hypothesis on passive voice therefore was accepted. the results are in line with dhludhlu et al. (2022b), who found insignificant difference between companies that are profitable and those that are not profitable on the use of passive voice. nonperforming district municipalities used more passive voice than performing ones, even though the difference was not significant. this means that non-performing district municipalities are distancing themselves from poor performance. the hypothesis that both groups have the same number of personal references is accepted as there was no significant variation identified by the mann-whitney test. notably, these results are contrary to the findings of a study done in the uk by clatworthy and jones (2006), which indicated significant differences on personal references usage between profitable companies and those that are not, and yasseen et al. (2017) who also found difference that is significant. these results are in line with those of yan et al. (2019) which revealed that personal reference usage in the chief executive officer’s statement is an impression management tactic. this research was grounded in the attribution theory lens. results verified that municipalities allot good results to their competence and distance poor performance from them. this is in the same line of thought with yasseen et al. (2017) who revealed that companies put themselves in a favourably position through allotment of good results to themselves whilst allotting bad results to factors outside the entity. no significant difference was identified in the length of the mayor’s foreword both in number of words and in number of pages between performing and nonperforming district municipalities, in line with previous studies phesa (2021), yasseen et al. (2017), mupedzi et al. (2023), mdhluli et al. (2023), phesa (2022) and dhludhlu et al. (2022b).however, there was insignificant difference in the use of passive voice in the mayor’s foreword for performing and non-performing district municipalities. passive voice is used as an impression management tactic phesa (2021), cen and cai (2014), yasseen et al. (2017) and (phesa & sibanda, 2022). lastly, significant difference was identified in the use of personal references in the mayor’s foreword between performing and non-performing district municipalities. use of personal reference is an impression management tactic, and this finding is consistent with previous studies such as (phesa et al., 2023) it is important to note that these results talk to the impression management employed in the mayor’s foreword section of the annual report. further, not the whole government sphere was used, only district municipalities which were considered playing a significant role. there may or may not be impression management tactics in other sections of the annual report and other government spheres. these results cannot be generalized across the whole public sector sphere , they are relevant for local government, specifically district municipalities in south africa. conclusion the main aim of the paper was to assess the evidence of the use of tactics of impression management by district municipalities in south africa. results revealed that south african district municipalities partook in the use of impression management in mayor’s foreword through length, passive voices, and personal references. in the use of impression management, the results found https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc no significant use between the performing and non-performing district municipalities meaning they have used the impression management to the same extent. three hypotheses of the study are then accepted. to address the problem of accuracy and completeness of information disclosed in the mayor’s foreword it is recommended that the auditor general south africa start to develop and auditing framework to audit mayor’s foreword. additionally, national treasury should use these results to design mayor’s foreword reporting/disclosure tool to be used by all municipalities. this will contribute to curb the use of impression management tactics in mayor’s foreword. auditors should use these results as a basis that the annual report contains information which is incomplete and inaccurate and should therefore verify the information now that they are aware of the impression management tactics. government should use these results to improve the communication in the mayor’s foreword to ensure transparency to all its stakeholders. the coordinating department for local government in its strategic plans should plan to use these results on the methods they should use to curb impression management in local government to ensure transparency, accountability, and proper stewardship by municipal management. references adams, s., & simnett, r. 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(2006). differential patterns of textual characteristics and company performance in the chairman's statement. accounting, auditing & accountability journal, 19(4), 493-511. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg https://doi.org/10.1080/09638180122562 assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 18 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc craig, s. e. (2017). keeping decentralisation in check: an exploration of the relationship between municipal audit outcomes and levels of service delivery in south african local government university of cape town]. dhludhlu, n., phesa, m., & sibanda, m. 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(2018). exploring the risks disclosed in south african technical vocational education and training colleges’ annual reports. southern african journal of accountability and auditing research, 20(1), 115-122. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg https://doi.org/10.3390/risks11030054 assessing impression management in south african district municipalities’ annual reports: a textual characteristics analysis of mayor’s foreword phesa and mgoyana 19 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc moola, m. 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(2017). accounting narratives and impression management on social media. accounting and business research, 47(6), 673-694. yasseen, y., moola-yasseen, m., & padia, n. (2017). a preliminary study into impression management practices in chairman’s statements in south african annual reports: an attribution theory perspective. communicare: journal for communication sciences in southern africa, 36(1), 47-66. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4, october 2024 page no. 1-16 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia eka rosalina politeknik negeri padang correspondent : ekarosalinapnp5@gmail.com received : august 25, 2024 accepted : october 5, 2024 published : october 31, 2024 citation: rosalina, e. (2024). banking on transparency: the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia. ilomata international journal of tax and accounting, 5(4), 116. https://doi.org/10.61194/ijtc.v5i4.1421 abstract: a company's investment decisions and their results determine a company's future cash flows and profitability and profoundly affect its long-term survival and growth. investment optimization must be made because it is the most important management responsibility and a fundamental problem in corporate finance. a company's investment decisions and results determine the company's future cash flow and profitability, and profoundly affect the company's survival, appropriate long-term growth and achieving investment efficiency in the company. this research examines the accrual quality, accounting conservatism and debt maturity on investment efficiency. this test was carried out in a regression manner on manufacturing companies in indonesia. the sample size was 132 out of 174 populations that met the criteria during the 2019 to 2021 fiscal period. the results show that the results of testing the quality of financial reports with accrual quality have a the favorable impact on investment efficacy suggests that the caliber of financial reports a higher source of information and will reduce asymmetric information thereby increasing investment efficiency and also debt maturity does not exert a substantial influence on the efficiency of investment, as the liquidity flow that would otherwise be desirable to invest must ultimately be spent on debt maturity which is quite high keywords: accrual quality, accounting conservatism, debt maturity and investment efficiency this is an open access article under the cc-by 4.0 license. introduction as the global economy continues to evolve within the framework of globalization, the competitive landscape of the business world is becoming increasingly intricate and formidable. this dynamic necessitates that corporate management can administer their organizations with both efficacy and efficiency to realize the objectives delineated by the enterprise. in addition to the intensifying rivalry, the challenges confronting companies are not exclusively attributable to external influences but also stem from internal dynamics within the organization (delima, 2023; haque, 2016). the business sector in indonesia presently faces the imperative to engage in global competition, as the https://www.ilomata.org/index.php/ijtc mailto:ekarosalinapnp5@gmail.com https://doi.org/10.61194/ijtc.v5i4.1421 the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc influx of foreign products threatens to occupy the domestic market share if local offerings fail to measure up in terms of competitiveness. a significant challenge for the business sector amid the competitive landscape in indonesia pertains to the production factor. enhancing production capabilities can be achieved through strategic investments. such investments should not be limited solely to the financial domain, encompassing instruments such as equities and bonds. in the 1950s, company value was equivalent to efficiency (marzuki & wahab, 2018; nurmansyah, 2024). uncertainty related to this policy changes the economic environment in which companies operate, ultimately affecting potential investment efficiency. in an economic context, investment is the placement of funds owned by a company during a certain period with the expectation of a return on value or an increase in value (moreno et al., 2014). if a company delays investment in the face of policy uncertainty, the company may experience lost investment opportunities (ardillah & halim, 2021). uncertainty in economic policy causes company investment levels to be less than optimal, so ownership is important in determining company investment behavior. the most important factor for the successful development of a company is the effective development of investment decisions. the investmemt decision is a commitment of a certain amount of funds to a company to gain benefits in the future and obtain profits and maximize profits from company operational activities and required expenditures from investors and entrepreneurs in purchasing capital in the form of company assets to facilitate the production of goods and services so that they can run following the economy company (cherkasova & rasadi, 2017). the efficacy of investment is intricately connected to corporate expansion. it is fundamentally associated with the organization’s capacity to engage in optimal investment practices as a derivative of growth, fiscal resources, and available investment prospects. in today's increasingly complex business environment and intense global competition, companies face pressure to ensure efficient use of resources and optimal investment. investment efficiency is the key to long-term success for a company, because the correct use of funds can affect the company's financial performance and growth. investment efficiency is efficiency in the capital allocation process according to the basic foundations of economic growth. characteristics in investment choices include institutions (jensen, and meckling, 1976) and behavioral considerations (jensen and meckling, 1994). corporate investment behavior and efficiency have always been hot topics in corporate finance (boubaker et al., 2018). companies allocate financial resources for the production of their goods. such investments are optimally executed to enhance the financial returns of the enterprise. a notable example is pt indofood sukses makmur tbk, which strategically maximizes its production capabilities and augments the integration of technological advancements within its manufacturing processes. pt indofood sukses makmur tbk is equipped with state-of-the-art production facilities that conform to international standards, thereby facilitating the generation of superior quality products with enhanced operational efficiency. the initiatives undertaken by mustika ratu tbk in 2021, as reported by the market.bisnis.com platform, involve leveraging the company's assets by optimizing inherent potential, particularly through the utilization of factory capacity for the production of https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc herbal medicine products, while concurrently advancing the developmental strategy through the effective management of corporate assets. the significance of financial matters report quality in the context of investment efficiency cannot be underestimated. as the main guide for management and company owners, the quality of financial reports plays an important role in determining smart and efficient investment decisions. companies listed on the indonesia stock exchange (idx) have set high standards by preparing quality company financial reports. the caliber of financial statements can be characterized as the information conveyed within the financial report being comprehensible, fulfilling the requirements of its stakeholders in the decision-making process, devoid of deceptive interpretations, substantial inaccuracies, and being trustworthy, thereby facilitating the comparability of the financial report.(hanafi & halim, 2009). (bushman & smith, 2001) shows that companies can reduce information asymmetry by improving the quality of financial reporting. managers are enabled to identify better investment opportunities, higher quality financial reporting increases investment efficiency. (g. c. biddle et al., 2009). the quality of financial reports is measured by measuring accrual quality and accounting conservatism, which both measure the quality of financial reports. regarding the quality of financial reports, determining factors in achieving investment levels include debt maturity, or the term of debt maturity, which plays a significant role in determining the efficiency of a company's investment. this concept refers to the period when a company must repay its debt to creditors. wise management in determining the structure of debt terms can affect the company's cash flow, financial risk, and ability to make long-term investments. therefore, careful analysis of debt maturity is key in evaluating the company's economic policies and their impact on investment efficiency. according to (manuelli, 2019) debt maturity is the maturity period of a company's debt. if a company has long-term debt, it may have more time to use the funds obtained from the debt for investment activities. conversely, if a company has short-term debt, it may face time constraints when using the funds for investment.(suaidah & sebrina, 2020).(ortiz-molina & penas, 2008)propose that shorter debt maturities can be used to reduce the problem of information asymmetry. based on the theoretical model(childs et al., 2005; myers, 1986) it is posited that the increased adaptability associated with shorter maturities enhances the efficiency of investment strategies. the efficiency of a company's investment is directly related to its operating position because investment is made so that the company can survive and grow. however, inefficient investment has become very common in recent times.(c.biddle & hilary, 2006)investment efficiency is likewise a strategic initiative corporate management undertakes to allocate resources judiciously and in alignment with organizational requirements. the use of appropriate resources must accompany a reduction in information asymmetry and conflicts of interest in the company.(firmansyah et al., 2022)the object of this study is the consumer non-cyclical sector companies listed on the indonesia stock exchange for the 2019-2021 period. the enterprises within the consumer non-cyclical sector encompass those involved in the primary consumer goods industry, which includes entities engaged in producing or distributing products and services typically marketed to consumers, specifically those commodities that possess fundamental characteristics rendering them impervious to fluctuations in economic growth. for instance, this https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc category includes retail establishments focused on primary goods, grocery outlets, pharmaceutical dispensaries, and similar entities. based on the phenomena described, the researcher will conduct a study entitled " the influence of accrual quality, accounting conservatism, debt maturity on investment efficiency”. the discussion is based on agency theory. pioneered by jensen and meckling. (jensen & meckling, 1976) conceptualize the corporation as a mechanism that optimises its intrinsic value and financial returns. the attainment of wealth maximization is contingent upon effective coordination and collaborative efforts among the stakeholders associated with the enterprise. nevertheless, the divergent interests of these stakeholders frequently give rise to conflicts of interest, which can be mitigated solely through a combination of ownership and managerial oversight. the self-interested stakeholders are cognizant that their objectives can only be fulfilled through the organisation's continued existence. consequently, they exert effort to ensure the sustainability of the corporation. in summation, agency theory elucidates the dynamics of the interaction between two disparate entities: the principal, or proprietor, and the agent, who bears the responsibility for the administration of the enterprise. investment efficiency is rarely researched because investment efficiency involves many variables and factors that are difficult to measure accurately. investment efficiency is calculated depending on the research context, such as the industrial sector, economic conditions, and government policy. this variation can make it difficult for researchers to generalise findings (he et al., 2019). and the scope of research related to investment efficiency is still narrow. based on the background above, several formulations of the following research problems can be formulated: accrual quality, accounting conservatism and debt maturity structure by looking at the influence on investment efficiency. this research aims to determine accrual quality, accounting conservatism and debt maturity structure by looking at the influence on investment efficiency, researched on consumer sector companies in indonesia. investment efficiency investment constitutes a strategic allocation of financial resources or assets an entity possesses, executed in the present to realise specific profit margins in the foreseeable future. investment can be defined as the deliberate designation or relinquishment of a defined quantum of financial resources in the present, with the anticipation of future profit generation (fajriani, wijaya, & widyastuti., 2021). furthermore, investment can be construed as capital expenditures incurred by firms in procuring goods and production apparatus to augment the production capability of goods and services within the economic landscape (siregar & amalia, 2020; sukirno, 2006). the efficiency of investment indicates the extent to which an investment is effectively employed to fulfill predetermined objectives or goals. within the domain of corporate finance, the efficiency of investment assumes critical significance for maximising corporate value and promoting sustainable economic advancement (jin & yu, 2017). the significance of investment efficiency is underscored by the assertion that (houcinel & kolsi, 2017) managers possess superior knowledge regarding the company’s prospects compared to external stakeholders, enabling them to react judiciously by https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc modulating capital allocation or escalating the cost of capital, which may result in the company forgoing lucrative investment prospects and consequently underinvesting. investment decisionmaking necessitates that a corporation determine how it will allocate a portion of its resources. accrual quality the utilization of accrual quality as an indicator of financial reporting quality is predicated upon the premise that accruals serve as a predictor of prospective cash flows and impart critical insights regarding organizational operations (houcinel and kolsi, 2017). this conceptualization of accrual quality aligns with the framework of the accounting system, which posits that one of the fundamental objectives of financial reporting is to furnish information about the company's operations for the benefit of current investors and management in facilitating rational decisionmaking and evaluating the anticipated cash flows of the enterprise. the integrity of accruals has become synonymous with the integrity of overall earnings. accrual quality represents a significant characteristic of financial reporting quality that emphasizes the precision of accounting information. the rationale for employing accrual quality as an indicator of financial reporting quality is grounded in the assertion that accruals act as a predictor of future cash flows (a. biddle, 2009), in conjunction with essential variables (silaban & dewi, 2023; siregar & nuryanah, 2019), and in adherence to the mcnichols model (2002), which constitutes a regression analysis of working capital accruals about existing, current, and forthcoming cash flows as well as variations in income and property, plant, and equipment (fixed assets). the high quality of financial reporting reflected in accrual quality is imperative for managers to enhance their investment decision-making processes by improving the identification of projects and presenting more relevant accounting figures during internal deliberations (bushman & smith, 2001). in line with research conducted (amrullah & fatima, 2013; dingkorici akasumbawa & haryono, 2021; rahmawati & harto, 2014) which also found that accrual quality has a positive and significant effect on investment efficiency. however, this does not align with research conducted by maulina devi, praptapa, farida. (2023) that accrual quality does not significantly impact investment efficiency, indicating that the quality of financial reporting does not significantly contribute to the considerations made regarding investment opportunities. h1: accrual quality influences investment efficiency accounting conservatism accounting conservatism means applying high verification in delivering good news compared to bad news in user reports. finance. the application of conservative accounting principles in financial statements is a positive signal that management has acted conservatively to prevent exaggerating the company's assets and income. accounting conservatism does not significantly affect investment efficiency; income smoothing still increases the probability of underinvestment, https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc but the effect becomes insignificant.(houcinel & kolsi, 2017)and also in the previous year 2013 (houcine, 2013) with different data statingthat conservatism does not have a significant effect on investment efficiency of companies in the tunisian market, based on us data. positive influence between accounting conservatism on investment efficiency shows that the better the financial reporting quality of a company, the more efficient is investments made by the company(syentia & wahyuni, 2021). h2: accounting conservatism influences investment efficiency debt maturity debt maturity, also known as debt repayment, is the amount of time the business that provided the loan has to repay the debt. the debt maturity structure is very important in finance and risk management because it affects the company's cash flow, risk management and overall financial structure (bhutta, alhares, shahab and tariq., 2022). when companies borrow money, they usually stipulate a certain term in the loan or bond contract, during which they must pay back the amount owed and a predetermined interest. this period can vary from several months to several years, depending on the type of debt and the company's financial strategy. research conducted by (ikhsan & septiana, 2019) the test results show that investment efficiency is unaffected by loan maturity. according to the findings of the study (rahmawati & harto, 2014) research findings indicate that the duration of debt does not exert a substantial influence on the efficacy of investment. short-term financing does not improve investment efficiency because interest rates in indonesia are comparatively higher than those in other markets. this claim is supported by the research that was done by (marsya & dewi, 2022) shows that debt maturity affects investment efficiency. in line with research (cutillas gomariz & sánchez ballesta, 2014). debt maturity is a variable that affects investment efficiency. h3 : debt maturity influences investment efficiency research framework the description of theory and previous research above can be presented in a framework to clarify research with variables that are measurement elements before forming a model. https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. research framework method research model and design the methodology utilized in this study is quantitative, namely a research strategy that looks at a certain population or sample, collects data using specific tools, and analyzes statistical data to describe and test preexisting hypotheses (sugiyono, 2016). find out if accrual quality, accounting conservatism, and loan maturity impact investment efficiency in non-cyclical consumer sector companies listed on the idx in 2019-2021. this research tested a multiple linear regression model, using the spss tool. this research's sample selection criteria are based on the non-cyclical consumer sector for the 2019-2021 period. this selection is based on sector characteristics that tend to show stability in their financial performance regardless of fluctuations in the economic cycle. the research selected companies in this sector listed on the indonesian stock exchange (bei) during that period. focusing on the non-cyclical consumer sector allows research to analyze investment efficiency in stability, where companies tend to show more consistent performance. thus, this research hopes that this sample selection will provide better insight into how financial report quality variables, and good debt maturity affect investment efficiency in the relatively stable environment of the non-cyclical consumer sector during the 2019-2021 period. the enterprises chosen for this study exhibit the following distinct criteria: non-cyclical consumer sector organizations listed on the indonesia stock exchange (idx) within the temporal parameters of 2018 to 2022. (5 years) for the variable about the quality of financial reporting. non-cyclical consumer sector enterprises publicly traded on the idx during the 2019-2021 timeframe (3 years) for the variable concerning company size and debt maturity. non-cyclical consumer sector enterprises that maintained their listing on the idx throughout the 2018-2022 timeframe. noncyclical consumer sector enterprises that have consistently submitted financial reports on the idx over the 2018-2022 timeframe. non-cyclical consumer sector enterprises that have persistently presented financial reports on the idx throughout the 2018-2022 timeframe. https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the demographic examined within this research comprised 122 entities from the non-cyclical consumer sector publicly traded on the idx from 2019 to 2021, employing purposive sampling as the methodological approach. following the established criteria for sampling, the number of companies sampled in this research was 43. the requirements for sampling are non-cyclical consumer sector companies registered on the idx for the 2018-2022 period, non-cyclical consumer sector companies that do not use foreign currency and non-cyclical consumer sector companies with complete financial reports. meanwhile, the observations used in this research were for three years, namely 2019-2021. so the total data used as a sample in this study was 132. the following is the equation of multiple linear regression in this study, namely: y= a + b1x1 +b2x2 +b3x3 information: y = investment efficiency x1 = accrual quality x2 = accounting conservatism x3 = debt maturity a = constants result and discussion the focus of this investigation pertains to the sector of consumer non-cyclical corporations that are publicly traded on the indonesia stock exchange during the period spanning from 2019 to 2021. consumer non-cyclicals sector companies are primary consumer goods sector companies, including enterprises that manufacture or disseminate products and services typically marketed to consumers for essential goods, thereby rendering them relatively insulated from fluctuations in economic growth. for example, primary goods retail companies, food stores, and drug stores. the sample in this study that met the criteria comprised 32 companies. several tests were conducted to determine the feasibility of the data, among others. normality test the assessment of normality aims to determine whether the confounding variables or residuals within the regression framework conform to a normal distribution (ghozali, 2018). the normality assessments employed in this investigation include the probability plot (p-p) normality test and the kolmogorov-smirnov (k-s) non-parametric statistical test. following the successful completion of the normality evaluations with the results: https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2. pp normality test autocorrelation test the autocorrelation test seeks to determine if there is a relationship between the error disturbances in the current period and those in the preceding period within the regression model. (ghozali, 2018). table 1. model summary source: data processed, 2024 based on the value of k = 3 and n = 132, the du value for this regression model shown in the durbin-watson table with a value of α = 5% then the du value is obtained as 1.7691. the durbin watson value in this regression model is between the du statistic and (4-du) which is 2.2309. therefore, it can be stated that this regression model does not exhibit autocorrelation symptoms between one residual variable and another (1.7691 <1.616<2.2309). mulitycollinearity test the general value used is a tolerance value of 0.10 or equal to a vif value > 10, so data unaffected by multicollinearity must have a tolerance value < 0.10 or vif > 10. https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. mulitycollinearity test wca has a tolerance value > 0.10 which is 0.948 and a vif value <10 which is 1.002. noac has a tolerance value > 0.10 which is 0.664 and a vif value <10 which is 1.003. at the same time, debt maturity has a tolerance value > 0.10, 0.687, and a vif value <10, 1.003. it can be concluded that there is no multicollinearity present among the variables. heteroscedasticity test the heteroscedasticity test aims to test for differences in residual variance between observations (ghozali, 2018). figure 3. heteroscedasticity test the data points within this regression paradigm exhibit a distribution encompassing values superior and inferior to the baseline of 0 on the y-axis. therefore, one can deduce that the independent variables integrated into this study's regression model lack heteroscedasticity. hypotesis test multiple linear regression test then, the examination was conducted using a multiple linear regression analysis to determine the degree to which the independent variable influences the dependent variable and the capacity to predict the value of the dependent variable, assuming all values of the independent variables are unstandardized coefficients standardized coefficients model beta t sig tolerance vif 1 (constant) -0.034 0.005 -6.491 0 wca (x1) 0.039 0.015 0.226 2.587 0.011 0.948 1.055 noac (x2) 0.009 0.001 0.099 0.962 0.338 0.687 1.456 stdebt (x3) 0.004 0.004 0.104 0.996 0.321 0.664 1.506 b std error collinearity statistics coefficients https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accessible. the findings of the multiple linear regression analysis are presented in the subsequent table: table 3. multiple linear regression test based on the table as mentioned above, the multiple linear regression model that has been established is delineated as follows: invst= -0.034 + 0.039wca +0.004noac+0.009stdebt from the above multiple linear regression equation, the following interpretation can be derived: a) the constant term (α) of -0.034 indicates that, assuming the independent variables—specifically the quality of financial reporting, organisational scale, and debt maturity—remain unchanged. the magnitude of investment efficiency is -0.032. b) the variable of financial report quality accrual quality exhibits a coefficient value of 0.039, characterised by a positive coefficient. this positive coefficient value suggests a unidirectional relationship between the independent variable, specifically the quality of financial reports, and the dependent variable, investment efficiency; whereby an enhancement in financial reports correlates with an increase in investment efficiency. c) the variable representing accounting conservatism exhibits a coefficient value of 0.004, characterised by a positive coefficient. a positive coefficient value signifies a unidirectional relationship between the independent variable, specifically accounting conservatism, and the dependent variable, investment efficiency, wherein an augmentation in the firm's size correlates with an enhancement in investment efficiency. d) the variable about debt maturity presents a coefficient value of 0.011, with a positive coefficient. this positive coefficient value elucidates a unidirectional relationship between the independent variable, identified as debt maturity, and the dependent variable, investment efficiency, whereby an increase in the debt maturity value leads to a corresponding increase in the investment efficiency value. this implies that a unit increase in debt maturity will yield an increment in investment efficiency quantified at 0.013. unstandardized coefficients b std error 1 (constant) -0.034 0.005 wca (x1) 0.039 0.015 noac (x2) 0.004 0.04 stdebt (x3) 0.009 0.01 model https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc partial test in terms of its influence, regression testing utilizing the t-test with the taking after comes about: table 4. regression the financial report quality accrual quality variable in this regression has a t-value of 3.114 with a significance level of 0.002. the t-value in the variable of financial report quality is greater than the t-table, namely 3.114> 1.9773 and a significance value of 0.011 <0.05. this shows that accrual quality exerts an influence on the efficacy of investment. the findings suggest that elevated accrual quality may facilitate firms in judicious and efficiently executing investments. the caliber of financial statements can mitigate information asymmetry within the organization. when financial reports are presented accurately and transparently, investors can make more efficient investment decisions. accurate and reliable information in financial reports helps investors evaluate company performance, investment risk, and general growth prospects. the accounting conservatism variable in this regression has a tcount value of 0.996 with a significance level of 0.321. the tcount value in the large company size variable from ttable is 0.996 <1.9773 and a significance value of 0.321> 0.05. this shows that accounting conservatism does not affect investment efficiency.. the debt maturity variable in this regression has a t-value of 1.754 with a significance level of 0.082. the t-value for the variable of debt maturity exceeds the threshold established by the t table, specifically 1.754 < 1.9773, accompanied by a significance level of 0.082 > 0.05. this indicates that debt maturity does not exert an influence on investment efficiency. the findings of this research are corroborated by agency theory, which elucidates the dynamics between two entities, namely agents and principals. agents serve as the parties directly engaged in the operational activities of the corporation. and have more information certainly must oversee the utilization of the company's indebtedness in a manner that is advantageous for the principal is paramount. the employment of short-term debt is accompanied by inherent risks, especially if the company cannot renew the debt or interest rates rise. if companies cannot manage short-term debt properly, it can disrupt their financial stability and affect investment efficiency, which is not good. high accrual quality can assist organisations in executing investments judiciously and effectively. superior quality financial statements can also mitigate information asymmetry within the organization. the results of this study are supported by the principles of agency theory, which elucidates the dynamics between two entities, specifically agents and principals. elevated accrual quality can aid in diminishing information asymmetry between stakeholders and management. financial statements can enhance stakeholders' comprehension of organizational performance and promote improved decision-making processes by delivering precise, pertinent, and dependable unstandardized coefficients model t sig tolerance vif 1 (constant) -6.491 0 wca (x1) 2.587 0.011 0.948 1.055 noac (x2) 0.962 0.338 0.687 1.456 stdebt (x3) 0.996 0.321 0.664 1.506 collinearity statistics coefficients https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc information. accrual quality contributes to increasing investment efficiency. higher accrual quality will help managers make investment decisions with better project identification (bushman & smith, 2001; mcnichols & stubben, 2008). the results are in line with the results of research conducted (amrullah & fatima, 2013; christine & yanti, 2017; rahmawati & harto, 2014) which also found the empirical evidence suggests that accrual quality exerts a positive and statistically significant influence on the efficiency of investments. these findings imply that elevated levels of accrual quality may help organizations execute their investment strategies in a manner that is both appropriate and efficient. this study on the h2 hypothesis is supported by agency theory, which elucidates the dynamics of the interaction between two entities, namely agents and principals. agents as parties who are directly involved in the company's operations and have more information certainly have the responsibility to manage assets so that they are also profitable for the principal. it shows that accounting conservatism tends to slow down or delay revenue recognition and recognise losses more quickly, thus creating a more cautious picture of a company's financial health. although this can affect financial statements, accounting conservatism does not directly affect investment efficiency because it affects growth prospects. the results align with research conducted by patricia & rusmanto, (2022) which stated that accounting conservatism does not exert a considerable influence on the efficacy of investment. short-term debt is also risky, especially if the company cannot renew the debt or if interest rates rise suddenly. if companies cannot manage short-term debt well, it can disrupt their financial stability and affect investment efficiency, which is not good. this is supported by the theory proposed by sukirno (2006), who states that interest rates mainly determine investment. if interest rates are high, the amount of investment will decrease, conversely, if interest rates are low, it will encourage more investment. the findings from this investigation align with prior research conducted by rahmawati and harto (2014), which indicates that debt maturity does not exert a statistically significant influence on investment efficiency. using short-term debt fails to enhance investment efficiency due to indonesia's comparatively elevated interest rates in contrast to those observed in foreign markets. conclusion based on the thorough examination of statistical outcomes and data assessment that has been performed, it can be inferred that the quality of financial disclosures considerably affects investment efficiency among non-cyclical consumer sector firms listed on the indonesia stock exchange. in contrast, the duration of debt does not significantly influence investment efficiency within non-cyclical consumer sector companies listed on the indonesia stock exchange. these results imply that enhanced accrual quality can aid organizations in executing investments in a manner that is both suitable and efficient. moreover, superior quality of financial reporting can alleviate information asymmetry within the organization.. the outcomes of this research are substantiated by agency theory, which elucidates the dynamics between two entities, specifically agents and principals. enhanced accrual quality can assist in diminishing information asymmetry https://www.ilomata.org/index.php/ijtc the influence of accrual quality, accounting conservatism and debt maturity on investment efficiency in consumer sector companies in indonesia rosaliana 14 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc between proprietors and management. accounting conservatism does not affect investment efficiency because it affects growth prospects, risks, and macroeconomic factors. although accounting conservatism can affect investor and creditor perceptions of a company's financial stability, a company's intrinsic value depends more on its ability to generate sustainable profits and sustainable growth in the future. there are other factors that investors should consider when assessing accounting conservatism in a company. investors do not see the accounting conservatism applied by the company, so the stock market price does not increase, resulting in the principle of accounting conservatism not affecting investors' assessment of the company. short-term debt is also risky, especially if the company cannot renew the debt or if interest rates rise suddenly. if companies cannot manage short-term debt well, it can negatively disrupt their financial stability and affect investment efficiency. the theory supports this, as suggested by sukirno (2006), who states that interest rates mainly determine investment. if interest rates are high, investment will decrease; conversely, if interest rates are low, it will encourage more investment. this research only examines the financial sector and also only one sector as the object of this research, where it would be better for this research also to test how investment efficiency is in other sectors listed on the indonesia stock exchange. also, time limitations cause this research only to examine research from 2019-2021. future researchers are expected to be able to conduct tests on other sectors and the financial company sector listed on the indonesian stock exchange to provide different and more accurate results. it is hoped that it will be able to add other independent variables related to investment efficiency as seen from other sectors, such as internal companies apart from financial reports, and external sectors, such as the impact on regulations in force in indonesia, so that it can provide different and more accurate results. reference ardillah, k., & halim, y. 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(2021). financial reporting quality, pengungkapan corporate social responsibility (csr), dan efisiensi investasi. invest : jurnal inovasi bisnis dan akuntansi, 2(2), 149–163. https://doi.org/10.55583/invest.v2i2.183 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 535-553 535 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc detection of the effects of hexagon fraud theory on financial statement fraudulent aisyah putri ramadhanty1, tika septiani2 12universitas swadaya gunung jati, indonesian correspondent: ramadhantyaisyahputri@gmail.com1 received : march 9, 2024 accepted : april 20, 2024 published : april 30, 2024 citation: ramadhanty, a, p., septiani, t. (2024). detection of the effects of hexagon fraud theory on financial statement fraudulent. ilomata international journal of tax and accounting, 5(2), 535-553. https://doi.org/10.61194/ijtc.v5i2.1195 abstract: the incidence of fraud has been increasing steadily over the years, with the most detrimental kind being financial statement fraud, leading to significant losses for both the company and the users of financial statements. the results of research provide information about the possibility of corporate fraud for the investors and the stakeholders to take better conclusions. two very popular concepts for identifying profit manipulation in companies and understanding the motivations of fraud are the m beneish model and fraud theory. the population used in research is 128 financial companies listed on the idx for the 20222023 period. the method used in this research is quantitative research method and uses logistic regression analysis in analyzing data. the results showed that financial targets and external pressures, ininfluenceive supervision, ceo tenure, arrogance and collusion had no influence on financial reporting fraud. however, total accrual ratio has an influence on fraudulent financial statements. keywords: beneish m-score financial statement fraud, hexagon fraud this is an open access article under the cc-by 4.0 license. introduction financial reporting include data that provides an overview of a company's financial performance and current state. the data in financial statements is presented and compiled based on financial accounting data. although these reports are made in accordance with strict legal requirements and strict reporting standards and are subject to external audits, there are various reasons why accounting data and financial statements can be manipulated and misused to create the desired picture of the company. accounting fraud and manipulation of financial statements can jeopardize overall management analysis. (luty, 2022) fraud is a global phenomenon (elsayed, 2017). according acfe (2022), fraud represents the most prevalent and costly form of financial crime globally. this is a truly international issue and plagues organizations in every region and industry. not only in companies, fraud has become a big problem for the financial industry and the tax https://www.ilomata.org/index.php/ijtc mailto:ramadhantyaisyahputri@gmail.com https://doi.org/10.61194/ijtc.v5i2.1195 detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 536 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sector. over the past few years, the financial and fiscal sectors have become two important forces that play a crucial role in the economy and development. therefore, the many scandals and crimes that occur in these two sectors cause concern for the government. the reason is, many cases of fraud or fraud in the country throughout 2021-2022 have occurred recently. since 2021–2022, the financial services sector has faced losses of idr 123.51 trillion due to fraud (source: ojk). in 2022, there were a total of 97 instances of fraudulent or unlawful investments, 619 instances of illicit online loans, and 62 instances of illegal pawnshops. according to the asia-pacific occupational fraud 2022: a report to the nations release from the association of certified fraud examiners (acfe), in 2022, indonesia was rated fourth among countries with the highest number of fraud cases, totaling 23 instances. in indonesia, the prevalent fraudulent activities are corruption, accounting for 64% of cases, followed by the misappropriation of state and corporate assets, accounting for 28.9% of cases, and financial statement fraud, accounting for 6.7% of cases. large-scale fraud occurred to pt asabri with state losses according to bpk (financial audit agency) amounting to rp 22.78 trillion, pt jiwasraya rp 16.81 trillion and the latest fraud at pt indosurya inti finance, which according to financial transaction reporting and analysis center (ppatk) causing customer losses of rp 106 trillion. after the reform, after the century bank scandal, this is the most astonishing fraud in the financial services sector. the century scandal was treated with a bailout of rp 6.7 trillion, while jiwasraya was cured with a bailout of rp 22 trillion from apbn (state revenue and expenditure budget). from the various scandals experienced by the country, it will have an impact on the people where the budget that should be used for the welfare of the people, is instead used to save financial institutions that are hit by fraud. with the rampant news of fraud that has befallen the financial industry that has occurred, this sereach aimed to detect fraudulent acts in financial sector companies listed on the idx in 20202023 by using the perspective of the latest fraud hexagon theory to detect these fraudulent acts. agency theory an agency theory developed by (jensen and meckling 1976), it describes a contextual connection between principal and agent, i.e. a relationship involving two or more persons, groups or organisations. the principal is the party that has the right to make decisions for the future interests of the company and to provide responsibility to another party (agent). according to eisenhardt (1989), there are two perspectives on the theory of agency: the principal-agent theory of agency and the positivist theory of agency. according to the research conducted by the principal agents, there are two possible problems associated with the agency: the sharing of the risk and the monitoring of the agent. these two problems are intertwined because differences in risk sharing lead to information asymmetry, which in turn makes it more difficult for principals to observe agent behavior. an ideal agreement between principal and agent is difficult to achieve due to changes in the perceived and actual sharing of risk. positivist agency theory centers on critical governance mechanisms that limit self-serving behavior.(bendickson dkk. 2016). https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 537 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial statement fraud the definition of accounting fraud according to international auditing standard no. 240 is “deliberate actions taken by one or more persons in the management team by publishing misleading financial reports to avoid negative opinions on the stability and financial performance of a company, where those responsible for the governance of the entity, employees, or third parties, involve the use of fraud to obtain unfair advantages or illegal advantages”. the financial services authority (ojk), which supervises indonesia's public enterprises, may suffer losses from financial statement fraud, which could also undermine public confidence in the agency. consequently, preventive measures are needed to address fraud issues. the measures include the use of an innovative model called s.c.c.o.r.e., which is an acronym that stands for stimulus, capability, collusion, opportunity, rationalization, and ego.(lionardi & suhartono, n.d.) fraud hexagon theory acfe (association of certified fraud examiners) classifies fraudulent schemes into a major category known as the “tree of fraud” (fraud tree). the fraud tree categorizes fraud into three main types: financial statement fraud, corruption, and misappropriation of assets. according to vousinas, the hexagon fraud theory, proposed in 2019, offers a comprehensive framework for understanding fraud. the theory posits that fraud may be explained by its constituent elements, namely stimulus, capability, collusion, opportunity, rationalization, and ego (s.c.c.o.r.e). this model is derived on the fraud triangle and expands upon it by introducing the fraud diamond. it highlights the significance of the ego factor in motivating individuals to engage in fraudulent activities.(vousinas, 2019) figure 1: the fraud hexagon source: the s.c.o.r.e. model represents an advancement in the theory of fraud. hypothesis development h1 the influence of financial targets on financial statement fraud apriliana & agustina, 2017 in (wicaksono & suryandari, 2021) said a financial objective, often known as a financial measure, refers to a predetermined level of corporate profits established by the agent. (jensen and meckling 1976) propose the presence of a connection between financial aims and agency theory, which elucidates the interaction between management as agents and shareholders as principals. https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 538 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the corporation endeavors to attain ambitious profit targets in order to secure substantial investments from stakeholders. consequently, setting ambitious financial goals amplifies the stress on management and incentivizes them to engage in fraudulent activities by producing misleading financial reports that do not align with the true condition of the company. thus, the higher the financial target obtained, the more fraud is committed by management. consequently, financial targets are quantified by means of the ratio of change in total assets, which can be employed to describe the company's asset growth ratio. the ratio in question, which assesses the effectiveness of a company in utilizing its assets to generate sales and profits, considers the variations in total assets over a certain period. this ratio also helps in knowing how influenceive the company is in managing and developing its assets to improve financial performance. a financial target is a company's objective to generate the greatest possible profit. in this case, the profitability of the company can be quantified using the roa (return on assets) metric.(fitriyah and novita 2021). roa, or return on assets, is a financial ratio used to calculate the amount of profit that can be obtained by a company from its assets. in accordance with the fraud hexagon theory, the profit target set by the company can induce pressure, which may ultimately result in financial statement fraud. this is because the individual may feel compelled to engage in fraudulent activities in order to achieve the desired target.(setyono et al., 2023) 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 h2 the influence of external pressure on financial statement fraud the term “external pressure’’ is employed to describe pressure originating from external sources, that is, sources external to the company. when companies struggle to pay high-risk credit debt, they experience pressure from outside sources. lenders will not lend money to companies with higher credit risk. in competition with other businesses, they invest more funds in operational financing. consequently, in order to be competitive, management must sustain the company's success. additionally, companies are compelled to provide correct financial information in order to persuade outside parties that they can repay the debts they have taken out. (skousen, smith, and wright 2009). a company with a higher leverage ratio may give rise to concerns among creditors regarding the viability of lending capital to the company.(fitriyah & novita, 2021) a corporation is said to have a high leverage value if it has a high level of risk and a significant quantity of debt. this creates a situation in which the possibility that the business will be unable to repay its debt is a concern for the lender or other interested party. in such circumstances, the corporation will attempt to conceal this by engaging in deception, leading users of financial statements to believe that the business can make loan repayments on schedule. consequently, corporations with high leverage figures are significantly more likely to engage in financial statement fraud.(fatkhurrizqi & nahar, 2021) this is related to the concept of agency theory, which posits a divergence of interests between management and the principal. in order to facilitate business development, the principal will require the management to obtain additional capital from third parties or external sources. in order https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 539 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to prevent the management from feeling pressured by the principal's demands. in order to appear satisfactory and meet the demands of external parties, the company's management engages in financial statement fraud.(dini febriani et al., 2023) 𝐿𝐸𝑉 = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 h3 influence of ininfluenceive monitoring on financial statement fraud an opportunity is a circumstance that allows for the perpetration of a fraud. the perpetrator believes that the fraud can be carried out undetected. it should be noted that the opportunity must be seen as real by the perpetrator, in the sense that the opportunity is not implicit. previous studies on fraud have shown that the position and authority that a person has within the company can also provide opportunities. fraud opportunities can arise due to ineffective monitoring. ineffective monitoring occurs when the supervisory role of an organization is not functioning correctly(andrew et al., 2022). this may be attributed to the monopolistic control of management, leading to ineffective supervision of financial statements and internal controls. the ineffectiveness of the supervisory function can be attributed to the absence of internal control, which creates chances for individuals to alter financial accounts. in the supervision of the company is very closely related to the board of commissioners. action fraud in in company could prevented with the more big ratio board of commissioners.(julia & yunita, 2022) the effectiveness of monitoring can be assessed by calculating the proportion of independent directors out of the total number of directors. there is a positive correlation between the proportion of independent directors on the board and the effectiveness of management oversight, as well as an increased probability of financial reporting fraud. (handoko, 2021). the establishment of an independent board of commissioners external to the company will enhance the efficacy of financial statement supervision, thereby reducing the likelihood of financial statement fraud.(wilantari & ariyanto, 2023) 𝐵𝐷𝑂𝑈𝐵𝑇 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐼𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝐵𝑜𝑎𝑟𝑑 𝑜𝑓 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝐵𝑜𝑎𝑟𝑑 𝑜𝑓 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 h4 the influence of rationalization on financial statement fraud the rationalization based on research (tugas, 2012) posits that the top management has convinced themselves that the fraudulent behavior they engage in is a worthy risk.the belief that someone can commit fraud is part of rationalization. many scammers think of themselves as honest ordinary people rather than criminals. some people rationalize their cheating behavior by reframing their definition of error to exclude their own actions. in accordance with research findings (christian & visakha, 2021) they should also provide reasons to make fraudulent actions more acceptable to them. therefore, they can ignore values and ethics and commit wrong actions because they consider them natural or harmless. https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 540 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc according to albrecht, the phenomenon of financial statement fraud can be attributed to a number of factors that motivate management to engage in fraudulent activity. one example is the total accrual ratio that can predict the likelihood of fraud. this ratio shows the subjectivity of decision-making by management which is reflected in the use of accruals in financial statements (oktarigusta, 2017). thus, rationalization becomes a mechanism used by individuals to justify unethical behavior, such as financial statement fraud, by providing socially acceptable reasons. (lastanti et al., 2022). management that commits accrual accounting fraud will increase profits by including future income in current income. this is done with the intention that his performance in the company is good.(agustin, yufantria, and ameraldo 2022). 𝑇𝐴𝑇𝐴 = 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 − 𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 h5 the influence of capability on financial statement fraud capability refers to the inherent qualities and abilities possessed by an individual that significantly influence the likelihood of fraud occurring when there is pressure, opportunity, and reasoning. it is unlikely that there will be significant instances of financial statement fraud, particularly involving billions of dollars, without the involvement of individuals with the requisite capabilities to implement the fraud. opportunities will open doors, and incentives and justifications will lead potential fraudsters to open loopholes, but the perpetrator also needs to have the ability to get through those loopholes. one of the capacities that encourages the management of a company to commit fraud is changing the term of office of directors. ceo tenure is the length of time a ceo stays with an organization. the longer the ceo serves, the more informed decisions he can make about the company he leads. decisions about the company he leads(suryakusuma & stephanus, 2023) a tenure of directors that exceeds six years has the potential to commit fraud because a long tenure can result in an adjustment period that triggers financial statement fraud. this is due to the fact that at this time, the company is typically experiencing a period of instability that has prevented the new director from meeting the principal's expectations. (wolfe & hermanson, 2004). a longer tenure for the ceo will result in a concentration of power, which will have an impact on the performance of the audit committee and the company's internal auditors. given the centralized nature of power, there is a possibility that this will result in an increase in the incidence of financial statement fraud. (wang et al., 2017). h6 the influence of ego/arrogance on financial statement fraud in accordance with freud's theory, the ego is a component of personality that serves as a mediator between the id (lust) and the superego (moral values). the ego seeks to meet the needs of the id without interfering with the moral values of the superego. the ego also serves as human awareness of the reality of the world. e. stotland (1977) proposes that the primary motivating factor behind white-collar crime defined by its perpetrators as economic abuse perpetrated through a combination of fraud, deceit, and collusion is a sense of superiority, dominance, and admiration of others. https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 541 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc situngkir and triyanto,2020 in (achmad, ghozali, rahardian, et al., 2022) declaring that the likelihood of fraud can be influenced by an extremely haughty demeanor. added by (lionardi & suhartono, n.d.) internal control is also meaningless to the ceo because of his rank and position, which makes him feel superior. the growing prevalence of ceo photographs in financial statements may contribute to the perception that ceos are more conceited. the ceo's ambition to become more well-known by flaunting his numerous positions inside the company is the reasoning. the ceo is thought to possess a haughty or conceited demeanor (pricewaterhousecoopers 2020). h7 the influence of collusion on financial statement fraud collusion refers to the deliberate agreement between two or more individuals to deceive a third party and deprive them of their rightful entitlements. collusion facilitates collaboration among fraudsters, resulting in the execution of an extensive fraudulent plan and inflicting significant financial damages upon the victims of fraud. collusion is a further contributing factor that might generate fraud. (vousinas, 2019) according to sari & nugroho 2020 in (mukhtaruddin et al., 2020) the collusion observed through the collaboration between private companies and government projects demonstrates that seeking partnerships with government projects motivates companies to strive for strong financial performance in order to secure approval for collaboration. according to (sagala & siagian, 2021), the government project referred to here is the acquisition of cooperation between the enterprise and the government project. the larger the scale of government project cooperation between the enterprise and the government, the larger the financial income received by the enterprise. this is supported by a study (permata sari & kurniawan nugroho, n.d.), which provides empirical evidence that the acquisition of cooperation in government projects leads to companies' efforts to participate in the project. in general, companies receive large revenues, which indicate good corporate performance and are communicated through the company's annual report. method the author employed a quantitative research methodology in their study. quantitative research methods are research methods that adhere to the philosophy of positivism. they are employed to study specific populations or specimens, collect data using research tools, perform quantitative/statistical data analysis, and test pre-defined hypotheses. the analysis of research data involves the utilization of the spss version 22 software for quantitative data analysis. logistic regression analysis is used in research when the dependent variable is categorical or binary, rather than assuming that the independent variables follow a normal distribution. the research focuses on financial organizations that are publicly traded on the indonesia stock exchange throughout the period from 2022 to 2023. the research employs purposive sampling as the sample technique. purposive sampling, as defined by sugiyono (2019), is a method used to select samples based on specific criteria or considerations. research relies on secondary data sources. the research data is sourced from audited financial statements and annual reports of https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 542 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial sector companies listed on the indonesian stock exchange (idx) for the periods of 2022-2023. the official idx website, www.idx.co.id, is used to access this information. source: author calculation 2024 variable dependen the beneish model enables the measurement of the dependent variable, which can differentiate between companies that may be engaged in fraudulent activities and those that are not. this differentiation is achieved by identifying instances of profit manipulation through the m-score. an m score of greater than -2.22 indicates that the company (may) manipulate its financial statements. conversely, an m-score below -2.22 indicates that the company is not doing any manipulation. using this, companies that are suspected of cheating are given a score of ‘’1”, while companies that are not are given a score of “0’’. (alfarago & mabrur, 2022) the m-score is calculated using the following formula: 𝑀 − 𝑆𝑐𝑜𝑟𝑒 = −4.84 + 0.92 ∗ 𝐷𝑆𝑅𝐼 + 0.52 ∗ 𝐺𝑀𝐼 + 0.404 ∗ 𝐴𝑄𝐼 + 0.892 ∗ 𝑆𝐺𝐼 + 0.115 ∗ 𝐷𝐸𝑃𝐼 – 0.172 ∗ 𝑆𝐺𝐴𝐼 + 4.679 ∗ 𝑇𝐴𝑇𝐴 – 0.327 ∗ 𝐿𝑉𝐺𝐼. dependent variable measurements: 1. days sales receivable index (dsri) this variable is a ratio of the comparison between sales and receivables from the first year and the second year. it is used to measure whether income and receivables are in balance for two consecutive years. the following is the formula for calculating the dsri ratio based on (beneish, n.d.) 𝐷𝑆𝑅𝐼 = 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑡 /𝑆𝑎𝑙𝑒𝑠𝑡 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑡−1 /𝑆𝑎𝑙𝑒𝑠𝑡−1 table 1: sample determination criteria total population: a list of financial sector companies that have been admitted to the idx for the 2022-2023 period. 105 does not fulfil sample criteria financial sector companies that experienced delisting during the period 2022-2023 consecutively (8) incomplete data related to research variables are presented in the annual reports for the period 2022-2023 consecutively (33) number of companies in the research sample 64 number of research periods (2022-2023) 2 the number of observations of research data in accordance with the specified criteria is 64 x 2. 128 total 128 https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 543 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. gross margin index (gmi) the gross margin index (gmi) is defined as the ratio of sales minus selling, general, and administrative expenses for sales in year t to the same ratio in year t-1. the formula for calculating the gmi ratio is as follows (beneish, n.d.): 𝐺𝑀𝐼 = (𝑆𝑎𝑙𝑒𝑠 𝑡−1 − 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑 𝑆𝑜𝑙𝑑𝑡−1)/𝑆𝑎𝑙𝑒𝑠 𝑡−1 (𝑆𝑎𝑙𝑒𝑠 𝑡 − 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑 𝑆𝑜𝑙𝑑𝑡)/𝑆𝑎𝑙𝑒𝑠 𝑡 3. asset quality index (aqi) the asset quality index is defined as the ratio of non-currency assets, excluding property, plant, and equipment (pp&e), to the total value of assets. a higher ratio indicates a greater likelihood of cost reduction. the following is the formula for calculating the aqi ratio, as proposed by (beneish, n.d.): 𝐴𝑄𝐼 = 1 − (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑡 + 𝑃𝑃&𝐸)/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝑡 1 − (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑡−1 + 𝑃𝑃&𝐸)/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑡−1 4. sales growth index (sgi) the sales growth index (sgi) is a comparison between the current year's sales and the previous year's sales. the following is the formula for calculating the sgi ratio, as proposed by (beneish, n.d.): 𝑆𝐺𝐼 = 𝑆𝑎𝑙𝑒𝑠 𝑡 𝑆𝑎𝑙𝑒𝑠 𝑡−1 5. depreciation index (depi) this indicator is to compare the depreciation rate of fixed assets for the previous year with the current year. the formula for calculating the depi ratio is as follows (beneish, n.d.): 𝐷𝐸𝑃𝐼 = 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑡−1 / (𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑡−1 + 𝑃𝑃&𝐸𝑡−1 ) 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑡 / (𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑡 + 𝑃𝑃&𝐸𝑡 ) 6. sales, general and administrative expenses index (sgai) this indicator is designed to assess the degree to which the ratio of sales, general expenses, and administration to sales in the current year differs from that of the previous year. the formula for calculating the sgai ratio is as follows (beneish, n.d.): 𝑆𝐺𝐴𝐼 = 𝑆𝑎𝑙𝑒𝑠, 𝐺𝑒𝑛𝑒𝑟𝑎𝑙 𝑎𝑛𝑑 𝐴𝑑𝑚. 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑡𝑡 /𝑆𝑎𝑙𝑒𝑠 𝑡 𝑆𝑎𝑙𝑒𝑠, 𝐺𝑒𝑛𝑒𝑟𝑎𝑙 𝑎𝑛𝑑 𝐴𝑑𝑚. 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑡𝑡−1 /𝑆𝑎𝑙𝑒𝑠 𝑡−1 7. laverage index this indicator is used to quantify the rate of change in the ratio of total debt to total assets over the course of the current and prior years. the formula for calculating the lvgi ratio, as proposed by (beneish, n.d.), is as follows: https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 544 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 𝐿𝑉𝐺𝐼 = (𝐿𝑇𝐷 𝑇 + 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦𝑡 )/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝑡 (𝐿𝑇𝐷 𝑇 + 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦𝑡−1 )/𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠𝑡−1 8. total acrual to total assets (tata) this indicator measures the quality of sales cash flow, the extent to which sales are generated in operating cash. the formula for calculating the tata ratio, as proposed by (beneish, n.d.), is as follows: 𝑇𝐴𝑇𝐴 = 𝐼𝑛𝑐𝑜𝑚𝑒 𝑓𝑟𝑜𝑚 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑡 − 𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 table 2: independent variable source: author calculation 2024 variable definisi operasional variable measurement skala frauduent financial reporting submission of material misrepresentat ion beneish model ratio finantial target kondisi pertumbuhan asset 𝑅𝑂𝐴 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 ratio external pressure pressure from third parties to management 𝐿𝐸𝑉 = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 ratio ininfluenceiv e monitoring ininfluenceive ness of the company's supervision system 𝐵𝐷𝑂𝑈𝐵𝑇 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐼𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝐵𝑜𝑎𝑟𝑑 𝑜𝑓 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝐵𝑜𝑎𝑟𝑑 𝑜𝑓 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 ratio total acrual ratio total accrual ratio 𝑇𝐴𝑇𝐴 = 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑛 𝑆𝑎𝑙𝑒𝑠 − 𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 ratio ceo’s tenure term of office of ceo the dummy variable is given code 1 if the director has a term of office > 6 th for the 2022-20223 period, and code 0 if it is the other way around nomi nal number of pictures of the ceo number of ceo images that are installed the number of images of ceo included in the annual financial report is to be determined. nomi nal cooperatio n with governme nt project cooperation with the government the dummy variable will be coded as 1 if there is a cooperative correlation from the company and the governing council during the 2022-2023 period, and code 0 otherwise. nomi nal https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 545 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc results and discussion the statistical results are presented in a descriptive manner source: spss output, processed by researchers (2024) the analysis results indicate that the mean value of the dependent variable, fraudulent financial reporting of financial sector companies, is 0.57. this suggests that the level of potential fraudulent financial reporting in these companies is relatively high. specifically, any m-score value > -2.22 has the potential to manipulate financial data. the stimulus proxied by the target financial which is assessed with the total asset ratio has an average value of 0.1757, meaning that the company's ability to generate profit is still quite low, which is 17.57%. the stimulus proxied by external pressure, which is assessed by the total debt ratio, has an average value of 0.5911. this suggests that, on average, the corporation maintains a financial structure that consists of 59% debt. the measure of opportunity, represented by influential monitoring, is determined by the average value of 0.4951 for the proportion of the board of commissioners. this indicates that, on average, the proportion of independent commissioners on the board is around 50%. the total accrual ratio acts as a substitute for rationalization, with an average value of 0.0463, suggesting that the company's accounting conservatism is somewhat weak. the term of office of directors of a firm, which represents their capability, has an average value of 0.34. this indicates that the majority of corporations have a relatively brief term of office. the ego, represented by the cumulative count of photographs featuring the ceo in the annual report, exhibits a relatively elevated mean value of 1.94. the collusion, facilitated through collaboration between the company and the government, has a relatively low average value of 0.17. this indicates that only a small number of sample companies engage in cooperation with the government. logistic regression analysis and hypothesis testing. assessing the overall model table 3 : descriptive statistics n range minimum maximum mean std. deviation roa 128 1,22 ,01 1,22 ,1757 ,19458 lev 128 1,67 ,01 1,68 ,5911 ,26743 bdoubt 128 ,67 ,33 1,00 ,4951 ,12178 tata 128 ,96 -,34 ,62 ,0463 ,10755 ceot 128 4 0 4 ,34 ,581 ceopic 128 3 0 3 1,94 ,830 govcoor 128 1 0 1 ,17 ,379 m-score 128 1 0 1 ,57 ,497 valid n (listwise) 128 table 4 : overall model fit test -2 log initial likelihood (block number 0) 174,906 -2 log likelihood end (block number 1) 125,145 source: spss output, processed by researchers (2024) https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 546 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4 indicates that the value of -2 log initial likelihood (block number 0) is 174.906, while the value of -2 log likelihood end (block number 1) is 125.145. the comparison indicates a reduction in value, which suggests that the regression model employed in this study is an appropriate model, or, alternatively, that the hypothesized model aligns with the data. feasibility test of regression model the chi-square value on the hosmer and lameshow goodness of fit statistic, as indicated in table 5, is 10.328 at a significant level of 0.243, which is above 0.05. it can be concluded that the regression model used in this study is suitable for further analysis, as there is no significant difference between the model and its observed value, indicating that the model fits the observed data. coefficient of determinant table 6 indicates that the nagelkerke r square value is 0.432. this indicates that the capacity of the independent variables, specifically pressure, opportunity, capability, arrogance, rationalization, and collusion within the present research sample, is capable of elucidating the dependent variable of fraudulent financial reporting by 43.2%. consequently, the remaining 56.8% is influenced by financial statement fraud detection variables that were not employed in this study. classification tables table 7 : classification plot observed predicted m-score percentage correct non-manipulator manipulator step 1 m-score non-manipulator 43 12 78,2 manipulator 18 55 75,3 overall percentage 76,6 source: spss output, processed by researchers (2024) the preceding table indicates that the regression model exhibits a 75.3% predictive power in identifying companies that engage in financial statement fraud. this indicates that 55 of the 67 companies in question have been found to engage in financial statement fraud. conversely, the number of companies that were not identified as having engaged in fraudulent reporting was 78.2%. in other words, the total number of companies that do not commit financial statement fraud is 43 out of 61. the overall percentage of the results of the regression model to predict companies that commit fraud and do not commit fraud in the financial statements is 76.6%. this table 5 : hosmer and lemeshow test step chi-square df sig. 1 10,328 8 ,243 source: spss output, processed by researchers (2024) table 6 : cox and smell r.square and nagelkerke r square step nagelkerke r square 1 ,432 source: spss output, processed by researchers (2024) https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 547 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is almost close to 100%, which indicates that the logistic regression model is quite feasible or fit with the data. simultaneous tests the results of the chi-square calculation with df = 7, as presented in the table above, indicate a chisquare value of 49.761. this value represents an overall significant level of the independent variable of 0.000, which is smaller than the required significant level of 0.05. consequently, the simultaneous influence of the independent variables, namely pressure, opportunity, capability, rationalization, arrogance, and collusion, on the detection of fraudulent financial statements is evident. regression coefficient testing financial target on potential financial reporting fraud the study's findings indicate that financial statement fraud in financial sector companies during the 2022–2023 period is not influenced by external pressure. the hypothesis is rejected since there is no evidence that the sample company's financial statement fraud rate is influenced by the total asset ratio (roa). the fraud hexagon theory, which posits that the target financial component is the primary motivation for deception, is not corroborated by these observations. there are several aspects of why this can happen. first, the average roa ratio value is not too high, which is 17.57%, from the maximum value. the rationale is that the target set by the company is still within an acceptable range for management. therefore, it is not possible to attain this goal, which eliminates the potential for fraudulent manipulation in the presentation of financial statements. moreover, the rise in the company's profit cannot be deemed as evidence of fraud, as it can be attributed to table 8 : omnibus tests of model coefficients chi-square df sig. step 1 step 49,761 7 ,000 block 49,761 7 ,000 model 49,761 7 ,000 source: spss output, processed by researchers (2024) table 9 : hypothesis test results variables in the equation b s.e. wald df sig. exp(b) step 1a x1 -,908 1,146 ,628 1 ,428 ,403 x2 -,025 ,881 ,001 1 ,978 ,976 x3 1,031 1,918 ,289 1 ,591 2,805 x4 22,446 4,706 22,747 1 ,000 5599447694,710 x5 ,405 ,420 ,929 1 ,335 1,499 x6 ,144 ,271 ,284 1 ,594 1,155 x7 -,720 ,600 1,439 1 ,230 ,487 constant -1,008 1,207 ,697 1 ,404 ,365 source: spss output, processed by researchers (2024) https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 548 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc various factors such as enhancing operational quality through technological advancements, recruiting talented employees, and effective management by the board of directors. second, this research is in line with (sholikatun & makaryanawati, 2023) that the high and low financial targets do not trigger fraud because the research sample has operational quality in terms of human resource potential and management policies that can increase the company's value. based on this, it is known that financial sector companies in their annual reports hold various programs for employees such as training, workshops, seminars, and the provision of educational scholarships as a form of competency development, one of which can be used to facilitate the achievement of company goals including financial targets. external pressure on potential financial reporting fraud the study findings indicate that there is no correlation between external pressure and instances of financial statement fraud in enterprises operating in the financial industry between 2022 and 2023. the hypothesis that the leverage ratio has an impact on the prevalence of fake financial statements in the sample companies has been disproven, since the evidence does not provide support for this claim. this data does not provide evidence to support the fraud hexagon theory, which posits that external pressure factors serve as the motivation for deception. the sample companies have a minimal debt ratio, which makes creditors willing to issue loans because of the low risk of default. creditors tend to choose companies with low debt ratios because they can protect against the risk of bankruptcy. in addition, based on the capital structure policy of the sample company, it is known that the entity prioritizes financing from internal sources to support business activities and maintain low debt value. the lower the debt ratio, the greater the margin of protection that creditors receive against losses. adding that the low leverage ratio will improve the company's financial reputation and make lenders feel more confident in providing loans with large capacity. thus, research supports the findings (oktavia et al., 2022) external pressure did not trigger financial statement fraud to obtain loans. ininfluenceive monitoring of potential financial reporting anomalies the study found that the average proportion of boards of commissioners in financial companies with independent boards of commissioners is nearly 50%, which is a relatively high proportion compared to the total number of boards of commissioners in other companies. ojk regulation no. 33/pojk/04/2014 states that, ‘’a company's independent committees must be at least 30% of authorized committees”. therefore, monitoring of management activity is more influenceive in all companies that have adopted the ojk regulation on the percentage of independent commissioners. the function of the board of commissioners, which is distinct from the responsibilities of management, is not a reliable indicator of financial statement fraud. this analysis leads to the conclusion that ininfluenceive monitoring does not have a significant impact on the detection of potential financial statement fraud. the results of research are consistent with those of previous research conducted by (sukmadilaga et al., 2022). however, this is not in line with the research conducted by (achmad, ghozali, & pamungkas, 2022), which states that ininfluenceive monitoring has relevance in detecting possible financial statement fraud. https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 549 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc total accrual ratio to potential financial reporting fraud the study's findings suggest that rationalization will impact the occurrence of fraud in the financial statements of organizations in the financial sector from 2022 to 2023. these findings demonstrate that the overall accrual ratio has a significant impact on the likelihood of financial statement fraud occurring in the selected organization, confirming the hypothesis. these findings provide evidence for the fraud hexagon theory, which posits that rationalization considerations are the underlying cause of deception. the correlation from the total accruals to total assets ratio and financial statement fraud is influenced by rationalization. the study findings indicate a positive correlation between the magnitude of outstanding profit obligations and the likelihood of misleading financial statements. the data from the companies used as a sample indicates that the total accrual to the total asset value is only partially negative. this indicates that the company does not have a large operating cash flow and that the accrued profit is high enough to justify earnings management. some studies have indicated that the absence of remuneration for profits can influence the behavior and financial decisions of management, thereby increasing the likelihood of financial statement fraud. research by dechow dan skinner (2000) dan gunny (2005) identify three types of profit management methods, including fraud accounting. they show that accounting fraud is related to the choice of accounting methods that violate accounting standardsin some cases, aggressive earnings management can increase the likelihood of fraudulent financial statements. the findings of this research are not in alignment with those of (fouziah & djaddang, n.d.) which says that the total accrual ratio does not affect the possibility of fraudulent financial reporting due to the implementation of anti-fraud policies within the company, which according to him is sufficient to minimize the occurrence of fraud caused by rationalization measures taken by management. ceo tenure on potential financial reporting fraud the results of the study show that rationalization has no influence on financial statement fraud in financial sector companies in 2022-2023. this evidence suggests that board tenure is an insignificant factor in the occurrence of financial statement fraud. the theory is that the longer the tenure of a board member, the greater the loyalty to the company and the lower the likelihood of fraud. the results from the study agree well with those from (lastanti et al., 2022) arrogance on potential financial reporting fraud the hypothesis that visit changes to the ceo picture would have an impact on budgetary announcing extortion was tested by examining the intermediary variable of visit changes to the ceo picture. the results demonstrated that visit changes to the ceo picture had no impact on budgetary announcing extortion, thus rejecting h6. hence, it can be inferred that the inclusion of the ceo's photograph in the annual report is not indicative of the managing director or ceo's arrogance or authority, but merely serves the purpose of introducing the president director or the individual currently holding the position of ceo to the general public. the company's activities and achievements are a clear reflection of its alignment with its vision and goal. the research findings are corroborated by achmad, ghozali, and pamungkas (2022), who argue that the ceo's photograph shown by the company fails to convey the ceo's arrogance. some organizations choose not to showcase the photograph of their ceo, or if they do, it is solely for introduction https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 550 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc purposes. according to a study conducted by riantika in 2021, the presence of photographs of the ceo in financial statements indicates the ceo's high standing in the company's management. this could be attributed to the ceo's cautiousness or recognition of their responsibility to fulfill their duties and uphold their reputation, thereby reducing the likelihood of engaging in fraudulent activities. collusion on potential financial reporting fraud the research confirmed that project co-operation between the company and the government can lead to illegality. in order to prevent the government's cooperation from influencing the detection of financial statement fraud. the existence of stringent regulations and legislation in cooperation projects with the government serves to compel companies to comply with the rules and reduce fraud. this is demonstrated by the regulations set forth in minister of finance number 741 of 1989, which require state-owned enterprises to prepare financial statements for public disclosure. furthermore, there is effective oversight from the audit committee in monitoring the financial statement process, which is conducted through a thorough and unbiased investigation by the auditor. when it comes to handling financial data, the audit committee will provide support in thoroughly reviewing financial statements for accurate accounting. these findings are backed by research conducted by (wicaksono and suryandari in 2021b). on the other hand, the current study's findings do not align with the research conducted by alfarago and mabrur (2022), which suggested that government cooperation played a role in influencing fraudulent financial statements. conclusion previous instances of financial reporting fraud have prompted researchers to explore the factors that contribute to fraudulent activity. however, previous studies have yielded conflicting results. this research aims to analyze the various factors that can impact fraudulent financial reporting. it focuses on seven variables that describe each component of the fraud hexagon. one of these variables is stimulus, which is measured through financial targets and external pressure. opportunity, which is represented by effective supervision, measurement of rationalization is indicated by the total accruals ratio, while capability is reflected in the tenure of directors. arrogance can be observed through the frequency of media appearances by the ceo, while ego is demonstrated by the frequency of the ceo being pictured with others. similar to a certified financial planner (cfp), there may be instances of collusion with government cooperation to combat fraudulent financial reporting in the financial sector companies listed on the idx from 2022 to 2023. the analysis of the research data indicates that the financial targets and external pressures identified in research do not appear to affect the occurrence of fraudulent financial reporting. financial reporting fraud does not appear to be influenced by ininfluenceive monitoring, the tenure of the ceo, arrogance, or collusion. nevertheless, the total accrual ratio exerts an influence on financial statement fraud. this is because the potential for financial statement fraud increases with the value of the profit yet to be paid. therefore, companies must be more careful in managing their finances and financial statements to avoid fraudulent acts. https://www.ilomata.org/index.php/ijtc detecting the influence of the hexagon fraud theory in financial report fraud ramadhanty and septiani 551 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc limitations experienced in research conducted on financial sector companies, which are in the regulations of the financial services authority (pjok) no.39/pjok.03/2019 which regulates the implementation of anti-fraud strategies for commercial banks, the insurance sector, and the financing company sector. thus, most companies in the financial sector, consisting of commercial banks, the insurance sector, and the financing sector, implement the anti-fraud strategy for researchers looking to explore the same topic, it may be beneficial to consider conducting research in sectors within other industries. it can also utilize various proxies for independent variables or expand the number of independent variables that are more relevant to the industry. additionally, it can incorporate alternative measurements for its financial statement fraud variables. reference achmad, t., ghozali, i., & pamungkas, i. d. 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(2023). determinan fraud hexagon theory dan indikasi financial statement fraud. e-jurnal akuntansi, 33(1). https://doi.org/10.24843/eja.2023.v33.i01.p07 wolfe, d. t., & hermanson, d. r. (2004). the fraud diamond: considering the four elements of fraud. https://digitalcommons.kennesaw.edu/facpubs https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 799-812 799 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator dwiyanjana santyo nugroho1, anita2 12universitas media nusantara citra, indonesia correspondent: santyonug@gmail.com1 received : august 28, 2023 accepted : october 18, 2023 published : october 31, 2023 citation: nugroho, d, s., anita (2023). gender diversity and sustainability performance: the role of financial technology adoption as moderator. ilomata international journal of tax and accounting, 4(4), 799-812. https://doi.org/10.52728/ijtc.v4i4.910 abstract: this research is intended to explore the influence of gender diversity on financial and bank environmental performance. in addition, in order to strengthen the impact of gender diversity on financial performance and environmental performance, this research also tests the moderating effect of financial technology adoption. the population in this study examines banks that received the 2022 digital banking awards, which is the research period from 2017-2022. the proportion of women on the board of commissioners and the board of directors is a proxy for gender diversity. this research method uses random effect models and fixed effect models in regression equations that test financial performance. meanwhile, the regression model that tests environmental performance uses logit regression. this study shows that the percentage of females on boards has an impact on financial results, but not on environmental performance. the financial and environmental performance is not affected by the gender ratio in the board of directors. other results show that, although financial technology can enhance the influence of women's representation on boards regarding environmental performance, but it does not have an impact on financial performance. on the other hand, the impact on financial and environmental performance of the proportion of women on the board of directors is not reduced by the adoption of financial technology. the implications of these findings provide input for regulators to determine the threshold for women's involvement on the board of directors. keywords: gender diversity, sustainability performance, financial technology adoption this is an open access article under the cc-by 4.0 license. introduction in view of the growing urgency of social issues such as climate change and natural resources, companies have begun to focus on environmental issues. sustainable development goal goal 13 calls for urgent development action at all levels to differentiate climate risks and protect environmental ecosystems (birindelli et al., 2019). stakeholders realize the importance of protecting the earth and the extinction of environmental ecosystems, so they demand repairs to the environment damaged by company operations. https://www.ilomata.org/index.php/ijtc mailto:santyonug@gmail.com https://doi.org/10.52728/ijtc.v4i4.910 gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 800 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc all industrial sectors have a role in protecting the environment, including the banking industry sector. banks make an enormous contribution even though banking is not directly related to environmental damage because its operational activities do not touch the environment. banks are heavily reliant on resources such as energy and paper, thereby contributing to indirect co2 emissions from business travel (bătae et al., 2021). three views can be taken into account in assessing the bank's environmental commitment: reducing the risk of lending to dirty industries, financing environmentally conscious industrial projects, and efficiently using resources within the bank by deciding on funding flow to companies whose business operations are destructive to the environment. this has resulted in the evolution of the banking environment, which means that financial benefits are not only considered when selecting funding channels. green banks not only improve operational performance and reduce risks; (gangi et al., 2018; jo et al., 2015) but reputation and customer loyalty will also improve (aramburu & pescador, 2019). in turn, this will help banks reduce the consequences of reputational crises. (giannarakis & theotokas, 2011), in other words, increasing banking competitive advantage. primary research emphasizes the identification of the drivers of environmental performance and the moderation of these direct impacts in the growing literature on corporate environmental management (cordeiro et al., 2020). the main driver of this paradigm shift is centered on inner company governance mechanisms, particularly board diversity. according to the resource dependence perspective, the diversity of the board could increase the information provided to managers about the reach of the board by making the existing information more accurate (biduri et al., 2023). the diversity of boards allows the board to gain a more detailed insight into the complexity of their organizational environment, thus improving decisions (luanglath et al., 2019). in particular, it is not only the board's composition that constitutes a major instrument for corporate governance to monitor management activity but also its decision making body on strategic objectives such as sustainability (akhmetshin et al., 2018; ferramosca & verona, 2020). board diversity can be determined from various factors, including educational background, age, and gender. gender diversity helps avoid dangerous cognitive biases by supporting decisionmaking mechanisms based entirely on multiple, freely expressed perspectives (galbreath, 2018). having women on boards contributes positively to governance effectiveness, as women tend to develop different approaches and reduce risks (galletta et al., 2021). gender diversity at issue is not only a failure to achieve gender equality, but banks need women at the center of policymaking. progress has been made in gender equality, but more attention needs to be paid to the presence of women on boards. the demand to prioritize gender diversity faces challenges that companies must balance to improve financial and environmental performance. huang (2019) has published a systematic review of 21 metanalyses and found that there seems to be stronger relationship between the environment and corporate financial performance as compared with social and governance quality and financial performance. these findings indicate that directors need to formulate strategic steps for the company to balance financial performance and environmental performance woman directors are usually visible as beneficial because they are extra orientated closer to social responsibility than men, are more inquisitive about community service and philanthropic activities, and convey distinct perspectives to the board (cordeiro et al., 2020). in addition, it is claimed that women directors are subject to more rigorous and strict oversight than male directors which can lead to improved performance of the company. another challenge the bod faces, especially in the banking industry, is the presence of new competitors, namely financial technology, which has recently developed rapidly and can be feared https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 801 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to disrupt banking stability in leading the financial industry. people choose alternative financing through financial technology rather than banking (nugroho et al., 2023). financial technology can provide more varied product choices and is better able to reach people who find it difficult to get access to capital from banks. innovation in banking, as well as the transformation of traditional services is not confined to emerging financial technology innovation at a number of areas of finance such as insurance, cash controls, wholesale billing, retail financing, capital raising and loaning (luo et al., 2022; murinde et al., 2022) as well as competing with them. the emergence of financial technology services can be both a threat and an opportunity for banks. banks that can integrate their products with financial technology will have a competitive advantage. this trend has forces banks to change and even collaborate with financial technology companies. banks benefit from more stringent regulation and capital; on the other side, financial technology benefits from its pliability (nugroho et al., 2023). digital banking developed by banks can be a response to the massive rise of financial technology and a strategic step in creating an environmentally friendly industry. digital banking can reduce carbon emissions by minimizing the use of paper, an essential contribution for banks in managing the environment. on the other hand, investment in digital banking is quite significant and can potentially disrupt the bank's financial balance. the diversity of directors serving in the bank will determine which policies will be taken. it is challenging for directors to prioritize the environment or consider the financial impact when adopting financial technology in banks. not many previous studies have tested the impact of implementing financial technology on whether it affects a company's environmental performance; only nugroho et al. (2023) showed that adopting financial technology can strengthen the negative impact of it investment on financial performance but have not tested the impact on environmental performance. gender diversity in board membership has become increasingly important among academics and policy makers in recent years (arnaboldi et al., 2020). extensive research has been conducted on the impact of board gender diversity on csr (byron & post, 2016; rao & tilt, 2016; yasser et al., 2017). however, environmental performance is the most effective indicator of complex csr engagement in this study, so it is difficult to distinguish between social and environmental performance (lu & herremans, 2019), so this studies will cognizance on banks' dedication to decreasing carbon emissions. research on carbon emissions has also been studied but still leaves gaps. the need for greater representation of women on boards to improve the quality of greenhouse gas emissions reporting in annual reports and sustainability reports is highlighted by hollindale et al. (2019). in contrast, cucari et al. (2018) abysmal representation of women on boards and their esg disclosures, shows that the presence of female directors is exacerbated by regulator. in ethical management of companies' sustainable business activities, as well as the promotion of ethics policies, board diversity has a key role to play (gulzar et al., 2019; nadeem et al., 2017). the existence of different kinds of females on boards improves the financial dimension but does not improve environmental or social dimensions, further authors have found (reyes bastidas & del briano-turrent, 2018). previous research argues that gender diversity positively affects bank performance and stability (garcia-meca et al., 2015; owen & temesvary, 2018). in contrast, talavera et al., (2018) highlight that more heterogeneous boards may consider different decisions due to differing directors' viewpoints, slowing down the boardroom's decision-making process and leading to poorer bank performance. these findings indicate that a gap still needs to be explored further to examine board diversity on bank financial performance. https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 802 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc when discussing the complexity of bank corporate governance principles, gender diversity plays a role (european banking authority, 2020). despite increased interest from banking regulators in the past few years, there is a lack of evidence on this issue and researchers' attention has been narrowing to gender diversity within the banking sector (galletta et al., 2021). this research tests whether board diversity influences financial and banking environmental performance. for the most part, researchers have not focused on examining how board diversity affects two dimensions of company performance. in addition, these studies examine whether the adoption of financial technology can increase the influence of board diversity in terms of financial and environmental performance. this is supported because this research examines banks with the title of best digital service in the 2022 digital banking awards. financial technology adoption is still rarely used in research because there are not yet mushrooming measurements that can be used to measure financial technology adoption, recently recorded by al-matari et al., (2022) and nugroho et al., (2023). at the same time, neither has attempted simultaneously to test both finances and environment performance. the need to fill the literature gap on board diversity, which remains a subject of debate between academicians, will be helped by this research. this research also develops literature regarding financial technology adoption for which very few sources can be obtained. in the following sections, we successively determine the research design, discuss the findings and present conclusions. method our research focuses on examining banks that have adopted financial technology, so the population of this research is banks that won the 2022 digital banking awards organized by investor magazine. the number of banks that received awards was 27 companies, and the research period was from 2017 2022. we obtained several selected samples using a purposive sampling technique, with the main criterion being banks listed on the indonesia stock exchange (idx). companies excluded from the sample because they did not meet these criteria were five banks, namely dbs indonesia, ctbc indonesia, sahabat sampoerna, bca syariah, and bca digital bank. meanwhile, banks that meet the criteria for this research are listed in table 1 below: table 1. research sample no bank 1 mandiri 2 bri 3 bca 4 bni 5 danamon 6 uob indonesia 7 permata 8 tabungan negara 9 mega 10 maybank indonesia 11 cimb niaga 12 keb hana bank 13. mayapada internasional https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 803 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 14. commonwealth bank 15. oke indonesia 16. artha graha indonesia 17. mnc internasional 18. btpn syariah 19. bank syariah indonesia 20. bank raya indonesia 21. neo commerce bank 22. bank jago source: digital banking award, 2022 data collection for this research uses secondary data from annual reports published on the idx and the relevant bank websites and other paid access. this research has four types of variables, namely dependent, independent, moderating, and control variables. the dependent variable consists of financial performance (kk), measured using roa, and environmental performance (kl), measured using a dummy variable, which has a value of 1 if the bank has a policy to increase emission reduction. otherwise, it is given a value of 0. this measurement follows galletta et al. (2021). meanwhile, details for measuring the independent, moderating, and control variables are listed in table 2. table 2. variable’s measurement variable measurement independent women commissioner (w_com) percentage of women on the board of commissioners women director (w_dir) percentage of women on the board of directors moderator financial technology adoption (fin) content analysis using the global financial technology adoption index control firm size (size) natural logarithm of total assets board size (bz) total members of the board of directors board skill (bs) dummy variable, code 1 if the bank describes the professional experience or skills or age of each member of the board of directors, value 0 otherwise ceo woman (cw) dummy variable, code 1 if the main director (ceo) is a woman, value 0 otherwise critical mass of women (cmw) dummy variable, code 1 if the board of directors has at least 3 women, value 0 otherwise liquidity (lik) net loans/total asset capital adequacy (ca) total equity/total asset operating cost (op) overhead/total asset the independent variable in this research is board diversity, which is proxied using the percentage of women on the board of commissioners (w_com) and board of directors (w_dir), following galletta et al., (2021). this is because the governance context in indonesia applies a two-tier system. financial technology adoption is measured following al-matari et al. (2022), while the control variables follow galletta et al., (2021) and birindelli et al., (2019). this quantitative empirical research uses three regression equation models, namely pls regression, logistic regression, and moderated regression. this is because this research has two dependent https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 804 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variables which have different characteristics. data processing uses stata version 17, with the following research model equation formula: kki,t : α + β1w_comi,t + β2w_diri,t + β3bzi,t + β4bsi,t + β5cwi,t + β6cmwi,t + β7liki,t + β8cai,t + β9opi,t + e ……………..(1) kki,t : α + β1w_comi,t + β2w_diri,t + β3bzi,t + β4bsi,t + β5cwi,t + β6cmwi,t + β7liki,t + β8cai,t + β9opi,t + β10w_com*fini,t + β11w_dir*fini,t + e ……………..(2) kli,t : α + β1w_comi,t + β2w_diri,t + β3bzi,t + β4bsi,t + β5cwi,t + β6cmwi,t + β7liki,t + β8cai,t + β9opi,t + e ……………..(3) kli,t : α + β1w_comi,t + β2w_diri,t + β3bzi,t + β4bsi,t + β5cwi,t + β6cmwi,t + β7liki,t + β8cai,t + β9opi,t + β10w_com*fini,t + β11w_dir*fini,t + e ……………..(4) equations 1 and 2 are panel models, which will be processed using pls, fixed effect, or random effect regression. before carrying out the test, make sure that the blue problem has been resolved, related to the problem of classical assumptions in the form of normality, multicollinearity, heteroscedasticity, and autocorrelation. equation models 3 and 4 are logistic models that will be processed using logit regression. result and discussion this research determines the regression model used using the haussman test to determine whether to use a fixed effect model (fem) or a random effect model (rem) for regression equations 1 and 2. the results of the hausman test show that eq . 1 has a significance of 0.0054, so using fem, and eq. 2 obtains a significance of 0.2035, so it uses rem. to overcome the problems of heteroscedasticity and autocorrelation in eq. 1, the regression adopts generalized least squares (gls). meanwhile, eq. 3 and eq. 4 use logit regression. descriptive statistic and hypothesis testing table 3 shows the results of descriptive analysis of each variable used in this research. meanwhile, table 4 displays the results of multiple regression, logistic, and moderation regression tests for all regression equations in this study. table 3. descriptive statistic n min max mean std. deviation kk 132 -.1958599 .0909855 .0097434 .0315095 kl 132 0 1 .5833333 .4948848 w_com 132 0 66.66667 14.70276 16.67081 w_dir 132 0 100 17.92715 17.52137 fin 132 0 .5789474 .2276715 .160682 bz 132 4 23 12.81818 5.184855 bs 132 0 1 .9393939 .2395153 cw 132 0 1 0984848 .2991042 cmw 132 0 1 .1969697 .3992243 lik 132 .1371372 1.03091 .7535646 .1969186 ca 132 .055336 .6700107 .1882885 .1051868 op 132 .000182 .181121 .0413852 .0319856 source: author data, 2023 https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 805 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an exciting finding in eq. 1 shows that w_com has a significance of 0.005, below the value of 0.05, and the direction of the coefficient is positive, which means that w_com has a positive effect on financial performance. in contrast, w_dir does not show a significant value. this shows that the role of women on the bod does not affect financial or environmental performance. the findings in eq. 2, which tested the moderating variable of financial technology adoption, actually showed values of 0.394 and 0.712, which means the values are not significant, meaning that the adoption of financial technology by banks is not able to strengthen the influence of gender diversity in improving bank financial performance. on the other hand, the findings of eq. 3 show the significance value of w_com and w_dir above 0.05, thus indicating an insignificant influence. eq. 4 shows the significance value of fin*w_com of 0.010, which means it has a significant effect. table 4. hypothesis test eq. 1 eq. 2 eq. 3 eq. 4 kk kk kl kl (constant) 0.019 (.0462145) 0.121 (.0480436) 0.167 (.029893) 0.346 (.0876733) w_com 0.005** (.0004726) 0.049** (.0005667) 0.075* (1.04113) 0.079* (-.9054196) w_dir 0.141 (-.0002998) 0.246 (-.0003221) 0.117 (-.9501149) 0.584 (-.9741987) fin*w_com 0.394 (-.0008089) 0.010** (1.83768) fin*w_dir 0.712 (.0003657) 0.666 (-.9300323) bz 0.000*** (.0027479) 0.013** (.0019673) 0.000*** (1.484573) 0.000*** (1.51002) bs 0.000*** (-.0448804) 0.100 (-.0244144) 0.013** (-.0490142) 0.010** (-.0380102) cw 0.514 (.0062929) 0.465 (.0080074) 0.803 (1.370455) 0.908 (1.18531) cmw 0.231 (.0099013) 0.343 (.0089074) 0.072* (9.038698) 0.208 (5.347984) lik 0.008** (-.0432901) 0.066* (-.0483695) 0.501 (-.2327965) 0.243 (-.064594) ca 0.091* (-.0490284) 0.201 (-.0518483) 0.929 (1.333443) 0.859 (-.5365993) op 0.030** (.1975302) 0.694 (.0481672) 0.714 (58.98655) 0.272 (744907.3) rsquare 58.39 55.20 47.52 53.55 log likelihood -47.053843 -41.641664 source: author data, 2023 *) significant at level 10% **) significant at level 5% ***) significant at level 1% gender diversity, financial technology adoption, financial performance eq. 1 shows that the relationship of female commissioners to company financial performance is favorable. the agency's theory that board members are acting as representatives and protecting https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 806 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the interests of shareholders in order to prevent what amounts to agency costs has been confirmed by this finding (galletta et al., 2021). it is more important for women to be involved in board supervision, so as to enhance the financial performance of banks. this is because in making decisions, there are many different backgrounds which bring their own perspectives (valls martinez et al., 2019). the presence of women on a company's board of commissioners can provide variations in supervision, where women are seen as more detailed and thorough in examining things. the argument for gender diversity in business is based on the monitoring efforts of female board members, which might be more efficient than those of men and would help firms to improve their economic performance (adams & ferreira, 2009). women have special skills on corporate boards, including their tendency to be more risk-averse than men (arnaboldi et al., 2021). however, there does not appear to be any material impact in the financial performance of a bank with female board members. the increase of performance in the bod and company is not guaranteed by gender diversity (creary et al., 2019). on the other hand, the culture of the bod is a factor that can influence the diversity of the bod in carrying out their duties (jabari & muhamad, 2021). gender diversity will hinder the company's operational decision-making process because it causes different views, which can harm the bank's financial performance. risk outweighs the value and diversity means that members with different backgrounds have to incur greater costs of decision making and conflict (adams et al., 2015; farag & mallin, 2017). this finding could be caused by the fact that there are banks whose directors are all women, so the diversity depicted is not explained well because men are not involved on the board of directors. another interesting finding is that the adoption of financial technology by banks does not strengthen the influence of gender diversity on bank financial performance. this finding is supported by al-matari et al., (2022) but contradicts the findings of nugroho et al., (2023). it investment to create financial technology services is expensive, so banks' ability to adopt financial technology varies. the financial technology innovation used takes into account the bank's uniqueness and specificity so that each bank's development focus is not the same. banks have to enforce semi-unified technology to make certain the supply of quality services that assist enhance bank performance (al-matari et al., 2022). gender diversity, financial technology adoption, environmental performance gender diversity in the ranks of commissioners and directors does not influence banking environmental performance; this is contrary to the findings in eq. 1. these findings agree with nadeem (2020) and nguyen et al. (2021) did not reveal a relationship between female directors and environmental performance. a positive relationship between gender diversity and environmental performance has not been established in some studies (boulouta, 2013; glass et al., 2016). our finding is agree with reyes bastidas & del briano-turrent (2018) that women directors have a positive impact on the economy, but also affect environmental and social dimensions negatively. gender diversity is not important as there's no limit to the number of women directors that can make a difference (cordeiro et al., 2020). the number of female directors and commissioners in banking remains relatively minimal. although there are, the proportion is still too small compared to male directors. not a few banks in indonesia have only male directors and commissioners, so https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 807 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the presence of women in decision-making is very limited. while minority groups serving as directors on boards can, without problems, be marginalized and taken into consideration tokens if their presence inside the larger group is not too sizeable, as the dimensions of the minority group will increase, they could gain trust, impact, and assignment majority decisions (bear et al., 2010; torchia et al., 2011). gender diversity is reflected in the presence of women on our board and as commissioners. according to table 3, on average, indonesian banks account for less than 20% of the total number of directors and committee members. this indicates that there is still a low proportion of females on the bank's management board, which means that women have no influence as far as environmental policies are concerned. the impact of the board's gender diversity on environmental performance may, however, be enhanced through financial technology advantages pursued by banks. financial technology has changed how automation and procedures are implemented, with the use of it to improve finance services (ren et al., 2021). one of the goals of banks in digitizing through financial technology innovation is to reduce carbon emissions through the use of paper and physical meetings and the presence of physical offices. environmental benefits can also be achieved by providing renewable energy (deng et al., 2019). dorfleitner & braun (2019) highlight that financial technology can mobilize green finance in the future as it allows access to new financing and investment opportunities. combining big data and artificial intelligence to promote the transition towards a greener economy, financial technology can be viewed as representing green finance (wang et al., 2021). in order to maintain competitiveness and sustain a sound level of fulfilment in the banking sector, banks need to provide value for stakeholders by introducing new methods and products (nugroho et al., 2023). the board of commissioners pays greater attention to company operations to keep up with technological developments, which will have a multiplier effect on various aspects. li et al. (2017) argue that diversity in the gender balance, particularly for companies whose impacts on the environment and society are significant, is a key factor to develop healthy environmentally sustainable policies. implementing financial technology requires enormous costs at the start, and the returns obtained can only be felt in the long term, so directors have no intention of adopting financial technology because it does not benefit them. meanwhile, the board of commissioners, as supervisors of the bod and considering the sustainability and competitive advantage of the bank, have the intention to adopt financial technology so that the application of financial technology can strengthen the concentration of the board of commissioners to be involved in decision making regarding the bank's environmental performance. the mere presence of independent commissioners cannot improve the company's environmental performance (wibowo & lasdi, 2022). however, a board of commissioners that has gender diversity can be further involved in influencing environmental performance. consequently, it can be seen that women commissioners in our sample are more concerned about social responsibilities and have improved their board decisions to encourage contributions towards environmental performance. conclusion this research proves that a female board of commissioners can influence banking financial performance, but a female board of directors does not influence financial performance this shows that there is considerable involvement of women in the monitoring of financial performance on the board of commissioners. the role of women directors in influencing the bank's environmental https://www.ilomata.org/index.php/ijtc gender diversity and sustainability performance: the role of financial technology adoption as moderator nugroho and anita 808 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance could, on the other hand, be enhanced by digitalization through adoption of financial technology. meanwhile, the presence of women on the board of directors and commissioners does not affect the bank's environmental performance. in the future, these findings can be used to test the effectiveness of diversity in the board of directors and commissioners in making decisions that can affect the bank's financial performance and the environment; this is because this research focuses on gender diversity. future research could also examine the role of gender diversity on bank social performance, which this study has not explored. future research can develop the financial technology adoption measurement used in this research, which is rarely implemented in research examining indonesia. this study has several limitations, but they do not cause bias in the findings obtained. the research uses a measurement of the adoption of financial technology which was not widely developed and inappropriate for indonesia's economic situation, so it is necessary to establish measurements on this variable. the impact of these limitations causes several indicator points that all banks cannot fulfill because they are not appropriate to the business context in indonesia. apart from that, this research also has implications that can be useful for practitioner stakeholders. the implications of the findings in this research are helpful for regulators in determining the threshold for companies to be required to involve women in the board of directors and commissioners, which will support gender equality, which is part of the sustainable development goals. banks can also apply the findings of this research in improving the financial technology services they develop so that they pay attention to indicators of financial technology adoption that are right on target. the researcher wishes to thank the research, technology and community services directorate (drtpm), in particular, who trusted us through the beginner lecturer research grant program (pdp) for fiscal year 2023 to realize this research. reference adams, r. b., de haan, j., terjesen, s., & van ees, h. 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(2017). corporate social responsibility and gender diversity: insights from asia pacific. corporate social responsibility and environmental management, 24(3), 210–221. https://doi.org/10.1002/csr.1400 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 338-352 338 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael1, william widjaja2 12universitas pradita, indonesia correspondent: william.widjaja@pradita.ac.id2 received : january 15, 2024 accepted : april 1, 2024 published : april 30, 2024 citation: michael., widjaja, w. (2024). boosting firm performance: insights from the food & beverage sector's key drivers. ilomata international journal of tax and accounting, 5(2), 338-352. https://doi.org/10.61194/ijtc.v5i2.1105 abstract: the food and beverage industry is a vital contributor to indonesia's economy, yet faces challenges in optimizing performance. this study investigates the impact of operating capacity, agency costs, and intellectual capital on firm performance within this sector. analyzing financial data from 12 out of 26 listed companies spanning 2018 to 2022, with convenience sampling, panel data regression in eviews 12 reveals significant findings. higher operating capacity positively influences revenue generation, marketing efficacy, and customer satisfaction. agency costs serve as incentives for managerial alignment with shareholders' interests, enhancing governance and transparency practices. intellectual capital fosters innovation, operational efficiency, and brand reputation, driving firm performance. the study underscores the strategic importance of these factors in managing firms within the food and beverage industry. for practitioners, insights gleaned from this research offer guidance in formulating effective strategies to enhance operational capacity, manage agency costs, and bolster intellectual capital. moreover, investors gain valuable insights into assessing investment opportunities in this sector. policymakers can utilize these findings to formulate policies conducive to fostering growth and sustainability within the food and beverage industry. by addressing these key determinants, firms can bolster their competitive edge and achieve sustained success in the dynamic landscape of the food and beverage sector in indonesia. keywords: agency cost, firm performance, operating capacity, intellectual capital this is an open access article under the cc-by 4.0 license. introduction the food and beverage industry is one of the important industrial sectors in indonesia, with significant contributions to gross domestic product (gdp) and employment. based on data from the central statistics agency (bps), in 2023, the food and beverage industry contributed 38.05% to the gdp of the non-oil and gas processing industry or 6.61% to the national gdp. this industry also absorbs 18.3 million workers, making it the industrial sector with the second largest employment in indonesia. https://www.ilomata.org/index.php/ijtc mailto:william.widjaja@pradita.ac.id https://doi.org/10.61194/ijtc.v5i2.1105 boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 339 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the high operating cost is one of the main obstacles to increasing profitability for food and beverage companies. based on the annual financial statements of food and beverage companies listed on the indonesia stock exchange (idx), the average ratio of operating costs to total revenue in 2023 was 75%. fluctuations in the price of raw materials, such as wheat, sugar, and cooking oil, can cause a significant increase in operating costs. in 2023, wheat prices increased by 15%, sugar prices increased by 10%, and cooking oil prices increased by 20%. intense competition in the food and convenience industry forces companies to implement various strategies, such as promotions and discounts, which can increase operating costs. based on nielseniq data, by 2023, the average spending of food and beverage companies on promotion and discount activities will be 10% of total revenue. operational efficiency is critical for food and beverage companies to reduce operational costs and increase profitability. agency costs are costs that arise due to information asymmetry and differences in objectives between the owner (principal) and manager (agent) of the company. based on a study conducted by the world bank in 2023, the average ratio of agency costs to total assets in indonesia is 15%. in the food and minimization sector, agency costs can arise in various forms, such as suboptimal decision-making, improper transactions, and misuse of company assets. based on a survey conducted by transparency international indonesia in 2023, the food and beverage sector is one of the sectors with a high level of corruption risk. the implementation of good corporate governance (gcg) can help minimize agency costs and improve company performance. in the context of the food and beverage industry, the agency problem arises when managers prioritize their interests over those of shareholders, leading to potential inefficiencies and reduced performance of the company. agency costs arise due to a misalignment of incentives between shareholders and managers, leading to conflicts that can negatively impact the financial performance of the company (luo, 2010). this misalignment of incentives can manifest in various ways, such as managers making decisions that prioritize short-term gains over long-term sustainability, engaging in fraudulent activities such as manipulating financial statements for personal gain, or excessive compensation packages that do not align with the company's performance (li, 2020; umam & halimah, 2021). while the issue of agency cost is certainly a valid concern for companies in the food and beverage industry, it is essential to consider the broader context in which these companies operate. agency costs may arise due to the separation of ownership and control, but it is essential to recognize that managers play a crucial role in steering the company toward success. in many cases, managers are incentivized to make decisions that are in the best interest of the company as a whole, as their own compensation and job security are tied to the company's performance (the effect of disclosure of corporate social responsibility (csr) and good corporate governance (gcg) on company value (asikin et al., 2019; kamaliah, 2020). intellectual capital is an intangible asset owned by a company, such as brands, patents, copyrights, and employee knowledge. based on a study conducted by the intangible asset research institute in 2023, the average ratio of intellectual capital to total assets in indonesia is 40%. intellectual capital is an essential source of competitive advantage for food companies and minimizers in building differentiation and increasing company value. based on forbes indonesia data, in 2023, https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 340 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the top 10 food and beverage companies with the most significant market capitalization value have an average ratio of intellectual capital to total assets of 60%. food and beverage companies with solid intellectual capital can develop innovative products and services, build strong brands, and improve operational efficiency. based on nielseniq data, by 2023, the top 10 food and beverage companies with the largest market share will have an average intellectual capital to total assets ratio of 55%. effective intellectual capital management is the key for food and beverage companies to improve company performance and value. this study is expected to make a valuable contribution to food and beverage companies, investors, and the government. for food and beverage companies, this research can provide a better understanding of the factors that affect company performance so that it can help companies formulate the right strategy to improve performance. for investors, this research can provide helpful information in making investment decisions in the food and beverage sector. for the government, this research can provide input in formulating policies that can support the development of the food and beverage industry in indonesia. based on this description, several research questions arise as follows: 1) does operating capacity have a significant effect on firm performance? 2) does agency cost have a significant effect on firm performance? 3) does intellectual capital have a significant effect on firm performance? this research has objectives for: 1) explore and analyze the effect of operating capacity on firm performance. 2) explore and analyze the effect of agency costs on firm performance. 3) explore and analyze the effect of intellectual capital on firm performance. figure 1. research framework source: data processed (2024) https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 341 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operating capacity and firm performance operating capacity refers to the maximum production level that a company can achieve in a certain period (lim, 1977). increasing operating capacity can have a positive impact on company performance in the food and beverage industry. one of the direct effects of increasing operating capacity is an increase in production volume. by having a larger production capacity, companies can produce more products at the same time. this can increase the company's sales and revenue, as well as expand market share. in addition, increasing operating capacity can also have a positive impact on production efficiency (jonathan & militina, 2019; ratmayanti & suaryana, 2021). by increasing operating capacity, companies can optimize the use of existing resources, including labor, raw materials, and production facilities. this can reduce production costs per unit of product and increase company profitability (dekkers & kanapathy, 2012; hamdani et al., 2020). in addition, increasing operating capacity can also increase the company's flexibility in dealing with fluctuating market demand. with greater production capacity, companies can quickly adjust production volumes according to consumer demand. thus, companies can avoid stock shortages when demand increases and avoid inventory surpluses when demand decreases (bish & suwandechochai, 2010; handiwibowo et al., 2021). increasing operating capacity can also have a positive impact on the quality of products and services offered by the company. with greater production capacity, the company can allocate sufficient resources to maintain and improve product quality and increase the level of customer satisfaction (handiwibowo et al., 2021; nurbismi & gunawan, 2019). h1: operating capacity significantly effect firm performance agency cost and firm performance the agency costs refer to the expenses incurred by a company in order to mitigate conflicts of interest between its managers (agents) and shareholders (principals), which arise due to the separation of management from ownership (jensen & meckling, 1976). in the context of the food and beverage industry, agency costs can have a significant impact on companies' performance. these costs can arise from various sources, such as monitoring and control mechanisms, managerial opportunism, and information asymmetry. the size of the company plays a crucial role in determining the level of agency costs (dalton et al., 2007; li, 2020). larger firms tend to have higher agency costs due to the greater separation of management from ownership. these costs can result in a decrease in the company's overall performance (ferris & yan, 2009; grashuis, 2020). one way to mitigate agency costs in larger firms is through increased information disclosure (boateng et al., 2022). by providing more information to shareholders and stakeholders, companies can reduce information asymmetry and improve transparency, which in turn can help align the interests of managers with the owners and shareholders (cadot, 2015; khuyen, 2021). additionally, highly leveraged firms may face higher agency costs due to increased auditing fees. as a result, such firms need to disclose more information in their annual reports as a means of reducing these costs. this can help enhance accountability and reduce the agency costs associated with managerial https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 342 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc opportunism (grashuis, 2020). furthermore, the agency theory suggests that managers of larger and more profitable firms may choose to disclose more information in order to gain personal advantages, such as maintaining their management position and securing higher compensation (luo, 2010). h2: agency cost significantly effect firm performance intellectual capital and firm performance the food and beverage industry is facing increasing pressure from various stakeholders, such as customers, regulators, and environmental activists, to address concerns related to health and the environment (xu et al., 2020). in response to these concerns, companies in the food and beverage industry are recognizing the importance of intellectual capital and its impact on their overall performance. intellectual capital refers to the intangible assets and knowledge that a company possesses, including its human capital (employees' skills and expertise), structural capital (the organization's systems, processes, and patents), and relational capital (relationships with customers, suppliers, and stakeholders) (arcese et al., 2015). research has shown that intellectual capital has a significant positive influence on the performance of companies in the food and beverage industry (kurfi et al., 2017). firstly, human capital plays a crucial role in the success of food and beverage companies. a skilled and knowledgeable workforce is essential for innovation, product development, and maintaining high-quality standards in the industry. employees with expertise in specific areas of food production, nutrition, and sustainable practices can contribute to the development of new products that meet consumer demands for healthier options. additionally, employees with strong problem-solving and decision-making skills can help companies navigate complex challenges related to food safety regulations, supply chain management, and sustainability initiatives (kurfi et al., 2017; tsai & mutuc, 2020; xu et al., 2020). secondly, structural capital also has a significant impact on the performance of food and beverage companies. effective systems and processes, such as quality control measures, supply chain management systems, and research and development capabilities, are essential for enhancing operational efficiency, productivity, and innovation in the industry. companies that invest in developing and maintaining robust structural capital are better positioned to adapt to changes in consumer preferences, technological advancements, and regulatory requirements (xu et al., 2020; yanti & munir, 2021; zhang et al., 2021). thirdly, relational capital plays a crucial role in the success of companies in the food and beverage industry. strong relationships with customers, suppliers, and stakeholders can provide companies with essential market insights, access to new distribution channels, and opportunities for collaboration and partnerships. additionally, these relationships can enhance brand reputation and customer loyalty, leading to increased sales and market share (wardani et al., 2019; xiong et al., 2015; yanti & munir, 2021). h3: intellectual capital significantly effect on firm performance https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 343 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method this research is associative research with a quantitative approach, which aims to find out the effect between independent variables (operating costs, agency costs, and intellectual capital) on the dependent variable (firm performance). the sampling technique used in this research is nonprobability sampling with convenience sampling. this study uses secondary data, and the sample is taken from 12 out of 26 financial reports from food and beverage sector companies listed on the indonesia stock exchange. the financial statements analyzed are for the financial statement period in 2018-2022 or as many as 5 years, so the total number of data observations is 60. table 1 shows the measurements used in each variable adopted from several references. table 1. variable measurement variable measurement scale operating cost (tato) 𝑡𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 ratio agency cost 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑠𝑎𝑙𝑒𝑠 + 𝐴𝑑𝑚. 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 𝑡𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑥100 ratio intellectual capital (vaic) vaca + vahu + stva ratio firm performance (roa) 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 ratio source: sitorus and fransiska (2023); giofani (2022) the data analysis technique used is panel data regression using the eviews version 12 tool. before panel data regression and hypothesis testing are carried out, model selection testing starting from the chow, hausman, and lagrange multiplier tests is first carried out. in addition, classical assumption testing is also carried out if one of the model estimates is selected, starting from the normality, heteroscedasticity, multicollinearity, and autocorrelation tests. classical assumption testing is not mandatory and depends on the selected model estimation. result and discussion table 2 shows the results of the chow test with the chi-square parameter showing a significance value of 0.000, meaning that the better model estimate is the fixed effect model, so further hausman testing is needed to compare the fixed effect model estimate with the random effect. table 2. chow test effects test statistic d.f. prob. cross-section chi-square 98.761217 11 0.0000 source: data processed (2024) https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 344 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3 shows the results of the hausman test with a significance level of 0.0006, which means that the best estimate between the fixed effect and random effect is the fixed effect model. hence, the estimation model chosen in this study is the estimation of the fixed effect model. table 3. hausman test test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 17.345376 3 0.0006 source: data processed (2024) furthermore, to ensure that the panel data regression model can be used, it is necessary to ensure that the classical assumptions are met. in this study, the selected model estimation is a fixed effect model, so the mandatory assumption tests are heteroscedasticity and multicollinearity tests, while other assumptions can be ignored (gujarati & porter, 2008). table 4 shows that the results of the glejser test have a significance value of 0.2017, meaning that the data avoid symptoms of heteroscedasticity or are homogeneous. table 4. uji glejser obs*r-squared 4.621275 prob. chi-square(3) 0.2017 source: data processed (2024) in the multicollinearity test, table 5 shows that the vif value of each independent variable is smaller than 5, so it can be said that there are no multicollinearity symptoms so that panel data regression testing and research hypotheses can be carried out. table 5. multicollinearity test coefficient uncentered centered variable variance vif vif c 0.000992 12.75530 na tato 0.000228 4.543138 1.305455 ca 0.007397 5.067188 1.259157 vaic 2.12e-05 3.902012 1.042585 source: data processed (2024) in table 6, the regression equation is obtained as follows: roa = -0.283222 + 0.055699 (tato) + 0.440090 (agency cost) + 0.079188 (viac) https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 345 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the regression equation states that return on assets (roa), or the rate of return on assets, is affected by total assets turnover (tato), agency cost, and managed intellectual capital (viac). the coefficient associated with each variable indicates how much relative influence each independent variable has on the dependent variable, roa. the positive coefficients for agency cost, tato, and viac indicate that an increase in these three variables will increase roa. table 6. fixed effect model and hypotheses test variable coefficient std. error t-statistic prob. c -0.283222 0.044177 -6.411080 0.0000 tato 0.055699 0.022366 2.490407 0.0165 ca 0.440090 0.152781 2.880538 0.0061 vaic 0.079188 0.003706 21.36888 0.0000 effects specification cross-section fixed (dummy variables) root mse 0.028980 r-squared 0.947671 mean dependent var 0.120033 adjusted r-squared 0.931391 s.d. dependent var 0.127756 s.e. of regression 0.033463 akaike info criterion -3.744405 sum squared resid 0.050391 schwarz criterion -3.220819 log likelihood 127.3322 hannan-quinn criter. -3.539602 f-statistic 58.21016 durbin-watson stat 2.073928 prob(f-statistic) 0.000000 source: data processed (2024) furthermore, table 6 also shows the results of hypothesis testing both partially and simultaneously. based on statistical testing results, the significance value of tato of 0.0165 <0.05 indicates that operating capacity (tato) has a significant effect on company performance (roa), so the first hypothesis is accepted. furthermore, the significance value of agency cost (ca) of 0.0061 <0.05 indicates that agency cost (ca) has a significant effect on company performance (roa), so the second hypothesis is accepted. likewise, the significance value of intellectual capital (viac) of 0.0061 <0.05 indicates that intellectual capital (viac) has a significant effect on company performance (roa), so the third hypothesis is also accepted. the statistical results also show that simultaneously, operating capacity, agency costs, and intellectual capital significantly affect company performance. the amount of influence is 94.76%, and only 5.24% is influenced by other variables not tested in this study, so it can be concluded that this estimation model is robust. https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 346 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operating capacity and firm performance the study results show that operating capacity significantly affects firm performance. operating capacity refers to the maximum level of production that a company can achieve within a given period. the higher the operating capacity of a company in the food and beverage industry, the more products it can produce and sell (zhou et al., 2021). this directly leads to increased revenue and profitability for the company. furthermore, operating capacity also has a significant impact on various aspects of the business, including pricing, marketing, promotional plans, and customer perceptions. the ability to differentiate experience that balances consumer value with margins is one aspect that can be affected by operating capacity (ma et al., 2021). by having a higher operating capacity, companies in the food and beverage industry can meet customer demands more effectively during peak mealtime hours. this can lead to improved customer satisfaction and loyalty (andersson, 1995; chowdhury et al., 2020). another factor affected by operating capacity is the ability to drive restaurant improvements (ma et al., 2021). by having an optimal operating capacity, companies can ensure efficient production and reduce wastage (chen et al., 2018; soni & gupta, 2020; zhao & stank, 2003). the impact of operating capacity on performance in the food and beverage industry can be seen through several vital factors. firstly, operating capacity influences the company's ability to meet demand. by having a higher operating capacity, companies can produce and deliver more products to meet customer demands promptly (ma et al., 2021). this not only helps in maximizing sales but also prevents the loss of potential customers due to the unavailability of products. secondly, operating capacity affects pricing strategies. by increasing their operating capacity, companies in the food and beverage industry can achieve economies of scale, which can lead to cost savings. these cost savings can be passed on to customers in the form of lower prices, making the company more competitive in the market (gopalakrishna-remani et al., 2016; hwang et al., 2010). additionally, operating capacity plays a pivotal role in marketing and promotional plans. companies with higher operating capacity can take on more extensive marketing campaigns, offer more promotions, and accommodate more significant events or gatherings. this allows them to reach a wider audience and attract more customers, ultimately leading to increased sales and market share (yeap, 2011). agency cost and firm performance the study results show that agency cost significantly affects firm performance. one reason why agency costs can have a positive impact on the performance of food and beverage companies is that it provides incentives for managers to act in the best interests of the shareholders (luo, 2010). these incentives can lead to increased effort and motivation on the part of the managers, which in turn can improve the overall performance of the company (corbetta & salvato, 2004; khuyen, 2021; kim et al., 2007). managers and shareholders may have different goals and interests. managers may prioritize short-term profitability or personal gain, while shareholders typically focus on long-term value creation and maximizing shareholder wealth. the presence of agency costs helps align the interests of managers with those of shareholders (blanco-mazagatos et al., https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 347 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2007; haugen & senbet, 1981; schulze et al., 2001). one way agency costs can positively influence the performance of food and beverage companies is through increased monitoring and control mechanisms. shareholders will closely monitor the actions and decisions of managers to ensure that they act in the best interest of the company. this monitoring can lead to improved corporate governance practices, more effective decision-making, and better risk management (li, 2020; umam & halimah, 2021). additionally, agency costs can lead to greater transparency and accountability within the company. managers may be more incentivized to provide accurate and timely information to shareholders, as this can help mitigate agency costs and build trust. managers may voluntarily disclose more information in annual reports, financial statements, and other communications to shareholders in order to reduce agency costs. this increased transparency can improve the overall performance of the company by providing shareholders with a better understanding of the company's operations, financial health, and prospects (alfadhl & alabdullah, 2013; boland et al., 2008). furthermore, addressing agency costs can also lead to improved efficiency and cost management within food and beverage companies. when agency costs are effectively managed, decision-making processes become more efficient, and costs can be better controlled. this can result in improved operational performance, reduced wastage, and increased profitability (luo, 2010; mohan et al., 2020; reynolds & biel, 2007; umam & halimah, 2021). intellectual capital and firm performance the study results show that agency cost significantly affects firm performance. the food and beverage industry is a highly competitive sector that requires companies to continually innovate and adapt to changing consumer preferences (wardani et al., 2019). numerous studies have been conducted to examine the impact of intellectual capital on company performance, particularly in the food and beverage industry. intellectual capital enables companies to innovate and differentiate themselves in a highly competitive market. this is particularly relevant in the food and beverage industry, where consumer preferences are constantly evolving. companies that possess a strong intellectual capital can develop new and innovative products, improve existing products, and respond quickly to changing consumer demands. this gives them a competitive advantage and allows them to attract more customers and increase their market share (kurfi et al., 2017; tsai & mutuc, 2020). intellectual capital contributes to the efficiency and effectiveness of company operations. companies that have a wealth of intellectual capital possess valuable knowledge, expertise, and skills that can be utilized to streamline processes, improve decision-making, and enhance overall operational performance (kanchana & mohan, 2017; wardani et al., 2019). additionally, intellectual capital facilitates knowledge-sharing and collaboration within the organization. this encourages learning, creativity, and innovation among employees, leading to continuous improvement and increased efficiency (hsu & sabherwal, 2012; xu et al., 2020). intellectual capital plays a crucial role in building strong customer relationships and brand reputation. companies that prioritize intellectual capital are more likely to invest in research and development, customer insights, and marketing strategies. this enables them to understand customer needs and preferences better, tailor their products and services accordingly, and build a strong brand reputation (kartikasari & sukarno, 2023; sharma, 2018)(igor et al., 2019). by https://www.ilomata.org/index.php/ijtc boosting firm performance: insights from the food & beverage sector's key drivers michael and widjaja 348 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consistently delivering high-quality products and creating positive experiences for customers, companies with strong intellectual capital can build trust and loyalty, ultimately leading to increased sales and profitability. conclusion based on the results, there are significant findings related to three factors that influence firm performance in the food and beverage industry: operational capacity, agency costs, and intellectual capital. first, operational capacity plays a vital role in improving firm performance. high levels of operational capacity enable firms to increase production and sales of their products, which in turn increases revenue and profitability. in addition, optimal operational capacity affects various aspects of the business, including pricing, marketing, and customer perception. second, agency costs have a positive impact on firm performance by encouraging managers to act in the interest of shareholders, improving monitoring and control, and increasing corporate transparency and accountability. third, intellectual capital also has a significant contribution to firm performance by enabling innovation, operational efficiency, internal collaboration, and building strong customer relationships. the theoretical implications of these findings underscore the importance of paying attention to these aspects in the strategic management of firms. in contrast, the practical implications highlight the need to focus on developing operational capacity, agency cost management, and strengthening intellectual capital to improve firm performance in the food and beverage industry. reference alfadhl, m. m. a. f., & alabdullah, t. t. y. 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(2003). interactions between operational and relational capabilities in fast food service delivery. transportation research, 161–173. www.elsevier.com/locate/tre zhou, l. l., ayegba, j. o., ayegba, e. o., ayegba, p. m., & jie, z. x. (2021). impact of dynamic capacities on the performance of food and beverage enterprises in lagos, nigeria. journal of innovation and entrepreneurship, 10(1). https://doi.org/10.1186/s13731-021-00169-1 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 941-961 941 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria yusuf alabi olumoh1, mubaraq sanni2 12kwara state university, nigeria correspondent: olumoh.yusuf@gmail.com1 received : april 02, 2024 accepted : july 17, 2024 published : july 31, 2024 citation: olumoh and sanni (2024). tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria. ilomata international journal of tax and accounting, 5(3), 941-961. https://doi.org/10.61194/ijtc.v5i3.1736 abstract: the state internal revenue services in southwest nigeria struggle with tax compliance rates and revenue generation optimization due to inadequate audits and low technology adoption, which affects detection, evasion reduction, accountability, and transparency in tax administration. therefore, this study investigated the impacts of tax audit management (tam) and technology integration (ti) in improving the performance of sirs in southwest nigeria. the study employed a cross-sectional quantitative survey research design, data were collected from 383 management personnel across various sirs offices in southwest, nigeria. pls-sem was employed to examine the impact of tam and ti on sirs performance. the findings indicate that tam significantly enhances sirs performance, with a coefficient of 0.440, a t-statistic of 2.736, and a p-value of 0.006, suggesting that effective tax audits boost revenue generation and reduce tax evasion. ti also positively influences sirs performance, with a coefficient of 0.328, a tstatistic of 2.143, and a p-value of 0.032, emphasizing its role in streamlining tax processes and improving compliance. however, the combined interaction effect of ti and tam on sirs performance is not statistically significant, with a coefficient of -0.050, a t-statistic of 0.523, and a p-value of 0.601. this study concludes that both tam and ti independently contribute to sirs performance, their combined effect does not significantly enhance the operational efficiency of tax authorities. based on these findings, the study recommends that sirs in southwest nigeria should prioritize the adoption of comprehensive tax audit management strategies and leverage technology to automate and optimize tax processes. keywords: tax audit management, technology integration, performance, state internal revenue services. this is an open access article under the cc-by 4.0 license. introduction the performance of revenue agencies is crucial for the economic growth and stability of any nation. in developed countries, tax authorities benefit from advanced technological integration, streamlined audit systems, and strong compliance mechanisms, leading to efficient revenue collection (gurama & mansor, 2021). for instance, countries such as the united states, the united https://www.ilomata.org/index.php/ijtc mailto:olumoh.yusuf@gmail.com https://doi.org/10.61194/ijtc.v5i3.1736 tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 942 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc kingdom, and germany have integrated sophisticated tax audit management systems and digital platforms, achieving tax compliance rates of over 90%. by leveraging technology, these countries enhance taxpayer compliance, reduce tax evasion, and automate processes, improving tax administration and lowering administrative costs. (senouci et al., 2024). conversely, developing countries face numerous challenges in achieving similar performance levels. weak institutional capacity, low levels of technological integration, and ineffective tax audit practices contribute to revenue leakages and underperformance (tsvetkov et al., 2017). according to the world bank (2023), tax revenue as a percentage of gdp in many developing countries averages around 15%, far below the 35% seen in developed economies. this highlights inefficiencies in tax administration, particularly in tax audit management and technology use, which limits compliance and enforcement (saberi et al., 2019; oto & wayas,2024). nigeria, as a developing country, experiences similar issues. its tax-to-gdp ratio stands at just 6.5%, one of the lowest in africa. (pantielieieva, 2022). despite various reforms in tax administration, the performance of revenue agencies, particularly the state internal revenue services (sirs), remains suboptimal. outdated audit practices, limited technology use, and weak enforcement mechanisms all contribute to this underperformance. in the south west region, these challenges are particularly pronounced, with revenue collection falling short of potential due to inefficiencies in tax audit management and poor technology integration. (morenike et al., 2024). tax audit management is a fundamental aspect of tax administration, ensuring compliance with tax laws and regulations. (ayu et al., 2022). it involves systematically reviewing taxpayers’ financial records to verify the accuracy of their declarations. (chalu & mzee, 2018; rahmayanti et al., 2020). effective tax audit management is crucial for optimizing revenue collection, reducing tax evasion, and promoting voluntary compliance among taxpayers in southwest nigeria. (morenike et al., 2024; azrina-mohd-yusof et al., 2014)however, many nigerian revenue agencies rely on manual, inefficient systems that delay audits, weaken enforcement, and reduce revenue collection. (alissa et al., 2014). for example, a 2021 national bureau of statistics report indicated that lagos state collected only 40% of its potential revenue, highlighting significant gaps in tax practices elemokaka, 2025).technology integration, particularly through digital audit management tools, has been identified as a key driver of performance improvement. (manita et al., 2020); fath-allah et al., 2015.). in developed countries, automated tax systems, data analytics, and real-time audit management software have transformed revenue collection. (joselin et al., 2024;taha et al., 2021). however, technology adoption in nigeria has been slow (anioke, 2024). while some southwest states, including lagos, ogun, and oyo, have initiated technology-driven reforms, these efforts remain insufficient. the lack of fully integrated systems hampers tax audit effectiveness and transparency, leading to revenue leakages and poor tracking of non-compliant taxpayers. therefore, the performance of state internal revenue services (sirs) in the southwest region of nigeria has been suboptimal due to the weak integration of technology in tax audit management. this research seeks to investigate the impact of tax audit management and technology integration on the performance of sirs in southwest nigeria. specifically, the study examined the moderating effect of technology integration on the relationship between tax audit management and the performance of the state internal revenue service in the south-west region of nigeria, https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 943 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc including ogun, oyo, lagos, osun, ekiti, and ondo. the findings of this study will significantly contribute to academic knowledge, inform policy development, and improve management practices, particularly by strengthening the ability of state revenue agencies to achieve their revenue targets and other decision-making. tax audit management is the evaluation of a taxpayer’s financial records and tax returns to ensure compliance with tax laws and regulations sriningsih (2016). during a tax audit, the tax authority reviews the taxpayer’s records, verifies the accuracy of reported information, and requests additional documents or explanations (chalu & mzee, 2018; olaoye & busari, 2021). it is defined as the process of planning, executing, and monitoring audit activities to ensure that taxpayers comply with the relevant tax laws. the fundamental components of tax audit management include audit planning, data analysis, back-and-field audit operations, reporting, follow-up, and enforcement. audit planning sets the foundation by defining the objectives, scope, and strategies of the audit, ensuring that resources are allocated to high-risk areas (blaufus et al., 2023). during data analysis, auditors utilize advanced tools to identify discrepancies or patterns in financial records, allowing for targeted investigations. both back-office audits (desk audits) and field operations (on-site audits) are employed to verify financial information, with field audits often providing deeper insights through direct inspection and interviews (kislina & wijaya, 2022; ayu et al., 2022). after audits are completed, reporting documents the findings, outlining any irregularities or non-compliance and offering recommendations for corrective actions nikolova, 2022).the follow-up phase ensures that taxpayers adhere to audit results and address any discrepancies, and, if necessary (ogundeko & idowu, 2020), enforcement measures such as penalties or legal actions are employed to secure compliance (ogunwole & adebayo, 2020). according to kislina and wijaya (2022) and nikolova (2022), effective management of these components leads to enhanced revenue collection, reduced tax evasion, and an overall improvement in the integrity and accountability of the tax system. according to kislina and wijaya (2022), and nikolova (2022), effective tax audit management can enhance revenue collection and reduce the instances of tax fraud and evasion. technology integration refers to the seamless incorporation of digital tools, systems, and processes into existing operations to enhance efficiency, accuracy, and accessibility. (udegbunam & nwankwo, 2023). according to madaki, et al. (2024), technology integration is the systematic incorporation of different types of technology, information systems, and the use of software by large organizations or public services. individually, in the context of modern tax administration, particularly for state internal revenue services (sirs), several types of technology are employed to streamline operations and improve service delivery. these technologies include web-based portals, mobile technology, cloud computing, data analytics, biometric systems, and automated audit tools estifanos (2023) and islam (2024)opine that web-based portals enable taxpayers to perform essential functions such as tax registration, return filing, and payment processing online, thereby enhancing accessibility and reducing physical contact between taxpayers and tax officials. similarly, umar, et al. (2023), and ait lhassan et al., 2022) depict that technology integration involves adopting automated systems like electronic filing (e-filing), data analytics, online payment platforms, and integrated tax management software to streamline tax processes. this transformation improves revenue collection, minimizes errors, and enhances transparency in tax https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 944 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reporting. additionally, it strengthens tax enforcement through the use of digital audits and realtime tracking of taxpayer activities, ultimately contributing to better compliance, reduced tax evasion, and improved overall tax administration efficiency. (mohammed et al., 2024; achibo & wanjohi, 2024). mobile technologies are also forms of technologies that are particularly useful in reaching informal sector operators and taxpayers in remote areas through mobile tax apps and sms-based notifications (tembine et al., 2024). furthermore, the adoption of cloud computing allows sirs to store and access taxpayer data securely in real time, facilitating better decision-making and efficient data management (madaki et al., 2024).biometric systems ensure identification, verification and fraud prevention, while data analytics tools enable the tax authority to analyze trends, detect anomalies, and identify high-risk taxpayers for audit (bernal-romero et al., 2023). shakil and tasnia (2022) see technology integration as it encompasses various specialized software solutions that are utilized in managing tax operations, ranging from end-to-end tax management systems to stand-alone applications focused on specific functions. there are much software employes by some tax revenue agencies. firstly, enterprise tax management (etm) or software enterprise resource planning (erp) integrates multiple tax processes including electronic tax compliance credentials, enforcement, and audit into a single, unified platform, thereby improving workflow efficiency and information sharing across departments (xue, 2021). additionally, revenue assurance software is employed to track real-time tax collections, reconcile payments, and flag discrepancies (abubakar, 2023). risk-based audit software is used to select taxpayers for audit based on risk profiling and historical data, minimizing subjective audit targeting (eberhartinger et al., 2021). some sirs also utilize geographic information systems (gis) to map taxable properties and business activities, especially for property and consumption taxes. these software systems reduce manual errors, enhance transparency, and contribute to improved compliance monitoring, which ultimately boosts organizational performance. (hartikayanti et al., 2022). another form of technological integration in tax administration is tax information system. according to reyes-tagle, et al. (2023), tax information systems (tis) are comprehensive digital platforms that enable the collection, storage, processing, and analysis of tax-related data for decision-making and service delivery. tis serve as the backbone of automated tax administration, providing a central database where taxpayer records, audit trails, compliance history, and financial transactions are stored and managed. a well-designed tis enables sirs to carry out automated assessments, issue electronic notices, conduct e-audits, and generate performance reports examples include integrated tax administration systems (itas), which consolidate various tax operations under one digital infrastructure, and electronic document management systems (edms), which facilitate secure storage and retrieval of taxpayer files and audit documents. these systems improve efficiency, minimize the risk of data loss or manipulation, and provide auditready documentation that enhances accountability (van rooi, 2023). by strengthening the information flow within the tax authority and between the tax authority and taxpayers, tis significantly contributes to revenue performance and institutional trust (al-okaily, 2024). performance refers to the measurable outcomes or results achieved by an individual, organization, or system concerning set goals or objectives. (fatile et al., 2019). according to (amirah et al., https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 945 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2024), performance can be assessed using various indicators such as productivity, revenue generation, service delivery, compliance, or financial management. in the context of tax administration, the performance of state internal revenue service is often measured by their ability to meet revenue targets, their operational efficiency, and the level of taxpayer compliance they can achieve (adenugba & ogechi, 2013). a well-structured audit system not only identifies noncompliant taxpayers but also deters potential evaders through strict enforcement and penalties. revenue agencies' performance implies the extent to which these institutions effectively and efficiently achieve their core objectives of mobilizing public revenue, ensuring compliance with tax laws, and providing quality service to taxpayers (yani & bambang, 2024). this performance can be measured through several fundamental indicators (increase revenue generation, tax compliance level, time efficiency, cost effectiveness, service delivery tax evasion reduction, accountability and minimizing tax gap. increased revenue generation reflects the agency’s ability to broaden the tax base and enhance collection efforts over time (achibo & wanjohi, 2024). improved tax compliance rates indicate the success of policies and systems in encouraging voluntary and accurate filing and payment of taxes (dada & taiwo, 2020). time efficiency in tax processing measures how swiftly and seamlessly tax-related transactions such as filing, assessment, and refund, are handled (morenike et al., 2024). cost-effectiveness of tax administration refers to the optimal use of resources to achieve revenue goals with minimal overhead (achibo & wanjohi, 2024). taxpayer satisfaction and service delivery quality focus on the responsiveness, accessibility, and overall quality of services provided to taxpayers, which fosters trust and compliance (artawan et al., 2020). reduction in tax evasion signifies improved monitoring, detection, and deterrence of illegal non-payment or underreporting of taxes (irawan & utama, 2021). effectiveness of enforcement actions examines the agency’s ability to apply penalties, conduct audits, and ensure compliance through fair and consistent enforcement. additionally, minimizing the tax gap, the difference between taxes owed and taxes actually collected (murphy, 2021), is a critical metric, as is accountability, which entails transparency in operations, responsible management of public funds, and regular performance reporting to stakeholders (amirah et al., 2024). resource-based view (rbv) theory the resource-based view (rbv) theory, developed by barney (1991), assumes that an organization’s performance is determined by the extent to which it possesses and utilizes valuable, rare, inimitable, and non-substitutable (vrin) resources and capabilities (zvarimwa & zimuto, 2022). from this perspective, tax audit management can be viewed as a strategic internal capability that, when effectively developed and deployed, can enhance the performance of state internal revenue services (sirs). skilled audit personnel, robust audit processes, and structured enforcement mechanisms are intangible resources that, if properly managed, can provide sirs with a sustainable advantage in revenue collection, compliance enforcement, and service delivery. capabilities (kamara, 2023). technology integration, in the context of rbv, serves as both a complementary resource and a performance enabler. it is expected to strengthen the efficiency, accuracy, and scalability of tax audit management functions, such as real-time data access, automated risk profiling, and digital https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 946 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc audit trails (yang et al., 2022). the theory accommodates modern, intangible assets such as information and communication technologies (luo & bu, 2016).it sees technology integration not just as infrastructure, but as a resource that can enhance the productivity and uniqueness of other internal processes like tax audits (ramli & ali, 2024). the strength of this theory is that, it provides a strong rationale for investigating how the deployment and combination of these internal resources (audit management and technology) directly influence performance outcomes in public sector institutions like sirs (ramli & ali, 2024). the limitations of rbv theory are viewed in three ways. firstly, it neglects external factors, as rbv focuses heavily on internal resources and does not account adequately for external environmental influences (e.g., political interference, regulatory changes, taxpayer behavior) that may also impact sirs performance (taher, 2011). secondly, the static view of resources, that is, the theory tends to view resources as static and does not fully address how capabilities evolve over time or respond to rapidly changing environments particularly relevant in the fast-changing field of tax technology (mehmood et al., 2023). thirdly, there is lack of specificity for public sector, rbv is traditionally applied to private-sector firms pursuing competitive advantage. applying it to public institutions like sirs requires caution, as their goals are more aligned with efficiency and public value rather than market competition (jibreal, 2022). empirical review tax audit management and organizational performance have been extensively studied from 2014 to 2024. researchers have examined various aspects of tax management practices on revenue generation and voluntary compliance and the influence of digital transformation on tax administration. several studies found that effective tax audit practices are crucial for enhancing revenue generation. similar studies by alissa, et al. (2014),dada and taiwo (2020), ogundeko and idowu (2020), and anjulo (2018). demonstrated that tax audits and investigations significantly improve the revenue-generating capacity of state tax agencies in nigeria. (sule et al., 2024) also found that a robust tax audit framework enhances compliance and maximizes tax revenue generation in nigeria. a study by olaoye, et al. (2018) found that tax audit has a significant effect on tax productivity in lagos state. however, the effectiveness of tax audits can be influenced by technological and organizational factors. (de et al., 2021; aguirre, 2021) reported mixed results in developing economies, revealing that technological improvements without corresponding investments in human capital led to only marginal gains in audit performance in mexico. in contrast, (gulzar et al., 2024) and (guo et al., 2024) found that the adoption of advanced data analytics and automation for audit targeting and processes resulted in increased revenue collection and improved efficiency. the covid-19 pandemic also affected tax audit practices, with (ogunwole & adebayo, 2020) revealing that the shift to remote auditing procedures led to increased revenue collection and reduced operational costs for state tax agencies. several studies highlighted the importance of technology integration in enhancing the performance and effectiveness of tax systems. researchers in nigeria, ethiopia, and indonesia found that embracing digital solutions, such as e-filing, electronic payments, automated data processing, and integrated billing systems, significantly improved revenue generation, reduced fraud, and facilitated https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 947 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc compliance (joselin et al., 2024; mohammed et al., 2023; udegbunam & nwankwo, 2023;umar et al., 2023).saleem, et al. (2024) and hesami, et al. (2024)found that digital transformation of tax administration enhances tax compliance. the studies also emphasized the role of e-governance and public accountability in improving tax administration. meanwhile, bassey, et al. (2023) found that adopting e-governance practices enhanced the efficiency and effectiveness of tax collection, leading to greater public trust in government institutions in nigeria. similar findings were reported in studies from portugal, switzerland, and south-west nigeria (campbell & hanschitz, 2018; santos & álvares, 2024; achibo & wanjohi, 2024; morenike et al., 2024). research gaps despite extensive research on tax audit management and technology integration, a significant gap remains in understanding the moderating effect of technology integration on the relationship between tax audit management and the performance of state internal revenue services (sirs) in southwest nigeria. previous studies (olaoye et al., 2018;de et al., 2021;joselin et al., 2024;mohammed et al., 2023; sule et al., 2024) have largely focused on the direct impact of tax audits or emphasized efficiency gains from digital transformation but have not considered technology integration as a moderating factor. there is also limited research exploring the simultaneous impact of both tax audit management and technology integration on sirs performance within the nigerian context, especially at the state level. this study aims to address this gap using structural equation modeling (sem) to examine both the direct effects and the moderating analysis of the subject matters. contribution to knowledge this study makes a unique contribution to the existing body of knowledge by examining not only the individual impacts of tax audit management and technology integration on the performance of sirs in southwest nigeria but also the moderating role of technology integration in this relationship. by doing so, it provides new insights into how technological advancements can enhance or hinder the effectiveness of tax audit practices. the study offers a more comprehensive understanding of the dynamics between tax administration practices and digital tools, thereby filling a critical gap in the literature concerning the interplay between audit management and technology in the nigerian tax system. additionally, it provides empirical evidence specific to the southwest region, which has been under-researched compared to other areas in terms of sirs performance and digital transformation efforts. this research could help policymakers in formulating more targeted. method the study adopted a cross-sectional research design with a population of 8,771 management staff data collected from state revenue in southwest nigeria. the primary data for this study was collected via questionnaires distributed to tax auditors, revenue officers, and other senior https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 948 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management in the sir's offices across southwest nigeria. a total sample size of 383 management personnel across various sirs offices in south-west, nigeria was targeted, with questionnaires designed to gather information on tax audit management, technology integration, and organizational performance. the study employed both descriptive and inferential statistical techniques for data analysis. descriptive statistics were used to summarize the data, including measures such as mean, standard deviation, as well as skewness and kurtosis to assess the normality of the distribution. this research employs the partial least squares structural equation modeling (pls-sem) technique to analyze the relationship between tax audit management, technology integration, and the performance of the state internal revenue service (sirs) in southwest nigeria. pls-sem is chosen and justified based on its effectiveness in handling complex relationships between multiple variables and its suitability for exploratory research. the research instruments were evaluated using the measurement model based on the basic partial least squares (pls) algorithm, with a focus on established quality assessment criteria. reliability was assessed through cronbach’s alpha and composite reliability to ensure internal consistency of the constructs. validity was further examined using the average variance extracted (ave) for convergent validity, while discriminant validity was assessed using both the fornell-larcker criterion and cross-loading analysis to verify that each construct was distinct from the others. to test the study's hypotheses, the structural equation model (sem) was evaluated using bootstrapping procedures within the pls-sem framework, implemented via smartpls software (version 4.1.1.2). the data was analyzed using the smartpls4 software to test the hypothesized relationships between the variables. figure 1. sample size is calculated using taro yamane’s formula: n = n/(1+n(e)2) where n = sample size, n = population, e = error limit (0.05), n= 8771/ (1 + 8771(0.05)2) =383. table 1. distribution of sample size of 383 to target respondents in the regions s/n states population size of management employees proportion of sample size about sampling frame sample size 1 lagos 4,879 (4,879x383)/ 8,771 213 2 ogun 1,728 (1,728x383)/ 8,771 76 3 oyo 1,535 (1,535x383)/ 8,771 67 4 osun 528 (528x383)/ 8,771 23 5 ondo 285 (285x383)/ 8,771 13 6 ekiti 324 (324x383)/ 8,771 4 total 8,771 383 source: author’s compilation, 2024 from the website database of the irs of each state. table 1 presents the population and sample size distribution for management personnel across the state internal revenue services (sirs) in the six southwestern states of nigeria. the total population of management employees across the states is 8,771, with a calculated sample size of 383 based on taro yamane’s formula. the sample size was proportionally allocated to each state according to its share of the total population. https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 949 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the study employed proportionate stratified random sampling, a technique in which the population was first divided into six distinct strata based on states (lagos, ogun, oyo, osun, ondo, and ekiti), and a proportional sample was allocated to each state according to its share of the total population of 8,771 management employees. the final sample size of 383 was determined using taro yamane’s formula and distributed proportionately across the states to reflect their population sizes. although random selection within each stratum was not explicitly stated, it is typically inherent in stratified sampling designs. this method ensures that each state's internal revenue service is adequately represented, thereby enhancing the balance, representativeness, and generalizability of the study’s findings across the southwestern region of nigeria. measurement of variables the independent variable, tax audit management, is measured using the following indicators: clarity of the tax audit process, efficiency of the tax audit management system, compliance of the audit process with regulatory standards, effectiveness of tax investigation procedures, costeffectiveness and location of audits, effectiveness of field audits, impact of back duty audits, and effectiveness of registration audits. the moderating variable, technological integration, is assessed through indicators such as integration of tax data systems, availability of online tax services, user-friendliness of the e-tax system, use of mobile technology for taxpayer outreach, electronic document management practices, adoption of financial management software, accuracy ensured by erp systems, and the existence of a centralized tax information system. the dependent variable, tax revenue performance, is measured by improved revenue collection, accountability in the utilization of tax revenue, enhancement of voluntary compliance, efficiency in processing tax-related transactions, operational efficiency and optimal resource utilization in service delivery, collaboration with stakeholders, effectiveness in combating tax evasion, and transparency and accountability in agency operations. result and discussion the results are presented using descriptive statistics (mean, standard deviation, and cramér-von mises p-value) in tables 2-4. the measurement model's reliability, validity, and discriminant validity, as well as the structural model's path coefficients, were assessed to test the hypotheses. table 2. descriptive statistics for tax audit management name items mean std. dev cramér-von mises p value tam-1 the tax audit process is well-defined and clearly communicated 3.640 1.229 0.000 tam-2 the tax audit management system effectively organizes and tracks audit cases. 3.640 0.975 0.000 https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 950 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tam-3 the tax audit compliance process aligns with regulatory requirements and industry best practices 3.380 1.075 0.000 tam-4 the tax investigation procedures adopted are effective in identifying potential tax issues and discrepancies. 4.440 0.726 0.000 tam-5 tax audit takes within the premises of tax officials and cost-effective 3.120 1.070 0.000 tam-6 the effectiveness of field audit allows physical verification of taxpayers' claims to confirm the facts and figures of the returns 3.980 1.029 0.000 tam-7 back duty audit practice is effective in correcting the mistake of lesser tax because of falsification of documents submitted by the taxpayers 3.400 1.200 0.000 tam-8 registration audit is effectively used to cage individuals and companies in the tax net within south-west nigeria 3.600 1.114 0.000 source: author’s computation (2024) table 3. descriptive statistics for technology integration name items mean std. dev cramér-von mises p value ti-1 the integration of tax data from different departments of sirs effectively reduces redundancy and improves consistency. 3.780 0.965 0.000 ti-2 sirs provides a fully functional online platform for tax registration, return filing, and payment through web-based portal 3.600 1.217 0.000 ti-3 mobile applications and sms are actively used by sirs to reach taxpayers in remote and informal sectors. 3.920 1.093 0.000 ti-4 software such as sharepoint or google drive used by sirs allows for efficient electronic st orage of documents and has significantly redu ced physical storage 4.040 0.824 0.000 ti-5 the use of accounting and financial management software (e.g. quickbooks or sap) has improved sirs budgeting processes 3.900 1.025 0.000 ti-6 the erp system enhances the accuracy of tax calculations and reporting in our tax accounting information system. 3.840 0.946 0.000 ti-7 a centralized tax information system exists for managing taxpayer records and audit trails. 3.620 1.056 0.000 source: author’s computation (2024) table 4. descriptive statistics for performance name items mean std. dev cramér-von mises p value https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 951 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc psirs-1 the agency has significantly increased its revenue collection by expanding the tax base and improving collection efforts.” 4.000 1.020 0.000 psirs-2 the tax revenue agency demonstrates accountability in the use of tax revenues. 4.000 0.849 0.000 psirs-3 the policies and systems implemented by the agency have enhanced voluntary tax filing and payment compliance among taxpayers. 3.980 0.883 0.000 psirs-4 tax-related transactions such as filing, assessment, and refund are processed efficiently and within reasonable timeframes. 3.880 0.886 0.000 psirs-5 sirs optimizes its operational efficiency through the utilization of its resources (e.g., labor, materials, and time) to provide service quality and achieve productivity. 4.040 0.999 0.000 psirs-6 the state irs actively collaborates with other government agencies, organizations, and stakeholders to enhance tax administration compliance and reduce tax evasion. 4.080 0.845 0.000 psirs-7 the agency has been effective in monitoring, detecting, and deterring tax evasion and underreporting. 4.020 0.761 0.000 psirs-8 the agency demonstrates transparency and accountability in operations, contributing to a reduced gap between taxes owed and collected 4.280 0.939 0.000 source: author’s computation (2024) the results presented in tables 2-4 highlight the effectiveness of tax audit management and technology integration within the tax administration system. in examining the descriptive statistics across the tax audit management (tam) and technology integration (ti) dimensions, several notable patterns emerge from the data analysis. for tax audit management in table 2, respondents indicated the highest mean score (4.440) for the effectiveness of tax investigation procedures (tam-4), with the lowest standard deviation (0.726) suggesting strong consensus among participants. the lowest mean score (3.120) was observed for the cost-effectiveness of tax audits conducted within tax officials' premises (tam-5). regarding technology integration in table 3, the data reveals generally positive perceptions, with the highest mean score (4.040) attributed to the efficiency of electronic document storage systems (ti-4), while the e-tax system's provision of accessible information (ti-2) showed the highest variability with a standard deviation of 1.217. in table 4 presents descriptive statistics indicating that the state internal revenue service (psirs) demonstrates high performance across key dimensions, with mean scores ranging from 3.880 to 4.280. the highest-rated item relates to transparency and accountability in operations (mean = 4.280), followed closely by stakeholder collaboration (4.080), while slightly lower scores were noted for efficiency in transaction processing (3.880). most items, including revenue generation and https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 952 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc voluntary compliance, received strong agreement from respondents, reflected in consistently low standard deviations and statistically significant cramér-von mises p-values (0.000), confirming the reliability of responses. table: summary of descriptive statistics construct no. of items mean median observed min observed max std. dev. skewness excess kurtosis tam 8 4.440 4.00 1 5 0.726 1.287 -1.242 ti 7 3.910 4.00 1 5 1.025 0.789 -0.943 psirs 8 4.280 4.00 1 5 0.939 2.232 -1.498 source: author’s computation (2024) the descriptive statistics in the table suggest that the data for the three constructs: tax audit management (tam), technology integration (ti), and performance of state internal revenue service (psirs) are generally acceptable but exhibit slight deviations from perfect normality. all three constructs have median values equal to 4.00, closely aligned with their means (tam = 4.44, ti = 3.91, sirs = 4.28), indicating a balanced central tendency. the standard deviations are within a reasonable range (0.726 to 1.025), reflecting moderate variability. however, based on the normality threshold of ±1 for skewness and kurtosis (hair et al., 2010), the constructs show that there is normality distribution of instruments. tam (skewness = 1.287, kurtosis = –1.242) and sirs (skewness = 2.232, kurtosis = –1.498) exceed the ±1 threshold for skewness, suggesting mild to moderate right-skewness, while ti (skewness = 0.789, kurtosis = –0.943) remains within acceptable bounds. hence, the data meets the basic assumptions for multivariate analysis. quality criteria this section presents the assessment of construct reliability and validity to ensure the measurement model’s adequacy. it includes analyses of internal consistency, convergent validity, and discriminant validity using established statistical criteria. the evaluation is guided by recommended thresholds from prior scholars such as hair et al. (2021) and fornell and larcker (1981). table 5. construct reliability and validity cronbach's alpha composite reliability (rho_a) composite reliability (rho_c) average variance extracted (ave) psirs0.871 0.908 0.898 0.528 tam0.842 0.848 0.877 0.522 ti0.840 0.845 0.880 0.512 source: author’s computation (2024) table 6. discriminant validity – fornell-larker criterion psirstamti psirs0.727 tam0.695 0.722 https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 953 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ti0.697 0.507 0.716 source: author’s computation (2024) table 7. discriminant validity – cross loadings psirstamtitix tam psirs-1 0.849* 0.770 0.735 -0.462 psirs-2 0.757* 0.543 0.500 -0.190 psirs-3 0.776* 0.498 0.607 -0.485 psirs-4 0.772* 0.539 0.477 -0.265 psirs-5 0.799* 0.510 0.479 -0.360 psirs-6 0.627* 0.323 0.513 -0.427 psirs-7 0.645* 0.400 0.274 -0.236 psirs-8 0.534* 0.204 0.224 -0.112 tam-1 0.540 0.745* 0.505 -0.276 tam-2 0.320 0.583* 0.359 -0.206 tam-3 0.306 0.697* 0.534 -0.184 tam-4 0.485 0.660* 0.528 -0.329 tam-5 0.402 0.684* 0.423 -0.098 tam-6 0.545 0.693* 0.665 -0.539 tam-7 0.528 0.677* 0.626 -0.313 tam-8 0.559 0.745* 0.692 -0.493 ti-1 0.455 0.576 0.798* -0.360 ti-2 0.445 0.496 0.640* -0.299 ti-3 0.615 0.696 0.765* -0.543 ti-4 0.482 0.539 0.681* -0.428 ti-5 0.507 0.567 0.732* -0.455 ti-6 0.500 0.509 0.668* -0.269 ti-7 0.448 0.629 0.711* -0.468 tix tam-0.461 -0.473 -0.572 1.000* source: author’s computation (2024) basic pls algorithm graphica representation source: smarpls4 output figure 1. path graph analysis tables 5 to 7 present the assessment of the measurement model, establishing the reliability and validity of the constructs: performance of state internal revenue services (psirs), tax audit https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 954 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management (tam), and technology integration (ti). as shown in table 5, all constructs meet the minimum threshold for cronbach’s alpha (>0.70), indicating strong internal consistency (hair et al., 2019. specifically, psirs (α = 0.871), tam (α = 0.842), and ti (α = 0.840) are reliable. composite reliability values (rho_c) for all constructs are above the acceptable 0.70 benchmark (psirs = 0.898, tam = 0.877, ti = 0.880), confirming construct reliability (hair et al., 2014). additionally, the ave values for psirs (0.528), tam (0.522), and ti (0.512) all exceed the 0.50 threshold, demonstrating sufficient convergent validity, which reflects that each construct explains more than half of the variance of its indicators (hair et al., 2021; fornell & larcker, 1981). discriminant validity is evaluated in tables 6 and 7. table 6 applies the fornell-larcker criterion, which requires that a construct’s square root of ave (on the diagonal) exceed its correlations with other constructs. this condition is satisfied for psirs (0.727), tam (0.722), and ti (0.716), confirming discriminant validity (fornell & larcker, 1981). table 7 further substantiates this using cross-loadings: each item loads highest on its intended construct (noted by asterisks), with significantly lower loadings on other constructs. for instance, psirs items load strongly on psirs but less on tam and ti (henseler et al., 2015). according to hair et al. (2021), this pattern affirms that each indicator is uniquely associated with its construct. together, the evidence from these three tables confirms that the measurement model is both reliable and valid is thus appropriate for further structural path analysis within the context of evaluating tax audit management, technology integration, and performance of state internal revenue services. structural model this section evaluates the structural model to determine the strength and significance of relationships among the latent constructs. key indicators such as collinearity statistics (vif), coefficient of determination (r²), and effect size (f²) are examined. the analysis follows the guidelines of hair et al. (2021) for assessing model adequacy in pls-sem. table 8. collinearity statistics – variance inflation factor (vif) vif tam-> psirs2.870 ti-> psirs2.309 tix tam-> psirs1.486 source: author’s computation (2024) table 9. r-square r-square r-square adjusted psirs0.542 0.512 source: author’s computation (2024) https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 955 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 10. f-square psirs psirs tam0.108 ti0.078 tix tam0.054 source: author’s computation (2024) tables 8 through 10 evaluate the preliminary aspects of the structural model, specifically collinearity, explanatory power, and effect size, which help assess the robustness of the model linking tax audit management (tam), technology integration (ti), and their interaction to the performance of state internal revenue services (psirs). table 8 presents the variance inflation factor (vif) values for all predictor constructs. the vif values for tam (2.870), ti (2.309), and their interaction term (1.486) are all below the conservative threshold of 3.3 recommended by hair et al. (2021), indicating that multicollinearity is not a concern. this implies that the constructs contribute independently to explaining variance in psirs, which is essential for the stability and interpretability of path coefficient estimates. table 9 shows that the model explains a substantial portion of the variance in psirs, with an rsquare value of 0.542 and an adjusted r-square of 0.512. according to (chin (1998), an r-square of 0.50 and above is considered moderate to substantial in behavioral research, indicating that tam, ti, and their interaction jointly explain over 50% of the variation in psirs performance. table 10 presents the f-square effect sizes, which measure the individual contribution of each predictor variable to the r-square of the dependent construct. the effect size of tam on psirs is 0.108, indicating a small to moderate effect; ti has a smaller effect (0.078), and the interaction term (ti × tam) has a minimal effect (0.054). as per cohen (1988), f-square values of 0.02, 0.15, and 0.35 indicate small, medium, and large effects respectively. these findings suggest that while tam and ti each have meaningful contributions, the interaction term adds marginal explanatory value: an insight important for refining strategic interventions in enhancing revenue service performance. graphical representation of structural model through bootstrapping source: smarpls4 output figure 2. pls-sem path: tam, it and psirs https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 956 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. path coefficient result constructs original sample (o) sample mean (m) std. dev. (stdev) t statistics (|o/stdev|) p values tam-> psirs 0.378 0.382 0.164 2.307 0.021 ti-> psirs 0.344 0.364 0.154 2.230 0.026 tix tam-> psirs -0.075 -0.073 0.102 0.736 0.462 source: author’s computation (2024) the results in table 5 show that tax audit management (tam) has a positive and significant effect on the performance of state internal revenue services (sirs) with a path coefficient of 0.378 (p = 0.021) at a 5% significant level. this indicates that improvements in tax audit management, such as more effective audit procedures and better regulatory, compliance monitoring, effective field and back duty audit lead to enhanced performance of revenue services. this finding implies that when sirs implements robust audit management practices, it results in increased efficiency, improved revenue collection, and a reduction in tax evasion. it emphasizes the critical role of tax audits in ensuring compliance and optimizing revenue generation for state governments. this finding is consistent with the outcomes from studies in nigeria by ogundeko and idowu (2020), who found that tax audit improves voluntary compliance and revenue generation, and johnson et al. (2021), who highlighted the positive impact of risk-based audit selection methods. it also aligns with the research by justine (2023) in ethiopia, okonye and akujor (2023) in nigeria, and (kassaw, 2023), all of which underscored the significance of tax audit management in enhancing the performance of revenue services. resource-based view (rbv) theory supports the relationship between tax audit management and performance of state revenue agencies. from the perspective of this theory, effective tax audit management can be considered a strategic and intangible organizational resource that is valuable, rare, inimitable, and non-substitutable (vrin). when properly developed and deployed, it serves as a core competency that enhances institutional performance. tam contributes to internal capabilities by improving oversight, promoting tax compliance, and deterring fraudulent practices. by leveraging these unique capabilities, sirs in southwest, nigeria can achieve sustained competitive advantage in revenue administration. thus, tax audit management functions not merely as a compliance tool but as a strategic asset that strengthens institutional effectiveness. similarly, technology integration (ti) has a significant positive impact on sirs performance with a path coefficient of 0.344 (p = 0.026). this suggests that the incorporation of technology into revenue service operations, such as the use of automated systems, data analytics, and digital platforms; improves organizational efficiency, reduces errors, and boosts revenue collection capacity. this finding implies that embracing technological solutions leads to more streamlined processes, better taxpayer services, and enhanced accuracy in audits, which ultimately improves the overall performance of the revenue agencies. this finding aligns with the studies by (eulerich et al., 2021), which showed improvements in audit cycle times and accuracy through automation in germany, and consistently, mohammed et al. (2023) found that digital solutions are crucial for improving tax system performance in nigeria. it also supports the findings of udegbunam and nwankwo (2023), umar et al. (2023), saleem, et al. (2024), and anioke (2024), who all reported https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 957 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that technology integration significantly boosts the performance of revenue services. similar findings align with out of campbell and hanschitz (2018) and santos and alvares (2024) that technological integration in tax administration could enhance the revenue performance in portuagal and switzerland. however, the findings of this study contrast with aguirre et al. (2021) in mexico, who reported mixed results in developing economies, noting that institutional factors like staff training and organizational culture were equally important for realizing the benefits of technology in tax audits. the influence of technology integration on the performance of state revenue agencies was supported by resource-based view (rbv) theory. according to the resource-based view theory, technology integration represents a strategic internal capability that can serve as a source of sustainable advantage when it is valuable, rare, inimitable, and well-organized (vrio). the adoption of advanced technologies such as digital audit tools, integrated tax administration systems, and data analytics platforms allows sirs to enhance its internal processes, improve decision-making, and respond more effectively to taxpayer behavior. these technological assets when effectively managed and customized are not easily replicable by other competing revenue agencies in the country, thereby positioning the revenue service to outperform others. thus, under the rbv framework, technology integration is not just an operational upgrade, but a core capability that enhances the strategic positioning and long-term performance of public revenue agencies. however, the moderating effect of technology integration on the relationship between tax audit management (tam) and sirs performance (psirs) was found to be insignificant, as indicated by the path coefficient (p = 0.462). this implies that while technology integration has a direct positive effect on sirs performance, it does not significantly strengthen or weaken the impact of tax audit management on performance. in other words, the effectiveness of tax audit management in enhancing the performance of sirs is not contingent on the level of technology integration. this finding suggests that tax audit management can independently improve sirs performance, and while technology integration improves overall efficiency, it does not act as a critical moderator in this specific relationship. this finding aligns with the rbv by proposing that the integration of technology moderates the relationship between tax audit management and sirs performance, amplifying the effectiveness of audit capabilities. thus, the rbv framework supports the hypothesis that a strategic combination of internal competencies (tax audit management) and enabling technologies can lead to superior organizational performance within public tax institutions in southwest nigeria. conclusion this study investigated the impact of tax audit management and technology integration on the performance of state revenue agencies, with a focus on the moderating effect of technology integration on the association between tax audit management and performance. the findings revealed that both tax audit management and technology integration have significant positive effects on the performance of sirs, supporting the resource-based view theory. however, the moderating effect of technology integration on the relationship between tax audit management https://www.ilomata.org/index.php/ijtc tax audit management, technology integration and performance of state internal revenue service in southwest, nigeria olumoh and sanni 958 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and performance was found to be insignificant, indicating that technology integration, while beneficial on its own, does not amplify the impact of tax audit management on sirs performance. based on these findings, it is recommended that sirs should continue to prioritize improving tax audit management practices as a key driver of organizational performance. in addition, sirs should invest in further technological advancements to enhance efficiency and accuracy in tax collection. in addition, the regulatory framework governing tax audits should be strengthened to empower auditors with the necessary authority to enforce compliance and reduce tax evasion. for micro, small, and medium enterprises (msmes), the findings highlight the need to embrace digital tax systems and maintain accurate financial records to facilitate audit readiness and minimize compliance risks. msmes are encouraged to invest in basic accounting and tax software, participate in taxpayer education programs, and establish internal controls to align with digital tax platforms. lastly, policy makers should develop inclusive digital tax policies that support msmes by offering incentives for technological adoption, simplifying tax filing procedures, and ensuring that tax audit practices are fair, transparent, and growth-supportive for small businesses. this study is not without limitations. first, the scope was restricted to state internal revenue services (sirs) in south-west nigeria, which may limit the generalizability of the findings to other regions or countries with different tax systems and institutional contexts. second, the data were collected through self-reported questionnaires, which may be subject to response biases despite efforts to ensure reliability and validity. third, the cross-sectional nature of the study limits causal inference between the variables examined. future research could address these limitations by adopting a longitudinal approach to observe trends and causal relationships over time. additionally, expanding the study to include federal inland revenue services (firs) and sirs across other geopolitical zones in nigeria would enhance external validity. future studies may also employ mixed-method approaches, incorporating interviews or focus groups to gain deeper qualitative insights into the dynamics of tax audit management, tax control mechanisms and technology integration. references ait lhassan, i., bedraoui, o., & akhannich, o. 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(2022). цифрова трансформація податкового адміністрування digital transformation of tax administration. traektoriâ nauki = path of science. 2022, 8(1). https://doi.org/10.22178/pos.78-9 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 4, issue 4, october 2023 page no. 878-894 878 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) ridha azka raga1 , wuwuh andayani2 , husna putri pertiwi3*, julaeha4, dwikora harjo5 13universitas terbuka, indonesia 245institute of social science and management stiami, indonesia correspondent: husna@ecampus.ut.ac.id3 received : september 2, 2023 accepted : october 21, 2023 published : october 31, 2023 citation: raga, r, a., andayani, w., pertiwi, h, p., julaeha, harjo, d. (2023). the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022). ilomata international journal of tax and accounting, 4(4), 878-894. https://doi.org/10.52728/ijtc.v4i4.921 abstract: tax avoidance is a deliberate strategic approach that companies employ to reduce their tax liabilities while remaining compliant with relevant tax regulations. the complexity of tax avoidance arises from its dual nature, where, on one side, it remains within the bounds of legality, and yet, on the other side, it is deemed undesirable by the government due to its adverse impact on national revenue. the objective of this research is to investigate how both the size and profitability of a company influence its engagement in tax avoidance between mining companies listed on the indonesia stock exchange (bei) from 2018 to 2022. this research utilized a descriptive quantitative methodology and for sample was selected through purposive sampling, identifying 14 companies meeting predefined criteria. the data collected was subjected to analysis using ibm spss statistics 25, which included classical assumption tests, multiple linear regression analysis, and hypothesis testing. the results of this study indicated a noteworthy impact of profitability on tax avoidance, while the size of the company did not demonstrate a significant influence on tax avoidance. moreover, the observation revealed that the joint consideration of both profitability and company size had a significant impact on tax avoidance. keywords: company size, profitability, tax avoidance this is an open access article under the cc-by 4.0 license. introduction taxes serve as a substantial revenue source for national development, which involves continuous development efforts to improve society's welfare. the level of public awareness to commit to their tax responsibilities can profoundly impact the sustainability of national development. below is a table illustrating tax revenue figures over the past five years. https://www.ilomata.org/index.php/ijtc mailto:husna@ecampus.ut.ac.id https://doi.org/10.52728/ijtc.v4i4.921 the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 879 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. tax revenue data (in million rupiah) notes 2018 2019 2020 2021 2022 target 1.424 1.577,56 1.198,82 1.229,6 1.485 realization 1.315,9 1.332,1 1.069,98 1.231,87 1.717,8 percentages 92,4% 84,4% 89,25% 100,19% 115,6% source: kemenkeu (data processed, 2023) the table presented that it is evident that the actual tax revenue collection has consistently fallen short of the established targets, despite witnessing incremental percentage increases. tax revenues in 2018-2022 experienced fluctuations yearly, where the realized value of tax revenues in 2020 was the lowest compared to the previous year. therefore, the government must optimize tax revenue to be stable and increase yearly. one key strategic measure to reach the tax revenue goal can be seen in the high level of taxpayer compliance. derived from information provided by the directorate general of taxes (djp), the formal taxpayer compliance ratio in 2018 was 71.10%, while in 2019, it was recorded at 73.06%, and in 2020, the standard taxpayer compliance ratio reached 77.63%. moreover 2021, formal taxpayers increased from the previous year to 84%; in 2022, the standard compliance level decreased from 83.2%. the government strives for a taxpayer compliance (wp) ratio following organization for economic cooperation and development (oecd) standards, reaching 85 percent. this percentage suggests that individuals still haven't disclosed their yearly responsibilities as taxpayers (nugroho, et al., 2022). a state's revenue is closely related to taxpayer compliance, if taxpayer compliance increases then state revenue will increase (beer et al., 2020). if we look at that data, the taxpayer compliance ratio has yet to reach its target and is still unstable yearly. the company's financial performance, as indicated by profitability, indicates its capacity for profit generation through the management of assets, identified as roa, according to dewinta & setiawan (2016), an increase in roa corresponds to higher company profits, while a decrease in roa indicates lower profits. consequently, a higher roa level results in increased corporate profits, leading to higher tax liabilities. in response, the company may adopt tax avoidance measures. if taxpayers do not comply with tax regulations, this will indirectly increase tax avoidance efforts (prastiyanti & mahardhika, 2022). divergent interests exist between the government in its role as tax authorities and companies acting as taxpayers. for the government, taxes serve as a potential income stream for funding governmental administration. conversely, tax is a burden for companies because of the potential to diminish earnings. profitability can be assumed that all sample companies carry out tax management which aims to reduce the tax burden, by transferring pricing to companies that have special relationships or with subsidiaries so that company profits can be minimized (moeljono, 2020) and then some companies maintain their profit value through tax avoidance (khoirunissa & ratnawati, 2021). companies aspire to achieve elevated earnings in each period; however, the greater the profit, the increased tax liability. thus, it is to enable companies to avoid taxes. tax avoidance involves strategically lessening the tax burden through methods that align with tax https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 880 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc regulations. when it adheres to existing loopholes in tax provisions, it is considered legal tax avoidance. tax avoidance practices have been observed within the coal mining sector, particularly involving companies affiliated with the bakrie group. these three companies have been implicated in tax avoidance activities totaling idr 2.176 trillion. additionally, there is documented evidence of tax avoidance in a report issued by global witness, which highlights the involvement of a major mining corporation in indonesia, pt adaro energy tbk. the report suggests that pt adaro energy tbk engaged in tax avoidance through transfer pricing tactics involving its subsidiary in singapore, known as coaltrade service international. these tax avoidance efforts by adaro are reported to have occurred between 2009 and 2017. during this period, adaro only paid taxes amounting to us$125 million, equivalent to idr 1.75 trillion (calculated at an exchange rate of idr 14,000 per us dollar), a significantly lower figure than its tax liability owed to indonesia (sugianto, 2019). the mining industry has evolved into one of the pivotal sectors in indonesia, playing a leading role in the state's economic landscape. nonetheless, to enhance transparency within the management of this sector, there is still a pressing need to optimize state revenues. the ministry of finance has underscored a notable disparity within the mineral and coal mining sector, wherein there exists a greater number of compliant taxpayers possessing licenses in contrast to those who neglect to submit their annual tax returns. in 2015, out of 8,003 taxpayers involved in coal mining, 4,532 did not file their spt. it's worth noting that this data excludes smaller coal entities that operate without tax registration. additionally, among those who do file their tax returns, there is a potential for underreporting based on the actual situation. some taxpayers may accurately submit their returns but engage in practices like aggressive tax planning, corporate inversion, profit shifting, and transfer mispricing for tax avoidance and savings (maftuchan, 2019) companies with high profitability levels tend to carry out careful tax planning, leading to ideal tax outcomes, and there will be a decline in the inclination to engage in tax avoidance activities (olivia & amah, 2019; ariska et al, 2020; carolina, 2020, dalam & novriyanti, 2020), meaning companies that have a high return on assets (roa) can pay their tax burden and maintain a reputation in the eyes of shareholders and the public. as a result, these companies are more likely to comply with applicable tax regulations, thereby reducing the possibility of corporate tax avoidance. good resource management, tax planning can also be managed properly. so that the company does not need to do tax avoidance (sunarsih et al, 2019). in determining the adoption of tax avoidance measures, a company must carefully evaluate various factors pertaining to the advantages gained and the associated costs. subsequently, during the execution of tax avoidance practices, managerial deliberations encompass the accrued benefits, encompassing those received by the manager in terms of rewards and promotions, in contrast to potential costs such as auditing expenses, fines, and damage to the company's reputation (dang & nguyen, 2022). in accordance with the delineated scope, the authors of this study have deliberately confined their investigation to specific parameters. specifically, the study delves exclusively into the examination and analysis of the impact of profitability and company size on tax avoidance. the focus of this research is https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 881 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc restricted to a case study encompassing mining companies listed on the indonesia stock exchange during the period spanning from 2018 to 2022. taxation according to mardiasmo (2019), tax represents a mandatory fiscal obligation imposed by legal authority, devoid of direct reciprocation. these funds are allocated to fulfill the various needs of the state, ultimately aiming to enhance the overall well-being of its citizens. meanwhile, according to waluyo (2017) and resmi (2019), taxes are compulsory community contributions that must be paid to the state, either through the central government or local governments that are coercive for those who are not compliant. profitability profitability serves as a metric for gauging the overall effectiveness of management, as it reflects the extent of profits earned from both sales and investments (fahmi, 2015). whereas profitability assessment serves as a critical measure to gauge a company's inherent ability to generate earnings and financial gains. (kasmir, 2016). profitability refers to a company's capacity to generate earnings within a specific timeframe. when a company experiences high profits, it indicates a corresponding increase in the tax obligation that needs to be met (kurniati & apriani, 2021). company size the measurement of company size is a multifaceted construct, frequently evaluated indirectly through the consideration of key financial parameters, including equity valuation, sales performance, and total assets (dayanara et al., 2019). concomitantly, hartono (2013) posits that company size constitutes a metric capable of stratifying an enterprise's magnitude via diverse methodologies, such as total asset valuation, logarithmic scaling, and stock market valuation, among others. typically, the categorization of company size tends to be discretized into three distinctive tiers, notably encompassing large corporations, medium-sized entities, and small companies. this classification predominantly hinges on the quantification of a company's total assets as a pivotal determinant. in principle, enterprises across all scales aspire to minimize their tax liabilities, with the overarching objective of facilitating the reinvestment of earned profits for the expansion of the company or their distribution to stakeholders, namely, owners or investors, often in the form of dividends (hemawan et al, 2021). tax avoidance according to suandy (2016), tax avoidance denotes a strategic endeavor by a company to mitigate its tax liabilities. conversely, tax avoidance is considered legally permissible as it leverages the available loopholes within tax legislation to reduce the tax liability owed (pohan, 2017). tax avoidance involves evading or minimizing tax payments by leveraging tax laws in ways not originally intended by the government. (hoseini & safari gerayli, 2018) agency theory according to jensen and meckling (1976), agency theory is directed at the ubiquitous agency relationship, in which one party (the principal) delegates work to another (the agent), who performs that work. in this study, the government serves as the principal, and the company acts https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 882 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as the agent. the government mandates that companies adhere to tax regulations and fulfill their tax obligations, while companies, aiming to optimize profits, seek to minimize expenses, including tax costs, by considering factors like profitability and leverage. the company's strategy of reducing the tax burden is a form of tax avoidance (carolina, 2020). hypothesis sugiyono (2018) states that a hypothesis serves as a provisional response to the formulation of a research problem. the research problem is initially presented as a question. the formulated research hypothesis was as follows: h1 = there is a positive influence between profitability on tax avoidance h2 = there is a positive influence between company size on tax avoidance h3 = there is a positive influence between profitability and company size on tax avoidance method research approach this research employed a quantitative approach because the data was numerical and analyzed by using statistics to reach conclusions. furthermore, this research used descriptive research methods to explain or describe the influence of the variables studied. operational variables dependent variable (y) within the scope of this study, tax avoidance was designated as the dependent variable and quantified using the cash effective tax rate (cetr) formula. the choice of cetr was made because it enables the evaluation of tax payments based on cash flow reports, offering insights into the actual cash outlays made by the company. the cetr formula used in this study is delineated as follows: 𝑪𝑬𝑻𝑹 = 𝐓𝐚𝐱 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 𝐁𝐞𝐟𝐨𝐫𝐞 𝐓𝐚𝐱 independent variable (x) 1. profitability (x1) the measurement of profitability in this study was conducted through the utilization of roa (return on assets). roa was chosen as the metric because it effectively gauges a company's capacity to generate profits from its operational activities. the computation of roa involved the application of the following formula: 𝑹𝑶𝑨 = 𝐏𝐫𝐨𝐟𝐢𝐭 𝐀𝐟𝐭𝐞𝐫 𝐓𝐚𝐱 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭 https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 883 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. company size (x2) according to hartono (2013), the size of a company serves as a metric that can categorize its magnitude through various criteria. (total assets, log size, stock market value, etc.). the procedure for computing the size of a company is as outlined below: company size = ln (total asset) data collection technique in this research, the data source employed was secondary data, consistent with the definition provided by sugiyono (2018). secondary data refers to information that is not directly obtained by the researchers themselves but is instead sourced from various pre-existing outlets, such as financial reports, bookkeeping records, and other established repositories. in this study, the data collection technique applied was documentation, which is a research method used to acquire pertinent information by collating current company data, primarily extracted from sources like financial reports. sampling technique the research population in this study refers to the broader category encompassing individuals or entities possessing specific attributes and characteristics, as determined by the researcher for the purpose of analysis and drawing informed conclusions (sugiyono, 2018). the population of this study was mining companies listed on the indonesia stock exchange in 2018-2022, totaling 58 companies. in this research, a sampling technique was used with purposive sampling where the information obtained comes from sources that are deliberately selected based on the criteria set by the researcher (sekaran & bougie, 2016). this purposive sampling method was used to determine the criteria for sampling. the reason for choosing purposive sampling was that not all samples had the requirements set by the researcher. based on the specified criteria, 14 sample companies out of 58 companies in the mining company population met the criteria for conducting research. data analysis technique the data analysis methodology employed in this research encompassed a range of statistical techniques, including descriptive statistical analyses, classical assumption tests, multiple linear regression analyses, hypothesis testing, and the assessment of coefficient of determination. these analyses were conducted utilizing the spss version 25 software application (ghozali, 2018). result and discussion descriptive statistics descriptive statistics aimed to determine the average (mean), maximum, minimum, and standard deviation values of the variables profitability, company size, and tax avoidance. https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 884 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. descriptive statistics test n min. max. mean std. deviation profitability (x1) 70 .00 .62 .1583 .15695 company size (x2) 70 15.73 27.93 20.1236 2.15917 tax avoidance (y) 70 .05 .61 .2396 .12692 valid n (listwise) 70 source: data processed, 2023 the outcomes of the descriptive statistical analyses have provided significant insights into the variables under investigation. specifically, concerning the dependent variable, tax avoidance, its observed values ranged from a minimum of 0.05 to a maximum of 0.61. on average, the tax avoidance rate stood at 0.2396, equivalent to 23.96% of the tax liability for several mining companies listed on the indonesian stock exchange. it is noteworthy that this average value of 0.2396 exceeded the standard deviation of 0.12692, indicating a relatively consistent pattern in the data with limited significant deviations. in contrast, the independent variable, profitability, displayed a range from a minimum of 0.00 to a maximum of 0.62. the average profitability rate was computed at 0.1583 or 15.83%, implying that companies, on average, achieved a net profit-to-total assets ratio of 15.83%, highlighting their efficiency in generating profits relative to their asset base. it's worth noting that the standard deviation value of 0.15695 was smaller than the average, indicating that the data was homogeneous, with minimal deviations. additionally, the independent variable, company size, ranged from a minimum value of 15.73 to a maximum of 27.93. the average company size was 20.1236, with a standard deviation of 2.15917. these findings pointed towards data homogeneity, as the standard deviation was smaller than the average value, underscoring that the data regarding the sizes of mining companies were relatively consistent and did not exhibit significant variations. classic assumption test results normality test results a normality test was carried out to assess the distribution of the data for normality. in this study, the one-sample kolmogorov-smirnov test, with a minimum significance level of 0.05, was employed. the outcomes of the data normality test are outlined as follows: figure 1. normality test results source: data processed, 2023 one-sample kolmogorov-smirnov test unstandardized residual n 70 normal parametersa,b mean .0000000 std. deviation .12068500 most extreme differences absolute .097 positive .097 negative -.054 test statistic .097 asymp. sig. (2-tailed)c .097 a. test distribution is normal. b. calculated from data. c. lilliefors significance correction. https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 885 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the data above showed that the data was typically distributed. it could be seen from the significant value, which was greater than 0.05 (0.097> 0.05). multicollinearity test results the multicollinearity test aimed to evaluate the strength of correlation among the independent variables within the regression model. a desirable regression model is characterized by the absence of significant correlations among the independent variables, indicating the absence of multicollinearity. multicollinearity is typically identified through the examination of two key indicators: the tolerance value and the vif (variance inflation factor). multicollinearity is present when the variance inflation factor (vif) exceeds 10 or when the tolerance value falls below 0.01. the following summarizes the outcomes of the multicollinearity test: figure 2. multicollinearity test results source: data processed, 2023 according to the data presented, the vif value for the profitability variable was found to be 1.006, while the vif value for the company size variable was 1.006 as well. additionally, the tolerance value for the profitability variable was calculated at 0.994, and for the company size variable, it was also 0.994. it is noteworthy that all independent variables under scrutiny in this study exhibited tolerance values exceeding the threshold of 0.01 and vif values well below 10.0. this substantiates the conclusion that there is no discernible multicollinearity issue within the dataset or the regression model. heteroscedasticity test results to assess the presence of heteroscedasticity, an examination of the scatterplot graph between sresid (the dependent variable) and zpred (the independent variable) was conducted. the subsequent section outlines the findings from the heteroscedasticity test: figure 3. heteroscedasticity test results source: data processed, 2023 coefficientsa model collinearity statistics tolerance vif 1 profitabilitas (x1) .994 1.006 ukuran perusahaan (x2) .994 1.006 a. dependent variable: penghindaran pajak (y) https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 886 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the examination of the data revealed a lack of discernible patterns and an even distribution. consequently, it can be inferred that this study did not encounter any issues related to heteroscedasticity. to further validate this assertion, the glejser test was conducted to ascertain whether any symptoms of heteroscedasticity were present in the dataset. figure 4. glejser test results source: data processed, 2023 it could be seen that after carrying out the glejser test, there was still no particular pattern found, and the data was spread evenly. this research did not have heteroscedasticity problems. autocorrelation test results in this study, the run test was employed to assess the presence of autocorrelation. the run test is used to ascertain whether residuals exhibit a random or irregular pattern. specifically, if the asymp.sig. (two-tailed) value exceeded 0.05, it would indicate the absence of an autocorrelation problem. the subsequent section outlines the results of the autocorrelation test: figure 5. autocorrelation test results source: data processed, 2023 based on the run test results above, the value of asymp could be seen. sig. (2-tailed) of 0.194 > 0.05. there were no autocorrelation symptoms in this research data. runs test unstandardized residual test valuea .0000000 cases < test value 40 cases >= test value 30 total cases 70 number of runs 30 z -1.300 asymp. sig. (2-tailed) .194 a. mean https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 887 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc multiple linear regression test results the primary objective of the multiple linear regression analysis was to elucidate the influence exerted by the independent variables, namely, profitability (x1) and company size (x2), on the dependent variable, tax avoidance (y). the following were the results of the multiple linear regression test: figure 6. multiple linear regression test results source: data processed, 2023 the regression equation formed based on the results of research was as follows: yit = 0,102 – 0,213x1 + 0,009x2 + e the preceding regression equation was elucidated as follows: a. the constant value (α) was determined to be 0.102, and it was positively oriented. this suggests that in the absence of the profitability and company size variables, the predicted tax avoidance would stand at 0.102. b. the coefficient associated with the profitability variable was calculated at -0.213, indicating a negative relationship. when the profitability variable increases by one unit, tax avoidance is expected to decrease by 0.213 units, all other factors held constant. consequently, it can be inferred that the profitability variable has a negative impact on tax avoidance. c. the coefficient for the company size variable was measured at 0.009, representing a positive value. in the event of an increase of one unit in the company size variable, it is expected that tax avoidance will also increase by 0.009 units, with the assumption that all other independent variables within the regression model remain constant. therefore, the positive coefficient value implies a positive correlation between company size and tax avoidance. d. the presence of a positive sign (+) signifies a positive and direct relationship between the variables, indicating that they move in the same direction. conversely, a negative sign (-) implies an inverse and negative relationship between the independent and dependent variables, indicating that they move in opposite directions. hypothesis test results simultaneous test results (f) a simultaneous test was obtained by comparing the value of fcount with ftable and looking at the significance value of the following figure: coefficientsa model unstandardized coefficients standardize d coefficients t sig. b std. error beta 1 (constant) .102 .140 .724 .471 profitabilitas (x1) -.213 .094 -.263 -2.256 .027 ukuran perusahaan (x2) .009 .007 .145 1.244 .218 a. dependent variable: penghindaran pajak (y) https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 888 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 7. simultaneous f test results source: data processed, 2023 based on the data provided, the computed f value was determined to be 3.550, while the f-table value, obtained from the f distribution table using degrees of freedom for the numerator (2) and the denominator (n2 = n-k, where n = total observations and k = number of predictors), was found to be 3.13. a comparison between the f-count value of 3.550 and the critical f-table value of 3.13 reveals a notable and statistically significant difference, with a significance level of 0.034, which falls below the conventional alpha threshold of 0.05. consequently, it can be concluded that both profitability (x1) and company size (x2) together exert a statistically significant influence on tax avoidance (y) within the context of mining companies listed on the indonesia stock exchange during the period from 2018 to 2022. partial test results (t) partial test results were acquired through the application of the t statistical test. this involved comparing the calculated t value with the corresponding t-table value and assessing the significance level, as indicated in the accompanying image. figure 8. partial test results (t) source: data processed, 2023 the t-table value was derived by referencing the percentage point table of the t distribution, utilizing the degrees of freedom (df) determined as df = total observation data (n) number of variables (k), with a predetermined significance level of 0.05. consequently, the computed t-table value amounted to 1.99547 (df = 70-2 = 68). with this foundation, the research findings can be summarized as follows: a. the influence of profitability on tax avoidance the results of the t-test above showed that profitability was measured using return on assets (roa), showing a significance value of 0.027 <0.05 (t-statistic/t-count) and had a tcount > ttable, namely -2.256 > 1.99547. therefore, h0 was rejected, while ha was accepted because profitability significantly affected tax evasion. so, the first hypothesis, which stated that profitability affected tax evasion, was accepted or proven. b. the influence of company size on tax avoidance anovaa model sum of squares df mean square f sig. 1 regression .107 2 .053 3.550 .034b residual 1.005 67 .015 total 1.111 69 a. dependent variable: penghindaran pajak (y) b. predictors: (constant), ukuran perusahaan (x2), profitabilitas (x1) coefficientsa model unstandardized coefficients standardize d coefficients t sig. b std. error beta 1 (constant) .102 .140 .724 .471 profitabilitas (x1) -.213 .094 -.263 -2.256 .027 ukuran perusahaan (x2) .009 .007 .145 1.244 .218 a. dependent variable: penghindaran pajak (y) https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 889 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the outcomes of the t-test, which assessed the impact of company size measured by size = ln (total assets), yielded a significance result of 0.218, exceeding the threshold of 0.05 (as indicated by the t-statistic/t-count). furthermore, the t-count value (1.244) was observed to be less than the critical t-table value (1.99547). consequently, the null hypothesis (h0) was accepted, while the alternative hypothesis (ha), which posited that company size influences tax evasion, was rejected. in summary, the research findings do not provide evidence supporting a significant effect of company size on tax evasion. determination coefficient test result (r2) the purpose of the test of the coefficient of determination was to find out how much influence the independent variable had in explaining the dependent variable. the following was the coefficient of determination of the study: figure 9. determination coefficient source: data processed, 2023 based on the coefficient of determination test results in figure iv.10, it could be seen that the coefficient of determination, which was equated to the r square figure, produced a result of 0.069, a percentage of 6.9%. it showed that profitability and company size influence tax avoidance by 6.9%. the influence of profitably (x1) on the tax avoidance (y) in this study, the profitability variable has a significant effect on tax avoidance. this is evidenced by the comparison between the t statistical test results and the t table, namely -2.256> 1.99547 with a significance value smaller than the significant level of 0.027 <0.05, so h0 is rejected and ha is accepted, thus it can be concluded that in this study profitability has a significant effect on tax avoidance in mining companies listed on the indonesia stock exchange for the period 2018 2022. the high and low value of profitability will affect the high and low levels of tax avoidance carried out by the company. profitability in this study has a negative directional relationship to tax avoidance. this negative direction indicates that the more the company's profitability value increases, the more it reduces the value of tax avoidance. companies with high profits tend to have good tax planning. thus, it will obtain effective and optimal taxes, which means that tax avoidance actions will be reduced. in addition, companies with high profitability will be better able to pay their tax burden and will report their tax burden by the regulations so that their reputation is good in the eyes of shareholders and get an image by the general public. thus, the company will reduce actions that harm the company, namely tax https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 890 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc avoidance. the results of this study are in line with research conducted by carolina (2020) which states that profitability has a significant negative effect on tax avoidance. the influence of company size (x2) on the tax avoidance (y) this study discerned that the variable representing company size lacked a significant influence on tax avoidance. this determination was reached through a rigorous evaluation involving a comparison between the results of the t-test and the critical t-table value. specifically, the t-test yielded a value of 1.244, which fell below the critical t-table value of 1.99547, with a significance level exceeding the predetermined alpha threshold of 0.05 (0.218 > 0.05). consequently, the null hypothesis (ho) was accepted, while the alternative hypothesis (ha) was rejected. therefore, this study concludes that, within the context of mining companies listed on the indonesia stock exchange from 2018 to 2022, company size does not exhibit a significant association with tax avoidance. the absence of a significant influence between company size and tax avoidance implies that a company's size does not inherently drive it to engage in tax avoidance practices. larger companies often come under closer scrutiny from the government, leading them to adhere more closely to tax regulations. additionally, larger companies tend to possess the financial capacity to fulfill their tax obligations without resorting to avoidance measures. furthermore, these companies prioritize long-term sustainability and aim to maintain a positive corporate image, which discourages tax avoidance strategies. it is important to note that all companies, regardless of size, are legally obligated to pay taxes, and larger companies are typically better equipped to fulfill this obligation. additionally, they have a vested interest in maintaining good relations with tax authorities to avoid audits and associated penalties. in addition, companies aspire to demonstrate strong performance to shareholders, irrespective of their size, further disincentivizing tax evasion. the findings of this study align with the research conducted by hernadianto et al. (2020), which also concluded that company size does not play a significant role in tax evasion among businesses. the influence of profitability (x1) and company size (x2) simultaneously on the tax avoidance (y) this study ascertained that both the profitability and company size variables, when jointly considered, wielded a statistically significant influence on tax avoidance. this determination was arrived at by subjecting the statistical f-test results to scrutiny in comparison with the critical ftable value. specifically, the f-test yielded a value of 3.550, surpassing the critical f-table value of 3.13. furthermore, the calculated significance level was established at 0.034, which falls below the pre-established alpha threshold of 0.05. consequently, the null hypothesis (ho) was rejected, while the alternative hypothesis (ha) was embraced. therefore, this study establishes that both profitability and company size, when analyzed simultaneously, significantly impact tax avoidance among mining companies listed on the https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 891 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indonesia stock exchange during the period from 2018 to 2022. it is noteworthy that as the values of profitability and company size increase, there is a corresponding rise in the likelihood of companies engaging in tax avoidance practices. conclusions the primary objective of this research was to investigate the impact of profitability and company size on tax avoidance within the context of mining companies listed on the indonesia stock exchange during the period spanning from 2018 to 2022. this study was conducted utilizing a descriptive quantitative approach, and the sample selection was accomplished through purposive sampling, involving 14 companies as the chosen sample set. based on the thorough analysis and discussions presented in the preceding chapters, the following pivotal conclusions can be gleaned from this research: 1. the partial t-test results have demonstrated the substantial impact of the profitability variable on tax evasion within the scope of mining companies listed on the indonesia stock exchange during the period from 2018 to 2022. 2. the partial t-test results have revealed that the company size variable does not exert a significant influence on tax evasion within the domain of mining companies listed on the indonesia stock exchange during the period spanning from 2018 to 2022. 3. the concurrent f-test results have indicated that both the profitability and company size variables collectively have a statistically significant impact on tax evasion within the cohort of mining companies listed on the indonesia stock exchange during the period from 2018 to 2022, accounting for a 6.9% variance in tax evasion. in this study, the authors provided suggestions for further research. however, things could still be improved regarding writing and discussion in this study. the suggestions and input were as follows. future researchers are encouraged to refine the research model, addressing certain limitations observed in this study. expanding the sample size, extending the observation period, and introducing additional independent variables are areas where improvement can be made. this is particularly relevant considering that, in this study, the variables examined collectively explained only 6.9% of the variance in tax avoidance. the remaining unexplained variance suggests the presence of other factors influencing tax avoidance, and future research endeavors can contribute to a more comprehensive understanding of this phenomenon in the context of profitability and company size. meanwhile, companies should take heed of the findings from this research, which underscores the importance of ethical tax practices. it is imperative that companies adhere to existing tax regulations and refrain from engaging in illegal tax avoidance tactics. such actions not only risk legal repercussions but also contribute to a reduction in state revenue derived from the taxation sector, which has broader implications for the economy. moreover, the directorate general of taxes should consider enhancing its oversight and monitoring efforts with respect to tax https://www.ilomata.org/index.php/ijtc the influence of profitability and company size on tax avoidance (a case study of mining companies listed on the indonesia stock exchange in 2018-2022) raga, andayani, pertiwi, julaeha, and harjo 892 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc avoidance. strengthening supervision can lead to more robust and effective control of tax avoidance activities. this, in turn, can contribute to optimizing state revenue from the taxation sector and 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(2018). metode penelitian kuantitatif, kualitatif dan r&d. alfabeta sunarsih, s., haryono, s., & yahya, f. (2019). pengaruh profitabilitas, leverage, corporate governance, dan ukuran perusahaan terhadap tax avoidance (studi kasus pada perusahaan yang tercatat di jakarta islamic index tahun 2012-2016). inferensi: jurnal penelitian sosial keagamaan, 13(1), 127-148. waluyo. (2017). perpajakan indonesia (11thed.). jakarta: salemba empat. https://www.ilomata.org/index.php/ijtc https://finance.detik.com/berita-ekonomi-bisnis/d-4612708/mengenal-soal-penghindaran-pajak-yang-dituduhkan-ke-adaro https://finance.detik.com/berita-ekonomi-bisnis/d-4612708/mengenal-soal-penghindaran-pajak-yang-dituduhkan-ke-adaro the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1, january 2025 page no. 75-89 75 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system to improve customs and excise services notika rahmi1, pebriana arimbhi2, dartono3 12institut ilmu sosial dan manajemen stiami, indonesia 3institut teknologi dan bisnis swadharma, indonesia correspondent: notika.rahmi@gmail.com1 received : december 15, 2024 accepted : january 15, 2025 published : january 31, 2024 citation: rahmi, n., arimbhi, p., dartono. (2025). implementation of the customs digital transformation policy using the ceisa 4.0 system to improve customs and excise services. ilomata international journal of tax and accounting, 6(1), 75-89. https://doi.org/10.61194/ijtc.v6i1.1648 abstract: the directorate general of customs and excise is evolving the information technology system. since the introduction of the customs fast release system (cfrs), the ceisa 4.0 application has been used. the ceisa 4.0 application continues to be developed to improve customs and excise services. this means that internal and external policymakers must continue adapting to changes in existing applications. this makes us research to analyse the implementation, obstacles, and efforts involved in implementing the ceisa 4.0 system. the research method used is qualitative analytical descriptive with data collection techniques of observation, interviews and documentation. interviews were conducted with 20 informants: customs, platform providers and service users. the research results show that the implementation of ceisa 4.0 is still under development and is not fully running perfectly because there are still business processes that are not/have not been touched by the ceisa 4.0 program. in some cases, bugs are still encountered and/or system stability has not been properly maintained. however, it has been running efficiently where customs and excise obligations are fulfilled paperless; it can be done anytime and anywhere. the hr capabilities of djbc and service users still require training in operating ceisa 4.0 because several tools are not yet familiar regarding the standards, policy targets and characteristics of the implementing organisation, namely that the implementation of the rules has gone well using a clear legal basis and rules. keywords: policy implementation, digital transformation, ceisa 4.0, customs and excise services, directorate general of customs and excise this is an open-access article under the cc-by 4.0 license. introduction since 1990, the directorate general of customs and excise has evolved the information technology system to support the service system. the customs fast release system (cfrs) was introduced in 1995, and the diskette-based goods import notification was implemented. continuing with the import goods notification system electronic data interchange (edi) in https://www.ilomata.org/index.php/ijtc mailto:notika.rahmi@gmail.com1 https://doi.org/10.61194/ijtc.v6i1.1648 implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 76 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc collaboration with pt. elektronik data indonesia in 1997, the renewal of electronic data notification (pde) phase ii in 2003, as well as major changes in 2007 where the portal indonesia national single window (insw) bridges and facilitates the exchange of documents in the world of trade, especially exports and imports. next, the application system began implementing costums-excise information system and automation (ceisa) in 2012. the ceisa application is an integration system for all directorate general of customs and excise services to all service users and the public. service users and stakeholders can access anytime and anywhere via the ceisa application (sudarmadi, primadista, & dartono, 2022) and (pradipta, pradnyana, & raharjo, 2020). the presence of ceisa is in line with the vision and mission of the directorate general of customs and excise, where one of the stated missions is to facilitate trade and industry. djbc's main function is to create a conducive business and investment climate by streamlining import and export logistics and simplifying customs and excise procedures (singgih, anisa, & permatasari, 2022; wulandari, teron, agustina, & rofiyanti, 2022). gradually, the ceisa application began to be developed as a web form application-based information technology system, which from 2018 until now was named ceisa 4.0 (pratiwi, fridyatama, & taryo, 2024). it is hoped that the ceisa 4.0 application will facilitate the integration and collaboration process between g2g (government to government), b2g (business to government) and b2b (business to business). in november 2023, the old module changed to web-based ceisa 4.0. socialisation efforts have been made, including the main service office (kpu) of tanjung priok port customs and excise and the indonesian logistics and fowardship association (alfi) providing technology training to customs services management companies (ppjk) members of the dki jakarta dpw alfi (irma latifah sihite edy sutrisno, 2024; widaningsih, natision, ungkari, & muharam, 2023). the ceisa 4.0 application has had a positive impact on the efficiency of the customs process since its implementation. (putri & syamsuddin, 2021), (rahman & harianto, 2023) and (murti & vikaliana, 2021). speed of submission of means of transport arrival plan (rksp) inward manifest so that routing can be felt through the ceisa 4.0 application. apart from that, ceisa 4.0 also offers speedy completion of customs processes before the arrival of goods (pre-arrival declaration); even users of customs services who have a good reputation can apply and obtain approval for the release of goods before submission of inward manifest (pre-notification). behind the positive things felt during the process, there were obstacles to using ceisa up to ceisa 4.0. based on the survey results by djbc as outlined in service memorandum no. nd774/bc.073/2023 for old ceisa and ceisa 4.0 service users. the level of satisfaction of users of the old ceisa service in 2021-2023 has increased, while the level of interest has decreased in 2022 and will increase again in 2023, as in figure 1 below: https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 77 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. survey of old ceisa users 2021-2023 source: service memorandum nd-774/bc.073/2023 furthermore, the level of satisfaction of ceisa 4.0 service users in 2022-2023 decreased by 4.13%, while the level of interest increased by 1.28%, as stated in figure 2 below: figure 2. ceisa 4.0 user survey 2022-2023 source: service memorandum nd-774/bc.073/2023 it can be said that the satisfaction felt has not been able to balance the interest in using the ceisa and ceisa 4.0 applications. also included in the service note are complaints submitted by service users, such as the application not being accessed, the menu not being used, the data displayed being incomplete, the time idle being too short, and so on. measuring the level of satisfaction is also carried out by (zahratul, fuada, & hasugian, 2023) and (purnomo & riyadi, 2022)this research analysed the implementation of customs digital transformation policies with the ceisa 4.0 system to improve customs and excise services. in contrast to previous research, in this research, the implementation process is discussed using implementation theory according to van meter dan van horn (nugroho, 2018) six things are available that influence each other in policy implementation: policy standards and targets, https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 78 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc resources, characteristics of implementing organisations, communication between organisations, attitudes of implementers, and the social, economic, and political environment. policy standards and targets will measure the success of realistic policy measures and objectives. policy performance assesses the achievement of standards and targets in the ceisa 4.0 system. the assessment of resources is seen from the organisation's ability to utilise available human resources, financial resources, facilities, and infrastructure in the ceisa 4.0 system. the characteristics of the implementing organisation explain the standard work procedures (sop) used in implementing the ceisa 4.0 system. inter-organizational communication analyses are related to clarity, consistency, and uniformity of standards used by ceisa 4.0 system service users. the attitude of the implementers analyses the readiness of internal and external policymakers to implement the ceisa 4.0 system. the reactions of various parties are also important, whether in the form of acceptance or rejection of the ceisa 4.0 application. finally, it will be related to the social, economic, and political environment, discussing the commitment between customs, platform providers, and service users to implement the ceisa 4.0 system. matters regarding strengths, weaknesses, opportunities and challenges are included as a systematic identification of factors based on theory (david, 2006) which will have a big impact (astuti & ratnawati, 2020). the concept of digital transformation is also discussed using the theory (mergel, haug, & edelmann, 2019) which includes input, process and output. this research is important to carry out to analyze the implementation of ceisa 4.0 because of the updates that continue to be carried out by the directorate general of customs and excise during its implementation, the new features that appear in the ceisa 4.0 application and the implementation which is carried out in stages through several mandatory stages to reach the use of the system ceisa 4.0 throughout indonesia. ceisa has been implemented in stages since 2019 with a measured approach and focus on optimizing services. by 2024, this implementation has reached the 14th stage, which covers various main services such as imports, exports, tpb (bonded stockpiling place), shipped goods, treasury and excise. at first, ceisa is implemented in offices with smaller transaction volumes. this is done to ensure system stability and identify areas of improvement before applying to offices with a larger transaction load. this approach allows for an in-depth evaluation of system functionality and the implementation of necessary updates. in the 4th quarter of 2024, all main ceisa 4.0 services are targeted to have been implemented nationally, although several challenges will be encountered. old features that previously existed often experienced problems during implementation, so they need to be reviewed more deeply regarding readiness to implement the ceisa 4.0 system. the ceisa 4.0 system is not new, but the gradual development is the main highlight of this research. problems still frequently found in the ceisa 4.0 system range from minor ones, such as uploading documents that often get stuck in the system, to major ones, such as tax application service downtime, which also affects the ceisa 4.0 system. if it continues repeatedly, it will disrupt business processes in the customs sector and reduce the service quality. carried out by the directorate general of customs and excise. the obstacles encountered and the efforts made are also important things discussed in this research. so that in the end, this research will provide a general overview of the implementation of ceisa 4.0 in the field as a consideration for https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 79 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc policymakers in meeting current and future technological needs. this research contributes information to djbc to improve customs and excise services. method the research method used is qualitative and descriptive approach analyst. qualitative research is a method for exploring and understanding the meaning that comes from social or humanitarian problems (cresswell, 2014). meanwhile, descriptive research provides an overview of the facts and relationships between the phenomena studied (silaen & widiyono, 2013)the author compared the old ceisa policy with the new one to understand the similarities and differences and then related them to the current implementation. later, this research will contribute information to the government, especially the directorate general of customs and excise, regarding implementing the ceisa 4.0 system. it is hoped that the government, especially djbc, can take the right steps to improve the ceisa 4.0 system. this research uses several data collection techniques: observation, interviews and documentation. observations were conducted directly at the directorate general of customs and excise customs and excise supervision and services office and the location of service users and platform providers. observations were also conducted by visiting and interacting directly and continued online with ceisa 4.0 application users to obtain more accurate information. interviews were conducted with the authorities at the directorate general of customs and excise with a total of 4 informants, ceisa 4.0 system users with a total of 9 informants, ceisa 4.0 platform providers with a total of 4 informants and academics with as many as three informants with the technique of determining informants using the purposive sampling technique. the criteria for deciding informants are selecting informants who master and understand and are directly related to the ceisa 4.0 system. documentation is carried out by collecting secondary data related to the ceisa 4.0 system. secondary data analyzed is the results of surveys of old ceisa and ceisa 4.0 users, data on service modules contained in ceisa 4.0, data on the movement of the number of old ceisa and ceisa 4.0 documents, and data on the number of times for completing ceisa 4.0 complaint tickets. this data provides an overview of the implementation of the ceisa 4.0 system, which is currently underway. result and discussion digital transformation in customs is very important to meet the demands of the times in various parts of the world (jonathan & marshall, 2006), (chebotareva, kazantseva, vologdina, grigorian, & sukhanova, 2021), (vovchenko, ivanova, khapilin, & khapilin, 2019) and (kafando, 2020). in the djbc business process, digital transformation is one of the demands of service users who adopt the latest technology in increasingly complex government services to become faster, safer, more effective and efficient which is implemented in regulatory products (novikova, sidorov, & goncharuk, 2020). digital transformation of customs and excise services is carried out in stages, adjusted to the needs and developments in information technology at that time (jaleta, 2024), (yereshko, khoma, & pyslytsia, 2024) and (jaloliddin, 2023). starting from diskette media and https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 80 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc electronic data exchange (pde) to the ceisa 4.0 application. every customs and excise regulation issued also accommodates the digital transformation policies that the leadership has established. starting from making customs forms electronic while still including hardcopy, until now, the majority have gone hardcopy again. this can significantly help increase compliance in fulfilling customs obligations safely and efficiently (shope, 2022) and (yaren, 2020) which will also have an impact on state revenues (jaleta & tulu, 2023). and by utilizing digital technology it can help supervision carried out by customs and excise (tanjung, anriani, & rofii, 2023). the background to the development of the ceisa 4.0 application is to overcome problems in the previous system, such as outdated technology, silo systems (separate systems), difficulty to manage, and lack of collaboration. ceisa 4.0 aims to improve interoperability (automatic and secure data exchange) with external systems, providing a reliable infrastructure, high availability, and utilising the latest technologies such as big data and ai (artificial intelligence). the legal basis for ceisa is attached to every regulation that regulates each business process. ceisa, in rules, is usually called skp (service computer system). each implementation of the application system uses the mandatory kep legal basis in stages, starting from the decree of the director general of customs and excise number kep-98/bc/2021 concerning the full implementation (mandatory) of ceisa 4.0 first stage up to the decree of the director general of customs and excise number kep60/bc/2024 concerning full implementation (mandatory) of ceisa 4.0 phase eight. ceisa 4.0 was formulated by the directorate general of customs and excise (djbc) in 2018 to support digital transformation and increase the efficiency and security of customs and excise services. the creation of ceisa 4.0 was carried out by the it development team from djbc, which involved various information technology and business process experts. in its implementation, ceisa 4.0 involves multiple parties from head office and verticals, business process owners (probis), users and it experts. a monev (monitoring and evaluation) team was also formed to ensure implementation went as expected. maintenance the ceisa 4.0 system is carried out by the it team from djbc who is responsible for maintaining system reliability and security and carrying out necessary repairs and updates. djbc employees and customs service users, such as importer and exporter companies can utilize the ceisa 4.0 system. it can be connected to various related systems via a web portal and api host-to-host. the ceisa 4.0 application policy aims to increase service efficiency, speed up business procedures, reduce process redundancy, and provide fast and accurate data. apart from that, ceisa 4.0 also provides benefits in terms of system integration, both internal and external, as well as improving user experience with a unified approach. it is customer-centric. the main target of the ceisa 4.0 application is customs service users, involving more than 20,000 service users as well as all customs and excise employees connected to ceisa. ceisa 4.0 functions to manage all customs and excise processes online. its main functions include creating and submitting import and export documents, monitoring customs processes in real-time, and providing information related to customs regulations and processes for service users. the benefits of ceisa 4.0 are better system integration, ceisa 4.0 integrates various applications and databases and mapping the wco data model in one efficient portal. service users do not need to manage many modules or perform repetitive data entry. improve interoperability: improve https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 81 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc interoperability with external systems through apis, enabling real-time data exchange with various institutions and companies. efficiency and speed of service: speed up the customs and excise process by re-engineering and simplifying business procedures. this system allows fast service without delays and minimizes additional costs. more effective surveillance: utilize the latest technology, such as iot, big data, and ai, for direct real-time monitoring of goods and movements. application of biometric and drone technology for border area surveillance. information security: increasing information security through comprehensive tracking and handling of intrusions. detected and responded to more than 8 million cyberattacks since 2021. ease of access and use: the web-based service user portal makes it easy to create and track customs documents online. reduces the need to install special applications on user devices. improved services and collaboration: facilitates integration and collaboration between both inside and outside customs application systems. opening new opportunities for platforms with value-added services through api connections host-to-host. support for decision making: strategic use of data to support organisational decision-making. providing in-depth data analysis to generate valuable insights. modern customs systems, such as ceisa 4.0, have also been implemented in various countries. countries that have used asycuda include africa, the caribbean, nigeria, cambodia and haiti. another system called crismon logic, based in singapore, is also used by southeast asia and the middle east countries. furthermore, the atos application is used in france, germany and england. other countries such as greece, belgium, and south africa also use a similar application called intrasoft. this shows that the global customs system adapts its functionality based on each country's economic needs, level of trade and technological infrastructure. the following table compares the features of several customs systems that have been implemented in various countries, listed in table 1: table 1. comparison of features of several customs systems feature ceisa 4.0 asycuda crimson logic atos intrasoft declaration √ √ √ √ √ validation √ n/a √ n/a √ tariff √ √ √ √ √ billing √ √ √ n/a √ guarantee √ n/a n/a n/a √ risk assessment √ √ √ √ √ channeling √ √ √ √ √ customs warehouse √ √ √ n/a n/a physical inspection √ √ n/a n/a n/a reporting √ n/a √ n/a √ source: directorate general of customs and excise, 2024 in indonesia, the standards used in the ceisa 4.0 application are designed to meet modern standards in public services, including the principles of smart customs (secure, measurable, https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 82 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc laboratory vhds (vehicle declaration) online excise skpkb pkbsi licensing silfiana settlement excise treasury vooruitslag monev excise notice of appeal vessel declaration system (vds) production excise content management system (cms) carnet trade excise sapabankum in-house imei registration refund excise mobile customs determination of import classification (pksi) facilities excise hki btd bdn bmmn analysis excise national block voluntary declaration administrative excise service user portal usdfs sofast temporary import release facility rush handling citac container profile hs runaway audit smart pcc company profile browse items cntc people profile price range / dbnp national dashboard browse commodities monum tpb trantib browse lartas rosa (record of ship assessment) company valuation e-seal carrier profile hs suggestion secretariat monitoring impl. wto tfa myceisa mfa sipuma ceisa lite ceisa care ski ceisa premium ska ikc service survey premium hi connect browse histori hs ceisa search risk management ska (mariska) risk engine hs suggestion apps manager reference data update monitoring probs data analytics prm pnr dan pau support legal aid efforts download data supervision per 17 ppbt database narcotics kln marine patrol kite ftz passenger goods delivery goods moving goods facility service manifest tps online impor ekspor tpb source: processed by the author, 2024 automated, risk management-based, and technology-driven). this system is also expected to be able to produce descriptive reports that can predict future policy decision-making. the following are the service modules in ceisa 4.0, which are listed in figure 3: figure 3. service module in ceisa 4.0 source: directorate general of customs and excise, 2024 figure 3 explains the service module in ceisa 4.0, which consists of services, facilities, supervision, support, and data analysis. the customs and excise service process begins with a manual customs and excise notification service. changes are made using a diskette system and then an electronic data processing (pde) system with a provider from pt edi. then, the ceisa system is developed until finally switching to ceisa 4.0. the differences between the previous customs service system and ceisa 4.0 are listed in table 2 below: table 2. differences in service systems before and after ceisa 4.0 no before ceisa 4.0 ceisa 4.0 1 stand-alone application, difficult to maintain (consists of various separate applications with each database) bringing together various applications and databases (single core) 2 access is limited to service users (modules) and is not flexible because it must be installed on the desktop/laptop by each person flexible because it can be accessed on websites or hosted by company systems or service users 3 repetitive processes in various problems, inefficient, not yet integrated in terms of validating and sending documents seamlessly it's integrated, so it's easy to integrity and traceability data 4 there has not been optimal supervision of export, import and excise activities wider supervision with ceisa 4.0 in terms of the prm system (passenger risk manager) https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 83 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in interviews conducted with informants namely service users, the resistance factors in changes to the digital transformation system of customs services are: adaptation is needed from customs and excise service users regarding the application of ceisa 4.0, host to host system development for which there are still few references, lack of it resources on the part of service users, because the implementation of ceisa 4.0 is still gradual, it often takes a long and repetitive process to create it wasting time. the expected achievement with digital transformation in the customs and excise business process is that the services provided can be more effective, efficient, fast, and transparent, ultimately improving the image of djbc. the general convenience of ceisa 4.0 for customs and excise is that it can facilitate the implementation of tasks and functions. for leadership elements, the speed of providing data and information presented can help decision-making (manager summary). the convenience of ceisa 4.0 for service users is that it can be accessed from anywhere, there is direct data exchange, and data processing is more effective and efficient. the long-term plan prepared through ceisa is ceisa next-gen, which seeks to provide "paperless, seamless and faceless" services with deep integration between business processes, digital infrastructure and data security. the main target is to provide a better service experience to service users by using a user-centric approach, increasing operational efficiency and accuracy through a system that can be accessed in real-time and achieving national strategic goals including increasing state revenue and protecting against security risks. this long-term plan aligns with the national economic development vision 2025-2029. according to the directorate general and customs, as the system's creator, ceisa 4.0 is currently under development and is not yet fully effective because there are still business processes that are not/have not been touched by the ceisa 4.0 program. apart from that, in some cases, bugs are still found and/or the stability of the ceisa 4.0 system is not well maintained. however, it has been running efficiently where service users' fulfilment of customs and excise obligations is carried out paperless. it can be done anytime and anywhere by minimizing face-to-face contact with customs officers. human resource capabilities in implementing ceisa 4.0 at djbc and customs and excise service users still require training in operating ceisa 4.0 because several tools are unfamiliar. however, outreach has been provided to service users in the form of direct assistance, especially to company employees who are service user portal operators. djbc has surveyed to measure the satisfaction and interest of users of ceisa 4.0 services for 2022-2023 as stated in service memorandum number nd-774/bc.073/2023. as a result, the level of satisfaction decreased because in that year, ceisa 4.0 had become mandatory in several large offices (survey respondents increased), and several bugs had not been resolved, thereby reducing the level of satisfaction. meanwhile, the importance level increases along with the use of ceisa 4.0. the following are the results of the evaluation of information and communication technology (ict) services for august 2024 regarding the movement in the number of ceisa 4.0 and old ceisa documents as listed in table 3: https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 84 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 3. movement in the number of old ceisa and ceisa 4.0 documents period old ceisa document ceisa 4.0 document % document on ceisa 4.0 jan-24 496.567 485.170 49% feb-24 414.738 467.702 53% mar-24 331.621 613.208 65% apr-24 160.244 586.252 79% may-24 146.032 862.376 86% jun-24 58.795 891.299 94% jul-24 31.463 1.072.852 97% aug-24 19.803 1.060.926 98% source: directorate general of customs and excise, 2024 the documents in ceisa 4.0 are getting bigger along with improvements to existing services and the interests of service users. in its implementation there were problems, one of which was the problem received through bcare. bcare is an application for problem reports, service requests, data requests, system proposals and inquiry reports. the following are the number and time for resolving ceisa 4.0 complaint tickets in table 4: table 4. number and time of completion of ceisa 4.0 complaint tickets no. period amount finished not finished yet < 1 hour > 1 hour layer 3 not finished yet (non-sla) 1 august 13520 12214 1147 49 110 percentage 90.34% 8.48% 0.36% 0.81% 98.82% 0.36% 0.81% source: directorate general of customs and excise, 2024 in table 4, it is explained that in august 2024, there were 13,250 complaint tickets, which could be resolved in less than 1 hour, reaching 90.34%. completion above 1 hour is 0.36%, unresolved at layer 3 is 0.36%, and non-sla is only 0.81%. as many as 30 officers will help handle incoming complaints within 24 hours. the following are the constraints and efforts in implementing ceisa 4.0 faced by customs based on interviews that have been conducted in table 5: table 5. constraints and efforts by the customs department in the implementation of ceisa 4.0 no constraint effort 1 requires a strong and stable internet network increase the bandwidth quota in each service office 2 requires hardware with qualified specifications procurement of hardware devices according to specifications 3 there are still bc officers who are not yet proficient in computer systems. intense ceisa 4.0 training and socialization source: processed by the author, 2024 https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 85 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from interviews conducted with service users, the following are the constraints and efforts in implementing ceisa 4.0 faced by service users in table 6: table 6. constraints and efforts of service users in implementing ceisa 4.0 no constraint effort 1 minimal references, but after assistance with ikc, development host to host can be finished. routine assistance has been provided, including visits to companies and associations 2 document reject. portal access is sometimes slow. system improvements have been made by forming a problem management team tasked with overseeing the optimization of ceisa 4.0 3 application performance is still relatively slow. 4 idle time is too short, oftenlogout. 5 manual book for new users who use ceisa 4.0 application guidelines have been created that can be used by vertical units to operate the ceisa 4.0 application source: processed by the author, 2024 the ceisa 4.0 system provides benefits for various parties, especially service users. just like the findings in previous research conducted by (murti & vikaliana, 2021), there are still obstacles that need to be improved behind the perceived benefits. the current implementation of the ceisa 4.0 system has improved compared to before. system improvements and services continue to be improved even though they have not yet reached perfection. follow-up has been carried out on several complaints, suggestions and input submitted by employees and service users, including, virtual socialization and assistance was carried out for all djbc vertical units and faceto-face assistance to several djbc vertical units in the process of implementing ceisa 4.0 import services, export services, tpb services and other customs services during 2023. regularly monitoring applications, networks, servers and databases that could cause a decrease in the performance of the existing ceisa and ceisa 4.0 systems as well as in-depth evaluation of the customs and excise information system. customs authorities must optimize and perfect the ceisa 4.0 system quickly and precisely. conclusion from the discussion that has been carried out, it can be concluded that the implementation of ceisa 4.0 is still under development and is not yet fully effective because there are still business processes that are not/have not been touched by the ceisa 4.0 program. however, it has been running efficiently where service users' fulfillment of customs and excise obligations is paperless. human resource capabilities in implementing ceisa 4.0 at djbc and customs and excise service users still require training in operating ceisa 4.0. however, outreach has been provided to https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 86 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc service users in the form of direct assistance. before ceisa 4.0, the applications used were still separate from their respective databases, access was limited to service users, lacked flexibility, required repetitive business processes, was not yet integrated and in terms of supervision was not optimal. ceisa 4.0 has facilitated business processes that are faster, more accurate, integrated and more flexible. this provides significant benefits for customs service users and djbc employees. obstacles encountered include the need for service users to adapt, the need for gradual system development, and improvements to devices and networks. in overcoming these obstacles, djbc has made various efforts, including improving infrastructure, training employees, and assisting service users. ceisa 4.0 is expected to improve djbc's image by providing more effective, efficient, and transparent services. in contrast to research that had been carried out previously when this research was conducted, the ceisa 4.0 system was increasingly refined and had undergone several changes to both existing features and services. the ceisa 4.0 system has also now been implemented nationally or comprehensively. the findings of implementation problems in this research need to be taken into special consideration by the directorate general of customs and excise as a policy maker to be able to immediately make improvements in various aspects starting from maximizing existing resources by providing training to officers who handle ceisa 4.0 problems, communicating well with platform providers and service users and continuing to commit to making improvements, especially to system stability to achieve perfection in customs and excise services. regarding the standards, policy targets, and characteristics of the implementing organization, the implementation of the sop has gone well, namely that it has used a clear legal basis and sop in implementing the policy. furthermore, suggestions that can be given are that the ceisa 4.0 system strives to maintain its quality and high availability, strengthen the system infrastructure so that the service process runs smoothly, provide a real-time online consultation feature to make it easier for service users and increase the competency of officers, especially in the it field, to prevent recurring problems later. if necessary, you can collaborate with external parties to develop the system. research limitations lie in the time and research funds required to reach all regions in indonesia that use the ceisa 4.0 system. however, researchers have tried to take samples in several areas that can represent the research results. with the transition from the old ceisa to the new ceisa, the strength of the ceisa 4.0 system is also not yet visible, so this is a suggestion for further research. it is hoped that further research will 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(2020). implementing blockchain technology in the customs environment to support the safe framework of standards. world customs journal, 14(1). https://doi.org/https://doi.org/10.55596/001c.116314 yereshko, k., khoma, o., & pyslytsia, a. (2024). digitalization of customs procedures: current state and prospects. journal of vasyl stefanyk precarpathian national university, 11(2). https://doi.org/https://doi.org/10.15330/jpnu.11.2.103-115 https://www.ilomata.org/index.php/ijtc implementation of the customs digital transformation policy using the ceisa 4.0 system in order to improve customs and excise services rahmi, arimbhi, and dartono 89 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc zahratul, n., fuada, s., & hasugian, l. p. (2023). pengukuran tingkat kepuasan pengguna ceisa 4.0 menggunakan system usability scale pada kantor pengawasan dan pelayanan bea dan cukai tipe madya pabean a purwakarta. majalah ilmiah unikom, 21(2), 71–77. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 4 october 2025 page no. 1-14 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish m-score approach intan puspanita1, anistya vinta desi2 12universitas sultan ageng tirtayasa, indonesia correspondent: anistya.vinta@untirta.ac.id2 received : august 22, 2025 accepted : october 15, 2025 published : october 31, 2025 citation: puspanita, i., & desi, a.v., (2025). analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish m-score approach. ilomata international journal of tax and accounting, 6(4), 1-14. https://doi.org/10.52728/ijtc.v6i4.1924 abstract: this research investigated the impact of tax avoidance, firm size, and profitability on the f-score as a measure of fraudulent financial reporting (ffr) in indonesian state-owned enterprises (bumn). the use of the beneish m-score to detect fraud is not new, but applying it in the context of bumn provides more insight into the level of honesty among government-linked businesses. the study utilizes secondary data from the annual financial statements of bumn for the years 2019 to 2023 and employs multiple linear regression to examine the relationships among variables. the results indicated that tax avoidance exerts a positive and significant influence on ffr. it was implied that elevated levels of tax avoidance may enhance the probability of financial misstatement. on the other hand, the size and profitability of a company do not have a big impact on ffr. these results validate that tax evasion may serve as a preliminary indicator of possible financial reporting fraud. this study offers a contextual contribution to the indonesian soe sector and underscores the necessity of fortifying the theoretical framework that connects tax behavior to financial reporting errors. this study also offers practical recommendations for policymakers to enhance internal control systems and improve the transparency of taxation strategies for state-owned enterprises (soes). keywords: tax avoidance, firm size, profitability, fraudulent financial reporting. this is an open access article under the cc-by 4.0 license. introduction financial statements are an important source of information for anyone who wants to assess the performance and financial condition of a company. the reliability of these statements is a key factor in maintaining the trust of the public, creditors, regulators, and investors in the information presented. however, in practice, many companies are still involved in financial statement manipulation or fraudulent financial reporting. this action is one of the most serious forms of fraud because it can mislead economic decision makers and undermine the integrity of the financial reporting system. https://www.ilomata.org/index.php/ijtc mailto:anistya.vinta@untirta.ac.id2 https://doi.org/10.52728/ijtc.v6i4.1924 analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a possible component of financial reporting fraud is tax evasion, which refers to the unlawful practice of willfully hiding or underreporting income in order to lower one's tax obligation. tax avoidance is not illegal per se, but many see it as a murky area that could be a sign of financial reporting manipulation. according to multiple research, corporations that engage in aggressive tax avoidance strategies may falsify their financial accounts by omitting important information. (nguyen, 2020). another factor that might affect the frequency of financial statement fraud is the size of the company. as a general rule, larger organizations are less likely to be victims of fraud because they have more robust systems of internal control and oversight. firm size does not necessarily reduce fraud risk, as larger firms may also manipulate information systematically (waqidatun et al., 2021). in this case, garuda indonesia reported a net profit of usd 809,000, while the audit results showed a loss of usd 244.95 million. the difference was caused by accounting manipulation, namely the recognition of revenue from long-term transactions that should not have been recognized in the current period. according to a report by tempo magazine (2019), these actions reflect a violation of accrual accounting principles and distort the financial performance reported to the public. previous studies have also highlighted the relationship between tax avoidance, firm size, and fraudulent financial reporting. (putri & suhardjo, 2022) found that tax avoidance has a positive and significant effect on fraudulent financial reporting in non-financial companies listed on the indonesia stock exchange. meanwhile, (lestari & machdar, 2024) found that companies are more likely to engage in accounting manipulation to hide their tax avoidance tactics from stakeholders if they are involved in significant levels of tax avoidance. (elisabeth & simanjuntak, 2020), through a systematic review of the literature on fraud detection in indonesia, highlight the importance of a context-specific approach, both in private companies and public sector entities. the review showed that most existing financial statement fraud detection methods were not fully effective when applied to the complex organizational structure of state-owned enterprises. meanwhile, (mardeliani & alvia, 2022) found that financial targets, collaboration in government projects, changes in directorship, and dualism of positions have a significant effect on indications of financial reporting fraud, while the quality and replacement of external auditors do not show a significant effect. the information provided a clear need for additional research, related to tax avoidance variables and firm size, as they relate to financial reporting fraud. therefore, this study aims to analyze state-owned enterprises (soes) listed on the indonesia stock exchange during the 2019–2023 period to deepen understanding of the relationship between these variables in the context of financial reporting fraud. agency theory according to (jensen & meckling, 1976), agency theory explains the relationship between owners (principals) and managers (agents), whereby principals authorize agents to manage companies in accordance with their interests. however, because agents have more information, information asymmetry arises, giving rise to conflicts of interest. when the personal interests of managers differ https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc from those of owners, they may act contrary to the company's objectives, including manipulating financial statements (ariani & prastiwi, 2020; julita et al., 2014; mareta & fitriyah, 2017). agency theory is used because it can explain how differences in interests and information asymmetry affect decisions and financial reporting. financial reports can be used as a means for managers to protect their personal interests amid performance pressure and incentive systems (abderrahim et al., 2024). therefore, this theory emphasizes the importance of governance and internal control to prevent manipulation and fraud in financial reports. fraudulent financial reporting deliberately misrepresenting financial facts with the goal of fooling stakeholders like investors, creditors, regulators, or the public is known as financial statement manipulation or fraud. accounting fraud, which includes the manipulation of financial statements (acfe, 2022), seriously compromises the trustworthiness and accuracy of financial records. one often used approach to identify the likelihood of this kind of fraud is the beneish m-score, a model created by (bernard et al., 1999) regarding the quantity of financial ratios. by evaluating eight financial variables, this model attempts to detect organizations that are likely to manipulate their financial statements. the main aspects that are often manipulated include an increase in accounts receivable, a decrease in gross profit margin, accumulation of non-productive assets, changes in depreciation methods, growth in operating costs, accrual measures, changes in leverage, and unusual sales growth. these forms of manipulation are captured by the eight ratios in the beneish m-score model. a high mscore, as explained by (fenyves et al., 2023), indicates a strong possibility of material misstatement related to fraud in a company's financial statements. since state-owned enterprises (soes) are huge, subject to intense public scrutiny, and frequently encounter pressure to preserve their reputation and financial performance in the view of both the public and the government, the beneish m-score method is especially applicable to their situation. indications of manipulation can be measured and the impact of factors like tax evasion and firm size on the likelihood for manipulation can be examined using this approach (falasifah et al., 2025). tax avoidance tax avoidance is a legal strategy used by companies to minimize their tax burden by exploiting loopholes in tax regulations. although it does not violate the law, this practice is often considered unethical because it can result in reduced state revenue (siregar et al., 2022; yunis & hasnawati, 2023). in the context of agency theory, tax avoidance reflects a potential conflict between managers and shareholders, as managers may utilize this strategy for personal gain, contrary to the company's long-term objectives (ngau et al., 2025). furthermore, research indicates that aggressive tax avoidance may encourage financial statement manipulation (yenni et al., 2017). building on this, tax avoidance is increasingly recognized as a form of managerial opportunism that can exacerbate institutional conflict and potentially lead to financial reporting fraud. however, research shows https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the relationship between tax avoidance practices, institutional conflict, and the quality of corporate financial reporting has not yet been explored, highlighting the need for further empirical investigation to clarify these dynamics (kusumawati et al., 2024; wongsinhirun et al., 2024). firm size firm size is a crucial indicator in financial analysis, as it reflects the scale of a company's operations and the resources. according to (verya, 2017) revenue, assets, and market cap are the three main indicators of a firm size. in this study, total assets were used as a measure of firm size. when a big firm is a state-owned entity (soe) that has to keep its performance in the public eye, it tends to distort reports to keep its stock price stable and its reputation in the market, according to a number of studies. research hypothesis when a business actively sought to minimize its tax liability using legitimate but forceful means, including income shifting or transaction manipulation, it was engaging in tax avoidance. although not explicitly forbidden, these methods raise the possibility of accounting information manipulation and, by extension, fraud. (sari & nugroho, 2020a). previous research has also found that companies engaging in tax avoidance tend to have a higher incentive to present misleading financial information, particularly to conceal their practices ((putri & suhardjo, 2022); (lestari & machdar, 2024). the probability of misleading financial reporting is proportional to the degree to which a corporation engages in tax avoidance. theoretically and empirically, this is in line with the idea that tax avoidance strategies might promote the use of deceptive financial reporting in order to hide tax avoidance. h1: tax avoidance is positively associated on the occurrence of fraudulent financial reporting a firm's size is an important gauge in financial analysis as it shows how large its operations are and what resources it has. according to (verya, 2017), firm size can be measured by total sales, total assets, and market capitalization. the larger the company, the greater its assets, cash flow, and influence on the market and regulatory environment. research conducted by (junus et al., 2025) conducted research across different firms and discovered that financial statement fraud is positively correlated with firm size. its results show that even very well-funded businesses can't always ensure honest financial reporting. a company's management may be tempted to falsify financial statements due to external factors like investor expectations and the necessity to preserve the company's reputation, even though larger organizations are able to establish more intricate internal control mechanisms. since the probability of financial statement fraud increases with firm size, firm size can therefore play a substantial influence in either amplifying or dampening the inclination for such fraud. management at large corporations may feel more pressure to distort https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial statements in order to meet investor expectations, preserve reputation, and assure stock price stability. this can lead to the problem. h2: firm size is positively associated on the occurrence of fraudulent financial reporting tax avoidance is a managerial strategy to reduce a company's tax burden by exploiting loopholes in legitimate tax laws. while not illegal, this strategy is often aggressive and opaque, encouraging companies to manipulate financial reports to avoid detection. this potentially increases the risk of fraudulent financial reporting (putri & suhardjo, 2022). according to (sari & nugroho, 2020), there is a strong correlation between tax evasion and the presentation of false financial reports by firms. misrepresentation, underreporting, and manipulation of earnings are all components of this practice. a second factor that affects the prevalence of financial statement fraud is the size of the company. there are greater options for management to cover up fraudulent acts in large organizations due to their complex organizational and operational frameworks. (sari & nugroho, 2020b). furthermore, pressure to maintain the company's image and performance in the eyes of investors and the public makes management more likely to seek ways to embellish financial statements (ariani & prastiwi, 2020). however, large companies generally have better internal control and governance systems than smaller companies, so there is also the possibility that larger companies are better able to prevent fraud (tamalia & andayani, 2021). the second component that impacts the frequency of fraudulent financial statements is the size of the business. because of the intricate systems in place, managers at big companies have more leeway to cover up wrongdoing. h3: tax avoidance and firm size have a simultaneous effect on fraudulent financial reporting. figure 1. conseptual framework tax avoidance (x1) firm size (x2) fraudulent financial reporting. (y) control variable: return on assets https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method in this study, quantitative research was used. the main source of data was secondary data in the form of financial reports from the idx that were already available. data analysis procedures were carried out through data processing, classical assumption tests (normality, multicollinearity, heteroscedasticity, autocorrelation), and multiple linear regression to test causal hypotheses. in this process, the researcher used purposive sampling techniques, namely selecting state-owned companies and subsidiaries of state-owned companies that met the criteria listed on the idx in the 2019–2023 period, so that the sample obtained was representative of the relevant population. the soe sector was chosen because it plays a strategic role in the national economy, faces unique governance complexities between public and commercial interests, and provides transparent and verified financial data for valid empirical analysis (chang & lin, 2021). table 1. operational variables no variable description variable measurement 1 fraudulent financial reporting the goal of financial reporting fraud is to make the information given in financial reports seem more favorable than it really is, to mislead readers, and to conceal material facts that do not pertain to the true financial health of the business. (ghaisani & supatmi, 2023). the model of the m-score is as follows: m − score = −4,84 + 0,920 ∗ dsri + 0,528 ∗ gmi + 0,404 ∗ aqi + 0,892 ∗ sgi + 0,115 ∗ de$p i – 0,172 ∗ sgai – 0,327 ∗ le$vi + 4,679 ∗ tata 2 tax avoidance companies engage in tax avoidance when they devise a strategy to minimize their tax liabilities by taking advantage of gaps, weak points, or unclear language in tax laws. (ngau et al., 2025) 𝐄𝐓𝐑 = total tax expense profit before tax 3 firm size companies are often categorized as small, medium, or big based on their firm size. the total assets of the firm are the most typical metric for this. (mutia & efriadi, 2020a). firm size = ln (total assets) 4 return on assets (roa) one indicator of efficient management is the return on assets (roa) ratio. a greater return on assets (roa) indicates that a corporation is efficient with its use of assets. (mutia & efriadi, 2020b) roa= net income total assets x 100% https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc result and discussion the results of descriptive statistical analysis in this section are used to establish fundamental knowledge of the research data. the study analyzed four variables, which included firm size, tax avoidance, return on assets (roa), and financial fraud reporting (ffr) from 60 state-owned idx-listed companies throughout 2019–2023. the analysis results serve as essential data for understanding distribution patterns and average value changes, and variable relationships, which will help identify potential connections before moving to inferential analysis and regression testing in the following stage. table 2. descriptive statistics with a range of -3.853 to 9.609, an average of 4.31828, and a standard deviation of 2.000349, the tax avoidance (ta) variable serves as the independent variable (x1). when the average value is positive, it means that most firms are avoiding paying taxes, but when the minimum value is negative, it means that certain corporations are being very cautious when reporting their taxes. firm size (firmsize), an independent variable (x2), ranges from 11.468 to 18.234 as measured by the natural logarithm of total assets. standard deviation of 2.049 indicated variability around a mean value of 16.098, suggesting a relatively consistent data distribution without significant deviation from the central tendency. according to these numbers, there is a wide variation in the data, and the sample consists mostly of large-scale companies. on the other hand, return on assets (roa), a control variable, ranges from -4.200 to 7.970. its standard deviation is 1.875, and its mean is 0.690. with a mean roa close to zero, it's clear that the sample businesses aren't doing a great job of turning their assets into earnings. not only that, but the negative minimum value proves that some of the dataset's enterprises posted net losses. the asymp. sig. (2-tailed) value was 0.200, which is larger than the 0.05 significance limit, according to the findings of the normalcy test. it may be inferred from this that the research model's residual distribution is normal. with this condition fulfilled, the data may go on to the next step of hypothesis testing, which is regression analysis, which relies on the normalcy assumption. that being the case, we accept the normally distributed residuals as the null hypothesis (h0). whether you want to know whether your regression model's independent variables are highly correlated, you may run a multicollinearity test. the model's credibility is jeopardized when multicollinearity prevents the independent influence of each predictor on the dependent variable from being seen. the independent variables in a perfect regression model should not be highly correlated with one another. tolerance and the variance inflation factor (vif) are the two most https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc typical measures used for this evaluation. the absence of multicollinearity in a model is determined by if each variable's vif value is less than 10 and its tolerance value is more than 0.10. reducing the vif value strengthens the regression model since it indicates less multicollinearity. table 3. multicollinearity test results model collinearity statistics tolerance vif 1 (constant) ta .975 1.047 firmsize .999 1.001 roa .955 1.047 a. dependent variable: f-score source: secondary data is processed (2025). the findings of the multicollinearity test on the regression model used in this investigation are shown in table 3. results indicated that all independent variables had vif values less than 10 and tolerance values higher than 0.10. when compared to standard methods for determining if multicollinearity symptoms are present, both sets of data are consistent. because of this lack of multicollinearity in the study's regression model, we may examine each independent variable separately, free from the influence of confounding factors. the dependability of the analysis findings is enhanced by this condition, which also lends credence to the regression model. the park test, which involves regressing the absolute residual against each independent variable, is used to conduct this heteroscedasticity test. this analysis presupposes a functional correlation between the error variance and an independent variable or variables. table 4. heteroscedasticity test results to identify heteroscedasticity, this research used the park test, which involves regressing the independent variables—firm size (firmsize), tax avoidance (ta), and profitability (roa)— on the natural logarithm of the squared residuals (ln(e²)). there is no indication of heteroscedasticity across the model variables, according to the data. regarding the tax avoidance (ta) variable in particular, there is no clear statistical evidence of heteroscedasticity as the significance value was 0.053, which is higher than the customary 0.05. the firm size (firmsize) variable also did not demonstrate heteroscedasticity, with a significance value of 0.627, which was much higher than the 0.05 benchmark. additionally, the profitability (roa) variable confirmed https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the lack of heteroscedasticity with a significance value of 0.555, which is significantly higher than the 0.05 threshold. finally, all independent variables passed the park test, so the regression model does not include heteroscedasticity. table 5. autocorrelation test results a value of 1.793 was shown by the autocorrelation test that used the durbin-watson (dw) test. if the dw value is between 1.5 and 2.5, then there is no autocorrelation in the regression model, as stated by sugiyono (2019). what this means is that the model's residuals are completely separate and unrelated to one another. this regression model satisfies a conventional regression assumption, which is that there is no autocorrelation. to determine whether each independent variable in a regression model significantly influences the dependent variable on its own, statisticians utilize the partial significance test, sometimes called the t-test. all forms of linear regression analysis, including basic and multiple linear regression, are used to administer this exam. table 6. t-test results we know that tax avoidance (ta) has a substantial impact on f-score, the dependent variable, from the t-test findings shown in the coefficients table. a computed t-value of 5.490, a regression coefficient (b) of 0.083, and a significance value of 0.001 (less than 0.05) all point to this. with all other factors held equal, these numbers show that an increase of one unit in total assets will result in an increase of 0.083 units in the f-score. on the other hand, finsize, the variable representing firm size, has a regression coefficient of 0.394, a computed t-value of 0.684, and a significance value of 0.498 (higher than 0.05). it may be concluded that f-score is unaffected by firm size. there is a positive trend, but the impact is not large enough to warrant a significance level. there is a correlation between roa and profitability (t=0.177, p=0.860), and the regression https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc coefficient is 0.007 as well. according to these numbers, the f-score is unaffected by profitability either. there is a positive correlation, but the impact is so little that it cannot be considered statistically significant. to find out whether a group of independent variables in a regression model have an effect on the dependent variable as a whole, an f-test is used. the model may be used for prediction and further analysis if the significance value (sig.) is less than 0.05, which means that the variables collectively have a significant impact. table 7. f-test result table 6 shows the results of the simultaneous tests, and the resultant f-value was 10.595 with a sig. level of 0.001. the 0.05 threshold for statistical significance is exceeded by this value. it is safe to say that the study's regression model is both valid and noteworthy. to rephrase, the study sample firms' tax avoidance and firm size are the independent factors that significantly impact the fraudulent financial statements. return on assets is the control variable. further analysis may be conducted using the regression model as it shown that the dependent variable can be explained by the combination of independent factors. the independent variable, tax avoidance (ta), has a substantial impact on the dependent variable, the f-score. the fact that the significance level is less than 0.05 (0.001) indicates this. accordingly, the f-score indicates the likelihood of financial statement fraud and is proportional to the extent to which a corporation engages in tax avoidance strategies. legal tax avoidance is a way for businesses to pay as little in taxes as possible. nevertheless, this tactic could be a red flag for dishonest accounting practices, as tax avoidance is sometimes accomplished by inventing false costs, manipulating revenue, or transferring tax liabilities around organizations. because of this issue, people may start to doubt the reliability of a business's financial reports. saputra and agustin (2021) found that firms using aggressive tax evasion tactics had higher f-scores, suggesting more financial statement fraud. our data corroborate this finding. at a significance threshold of 0.498 (higher than 0.05), the estimated t-value is 0.684, and the regression coefficient for firm size (firmsize) is 0.394. this suggests that the f-score is unaffected by the size of the firm. dwi urip wardoyo et al. (2022) also discovered that the likelihood of fraud within a corporation is unaffected by its size, therefore our results are in line with theirs. it was highlighted in this research that, depending on internal circumstances and management pressures, both big and small organizations have similar potential to distort their financial accounts. https://www.ilomata.org/index.php/ijtc analysis of tax avoidance and firm size on fraudulent financial reporting with the beneish mscore approach puspanita and vinta desi 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a regression coefficient of 0.007, a computed t-value of 0.177, and a significance level of 0.860 are all associated with the profitability (roa) variable. profitability does not seem to have much of an effect on the f-score either, according to this number. based on these findings, it seems that roa, which measures a company's profitability, is not the main factor that determines the likelihood of fraud. this conclusion is in line with that of adinda fitriyah & senapan (2021), who argue that roa does not significantly affect fraud risk because, despite strong financial results, the honesty of financial reports can be compromised due to internal pressures or opportunities. conclusion an indication of false financial reporting, the f-score, is significantly and positively affected by tax avoidance. the study found that a correlation between a company's tax avoidance practices and suspicions of financial statement manipulation was statistically significant. on the other hand, the f-score was unaffected by firm size and return on asset (roa). because state-owned enterprises (soes) of all sizes are susceptible to financial statement fraud depending on the strength of their internal controls and the pressures they are under, firm size should not be considered as a main determinant when evaluating fraud risk. similarly, without sound corporate governance practices, a company's financial statements might be misleading. the results of this study emphasize the importance of monitoring managerial behavior, tax avoidance practices, and the effectiveness of internal controls, in addition to financial indicators such as size and profit, in detecting financial reporting fraud in state-owned enterprises. to maintain fiscal accountability and integrity, transparent governance and strict supervision are required. theoretically, this study broadens the understanding of tax avoidance as a form of opportunistic behavior by managers in the context of agency theory, while practically it provides implications for regulators to strengthen governance, internal supervision, and audit effectiveness in soes to avoid financial reporting fraud. further research is recommended to add variables such as good corporate governance, financial difficulties, and auditor tenure, as well as to use a mixed or qualitative approach and a broader scope so that the results are more comprehensive and generalizable. reference abderrahim, c., morad, d., mohamed, b., ahmed, s., & outmane, f. 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(2023). pengaruh tax avoidance , nature of industry , ukuran perusahaan dan financial distress terhadap manipulasi laporan keuangan pada perusahaan sektor industrial tahun 2019-2021. jurnal ekonomi trisakti, 3(1), 1457–1468. https://doi.org/http://dx.doi.org/10.25105/jet.v3i1.16036 e-issn https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 793 806 793 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy lukman adebayo-oke abdulrauf1, adedeji daniel gbadebo2 1kwara state university, nigeria, 2walter sisulu university, south africa correspondent: gbadebo.adedejidaniel@gmail.com1 received : may 23, 2024 accepted : july 15, 2024 published : july 31, 2024 citation: abdulrauf, l.a.o., & gbadebo, a.d. (2024). the correlation of investment securities and the returns of pension fund administrators in an emerging economy. ilomata international journal of tax and accounting, 5(3), 793 806. https://doi.org/10.61194/ijtc.v5i3.1600 abstract: the pension fund administrators (pfas) are saddled with the responsibility to manage and invest pension contributions on behalf of employees through investment in securities and the earnings from the investments. the pfas are constantly faced with the problem of optimizing financial performance of assets to invest in. the paper aims to access the connection between financial assets that the pfas in nigeria invest in and their investment returns. in line with theory, econometrics offers correlation frameworks as a simple and efficient way to resolve and understand the relationship between financial assets and financial returns. we applied a pairwise correlation approach to published information from the national pension commission (pencom) from 2007 to 2021 to evaluate the link between four financial assets and investment returns. we find that two of the securities – money market securities and mutual funds – have a positive relationship with the pfas’ returns, and the other two considered – the federal government securities and private equity funds – have a negative relationship with the pfas’ returns. only the correlation between the growth of investment return and investment in money market securities is moderate and significant. in contrast, others are low and insignificant, thus leading us to refute the first hypothesis, maintaining others. the study offers insights into factors that affect their financial performance and investment strategies to be put in place to optimize return, which in turn will benefit their contributors. the outcome provides policymakers and regulators with a comprehensive overview of all investment securities and administrators' performance. keywords: pension fund administrators, financial assets, return on investment, pairwise correlation. this is an open access article under the cc-by 4.0 license introduction the pension fund administrators (pfas) are saddled with the responsibility to manage and invest pension contributions on behalf of employees through investment in “securities, and the earnings from investment generate incomes for employees at retirement. they are required by regulations to allocate a fraction of the funds for investment, ranging from government securities, which are low https://www.ilomata.org/index.php/ijtc mailto:gbadebo.adedejidaniel@gmail.com1 https://doi.org/10.61194/ijtc.v5i3.1600 the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 794 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc risk, to periodic coupon payments, which provide a steady stream of income for the pfas (madukwe & okeke, 2022). the pension assets in developing countries are still low, at 20% compared to 92% in the organization for economic co-operation and development (oecd) countries. in 2020, pencom increased the allowable limit for equity investments from 25% to 30% of their total assets under management to encourage more investment in the stock market. this led to an increase in equity investments by some pfas, although many continue to focus on fixed-income securities (united nations, 2021). in nigeria, the pfas have for years invested primarily in fixed-income securities, such as government bonds, treasury bills, and corporate bonds, as conditioned by the pension reform act (pra) of 2004 that pension funds should be invested in low-risk securities. this requirement is intended to protect pension fund members. however, it limits the ability of pension funds to generate high returns because low-risk securities generally have lower yields than higher-risk securities such as private equity, mutual funds, infrastructure, and real estate. in recent years, there has been a shift towards alternative investments as the pfas seek to diversify their portfolios and generate higher returns. this has increased the proportion of pension funds invested in equities from 7.8% in 2019 to 9.1% in 2020 and their return on investment from 9.33% to 11.27% in the same period. this increase was largely due to the stock market's strong performance in the second half of 2020, which benefited pfas (pencom, 2020). the pfas are constantly faced with the problem of decision-making and optimizing the financial performance of assets in which to invest. this is because an investment vehicle that provides income for retirees, if unsecured, may result in retirees not receiving the income they need during retirement. because invested funds are exposed to risks, some theories suggest investing in various securities to spread risk and reduce exposure to one particular security or asset class (idowu & ibrahim, 2021). diversifying an investment portfolio ensures security, reduces the risk of investment losses, and improves the fund's overall performance (omiete, 2023). several studies, including benedictus (2020), ahmed and opusunju (2022), ogungbade et al. (2022), musa et al. (2021), fisnik and simon (2022), wambui (2021) and mutula and kagiri (2018) investigated investments and financial performance. benedictus (2020) examined the factors that hinder pension fund investment in infrastructure in namibia. in nigeria, ahmed and opusunju (2022) investigated the determinants of the efficiency of pfas. musa et al. (2021) investigated the efficiency of pension fund investment in shares, bonds, and treasury bills. only ogungbade et al. (2022) examined the assets holding and financial performance of the pfas. however, they do not provide a framework on the correlation between the assets and financial returns of the firms, which represents an efficient way to understand and resolve the issue of which class of assets the pfas can invest in since the investment returns are likely affected by the securities which they are invested. given how vital the pension funds are to stakeholders and the role of investment securities in reducing the risk of losses and ultimately improving the financial performance of the pfas, it is therefore important to examine how the securities and financial performance of pfas are related. https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 795 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the paper seeks four specific aims: 1. determine the association between the money market security and the financial performance of pension funds. 2. ascertain the link between the investment in government security and the financial performance of pension funds. 3. to examine the connection between the private equity funds and financial performance of pension funds 4. determine the relationship between the mutual funds and the financial performance of pension funds. for the aim we apply a simple correlation framework to assess the direction and extent and test the significance of the relationship between the different investment securities and the financial performance of pension funds. in sum, the findings show that two of the securities – money market securities and mutual funds – have a positive relationship with the pfas’ returns, and the other two considered – the federal government securities and private equity funds – have a negative relationship with the pfas’ returns. moreover, only the correlation between the growth of investment return and investment in money market securities is moderate and significant. in contrast, others are low and insignificant, thus leading us to refute the first hypothesis, maintaining others. this offers insights into factors that affect their financial performance and investment strategies to be put in place to optimize return, which in turn will benefit their contributors. the outcome provides policymakers and regulators a comprehensive overview of all investment securities and administrators' performance. the findings inform regulators in developing policies and regulations to ensure pfas comply with best practices in fund management to enhance sustainability, survival of pfas, and the well-being of the industry in general. pension funds pension fund administrators (pfas) are institutional investors who collect, accumulate, and invest funds from contributors to provide future benefits (ibish et al., 2020). pension funds are among the most vital institutions in some domestic financial markets. they represent a form of financial intermediation, carried out by non-financial institutions via collection and investment of funds pooled for payment to members as retirement benefits (ndum & okoye, 2022). the purpose of the pension fund is to manage funds contributed by employees during their working years to provide benefits in the form of income during retirement. the age of retirement may vary from country to country. it enables employees to accumulate savings during their active service years to fund their needs in retirement. pension funds are categorized as defined benefit (db) or defined contribution (dc). in db funds, employers guarantee the benefit the employees will get upon retirement based on the employee’s salary before retirement. this system follows the pay as you go scheme. in dc funds, the employees’ retirement benefits are determined based on employee and employer contributions and any returns earned from the funds' investment during the contribution period (benedictus, 2020). more recent pfas are mostly dc funds, while older ones are db funds. https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 796 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in nigeria, the contributory pension scheme (cps) is the dc pension scheme that was adopted in 2004. before the pension act reform in 2004, amended in 2014, the public sector pension funds followed the db scheme and were always subject to budgetary allocations, non-contributory and not fully funded constraints resulting in different issues, including deficits, diversion of allocated funds, and presence of ineligible pensioners on the payroll. the reform was patterned to ensure that the employee contributes 8% and the employer contributes 10% that is reviewed thereafter to a pfas who will, on behalf of the retiree, invest the fund and provide the funds cum returns upon retirement (50 years and above) as a pension. the dc scheme of 2004 amended 2014 replaced the db scheme with the objectives of ensuring that everyone who has worked in the public and private service of the federation receives their entitlement as at when due, ensuring adherence to a uniform set of rules, regulations, and standards of administration in payment of retirement benefits, among others (egolum & ndum, 2021). the pfa works with the pension fund custodian, who keeps the funds in safe custody and then carries out transactions on their behalf. pencom regulates the activities of the pfas, pension fund custodians, and other stakeholders. one of the requirements of the new pension scheme is that pension funds are to be managed privately by licensed pfas and activities supervised by pencom. the pfas are duly licensed by pencom and are required to open the rsas for employees, invest and manage the pension funds in line with the commission’s issued guidelines, provide information to the employees or their beneficiaries, and pay retirement benefits to employees in line with the pra 2014 (onakeke & falope, 2020). the roles of pfas are to open rsa for all employees with a personal identification number (pin), appoint a pfc for receipt of contributions and safe custody of pension funds and assets, invest and management of the fund and assets, calculate annuities; provide customer support services including account statement and payment of retirement benefits following the provisions of commission. other functions include providing customer service to rsa holders, like issuing rsa statements at least once every quarter and appointing a pension fund custodian to provide custody and safety of the pension fund under its management (pra, 2014). investment securities provision of the pencom regulation on investment of pension fund assets act 2019 as amended stipulates that pension funds should be invested in the following allowable securities: federal government securities, state and local government securities, corporate debt securities, quoted ordinary shares, money market securities, mutual funds, private equity funds registered with security and exchange commission (sec) and both real estate investment trusts (reits) and the infrastructure funds registered with registered by the sec (pencom, 2019). federal government securities: federal government securities are typically regarded as low-risk investments because the taxing power of a government backs them and offers fixed interest rates and periodic coupon payments, which can provide a steady stream of income for pension funds (madukwe & okeke, 2022). according to pencom investment act 2019, they are bonds, sukuk, treasury bills, global depository notes, and other securities issued by the federal government of nigeria through the https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 797 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc central bank of nigeria (cbn) or their agencies. in nigeria, more than 70% of pension fund assets are invested in federal government securities. money market securities: money market securities are short-term debt instruments that typically have high liquidity and low credit risk. pension funds invested in money markets are meant to buy and sell short-term securities to achieve a fair return on investment with minimum risk (horne & kotaskova, 2019). it provides regular income in the form of interest payments. these payments can serve as a consistent source of revenue for pension funds, supporting their cash flow requirements. in line with the pencom investment act 2019, pfas can invest in money market securities such as bank placements and commercial papers. mutual funds: mutual funds or unit trusts are collective investment schemes that offer a valuable strategy that can be employed by small investors with limited investment knowledge and skills to profit from the financial market amidst uncertainties (yinusa et al., 2018). mutual funds take various forms, such as open or closed-ended investments, where public members are invited to invest their money or assets into a shared portfolio (investment & securities act, 2007). in a mutual fund, the portfolio is collectively owned by individuals and firms who have invested in the fund, and no individual investor can claim ownership of specific assets within the portfolio. in line with pencom investment and securities act 2019, mutual funds are open/close-ended/hybrid investment funds, including exchange traded funds and non-interest compliant investment funds, real estate investment trusts (reits) which are registered with the sec. private equity funds: private equity refers to private financing outside of public markets and involves investors directly investing in firms or buying them out (harvard business school, 2020). investors are often high-net-worth individuals, institutional investors, or venture capital firms interested in supporting a company's operations for personal or commercial reasons (tamunowariye & otekenari, 2021). the fund companies aim to generate profit for their investors. in return, investors in private equity funds pay management fees to the firms. in line with the pencom investment and securities act (2019), a private equity fund is investment capital targeted at all stages of private equity investment, from start-ups to large buyouts, including those held by corporate entities, limited partnerships, and other investment vehicles. state and local government securities: they are bonds and sukuk issued by eligible state and local governments or their agencies or wholly owned companies of the state government, provided that such securities are fully guaranteed by irrevocable standing payment orders (ispos) or external guarantees by eligible banks or development finance institutions with a minimum credit rating of ‘a’ (investment and securities act 2019). corporate debt securities: they are bonds, debentures, redeemable/convertible preference shares, and other non-interest-compliant debt instruments issued by eligible listed and unlisted corporate entities https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 798 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and asset-backed securities, including mortgage bonds, mortgage-backed securities, and infrastructure bonds. they include debt securities issued by corporate entities and guaranteed by the governments. quoted ordinary shares are ordinary shares of public limited companies listed or proposed to be listed through an initial public offer (ipo) on a securities exchange. majorly, investment in shares is done in existing securities bought and sold in secondary markets, and it is meant for long-term investment (pencom, 2019). research framework the study's empirical method hinges on the agency theory's theoretical construct. the theory from jensen and meckling (1976) conjects how the relationship between agents, such as the company executives and managers, and their principals, such as shareholders, can be tapped to govern a corporation to realize its efficiency. the theory is essential because decisions made by the agent regarding contributions, asset allocations, and risk preferences impact its financial performance. interest in agency relations became more prominent for many large corporations, where many agents seek other goals that conflict with their principals’ profit-maximizing aim and lead to agency conflict. this problem is addressed by developing a framework between principals and agents and identifying ways to align their interests through incentive mechanisms, such as performance-based compensation, that motivate agents to act in the best interests of the principal and to align interests through monitoring mechanisms, such as auditing that provide principals with periodic information. in the pfa context, the pensioners and sponsoring firms are the principal, while agents are the pfas. some authors should align the relationship with modern portfolio theory (mpt), especially in pfas (wambui, 2021). the mpt, from markowitz (1952), is an investment-based theory that states that risk and reward are inherent in all investing options. it is based on the premise that investors are rational and risk-averse, and when faced with two investments and securities that offer the same expected return, the investor will go for the less risky one. conversely, investors who want higher expected returns pursue such at the expense of more risk. the theory proposes the diversification of securities by constructing a diversified portfolio of assets with varying degrees of risk and return. investors can achieve higher returns for a given level of risk. the mpt advocates for investors to pick stability over high return, showing that the portfolio's performance is more important than individual stock (jingchen & juntai, 2022). the investor will have various options for assets that will be included in the portfolio, considering that when assets in a portfolio are joined, they build an efficient frontier portfolio with a set of portfolios that offer the highest expected returns. the risk of an individual asset is not as vital as the overall portfolio's risk if the assets are diversified and uncorrelated. in the pfa context, pension managers can construct a well-diversified portfolio and make informed investment decisions that achieve investment objectives while minimizing risk. based on this, the paper construes four hypotheses: 1. there is no significant correlation between investments in money market securities and pension fund financial performance. https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 799 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2. there is no significant correlation between the investment in the government security investment and pension funds' financial performance. 3. there is no significant correlation between the investment in private equity funds and the financial performance of pension funds. 4. there is no significant correlation between mutual fund investments and pension fund financial performance. the other sections are presented as follows: section 2 provides the method, section 3 presents the outcomes, and section 4 closes. method the data from the annual reports of pencom involves information from 2007-2021. the year 2007 was chosen as the baseline since the year already accounts for the lag that ensures the ramifications of the potential impact of the pra. the periods were limited to 2021 due to the unavailability of complete information on all variables for the periods after. the recapitalization exercise by pencom requires the pfa to have operational capital based on n5 billion within a 12-month transition period from april 27, 2021, to april 27, 2022. this led to the reduction of the pfas from 22 to 20. table 1 offers a list of the 20 licensed pfas. the literature measures financial performance through different approaches, including return on investment (gbadebo et al., 2023; igbekoyi et al., 2022), expense ratio (wambui, 2021), risk-adjusted returns (wambui, 2021), liquidity and asset allocation (ogungbade et al., 2022). we use the growth rate of return on investment (groi) computed by dividing the net profit by total investment multiplied by 100 as a measure of the financial performance of pension funds. although the pencom investment guideline offers a broad range of securities in which the pfas invest the pension funds. the investments are the major ones often undertaken by the pfas. to ensure a unified scale for estimating the correlation coefficients, we use the growth rate for the security. the growth rate for the money market securities (grmms) is computed as the percentage of investment in money market securities to total assets. the growth rate for federal government securities (grfgs) is the percentage of investment in federal government securities to total assets. the growth rate for private equity funds (grpe) is measured as the percentage of investment in private equity funds in total assets. the growth rate for the mutual funds (denoted grmf) is measured as the percentage of investment in mutual funds to total assets (ogungbade et al., 2022).” table 1. licensed pfas in nigeria s/n licensed pfas s/n licensed pfas 1 arm pension managers limited 11 npf pension fund managers https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 800 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2 crusader sterling pensions limited 12 oak pensions limited 3 fcmb pensions limited 13 pensions alliance limited 4 fidelity pension managers limited 14 premium pension limited 5 first guarantee pension limited 15 radix pension managers limited 6 guaranty trust pensions managers limited 16 sigma pensions limited 7 iei-anchor pension managers limited 17 stanbic ibtc pension managers ltd. 8 leadway pensure pfa limited 18 tangerine apt pensions limited 9 nigerian university pension management 19 trustfund pensions limited 10 nlpc pension fund administrators limited 20 veritas glanvills pensions limited source: pencom quarterly report (2022) the paper follows the standard procedure for empirical testing required to evaluate the study’s hypotheses. first, we employ some summary statistics, including the mean, standard deviation, minimum, and maximum, to describe the variables. we also employ the jarque-bera (jb) statistics to demonstrate the normality or otherwise of the variables’ distribution. the statistic, computed from equation (1), represents a goodness-of-fit assessment that confirms whether recovered sample skewness and kurtosis match the normal distribution. 𝐽𝐵-statistic = 1 6 ∗ [(�̃�3)2 + 0.25 (𝜇4 − 3)2]⁄ (1) where 𝜇3 and 𝜇4 are the skewness and kurtosis coefficients. the variable’s series is a non-normal distribution if the jb is far from zero and the test is significant at the chosen level. second, the correlation matrix was presented here to describe the relationship among the variables. correlation provides direction and strength of the link between covariates. to demonstrate this, the standard procedure is to assume two data pairs (𝑥𝑖, 𝑥𝑗 ), with n-set [(𝑥1,1, 𝑥2,1), 𝑥1,2, 𝑥2,2), …, (𝑥1,𝑛, 𝑥2,𝑛)], and use equation (2), which offers the estimates for the (centered) correlation coefficient (denoted 𝑟𝑥1𝑥2 ), where: 𝑟𝑥1𝑥2 = ∑ (𝑥1,𝑡 − �̅�1)(𝑥2,𝑡 − �̅�2)𝑛 𝑖 [√(𝑥1,𝑡 − �̅�1)2√(𝑥2,𝑡 − �̅�2)2] −1 (2) the estimated coefficient would lie between –1 and +1, with a mid-point at 0, showing the nonexistence of linear evidence. result and discussion we present the results and evaluate the working hypotheses. before presenting correlation and its “significant tests, we report the summary statistics of the variables in table 2 to show the descriptive information of the considered variables on the investment growth and the returns. mean values represent the average behavior of each variable over the period. the return on investment has an average of 0.234507 (23.45%), a standard deviation of 0.062058 (6.2%), a minimum of 0.065121 (6.5%), and a maximum of 0.326364 (32.6%). the growth rate of investment in money market securities has an average of 0.142515 (14.25%) with a standard deviation of 0.023023 (2.3%), a minimum of 0.065121 (6.5%), and a maximum of 0.326364 (32.6%). https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 801 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the growth rate of investment in government securities has an average of 0.669952 (67%), with a standard deviation of about 0.031517 (3.1%), a minimum of 0.644073 (64.4%), and a maximum of 0.764802 (76.48%). the growth rate of investment in private equity funds during the period has an average of 0.001278 (0.13%), with a standard deviation of 0.00058 (0.058%), a minimum of 0.000942 (0.094%), and a maximum of 0.00282 (0.28%). the growth rate of investment in mutual funds has an average of 0.004132 (0.41%), with a standard deviation of 0.001151 (0.12%), a minimum of 0.001128 (0.11%), and a maximum of 0.005269 (0.53%). the jarque-bera statistic shows that all the variables are not normally distributed. this is evident from the p-values of their respective jarque-bera statistics. the p-values of their jarque-bera statistics are less than 0.05, indicating a rejection of the normality null. table 3 shows the correlation matrix. the evidence indicates that the growth of return on investment has a positive relationship with the growth of investment in money market securities. the correlation coefficient of 0.4615 is moderate and significant. the p-value of 0.0103 associated with the relationship between return on investment and money market securities is less than 0.05, indicating that the first null is significant at 5%. the correlation has the highest magnitude relative to investment growth in other securities. we find no sufficient evidence to maintain the first null. the findings revealed that investment in money market securities is associated with improved return on investment, supposing the risk-returns relation for the money market securities is consistent with the agency theory (wambui (2021) orbunde et al. (2019)). the growth of return on investment has a negative link with growth in government securities. the correlation of -0.150496 is low and insignificant since the associated p-value of 0.4273 is over the acceptable significance of 0.1, indicating that the second null is maintained. the findings revealed that investment in government securities is not associated with the pfas’ returns. thus, the risk-return relation for government security is inconsistent with the agency theory. the growth of return on investment has a negative relationship with investment growth in private equity funds. the correlation coefficient of -0.140266 is low and insignificant, as the p-value of 0.4597 associated with the correlation is over the acceptable significance of 0.1, indicating that the third null is maintained. the findings revealed that investment in private equity is not associated with the return on investment of the pfas. hence, the risk-returns relations for the private equity funds are inconsistent with the agency theory. the growth of return on investment has a positive relationship with the growth of investment in mutual funds. the correlation coefficient of 0.147274 is low and insignificant, as the p-value of 0.4374 associated with the correlation is over the acceptable significance of 0.1, indicating that the fourth null is maintained. the findings revealed that investment in mutual funds is not associated with the return on investment of the pfas. hence, the risk-returns relations for the private equity funds are inconsistent with the agency theory. huan et al. (2019) show that a pension fund imbalance would occur in the early 2020s and then expand under existing policies. fertility adjustment, retirement delay, or combination reforms would not fundamentally solve the financial crisis in the long term. zwan et al. (2019) identify considerable variation in the joint regulatory incentives that support sustainable investment, with the netherlands, denmark, and germany as active, modest, and with little regulatory support for sustainable https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 802 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investment. wambui (2021) discovered a strong link between liquidity and performance, indicating that more liquid pension schemes perform better. bakare (2020) revealed that pension fund investments have favorably impacted nigeria's stock market development. musa et al. (2021) revealed that investment in shares and bonds has a positive and significant effect on the return on the investment, with treasury bills recording insignificant returns. sajuyigbe et al. (2021) found that the contributory pension scheme has no essential effect on job satisfaction and organizational commitment among osun state workers in nigeria. umar (2021) explored the islamic pfa scheme and found that due to religious beliefs, nigerians had a positive perception of participating in an islamic pension scheme. ahmed and opusunju (2022) found that determinants of the efficiency of pfas include short-term debt to total and total debt to total assets. ogungbade et al. (2022) found that the accumulation of assets by pfas impacts the financial performance of the pension funds. the assets held by pfas are relevant in terms of their financial performance”. table 2. summary statistics variable mean std. dev. minimum maximum jb jb p-value roi 0.243507 0.062058 0.065121 0.326364 10.07232 0.006 mms 0.142515 0.023023 0.068235 0.179053 24.44126 0.000 fgns 0.669952 0.031517 0.644073 0.764802 29.04604 0.000 pef 0.001278 0.000581 0.000942 0.002827 20.67379 0.000 mf 0.004132 0.001151 0.001128 0.005269 17.99357 0.000 note: jarque-bera (jb) source: authors (2024) table 3. correlation coefficients variable grroi gmms gfgs gpef grmf groi 1.0000 gmms 0.461518** 1.0000 (0.0103) gfgs -0.150496 0.233353 1.0000 (0.4273) (0.2146) gpef -0.140266 0.342714* 0.640039*** 1.0000 (0.4597) (0.0637) (0.0000) grmf 0.147274 0.527546*** 0.387367** 0.349973* 1.0000 (0.4374) (0.0027) (0.0344) (0.0580) note: p-value in parenthesis; *, **, ***, signify significance at 10%, 5%, and 1% respectively. the correlation coefficients are the pairwise correlation matrix. table 3 shows the correlation matrix that depicts the direction and extent of the linear relationship between the variables. https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 803 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: authors (2024) furthermore, “other findings are discussed based on the relationship between the different investment components. the growth of investment in money market securities has a significant positive relationship with the growth of investment in private equity funds and the growth of investment in mutual funds. still, it has an insignificant relationship with the growth of investment in government securities. the relationship between investment growth in money market securities and the growth of investment in private equity funds is significant at a 10% significance level. in comparison, the relationship between investment growth in money market securities and the growth of investment in mutual funds is significant at a 1% significance level. the relationship between investment growth in money market securities and investment growth in government securities is insignificant since its pvalue is greater than the 10% significance level. this implies that investment in money market securities is positively related to investment in private equity funds and mutual funds. the growth of investment in government securities has a significant positive relationship with the growth of investment in private equity funds and the growth of investment in mutual funds. the relationship between investment growth in government securities and investment in private equity funds is significant at a 1% significance level. in comparison, the relationship between investment in government securities and the growth of investment in mutual funds is significant at a 5% significance level. this implies that investment in government securities is positively related to investment in private equity funds and investment in mutual funds, and it moves in the same direction with both variables. the growth of investment in private equity funds has a significant positive relationship with growth in mutual funds. the relationship between investment growth in private equity funds and growth in mutual funds is significant at 10%. this implies that investment in private equity funds is positively related to investment in mutual funds, and both variables move in the same direction. conclusion the pension managers in nigeria manage the pension contributions in a broad range of securities in line with investment guidelines issued by pencom. they diversify risk as much as possible to achieve the scheme's objectives of financial sustainability of social security. the investment comprises treasury bonds and treasury bills; money market securities are short-term debt instruments that have high liquidity and low credit risk as well as mutual funds that offer a valuable strategy to profit from the market amidst uncertainties and private equity funds involving investors directly investing in firms or buying them out. some studies provide the knowledge frontier about how investment securities affect the performance of the pfas (huan et al., 2019; zwan et al., 2019; benedictus (2020), wambui, 2021; zwan et al., 2019; kinyua et al., 2022). according to the aim, we consider the assessment of a simple correlation and its significance in showing the relationship between the investment securities and the financial performance of pension funds between 2007 and 2021 for 20 pension funds in nigeria. this finding is four-fold: first, a significant positive association exists between investment growth in https://www.ilomata.org/index.php/ijtc the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 804 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc money market security and the financial performance of pension funds. second, a significant positive association exists between the growth of government security investment and pension funds' financial performance. third, a significant positive association exists between the growth of investment in private equity funds and the financial performance of pension funds. fourth, a significant positive association exists between the growth of investment in mutual funds and the financial performance of pension funds. the findings, which provide insights into the risk-return trade-offs associated with different investment securities and the financial performance of pension funds in nigeria, offer information for policy, regulations, and future research on the subject. despite this, the paper has some limitations, which we suppose that future studies can supplement. it focused only on four financial market assets: money market securities, federal government securities, mutual funds, and private equity funds. as pencom investment guideline recommends, pension administrators invest in other investment securities. therefore, we suggest that future studies may consider establishing the relation to involve a broad range of permissible” investments. references ahmed, i.a. & opusunju, m.i. 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(2020). evaluation of the financial performance of pension funds. empirical evidence: kosovo, albania, and north macedonia. european journal of sustainable development, 9(1), 161-172. https://www.ilomata.org/index.php/ijtc https://open.uct.ac.za/ https://doi.org/10.3390/su11030883 the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 805 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc idowu, k. a., & ibrahim, j. (2021). effect of risk management and internal controls on pension management in nigeria. gusau international journal of management and social sciences, 4 (3), 1-11. jensen, m., & meckling, w. (1976). theory of the firm: managerial behavior, agency costs, and ownership structure. journal of financial economics, 3(4), 305–360. jingchen, y., juntai, z. 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(2019). contributors’ monitoring of pension fund investment and prompt payment of pension benefits in university of ibadan, nigeria. iosr journal of humanities and social science (iosr-jhss), 24(3), 32-37. ogungbade, i.o, alani, o. e., efuntade, o.o, & olaniyan, n.o (2022). assets holding and financial performance of pension fund administrators in nigeria. journal of acta universitatis danubius (audoe), 18(3), 139-160. omiete, v. o. (2023). pension assets investments in the nigerian economy. saudi journal of economics and finance, 7(3), 115-125. onakeke, n. & falope, f.j. (2020). impact of contributory pension scheme to nigeria economic development. international journal of advanced academic research social and management sciences, 6(3), 40-54. https://www.ilomata.org/index.php/ijtc https://doi.org/10.26772/cjsms2022070103 the correlation of investment securities and the returns of pension fund administrators in an emerging economy abdulrauf and gbadebo 806 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc orbunde, b., lambe, i. & bako, i. (2019). impact of pension fund investment on capital market performance in nigeria. bingham intl journal of accounting and finance, 144-154. sajuyigbe, a.s., eniola, a.a., ayeni, a. & sanusi, b.m. (2021). moderating effect of employees’ retention on the influence of contributory pension scheme on employees’ attitude. organizational psychology, 11(3) 62-77. tamunowariye, c. & otekenari, d.e. (2022). economic development benefits of private equity in nigeria. european journal of research in social sciences, 9(2), 14-28. umar, b. (2021). potentials of an islamic pension fund administration scheme in nigeria. journal of global economics and business, 2(6), 89-102. united nations (2021). financing for sustainable development report 2021. new york: united nations, inter-agency task force on financing for development. available at: wambui, w. (2021). effect of fund characteristics on financial performance of pension schemes in kenya. m.sc. thesis of the university of nairobi, kenya. yinusa, o., elumah,l. & bamidele, i. (2018). performance of mutual funds in nigeria. the ieb international journal of finance, 17(1), 8-25. doi:10.5605/ieb.17.1 zwan, n.v., anderson, k. & wib, t. (2019). pension funds and sustainable investment: comparing the netherlands, denmark, and germany regulation. network for pension studies, ageing and retirement series, 1-34. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 180-201 180 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) siti nurhadimah1, v. santi paramita2 12university of jenderal achmad yani cimahi, indonesia correspondent: veronika.santi@lecture.unjani.ac.id2 received : november 7, 2023 accepted : january 5, 2024 published : january 31, 2024 citation: nurhadimah, s., paramita, v, s. (2024). the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 20172022). ilomata international journal of tax and accounting, 5(1), 180-201. https://doi.org/10.52728/ijtc.v5i1.1036 abstract: financial distress is a situation that arises when a company has an unstable financial situation. if this condition continues, it will impact the company’s bankruptcy. this research aims to determine the influence of good corporate governance, firm size, and operating capacity on financial distress in the retail trade sub-sector listed on the indonesia stock exchange in 2017-2022. the independent variables of good corporate governance include the audit committee, board of commissioners, board of directors, managerial ownership, and institutional ownership. the research method uses a quantitative and associative approach. the population in this study was 27 companies with a sampling technique using purposive sampling, and 25 companies were obtained as samples, so 150 observation data were obtained. the data analysis technique in this research uses logistic regression analysis using ibm spss 25 software. the partial research results show that the audit committee, managerial ownership, institutional ownership, and firm size do not affect financial distress. the board of commissioners, board of directors, and operating capacity negatively affect financial distress. simultaneously, good corporate governance, firm size, and operating capacity influence financial distress. this research implies that companies must pay attention to the good corporate governance sub-variables related to the board of commissioners and board of directors because these subvariables have been proven to influence financial distress. apart from that, companies must also pay attention to their operating capacity because, in this research, this variable was proven to influence financial distress. keywords: financial distress, good corporate governance, firm size, operating capacity this is an open-access article under the cc-by 4.0 license. introduction in the current era of globalization, business competition is becoming increasingly fierce. companies that want to grow must constantly improve all aspects of their operations. in a situation like this, no market is completely safe from industrial activity, both local and global. https://www.ilomata.org/index.php/ijtc mailto:veronika.santi@lecture.unjani.ac.id https://doi.org/10.52728/ijtc.v5i1.1036 the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 181 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in 2017, several retail trade sectors experienced a decline in sales due to the emergence of the online shopping phenomenon among the public; this caused a rift in relations between retail traders and made consumer behavior reluctant to shop out because online shopping was more effective and efficient. the rise of online-based business platforms such as shopee, tiktok shop, instagram shop, tokopedia, and lazada has caused business competition to become increasingly fierce. added to this is the decline in the purchasing power of people who have shifted to online platforms. this, of course, causes pressure on the retail trade sub-sector, which has an impact on the sales growth percentage in 2017 decreasing as reported by (databook.katadata.co.id). the parameter used to indicate the state of financial distress in a company is the earning per share (eps) value because, compared to other processes, eps is an evident ratio when a company experiences a loss in its business (hikmawati, 2022). the company will achieve good growth in the future if it produces positive eps and experiences continuous increases in each period. oen the oether hand, if it proedueces negative eps and eps decreases coentinueoeuesly oever several perioeds, it shoews that the proefit proespects are noet goeoed, soe it is noet attractive toe investoers and has the poetential foer financial distress (sunarwijaya, 2017). the following is the development of earnings per share (eps) in the retail trade sub-sector for 2017-2022. figuere 1. develoepment oef earning per share (eps soeuerce: idx.coe.id (proecessing data, 2023) figure 1 shows the average eps value for the retail trade sub-sector, where in 2017, it showed a decline in eps caused by the phenomenon of online platforms resulting in a decline in people’s purchasing power, which had an impact on a decline in sales, which was marked by a decline in a company’s earnings per share (eps). the decreasing earnings per share (eps) trend indicates that the coempany has decreased proefits in a certain perioed (masita & puerwahandoekoe, 2020). the cloesuere oef retail trade oeuetlets in varioeues regioens illuestrates the oeccuerrence oef slueggishness in the retail trade sueb-sectoer. this was cauesed by the lack oef bueyers and the high oeperatioenal coests incuerred, soe the coempany experienced loesses. the influeence oef oenline platfoerms makes it easier foer cuestoemers toe get goeoeds withoeuet having toe goe toe the oeuetlet. several coempanies are starting toe cloese their oeuetlets oene by oene, as experienced by pt. matahari department stoere tbk (lppf) is the pioeneer oef the moedern fashioen buesiness in indoenesia. pt. matahari department stoere cloesed 25 oef 2016 2017 2018 2019 2020 2021 2022 eps 42.57 21.23 45.8 35.36 -47.53 69.64 81.18 -60 -40 -20 0 20 40 60 80 100 https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 182 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc its oeuetlets in jakarta and manggarai areas duee toe a drastic decline in proefits oef 52,3%, and these oeuetlets did noet proevide significant incoeme foer the coempany (cnn indoenesia, 2021). then pt. mitra adiperkasa tbk cloesed three oef its oeuetlets, foelloewed by loetues department stoere cloesing twoe oef its oeuetlets. the twoe hypermart stoeres, which are part oef the matahari groeuep, alsoe cloesed their oeuetlets. ramayana alsoe cloesed six oeuetlets in 2017. fuerthermoere, pt. heroe suepermarket tbk cloesed 26 giant oeuetlets in varioeues regioens, and 532 emploeyees were affected by the cloesuere oef these oeuetlets (cnbc.coem). the coempany’s inability toe face the era oef gloebalizatioen will cauese coempany bankrueptcy. bankrueptcy is the failuere oef a coempany toe oebtain the expected proefits. meanwhile, financial difficuelties are a phase where financial coenditioens experience a coentinueoeues decline and resuelt in bankrueptcy (christine et al., 2019). bankcruptcy can be caused by general factors, company external factors, and company internal factors. in indonesia bankcruptcy is regulated in uu no.1 of 1998, which states that a debitor who has two or more creditors and cannot pay at least one overdue debt that cannot be collected, is declared bankcrupt by an authorized court decision, either on his own request, or at the request of one or more creditors. this application can also be submitted by the prosecutor for the public interest (helastica & paramita, 2020). therefoere, financial distress analysis muest be carried oeuet as early as poessible toe predict a coempany’s poetential foer financial difficuelties oer even bankrueptcy. if noet resoelved immediately, it will resuelt in a loess oef investoer coenfidence in the coempany. as a hot topic, financial distress prediction (fdp), called corporate failure prediction or bankruptcy prediction, plays an essential role in decision-making in various areas, including accounting, finance, business, and engineering. since academic research on financial distress prediction has gone on for nearly eighty years, there is abundant literature on this topic (sun et al., 2014). there are various bankruptcy prediction models, each with weaknesses and advantages. in this research, we predict bankruptcy by using earnings per share (eps) as a dummy variable with a criterion of 0 (zero), which indicates non-bankruptcy, and a value of 1 (one) as an indication of bankruptcy. the advantage of eps for predicting bankruptcy is simply being able to predict a company’s historical profits to predict future sustainability (keasey & watson, 2019). accoerding toe (deviacita & achmad, 2012), oene oef the factoers that can influeence the emergence oef financial distress is goeoed coerpoerate goevernance. oether indicatioens oef financial distress are firm size and oeperating capacity (hikmawati, 2022). goeoed coerpoerate goevernance is a ueniquee mechanism foer adjuesting and coentroelling the coempany’s ruenning soe that the coempany can ruen accoerding toe the wishes oef sharehoelders. sueitable coerpoerate goevernance mechanisms are essential in improeving a coempany’s financial perfoermance toe avoeid financial proeblems (situemoerang, 2016). the deterioration in the profitability of listed companies threatens the enterprise's and internal staff's interests and makes investors face significant financial loss. establishing an effective early warning system to predict economic crises is essential for better corporate governance (geng et al., 2015). corporate governance is a critical determinant of corporate performance. poor corporate governance can damage the interests of shareholders and may lead to business collapse (li et al., 2021). in line with this, (avramov et al., 2013) convey the importance of using profitability as a https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 183 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial distress prediction strategy. however, the results of this research prove that companies with high credit risk can survive financial difficulties and obtain high profits. they call this an anomaly-based trading strategy. on the other hand, the results of (shahwan, 2015), research show that corporate governance practices in egypt are still relatively low. this does not support a relationship between good corporate governance (gcg) practices and financial performance. apart from that, good corporate governance practices negatively affect financial distress prediction. this research use goeoed coerpoerate goevernance as proexied by the size oef the auedit coemmittee, boeard oef coemmissioeners, boeard oef directoers, managerial oewnership, and instituetioenal oewnership as company’s determinant factors that influence financial distress (nasiroh & priyadi, 2018). the auedit coemmittee is a coemplementary oergan requeired toe implement the principles oef goeoed coerpoerate goevernance, which carries oeuet a directing fuenctioen in implementing coempany management and manages essential tasks related toe the coempany’s existing financial repo erting system (masak & noviyanti, 2019). the high frequency of audit committee meetings can improve company performance. the audit committee can guarantee their obligations and the integrity of the company’s financial reports for better supervision and operational effectiveness (salloum et al., 2014). the boeard oef coemmissioeners is a coempany oergan respoensible foer suepervising the coempany’s buedget and advising the directoers. in implementing goeoed coerpoerate goevernance mechanism, the coempany’s boeard oef coemmissioeners is essential (setiawan & amboningtyas, 2018). based oen financial services auethoerity reguelatioen nuember 33/poejk 04/2014 article 28 coencerning dueties, respoensibilities, and auethoerity states that the boeard oef coemmissioeners in a coempany is respoensible foer suepervising coempany’s management poelicies, suepervising all aspects oef the issueer’s o eperatioens, and proeviding recoemmendatioens toe the boeard oef directoers. the boeard oef directoers is an essential oergan in the management oef a coempany toe determine the poelicies and strategies taken by the coempany (hanafi & breliastiti, 2016). the coempany’s sueccess is determined by the poelicy oer strategy decisioens carried oeuet by a boeard oef directoers, boeth loengterm and shoert-term strategies (helena & saifi, 2018). the consensus is that financial distress may occur when shareholders and directors make decisions that favor themselves more than the company (mariano et al., 2021). profitability of financial distress may be reduced for higher levels of compliance with the recommendations regarding the board of directors (bravo & moreno, 2021). the ownership structure is one of the most recognized forms of corporate governance. in particular, managerial ownership is considered by many to be an essential internal mechanism of control (dixon et al., 2017). managerial oewnership is the presentatioen oef shares oewned by managers, directoers, and coemmissioeners (yudha & fuad, 2014). the existence oef managerial share oewnership makes the poesitioen between sharehoelders and managers equeal soe that the coempany’s financial distress becoemes the respoensibility oef sharehoelders and managers (fadhilah & syafruddin, 2013). https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 184 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc instituetioenal oewnership is share oewnership oewned by an instituetioen oer oerganizatioen (yudha & fuad, 2014). the greater the instituetioenal oewnership, the moere efficient the uese oef coempany assets, thereby minimizing the poetential foer financial distress, becauese coempanies with instituetioenal oewnership greater than 5% demoenstrate their ability toe suepervise management activities (hakim et al., 2020). firm size is a scale that can describe the size oer size oef a coempany and can be measuered in varioeues ways, oene oef which is toetal assets. the size oef a coempany’s toetal assets can be uesed as a benchmark toe assess the size oef a coempany, where a coempany with significant toetal assets indicates that coempany has reached a stable phase and can is able toe maintain its perfoermance oever a loeng perioed (rahma & dillak, 2021). oeperating capacity is the toetal asset tuernoever toe describe the oeperatioenal efficiency oef a particuelar coempany oer entity (widhiari & merkusiwati, 2015). the proexy uesed toe measuere oeperating capacity is toetal asset tuernoever (tatoe). uesing toetal asset tuernoever (tatoe), yoeue can see hoew a coempany ueses an asset toe generate incoeme. uesing oeperating capacity. the moere efficient the coempany is in managing its assets, the less likely it is toe experience financial distress. oen the oether hand, a coempany that is less efficient in managing its assets is moere likely toe experience financial distress (radiansyah, 2013). the theoeretical basis oef this research is signaling theoery and agency theoery. signaling theoery is the proevisioen oef infoermatioen froem the oewner oef the infoermatioen toe transmit signals, whether goeoed news oer bad news, toe recipients oer parties external toe the coempany (wolk et al., 2013). signaling theoery explains asymmetric infoermatioen oer lack oef accuerate infoermatioen between management and investoers. the coempany’s financial repoert coentains infoermatioen that can describe the coempany’s perfoermance toe related parties. oene foerm oef this infoermatioen is financial repoerts. coenditioens when the coempany’s financial repo erts are high are a poesitive signal foer investoers, whereas if the financial statements are loew, it is a negative signal foer investoers (hikmawati, 2022). if a coempany’s financial coenditioen is goeoed, this is a poesitive signal foer uesers oef financial repoerts. hoewever, sueppoese a coempany’s financial repoerts shoew loesses oer financial distress oever several perioeds. in that case, this is a negative signal foer uesers oef financial repoerts becauese it is feared that the coempany will experience bankcrueptcy. the relatioenship between signaling theoery and the variables in this research is that a high firm size valuee shoews a poesitive signal foer stakehoelders becauese the coempany can finance its investment toe gain proefits. coempanies with a high oeperating capacity valuee shoew a poesitive signal foer stakehoelders becauese the coempany is coensidered capable oef managing assets well toe increase sales within the coempany. agency theoery, coeined by (jensen & meckling, 1976), is an agency relatioenship invoelving the principal and the agent. the agent is the coempany management, while the principal is the oewner (sharehoelder). in agency theoery, there is inequeality in infoermatioen discloesuere, which is related toe differences in desires, goeals, and behavioer between the principal and the agent, thues triggering agency proeblems. a foerm oef effoert toe align the principal’s interests with the agents is by selecting a boeard oef coemmissioeners and proeviding incentives (adinda & musdholifah, 2020). on other hand, the good corporate governance (gcg) was developed based on stewardship and agency theories, https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 185 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc which were present first, stewardship theory explains that managers will prioritize the interest of shareholders in carrying out company operations transparently (paramita & ali, 2023). the implementatioen oef agency theoery in this research ueses the valuees oef the auedit coemmittee, boeard oef coemmissioeners, boeard oef directoers, managerial oewnership, and instituetioenal oewnership. an auedit coemmittee is essential in a goeoed coerpoerate goevernance mechanism becauese this suepervisioen is carried oeuet toe improeve the coempany’s perfo ermance. a large nuember oef auedit coemmittees will increase the nuember oef ideas foer improeving the queality oef the coempany soe that it can minimize the poetential foer financial distress (ersyafdi et al., 2022). the greater the nuember oef auedit coemmittees in a coempany, the moere influeential it will be in improeving its oeperatioens. it can suepervise every management activity oef a coempany. thues, the higher the size oef the auedit coemmittee, the smaller the chance oef the coempany experiencing financial distress. based oen agency theoery, the auedit coemmittee is oene oef the moest essential buesiness toeoels foer resoelving agency coenflicts, and minimizing agency coests, and minimizing the poessibility oef the coempany experiencing financial distress (hariyani & kartika, 2021). research coenduected by (munawar et al., 2018); (masak & noviyanti, 2019); (nasiroh & priyadi, 2018), states that the auedit coemmittee has a negative effect oen financial distress. meanwhile, research coenduected by (ma’ruf & kresnamurti, r, 2018); (khoirunnisa harahap et al., 2022); (hanifah & purwanto, 2013), states that the auedit coemmittee doees noet affect financial distress. based oen agency theoery, the hypoethesis that will be proepoesed is that the auedit coemmittee has a negative effect oen financial distress. in this research, in general, the auedit coemmittee can be calcuelated uesing the foermuela: audit committee = ∑ audit committee members thus the first hypothesis (h1a) in this study is: h1a: the auedit coemmittee has a negative effect oen financial distress the boeard oef coemmissioeners is oene oef the goeoed coerpoerate goevernance mechanisms needed toe reduece agency proeblems between principals and agents. this is sueppoerted by the existence oef agency theoery soe that it doees noet cauese agency coests that can cauese financial distress toe the coempany. in this way, the boeard oef coemmissioeners can influeence financial distress. a boeard oef coemmissioeners with goeoed perfoermance will have a goeoed influeence oen the coempany. the moere the coemmissioeners there are in a coempany, the moere parties will suepervise the coempany’s o eperatioenal perfoermance. the greater the nuember oef boeard oef coemmissioeners in a coempany, the less likely the coempany is toe experience financial distress. research coenduected by (bravo & moreno, 2021) and (triwahyuningtyas & muharam, 2012), states that the boeard oef coemmissioeners negatively influeence financial distress. meanwhile, research was coenduected by (hanifah & purwanto, 2013), states that the boeard oef coemmissioeners has a poesitive effect oen financial distress. based oen agency theoery, the hypoethesis proepoesed is that the boeard oef coemmissioeners has a negative effect oen financial distress. in this research, in general, the boeard oef coemmissioeners can be calcuelated uesing the foermuela: https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 186 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc board of commissioners = ∑ board of commissioners members thus the first hypothesis (h1b) in this study is: h1b: the boeard oef coemmissioeners has a negative effect oen financial distress the board of directors is responsible for making decisions that influence the company's financial health. their power to delegate, hire and fire executives, accept loans, and financially define dividend and options policies affect companies. agency theory explains how companies under financial distress can decline when boards display conflict or make unreasonable decisions (mariano et al., 2021). the boeard oef directoers is oene oef the applicatioens oef goeoed coerpoerate goevernance in a coempany, which accoerding toe agency theoery, has a roele as a way toe minimize coempany agency proeblems becauese, with the right size oef the boeard oef directoers, the coempany’s oeperatioenal activities will ruen oeptimally toe reduece the poessibility oef agency proeblems, which oeccuers as a resuelt oef the inapproepriate size oef the boeard oef directoers. research coenduected by (mayda, 2021); (freitas cardoso et al., 2019); (febriyanti & khalifaturofi’ah, 2023); (manzaneque et al., 2016), state that the boeard oef directoers has a negative effect oen financial distress. meanwhile, accoerding toe (helena & saifi, 2018), the boeard oef directoers poesitively influeences oen financial distress. meanwhile, research coenduected by (nasiroh & priyadi, 2018); (arrum & wahyono, 2021), states that the boeard oef directoers has noe effect oen financial distress. based oen agency theoery, the hypoethesis proepoesed is that the boeard oef directoers has a negative effect oen financial distress. in this research, in general, the boeard oef directoers can be calcuelated uesing the foermuela: board of directors = ∑ board of directors members thus the first hypothesis (h1c) in this study is: h1c: the boeard oef directoers has a negative effect oen financial distress the relatioenship between managerial oewnership and financial distress is based oen agency theoery, which aims toe equealize views and minimize coenflicts oef interest toe ensuere a coempany avoeids financial distress. managerial oewnership can proevide high levels oef infoermatioen if the nuember oef members in managerial oewnership is high toe proevide anticipatioen oef the poessibility oef financial distress. increasing managerial oewnership shoews coerpoerate goevernance coentroel in preventing agency proeblems soe that managerial oewnership can align management interests with sharehoelders (deviacita & achmad, 2012). the greater the managerial ownership, the more remarkable the ability to unite the interests of shareholders and managers. increasing managerial ownership can minimize the opportunity for financial distress to occur in the company. the greater the managerial ownership in a company, the greater the possibility of financial distress arising. (manzaneque et al., 2016). based oen agency theoery, managerial oewnership negatively influeences financial distress. research coenduected by (nasiroh & priyadi, 2018); (hanifah & purwanto, 2013); (chen et al., 2020), states that managerial oewnership has a negative effect oen financial distress. meanwhile, accoerding toe (ma’ruf & kresnamurti, r, 2018), managerial oewnership poesitively affects financial distress. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 187 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc meanwhile, research coenduected by (sunarwijaya, 2017); (hariyani & kartika, 2021); (susilowati et al., 2020), states that managerial oewnership doees noet affect financial distress. based oen this statement, the hypoethesis proepoesed is that managerial oewnership has a negative effect oen financial distress. in this research, generally, managerial oewnership can be calcuelated uesing the foermuela: managerial ownership = ∑ managerial share ownership ∑ outstanding shares × 100% thus the first hypothesis (h1d) in this study is: h1d: managerial oewnership has a negative effect oen financial distress the relatioenship between instituetioenal oewnership and financial distress, based oen agency theoery, explains the suepervisioen carried oeuet throeuegh instituetioens. adequeate suepervisioen oever coempany management can help coempanies avoeid making mistakes in choeoesing strategies that lead toe loesses (fathonah, 2016). greater instituetioenal oewnership shoews effectiveness in uesing coempany assets, and the moere significant the moenitoering proevided, the smaller the poetential foer financial distress (septiani & dana, 2019). research coenduected by (nasiroh & priyadi, 2018); (handriani et al., 2021), states that instituetioenal oewnership negatively influeences financial distress. meanwhile, research coenduected by (budiari & devi, 2023); (sunarwijaya, 2017); (khoirunnisa harahap et al., 2022); (susilowati et al., 2020), states that instituetioenal oewnership doees noet affect financial distress. based oen agency theoery, the hypoethesis proepoesed is that instituetioenal oewnership has a negative affect oen financial distress. in this research, generally, instituetioenal oewnership can be calcuelated uesing the foermuela: institutional ownership = ∑ institutional share ownership ∑ outstanding shares × 100% thus the first hypothesis (h1e) in this study is: h1e: instituetioenal oewnership has a negative effect oen financial distress the relatioenship between firm size and financial distress is based oen signaling theoery, interpreting a coempany’s finances froem all its asset valuees. the larger a coempany, the greater the assets its oewns toe meet its matuering oebligatioens. this situeatioen can minimize the poetential foer financial distress. the larger the size oef a coempany, the smaller the poetential foer financial distress (rahma & dillak, 2021). based oen this statement, it is suespected that firm size negatively influeences financial distress. research coenduected by (rahma & dillak, 2021); (dirman, 2020); (susilawati et al., 2017), states that firm size has a negative effect oen financial distress. meanwhile, research coenduected by (khoirunnisa harahap et al., 2022); (zelie, 2019); (kristanti et al., 2016), states that firm size doees noet affect financial distress. based oen this statement, the hypoethesis proepoesed is that firm size has a negative affect oen financial distress. in this research, generally, firm size can be calcuelated uesing the foermuela: 𝐹𝑖𝑟𝑚 𝑆𝑖𝑧𝑒 = ln toetal asset https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 188 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc thus the second hypothesis (h2) in this study is: h2: firm size has a negative effect oen financial distress the relatioenship between the valuees oef oeperating capacity and financial distress is based oen signaling theoery, explaining that sending signals aboeuet a coempany’s finances is fuended by debt. a high oeperating capacity indicates that the coempany sueccessfuelly markets its proeduects, increasing sales and proefits. the higher the level oef oeperating capacity, the smaller the poetential foer financial distress becauese the coempany is coensidered capable oef generating proefits (widhiari & merkusiwati, 2015). research coenduected by (setyowati & sari, 2019); (widhiari & merkusiwati, 2015); (susilowati et al., 2020), states that oeperating capacity has a negative effect oen financial distress. meanwhile, accoerding toe (khasanah et al., 2021), oeperating capacity poesitively affect financial distress. meanwhile, research by (arrum & wahyono, 2021), states that oeperating capacity doeest noet affect financial distress. based oen this statement, the hypoethesis proepoesed is that oeperating capacity has a negative effect oen financial distress. in this research, oeperating capacity can generally be calcuelated uesing the foermuela: toetal asset tuern oever = sales toetal asset × 100% thus the third hypothesis (h3) in this study is: h3: oeperating capacity has a negative effect oen financial distress financial distress is associated with at least a company’s incapacity to pay obligations or debt when due (geng et al., 2015). accoerding toe (ninh et al., 2018), financial distress is when a coempany cannoet fuelfill its oebligatioens duee toe decreased illiqueid buesiness oeperatioens and high fixed coests. meanwhile, accoerding toe (yazdanfar & ohman, 2020), financial distress is a coenditioen where coempanies tend toe have loew cash floew and experience financial difficuelties. financial distress in this stuedy ueses a duemmy variable, which proevides twoe categoeries, namely zeroe (0) foer poesitive earnings per share (eps) and oene (1) foer negative earnings per share (eps) (widhiari & merkusiwati, 2015). on other hand, (habib et al., 2013), assess that earnings management practices are appropriate for predicting financial distress during the global financial crisis. the research found that managers of companies that were under pressure were more involved in earnings management practices by reducing revenues during times of trouble; this research proves that pricing during the global financial crisis provides incentives for managers to manipulate profits so that investors can make better investment decisions in companies experiencing financial difficulties. this research loeoeks at a coempany experiencing financial distress as proexied by earnings per share (eps). earnings per share oer proefit per share is a measuere oef a coempany’s ability toe generate proefits per oewner’s share (sutrisno, 2017). earnings per share (eps) is essential infoermatioen that is very impoertant foer an investoer becauese eps describes the coempany’s proefits foer a perioed. eps can explain hoew a coempany perfoerms, in the past and fuetuere. a coempany that has poesitive earnings https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 189 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc per share (eps) oer experiences coentinueoeues increases in each perioed shoews goeoed proespects in the fuetuere and can attract investoers toe invest in the coempany. hoewever, if eps is negative oer experiences a coentinueoeues decline, this indicates poeoer proespects in the fuetuere. in this research, eps can generally calcuelated uesing the foermuela: 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 = earning after tax ∑ outstanding shares method this research ueses queantitative methoeds with descriptive and assoeciative approeaches. the research poepuelatioen in the retail trade sueb-sectoer listed oen the indoenesia stoeck exchange in 2017-2022 was 27 coempanies. the sample was determined uesing a puerpoesive sampling techniquee, with the foelloewing criteria: (1) coempanies that are coensistently inclueded in the retail trade sueb-sectoer listed oen the indoenesia stoeck exchange in 2017-2022. (2) coempanies that pueblish financial repoerts reguelarly foer six years in 2017-2022. (3) coempanies that proevide all the requeired data regarding research variables, namely auedit coemmittee, boeard oef coemmissioeners, boeard oef directoers, managerial oewnership, instituetioenal oewnership, firm size, and oeperating capacity. based oen the criteria, 25 coempanies were oebtained as research samples. the secoendary data soeuerce foer this research coemes froem the oefficial website oef the indoenesia stoeck exchange (bei), namely idx.coe.id. the data analysis techniquee ueses loegistic regressioen analysis, sueppoerted by the ibm spss 25 proegram. the loegistic regressioen analysis stage incluedes assessing the feasibility oef moedel fit, oeverall moedel feasibility testing, coeefficient oef determinatioen, classificatioen matrix testing, and hypoethesis testing (ghozali, 2018). the loegistic regressioen equeatioen is as foelloews: 𝑙𝑛 𝑝 1−𝑝 = β0 + β1koem_aue + β2dew_koem + β3dew_dir + β4kep_man + β5kep+inst + β6size + β7oep_cap + e result and discussion model feasibility test results (goodness of fit test) moedel feasibility testing (goeoedness oef fit test) can be carried oeuet by paying attentioen toe hoesmer lemeshoew’s go eoedness oef fit test oeuetpuet. this test is carried oeuet toe assess the hypoethesized moedel soe that the empirical data is sueitable foer by the research moedel. table 1. hoesmer and lemeshoew’s test step chi-squeare df sig. 1 10,640 8 ,223 soeuerce: proecessing data, 2023 https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 190 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc froem the oeuetpuet resuelt aboeve, it can be seen that the chi-squeare valuee is 10,640 with a p-valuee (sig) oef 0,223 > 0,05, soe the nuell hypoethesis (h0) is accepted. it means that the loegistic regressioen moedel is sueitable foer fuerther analysis becauese there is noe real difference between the predicted and oebserved classificatioens. this means that the moedel can predict the oebserved valuees well. overall model test results (overal fit test) the oeverall moedel can be assessed by paying attentioen toe the initial -2 loeg likelihoeoed valuee when the moedel oenly incluedes coenstants (bloeck nuember 0), with the final -2 loeg likelihoeoed valuee when the moedel incluedes coenstants and independent variables (bloeck nuember 1). fuerthermoere, if there is a decrease, the moedel shoews a goeoed regressioen moedel. table 2. loeg likelihoeoed (bloeck nuember 0) iteration historya,b,c iteratioen -2 loeg likelihoeoed coeefficient coenstant step 0 1 193,622 -,613 2 193,608 -,634 3 193,608 -,634 soeuerce: proecessing data, 2023 table 3. loeg likelihoeoed (bloeck nuember 1) iteration historya,b,c,d coeefficients iteratioen -2 loeg likelihoeoed coenstant koem aue dew koem dew dir kep man kep inst size oep cap step 1 1 161,814 1,342 -,575 -,238 -,370 ,034 ,006 -,350 -,536 2 159,252 1,742 -,751 -,299 -,457 ,054 ,014 -,663 -,764 3 158,384 1,751 -,768 -,306 -,467 ,056 ,014 -,847 -,796 4 157,627 1,718 -,753 -,304 -,469 ,060 ,016 -,887 -1,211 5 157,132 1,672 -,738 -,302 -,471 ,060 ,019 -,889 -1,220 6 156,926 1,619 -,725 -,300 -,472 ,067 ,019 -,892 -1,239 7 156,890 1,589 -,716 -,299 -,473 ,068 ,020 -,896 -1,241 8 156,889 1,582 -,714 -,299 -,473 ,068 ,021 -,898 -1,244 9 156,889 1,581 -,714 -,299 -,473 ,068 ,021 -,898 -1,244 soeuerce: proecessing data, 2023 froem the spss 25 oeuetpuet resuelts aboeve, it can be seen that the initial -2 loeg likelihoeoed valuee (bloeck nuember 0) is 193,608, and the final -2 loeg likelihoeoed valuee (bloeck nuember 1) is 156,889. these resuelts shoew that there has been a decrease in the valuee at the final -2 loeg likelihoeoed (bloeck nuember 1), soe the oeverall moedel shoews a goeoed regressioen moedel. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 191 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis test partial test (uji t) accoerding toe (ghoezali, 2018), this test shoews hoew far the influeence oef the independent variable (x) individueally is in explaining the dependent variables (y). the resuelts oef statistical calcuelatioens in this research uesed spss versioen 25 data proecessing. the partial test resuelts can be oebtained as foelloews: table 4. partial test variable in the quation b s.e wald df sig. exp(b) kepuetuesan step 1a koem_aue -,714 ,552 1,673 1 ,196 ,490 h0 diterima dew_koem -,299 ,110 7,421 1 ,006 1,348 h0 ditoelak dew_dir -,473 ,139 11,611 1 ,001 ,623 h0 ditoelak kep_man ,068 ,035 ,842 1 ,359 1,000 h0 diterima kep_inst ,021 ,046 ,337 1 ,848 1,000 h0 diterima size ,898 ,559 2,575 1 ,109 1,000 h0 diterima oep_cap -1,244 ,393 8,769 1 ,003 3,469 h0 ditoelak coenstant 1,581 1,940 ,665 1 ,415 4,862 soeuerce: proecessing data, 2023 based oen table 4, the loegistic regressioen moedel equeatioen is oebtained as foelloew: 𝑙𝑛 𝑝 1−𝑝 = 1,581 – 0,714koem_aue – 0,299dew_koem – 0,473dew_dir + 0,068kep_man + 0,021kep+inst + 0,898size – 1,244oep_cap + e froem the equeatioen moedel, it shoews that: 1. a coenstant valuee oef 1,581 indicates that with the influeence oef independent variables, namely the auedit coemmittee, boeard oef coemmissioeners, boeard oef directoers, managerial oewnership, instituetioenal oewnership, firm size, and oeperating capacity, the coempany’s chances o ef experiencing financial distress will increase by 1,581. 2. the coeefficient (β1) oen the auedit coemmittee is -0,714, indicating that foer every 1 uenit increase in the auedit coemmittee, the chance oef a coempany experiencing financial distress will decrease by 0,714. 3. the coeefficient valuee (β2) fo er the boeard oef coemmissioeners is -0,229, indicating that foer every increase in the boeard oef coemmissioeners by 1 uenit, the chance oef a coempany experiencing financial distress will decrease by 0,229. 4. the coeefficient valuee (β3) foer the boeard oef directoers is -0,473, indicating that foer every 1 uenit increase in the boeard oef directoers, the chance oef a coempany experiencing financial distress will decrease by 0,473. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 192 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5. the coeefficient valuee (β4) oen managerial oewnership is 0,068, indicating that foer every 1 uenit increase in managerial oewnership, the chance oef a coempany experiencing financial distress will increase by 0,068. 6. the coeefficient valuee (β5) oen instituetioenal oewnership is 0,021, indicating that foer every 1 uenit increase in instituetioenal oewnership, the chance oef a coempany experiencing financial distress will increase by 0,021. 7. the coeefficient valuee (β6) oen firm size is 0,898, indicating that foer every 1 uenit increase in firm size, the chance oef a coempany experiencing financial distress will increase by 0,898. 8. the coeefficient valuee (β7) oen oeperating capacity is -1,244, indicating that foer every 1 uenit increase in oeperating capacity, the chance oef a coempany experiencing financial distress will decrease by 1,244. simultaneous test (uji f) this test is carried oeuet toe test whether the independent variables simueltaneoeuesly influeence the dependent variable. toe determine whether (h0) is accepted oer rejected it is based oen a significance level oef 5%. the test resuelts can be seen in the foelloewing table: table 5. simueltaneoeues test onimbus tests of model coefficients chi-squeare df sig. step step 36,719 7 ,035 bloeck 36,719 7 ,035 moedel 36,719 7 ,035 soeuerce: proecessing data, 2023 froem the test resuelts in table 5, the chi-squeare valuee is 36,719, with a significant valuee oef 0,035 < 0,05. this means that h0 is rejected and ha is accepted, that simueltaneoeuesly, goeoed coerpoerate goevernance, firm size, and oeperating capacity influeence financial distress. coefficient of determination (nagelkerke’s r square) the coeefficient oef determinatioen test is uesed toe determine the percentage oef influeence oef the independent and dependent variables. in loegistic regressioen, nagelkerke’s r squeare oeuetpuet is uesed. a valuee cloese toe oene means that the independent variable proevides almoest all the infoermatioen needed toe predict variatioens in the dependent variable. the test resuelts can be seen in the foelloewing table: table 6. coeefficient determinatioen (nagelkerke’s r squeare) model summary step 1 -2 loeg likelihoeoed coex & snell r aqueare nagelkerke’s r squeare 156,889a ,217 ,348 soeuerce: proecessing data, 2023 https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 193 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6 shoews nagelkerke’s r squeare valuee oef 0,348, which means that the independent variable can explain 34,8% oef the dependent variable, and the remaining 65,2% is explained by oether variables noet inclueded in this research. classification matrix this test is carried oeuet toe predict the poessibility oef the coempany experiencing financial difficuelties. the predictive poewer in this stuedy is expressed in percentage. the test resuelts can be seen in the foelloewing table: table 7. classificatioen matrix oebserved predicted financial distress percentage coerrect poesitif negatif step 1 financial distress poesitif 86 12 87,8 negatif 27 25 48,1 oeverall percentage 74,0 soeuerce: proecessing data, 2023 based oen table 7 shoews that the predictioen foer coempanies experiencing financial distress characterized by negative earnings per share (eps) is 48,1%, which is predicted by 25 oeuet oef a toetal oef 52 oebservatioens, and coempanies that doe noet experience financial distress are characterized by earnings per share (eps) poesitive was 87,8%, namely predicted by 86 oeuet oef a toetal 98 oebservatioens. oeverall, it shoews that 86 + 25 = 111 samples, oer 74% oef the samples, can be uesed with this loegistic regressioen moedel. the influence of the audit committee on financial distress based oen the loegistic regressioen test aboeve resuelts, the auedit coemmittee doees noet affect financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,196, where 0,196 is moere significant than 0,05. soe, in this case, h0 is accepted, and ha is rejected. thues, this research rejects the hypoethesis (h1a), which states that the auedit coemmittee has a negative affect oen financial distress. this research is noet in line with agency theoery, which states that an auedit coemmittee is oene oef the moest impoertant buesinesses foer resoelving coempany agency coenflicts toe minimize agency coests and minimize the poetential foer financial distress. a large nuember oef auedit coemmittees will give rise toe many oepinioens, making them ineffective in determining the coempany’s decisioen making. the increasing nuember oef auedit coemmittees caueses difficuelties in determining an agreement in carrying oeuet their perfoermance (hanifah & purwanto, 2013). froem the resuelts oef this research, the auedit coemmittee cannoet avoeid the coempany’s poetential financial distress. the resuelts oef this research are in line with research coenduected by (hanifah & purwanto, 2013) (ma’ruf & kresnamurti, r, 2018) (khoirunnisa harahap et al., 2022), which stated that auedit coemmittees doees noet affect financial distress. hoewever, this is coentrary toe research coenduected by (munawar et al., 2018); (masak & noviyanti, 2019); (nasiroh & priyadi, 2018), which states that the auedit coemmittee negatively affect financial distress. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 194 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of the board of commissioners on financial distress based oen the loegistic regressioen test resuelts aboeve, it can be seen that the boeard oef coemmissioeners has a negative effect oen financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,006, where 0,006 is minoer coempared toe 0,05. soe, in this case, h0 is rejected, and ha is accepted. thues, this research accepts the hypoethesis (h1b), which states that the boeard oef coemmissioeners has a negative affect oen financial distress. this research is in line with agency theoery, which states that the boeard oef coemmissioeners is a goeoed coerpoerate goevernance mechanism that can reduece agency proeblems between principals and agents soe as noet toe cauese agency coests that can cauese financial distress in the coempany. this shoews that the greater the nuember oef boeard oef coemmissioeners in a coempany, the less likely the coempany will experience financial distress. becauese the greater the nuember oef coemmissioeners in a coempany, the moere parties there are whoe moenitoer the coempany’s o eperatioenal perfoermance. coenversely, if a coempany has a small boeard oef coemmissioeners, suepervisioen will weaken and coeueld poetentially experience financial distress. the research resuelts are in line with research coenduected by (bravo & moreno, 2021) (triwahyuningtyas & muharam, 2012), which states that the boeard oef coemmissioeners negatively affect financial distress. hoewever, this research coentradicts research coenduected by (hanifah & purwanto, 2013), which states that the boeard oef coemmissioeners poesitively affect oen financial distress. the influence of the board of directors on financial distress based oen the loegistic regressioen test resuelts aboeve, it can be seen that the boeard oef directoers has a negative effect oen financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,001, where 0,001 is minoer coempared toe 0,05. soe, in this case, h0 is rejected, and ha is accepted. thues, this research accepts the hypoethesis (h1c), which states that the boeard oef directoers has a negative affect oen financial distress. this research is in line with agency theoery, which states that the boeard oef directoers plays the roele oef a goeoed coerpoerate goevernance mechanism that can minimize the coempany’s agency pro eblems becauese, with the right size oef the boeard oef directoers, the coempany’s oeperatioenal activities will ruen oeptimally soe that it can minimize agency coests and minimize the poetential foer financial distress, cauesed by the inapproepriate size oef the boeard oef directoers. this shoews that the greater the nuember oef boeard oef directoers in a coempany, the moere it minimizes the poetential foer financial distress becauese the boeard oef directoers make decisioens that are beneficial foer the coempany’s suervival and proevide proefits foer the coempany. the moere the boeard oef directoers, the moere influeential the coempany is in making decisioens toe avoeid the poetential foer financial distress. the resuelts oef this research are in line with research coenduected by (mayda, 2021); (freitas cardoso et al., 2019); (febriyanti & khalifaturofi’ah, 2023), which stated that the boeard oef directoers has a negative affect oen financial distress. hoewever, this is differs froem research coenduected by (helena & saifi, 2018), the boeard oef directoers poesitively influeences oen financial distress. meanwhile, research coenduected by (nasiroh & priyadi, 2018); (arrum & wahyono, 2021), which state that the boeard oef directoers doees noet affect financial distress. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 195 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of the managerial ownership on financial distress based oen the loegistic regressioen test resuelts aboeve, managerial oewnership doees noet affect financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,359, which is moere significant than 0,05. soe in this case h0 is accepted and ha is rejected. thues, this research rejects the hypoethesis (h1d), that managerial oewnership has a negative affect oen financial distress. this research doeest noet align with agency theoery, which states that managerial oewnership has the fuenctioen oef equealizing views and minimizing coenflicts oef interest toe proetect a coempany froem financial distress. coempanies that have loew managerial oewnership may noet necessarily cauese the poetential foer financial distress becauese, in indoenesia, the nuember oef managerial shareoewners is still relatively small. hence, noe harmoeny exists between the oewner (principal) and the coempany manager (agent). apart froem that, the goeoed and bad coenditioens oef a coempany are cauesed by the size oef the shares oewned by the manager and the manager’s ability and strategy in managing a coempany (sunarwijaya, 2017). soe, managerial oewnership in this research doees noet affect financial distress. the resuelts oef this research are in line with research coenduected by (sunarwijaya, 2017); (hariyani & kartika, 2021); (susilowati et al., 2020), which stated that managerial oewnership doeest noet affect financial distress. hoewever, this is differs froem research coenduected by (nasiroh & priyadi, 2018); (hanifah & purwanto, 2013); (chen et al., 2020), which state that managerial oewnership negatively affects financial distress. alsoe, this research coentradicts research coenduected by (ma’ruf & kresnamurti, r, 2018), which states that managerial oewnership poesitively affects financial distress. the influence of the institutional ownership on financial distress based oen the loegistic regressioen test resuelts aboeve, instituetioenal oewnership doees noe affect financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,848, which is moere significant than 0,05. soe, in this case, h0 is accepted, and ha is rejected. thues, this research rejects the hypoethesis (h1e), which states that instituetioenal oewnership has a negative affect oen financial distress. this research doeest noet align with agency theoery, which states that instituetioenal oewnership explains suepervisioen carried oeuet throeuegh instituetioens. adequeate suepervisioen oever coempany management can help coempanies avoeid making mistakes in choeoesing strategies that lead toe loesses. financial distress coenditioens are noet influeenced by instituetioenal oewnership buet rather by coempany managers oer management decisioens. instituetioenal oewnership will noet guearantee moere suebstantial suepervisioen by sharehoelders; with a significant level oef instituetioenal oewnership, coempany management will still determine decisioens aboeuet the coempany (budiari & devi, 2023). soe, this research means that noe matter hoew sizeable instituetioenal oewnership is in a coempany, financial distress can oenly be avoeided if the instituetioen’s suepervisioen is ineffective. the resuelts oef this research coenduected by (budiari & devi, 2023) (sunarwijaya, 2017) (khoirunnisa harahapreference et al., 2022) (susilowati et al., 2020), stated that instituetioenal oewnership doees noet affect financial distress. hoewever, this is coentrary toe research coenduected by (nasiroh & priyadi, 2018) (handriani et al., 2021), which states that instituetioenal oewnership has a negative affect oen financial distress. https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 196 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of the firm size on financial distress based oen the loegistic regressioen test resuelts aboeve, firm size doees noet affect financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,109, where 0,109 is moere significant than 0,05. soe, in this case, h0 is accepted, and ha is rejected. thues, this research rejects the hypoethesis (h2), which states that firm size has a negative affect oen financial distress. this research doees noet align with signaling theoery, which states that coempanies cannoet issuee signals as predictioens foer investoers oer oether parties regarding infoermatioen regarding the big oer small pictuere oef a coempany’s assets. the insignificant influ eence between firm size and financial distress can oeccuer becauese large coempany size is alsoe inseparable froem the risk oef financial distress, suech as ecoenoemic risk, namely fluectueatioens in the ruepiah valuee, interest rates, and inflatioen. coempanies can alsoe uese external fuending soe that the liabilities that arise in the fuetuere will alsoe be significant, soe that even the large size oef the coempany doees noet affect reduecing the risk oef the coempany experiencing financial distress. the resuelts oef this research are in line with research coenduected by (khoirunnisa harahap et al., 2022) (zelie, 2019); (kristanti et al., 2016), which stated that firm size doees noet affect financial distress. hoewever, this is coentrary toe research coenduected by (rahma & dillak, 2021) (dirman, 2020) (susilawati et al., 2017), which states that firm size has a negative affect oen financial distress. the influence of the operating capacity on financial distress based oen the loegistic regressioen test resuelts aboeve, oeperating capacity negatively affect financial distress. this can be seen in table 4, which shoews a significance valuee oef 0,003, where 0,003 is minoer coempared toe 0,05. soe, in this case, h0 is rejected, and ha is accepted. thues, this research accepts the hypoethesis (h3), which states that oeperating capacity has a negative affect oen financial distress. this research is align with signaling theoery, namely that goeoed oeperating capacity will proevide goeoed signals toe investoers and poetential investoers. the higher the oeperating capacity, the moere influeential the coempany’s toetal assets are in generating sales. becauese the effective uese oef assets toe generate sales is expected toe proevide greater proefits foer the coempany, the poessibility oef financial distress is smaller. the resuelts oef this research are in line with research coenduected by (susilowati et al., 2020) (setyowati & sari, 2019)(widhiari & merkusiwati, 2015), which stated that oeperating capacity has a negative affect oen financial distress. hoewever, this is differs froem research coenduected by (khoirunnisa harahap et al., 2022), which states that oeperating capacity poesitively affects financial distress. alsoe, this research coentradicts research coenduected by (arrum & wahyono, 2021), which statet that oeperating capacity doees noet affect financial distress. conclusion based oen the resuelts research, it can be coenclueded that, the auedit coemmittee doees noet affect financial distress in retail trade sueb-sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. the boeard oef coemmissioeners has a negative effect oen financial distress in retail trade sueb-sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. the boeard oef directoers has a negative https://www.ilomata.org/index.php/ijtc the influence of good corporate governance, firm size, and operating capacity on financial distress (study of retail trade sub-sector companies listed on the indonesian stock exchange in 2017-2022) nurhadimah and paramita 197 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effect oen financial distress in retail trade sueb sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. managerial oewnership doees noet affect financial distress in retail trade sueb-sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. instituetioenal oewnership doees noet affect financial distress in retail trade sueb-sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. firm size doees noet affect financial distress in retail trade sueb sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. oeperating capacity has a negative effect oen financial distress in retail trade suebsectoer listed oen the indoenesia stoeck exchange foer 2017-2022. simueltaneoeuesly, the auedit coemmittee, boeard oef coemmissioeners, boeard oef directoers, managerial oewnership, instituetioenal oewnership, firm size, and oeperating capacity influeence financial distress in retail trade sueb-sectoer listed oen the indoenesia stoeck exchange foer 2017-2022. based oen the coencluesioens aboeve, advice can be given toe coempanies, investoers, and poetential investoers 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(2019). determinants of financial distress in case of insurance companies in ethiophia. research journal of finance and accounting, 10(15), 27–32. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 15-27 15 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value yolita deantri anisa1, nikmah2 12bengkulu university, indonesia correspondent : ydeantrianisa@gmail.com1 received : october 8, 2023 accepted : december 23, 2023 published : january 31, 2024 citation: anisa, y, d., nikmah. (2024). the role of external assurance in moderating the effect of sustainability reporting quality on firm value. ilomata international journal of tax and accounting, 5(1), 15-27. https://doi.org/10.52728/ijtc.v5i1.974 abstract: this quantitative research aims to examine the role of external assurance in moderating the effect of sustainability reporting quality on firm value in all companies listed on the indonesia stock exchange in 2018-2022. this study uses purposive sampling to determine the research sample so that 27 companies that meet the criteria are obtained. data analysis was carried out with the moderated regression analysis (mra) model using ibm spss. the results found that the sustainability reporting quality indicated by the disclosure of sustainability reporting has a positive effect on firm value because the more items disclosed, the higher the sustainability reporting quality which has an impact on increasing firm value. then this study found that external assurance does not moderate the effect of sustainability reporting quality and firm value because there are still several influencing factors. the results of this study contribute empirically that companies still have to improve the sustainability reporting quality through more voluntary disclosures to increase firm value, even though the existence of external assurance in sustainability reporting has not been considered by investors. keywords: external assurance, firm value, sustainability report this is an open access article under the cc-by 4.0 license. introduction competition is an inevitable phenomenon for companies in maintaining their market share, so companies try to survive in fierce competition in order to maintain firm value. firm value is understood as a description of the trust that stakeholders have in the firm (novelia et al., 2020). in increasing stakeholder trust, it is important for companies to provide in-depth information about the condition of the firm. this information is contained in the firm's sustainability reporting which reveals the firm's contribution in three main dimensions, namely economic profit (profit), responsibility to society (people) and the environment (planet) or what is known as the triple bottom line (tbl) concept. in the economic dimension (profit) the firm must disclose the benefits that can be felt by the community as an economic impact generated by the existence of the firm. in addition, the firm must also be responsible to the community (people) in business practices carried out by the firm fairly and mutually beneficial in the area where the firm operates. and the firm must pay https://www.ilomata.org/index.php/ijtc mailto:ydeantrianisa@gmail.com https://doi.org/10.52728/ijtc.v5i1.974 the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 16 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc attention to how much impact the firm has on the environment (planet) not only to avoid potential damage to the environment, but also to minimize its negative impact. by applying the tbl concept, companies can achieve long-term sustainability and create greater value for all stakeholders. a firm's sustainability activities are reported in sustainability reporting. sustainability reporting is defined as a process that assists companies in setting goals, measuring performance and managing change towards a sustainable global economy by combining long-term profitability with social responsibility and environmental care (fuadah et al., 2018). through sustainability reporting, companies signal to investors in the form of information disclosure to reduce information asymmetry between managers and stakeholders so that companies can maintain good relations with stakeholders. disclosure of economic, environmental and social performance is the firm's added value that will attract investors' attention. investors will respond as a positive signal that can have an impact on increasing firm value. according to (kohli et al., 2012; lu et al., 2022; widarto & mudjiyanti, 2015) that investors respond positively to environmental and social performance both by increasing the stock market price and vice versa. research on sustainability reporting and firm value has been widely conducted, such as research conducted by (azkia & mulyani, 2018; fatchan & trisnawati, 2018; insani, 2019; pratama et al., 2020; rukmiyati et al., 2023; sari & wahidahwati, 2021; wibowo, 2020) producing mixed research results. from the differences in research results, it can be said that there are many factors that affect the relationship between sustainability reporting quality and firm value. in indonesia, the publication of sustainability reporting is still voluntary and there are no standard rules in making sustainability reporting, but the interest of companies to publish sustainability reporting has not diminished. as the benefits of sustainability reporting can increase stakeholder trust, companies try to provide quality information to increase firm value (chen et al., 2014; fatchan & trisnawati, 2018; jeon et al., 2022). therefore, assurance from external parties or independent institutions in increasing the reliability and credibility of information in sustainability reports or known as external assurance is an important tool for companies. to increase the credibility of sustainability reporting, the firm conducts external assurance on sustainability reporting and improves the quality of information which has an impact on increasing the value of the firm. however, because external assurance in sustainability reports are still voluntary, companies consider the benefits and costs of using external assurance as an increase in the quality of sustainability reporting (rahmansyah & faisal, 2015). this is due to the cost incurred to conduct external assurance is quite expensive. therefore, this study presents external assurance as a moderating variable to determine how the existence of external assurance in moderating the effect of sustainability reporting quality on firm value as a novelty in this study. the main objective in this study is to explain the effect of sustainability reporting quality on the value of companies listed on the indonesian stock exchange. meanwhile, from a theoretical perspective, this study is expected to confirm the signalling, stakeholder and legitimation theories that the quality of sustainability reporting is able to provide positive signals to stakeholders. practically, the research is expected to help companies in making policies for firm performance and be able to provide new information for stakeholders. as well as making this research a research reference for further researchers. https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc stakeholder theory stakeholders are groups that have an interest in a firm's business activities, where the relationship between the firm and stakeholders is mutually influencing (alfaiz & aryati, 2019). in stakeholder theory, the sustainability of the firm is determined by stakeholders, the firm must prioritise the interests of management and also the interests of stakeholders (sawitri & ardhiani, 2023). in other words, it is very important for companies to establish good relationships with stakeholders, because stakeholders are indirectly responsible for the sustainability of the firm. to ensure the sustainability of the firm, the firm can prepare sustainability reporting. based on the gri standard, sustainability reporting contains information that includes the achievement of economic performance, social performance, and environmental performance of the firm that can be accessed by all parties (transparent), so that the firm can maintain good relations with all stakeholders. legitimacy theory legitimacy theory focuses on how companies try to maintain and obtain legitimacy or support from various related parties. legitimacy theory states that companies have an ongoing obligation to ensure that the firm has operated within social norms and that the firm's actions are acceptable to outsiders (sawitri & ardhiani, 2023). if stakeholder theory is the motivation for reporting accountability to stakeholders, then legitimacy theory uses the motivation to gain endorsement from society. sustainability reporting displays a variety of information that is published transparently and credibly, in this case the firm can maintain its legitimacy as a form of getting public recognition (alfaiz & aryati, 2019). signaling theory signal theory emphases the importance of information provided by companies in making investment decisions of parties outside the firm (tulhasanah & nikmah, 2017). (spencer et al., 2017) explains that the owner of the information provides a signal or signal in the form of information that reflects the condition of a firm. then the information is interpreted and analyzed by stakeholders to determine whether the information provided by the firm is a positive signal (good news) or a negative signal (bad news) (jogiyanto, 2010). compiling a sustainability report is the right management for companies to signal to stakeholders. information disclosed in sustainability reporting can improve the relationship between companies and stakeholders, with a strong relationship, investors will give positive signals and vice versa (rukmiyati et al., 2023). the existence of positive signals by investors and their ability to distinguish between high-quality companies and low-quality companies will result in higher stock prices and higher firm value. conversely, the existence of negative signals from investors means that there is less interest in making investments, which ultimately causes the firm's value to decline. sustainability reporting quality sustainability reporting is defined as a process that helps businesses set goals, measure performance, and manage change towards a sustainable global economy (fuadah et al., 2018). companies combine long-term financial goals with efforts to protect the environment and uphold social responsibility in operations. sustainability reporting has been responded globally by business companies to become a lure to attract investors and maintain firm legitimacy. based on signalling theory, companies try to give positive signals to stakeholders to increase stakeholder confidence in the firm. stakeholders will https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 18 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc assume that the quality of the firm will be low if the disclosure is absent or low (razak et al., 2022). therefore, the firm will maintain the sustainability reporting quality by disclosing all aspects of firm performance based on the standards promoted by gri, namely aspects of economic performance, environment, human rights, social, product responsibility, and labor and decent work (fuadah et al., 2018). with the suitability of corporate sustainability reporting with gri standards, the information submitted will be of higher quality. (dara, 2022) reveals that the quality of sustainability reporting is based on how extensive the information in sustainability reporting is disclosed by the firm. firm value firm value is the value created by investors, namely the assessment of the quality of the firm's performance, especially as reflected in the firm's share price or the price that potential buyers are willing to pay if the firm is sold (novelia et al., 2020). according to (wibowo, 2020), firm value can be reflected in firm performance, which can be assessed through two main aspects, namely financial statement analysis using financial ratios, and changes in stock prices. the stock price generally illustrates the value of the firm because the stock price can describe the prosperity of shareholders (damayanthi, 2019). when the stock price in the market is high, it will increase firm value and shareholder prosperity and vice versa (sari & wahidahwati, 2021). external assurance external assurance refers to a process or action that involves an external party or an independent third party to provide assurance, assessment, or verification of information or statements provided by another party. in this study, external assurance is proxies by external assurance in the company's sustainability report. external assurance is a service that aims to improve the quality of reports, especially in corporate sustainability reports. according to (sugioko, 2019), companies choose to use external assurance services by considering the benefits, which include improving the quality of information submitted in the report and also increasing the company's reputation in line with legitimacy theory, where companies can get a positive image in the eyes of the public as a result of implementing corporate social responsibility. the effect of sustainability reporting quality on firm value in running its business, the company aims to increase firm value. firm value is defined as the price the company receives when one day the company is sold (noviani et al., 2019). companies can publish sustainability reporting as additional information to increase firm value as the benefit of sustainability reporting is to maintain a good relationship with stakeholders. therefore, companies must disclose all aspects of the work in sustainability reporting based on the gri standard. by disclosing information related to the economy, environment and society, the company's value will be guaranteed to grow sustainably. the more items disclosed by the company, the higher the quality of the company's sustainability reporting. when the sustainability report submitted is of high quality, it will increase the attractiveness of stakeholders, especially investors who want to invest in the company. the quality of sustainability reporting will increase the value of the company when investors invest in the company, this can be seen from the stock price and company profits (gunawan & mayangsari, 2015). thus, companies must maintain good relationships and convince investors to invest in their companies (sugioko, 2019). firm value has a very important role because increasing firm value often goes hand in hand with greater profits for shareholders. therefore, this study hypotheses that: https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 19 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h1 : the sustainability reporting quality has a positive effect on firm value. the role of external assurance in moderating the effect of sustainability reporting quality on firm value (market reactions to the first-time issuance of corporate sustainability reports: evidence that quality matters, 2010) found that companies with a high level of sustainability reporting disclosure quality have a more positive market reaction than low disclosure quality. companies use sustainability reporting improving the company's reputation which has an impact on increasing the company's value. however, an assessment conducted by (sari & wahidahwati, 2021) concluded that sustainability reports have no effect on firm value. the two studies get different results, so there are other factors that may affect the relationship between sustainability reporting and firm value, namely external assurance. the existence of external assurance can increase trust in the information submitted by the company to the public to reduce asymmetric information. users of financial statements become more confident in the quality of sustainability reporting which has an impact on increasing company value. based on this description, the proposed hypothesis is as follows: h2 : external assurance moderates the effect of sustainability reporting quality on firm value. research framework method research model and design this study uses a quantitative descriptive approach with a causality design to explain the causal relationship between research variables in order to test the hypothesis. this study reveals the effect of sustainability reporting quality on firm value and how the role of external assurance in moderating the effect of sustainability reporting quality and firm value. sustainability reporting firm value external assurance figure 1 research framework h1 h2 https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 20 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc population and sample the population in this study are all companies listed on the indonesia stock exchange in 2018-2022. the research sample selection used purposive sampling method with the following criteria: 1. companies that publish sustainability reports consistently in 5 years (2018-2022) 2. companies that present financial reports in rupiah currency. based on 2 criteria, 27 companies were obtained that could be sampled. data collection in this study, the data used is secondary data obtained from the financial statements of companies listed on the indonesia stock exchange through the website www.idx.co.id and annual reports and sustainability reports published on the website of each company that meets the criteria. in collecting data, this study uses financial report documentation techniques, annual reports and sustainability report. data processing this study uses the moderated regression analysis (mra) method with ibm spss software. this method is used to determine the relationship between the dependent variable and the independent variable and the moderating variable that affects the dependent variable. operational definition and variable size firn value in this study, firm value is the dependent variable. firm value is measured using a ratio developed by professor james tobin (1976), namely the tobin's q ratio (susanti et al., 2012). tobin's q is the ratio of the company's market value to its net investment. if the stock price increases, the company value will also increase (novelia et al., 2020). if the q ratio > 1 indicates that investment in assets generates profits that provide higher value than investment expenditures, this stimulates new investment. if the q ratio < 1 indicates that investment in assets is not attractive (fatchan & trisnawati, 2018). the value of the company using tobin's q is measured by the formula (gherghina & vintilă, 2016): description: mve: number of shares outstanding x closing stock price debt : total debt ta : total assets sustainability reporting quality in this study, the quality of sr is an independent variable measured using the sustainability reporting disclosure index (srdi) with gri g4 if the specified information item is disclosed, it will be given a score of 1 and if it is not disclosed, it will be given a score of 0 (mansi, 2015). the more information disclosure, the higher the quality of the company's sustainability report. the quality of sustainability reporting using srdi is measured by the formula (ching et al., 2014): https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 21 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc description: srdi: sustainability reporting quality k: items disclosed by the company n : expected items external assurance in this study, external assurance is a moderating variable between sustainability reporting quality (independent variable) and firm value (dependent). this external assurance is measured by providing a dummy. if there is an external assurance in the company's sustainability reporting, a score of 1 will be given and a score of 0 if there is no external assurance in the company's sustainability reporting (sugioko, 2019). data analysis method this study uses moderated regression analysis (mra) with the equation model: description: y : firm value sr (x): sustainability report ea (z) : external assurance sr*ea (mo) : interaction variable of sustainability reporting quality and external assurance β1 β3 : regression coefficient α : constant coefficient ε : residual error (error) result and discussion this research was conducted on all companies listed on the indonesia stock exchange in 2018-2022, but the sample in the study amounted to 27 companies with the specified criteria. the criteria are as follows: 1. companies that publish sustainability reports consistently in 5 years (2018-2022) 2. companies that present financial statements in rupiah currency. the research was conducted in 5 years of observation so that the number of samples was 135. in the research process there were several outlier data, so that the treatment was carried out to normalize the data, namely deleting 19 outlier data so that the sample was 116. y = α + β1sr + β2ea + β3sr*ea + ε https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 22 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc descriptive statistics table 1 descriptive statistics result variable n minimum maximum mean std. deviation kualitas sr 11 6 0. 11 0. 70 0. 33 65 0.1319 0 nilai perusahaan 11 6 0. 31 10 .1 8 1. 11 20 0.9504 1 source: ouput descriptive analysis of data from spss, 2023 table 2 descriptive statistics of dummy variables frequency distribution ekternal assurance (ea) frequency percent v a l i d .00 55 47.5 1.00 61 52.6 total 116 100.0 source: ouput descriptive analysis of data from spss, 2023 based on the results of descriptive statistical analysis in table 1, the lowest sustainability reporting value is 0.11 and the highest is 0.70 with a standard deviation of 0.13190. the average sustainability reporting in the company is 0.3365, this shows that an average of 33.65% of the information in sustainability reporting has been disclosed by the companies sampled. from table 1, the standard deviation value is smaller than the mean value of the research sample (0.13190 < 0.3365), meaning that the data set is relatively homogeneous and does not vary. the lowest value of company value in this study is seen by the company's tq value of 0.31 and the highest is 10.18 with a standard deviation of 0.95041. the average tq of the company is 1.1120, this shows that the average share price is 1.1120 times the book value. this shows that the average investment in the sample companies produces a market value greater than the carrying value of the company's assets. table 2 shows the moderating variable in this study, namely ea, because the ea variable is assessed dichotomous, the distribution frequency is seen. of the 116 total samples, there were 55 samples or 47.4% that used external assurance in the sustainability reports of the companies sampled. meanwhile, 61 samples or 52.4% of companies did not use external assurance in the sustainability report. https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 23 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hypothesis test table 3 mra test results variable coeficient t sig. (constant) 0.777 2.554 0.012 sr 2.425 6.131 0.001 ea 0,983 2.517 0.013 sr*ea -2.745 1.494 0.138 r square : 0.480 adj r2 : 0.466 dw : 1.818 f : 34.711 sig model : <0.001 source: ouput descriptive analysis of data from spss, 2023 the results of the hypothesis 1 t test show that sustainability reporting has a significance value of 0.001 less than the significance level of 0.05 (0.001 <0.05). so, the quality of sustainability reporting has an effect and is statistically significant on firm value. this means that the quality of sustainability reporting has a significant positive effect, so h1 is accepted. hypothesis 2 t test results show that the interaction variable has a significance value of 0.138 greater than the significance level of 0.05 (0.138> 0.05). so it can be concluded that external assurance does not moderate and has no effect on the relationship between sustainability reporting quality and firm value, so h2 is rejected. based on the f test results, fcount = 34.711 is greater than ftable, which is 3.92 with a significance level of 0.001 <0.05 so that h1 is accepted, it means that the regression model is fit. these results indicate that sustainability reporting quality and interaction variables together have an effect on firm value. based on the results of the coefficient of determination test, the adjusted r2 of 0.466 is obtained, which means that 46.6% of the company value (tq) can be explained by the composition of the independent variables, namely sustainability reporting quality and external assurance, while 53.4% is explained by other variables outside this research method. the effect of sustainability reporting quality on firm value based on the results of research on the quality variable sustainability reporting has a significance value of 0.001 smaller than the significance level of 0.05 (0.001 <0.05). so that h1 is accepted, meaning that the quality of sustainability reporting has an effect and is statistically significant on firm value. based on the coefficient of sustainability reporting value is 2.245 with positive parameters. this means that every time there is an increase in the quality of sustainability reporting by 1 unit, it will have an impact on increasing tobin's q by 224.5%. thus, the higher the quality of the company's sustainability report, the better the value of the company. in the study, it was found that companies https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 24 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that have a high tq value, namely aali, unlv, wika, have sustainability reporting disclosures that are more than the average of 0.33. meanwhile, companies that have less than average sustainability reporting disclosure have low tq values, namely bnii, bjtm and peha with tq values less than 1. this is in line with what (fatchan & trisnawati, 2018) found that the quality of annual reports, especially sustainability reporting, has a positive influence on company performance. the more disclosures disclosed by the company, the quality of sustainability reporting will increase so that the company's value will also increase (kharisma & zulfiati, 2020). (ronald et al., 2019) revealed that disclosing sustainability reporting will be profitable because of the investment made so that it has an impact on increasing company value. this is also in line with signalling theory, where the quality of sustainability reporting will be a positive signal for investors to invest in the company. in addition, this result also supports that the company's image can be improved by using sustainability reports in line with legitimacy theory and stakeholder theory. the role of external assurance in moderating the effect of sustainability reporting quality on firm value based on the t test, the significance value of external assurance of 0.138 is greater than the significance level of 0.05. therefore, it can be concluded that external assurance does not moderate the effect of sustainability reporting quality on firm value. this study proves that companies that use external assurance to improve the quality of their sustainability reporting have not been able to increase company value because there are still several factors that can influence, namely investor attention and costs. information on the existence of external assurance in sustainability reporting is not considered by investors. (rahmansyah & faisal, 2015) revealed that investors' demand and attention are still lacking and the company's lack of understanding of external assurance is a factor in external assurance not being carried out by the company and the high cost. this statement is reinforced by the findings of this study which show that the level of external assurance is still voluntary, this can be seen in the research sample which shows that companies that use external assurance are fewer than companies that do not use external assurance in their sustainability reports, namely 46.4%. (cho et al., 2014) stated that companies conduct external assurance more for the benefit of shareholders, so that companies conduct external assurance if there is a request from investors. another reason companies do not use external assurance is because high financing can change investor perceptions, when investors assume that the existence of external assurance will increase costs rather than provide added value so that it can reduce investor shares. this can have an impact on firm value. conclusion this research proves that the higher quality of sustainability reporting indicated by the high level of disclosure can increase company value, because with sustainability reporting, the company has increased information transparency and stakeholder trust. the increasing quality of sustainability reporting is a positive signal for investors. these results are in line with stakeholder theory, legitimacy theory and signalling theory. external assurance do not moderate the relationship between sustainability reporting quality and firm value, this is because there are still many investors who have not considered the existence of external assurance in investor decision-making. in addition, the existence of external assurance is considered to increase company costs. the implication of the results https://www.ilomata.org/index.php/ijtc the role of external assurance in moderating the effect of sustainability reporting quality on firm value anisa and nikmah 25 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of this study is that companies still have to improve the quality of sustainability reporting through more disclosures to increase firm value, even though the company does not use external assurance. the limitations in this study cannot explain the quality of sustainability reporting from the content of the disclosed statements, only see how many sustainabilities reporting disclosure items are carried out by the company. in addition, this study only looks at the existence of external assurance disclosed in the company's sustainability reporting, so it cannot explain the benefits of the existence of external assurance. future researchers can examine using different measurements for the quality of sustainability reporting such as content analysis of disclosures and the role of external assurance to get better research results. reference alfaiz, d. r., & aryati, t. 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(2015). pengaruh environmental performance dan environmental disclosure terhadap economic performance. media ekonomi, 15(2), 76. https://doi.org/10.30595/medek.v15i2.1291 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 1, january 2024 page no. 292-300 292 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency elsa calista zega1, nadhira hardiana2 12universitas terbuka, indonesia correspondent: nadhirahardiana@ecampus.ut.ac.id2 received : january 2, 2024 accepted : january 28, 2024 published : january 31, 2024 citation: zega, e, c., hardiana, n. (2024). analysis of local tax potential of ogan komering ulu regency. ilomata international journal of tax anad accounting, 5(1), 292300. https://doi.org/10.61194/ijtc.v5i1.1129 abstract: the original revenue of local governments is one of the vital elements that can support regional development and governance, exemplified by bphtb as a significant revenue generator. this study aims to analyze the potential of the fees for acquisition of rights on land and buildings (bphtb), which is one of the local taxes in the ogan komering ulu regency. the research employs a qualitative approach with descriptive methods. the discussion reveals that the regional original revenue in ogan komering ulu regency experiences significant fluctuations but generally increases annually. this phenomenon is attributed to the efforts of related institutions in collecting and implementing policies to optimize the original revenue. the implementation of the bphtb tax policy along with existing policies in ogan komering ulu regency has caused some challenges as it was considered a panic policy following the audit conducted by the bpk. however, ultimately, this policy has contributed to an increase in original revenue through the enforcement of the applicable land tax. keywords: bphtb, regional original revenue, local tax this is an open access article under the cc-by 4.0 license. introduction fundamentally, the purpose of the republic of indonesia's formation is to create welfare for its people. typically, indonesia aims at creating a welfare nation. the national development's objective is to increase social prosperity, including in the aspect of economic growth and in fulfilling the basic social and economic needs of all citizens, so that they may at least live at the minimum living standard. that is the nation's moral ideal as created in the formation of this country. it is the compass or the direction that the indonesian nation hopes to achieve. (dimyati et al., 2021) however, in the modern welfare state model, the government's role in fulfilling public interests often becomes ambiguous and sometimes infringes upon taxpayers' rights in tax enforcement. this situation could be avoided if the government adheres to and upholds the tax laws in place, as taxation serves as a legitimate means for the government to finance its obligations.(saidi, 2007) in the concept of a welfare state, the state has the responsibility to create welfare for its people. the capital to build this welfare is from taxes paid by taxpayers. tax collection is an essential function of the state. (sydrastiny & parsa, 2021) indonesia is a country that, in the order of the https://www.ilomata.org/index.php/ijtc mailto:nadhirahardiana@ecampus.ut.ac.id https://doi.org/10.61194/ijtc.v5i1.1129 analysis of local tax potential of ogan komering ulu regency zega and hardiana 293 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc law, regulates the definition of the taxpayer. taxes are regulated in article 23a of the 1945 constitution of the republic of indonesia, namely, "taxes and other levies that are coercive for state needs are regulated by law." (suparno, 2023) the mandate has been carried out through the establishment of several tax laws, one of which is law number 6 of 1983 concerning general provisions and tax procedures as amended several times, most recently by law number 7 of 2021 concerning harmonization of tax regulations (kup law). (barus, 2022) the principle of legality aims to provide legal protection for taxpayers when the state requires taxes. tax is an agreement that arises based on the law. this agreement is established between the dpr and the president because the state needs taxes to finance the administration of state governance. taxes stipulated in the form of the law have a coercive nature because they contain legal sanctions in the form of administrative sanctions and criminal sanctions. (nashirudin, 2023) taxes are a highly potential alternative. as one of the very potential sources of state revenue, taxes are an extremely appropriate choice. besides being relatively stable in amount, they also reflect active participation from the community in financing development. (mardiasmo, 2011) tax classification based on the collecting institution is divided into two, namely taxes collected by the central government and taxes collected by local governments. the tax collected by the central government is called central used to finance state expenditures. the tax collected by local governments is called local tax, which is a mandatory levy on individuals or entities imposed by local governments without directly balanced compensation. it can be enforced based on prevailing legislation and is used to finance local government operations and regional development. (prakosa, 2005) original regional revenue (pad) is all regional revenues sourced from the original regional economy, consisting of regional taxes, regional levies, results from the management of separated regional assets, and other revenues. (hendrayanti & sari, 2023; abdullah et al., 2021; syahputra et al., 2021; mamonto et al., 2015) one of the local taxes that positively impacts regional original revenue is the fees for acquisition of rights on land and buildings, hereinafter referred to as bphtb. (anjani et al., 2018; siahaan, 2005) article 2 letter a number (1) 20 of 2000 concerning amendments to law number 21 of 1997 concerning bphtb. initially bphtb was collected by the central government and deposited with the central government treasury and the state expenditure budget based on the a quo law, but with the issuance of law number 28 of 2009 concerning regional taxes and regional levies (hereinafter abbreviated as "pdrd law") mandates that bphtb be included in the regency / city regional tax collection, which is deposited to the regional government cash in the regency / city expenditure budget. in addition, bphtb payment is one of the conditions that must be done to do the name. (redi & ardiana, 2020) the transfer of bphtb tax collection authority to regional governments is a policy of fiscal decentralization in the context of strengthening local taxing power. (nugroho et al., 2023) the subject of bphtb is individuals or entities acquiring rights to land and/or buildings, as stipulated in article 86 of the law on regional taxes and regional retribution. bphtb is imposed on every acquisition of rights to land and/or buildings in indonesia, whether it involves the transfer of rights from one party to another or the government's acquisition from individuals or entities. according to wibhawa (2023), tax objects related to bphtb are as follows: 1. acquisition of land and/or building rights. 2. transfer of rights due to: sale and purchase, exchange, grants, bequests, inclusion in a company or other legal entity, separation of rights resulting in a transfer, appointment of a buyer in an auction, implementation of a judge’s decision that has permanent legal force, business merger, business consolidation, expansion of business or gifts. https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency zega and hardiana 294 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 3. granting of new rights due to: continuation of release of rights or other than release of rights. 4. land rights are property rights, business use rights, building use rights, usufructuary rights, ownership rights to flats and management rights. according to article 87 of the law on regional taxes and regional retribution, the basis for bphtb taxation is the tax object acquisition value (npolp). the tariff for bphtb is uniformly set at 5%, as stipulated in article 88 of the law on regional taxes and regional retribution. thus, the amount of bphtb payable is calculated as 5% of npolp. in conclusion, based on the provisions of article 88 of the law on regional taxes and regional retribution, bphtb is taxed based on the transaction value or land value exceeding 60,000,000 idr, with a fixed tax rate of 5%. however, the provisions of article 95(1) of law no. 28 of 2009 stipulate that taxes must be determined in advance by regional regulations (perda). based on this, local governments must first establish regional regulations governing bphtb. in the absence of local government regulations, local governments cannot collect bphtb, especially from locals, because the tax department reduces local revenue. (lubis & maharany barus, 2022) the legal basis for bphtb collection in ogan komering ulu regency is regional regulation number 18 of 2010. this regional regulation regulates the name, tax object, and taxpayer; tax assessment basis, rates, and calculation methods; collection area; tax due date and tax notification letter; tax collection; excess payment refund; and collection expiry of bphtb in ogan komering ulu regency. meanwhile, the implementation of bphtb in ogan komering ulu regency is experiencing problems. although there is a regional regulation governing the collection of bphtb, the revenue from local taxes in the ogan komering ulu regency has not yet reached optimal levels. table 1. revenue from local taxes of the ogan komering ulu regency year budget (billion rupiahs) realization (billion rupiahs) % 2020 58,61 44,32 75.62 2021 90,86 50,29 55.35 2022 90,86 54,22 59.67 2023 77,09 25,98 33.69 source: directorate general of fiscal balance (2023) based on the data obtained from directorate general of fiscal balance of the republic of indonesia, there was a significant decrease in the revenue from local taxes of the ogan komering ulu regency from 2022 to 2023. in addition, only 33.69% of revenue from local taxes has been realized, although it is expected that bphtb could become one of the potential sources of pad for regencies/municipalities compared to the entire revenues of the existing local taxes. (sufyan et al., 2020) however, in 2023, the office of the regional revenue service of the ogan komering ulu regency, after being audited by the supreme audit agency (bpk), found that there were many instances of tax verifications resulting in transactions below 60,000,000 idr, leading the bpk team to recommend improvements to the regional revenue service due to the suboptimal performance in collecting regional original revenue. according to the viewpoint presented above, the study problem is related to the collection of bphtb in accordance with the discretion outlined in law number 28 of 2009 in ogan komering ulu regency, south sumatera, indonesia. https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency zega and hardiana 295 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method the researcher applied the normative juridical method. in normative legal research, library materials are primary data that are classified as secondary data, namely data that is ready to be made, its form, and content that have been compiled by previous researchers and can be obtained without being bound by time and place. (mulyanti et al., 2024; soekanto & mamudji, 2001) legislation at different tiers, such as laws, government regulations, presidential decrees, and others, comprised primary sources of law. legislative drafts, secondary law sources, law textbooks, reports of legal research that analyze or explain secondary law sources, and law science journal articles are examples of secondary law sources. secondary sources of law are non-binding. furthermore, in order to acquire comprehensive data, interviews were carried out with informants and respondents affiliated with the relevant institution in the ogan komering ulu regency. tertiary law sources comprised the identification and retrieval of primary and secondary law sources, such as law journal indexes, legal dictionaries, and electronic and printed encyclopedias. additionally, these sources of tertiary law were not legally binding. result and discussion in line with indonesia's system of decentralization, the nation's development begins with the development of regions/provinces. each region explores and develops various potentials it possesses, which will ultimately lead to the success of governance, development, and public services in the region. the existence of regional autonomy enables regional governments to manage their governance independently towards the development and welfare of their communities. the implementation of regional autonomy is crucial for reducing the burden of governance in every region across indonesia, which is numerous. consequently, the work of the central government can be more focused on macro-policy formulation. to implement regional autonomy effectively, the central government has provided support to regional governments to encourage and facilitate their initial development independently from the central government. regions must develop by utilizing their own economic and resource potentials without being overly dependent on central government assistance. however, the contribution from the central government remains significant, as evidenced by the comparison of the general allocation funds (dau). the high dependence on subsidies from the central government, particularly in the taxation sector, is due to the high degree of centralization in tax matters and the diverse nature of regional taxes, which have not been optimally utilized as a source of revenue. one of the reasons for this is that regional taxes, as one of the sources of regional original revenue (pad), have not been optimally utilized to increase pad. thus, to reduce dependence on subsidies from the central government, regional governments must be able to optimize regional original revenue. the existence of regional autonomy resulting from the implementation of a decentralized governance system allows regional governments to manage and develop their regions. this is inseparable from the funding allocated by regional governments. related to this, one of the sources of revenue in the implementation of regional autonomy is regional original revenue (pad). regional original revenue (pad) is the revenue generated by the region itself, derived from regional taxes, regional retribution, revenues from separated regional wealth management, and https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency zega and hardiana 296 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc other legitimate pad sources. the potentials owned by each region must be explored so that the results can be maximized. pad enhances the region's ability to finance its development and becomes one of the supporting factors for the success of the implementation of autonomy in the region. regional revenue that is collected can be used to finance the implementation of regional government affairs. regional expenditures are used to finance the implementation of regional government affairs, which consist of mandatory activities, optional activities, and activities whose implementation is in certain fields. mandatory expenditure allocation is prioritized to support and improve the quality of community life in efforts to fulfill the region's obligations mandated in basic services improvement, education, health, social facilities, and adequate infrastructure, as well as developing a social security system. in-laws law number 9 of 2015 concerning regional governments and law number 33 of 2004 concerning fiscal balance between the central government and regional governments, it is stipulated that government revenue consists of regional original revenue, fiscal transfer funds, and other legitimate sources. regional original revenue (pad) is the accumulation of revenue from tax receipts consisting of regional taxes and regional retributions, non-tax revenue consisting of regional government-owned enterprises, as well as revenue from investment and natural resource management. regional revenue collected from sources within its territory is collected based on regional regulations by prevailing laws and regulations. in this regard, regional autonomy can be relied upon as a cornerstone of development by providing a conducive environment for regional governments from the central government to increase their pad. increasing pad, in line with the increasing number of responsibilities delegated to regional governments, accompanied by the transfer of personnel, assets, financing, and authority to regions in considerable amounts. fiscal transfers from the central government to regional governments in supporting regional autonomy must be sufficient, but regional governments must be relatively more creative and innovative in increasing pad and improving fiscal sustainability in managing their regional budgets. therefore, regions are expected to be able to explore various sources of pad maximally. the fiscal correlation relationship between the central government and regional governments is characterized by the high control of the central government over the progress of regional development programs. this is evident from the low proportion of pad to the total regional revenue compared to the substantial amount of subsidies from the central government. one way to increase regional original revenue is through the optimization of regional taxes. one of the government's policies regarding taxes in the context of law number 34 of 2000 concerning regional taxes and retributions was transformed into law number 28 of 2009 in line with the addition of new tax types, the expansion of the tax base, and the flexibility of tax rates. one of the new tax types transferred from central government taxes to regional taxes is the land and building acquisition tax (bphtb). the transfer of bphtb administration from the central to regional government began on january 1, 2011, and was completed by january 1, 2014. in banjarmasin city, a regional regulation was issued regarding bphtb administration, namely banjarmasin city regional regulation no. 20 of 2010 concerning land and building acquisition tax, which took effect on january 1, 2011. with this transfer, bphtb tax revenue is expected to become a source of regional original revenue with significant potential for banjarmasin city. the transfer of bphtb administration not only includes collection and payment but also covers data collection, assessment, determination, services, and administration that must be carried out by the region. bphtb is determined based on the tax object sales value (njop) by the transaction value of the tax object or the market value of the tax object. the transaction value is the real price of the https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency zega and hardiana 297 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sold object agreed upon by both parties, the seller and the buyer, without being pegged to the market value purchased. the tax object of bphtb is the acquisition of land and buildings. the transfer of rights to land and buildings involves the transfer and granting of new rights. this transfer of rights includes buying and selling, exchange, donation, testamentary gift, inheritance, inclusion in the marriage settlement or other community property, separation of rights resulting in transfer, converting buyers at auction, implementing court decisions that have permanent legal force, mergers, acquisitions, business mergers, and gifts. each region has determined the procedures for the collection of bphtb taxes to ensure that the results are by the targets. however, in the implementation of bphtb collection, there are often discrepancies, especially regarding the sales value of land and/or buildings. one of the discrepancies encountered is in determining njop in bphtb collection. bphtb taxation assumes that the transaction price reported is close to the fair market value of the property. this assumption can sometimes be difficult to apply given the high transaction values that may reflect the associated transaction costs. therefore, sellers and buyers tend to choose a lower value to avoid reporting the actual transaction value in the sales deed to reduce costs. therefore, to determine the accuracy of the transaction value reported by taxpayers, each regency or city land office must publish or issue a land value zone so that we can estimate the range of land values based on this land value zone (znt) issued by the national land agency as the basis for taxation. znt is not a fixed value but rather an effort by the government to minimize tax losses. in addition to using znt, field verification or investigation may also be necessary. if there is a discrepancy between the transaction value and the fair market value during field verification, it will be immediately corrected by the relevant authorities. furthermore, after comparing the transaction value and the fair market value, it will be compared again with the njop of the land and/or buildings that become the object of the transfer of rights, with the highest value being used as the basis for bphtb taxation. (abdulaziz, 2021) to understand the effectiveness of tax collection, bphtb tax collection is usually measured by the tax collection ratio, which is the ratio of successfully collected taxes compared to the amount of taxes that should be collected based on potential taxes. the tax collection ratio approach assumes one crucial thing that affects the figures it produces: how the approach or method is used in calculating the tax base. as information, the original regional revenue can be seen in the following table: table 2. original regional revenue of the ogan komering ulu regency no year original regional revenue (rupiahs) regional taxes (rupiahs) 1 2018 156,620,815,410 43,504,672,970 2 2019 145,563,548,510 45,382,895,228 3 2020 115,934,921,028 44,320,888,883 4 2021 102,295,531,439 50,287,090,418 5 2022 119,624,885,514 54,216,578,030 source: ogan komering ulu regency regional revenue service (2018 2022) from the table above, it can be observed that there are fluctuations between each year, and the change in the graph of the original regional revenue of oku regency is quite significant. this is based on the increasing revenue from regional taxes, where bphtb becomes one of the https://www.ilomata.org/index.php/ijtc analysis of local tax potential of ogan komering ulu regency zega and hardiana 298 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc contributors to these figures. the revenue of the region derived from regional taxes, including bphtb, has contributed significantly to these numbers. this fact cannot be denied as it has been audited by the audit board of the republic of indonesia (bpk) and received findings that the regional revenue service was unable to collect and optimize bphtb revenue as regional taxes. therefore, the head of the regional revenue service of oku regency took the policy that in every verification of bphtb implementation, they would no longer consider the base value or the transaction value but instead directly multiply it by 5%. in other words, regardless of the base value submitted, if it is below 60,000,000 idr, the bphtb tax will be multiplied by 5%. this becomes a problematic policy in practice, but it can instantly increase the bphtb tax amount, and it can be seen from the data table above that in 2022 there was an increase in the amount of original regional revenue. the implementation of a sound tax collection projection requires a well-crafted strategy. thus, the tax contribution will increasingly have a significant impact on regional tax revenue in oku regency. conclusion the research findings indicate that the collection of bphtb in ogan komering ulu regency has not been operating at its best. the implementation of bphtb in ogan komering ulu regency is experiencing problems. although there is a regional regulation governing bphtb collection, the revenue from local taxes in the ogan komering ulu regency has not yet reached optimal levels. evidenced by the revenue from local tax realizations from 2020 to 2023. despite being granted discretion in tariff setting according to the relevant law, revenue from local tax collection has not met optimal levels. the implementation of bphtb as a regional tax in increasing regional revenue has proven to be highly impactful and has a significantly significant contribution to regional revenue. the policy of applying a direct 5% tax rate may lead to potential issues, but it has successfully increased the figure of regional revenue. bphtb has become one of the sources of revenue from regional taxes that can support and bring very positive outcomes to government finances. the head of the regional revenue service of oku regency took the policy that in every verification of bphtb implementation, they would no longer consider the base value or the transaction value but instead directly multiply it by 5%. in other words, regardless of the base value submitted, if it is below 60,000,000 idr, the bphtb tax will be multiplied by 5%. this becomes a problematic policy in practice, but it can instantly increase the bphtb tax amount, and it can be seen from the data table above that in 2022 there was an increase in the amount of original regional revenue. the implementation of a sound tax collection projection requires a well-crafted strategy. thus, the tax contribution will increasingly have a significant impact on regional tax revenue in oku regency. reference abdulaziz, n. s. 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(2023). analysis of calculation of regional taxes (pbb-p2 and bphtb) on increasing native regional income (pp. 663–671). https://doi.org/10.2991/978-94-6463-146-3_62 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4 october 2024 page no. 1-16 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc impact of social responsibility on income tax: empirical evidence from nigeria emmanuel imuede oyasor1 1walter sisulu university, south africa. correspondent: emmanueloyasor247@gmail.com1 introduction corporate social responsibility (csr) is a moral obligation which, sometimes, conflicts with the firms’ profitability objective. gribnau (2015) notes that companies endorsing csr accept ethical obligations “beyond compliance with the law. the sustained interest being shown by organizations received : july 15, 2024 accepted : october 10. 2024 published : october 31, 2024 citation: oyasor, e.i. (2024). impact of social responsibility on income tax: empirical evidence from nigeria. ilomata international journal of tax and accounting, 5(4), 175-183. https://doi.org/10.61194/ijtc.v5i4.1665 abstract: the study investigated the relationship between community responsibility and effective income tax rate of listed insurers in nigeria; determined the relationship between environmental responsibility and effective income tax rate of listed insurers in nigeria; examined the relationship between ethical responsibility and effective income tax rate of listed insurers in nigeria; examined the relationship between firms’ diversity and effective income tax rate of listed insurers in nigeria the ex-post facto research design was employed and on published sourced from the audited annual reports of the listed insurers between the periods of 2013-2022. the data were pre-tested using descriptive statistics, stationarity (unit) root test, johansen cointegration. the hypotheses were analyzed using fixed effect (panel data). the findings revealed that (p=0.8909>0.05) which indicated that there is not enough evidence to reject the null hypothesis one. thus, community responsibility has no significant relationship with effective income tax rate of listed insurers in nigeria. similarly, the environmental responsibility indicated (p=0.4889>0.05) on effective income tax rate, which implied that environmental responsibility has no significant relationship with effective income tax rate of listed insurers in nigeria. ethical responsibility depicted (p=0.4801>0.05) on effective income tax rate, which implied that the ethical responsibility has no significant relationship with effective income tax rate of listed insurers in nigeria. and firms’ diversity showed (p = 0.7930 < 0.05) effective income tax rate, which revealed that the firms’ diversity has no significant relationship with effective income tax rate of listed insurers. the study concluded that community responsibility, environmental responsibility, ethical responsibility and firms’ diversity have no connection with corporate income tax of the listed insurance companies. keywords: community responsibility, environmental responsibility, ethical responsibility and firms’ diversity, effective tax rate this is an open access article under the cc-by 4.0 license. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg mailto:emmanueloyasor247@gmail.com1 https://doi.org/10.61194/ijtc.v5i4.1665 impact of social responsibility on income tax: empirical evidence from nigeria oyasor 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in csr is a continued attempt to satisfy the expectations of various stakeholders. there have been civic, labor, ecological, and product factors. ecological factors concentrate on investment in a safe and habitable environment or doing business in a manner that allows the environment to remain sustainable. these lines of thought signpost a good part of the sustainable development goals (obaideen et al., 2022). in nigeria, most firms, especially insurance companies are deemed to be socially responsible and at the same time consider crs as one of the tax planning strategies. the main reason for insurance business to make the economy more resilient for the people (oyetunji et al., 2021). corporate taxes in nigeria are not fully utilized for it purposes due to bad governance and corruptions. as a result, most insurers prefer to invest in csr to socially and economically safeguard the lives and properties of their insureds (olaleye, 2022). this would lower risk exposure to the public and in turn reduce the burden of claim to be paid by the insurers. for instance, a motor liability insurance company with large number of policyholders would prefer to invest on road constructions and rehabilitations to reduce risk burdens, because if the corporate tax is paid, it may not deliver the road because of bad government. csr enhances financial growth of insurers and in the same vein serves as tax-deductible as recommended in section 25 of the companies income tax act (cita) (olaleye, 2022). it has been argued that being csr compliant can put an organization at a less vantage competitive position than the ones that are not (itotenaan et aal., 2022). the primary focus of csr is a redefinition of the objective of the firm from the more common motive of making a profit to making it in a manner that can be described as fair and environmentally sustainable. this raises a question of management and control of csr given that the law does not expressly demand all angles of csr from corporate organizations (carroll on sunday & adenike 2016) therefore, it becomes necessary to investigate impact of csr practices on corporate income tax of listed insurance in nigeria. in the insurance sector, csr applies the role of providing financial assistance to people in the event of a disaster, as well as sharing expertise in solving environmental problems, maintaining social security and promoting human rights. in nigeria, most insurance companies have seen investment on csr as a way of evading tax. they tend to inflate the investment amount to quantify the level of taxes to be waived. this practice is unethical (olaleye, 2023). the csr investment policy framework is not effective that most insurers discovered and used against revenue generation. another issue with csr is the nondisclosure of csr activities as well as false disclosure of profits by the insurance company performance to dodge tax. they do have two separate annual reports, one for government for tax purposes and the other for stakeholders for returns purposes. the former is usually falsified to lowering the level of tax to pay while the latter shows the normal profits realize over a fiscal year (olaleye, 2023). most previous studies have considered government institutions which include (mas’ud et al., 2020; amrie & riska, 2020; lanis & richardson 2015; gugong & ayuba, 2018). none of the studies examined crs practice on corporate income tax, especially insurance companies in nigeria. this study uses listed insurers in nigeria to understudy their crs practice on corporate income tax. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc legitimacy theory the theory postulates that there should be mutual co-existence and understanding between the companies and their host communities, the business entities must rely on societal legitimacy to operate; business entities normally cannot succeed without the society as well as the cooperation and understanding of other stakeholders in the society. the corporate entities’ value systems must be in consonance with that of the society since the entities must produce goods and services that must be accepted by the society. the social contract between the companies and their host communities or the society must be respected for them to operate smoothly. the social contract reflects the expectations of the society from the business entities. many authors have shown support for the legitimacy theory including, bissadu et al. (2017). other authors such as munoz et al. (2017), and izzo et al. (2020) questioned the veracity of the theory, stating that the expectations of the stakeholders or the society from corporate bodies are open-ended and sometimes unattainable, which makes it impossible for companies to meet up. the relevance of the legitimacy theory is that it explains the interconnectedness between the company, its stakeholders and the society at large. benefit theory the theory, from eric lindahl (1919) assumes that the government has another source of infrastructure funding, and that the burden will now be passed on to the citizen. the theory assumes that taxpayers and the state have an exchange or contractual relationship. members of society contribute to the cost of certain goods and services provided by the state in proportion to the benefits received. issues like equitable income and wealth distribution have no place in this quid pro quo arrangement. instead, the benefits received are used to determine how the tax burden should be distributed. eric-1919 believed that levying taxes on this principle as stated would result in justice. the model has been criticized that benefit-based taxation will not generate much revenue for the government because, as previously stated, many people who can afford to pay high taxes may end up paying less tax simply because they do not receive much benefit from government spending. if the state maintains a certain connection between the benefit conferred and the benefits served, it will be against the principle of tax as it is compulsory contribution made to the public authorities to meet the expense of the government and for the provision of general infrastructures to all and; another flaw of benefit theory is that most of the expenditures incurred by the state are for the general benefits of the citizen. ability to pay theory the theory was propounded in 1939 by m. s. kendrick. according to this theory, every taxpayer should be taxed based on his or her ability to pay. people with higher incomes, according to this theory, should pay more taxes than people with lower incomes. in this case, taxes should be levied based on an individual's taxable capacity. this approach considers tax liability in its purest form, as a mandatory payment to the government with no strings attached and does not assume any commercial or semi-commercial relationship between the government and the individuals. individuals must pay taxes simply because they can, and their relative share of the total tax burden https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is determined by their ability to pay. the rationale behind the theory is that it ensures tax justice or equity on taxpayers: taxes are based upon the amount of money people earn. the paper tests the following research hypotheses: 1. community responsibility has no significant impact on effective income tax of nigerian insurers. 2. environmental responsibility has no significant impact on effective tax rate of nigerian insurers. 3. ethical responsibility has no significant impact on effective income tax rate of nigerian insurers. 4. firms’ diversity has no significant impact on effective income tax rate of nigerian insurers. the study investigates the impact of examine impact of csr practices on corporate income tax of listed insurance in nigeria. first, we examine the impact of community responsibility on effective income tax rate of listed insurers, second, we assess the impact of environmental responsibility on effective income tax rate of insurers. third, we determine how ethical responsibility affect effective income tax rate of insurers. and lastly, we confirm how firms’ diversity impact effective income tax rate of insurers in nigeria. the findings show that community responsibility has no significant relationship with effective income tax rate. moreso, the insurers’ environmental responsibility has no significant relationship with effective income tax rate. lastly, ethical responsibility has no significant relationship with effective income tax rate of listed insurers in nigeria. the outcome provides insurers to understand the linkage between their respective firms’ csr investments and corporate income taxes. the findings enlighten stakeholders, including corporations, on the significance of csr practices and aid them in effective managerial decision-making. it educates the government on the useful channel for the improvement of policy on effective tax rate. its informative for firms on understanding fair return on capital invested through improved efficiency. we structure the reminder of the paper as follows. section two presents literature, section three offers methodology. section four discloses the results and section five concludes. method to establish the impact of corporate social responsibility on corporate income tax in nigeria, the study is based on the legitimacy theory. ogunode (2022) stated that the legitimacy theory has to do with a social contract between corporate bodies and the society where the companies operate. the existence of an agreement between the corporate entity and the society or community in which it carries out its operations is very important for the purposes of legitimacy, peaceful coexistence and for the mutual benefits of both parties. suddaby et al. (2017) posit that legitimacy theory entails such assurance of meeting the conditions and expectations of the society, while the entity is carrying on its legitimate business. the theory suggests that companies should naturally accept to carry on their operations or activities within the confines of the existing laws without violating the existing peace, rules and regulations as well as environmental and social norms where they do their businesses. the paper employs 13 insurance firms, registered, with published information during 2013 to https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2022. the data are obtained from audited financial reports of selected insurance firms on nigerian stock exchange. the independent variable was corporate social responsibility disclosure index. this was rated between disclosure = 1 and non-disclosure = 0 (shafat, 2018). also, the dependent variable, effective tax rate which was measured as the income tax expense divided by the earnings (or income earned) before taxes (greene, 2016). further, firm size (size) is defined as the natural log of book value of assets. larger firms are expected to disclose more csr-related information (kansal et al., 2014). claim settlement is defined as a request filed by the beneficiary of the policy to the insurer to avail death benefit in case of the unfortunate demise of the insured during the policy tenure. the ability of insurers of settle claims lies on her net claim. the larger the net claim the more the ability to indemnify the insureds (customers) who have suffered any loss (adeloju, et al., 2019). reinsurance occurred when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of disaster. by spreading risk, an insurance company takes on clients whose coverage would be too great of a burden for the single insurance company to handle alone. claim settlement and reinsurance indicate the insurers’ risk tolerance towards social activities (falade & olasupo, 2021). we estimate the model below”. eitrit = α0 + β1comr1t + β2comr1t + β3envr1t + β2ethr1t + β5size1t + β6net1t + β7ren1t + eit (1) “where, comr = community responsibility, envr = environmental responsibility, ethir = ethical responsibility, div = diverse, net = net claim, ren = reinsurance profit, et = error term.  01 = constant term  1 6 = φt parameters to be estimated. before the paper assesses the main hypothesis, the study extends the behaviour of the data by presenting the basic deterministic statistics and correlation matrix. some pre-estimation (multicollinearity, panel effect, cross-section dependence, and hausman) tests are completed to confirm the stochastic characterization of the stacked panel. the ordinary least square (ols) regression estimates the panel data based. results and disscusion table 1 shows the basic summary of the considered variables. the minimum and maximum values of effective interest rate during the period of 2013 – 2022 for the sample are 0.000 and 3.84 respectively and with an average rate of 0.165. the variable according to the value deviated with 0.391 from its mean and positively skewed with the rate of 6.905 which showed that eitr has a long right-tail, and the kurtosis is mesokurtic distribution in nature, simply because the eitr exhibited the rate of 62.46 < 3. further, the jarque-bera of 20031.04 was observed, which implied that the variable had a good fit in the distribution but statically significant as the p-value < the table value (0.0000< 0.05). community responsibility was also related in the table to have an average value of 0.474 which showed the accumulated average contribution of community responsibility on effective interest rate in nigeria over the period of 10 years. the table confirmed that community responsibility exhibited the minimum and maximum value of 0.000 and 0.8200 respectively. the variable deviated with 0.13042 from its mean and positively skewed with the value of 0.019 which implied https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that the variable has a long right-tail and the kurtosis was leptokurtic, simply because the variable exhibited the value of 3.426>3.this implied that the variable has a flatter shape with fatter tails resulting in a greater chance of extreme positive effect. the table depicted jarque-bera value of 0.984, implied that the variable has a good fit in the distribution but confirmed to be insignificant at 0.611>0.05. an average value of 0.411 was observed for environmental responsibility. the table as well depicted the minimum and maximum value of 0.250 and 0.75000 respectively. the environmental responsibility over the period, according to the table, deviated with 0.165 from its mean value and positively skewed with the value of 0.529. the kurtosis was mesokurtic, as the value was 2.298<3. the jarque-bera test exhibited 8.676 which implied that the variable has a good fit in the distribution and is confirmed significant. the result depicted the data on ethical responsibility with an average value of 0.585 as the accumulated contribution average on effective interest rate over the period of 10 years. it was confirmed that ethical responsibility exhibited the minimum and maximum value of 0.000 and 0.880 respectively. the variable deviated with 0.258 from its mean and negatively skewed with the value of -0.377, which implied that the variable has a short right-tail and the kurtosis was mesokurtic. the jarque-bera value of 11.031 was observed which implied that the variable has a good fit in the distribution and confirmed to be significant at 0.004<0.05. an average value of 0.351 was observed for diversity. the outcome shows the minimum and maximum value of 0.250 and 0.380 respectively. the diversity deviated with 0.054 from its mean value and negatively skewed with the value of -1.318. the kurtosis was mesokurtic, as the value was 2.738<3. jarque-bera test exhibited 37.741 which implied that the variable has a good fit in the distribution and was confirmed perfectly and significant at 0.000<0.05. a record was taken on csrdi to relate with effective interest rate with an average value of 0.622. the outcome shows csrdi has a minimum and maximum value of 0.500 and 0.850, respectively, as well as a standard deviation of 0.062 and positively skewed. this implied that the variable has a flatter shape with fatter tails. the jarque-bera value of 17.81, implied that the variable has a good fit in the distribution but confirmed to be insignificant at 0.000136<0.05. the insurance firms’ size deviated, with 24572857 from its mean value and positively skewed with the value of 4.324. the kurtosis was leptokurtic, as the value was 26.47>3. however, the jarquebera test exhibited 3363.156 which implied that the variable has a good fit in the distribution and was confirmed significant at 0.000<0.05. the result shows that net claims have an average value of 2290771 the minimum and maximum value of -2599181 and 30776073 respectively. the variable deviated with 4485732 from its mean and positively skewed with the value of 4.241 which implied that the variable has a long right-tail and the kurtosis was leptokurtic, as the value 22.81561>3. the jarque-bera value of 2497.332, implied that the variable has a good fit in the distribution. finally, the industry invested an average value of n1910340 billion in reinsurance, contributing to good risk practices. the minimum and maximum values are -7579125. and n8618365 billion was recorded, respectively. the reinsurance deviated with n2516270 billion but negatively skewed with the value of -0.339553. the kurtosis was leptokurtic, as the value was 5.260484>3. however, the jarque-bera test exhibited a value of 29.94399, which implied that the variable fits well in the distribution and was confirmed statistically significant at 0.00000<0.05. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg https://www.investopedia.com/terms/t/tailrisk.asp https://www.investopedia.com/terms/t/tailrisk.asp impact of social responsibility on income tax: empirical evidence from nigeria oyasor 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 presents the results for the panel unit root. the test assumes a null of no unit root. at level, the levin, lin & chu (llc)’t* had a p-value of 0.0000<0.05, im, pesaran and shin (ips)’ w-stat had 0.0000 <0.05, implying that the variable is stationary at level. table 3 reports cointegration outcomes. at the 5% level of significance, the result indicates the existence of a cointegrating equation. the hypothesis of no co-integration was accepted at a 5% significance level for the trace statistic and max eigenvalue test. this is because 8 of 9 tested parameters revealed values above 0.05. this result indicated that there is no presence of long-term relationship among the variables”. table 1. descriptive statistics min mean max std. dev. skew kurt norma l variabl e jb p(jb ) eitr 0.000 0.164 3.843 0.391 6.90 4 62.46 20031. 1 0.00 0 comr 0.000 0.474 0.820 0.130 0.01 9 3.426 0.984 0.61 1 envr 0.250 0.411 0.750 0.164 0.52 9 2.297 8.676 0.01 3 ethr 0.000 0.585 0.880 0.258 0.377 1.782 11.031 0.00 4 divr 0.250 0.351 0.380 0.054 1.318 2.739 37.741 0.00 0 size 0.000 20215121 1.96e+0 8 2457285 7 4.32 4 26.47 1 3363.1 0.00 0 net -259918 2290771. 1 30776073 4485732 4.24 1 22.81 5 2497.3 0.00 0 ren 7579125 1910340. 1 8618365 2516270 0.340 5.260 29.943 0.00 0 source: author table 2. panel unit root test statistic p-value order statistic p-value order levin, lin & chu (llc) eitr -53.641 0.0000 i(0) -24.9543 0.0000 i(0) comr -3.0708 0.0011 i(0) -12.8368 0.0000 i(0) envr -2.9522 0.0016 i(0) -5.9683 0.0000 i(0) ethr -4.9280 0.0000 i(0) -18.0118 0.0000 i(0) divr -1.5445 0.0612 i(1) -3.1746 0.0008 i(0) size 1.5261 0.9365 i(1) -4.4985 0.0000 i(0) net 1.4422 0.9254 i(1) 4.72481 1.0000 i(1) ren 0.2387 0.5942 i(1) -5.7395 0.0000 i(0) im, pesaran and shin (ips) eitr -9.3213 0.0000 i(0) -7.7375 0.0000 i(0) comr -1.2870 0.0991 i(1) -4.3819 0.0000 i(0) envr -1.7529 0.0398 i(0) -2.9171 0.0018 i(0) https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ethr -2.5887 0.0048 i(0) -6.3107 0.0000 i(0) divr 0.0734 0.5294 i(1) -1.2492 0.1058 i(1) size 2.8844 0.9980 i(1) -1.5939 0.0555 i(1) net 0.5765 0.7178 i(1) 1.53992 0.9382 i(1) ren 0.9371 0.8256 i(1) -0.8630 0.1941 i(1) source: author (2024) table 3: cointegration test hypothesized trace statistic maximum eigenvalue no. of ce(s) ev stat cv prob.** ev stat cv prob.** none * 0.491 207.56 197.37 0.0141 0.491 60.89 58.43 0.0281 at most 1 0.392 146.67 159.57 0.2012 0.392 44.91 52.36 0.2356 at most 2 0.340 101.75 125.64 0.5459 0.343 37.46 46.23 0.3152 at most 3 0.234 64.29 95.76 0.8803 0.238 24.02 40.07 0.8246 at most 4 0.171 40.26 69.81 0.9435 0.171 16.91 33.87 0.9250 at most 5 0.129 23.35 47.85 0.9551 0.129 12.46 27.58 0.9123 at most 6 0.073 10.88 29.79 0.9639 0.073 6.828 21.13 0.9603 at most 7 0.042 4.056 15.49 0.8990 0.042 3.922 14.26 0.8674 at most 8 0.001 0.133 3.841 0.7151 0.001 0.133 3.841 0.7151 source: author (2024) table 4 shows the outcome of the pre-estimation (hausman) test for the multivariate panel regression. the test, completed with the null of random effects, confirms whether the model best fits fixed or random effects. the outcome indicates the chi-square. (𝜒2) statistic of 7.4408 with prob > (𝜒2) = 0.3855, is not significant, providing evidence to maintain the null. hence, the model is best fitted with the random effect. table 5 shows the outcome of the fixed effect model. the result shows that a unit change in effective interest rate would be about a 4.1% change in community development, -1149% change in firms’ size, -1838% change in the net claim of the insurers, and -531% change in reinsurance profit of the insurers. from the second model, it was also observed that β2 had a coefficient of 0.159, which implied that a unit change in eitr would change environmental responsibility by 15.9%, -1149% change firms’ size, -1838% change in net claim of the insurers, and -531% changes in reinsurance profit of the insurers. β3 had a coefficient of -0.109 (-11.0%), which means that a change in eitr would negatively change environmental responsibility with -11.0%, -1149% change firms’ size, -1838% change in the net claim of the insurers, and -531% changes in reinsurance profit of the insurers. it was also further observed that β4 had a coefficient of 0.182649, which implied that a unit change in eitr would change insurance diversity by -0.182 (18.3%), change firms’ size, -1838% change in the net claim of the insurers, and -531% changes in reinsurance profit of the insurers. based on the four hypotheses tested above, the results accepted the four null hypotheses, which stated that community responsibility has no significant relationship with the effective income tax rate of listed insurers in nigeria; environmental responsibility has no significant relationship with the effective income tax rate of listed insurers in nigeria; ethical responsibility has significant no https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc relationship with effective income tax rate of listed insurers in nigeria; firms’ diversity has no significant relationship with effective income tax rate of listed insurers in nigeria. these results seemed to align with some of the results of past studies. for example, gulzar et al. (2018) found that csr is negatively associated with etr and cash etr, explaining that companies with higher csr are involved in more tax avoidance when compared to companies with lower csr. sari and tjen (2016) found that corporate social responsibility disclosure reduces tax aggressiveness. this study also provides evidence that the environmental responsibility performance, as measured by the results of the company performance rating assessment in environmental management, can reinforce the reduction in tax aggressiveness caused by the disclosure of social responsibility. yi and li (2018) suggested that environmental taxes do not necessarily reduce carbon emissions in the long run, as the outcomes depend on the environmental pollution and the policy mechanism chosen to implement these taxes. recent studies concluded that carbon taxes and policies have varied impacts in different areas within the same region (bashir et al., 2021; dong et al., 2019). table 4. hausman test outcome hausman test: 𝐻0: random effect and 𝐻1: fixed effect test statistic cross-section random, 𝑐ℎ𝑖 − 𝑠𝑞𝑢𝑎𝑟𝑒𝑑 7.4408 (0.3855) source: author (2024) note: the null (𝐻0) assumes the existence of a random effects model. if the test statistic exceeds the relevant critical value, the random effects model is rejected. alternatively, if the p-value for the test is less than 1%, it indicates that the random effects model is not appropriate and that the fixed effects specification is to be preferred. table 5: fixed effect estimation for eitrit variable coefficient std. error t-statistic prob. const. 0.1812 0.3146 0.5758 0.5659 comr 0.0414 0.3014 0.1375 0.8909 envr 0.1594 0.2296 0.6944 0.4889 ethr -0.1100 0.1552 -0.7085 0.4801 divr -0.1826 0.6945 -0.2630 0.7930 size 0.0000 0.0000 -0.0386 0.9693 net 0.0000 0.0000 -0.4341 0.6651 ren 0.0000 0.0000 1.7417 0.0843 r-squared (adj) 0.1361 f-statistic 1.0290 prob(f-statistic) 0.4333 dw 2.0424 source: author (2024) https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impact of social responsibility on income tax: empirical evidence from nigeria oyasor 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc conclusion the study leveraged the legitimacy theory, which demonstrates the interconnectedness between the company, its stakeholders and society. csr asserts that corporations should consider the interests of customers, employees, shareholders, host communities, and the ecological footprint in all operations. we verify the relationship between social responsibilities, including community responsibility, environmental responsibility an ethical responsibility, and effective income tax rate of insurance. the findings show that community responsibility has no significant relationship with effective income tax rate. the insurers’ environmental responsibility has no significant relationship with effective income tax rate. lastly, ethical responsibility has no significant link with effective income tax rate of insurers in nigeria. the study perceived an adverse predisposition of the insurers to engaging in corporate income tax. the insurers belong more to the empathetic disposition of csr as they do not see corporate income tax as a demonstration of social responsibility. we found that community, environmental, and ethical responsibility have no connection with the corporate income tax of insurers in nigeria. the paper offers some recommendations based on this finding. first, to enhance performance and peaceful coexistence with people within its environment, insurers should make more efforts to increase their commitment to community projects, environmental protection and other social responsibility activities. second, firms should proactively address social responsibility issues to avoid business disruption from host communities. third, insurance firms are expected to increase their csr activities in the immediate environment and the surrounding community so that the surrounding community can take advantage of the company's existence. references asian, a. u. & uche, t. a. 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(2018). what do we know about tax aggressiveness and corporate social responsibility? an integrative review. journal of cleaner production 204: 542–52. https://doi.org/10.1016/j.jclepro.2018.08.334 https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg https://doi.org/10.1016/j.intaccaudtax.2020.100304 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3189628 https://doi.org/10.1016/j.jclepro.2018.08.334 ilomata international journal of tax and accounting p-issn: 2714-8971; e-issn: 2714-8963 volume. 6 issue 1 january 2025 page no: 53 69 53 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme ainaya fatimah nurulita1, tusta citta ihtisan tri prasidya2 12universitas mataram, indonesia correspondent: fatimahainaya@gmail.com1 received : december 23, 2024 accepted : january 17, 2025 published : january 31, 2025 citation: nurulita, a.f & prasidya, t.c.i.t. (2025). combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme. ilomata international journal of tax and accounting, 6(1), 53 – 69. https://doi.org/10.61194/ijtc.v6i1.1613 abstract: climate change poses an urgent global challenge, necessitating the adoption of innovative fiscal policies to mitigate its effects. green taxation, rooted in pigou’s 20th-century economic theory, has gained prominence as a mechanism to incentivize sustainable practices and deter environmental harm. this study investigates the implementation of green tax policies in denmark, norway, and sweden, analysing their effectiveness in reducing carbon emissions and promoting renewable energy utilization. employing a comparative case study approach, the research identifies key factors underpinning the success of these scandinavian models, including phased implementation, public acceptance, and the integration of economic and environmental objectives. by drawing lessons from these experiences, the study provides policy recommendations for indonesia to develop and enhance its green taxation framework and process of implementation which include the incorporation of these strategies: phased tax implementation, transparent stakeholder engagement, strategic revenue use, and industry-specific measures. keywords: climate change, green taxation, sustainable development, social development. this is an open-access article under the cc-by 4. 0 license introduction environmental degradation has been a major topic of discussion for policymakers on a global scale since the late 1960s. decades of rapid industrialization have significantly increased greenhouse gas emissions, leading to rising global temperatures. this phenomenon has caused climate change, which affects the entire planet. its impacts are wide-ranging, including melting ice caps, rising sea levels, unpredictable rainfall patterns, wildfires, and prolonged droughts (hussain & dogan, 2021; su et al., 2023). as global warming becomes more prevalent, efforts to combat its causes and mitigate its effects are gaining momentum worldwide through policies initiated by countries and international https://www.ilomata.org/index.php/ijtc mailto:fatimahainaya@gmail.com1 https://doi.org/10.61194/ijtc.v6i1.1613 combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 54 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc organizations. one such approach is the adoption of green taxes, designed to encourage sustainable practices, lower greenhouse emissions, and foster greater environmental accountability. the term green tax which is also known as the environmental tax was coined by pigou (1920) in the early 20th century. the idea of this tax scheme was introduced to address the environmental costs of private activities that otherwise be borne by society. by internalizing such costs, a green tax could reflect the true environmental costs of the activity and influence the decision-making in the private sectors (milne, 2007). more than five decades later, the organization of economic co-operation and development (oecd) – built upon pigou’s idea – developed a green theoretical basis that is referred to as the polluters pay principle. the principle was designed to ensure that polluting behavior are altered – or if they are not – polluters are required to compensate society for the damages they cause and can be implemented through economic instruments such as taxes (mottershead et al., 2021). however, despite the early theoretical discussions, the practical implementation of green taxation systems did not emerge until the late 1980s, with scandinavian countries among the first to adopt these measures. this delay highlights the challenges in translating theoretical concepts into actionable policies, particularly those that require broad societal and political support. nevertheless, scandinavian nations like denmark, sweden, and norway were successfully setting examples for how such policies could be effectively applied to address environmental concerns by pioneering the introduction of carbon taxes and other green tax initiatives. their early adoption underscored the feasibility and potential impact of green taxes, paving the way for broader international implementation. in these three countries, green taxation emerged as a prominent topic in environmental policy discussion in 1988 (daugbjerg & pedersen, 2004). before the releasing carbon tax scheme in the early 1990s, denmark, sweden, and norway had implemented pesticide tax. the purpose of the tax was generally to address the growing concerns over agri-environmental damages caused by farm chemical products. in denmark, for instance, the revenue from the tax was used to fund subsidies for organic farming, monitor pesticide pollution, and support policies aimed at reducing nitrate pollution. in sweden and norway, the green tax revenue from pesticides was allocated to environmental improvement on farms, including the enlargement of storage facilities and a land conservation scheme (daugbjerg & pedersen, 2004). in the early 1990s, scandinavian nations took bold and transformative steps in the application of green taxes by introducing carbon taxes. these measures marked a significant turning point in environmental policy, as they directly targeted carbon emissions, one of the primary drivers of climate change. this initiative was implemented shortly after the 1987 report our common future by the brundtland commission, which advocated for the use of green taxes as a strategy to address environmental challenges (andersen, 1994). sweden and norway implemented a carbon tax in 1991 with denmark adopting a similar measure in 1992. after a study examined that the implementation of such tax had successfully reduced carbon dioxide emissions (speck et al., 2006), several countries started to follow suit. germany, for instance, initiated a phased introduction of a tax on energy products and electricity in 1999. similarly, two years later, in 2001, the united kingdom launched a climate change levy on https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 55 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc electricity and fossil fuels consumed outside the household sector (milne, 2007). support for green taxation has grown significantly since then, particularly among developed nations. the scope of green taxation has also broadened over time to encompass various forms, including carbon, sulfur, emissions, and pollution taxes (nobanee & ullah, 2023). inspired by the successful implementation of green tax policies in developed nations, many emerging markets began adopting similar measures in the early 2010s as part of their broader environmental strategies, not to mention indonesia. as one of the largest economies in southeast asia, the government of indonesia recognized the potential benefits of green taxation in addressing its environmental challenges. however, similar to other emerging markets, the implementation of such policies has been regarded as slow, particularly due to political resistance. a study by leonard et al., (2024) indicated that discussions on green taxes began in indonesia as early as 2006, and were later incorporated into the draft law on regional taxes and levies in 2014 (eva mustika pratiwi & setyawan, 2014). nevertheless, a solid foundation of green tax only emerged in 2021 through the promulgation of the harmonization of tax regulation law and the finalization of the draft presidential degree on economic value of carbon. these two enactments regulate the carbon tax and carbon exchange technical mechanism which will be implemented on limited scope by july 2022. from this initial stage, a second phase was planned to be carried out by 2025, involving the full implementation of carbon trading through carbon exchanges, along with the expansion of the carbon tax sector based on the readiness of individual industries (suryani, 2022). departed from this background, this study is aimed to address the following questions: how can insights from scandinavian green tax policies be adapted to develop an effective fiscal strategy for combating climate change in indonesia? its objective is to examine how indonesia can strengthen its green taxation framework by drawing comparative insights from the pioneering experiences of denmark, sweden, and norway. as leaders in implementing green taxation policies, these three scandinavian countries offer a wealth of experience and best practices that indonesia can adapt to its unique socio-economic and environmental context. this study seeks to identify key lessons, including effective policy design, gradual implementation strategies, mechanisms for balancing economic growth with environmental sustainability, and methods for fostering public and industrial acceptance. furthermore, it aspires to highlight how green taxation policies can contribute to achieving national sustainability goals and aligning with global climate change initiatives, ultimately promoting a greener and more resilient economy. the novelty of this research lies in its comparative approach, drawing actionable insights from scandinavian green tax schemes to address climate change in indonesia. by contextualizing successful fiscal policies from developed nations within indonesia's unique socioeconomic and environmental framework, the study offers a fresh perspective on adapting proven strategies to developing economies. it bridges the gap between global best practices and local implementation, providing practical, policy-oriented recommendations for a sustainable future. https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 56 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc green tax: an overview with growing concerns over environmental degradation and the escalating impacts of climate change, green taxation has become an increasingly prominent topic in global discussions on mitigating the effects of global warming. these policies – designed to encourage environmentally sustainable practices by placing a financial burden on activities that harm the environment – are not only gaining traction in their implementation but are also emerging as a significant area of academic and policy research. over the past few decades, extensive studies have examined the design, effectiveness, and socio-economic impacts of green taxation across different countries and sectors. nobanee & ulah (2023) mentioned that the concept of green taxation, particularly that of carbon tax, has garnered significant attention and become a popular research focus amongst international organization and economist due to its cost-reduction effectiveness. grounded on pigou’s theoretical framework, the concept has expanded and researchers such as norouzi have reached a consensus on the definition and nuances of green tax, which have evolved from singular-specialized tax into a diverse range of tax types and strategies aimed at resource utilization and environmental protection (norouzi et al., 2022; saad & ariffin, 2019; shi et al., 2023; yang et al., 2024). oecd, for instance, defined green tax as a tax imposed for environmental purposes, such as those design to incentivize the reduction of specific emission to optimal level or taxes levied on environmentally harmful products (cottrell et al., 2023). while the oecd focuses more on the object of the tax imposed, deng & huang (2020) defined green tax based on its scope. in their study, green tax is divided into two categories: (1) the narrow perspective which solely concentrate on pollutant emission; and (2) the broader perspective which considers the interconnected advancement of the economy, ecology, and society. in the most recent research, nobanee & ulah(2023) correlates the green tax definition with its capacity to support the achievement of sustainable development goals both in the advanced and emerging nations. the implementation of green taxation is considered vital in attaining sustainable development by promoting the adoption of cleaner, more efficient technology, reducing reliance on non-renewable resources, and discouraging environmentally harmful practices. further, nobanee & ulah (2023) also highlight the various form of green taxation which includes carbon tax, pollution tax, and tax on waste disposal. concerning this, oecd has specifically categorizes green tax into four types: (1) environmental pollution tax that is levied on the emission of pollutant such as sulfur, nitrogen, garbage, and shopping bag consumption; (2) energy tax that is levied on the extraction, use, and emission of energy sources; (3) vehicle and transportation tax that is levied on the purchase, sale, use, and road use of motor vehicles and ships; and (4) resource tax that is levied on the extraction and use of natural resources, including mineral, natural gravel, tap water, and hunting license. in summary, green taxes encompass several key aspects, including the following: https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 57 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc table 1. summary of key aspect on green tax definition no key aspect sources 1 design to incentivize, aimed at emission reduction. (cottrell & falcão, 2018) 2 having two scopes of implementation: (1) focus solely on pollutants; and (2) considering the intricacies of such taxes within the dimension of economy, ecology, and social. (deng & huang, 2020) 3 imposed particularly to achieve sustainable development goals. (nobanee & ullah, 2023) having been implemented in various countries for more than three decades, green tax is bringing enormous benefits environmentally and economically. a study by yunzhao (2022), for instance, showed that the implementation of eco-innovation and green taxation in e7 countries had successfully reduced the emissions of carbon from 1995 through 2018. similarly, liu et al. (2023) also highlighted that green tax policies play a crucial role in promoting environmentally friendly behaviours while discouraging activities that contribute to pollution and resources depletions. green taxation policies offer financial support for renewable energy development, technological innovation, implementation, and the research and promotion of sustainable energy practices. the strategic and efficient use of environmental tax instruments acts as a strong incentive to transition to renewable energy sources, paving the way for an energy future that is both economically viable and environmentally sustainable (song & hua, 2024). however, it is important to acknowledge that the discourse surrounding green taxes is often intertwined with debates about their economic implications. while green taxes aim to promote environmental sustainability, critics argue that they could impose financial burdens on businesses and consumers, potentially slowing economic growth. this is in line with the result of the study conducted by lin & li (2011) which noted that green tax is likely increase the prices of related products, raise operational costs for businesses, reduce the competitiveness of energy-intensive industries, and potentially have adverse effects on economic growth. yip (2018) also mentioned that environmental tax may negatively impact the employment rate. instead of opening more jobs, yip (2018) argued that such tax had been shown to disproportionately affect individuals with lower levels of education, often leading to job displacement. this leaves many to take up temporary or informal employment, while others may become discouraged from participating in the workforce altogether. this duality highlights the need for carefully balanced policies that achieve environmental objectives without compromising economic stability. https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 58 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc green tax in developing countries context while climate change impacts the planet as a whole, its effects are unevenly distributed, with certain regions and communities experiencing more severe consequences than others. all economic predictions indicate that climate change will hit the developing countries hardest due to their limited resources, higher dependence on climate-sensitive sectors like agriculture, and weaker adaptive capacities. in response to this mounting crisis, governments in many developing countries have become increasingly aware of the need for environmental policies. although the pace has been slow, there has been a growing recognition of the importance of green taxes as part of broader climate action strategies. cottrell & falcão (2018) argued that environmental taxes can help tackle some of the environmental challenges faced by developing countries, while promoting more sustainable production and consumption patterns. additionally, they provide the financial resources needed to improve environmental and social outcomes. similarly, the study conducted by heine & black (2018) also indicated that the impacts of green tax implementation are likely to be more positive in developing countries than is often perceived. within the context of developing countries, green tax is expected to deliver a double dividend – simultaneously reducing pollution and boosting economic growth. heine & black (2018) argued that the implementation can also enhance welfare in developing countries on two key fronts. first, green tax can directly improve well-being by reducing pollution and, consequently, minimizing welfare losses caused by environmental externalities. moreover, because many pollutants are emitted simultaneously during certain processes, green tax’s benefits often extend beyond the targeted pollutant. for example, burning coal releases both co₂, which drives global warming, and pm2.5, a particulate matter harmful to health. by addressing such emissions, green tax can deliver multifaceted improvements to public welfare. second, green tax can indirectly improve welfare by stimulating economic activity. this can be achieved either by lowering the excess burden of the tax system through revenue-neutral recycling or by expanding domestic resources for public investment. nevertheless, although the implementation of green taxes offers greater benefits in developing countries, it is important to emphasize that the complexity of their application poses significant challenges. these challenges often stem from factors such as limited institutional capacity, lack of comprehensive data for effective tax design, and political resistance from stakeholders who may be adversely affected in the short term. kuralbayeva (2019), for instance, mentioned that when considering the implementation of such taxes, governments often evaluate whether they can serve dual purposes: not only achieving environmental objectives but also contributing to broader social and economic goals, such as reducing unemployment rates. in relation to green taxes, these policies can reduce private incomes, including those of individuals receiving state benefits, which in turn makes environmental tax reforms politically contentious and challenging to execute. additionally, ensuring public acceptance of green taxes can be difficult in contexts where awareness about environmental issues is low or where citizens are already burdened by other taxes. https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 59 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc method this study employed qualitative method by adopting comparative case study approach (bartlett & vavrus, 2017), analysing the green tax schemes of three scandinavian countries—denmark, norway, and sweden. the aim is to identify effective green tax policies used to combat climate change and explore how these can be applied to indonesia's context. the study will draw insights from the successes and challenges faced by these countries in implementing green taxes and aim to provide policy recommendations for indonesia. denmark, norway, and sweden were chosen for this study because of their advanced and well-documented green tax schemes. each country has not only established green taxes but has also been successful in using these fiscal tools to reduce greenhouse gas emissions, promote renewable energy, and encourage sustainable consumption. data were collected through literature review. the collected data from three countries were then categorized into six comparative evaluations: (1) design, delving into the arrangement of green tax application; (2) implementation, aimed to find out the process of implementation; (3) outcome, to get insight regarding the result of such green tax designed implemented; (4) public acceptance, to measure how the policy was being perceived by each country’s constituent; (5) success factor, to examine the elements contributed towards the success of the green tax policy; and (6) challenge, to explore the obstacle that might rise from the execution of such policy. by studying these countries through these six comparative evaluations, it is expected to have a better understand of the intricacies of implementing green taxes in a developed economy. these case studies will provide a foundation for identifying policy strategies that could be relevant to indonesia. the research relied on secondary data from literature, government reports, and international publications to examine the design, goals, and impacts of green taxes in these countries. this will include government reports, research papers, and publications from international organizations that discuss the implementation of green taxes in denmark, norway, and sweden. result and discussion the green tax has emerged as a pivotal strategy for nations striving to balance economic growth with environmental sustainability. by restructuring tax systems to penalize pollution and incentivize green practices, green tax aims to reduce environmental harm while promoting economic efficiency (stameski et al., 2024). the scandinavian countries—denmark, norway, and sweden—stand at the forefront of implementing such policy, offering valuable insights into the practicalities and impacts of green tax. the following case studies delve into the specifics of each country's journey with green tax, analyzing the factors that contributed to their successes and the obstacles they encountered. https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 60 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc a sneak peak of green taxation in scandinavian: the case of sweden, norway, and denmark in the early 1990s, sweden, norway, and denmark embarked on pioneering journeys to implement green taxation, tailoring their approaches to their unique economic landscapes and environmental objectives. these initiatives aimed to reduce greenhouse gas emissions, promote sustainable energy practices, and stimulate economic growth through environmental innovation. sweden introduced its carbon tax in 1991, becoming one of the first countries globally to implement such a measure. the tax targeted carbon dioxide emissions from fossil fuels, with the initial rate set at 120 us dollars per ton of carbon. this rate was considered among the highest at the time, reflecting sweden's commitment to environmental sustainability (jonsson et al., 2020). sweden's carbon tax design was influenced by two primary objectives: addressing climate change and reforming the tax system. the tax aimed to stabilize swedish carbon emissions, aligning with the 1988 stabilization target, and to replace other taxes, such as income and payroll taxes, with environmental levies (hildingsson & knaggård, 2022). according to jonsson et al. (2020) green-tax switch. this approach involved increasing environmental taxes, such as the carbon tax, while reducing other taxes. upon implementation, the tax was modest initially, levied at sek 250 per 1,000 kg of co₂— approximately $40 at the time(jonsson et al., 2020). this strategic move aimed to incentivize businesses and households to reduce their carbon footprints. over the years, the tax rate has increased incrementally, reaching sek 930 in 2007, reflecting sweden's unwavering commitment to combating climate change. the carbon tax covered fossil fuels used in heating, electricity generation, and transportation, encompassing about 40% of sweden's carbon emissions. however, certain industries, such as commercial horticulture, mining, manufacturing, and pulp and paper, were either taxed at a reduced rate or exempted entirely. this selective application led to discussions about the tax's effectiveness and fairness (jonsson et al., 2020). despite these challenges, the outcomes of sweden's carbon tax have been noteworthy. between 1990 and 2018, the nation achieved a 27% reduction in greenhouse gas emissions, with significant decreases in heating homes and industrial facilities. the tax also played a pivotal role in promoting renewable energy sources, such as biomass, and encouraging energy-efficient technologies. economically, sweden experienced steady gdp growth, with gdp per capita increasing in real terms by more than 50% between 1990 and 2019 (hildingsson & knaggård, 2022). furthermore, the public acceptance of the carbon tax remained relatively high, attributed to the transparent allocation of tax revenues to environmental initiatives and the reduction of other taxes. a study by jagers et al. (2019) found that addressing fairness considerations, such as personal and collective distributional effects, can enhance public acceptance of stricter carbon taxes. sterner (sterner, 2020), for instance, mentioned that compared to other countries, sweden has a remarkably even income distribution historically. for such a controversial policy, the swedish government would proactively initiate various social programs to compensate its constituents. one example of supportive programs to remunerate the increase of carbon tax is public transportation and "community heating" systems – centralized district heating that offers affordable heating to most of the population (sterner, 2020). https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 61 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc in the early 1990s, norway embarked on a pioneering journey to address climate change by implementing a carbon tax targeting the petroleum sector. this strategic move aimed to internalize the environmental costs associated with fossil fuel extraction, reflecting norway's commitment to sustainable development (dugstad et al., 2024). the carbon tax design was structured to reflect the carbon content of fuels, promoting cleaner energy use. the tax system was carefully crafted to balance environmental objectives with economic considerations, ensuring the petroleum industry could adapt without compromising its competitiveness. the norwegian government introduced the carbon tax in the early 1990s, applying it to various sectors with some exemptions to protect economic competitiveness. this approach allowed for a gradual transition, giving industries time to adjust to the new tax regime. the outcome of this policy was significant. norway's carbon tax contributed to decoupling economic growth from carbon emissions, with reductions in emission intensity observed alongside continued economic development(dugstad et al., 2023). this success demonstrated that environmental policies could align with economic prosperity. public acceptance of the carbon tax was facilitated by a strong environmental consciousness and the government's efforts to communicate the necessity of the tax for sustainable development. transparency in the allocation of tax revenues and the reduction of other taxes further enhanced public support (dugstad et al., 2024). meanwhile, denmark introduced its carbon tax in 1992, targeting carbon dioxide emissions from fossil fuels. the initial tax rate was set at 25 us dollars per ton of carbon, with plans for gradual increases over time (daugbjerg & pedersen, 2004). the revenue generated from the carbon tax was allocated to various environmental initiatives, including subsidies for renewable energy projects and energyefficient technologies. denmark pioneered green taxation, introducing carbon taxes in the early 1990s in response to a regional economic crisis (daugbjerg & pedersen, 2004). in 2024, denmark announced plans to implement a co₂ equivalent (co₂e) emission tax on livestock emissions, starting at 300 danish kroner per ton of co₂e in 2030, escalating to 750 kroner per ton by 2035 (moody, 2024) this initiative aims to reduce emissions from the agricultural sector, which is a significant contributor to denmark's greenhouse gas emissions. the introduction of the co₂e emission tax on livestock has faced mixed reactions. while environmental groups support the measure as a necessary step toward reducing agricultural emissions, farmers have expressed concerns about increased production costs and potential impacts on food prices. the government has proposed income tax deductions to mitigate the financial impact on farmers, aiming to balance environmental goals with economic considerations (moody, 2024). earmarking green tax revenue also became another strategy taken by the danish government. for instance, the revenue generated from the carbon tax is invested entirely in environmental projects, such as subsidizing the establishment of css plants. in contrast, revenue generated from the green tax that targets farms must be returned to the industry as a whole (møller & oksbjerg, 2024). sweden, norway, and denmark have embarked on ambitious journeys to implement green taxation, each aiming to reduce carbon emissions and promote sustainable practices. despite their unique approaches, these nations have faced similar challenges, particularly from the oil, gas, and agriculture industries. these sectors have raised concerns about the increasing operational costs associated with https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 62 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc green taxes and the potential loss of competitiveness in a global market. as a result, calls for exemptions, rebates, and a more gradual introduction of tax policies have been common. in response to these challenges, the governments of sweden, norway, and denmark have employed various strategies. one key measure has been the gradual increase of tax rates, giving industries and consumers time to adjust. this approach aims to ease the transition while encouraging a shift toward more sustainable practices. transparent communication has also played a vital role, with governments clearly outlining these reforms' environmental and economic benefits. to further ensure public support, the revenue generated from the taxes has been allocated to environmental initiatives and subsidies for green technologies, ensuring that the funds contribute directly to promoting sustainability. despite these well-crafted strategies, the path toward successful implementation of green taxes has not been without obstacles. in sweden, for example, the northern regions are experiencing significant financial strain due to investments in green industries. the recent bankruptcy of northvolt, a major battery manufacturer, has underscored the potential economic risks for local authorities, particularly in areas such as skellefteå. the need for substantial infrastructure investments to support emerging green industries has added pressure to local governments already burdened with high social and healthcare costs. the swedish association of local authorities (skr) has called for greater financial support from the central government, but a clear response has not yet been forthcoming. although sweden's northern regions are rich in natural resources and access to cheap, carbon-free electricity, the region has faced delays and slowed growth in green projects. opposition to wind power and the high costs associated with nuclear energy have further hindered progress. despite some optimism from regional companies, local governments remain concerned about covering the substantial initial costs required to support these green transitions (abnett, 2024). similarly, denmark has encountered challenges, particularly about the european union's evolving climate policies. in recent years, there has been increasing pressure from some eu member states to weaken or delay climate change policies, which were already softened due to political resistance. in particular, recent european elections have shifted national priorities, focusing less on environmental concerns and more on rejuvenating struggling industries. as a result, the eu parliament has decided to delay an anti-deforestation law. it has adjusted green farming policies in response to objections from member states and trade partners. in denmark, climate minister lars aagaard has strongly cautioned against further amendments to existing laws, stressing the importance of maintaining consistent regulations for investor confidence. any drastic changes, he argues, could undermine the credibility of denmark's green initiatives and penalize those who have already made significant investments in sustainability. these experiences in sweden, norway, and denmark underscore the complexities and challenges of implementing green taxation policies. while each nation has taken strides toward a more sustainable future, the path has been riddled with obstacles. industry pushback, economic pressures, and political resistance have all played a role in shaping the outcome of these initiatives. nevertheless, the strategies https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 63 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc employed—such as gradual tax increases, transparent communication, and reinvestment of tax revenues into green technologies—have contributed to a successful transition in many areas. the ongoing dialogue between governments, industries, and the public will ensure that these environmental reforms remain effective and sustainable in the long term. in summary, the experiences of denmark, norway, and sweden in implementing green taxes offer valuable insights into the design and execution of effective environmental tax reforms. key factors contributing to their successes include strong political will, transparent communication, stakeholder engagement, and the strategic use of tax revenues. challenges primarily revolved around balancing economic and environmental objectives, maintaining competitiveness, and ensuring equitable impacts. the following table provides a comparative overview of the green tax implementations in these three countries: table 2. summary comparison of green taxation in denmark, norway, and sweden aspect denmark norway sweden design focus on energy consumption, carbon emissions, and waste management. carbon taxes targeting the petroleum sector. carbon tax on fossil fuel consumption across various sectors. implementation phased approach with revenue recycling to reduce labor taxes. introduced in the early 1990s with sectoral exemptions. implemented in 1991 with differentiated rates for industries. outcome reduced carbon emissions and energy consumption; growth in renewables. decoupling of economic growth from carbon emissions. significant emission reductions alongside economic growth. public acceptance achieved through transparent communication and stakeholder engagement. facilitated by strong environmental consciousness. high acceptance due to environmental awareness and trust in government. success factors political commitment, stakeholder engagement, and clear revenue linkage. proactive policies, public awareness, integration into fiscal policies. comprehensive design, gradual implementation, and public engagement. challenges competitiveness concerns ensuring equitable societal impacts. balancing environmental goals addressing impacts on energy-intensive https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 64 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc with petroleum industry interests. industries, ensuring social equity. key insights and policy implication for indonesia indonesia, like sweden, norway, and denmark, is navigating the complexities of implementing green taxation to foster a sustainable economy. drawing lessons from these scandinavian countries can provide valuable insights for indonesia's policy development. on april 1, 2022, indonesia took a significant step toward a greener economy by introducing a carbon tax. this marked a key moment in the country’s environmental policy, signaling its commitment to reducing carbon emissions and transitioning towards more sustainable practices. however, as with any ambitious policy shift, indonesia faces various challenges in implementing the tax, particularly resistance from industries and concerns about economic competitiveness. these hurdles are not unique to indonesia, as countries worldwide, including those in the scandinavian region, have faced similar obstacles when implementing green taxation. by drawing on the lessons from these nations, indonesia has the opportunity to navigate these challenges more effectively. one of the key strategies that has proven successful in countries like sweden, norway, and denmark is the gradual implementation of carbon taxes. tax rates were introduced incrementally in these countries, allowing businesses and industries time to adjust and minimize economic disruptions. by adopting a similar phased approach, indonesia can allow industries to adapt to the tax without overwhelming them in the short term. this gradual increase provides businesses with time to adjust and helps ease the public’s transition toward a more sustainable economy. in addition to a phased implementation, transparent communication with stakeholders is another crucial factor for success. governments made concerted efforts in sweden, norway, and denmark to explain the rationale behind green taxes and how the revenues would be reinvested in renewable energy projects and environmental initiatives. this kind of transparent engagement has been key to building public trust and garnering support for such policies. indonesia can follow suit by engaging with industries, consumers, and environmental groups, ensuring they understand both the necessity of carbon tax and its long-term benefits. by fostering an open dialogue, the government can address concerns and garner the public support needed for the tax to be successful. another important lesson from scandinavian countries is the strategic use of carbon tax revenues. in those nations, the revenues generated from the tax were reinvested into renewable energy projects, green technologies, and environmental initiatives, demonstrating a clear commitment to sustainability while offsetting some of the economic costs of the tax. for indonesia, allocating carbon tax revenues similarly could serve two purposes: it would help drive the transition to renewable energy and sustainability and mitigate potential economic burdens on businesses and consumers. this approach can create a win-win scenario, where the tax is not viewed simply as a financial burden but as an investment in the country’s green future. finally, addressing industry-specific concerns is crucial. in https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 65 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc industries where international competition is particularly fierce, such as manufacturing and energy, targeted exemptions or rebates may be necessary to ensure that the carbon tax does not place local industries at a disadvantage. this has been a challenge in many countries, and balancing environmental goals with economic competitiveness will be key for indonesia. by tailoring measures to protect sectors vulnerable to international competition, indonesia can balance environmental objectives and economic concerns, ensuring that the policy is fair and effective. by incorporating these strategies—phased tax implementation, transparent stakeholder engagement, strategic revenue use, and industry-specific measures—indonesia can create a more sustainable economy while addressing the concerns of industries, consumers, and the public. drawing from the successes and challenges faced by countries like sweden, norway, and denmark, indonesia can make its green taxation policy a vital tool in fostering a greener, more resilient future. however, the difference between indonesia’s and scandinavian constituents is also worth noting. for instance, most of the citizens in norway are quite aware of climate change and the need to take action against it, as mentioned in grimsrud et al.’s research (grimsrud et al., 2020). the welfare of the citizen in scandinavian countries is also considerably higher than that of indonesia, so they can expand their attention away from social development. whereas, indonesia is still struggling with welfare and poverty issues. hence, similar to other developing countries, indonesia's government must ensure that such policies will also contribute to social development, such as employment and social equity (kuralbayeva, 2019). considering such hindrances, strategies from developed countries must be well adapted to the needs of domestic constituents. moreover, a larger population would make the implementation process more complex and time-consuming. conclusion scandinavian nations have demonstrated the transformative potential of green taxes in addressing environmental challenges, offering valuable insights for indonesia as it seeks to enhance its green taxation framework. key lessons from denmark, norway, and sweden include the importance of phased implementation, robust public communication strategies, and utilizing tax revenues to support renewable energy and environmental projects. while indonesia has taken initial steps toward adopting green taxation, significant challenges remain, including political resistance and public skepticism. steps of facing such obstacles can be begun by tailoring clear, concise, and open communication with the public in general and affected stakeholders in particular. the government of indonesia can optimize its online presence to reach broader audiences and design more open dialogues with affected stakeholders. at the same time, close engagement with academics, practitioners, and professionals to evaluate the policy regularly is also needed. these engagements would also be required to measure the industry's readiness and create a phased green tax implementation roadmap. last but not least, the indonesian government needs to be more transparent about the usage plan of revenue generated from the green tax. earmarking and equal distribution would be crucial to win public acceptance. by addressing these barriers and drawing on international best practices, indonesia can position itself as https://www.ilomata.org/index.php/ijtc combating climate changes through fiscal policies in developed world: key insights for indonesia from scandinavian green tax scheme nurulita and prasidya 66 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc a leader in sustainable development within southeast asia. ultimately, a well-designed green tax system will mitigate environmental harm and promote economic resilience, aligning national policies with global sustainability goals. finally, this research is expected to contribute to global climate change discourse by adapting successful scandinavian green tax policies to indonesia’s context. it emphasizes actionable strategies like phased implementation, public engagement, and transparent revenue allocation, showing how developing nations can align with global sustainability goals while addressing local challenges. reference abnett, k. 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(2022). modelling the role of eco innovation, renewable energy, and environmental taxes in carbon emissions reduction in e−7 economies: evidence from advance panel estimations. renewable energy, 190, 309–318. https://doi.org/10.1016/j.renene.2022.03.119 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 4 october 2024 page no. 1-12 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria ahmed oluwatobi adekunle1 1walter sisulu university, south africa correspondent: aadekunle@wsu.ac.za1 received : august 23, 2024 accepted : october 15, 2024 published : october 31, 2024 citation: oluwatobi, a., & adekunle, (2024). trade openness and economic growth: an empirical analysis from nigeria. ilomata international journal of tax & accounting. 5(4), 1-12. https://doi.org/1061194/ijtc.v5i3.1640 abstract: with a focus on trade openness, interest rates, exchange rates, and foreign direct investment, this study investigates the relationship between trade openness and economic growth in nigeria between 1986 and 2021. many observers believe that nations with poor infrastructure are unable to maintain sustained economic growth, particularly when trade openness is hampered by several obstacles. even though trade liberalization has been extensively studied, few studies thoroughly examine how these factors collectively affect nigeria's economic growth now, especially over a wide range of data. using ardl methodologies, this study shows that trade openness has a significant impact on economic growth, highlighting its critical role in the economy. the study demonstrates that trade openness and foreign direct investment significantly affect economic growth. these revelations improve understanding of the role macroeconomic analysis plays in economic growth and strategic economic management issues. keywords: economic growth, fdi, trade openness, ardl this is an open access article under the cc-by 4.0 license introduction since no country can thrive without engaging with the global market, economic interconnectedness between nations is unavoidable. there is a widespread belief that nations with poor infrastructure do not have the resources to continue their path to sustainable economic growth. for this reason, they frequently turn to luring in foreign resources to boost economic expansion, which is usually accomplished through international commerce (chen et al., 2022; liu et al., 2022; nam & ryu, 2024; oloyede et al., 2021; zaman et al., 2021). most african nations experienced a 13.9% and 20.6% drop in exports and imports, respectively, and a 6.8% drop in gdp in 2020 compared to 2019 (udeagha & ngepah, 2021) . based on this, it seems that nigeria's economy has not benefited as much from trade liberalization as anticipated, as the country has been grappling with the issue of trade balance following a series of trade openness policies. in addition, most economy has been characterized by high rates of inflation, unemployment, and inequality (nguyen et al., 2022; tiwari et al., 2022; yang et al., 2022). https://www.ilomata.org/index.php/ijtc mailto:aadekunle@wsu.ac.za1 https://doi.org/1061194/ijtc.v5i3.1640 trade openness and economic growth: an empirical analysis from nigeria adekunle 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the question that still needs to be answered is whether nigeria's extensive adoption of trade openness policies is responsible for any appreciable economic growth in the nation. this important subject necessitates a quick examination to confirm the effectiveness of trade openness in fostering economic growth in nigeria. nigeria is one of the few most liberalized economies on the continent with substantial trade openness policies, which justifies the country's selection as the research area. nigeria's economy is essentially open to economic integration, which should lead to the transfer of technology and other byproducts of trade openness. if correctly handled, these byproducts should drive the nation's economic expansion. additionally, technology transfers help open economies by encouraging competition and innovation in poorer countries (bazán navarro et al., 2024; ehigiamusoe et al., 2024; erero & makanamisa, 2021; nam & ryu, 2024; papadas, 2024; wang et al., 2022; zuo et al., 2023). international commerce has a major impact on innovation in these economies and exposes them to cutting-edge technologies (wang et al., 2022). through international trade, governments acquire important information, transaction agreements, and expertise. export and import-related activities have produced a business climate that is favorable to expansion, which has led governments to enact pertinent laws intended to stabilize economic growth, streamline regulatory frameworks, and improve infrastructure. this promotes economic development by enhancing the capacities of governments and businesses involved in global trade. for developing economies, trade-led growth policies are essential. in essence, academic publications on trade openness, aggregate variables, and emerging economic populations have grown over time, presenting a range of empirical findings and their approaches. qabhobho et al., (2022) evaluates the connection amid trade openness and ecowas nations' economic growth. using co-integration, vector error correction, and the adf and pp unit root test, the study concentrated on ghana and nigeria. real government spending and trade openness were discovered having direct effect on the economies of the chosen ecowas nations. kutu & ohonba, 2024 used a cointegration approach to study the effect of trade liberalization on economic growth in south africa, and the results demonstrated that economic liberalization is important and positively stimulates economic growth. by looking at various economic indicators, the study seeks to comprehend their combined impact on gdp. in essence, this research examines how trade openness affects economic growth in nigeria. it provides a thorough analysis of their importance to the expansion of the nigerian economy. this study is significant from an academic and practical standpoint. in terms of academia, it adds to the body of evidence already available on trade openness analysis in the nigerian economy, with a particular emphasis on long-term data trends. in practice, the results offer useful information for managing aggregate analysis to boost economic growth and for the government looking for datadriven decision-making techniques. this study gives international trade analysts useful tools to efficiently improve macroeconomic management and operational strategies by determining the relative effects of trade openness and exchange rates. based on the above analysis, the research model framework is as follows: https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 1. framework source: author’s compilation (2023) -40 -30 -20 -10 0 10 20 30 1990 1995 2000 2005 2010 2015 2020 figure 2. cointegration graph source: author’s compilation (2023) method for the purposes of this investigation, trade openness is determined by dividing trade volume by gdp. as it represents a nation's true level of economic integration with the rest of the globe, this is a legitimate metric (banday et al., 2021; kutu & ohonba, 2024). kutu & ohonba, (2024) concentrate on the dynamic and macro indicators of trade liberalization, they also classified the metric as de-facto. interestingly, this study introduces trade openness growth as a logical variable that catches the exhibition of most aggregate factors, such as imports and exports. to prevent potential endogeneity and multicollinearity problems, these variables are included in the economic growth metric. to the best of the author's knowledge, the study only contained the explanatory factors that were required to determine economic growth. this work is empirically based on the submission of earlier research on the south african country, including kutu & ohonba, 2024 cgdp = f(tro, exr, fdi, inr) 1 export exchange rate import economic growth https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 𝐶𝐺𝐷𝑃 = ∅0 + ∅1𝑇𝑟𝑂 + ∅2𝐸𝑥𝑅 + ∅3𝐹𝐷𝐼 + ∅4𝐼𝑛𝑅 + 𝜇 2 ∆𝐶𝐺𝐷𝑃 = ∅0 + ∑. 𝐽 𝑠=1 ∅1𝑠∆𝐶𝐺𝐷𝑃.𝑡−𝑛+ ∑. 𝐽 𝑠=1 ∅2𝑠∆𝑇𝑟𝑂.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅3𝑠∆𝐸𝑥𝑅.𝑡−𝑛 + ∑. 𝐽 𝑠=0 ∅4𝑠∆𝐹𝐷𝐼.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅5𝑠∆𝐼𝑛𝑅.𝑡−𝑛 + 𝜕1𝐶𝐺𝐷𝑃𝑡−1 + 𝜕2𝑇𝑅𝑂𝑡−1 + 𝜕3𝐸𝑥𝑅𝑡−1 + 𝜕4𝐹𝐷𝐼𝑡−1 + 𝜕5𝐼𝑛𝑅𝑡−1 + 𝜇 3 ∆𝐶𝐺𝐷𝑃 = ∅0 + ∑. 𝐽 𝑠=1 ∅1𝑠∆𝐶𝐺𝐷𝑃.𝑡−𝑛+ ∑. 𝐽 𝑠=1 ∅2𝑠∆𝑇𝑟𝑂.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅3𝑠∆𝐸𝑥𝑅.𝑡−𝑛 + ∑ . 𝐽 𝑚=0 ∅4𝑚∆𝐹𝐷𝐼.𝑡−𝑛+ ∑ . 𝐽 𝑚=0 ∅5𝑚∆𝐼𝑛𝑅.𝑡−𝑛 + 𝜕1𝐶𝐺𝐷𝑃𝑡−1 + 𝜕2𝑇𝑟𝑂𝑡−1 + 𝜕3𝐸𝑥𝑅𝑡−1 + 𝜕4𝐹𝐷𝐼𝑡−1 + 𝜕5𝐼𝑛𝑅𝑡−1 +∈ 𝐸𝐶𝑇𝑡−1 +∈𝑡 4 the error correction model (ectt) is a mechanism that give the feedback effect or speed of adjustment of the model. it reveals how much and faster the disequilibrium in the short term has been adjusted. in essence, it entails the extent to which any imbalance in the previous period has been corrected in the independent variable. ardl regression model is limited because it provides only the short run result. however, the long run findings are more critical to researchers as its guide serve as a guide for policy formulation. hence, the co-integration test and error correction model becomes imperative (chen et al., 2022; zaman et al., 2021). thus, a positive coefficient of ect signifies a deviation, while an indirect coefficient presents a merging. a coefficient of ect = 1, suggests that hundred percent of the modification occurred speedily over time, while an estimated coefficient of ect = 0.5, implies that fifty percent of the modification takes place over time. more critically, ect = 0, shows that there is no correction, hence, making a meaningless representation of the long run relationship duru et al., (2020) , kutu & ohonba, (2024) and osabuohien et al., (2019) result and discussion cointegration evaluation using bound testing approach in 1986-2021 table 1. cointegration evaluation using bound testing approach in 1986-2021 test statistic value k f-statistic 5.484899 4 c.v.b significance i0 i1 10% 1.56 2.63 https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 5% 1.97 3.12 2.5% 2.36 3.38 1% 2.85 4.17 source: author compilations, 2023 cointegration among our variables of interest is indicated in table 1 above. it is basically evident that the f-statistic (5.48) is higher than both the lower (1.97) and upper (3.12) bounds. as a result, we may move forward with our ardl analysis, both shortand long-term. ardl long run output for the study in 1986-2021 table 2: ardl long run output for the study in 1986-2021 variable coefficient std. error t-statistic prob.* gdpc(-1) 0.236867 0.148869 1.591118 0.1339 gdpc(-2) 0.417445 0.132199 3.157710 0.0070 tro 1.47e-11 1.16e-11 1.269201 0.2251 exr 0.051030 0.016971 3.006911 0.0094 exr(-1) -0.009929 0.014255 -0.696543 0.4975 exr(-2) 0.007168 0.013514 0.530460 0.6041 exr(-3) 0.031579 0.013209 2.390750 0.0314 exr(-4) 0.050869 0.011474 4.433491 0.0006 inr 0.066034 0.073419 0.899416 0.3836 inr(-1) -0.067177 0.053166 -1.263535 0.2270 inr(-2) 0.095008 0.064009 1.484296 0.1599 inr(-3) 0.063996 0.066931 0.956155 0.3552 fdi -4.25e-10 3.81e-10 -1.113678 0.2842 fdi(-1) 8.20e-10 4.29e-10 1.910273 0.0768 fdi(-2) 9.63e-10 4.20e-10 2.294071 0.0378 fdi(-3) -2.06e-10 4.05e-10 -0.509905 0.6181 fdi(-4) -1.41e-09 4.88e-10 -2.889176 0.0119 c -6.089933 3.177301 -1.916700 0.0759 source: author compilations, 2023 trade openness is a strong predictor of economic growth in nigeria, following the long-run output shown in table 2. as a result, a 1% rise in trade openness would greatly boost economic expansion by 1.4%. the endogenous development hypothesis' apiori hypothetical assumption is met by this result. thus, as per endogenous development models, exchange influences a country's specialization research-serious innovations and creation frameworks, changes the viable size of the market confronting makers, and gives admittance to imported merchandise that exemplifies that innovation. the outcomes additionally support the exact exploration directed in south africa and nigeria (adekunle, et al., 2023; gbadebo, et al., 2023; adekunle, 2024; bekun et al., 2023; kutu & ohonba, 2024). qabhobho et al., (2022) assert that trade openness policies implemented by south africa's consecutive governments significantly contribute to the nation's economic progress. observing that there is flexibility in the connection amid economic development and trade openness, indicating that https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a small change in trade openness will result in a more than proportionate shift in economic growth. therefore, economic openness is necessary for the nigerian economy to thrive as intended. for south africa's government and stakeholders, this is crucial and instructive. additional findings showed that a 1% increase in exchange rates leads to a robust 0.3% long-term advance in economic growth. accordingly, we draw the conclusion that exchange rates play a crucial role in boosting nigeria's economic growth, which is consistent with both our apriori expectations and the theoretical foundation of neoclassical theory. the theory states that higher exchange rates have the power to pull an economy out of any state of decline. the research conducted in south africa by kutu & ohonba, 2024 provides empirical support for this. over time, foreign direct investment has a significant and detrimental impact on economic growth. a 9.6% rise in economy expansion will result from a 1% rise in fdi (lag 2) entrance, which is consistent with the findings of kutu & ohonba, 2024 in south africa. the study concludes that fdi is a prime factor in stimulating transformation in nigeria. this supports both our appriori expectation and the modernization theory's theoretical tenet that the recipient economy will gain from the influx of foreign direct investment. additionally, it was found that interest rates had no discernible impact on economic expansion. an intangible reversal in economic growth would be degenerated by 0.06% for every 1% increase in interest rates. this study carried out four diagnostic tests on the model in nigeria to guarantee its validity, stability, and credibility. tables 4 and 5 below show the outcomes of these tests. ardl short run output for the study in 1986-2021 table 3: ardl short run output for the study in 1986-2021 variable coefficient std. error t-statistic prob. d(gdpc(-1)) -0.417445 0.132199 -3.157710 0.0070 d(tro) 0.030000 0.018000 1.666666 0.0251 d(exr) 0.051030 0.016971 3.006911 0.0094 d(exr(-1)) -0.007168 0.013514 -0.530460 0.6041 d(exr(-2)) 0.031579 0.013209 2.390750 0.0314 d(exr(-3)) -0.050869 0.011474 -4.433491 0.0006 d(inr) 0.066034 0.073419 0.899416 0.3836 d(inr(-1)) -0.095008 0.064009 -1.484296 0.1599 d(inr(-2)) -0.063996 0.066931 -0.956155 0.3552 d(fdi) -0.000000 0.000000 -1.113678 0.2842 d(fdi(-1)) -0.040000 0.180000 -0.222071 0.0378 d(fdi(-2)) 0.000000 0.000000 0.509905 0.6181 d(fdi(-3)) 0.000000 0.000000 2.889176 0.0119 cointeq(-1) -0.345687 0.194885 -1.773800 0.0978 source: author compilations, 2023 the short-term dynamic estimates of the connection amid nigeria's economic expansion and tro are displayed in table 3. the output of the empirical analysis indicates that, at the 1% level of significance in the present year, trade openness was shown to have a positive and significant impact on economic https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc growth. therefore, there would be a 0.3% gain in economic growth for every 1% increase in openness in trade. in line with the findings of qabhobho et al., (2022) and kutu & ohonba, 2024 in south africa, this suggests that tro is a key factor of economic expansion in nigeria. udeagha & ngepah, (2021), trade openness only has a short-term, substantial effect on economic growth. this must have been fixed this year, though it may not be unrelated to conflicting policy. trade openness continues to be a growth-promoting factor in nigeria. additionally, the results indicated that foreign direct investment had a negative and significant impact during the lag 1 period, suggesting that fdi inflow had a weak and negative impact on nigeria's economic growth. this is consistent with the findings of qabhobho et al., (2022) and (kutu & ohonba, 2024) in south africa. a 1% increase in foreign direct investment would result in a 0.04% decrease in economic growth. on the other hand, fdi entry during the last year and two years has had a beneficial but negligible impact. however, interest rates have a substantial effect on economic expansion, they are the short-term predictor of economic growth in nigeria. interest rates increased by 1% in the current year, lag 1 and lag 2, respectively, producing a high and negligible opposite growth rate of 0.06%, 0.09%, and 0.06%. this implies that because of its volatility, nigeria's present interest rate policy is anti-growth. considering the outcomes above, it very well may be closed that tro has a short-term effect on the nigerian economy. in essence, the cointeq(-1) indicates that any short-term disequilibrium will be restored by a 34% speed of adjustment in the long-term, with a negative sign (-0.34) and a probability of 0.09 level of significance. -20 -15 -10 -5 0 5 10 15 20 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 cusum 5% significance figure 3. cusum stability test (2023) https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 cusum of squares 5% significance figure 4. cusum of squares stability test (2024) the study used the cumulative sum of recursive residuals (cusum) and cumulative sum of recursive residuals of the squares (cusum of square) tests to determine the model's stability. the plot of the model's cusum statistic and cusum of squares is inside the critical bound, according to the stability test displayed in figures 2 and 3. the model is hence stable and appropriate for policy implications. since the model passed all stability and diagnostic tests, it tends to be reasoned that the model derived in the study is valid, credible, stable, and dependable. heteroskedasticity test for the study in 1986-2021 table 5. heteroskedasticity test for the study in 1986-2021 f-statistic 0.124871 prob. f(1,33) 0.7261 obs*r-squared 0.131940 prob. chi-square(1) 0.7164 serial correlation test for the study in 1986-2021 table 6. serial correlation test for the study in 1986-2021 f-statistic 4.132147 prob. f(2,30) 0.0260 obs*r-squared 6.931860 prob. chi-square(2) 0.0312 we are unable to reject the null hypothesis since this suggests that the variable in the model is regularly distributed. likewise, the breusch-godfrey serial correlation lm test was used to determine whether a serial correlation was present. since the likelihood esteem is more prominent than the 5% importance level, the invalid speculation, which expresses that there is no sequential connection, can't be discredited. also, the result of the test for heteroscedasticity. we cannot dismiss the invalid speculation since this recommends that the variable in the model is routinely dispersed. similarly, the breuschgodfrey sequential connection lm test was utilized to decide if a sequential relationship was available. since the likelihood esteem is more prominent than the 5% importance level, the invalid https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc speculation, which expresses that there is no sequential connection, can't be refuted. also, the result of the test for heteroscedasticity. conclusion several important implications may be made from the study's findings about the relationship between trade openness and economic growth in nigeria from 1986 to 2021. first, the analysis's most significant finding demonstrates that trade openness is a crucial component that supports nigeria's economic expansion. the implication is that trade liberalization will boost the country's economy. second, fdi has a significant impact on nigeria's economic expansion. the overall conclusion is that the economy's participation in international trade will have a cascading effect that will lead to greater economic scale, benefits from information and technological advancement, increased export competitiveness, and ultimately, economic growth. the following suggestions are offered for policy implications considering the findings: the government should endeavor to guarantee that trade openness has a substantial impact on economic growth. for complete economic connection with the rest of the world, the government of the nation will strategically open its borders. additionally, the economy must embrace measures that encourage liberalization, such diversifying the export structure by making sure that more manufactured goods are exported rather than relying just on primary exports. this is relevant to boost their benefits from trade openness. therefore, strategies aimed at boosting local output by reviving home industries so they can manufacture items that can effectively compete with goods from other countries should be implemented. the existing liberalization policies, which are already producing greater performance, need to be strengthened. last but not least, the exchange rate plays a significant role in trade and is a key factor that affects how the economy functions overall. it establishes the pace of international trade between the home economy and the global economy. therefore, to maintain a steady rate that is beneficial to the domestic economy, monetary authorities must keep an eye on and regulate changes in the rates. in this way, it will stimulate export growth, increase investor trust, 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(2022). impact of equity market development on renewable energy consumption: do the role of fdi, trade openness and economic growth matter in asian economies? journal of cleaner production, 334, 130244. https://doi.org/10.1016/j.jclepro.2021.130244 udeagha, m. c., & ngepah, n. (2021). the asymmetric effect of trade openness on economic growth in south africa: a nonlinear ardl approach. economic change and restructuring, 54(2), 491–540. wang, x., lang, x., deng, y., tang, j., he, q., xie, f., & yin, q. (2022). early mesozoic magmatism records the tectonic evolution from synto post-collisional setting in the central lhasa subterrane, tibet. lithos, 416–417, 106642. https://doi.org/10.1016/j.lithos.2022.106642 yang, x., ramos-meza, c. s., shabbir, m. s., ali, s. a., & jain, v. (2022). the impact of renewable energy consumption, trade openness, co2 emissions, income inequality, on economic growth. energy strategy reviews, 44, 101003. https://doi.org/10.1016/j.esr.2022.101003 zaman, m., pinglu, c., hussain, s. i., ullah, a., & qian, n. (2021). does regional integration matter for sustainable economic growth? fostering the role of fdi, trade openness, it exports, and capital formation in bri countries. heliyon, 7(12), e08559. https://doi.org/10.1016/j.heliyon.2021.e08559 zuo, y., zhi, k., pei, y., zhuang, w., & chen, y. (2023). combining the role of natural resources development and trade openness on economic growth: new evidence from linear and https://www.ilomata.org/index.php/ijtc trade openness and economic growth: an empirical analysis from nigeria adekunle 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc asymmetric analysis. resources policy, 83, 103538. https://doi.org/10.1016/j.resourpol.2023.103538 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 923-940 923 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis abraham nii adu okine1, david kwashie garr2 1accra institute of technology, ghana 2presbyterian university, ghana correspondent: davegarr2023@yahoo.com2 received : may 21, 2024 accepted : july 22, 2024 published : july 31, 2024 citation: okine, a, n, a., garr, d, k. (2024). the effect of macroeconomic and bankspecific factors on the level of nonperforming loans in ghana: panel data regression analysis. ilomata international journal of tax and accounting, 5(3), 923-940. https://doi.org/10.61194/ijtc.v5i3.1733 abstract: non-performing loans has posed persistent challenge in ghana impacting negatively on financial stability and economic growth. studies have been conducted on npls focusing on external factors. however, the real impact of internal determinants has not been explored in the ghanaian context. this work investigates the effect of macroeconomic and bank-specific variables on npls in the ghana, using existing data from published financial reports of nine firms from 2008 to 2021. this study focuses on npls as proxies for the dependent variable, while gdp growth rate, bank’s size, capital adequacy, and unemployment are used as predictor variables. the random effects technique was employed for examination using ordinary least squares. the discoveries prove that gdp has insignificant negative influence on npls, whilst bank size and capital adequacy have positive and statistically significant effect on npls. again, unemployment has statistically significant effect on npls and bank performance. banks need to strengthen credit risk management frameworks, particularly for larger institutions, and refine the capital adequacy strategies to align with actual risk exposure. this calls for regulators to adjust capital requirements and explore employment support mechanisms to mitigate the complex relationship between unemployment and npls, ensuring that policies are tailored to suit local conditions. keywords: non-performing loans, bank-specific factors, ghanaian banking industry, financial stability, economic growth this is an open-access article under the cc-by 4.0 license. introduction the problem of bad debts known as non-performing loans (npls) poses a momentous challenge to the financial stability and survival of banks operating in less developed economies, including ghana, with significant implications for economic progress of the nation as well (gadzo, 2018). figures from the central bank, and ghana bankers association in recent years paint a gloomy picture of npls in the banking sector having recorded 22.8% high in 2018. notwithstanding the https://www.ilomata.org/index.php/ijtc mailto:davegarr2023@yahoo.com https://doi.org/10.61194/ijtc.v5i3.1733 the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 924 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc seeming growth of the ghanaian economy, the recent banking sector clean-up, and recommendations from earlier researches, npl has remained a contentious issue in the financial sector. the main determinant and influence of npls on banking firms is inconclusive. this article thus investigates the role of macroeconomic and bank-specific factors on npl using panel data regression model to add to the ongoing discussions on npls. existing works on this topic provide valuable insights worth discussing. for instance, adusei & bannerman, (2022); and gadzo, (2018), assess the impact of bank-specific and key macroeconomic factors on the level of npls in the local banking sector, and conclude that the npl ratio in the banking sector of ghana averaged 8.13%. this suggests that more than 5% of the loans provided by ghanaian banks become nonperforming and uncollectible against internationally agreed ratios and the pillar two of the basel accord (gadzo, 2018). this leads to financial distress in the banks, potentially resulting in liquidations, failures, takeovers, mergers and acquisitions as occurred in 2017-18 in the financial sector of ghana. the recent growth of npls across several countries has emphasized the need to evaluate the performance of the sharp credit deterioration, npls, and non-accrual loans (adusei & bannerman, 2022; gadzo, 2018). information asymmetry, moral hazard and competition have been discovered as some of the key determinants of bank npls according to dewi and srihandoko, 2018; and olarewaju, 2020. in this regard, borrowers default, rent yield declines, and the long-term analysis yields negative results. however, it is a fact that banking is an indispensable activity in any economy; it is central to the transmission of monetary policies in any country. for the efficient performance of models of the credit market and policy simulation relating to credit portfolios and npls in depository institutions, supervisors and macroeconomists must provide thoughtful, predetermined, accurate forecasts and policy recommendations to bank managements (dou et al., 2020). it is however crucial that risk management policies keep pace with the swift changes in the banking environment caused by the rapid growth in ict (drost & sikken, 2015). for instance, risks and instability in financial reforms, and the rapid enhancement of technology coupled with stiff competition from non-banking firms, including community and rural banks are major features of the current banking landscape, which have in diverse ways, combined to transform the risk structure of banks. consequently, non-performing loans affect the overall fiscal and economic growth of a bank’s jurisdiction (garg, 2016). depositors are averse to failing banks, and hence, a run on a bank (panic withdrawals), occurs at the slightest indication of a deterioration in bank performance. the outcome of such an occurrence is the impact and channeling of the effect of the performance of banks unto the macroeconomic activity of the respective jurisdictions (haim, 2008). this study explores some of the key bank-specific and macroeconomic determinants of npls in ghana for the period 2008–2021 to identify and understand the relationship between these factors and nonperforming loans. the purpose of the study is to contribute knowledge and literature to this field of study by identifying the key factors of npls, providing empirical evidence on the nexus between the key determinants and npls, informing policy decisions targeted at reducing npls, offering insights into ghana’s banking system, and contributing to the development of credit models and methodologies in managing loans. https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 925 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this study is crucial because the financial sector of every economy performs vital role in the mobilization of savings and the allocation of scarce financial resources to individuals and corporations for both consumption and investment purposes (poudel, 2018). however, challenges in credit extensions subsequently result in banks incurring bad debts. subsequently, the value of issued loans impacts the performance of financial institutions and to large extent the economy. the interest of the bank increases in the issuance of high-quality loans, as the realization of poor loans results in financial losses. in addition, bank's funds that would have been used for alternative investment opportunities are channeled towards loan loss provisions and actual bad debt writeoffs; both of which come at an additional cost to banks. hence, such costs have to be avoided by guaranteeing that the firm operates with a lower level of poor loans. with the above specific objectives, the study is conducted using existing data from selected banks obtained from the ghana stock exchange (gse) and the quarterly reports found in the online finance database for the periods 2008-2021. the rest of the paper is structured in the following sections: section two sets out the review of literature and hypotheses; section three presents the methodology employed; section four discusses the empirical result, with the fifth section highlighting the conclusion, policy implications, suggestions, and limitation, and section six rounds off the study with references and appendices. the greater demand for loans for business investments by banks becomes more awkward, especially in the presence of capital inadequacies. such banks become reluctant to issue loans based on the unacceptably high interest rates needed to cross-sell other financial services. banks may also decide to withdraw their deposits, eventually leading to economic growth slump. the degree of change and resulting aggregate outcome, on the other hand, is dependent on various factors, such as bank-specific, industry-specific, or country-specific factors. these factors could equally influence the level of disruptions to some degree in the level of information asymmetry between banks and borrowers in the presence of an inefficient allocation of credit. in the last few decades, there has been an upsurge in the significance of bank intermediation in promoting economic growth and redistribution of resources. this is mainly because the availability of funds to finance private investments by corporate institutions is direly needed, especially in the newly liberalized and globalized world. the bank lending channel indicates how central bank’s actions and monetary policy changes are transmitted to the domestic business cycle. banks’ condition can affect their lending, thereby affecting business investment. the core occupation of banks is to make profits through credit rate margins by matching potential borrowers (hedge) and well-performing investors to use lent funds, probing banks to benefit when the information becomes better. this undermines the borrowers from the negative effect of interest rates, causing it to rise sufficiently above the central bank’s rates. perused lending practices reduce firms’ interaction, resulting in the laxity of monetary policies. in ghana, researchers are yet to embark on a detailed empirical investigation of this subject matter. commonly considered bank-specific variables comprise bank size (including total bank assets and number of bank branches), credit policy (policy for sustaining the quality of loans and close monitoring of their credit risk), efficiency (implying dual margins of cost and profit efficiency), collateralization of bank loans (assumed to be related to npl levels), and income diversification (gyamerah & amoah, 2015). this firm-level analysis of npl rates is particularly relevant and lacks https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 926 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc complex detailed information requirements. however, although micro-based, they exemplarily extract useful individual bank information and assess their risk management effectiveness. globally, many studies have established a connection between the npls and bank-specific determinants (kumar et al., 2018). the effect of bank-specific variables on npls has been a popular subject in academia for several years. while some expect banks with stable management to perform better in managing their risk than their less stable counterparts, others argue that institutional, size, and regulatory changes differentially alter npl levels across banks with different ownership types and countries of operations and origins (mansilla-fernández, 2020). this review focuses particularly on bank-specific factors, since the bank of ghana intends to take a sectorial tactic to resolving npls associated with credit assessment and management practices. loan interest rate, loan-to-asset ratio, inefficiency ratio, returns on equity, returns on assets, and loan loss provision over reserves all impacted on bank npls (ofori‐abebrese et al., 2016). the results shows that banks with large loan portfolios and loans granted at very high interest rates, on average, experience higher npls because of the higher risk of default associated with these lending practices (ofori‐abebrese et al., 2016). similarly, banks with low profitability and high cost-toincome ratios tend to have higher npls levels. ofori-abebrese at al., covered the period of 2008 to 2015 and adopted adrl, and are commended for the detailed work. but this study extends the period to 2021 to cover current happenings in the field and uses ols for the analysis, with the advantages of being one of the best linear unbiased estimators, simple to interpret and globally applicable in statistical field. martiningtiyas and nitinegeri (2020), also found that both macroeconomic variables (gdp per capita growth and the real effective exchange rate), and bank-specific variables (loan growth), substantially influence npls in the banking system. these studies highlight that both macroeconomic and bank-specific factors are important in explaining the level of npls. the problem of non-performing loans presents substantial obstacles to banks’ financial soundness, particularly in evolving economies such as ghana. a thorough comprehension of the determinants of npls involves an evaluation of the macroeconomic indicators and bank-specific factors will go a long way in assisting bank management and regulators to control the incidence of npls. this literature review brings together key research findings on these determinants, emphasizing the methodologies, variables, and outcomes. ghosh (2015) scrutinizes the impact of macroeconomic elements on npls in the indian the banking sector by employing a panel data methodology spanning 1998 to 2012. the study incorporated the rates of gdp growth, inflation rate, and interest rate as the primary variables. ghosh discovered that elevated inflation and low gdp growth are significantly associated with increased npl levels. the utilization of fixed-effects and random-effects models enables robust analysis by tackling endogeneity and heterogeneity, thus providing a clear picture of how economic environments influence the value of loan (ghosh, 2015). whilst the study of ghosh (2015), and martiningtiyas and nitinegeri (2020) are detailed and comprehensive, they are related to india and indonesia, foreign economies with conditions that defer from ghana. the current study will investigate the case in the ghanaian economy and replicate the result in the local scene. https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 927 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc morrison and white (2017) conducted a comparable analysis in the european union, examining the affiliation between macroeconomic variables and bank non-performing loans (npls) between 2004 and 2015. their study employed dynamic panel data models and considered the unemployment rates, real gdp growth, and housing market conditions. the findings indicate that an increase in unemployment and a decline in housing price is strongly related to higher npls. this finding highlights the impact of economic downturns on credit risk and emphasizes the need for proactive regulatory interventions (morrison & white, 2017). whilst this study is commendable, there is the need to factor in the size of a bank which is a crucial component of bank specific determinants of npls, and the current study fills that gap. akinlo and emmanuel (2020) focus on nigeria, using quarterly data from 2000 to 2018 to investigate the effects of macroeconomic factors on npls. their study adopted autoregressive distributed lag (ardl) bounds testing tactic and considered exchange rates, inflation, and interest rates. the researchers discovered that exchange rate volatility and inflation significantly predicted npl levels, suggesting that economic instability directly impacts loan performance (akinlo & emmanuel, 2020). the nigerian economy defers from ghana and the adoption of ols gives different dimension to the study in the local economy compared to the ardl adopted by the researcher. furthermore, kumar and rajan (2016) studied the causes of bank non-performing loans (npls) in indian firms using cross-sectional data from 2005 to 2014. their research focuses on determinants such as capital adequacy, size of banks, and management quality. through a regression analysis, they found that lower capital adequacy ratios and poor management quality were strongly correlated with higher npl levels. this study emphasizes the importance of effective internal controls and sufficient capital to mitigate credit risk (kumar and rajan 2016). nnanna and ojo (2018) examined bank-specific factors influencing npls in nigerian financial institutions, using annual data from 2001 to 2016. the key variables in their analysis were the capital adequacy, advance-to-deposit ratio, and asset quality. the panel regression models revealed that higher loanto-deposit ratios and deteriorating asset quality are linked to an increase in npls. their findings suggest the need for stringent loan underwriting standards and improved asset managing practices (nnanna and ojo, 2018). though commendable, the crucial macroeconomic factors which influence npls especially in low-income countries was missing from the variables, and this study fills in the gap by including key macroeconomic factors such as gdp and unemployment in the analysis. in ghana, mensah, and danso (2021) undertook an investigation on the causes of non-performing loans (npls) using a combination of time-series and cross-sectional data from 2006 to 2020. they examine factors such as the size of the bank, profitability, and liquidity by employing a generalized least squares (gls) approach. the study found that banks with lower profitability and poor liquidity management practices experience higher npl levels. this study highlights the need for better financial performance monitoring and liquidity management to control npl risks (mensah & danso, 2021). the reviewed studies collectively demonstrated that both bank-specific and macroeconomic factors significantly affect npl levels. high inflation, economic downturns, and unstable exchange rates are consistently associated with increased npls in different contexts. similarly, factors such as inadequate capital, poor management quality, and high loan-to-deposit https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 928 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ratios exacerbate banks’ npl problems. the methodologies used in these studies, ranging from panel data analysis and regression models to ardl and gls, provide robust evidence of these relationships, although the impact can vary by economic, institutional and banking-sector-specific. consequently, the literature finds that the effects of bank-specific variables on npls may differ across bank ownership types, bank sizes, economic conditions, and countries of operation. for instance, martiningtiyas and nitinegeri (2020) and ozili (2019) found that the connection between bank size and npls is ambiguous, with some scholarships concluding that larger banks have higher npls because of their complex organizational structures and weak risk management practices, while others find that larger banks have lower npls because of their more diversified loan portfolios and access to better technology and credit assessment skills. the conclusion on the influence of bank size on npls remains inconclusive per previous works, and this study adds to the debate on bank size. furthermore, it is critical to employ a nuanced style for comprehending the determinants of npls. this approach should consider both the broader economic climate and specific banking practices. for banks in ghana, this insight underscores the necessity of maintaining a dual focus on economic stability and sound internal banking management practices to manage npls effectively. future research could benefit from longitudinal studies and more detailed data to offer a clearer comprehension of these nuances and to inform the development of targeted policy measures on npl. method this research applies panel data regression technique to investigate the influence of bank-specific factors and key macroeconomic variables on the level of non-performing loans in the ghanaian banking sector. the panel data span the period 2008 to 2021 and encompass nine (9) universal banks operating in ghana during this period. though there are other regression techniques including cross-sectional and time series, the panel data approach was adopted for several reasons. the data selected were panel; comprising both cross-sectional and time series data; panel data allows for the analysis of two-dimensional data including cross-sectional and time series; it controls unobserved heterogeneity, it identifies trends and causal association, reduces omitted variable bias, improves accuracy of estimates, and offers efficiency, variability, and robustness of statistical modeling. secondary data were used in this study, and they were derived from openly available financial reports of nine chosen institutions covering 2008 to 2021 within the sample. these universal banks were selected because they are listed on the ghana stock exchange, they meet eligibility criteria, they are representative enough universal banks in ghana, the result can be generalized, their accounts are audited and they comply strictly with the bank of ghana’s requirements for banking. again, their financial reports are reliable source of secondary data, as they are subject to internationally accepted accounting standards and external auditing to verify their accuracy and reliability. the period between 2008 to 2021 was purposely chosen because of availability of data and to make the study more current and relevant to the ongoing debate on the determinants of npls. to mitigate https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 929 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc potential biases, purposive sampling was combined with random sampling method to give each firm the chance of selection, data quality was checked, and sensitivity analysis was adopted to test the robustness of the data. the objective of this study is to conduct descriptive statistical and regression analyses to examine the relationship and impact of bank-specific variables, and macroeconomic indicators including the gdp growth rate, levels of unemployment, bank size, and capital adequacy ratio on nonperforming loans. the descriptive statistics provides a detailed summary and explanation of the investigated data. conversely, regression technique encompasses evaluation of the linkage between the predictor and the outcome variables, which can be illustrated employing a regression equation. the regression equations below were constructed through the use of a panel regression model to demonstrate the association between bank-specific factors and non-performing loans: the empirical model is as follows: nplit = α + β1gdpgrit + β2banksit + β3carit + β4unemprit + εit (1) where: npl is the level of non-performing loans, measured as the ratio of non-performing loans to total loans for bank i in year t. gdpgrit — gdp growth rate banksit: bank size as the natural logarithm of total assets for bank i in year t carit: capital adequacy ratio i in year t unemprit: unemployed rate. the facts for this study were obtained from the published annual financial statements (reports) of universal banks operating in ghana during the study period as well as from the ghana association of banks and the bank of ghana's statistical bulletins. the facts and figures selected for the study are defined and explained below. many scholars have defined these variables in various ways: to suit their philosophy, purpose and area of study. but, for the purpose of this study, the working definition chosen for these variables did not adopt any particular scholar’s philosophy, but to suit the current study. these variables are defined next: non-performing loans (npls): nonperforming loan is defined as a bank credit or loan that is doubtful or unlikely to be collected within the agreed terms of the contract. it is also a loan in which both the principal amount and the accrued interest have not been honored, or payment is overdue. according to the imf, nonperforming assets or loans are that aspects of loan portfolio that have not been honoured as scheduled in both interest and principal for a specified time period, normally 90 days or more. nonperforming loans are measured through the npl ratio, which is a measure of proportion of the npl in relation to the total loan portfolio of the particular bank. return on assets (roa): return on asset is bank or financial performance method that is calculated to measure how effectively and efficiently a firm applies its resources to engender income for the company. return on assets is vital performance measurement tool that is applied https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 930 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in assessing the capability of companies to use their resources to generate earnings for the shareholders to make informed decision about its financial performance and operational strategy. return on assets is used as an efficiency indicator, for comparative inter or intra-company analysis, or as a formular for making trend analysis. return on assets is measured as the disposable inflow of the entity divided by its average total assets multiplied by 100%. returns on equity (roe): this is an economic and financial performance tool calculated to evaluate the viability of an enterprise relative to its total equity shares. the purpose is to evaluate the effectiveness of a firm in generating its return from its available equity shares. return on equity is measured as the net income divided by the shareholders’ equity. gross domestic product growth (gdp) rates: the gdp growth rate of any economy is the annual percentage growth in an economy’s gdp, reflecting the economic performance over a specified period of time. the gdp growth rate provides a vital information on the health of the economy and it is an essential indicator for investors, economists, scholars, policy makers and managers of the economy. the gdp is calculated to measure the change in a country’s economic output over a given period of time. the annual gdp growth rate of an economy is calculated as the gdp of the preceding economic period less the gpd of the present period over the gdp of the present year multiplied by 100. unemployment rates: unemployment is an economic condition where individuals who are willing and able to work cannot find jobs. the rate of unemployment of any economy is the portion of the unemployed labor force all over the total labor force in the country times 100. capital adequacy ratio (car): the car of an entity, otherwise termed as the capital riskweighted assets ratio is a measurement tool that calculates a company’s investment (capital) in connection to its risk-weighted assets. the car is a performance metric adopted by regulatory authorities to make sure that banks have enough assets buffer to cover any potential operating losses and to meet their debt obligations to customers. the purpose of car is primarily to secure the fund of bank depositors, promote market and economic sector solidity and to help a company to absorb losses. the car is measured by dividing the capital of the company by its risk-weighted assets. bank size: bank size is a variable that typically represents the total wealth, assets or equity of a firm, in relation to the total bank population or the market value, influencing its performance due to economies of scale or market power. table 1 variables, notation, and proxies of the research determinants/variables notations definitions outcome / dependent variables (performance indicators) roa returns on assets. this tool measures the viability of a bank relative to its total wealth / assets. roa = net income / average total assets x 100 https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 931 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc determinants/variables notations definitions explanatory / independent variables gross domestic product unemployment capital adequacy ratio bank size roe npl gdp unemp car banks return on equity. roe evaluates a company's the profitability of a firm in relation to its total equity. roe = net income / average shareholders equity x 100 npl (non-performing loans) is a ratio that evaluates the percentage of loans in portfolio classified as nonperforming (over-due) to the total value of the loan portfolio. npls ratio = npls/ total loan x 100 gdp growth rate for entity. this indicates the rate of economic growth that can influence bank performance. gdpgr = gdptime 2 gdptime 1 / gdptime 1 x 100 unemployment rate signifies the number of able and willing people who are not employed at a particular time. unemp rate = total number of unemployed / labour force x 100 capital adequacy ratio is a measurement tool that calculates a company’s capital in connection with its risk weighted assets. car = total assets (capital) / risk-weighted assets bank size. this variable typically represents the total assets or equity of a bank, influencing its performance due to economies of scale or market power. the size of a bank = the natural logarithm of its total assets. result and discussion the table 1 below displays the summary (descriptive) statistics for both the outcome and the predictor variables. the non-performing loan portfolio were utilized as surrogates (proxies) for the dependent variable, whereas bank-specific factors, including working capital management, bank size, capital adequacy ratio, and bank lending rates, served as proxies for the independent variables. descriptive statistics are depicted in eight observations and rows, including the observation, kurtosis, skewness, maximum, minimum, standard deviation, median and the mean. https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 932 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2 descriptive statistics npl gdpgr banks car unemp mean 10.99039 5.484949 5.042545 14.15583 4.877203 median 9.600000 5.600000 3.890000 13.85000 4.900000 maximum 72.00000 13.60000 24.77000 148.0000 8.732000 minimum 0.000000 0.510000 0.000000 0.000000 2.170000 std. dev. 9.436856 2.596319 4.611527 12.95858 1.654323 skewness 1.658774 1.053370 1.499867 5.943971 0.561947 kurtosis 8.336961 5.791592 5.531515 59.42804 2.715388 observations 399 399 399 399 399 source: authors own creation, 2024 table 2 provides a detailed overview of the essential financial and economic indicators used to evaluate non-performing loans (npls). the presented data encompass a comprehensive range of values for non-performing loans, gdp growth rate, bank size, capital adequacy ratio, and unemployment rate, offering comprehensive insight into their distribution and variability over the observed period. the average percentage of npls amounts to 10.99%, indicating that, on average, nearly 11% of the loans in the sample are classified as non-performing. this average value conceals substantial variability within the data, as evidenced by the extensive range of values. the highest npl rate of 72% serves as an exceptional instance, in which a substantial portion of loans have defaulted. in contrast, the lowest npl rate of 0% signifies cases in which no loans have been classified as nonperforming, possibly reflecting outstanding loan performance or potential data limitations. the significant gap between the minimum and maximum values highlights substantial disparities in loan performance across various banks and periods, implying potential underlying issues with credit management, lending policies and practices, or economic conditions. the gdp growth rate over the specified period is approximately 5.48%. this figure suggests moderate economic expansion as it falls within the middle of the range of growth rates. a maximum growth rate of 13.60% indicates strong economic growth, while a minimum rate of 0.51% suggests stagnation or minimal economic expansion. the relatively high average growth rate implies a generally favorable economic environment, but the wide range of growth rates underscores the diverse economic conditions that could potentially impact the performance of loans and banking stability. based on the data, the average bank size is 5.04%. this figure may represent various metrics, such as asset size or market share, and reflects the relative scale of banks within the sample. the significant difference between the maximum and minimum values indicates a diverse banking sector with varying operational scales. large banks with higher maximum values may have https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 933 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc different risk profiles than smaller banks, potentially impacting their non-performing loan (npl) ratios differently. the observed average capital adequacy ratio (car) is 14.16%, reflecting that proportion of the value (capital) of the bank relative to the bank’s risk-weighted assets. the maximum ratio of 148% indicates instances where banks maintain substantial capital buffers well above regulatory requirements, potentially indicating strong financial health or conservative risk management practices. in contrast, the minimum ratio of 0% suggests extreme cases in which banks may have inadequate or no provision at all, for capital reserve relative to their risk exposures, which could be a critical risk factor for elevated npl levels. the very broad range of capital adequacy ratios illustrates varied financial robustness among banks, which influences their capacity to absorb losses and manage credit risk effectively. the average unemployment rate is 4.88%, reflecting moderate labor-market conditions. a maximum unemployment rate of 8.73% signifies periods of higher unemployment, which could adversely affect borrowers' ability to repay loans, thereby increasing npls. the minimum unemployment rate of 2.17% represents periods of relatively low unemployment, potentially correlating with lower npl rates owing to improved borrower’s disposable income, thus, enhanced repayment capabilities. the range of unemployment rates highlights the variability in the labor market conditions, which can have direct effects on loan performance and banking sector stability. table 3 redundant fixed effects tests effects test statistic d.f. prob. cross-section f 7.164045 (19,375) 0.0000 cross-section chi-square 123.559222 19 0.0000 table 4 correlated random effects hausman test test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 0.000000 4 1.0000 based on the null hypothesis, the random effects model is generally deemed the most appropriate option, whereas the alternative hypothesis proposes that the fixed effects model is preferable. the information displayed in tables 3 and 4 indicates that the random effects model is more suitable for this analysis, as demonstrated by the hausman test. hence, this study used a random-effects model for analysis. https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 934 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5 panel egls (cross-section random effects) variable coefficient std. error t-statistic prob. c 11.50495 2.492073 4.616618 0.0000 gdpgr -0.303987 0.169695 -1.791374 0.0740 bnks 0.440850 0.137717 3.201136 0.0015 car 0.118130 0.034106 3.463620 0.0006 unemp -0.562229 0.273547 -2.055331 0.0405 r-squared 0.082424 mean dependent var 3.825277 adjusted r-squared 0.073108 s.d. dependent var 8.226288 s.e. of regression 7.919819 sum squared resid 24713.07 f-statistic 8.848038 durbin-watson stat 0.994476 prob(f-statistic) 0.000001 table 5 displays the regression outcomes that assess the impact of the gdp growth rate, size of bank, capital adequacy, and unemployment rate on bank’s non-performing loans (npls). the analysis reveals several crucial findings concerning the influence of these variables on npls, imparting insights into their roles in determining loan performance. regression parameter of the coefficient for the gdp growth rate is denoted by β = -0.304, with a corresponding t-value of 1.791 and p-value of 0.0740. this indicates the negative effect of the rate of gdp growth on npls, though it fails to achieve the conventional levels of statistical import of 0.05 or 0.01. the negative coefficient suggests a theoretical converse association between the rate of gdp growth and bank’s npls, implying that higher gdp growth might be associated with lower npls. nevertheless, given that the p-value surpasses the standard threshold (p<0.05) for statistical significance, there is insufficient evidence to conclude that the rate of gdp growth has a meaningful bearing on npls. the foregoing suggests that fluctuations in gdp growth do not significantly affect the portion of non-performing loan portfolio in the sample surveyed. the coefficient for the bank size variable is denoted as β, which is equal to 0.441. the t-value associated with this coefficient was 3.201 and the corresponding p-value was less than 0.001. the direct and statistically substantial bond indicates that bigger financial institutions are inclined to exhibit higher levels of npls. specifically, a 1% increase in bank size was associated with a 44.1% increase in npls. this finding suggests that, as banks grow larger, their exposure to credit risk increases proportionally, potentially due to factors such as expanded loan portfolios or increased lending activities. this substantial effect underscores the need for larger banks to implement effective general financial risk management strategies to mitigate the rise in bad debt (npls) to align with their expansion. the rate of capital adequacy in a bank demonstrates favorable and momentous effect on npls, with a coefficient of β = 0.118, a t-value of 3.463, and a p-value below 0.001. this suggests that an upsurge in the capital adequacy is linked with an upsurge in npls. specifically, a 1% increase in car corresponds to an 11.8% growth in npls. this direct and noteworthy bond between car and npls is counterintuitive because higher capital adequacy ratios are typically expected to reduce credit risk. the positive coefficient proves that banks with higher capital reserves might also https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 935 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc engross in riskier lending practices or have greater exposure to credit losses, thereby increasing their npls. the regression analysis also reveals a detrimental and statistically substantial impact of the levels of unemployment on npls, as indicated by the coefficient of β = -0.562, a t-value of -2.055 and a p-value of 0.0405. this observation signifies that increased joblessness is accompanied by a lower incidence of npls. specifically, a 1% growth in the rate of unemployment corresponds to a 56.2% reduction in npls. the above counterintuitive outcome may be attributable to intricate nuances in the relationship between labor market dynamics and loan performance, suggesting that periods of elevated unemployment may coincide with enhanced loan repayment conditions or modifications in borrower behavior that result in reduced npls. table 5 presents fascinating observations concerning the connections between some key macroeconomic and internal bank-specific factors, against non-performing loans (npls). the examination of these connections illuminates the elements that impact the performance of loans within the ghanaian banking industry, while providing a point of comparison with the existing literature in this field of study. the insignificant, yet negative impact of the gdp growth rate on npls suggests that changes in economic growth does not substantially affect the levels of non-performing in the observed period. this contrasts with much of the existing literature, which typically reports a significantly negative relationship between gdp growth and npls. for example, ghosh (2015), hasan (2019), and gaur and mohapatra (2020) find that higher gdp growth rates are associated with reduced npls in the indian banking sector, attributing this to improved economic conditions leading to better borrower repayment capabilities. similarly, morrison and white's (2017) research across european banks, and supports the notion that strong economic growth is correlated with lower npls. the lack of significance in this study may reflect unique economic conditions in ghana, where other factors may overshadow the impact of gdp growth on loan performance, or it may indicate that the economic growth rate alone is not a sufficient predictor of npl variations. this relationship may also stem from the lagged or weak impact of gdp on npl and the fact that other variables, more powerful than gdp have significant impact on npl in the ghanaian economy. the various banks can take advantage of these nuanced relationships between these variables and implement policies that address specific challenges in their area of operations. these policies may include prudent loan portfolio diversification, quality credit management and monitoring to mitigate risk, influence loan terms, customer behavior, credit-worthiness, and maintenance of regulatory compliance. bank management should consider other factors aside gdp, diversify the credit portfolios, prioritize proactive risk management and carry out detailed risk assessment and customer evaluation before granting credit. the connection that exists between the size of a bank and non-performing loans (npls) is direct and statistically substantial, indicating that larger banks have higher levels of npls. this finding aligns with those reported by kumar et al. (2018), agarwala and agarwala (2019), and thomas and thakur (2020), who observed that larger banks, owing to their expanded loan portfolios and increased potential for credit risk exposure, often face enhanced npls. this correlation may be ascribed to the increased complexity of managing large-scale operations such as financial https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 936 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc institutions, which can lead to less-effective credit risk management. the positive effect observed supports the view that scaling up operations without proportional enhancements in risk management can exacerbate credit issues and increase npl levels. these results may be due to the higher appetite of lenders, leading to excessive and aggressive loan practices, large firms having intricate operations, or the fact that bigger firms have large array of credit activities fueling their exposure to risk. there will be both regulatory and industry implication of this finding. banks should practice stringent governance and control to prevent excessive risk-taking; ensure robust risk management; and strive for loan portfolio diversification. regulators must of necessity set a higher capital requirement on bigger firms; enforce stricter regulations on large institutions; and increase oversight on these big banks for them to maintain strict regulatory compliance. the connection existing between capital adequacy ratio and npls is substantial and direct, which suggests a higher capital adequacy being associated with increased npl levels. this finding is somewhat counter-intuitive because a higher car is generally expected to mitigate credit risk by providing a stronger buffer against potential losses. thus, this result diverges from studies such as those by akinlo and emmanuel (2020), abiodun et al. (2020), sunaryo (2020), and ikpe et al. (2018), which studies find an inverse nexus between capital adequacy ratio and npls in nigerian banks. the observed direct association in the study might suggest that banks with greater capital ratios engage in riskier lending practices, possibly due to a perceived safety net from their strong capital positions. this could imply that increased capital adequacy might lead banks to take on more credit risk, or relax in aggressively pursuing existing loan defaulters, thus inadvertently contributing to higher npls in the face an increased car. this outcome implies that banks should ensure good governance, restrict capital allocation decision unless they in consonance with managerial ability and risk appetite, and mitigate potential loses. regulators should also consider the implementation of risk-based capital requirement, enhance firms’ supervision and review banks’ capital requirements, whilst enforcing compliance to banking standards and regulation. the finding which posits unemployment rate to have a negative and statistically remarkable impact on npls is particularly noteworthy, but diverges from conventional expectations. generally, higher unemployment is associated with increased npls because unemployed individuals are less likely to meet their loan obligations. research conducted by ghosh (2017), akinlo and emmanuel (2020), park and park (2020), and abimbola (2020) supports this view, demonstrating a direct affiliation between unemployment and npls. however, the negative relationship observed in this study suggests a different dynamic for ghana in this period and economic condition studied. this could be due to the specific local economic conditions, government interventions or specific government policy, that mitigate the negative impact of unemployment on loan performance in ghana. for example, if unemployment leads to higher levels of government or institutional support, this might offset the potential increases in npls. it may also be that, the unemployed avoid contracting loans altogether, knowing their current conditions. alternatively, the structural aspects of the ghanaian economy or banking sector may alter the usual relationship between unemployment and loan performance. the unexpected result may stem from the informal nature of the economy, restricted access to flexible loans, and individuals having access to other sources of income from friends, families or remittances from abroad. the theory of financial exclusion which suggests restricted access to formal sources of funding could also lead to interruption between unemployment and npls. this relationship implies that the banks need to ensure capital https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 937 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc buffers to absorb potential fallouts from npls, recognize probable susceptibilities and take mitigative actions, monitor credit exposure and diversify their risk exposures. regulatory authorities also need to implement policies such as loan refinancing to cushion borrowers; prioritize robust credit risk evaluation; and implement micro-prudential strategies to reduce the weight of economic meltdown on the financial industry. conclusion the findings presented in table 5 demonstrate the intricate, and nuanced relationships between macroeconomic indicators and internal bank-specific variables on non-performing assets in the ghanaian financial system. the insignificant negative correlation between the rate of gdp growth and bad debts (npls) indicates that growth in the economy alone will not necessarily be the main determining factor affecting loan performance. this result contradicts the existing literature, which frequently associates robust economic growth with decreased npls, suggesting that other variables may have a more substantial impact in this situation. conversely, the association between bank size and the prevalence of non-performing assets (npls) is positive and substantial, demonstrating that larger banks commonly encounter higher levels of npls than the smaller ones. this aligns with previous research, which posits that larger financial institutions frequently face greater difficulties in effectively managing credit risk due to their extensive loan portfolios and heightened exposure to risk. this conclusion highlights the necessity of implementing robust credit risk management practices as banks continue to grow their operations. the relationship between a bank’s capital adequacy ratio and its npls presents a counter-intuitive result, as it suggests that higher capital buffers may correlate with increased npls. this finding contradicts the typical expectation that higher capital adequacy reduces credit risk and npls. this implies that firms with larger capital ratios could involve in riskier lending practices, potentially because of a false sense of security provided by their capital buffers. lastly, the finding which proves that there is an unexpected indirect affiliation between the rate of unemployment and npls warrants further investigation. this deviation from conventional expectations may indicate the presence of unique local economic conditions or support mechanisms in ghana that mitigate unemployment’s negative impact on loan performance. theer are practical and policy implications of the foregoing findings. banks should strengthen credit risk management frameworks, particularly for larger institutions, and refine their capital adequacy strategies to align with the actual risk exposure. regulators must adjust capital requirements and explore employment support mechanisms to mitigate the complex relationship between unemployment and npls, ensuring that policies are tailored to local economic conditions. local banks should limit the value of loans granted to customers whose creditworthiness is not guaranteed. this scholarly work is localized to the banking sector of the ghanaian economy covering a fourteen-year period between 2008 to 2021. though, there are other elements affecting bank’s non-performing loans, this research focused on gpd and unemployment rate as macroeconomic https://www.ilomata.org/index.php/ijtc the effect of macroeconomic and bank-specific factors on the level of non-performing loans in ghana: panel data regression analysis okine and garr 938 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc factors, and capital adequacy ratio and size of bank as internal bank-specific variables, to respectively influencing the levels of npl. the ordinary least square method was adopted as the statistical tool of analysis, but there are other methods of regression analysis which were not considered in by the current work. finally, the study used an existing (secondary) data gleaned from the published financial statements of the selected institutions. other studies can adopt other methods of analysis, cover different economies and periods, or make use of primary data, and the results could be different. references abimbola, e. 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(2023). non-performing loans and moral hazard in the indian banking sector: a threshold panel regression approach. global business review, 24(6), 14821499. https://doi.org/10.1177/0972150920926135 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 856 866 856 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kayode david kolawole1 1walter sisulu university, south africa correspondent: kolawolekayode@yahoo.com1 received : march 28, 2024 accepted : july 1, 2024 published : july 31, 2024 citation: kolawole, k.d. (2024). corporate social responsibility and employees’ performance of companies in kwara state. ilomata international journal of tax and accounting, 5(3). 856 866 https://doi.org/10.61194/ijtc.v5i3.1661 abstract: the study examined how corporate social responsibility affected kwara state businesses' employees' performance. the study used primary data collected by distributing questionnaires to employees of selected kwara state businesses. to determine the sample size, 576 people were selected, and the sampling technique used in the study was creswell and creswell (2012). to analyse the collected data, the study used partial least square (pls) structural equation modelling. the study's findings demonstrated that kwara state employees' performance is positively impacted by their philanthropic duties. the study also showed that kwara state employees' performance is positively impacted by education responsibility. lastly, the results demonstrated that kwara state employees' performance is positively impacted by ethical responsibility. according to the study, csr significantly affects how well employees perform in kwara state businesses. according to the report, businesses should practise environmental responsibility to improve employee performance. keywords: corporate social responsibility; employees’ performance, performance. this is an open-access article under the cc-by 4.0 license introduction the issue of corporate social responsibility (csr) has grown more complex and important in the current era of globalisation and the complex business environment, especially in light of community expectations. at the moment, organisational management is concentrated on successfully resolving these issues and satisfying business owners' demands (seelos & maak, 2016). additionally, there are problems brought on by changing consumer preferences, stricter government rules for businesses, and an increase in demand from a wide range of stakeholders (itoya et al., 2022; tai, 2022). as a result, corporate social responsibility—also referred to as social or community support—has emerged as a key business strategy. that any forward-thinking firm must take into consideration if it is to prosper and improve operational effectiveness in the modern business environment (obiekwe & nwaeke, 2019; kolawole et al., 2021; chebbi & ammer, 2022). in this context, the perception and reputation of a company has a big impact on how well society as a whole accepts its name and goods. because businesses operate within and rely on society, as well as on societal patronage and other forms of support for their survival, they must demonstrate social responsibility. this is because businesses https://www.ilomata.org/index.php/ijtc mailto:kolawolekayode@yahoo.com1 https://doi.org/10.61194/ijtc.v6i1.1661 corporate social responsibility and employees’ performance of companies in kwara state kolawole 857 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and society are inherently intertwined (warfield, 2018; maqbool & hurrah, 2020). osemene and fagbemi (2017) assert that a business organisation must exhibit a proactive approach in meeting the demands of its immediate operational environment if it is to prosper in the current, fiercely competitive landscape (zhang and liu, 2023; coelho, jayantilal & ferreira, 2023). the organisation should also position itself as a morally upright one that prioritises the well-being of the local community in which it operates. according to a study by hasan et al. (2021), kpmg discovered that 92% of the top 250 multinational corporations disclosed information about their social performance in either their annual financial reports or their corporate social responsibility (csr) reports (ojuando & kihara, 2022; al lawati & hussainey, 2022). nonetheless, the need to increase profits drives a lot of nigerian businesses, frequently at the expense of their clients and staff. the needs of host communities, worker welfare (with a preference for cheap labour), environmental conservation, and community development were all not adequately addressed by some businesses (osemene, 2012; al-ma’ani, al-qudah, & shrouf, 2019; yunusa et al., 2023). the relationship between csr and financial success has been particularly examined in several research (e.g., omoro et al., 2014; iqbal, ahmad, hamad, bashir, & sattar, 2014; singh & misra, 2021; hayat, naim, & aziz, 2022). an investigation of the impact of corporate social responsibility (csr) on the non-financial activities of nigerian companies is yet necessary. thus, this study especially looked at the relationship between csr and kwara state businesses' employees' performance. furthermore, corporate social responsibility has been categorised as a single variable in previous studies. corporate social responsibility (csr) was divided into several areas in this study, including economic, charitable, ethical, environmental, and educational responsibilities. the following section will address methodology, followed by the presentation and analysis of data in the third section and the conclusion and suggestions in the fourth. method for this study, survey research procedures and archive approaches were used. survey research was used to collect data on respondents' perceptions of csr and employee performance. this is because it makes it possible to analyse the primary goal of the study in great detail, which is why this research strategy was thought to be appropriate. employees of businesses in kwara state were given questionnaires to complete to collect the data used in this study. to ensure the content validity of the research, copies of the instrument were given to colleagues in professional and academic accounting. their insightful recommendations were incorporated into the completed questionnaire. the research questions and hypotheses were tested by estimating structural equation modelling using partial least square (pls) 4.0. structural equation modelling using partial least square (pls) 4.0 was chosen because it describes the relationship between a dichotomous response variable and a set of explanatory variables rated on a five-point likert scale with answer choices of strongly agree (sa), agree (a), disagree (d), and strongly disagree (sd) with weights of 5, 4, 3, 2, and 1, respectively. however, the sample size was determined by creswell and creswell (2012). sample size infinite population (where the population is greater than 50,000). https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 858 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ss= zzx(p)x (1p)……………………………………………………………………….(1) c2 ss = sample size z = z-value(1.96 for a 95 percent confidence level) p = percentage of population picking a choice, stated as decimal (0.5) c = confidence interval, expressed as decimal (.04 = +/4 percentage points) ss = 3.8416 x .5 x .5…………………………………………………………………..(2) 0.0016 ss = 600 newss = ss……………………………………………………………………(3) 1 + (ss-1) population note: compute the sample size using the infinite population formula first. then, use the sample size obtained from that computation to compute a sample size for a finite population. example: newss = 600………………………………………………………….………(4) 1 + (600-1) 13988 new ss = 575.631 new ss ≈ 576 thus, to ascertain the questionnaire forms to be distributed to participants, the researcher made use of 576 participants. 576 copies of questionnaire were distributed to staff of some companies in kwara state. model specification: model for corporate social responsibility and employees’ performance to address the aim three of this research which is to assess the influence of csr on employees’ performance of companies in nigeria, the following model is specified: emp= f (phr, edr, envr, ethr, ecnr)…………………………………….…(5) which transforms into: https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 859 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc emp = β0 +β1phr+ β2edr+ β3envr+ β4ethr+ β5ecnr +μ………….….....…(6) where: emp= employees’ performance phr= philanthropy responsibility, edr = educational responsibility envr= environmental responsibility ethr= ethical responsibility and ecnr= economic responsibility. μ = error term result and discussion table 1. descriptive statistics and normality test mean median min max standard deviation excess kurtosis skewness number of observations used economic responsibility 4.159 4.000 2.000 5.000 0.573 0.505 -0.151 226.000 educational responsibity 3.739 4.000 2.000 5.000 0.861 -1.216 0.323 226.000 employees' performance 4.004 4.000 1.000 5.000 0.628 3.082 -0.869 226.000 environmental responsibility 3.673 3.000 2.000 5.000 0.830 -1.102 0.537 226.000 ethical responsibility 3.690 3.000 3.000 5.000 0.799 -1.170 0.618 226.000 philanthropic responsibility 3.690 3.000 3.000 5.000 0.777 -1.101 0.603 226.000 source: authors computation, 2024 table 1 presents the mean and standard deviation of the variables/indicators utilized in the research, and these came from the study. to evaluate the alignment of indicators, a criterion mean of 2.50 and standard deviation of 1.5 were established. indicators with a mean significantly above the 2.50 benchmark are thought to have a significant impact on the study, while items below the 2.50 benchmark are thought to have a strong lack of influence. a standard deviation of less than 1.5 indicates minimal variation or changes from the mean, while a value above 1.5 indicates a high deviation from the mean. finding the indicators that are above the predetermined reference point for the mean and below the benchmark for the standard deviation is necessary to find the elements that have a significant impact. overall, all indicators have values above the criterion of 2.5 for https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 860 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mean and below 1.5 for standard deviation, as the table illustrates. this implies that the answers are reliable enough to be used for more research and to draw reliable study findings. assessment of measurement model the hypothesis focusses on csr and employee performance to evaluate how csr affects organisational performance. . figure 1: a path model of csr determinants and employees’ performance source: smartpls output, 2024 the route model of the csr determinant and employee performance was displayed in figure 1. where a single variable contributes to the latent variables, the graphic illustrates interaction influence. it has been established that if a latent variable has only one indicator, the outer weight model's weight will also be one (1). the outer weight model's absolute maximum value is one (1). since all of the loading weights were higher than 0.50, the results of the outer model weights explain why the strong loading could not be disregarded. according to the literature, these factors were also important parts of the latent variables. multicollinearity the link between the independent variables was assessed in this study. it seeks to ascertain whether two independent variables are producing comparable results and are not associated. this study uses the variance inflation factor (vif) to assess potential correlations between the independent variables. https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 861 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. inner vif values source: authors compilation, 2024 table 4.15 represent the vif values for the latent variables connected to employees’ performance. all of the indicators' vif levels are far below the benchmark value of 10, which is 10, indicating a positive indicator. it suggests that these variables do not significantly exhibit multicollinearity. stated differently, these variables are included in this analysis without significant multicollinearity problems because they have a modest association with one another. table 3. boostrapping path coefficients original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/stdev|) p values economic responsibility -> employees' performance 0.491 0.495 0.104 4.744 0.000 educational responsibity -> employees' performance -0.399 -0.410 0.166 2.402 0.016 environmental responsibility -> employees' performance 0.100 0.093 0.196 0.512 0.609 ethical responsibility -> employees' performance 0.378 0.402 0.196 1.923 0.055 philanthropic responsibility -> employees' performance 0.016 0.004 0.134 0.121 0.904 source: authors compilation, 2024 the direct null hypothesis that csr determinants do not significantly affect employees' performance was examined using the bootstrap path coefficient analysis shown in table 3. in this instance, the results demonstrate that economic and educational responsibility as csr determinants have a significant impact on employees' performance, as evidenced by the p-values being below the conventional significance level of 0.05 and the t statistics being greater than 1.96. examining other avenues for philanthropic, ethical, and environmental responsibility reveals that economic responsibility educational responsibity employees' performance environmental responsibility ethical responsibility philanthropic responsibility economic responsibility 2.200 educational responsibity 3.758 employees' performance environmental responsibility 5.932 ethical responsibility 5.704 philanthropic responsibility 3.329 https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 862 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc they are not statistically significant as csr determinants on employees' performance because the t statistics are less than 1.96 and the p-values are greater than the conventional significance level of 0.05, providing strong evidence that these determinants should be adequately monitored to guarantee improved employee performance. table 4. coefficient of determination value r square r square adjusted employees' performance 0.356 0.342 source: authors compilation, 2024 table 4 displays the coefficient of determination, which stands for r-squared, which is used to assess a model's goodness of fit. the model's r-squared values, which are over 20%, indicate that the independent or latent factors included in the model moderately explain the variability in the dependent variable (workers' performance). this implies that the model accounts for and explains the minor differences in worker performance that have been noticed. however, a greater number of observed differences in employees' performance can be explained by characteristics not included in the model. table 5. assessment of the effect size (f2) economic responsib ility education al responsibi ty employee s' performan ce environmen tal responsibili ty ethical responsi bility philanthrop ic responsibili ty economic responsibili ty 0.170 educational responsibity 0.066 employees' performance environmen tal responsibili ty 0.003 ethical responsibili ty 0.039 philanthropi c responsibili ty 0.000 source: authors compilation, 2024 in statistical analysis, the effect size, denoted as f-square, is shown in table 5 and indicates how strongly independent variables relate to or impact a dependent variable. the effect sizes of several https://www.ilomata.org/index.php/ijtc corporate social responsibility and employees’ performance of companies in kwara state kolawole 863 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc latent factors on "employees' performance" were investigated in this study. the f-square value of each csr determinant on employee performance is less than 0.35. except environmental responsibility, which has a tiny effect size and philanthropic duty has no contribution, this shows a moderate effect size, meaning that the factors have a discernible impact on employees' performance. therefore, moderate changes in employees' performance can be explained by variations in each of the csr determinants. according to the research of ali et al. (2010), sujana (2013), belinda (2014), and solanke et al. (2023), the results of this study also demonstrated a positive relationship between csr variables (such as philanthropy responsibility, education responsibility (edr), and ethical responsibility (ethr) and the performance of employees of businesses in kwara state. these results are consistent with stakeholder theory, which is based on the idea that corporate social responsibility (csr) is a contractual relationship that is self-sustaining when a company's present value gains from maintaining its reputation outweigh the expenses associated with csr activities (rui et al., 2001; setiawan et al., 2022; obiekwe & nwaeke, 2019; albuhisi & abdallah 2019). consequently, the it is necessary to reject the null hypothesis, which states that csr has no discernible impact on the performance of businesses' employees in kwara state. conclusion by examining the impact of ethical and educational responsibilities on the performance of businesses in kwara state, the study added to the body of knowledge in the area of corporate social responsibility. this study also took into account the relationship between csr and employee performance in a novel way. the study concludes that kwara state employees' performance is impacted by corporate social responsibility. ultimately, it was determined that csr affects kwara state businesses' performance. to enhance their effectiveness, kwara state company administrators ought to be more involved in environmental duties. future research should concentrate on how csr affects the attitudes of deposit-taking banks' customers in nigeria. reference abubakar, a. a., yunusa, g., moses, m., & ahmad, m. d. 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(2023). the impact of corporate social responsibility on financial performance and brand value. sustainability, 15, 16864. https://doi.org/10.3390/su152416864 https://www.ilomata.org/index.php/ijtc https://doi.org/10.3390/su152416864 the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3 july 2024 page no. 952 – 969 952 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evaluating an optimal corporate income tax system for harmonization in the african union samuel john chiromo1, danie schutte2 12north-west university, south africa correspondent: echirosj@unisa.ac.za1 received : april 2, 2024 accepted : july 20, 2024 published : july 31, 2024 citation: chiromo, s. j., & schutte, d. (2024). evaluating an optimal corporate income tax for harmonization in the african union. ilomata international journal of tax and accounting, 5(3), 952 – 969. https://doi.org/10.61194/ijtc.v5i3.1522 abstract: harmonizing corporate income tax (cit) is spotlighted in economic integration debates. these debates have reached no consensus regarding the best cit system to be adopted in various economic integrations, including the african union (au). this study aimed to determine the best tax system for cit harmonisation in the au. the study adopted a qualitative research method by collecting data through interviews. the study used purposive sampling to identify 30 participants drawn from the african tax administration forum (ataf) and large international accounting firms, namely kpmg, pwc and deloitte. the study revealed that a new system called the africa hybrid tax system or the africa blended tax system should be implemented for effective and efficient cit harmonisation in the au. this system should address the shortcomings of both the classical and the imputation tax systems. the study recommended that technology and adequate resources are crucial for successfully implementing the african hybrid tax system. therefore, member states should jointly invest in technology and resources to facilitate the implementation of the african hybrid tax system for cit harmonisation in the au. keywords: corporate income tax, tax harmonisation, classical tax system, imputation tax system, african union. this is an open-access article under the cc-by 4.0 license. introduction cit harmonisation is under the spotlight in economic integration debates. there is no consensus regarding the cit system that may promote cit harmonisation (stojkova & kjoseva, 2024; garbarino, 2020; conconi, perroni & riezman, 2008; osterloh, heinemann, 2013; dharmapala, 2016). some scholars (bett, 2016; madyo, 2008; garbarino, 2020; quak, 2018; banderlipe, 2015) agree that harmonised cit systems may benefit the member states in regional economic integration. these benefits include, among others, the reduction of competition, the reduction of financial distortions, the reduction of tax evasion, the minimisation of tax avoidance and the reduction of administrative and compliance costs (igbinenikaro & adewusi, 2024; bruce-twum, schutte & nicholas, 2022; banderlipe, 2015). nonetheless, cit harmonisation has not been achieved in the au due to economic, structural, political and institutional constraints (uyioghosa & igbinosa, 2023). the au is an emerging https://www.ilomata.org/index.php/ijtc mailto:echirosj@unisa.ac.za https://doi.org/10.61194/ijtc.v5i3.1522 determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 953 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc economic integration formed to increase the cooperation and integration of african states to drive africa’s growth and economic development. to make this a success, africa must address structural issues such as tax loopholes in the member states. during the 4th high-level tax policy dialogue, consisting of representatives from the united arab emirates and the africa tax administration forum (ataf), it was stressed that there is a need for harmonisation of tax policies of the au that address challenges such as taxation of cross-border transactions of multinational enterprises, granting wasteful tax incentives, and the formulation of policies on taxation of digital transactions (ataf, 2020). sting (2014) asserted that the harmonisation of cit benefits the economic and monetary union (emu) as it increases economic cohesion in the internal market, improves fiscal policies, provides better control of tax fraud, and strengthens the financial power of the member states within the union. however, kireyev (2016) believes that cit harmonisation faces complex political and economic challenges in the economic integrations of developed and developing countries. these challenges include the lack of commitment of member states to coordinate their tax policies effectively and the failure to establish, maintain and finance the necessary institutions (quak, 2018; nembe & idemudia, 2024). in the european union (eu), cit harmonisation grew considerably with attempts to foster more significant regional trade and investment (kireyev, 2016; adelakun et al., 2024). the european model of cit harmonisation offers a discernible example, involving a multidecade process that began with policy harmonisation concerning trade, followed by harmonisation of standards and the creation of institutional and legal structures, as well as a long period of policy coordination (quak, 2018; christensen, 2024). this model may not be effective in the au, given the varying heterogeneous conditions between the au and the eu (uyioghosa & igbinosa, 2023). therefore, the au must implement its tax system that enhances cit harmonisation among its member states (uyioghosa & igbinosa, 2023; scherleitner & traversa, 2024). uyioghosa and igbinosa (2023) noted that to determine the optimal tax system that promotes cit harmonisation in the au, it is critical to determine whether existing studies exist on this phenomenon. gastanaga, nugent and pashamova (1998) hypothesised that a reasonable level of harmonisation of tax policies can influence fdi in the host economies. moreover, sudsawasd and mongsawad (2011) observed that fdi and total share of investment inflows are positively influenced by cit harmonisation. this study further stated that an economy with less differentiation in tax policy attracts more fdi net inflows than an economy with more differentiation in tax policy. in 2010, hansson and olofsdotter investigated the effects of tax harmonisation on fdi in the eu. this study's results revealed that increased tax harmonisation levels enhance economic activities in an integrated region. these findings generally align with the findings of asiedu (2002) and tax justice network-africa and actionaid international (2012) studies. these studies found that effective harmonisation of tax policies is a key determinant of fdi in african regional integrations. based on various scholars (uyioghosa & igbinosa, 2023; gastanaga et al., 1998; sudsawasd & mongsawad, 2011; asiedu, 2002), it is, therefore, conclusive that the implementation of cit harmonisation may play a significant role in the economic development of the au. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 954 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc despite abundant studies on the harmonisation of cit in various economic integrations, studies on determining the best-fit tax system for cit harmonisation are incredibly scant. this has resulted in the lack of tax policy for cit harmonisation in the au. as an emerging economic integration, it is paramount for the au to have a cit system to enjoy the benefits of cit harmonisation. nonetheless, choosing the best cit system that fits well in the au remains challenging. numerous cit systems include, among others, classical systems, imputation systems, exemption systems, deduction systems, and cash flow systems (teixeira, 2021; schutte & van der zwan, 2019). however, previous studies have shown that only two systems merit consideration: the so-called 'classical' system, which preserves full economic double taxation of dividends, and the imputation system, which relieves this double taxation by granting a tax credit to the recipient of the dividends (de mooij, klemm & perry, 2021; richman, richman, richman, 2020; bulgac, 2024). the rationale for choosing classical and imputation systems is that they are the central tax systems comprising features of other tax systems (hakelberg, 2024; garbarino, 2020; conconi, perroni & riezman, 2008). osterloh, heinemann, 2013; dharmapala, 2016. hence, they are spotlighted in cit harmonisation debates (osterloh, heinemann, 2013; dharmapala, 2016). in harmony with these studies, this paper analyses classical and imputation cit systems to determine the best fit for the au. first, this paper analysed the central existing cit systems: imputation and classical. then, it analyses the empirical data derived from the interview responses; typically, the literature and the empirical data were used to determine the findings and the paper's recommendation. according to de mooij et al. (2021), the imputation cit system is the system whereby a natural person is acknowledged as the owner of legal entities in an economy that bears the true incidence of taxes. the davis tax committee (dtc, 2018) asserted that under the imputation system, an individual receiving a dividend becomes entitled to an income tax credit representing the corporation tax already paid by the company paying the dividend. nevertheless, the extent to which the shareholder can access tax credits for rebate purposes varies from country to country, posing challenges for countries within the same economic integration. although the imputation system of cit seems to make economic sense, de mooij et al. (2021) noted that imputation credits are generally not provided for foreign corporate income tax paid on international transactions, which then causes distortions in global capital markets. as a result, the eu imputation systems have been abolished, as they impede international investors from investing in the union (dtc, 2018). richman et al. (2020) concur that the imputation system is complicated and commonly negatively impacts the revenue of corporations due to the dividend tax that corporations pay on behalf of shareholders. in a nutshell, there is no consensus regarding the cit system that may promote cit harmonisation in the au. due to economic, structural, political and institutional constraints, cit harmonisation has not been achieved in the au. this has resulted in a lack of tax policies that may address challenges such as the taxation of cross-border transactions of multinational enterprises and the granting of wasteful tax incentives. even adopting the eu model of tax harmonisation may not be practical due to varying heterogeneous conditions in the au and eu. therefore, choosing the best cit system that fits well in the au remains a challengewhether to use the classical or imputation system of cit in the au is unclear, requiring further research, which prompts the current study. the current paper addresses this dilemma by proposing the best tax system for cit https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 955 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc harmonisation in the au member states. to address these gaps, the current paper analyses classical and imputation cit systems to determine the best-fit tax system for the au. method the study adopted a qualitative research approach, which is a process that assists the researcher in exploring individual or group behaviour and describing social problems (sugiyono, 2019). the qualitative approach was appropriate for the current study because limited data is available on the subject matter as the au is an emerging economic integration. as a result, perceptions and values of tax policy representatives from existing african economic integrations were used to determine the best tax system to be adopted in the au. the research process starts with making research questions and procedures, collecting data from participants, analysing data inductively, constructing data and providing interpretations of the meaning of data (kovacs & spens, 2005). the type of research used is descriptive research, which presents a picture of the specific details of the situation, social setting, or relationship (neuman, 2011). an interview and an electronic qualitative survey were used to collect participant data. these participants consist of 17 council members of the african tax administration forum (ataf) from selected african economic integration tax authorities and 13 cross-border tax specialists drawn from sizeable international accounting firms, namely kpmg, pwc and deloitte. these participants were selected based on their ability to influence tax policies on various african economic integrations. their choice was also based on the fact that they are regarded as front runners of tax harmonisation in their respective economic integrations. the study adopted purposive sampling, a non-probability sampling technique where the researcher identifies information-rich participants because they are possibly knowledgeable about the phenomena under study (mcmillan & schumacher, 2006). the purposive sampling allowed the researcher to identify and select knowledgeable tax experts to provide relevant opinions on the best tax system to be implemented in the au. gary (2014) suggests that the logic and power of purposeful sampling lie in selecting informationrich cases for in-depth study. information-rich cases are those from which one can learn a great deal about issues of central importance to the purpose of the research. therefore, the researcher targeted known sources of rich information from the ataf and sizeable international accounting firms with cross-border tax specialists in this study. the responses from the participants were coded using thematic analysis, a flexible qualitative data analysis method that seeks to "identify, analyse and describe patterns, or themes, across the data set” (bryman & bell, 2014). the study sought to find patterns by identifying themes that may emerge from the literature and participants' opinions regarding the best-fit tax system to be adopted in the au that promotes cit harmonisation. the themes of the study identified are indicated in table 1 below. the codes were developed inductively from the responses of the participants and existing literature. thus, the responses were read and reread, prevalent themes were highlighted, and then the participants' reactions were compared to find similarities that indicated shared perceptions about the best-fit tax system for the au. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 956 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1: themes of the study: themes of the study description classical tax system the literature indicates that the classical tax system is usually characterised by an approach that adopts dividend tax payments paid by the shareholder (bond et al., 2000; cnossen, 2017). in this system, profits earned by the company are taxed through corporate income taxes, and then, if the profits are paid out as dividends, they are taxed for the second time through personal income taxes (auxiliar, 2005). participants provided opposing views on whether the classical tax system suits the au. shareholders some participants recognised shareholders as victims in the classical tax system. they criticised the system because the tax cost is transferred to shareholders who earn lower income than it would have been had corporate and shareholder levels of taxation been integrated into one tax process. dividend tax dividend tax was identified as one of the codes, as participants criticised the classical system for inviting dividend tax into the hands of shareholders. nonetheless, other participants emphasised that by inviting dividend tax, tax revenue increases as the company and shareholders pay tax. double taxation some participants believed that the classical system promotes double taxation by taxing income at both the corporate and shareholder levels, which creates a disincentive to establishing corporations in member states with the classical system. transparency the participants echoed that the au requires a transparent tax system that may bring more tax revenues to the member states. they indicated that the african hybrid tax system needs a transparent administration system. tax administration participants who supported the classical tax system based their views on the fact that it simplifies administrative procedures, as tax administration for the company is conducted separately from that of the shareholder. some responses supported the imputation system by indicating that it reduces the administrative burden on the taxpayer as the company is responsible for the administration of tax, not the individual. from a shareholder's perspective, some participants believe that the imputation system probably has less administration and limits shareholders' liability (on late payment) as companies handle the tax administration. some participants thought that the au tax system should be able to support tax administration for adequate controls and audits of both local and multinational companies. imputation tax system the eu is the most significant economic integration and has been trying to solve the double taxation caused by the classical system by considering the imputation tax system (auxiliar, 2005). in this system, corporations act as taxwithholding agents (cnossen, 2017). de mooij et al. (2021) stated that corporations are the most suitable tax collection agents for governments as these businesses have experience in withholding other taxes, such as value-added tax (vat) and personal income tax (through pay-as-you-earn schemes). some participants indicated that the imputation system does not recognise the distinction between the company and shareholders. it can be used for tax avoidance and does not prevent double taxation. the system is also not helpful for small companies as it requires a significant investment in resources and technology to be implemented. some participants indicated that the imputation system brings benefits, such as integrating corporate and shareholder personal income taxes to alleviate double taxation of dividend income. it is also intended to create a level playing field by taxing the same activity in the same way, irrespective of the business structure used, namely, a company or trust. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 957 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc cross-border ownership of shares although the imputation system is known to be the remedy for double taxation, some participants stated that it harms cross-border share ownership as it is challenging to align corporate tax rates with investors’ top personal tax rates, especially when investors come from different countries with different top individual tax rates. the participants also indicated that the new system requires the au to prioritise tax harmonisation efforts and foster cooperation to promote cross-border trade and investment. tax avoidance participants echoed that the imputation system does not recognise the distinction between the company and shareholders, and it can be used for tax avoidance. the participants believe that the au must develop its capacities to tackle tax evasion, reduce opportunities for tax avoidance, and recover stolen assets. the new system must establish well-equipped transfer pricing units that will assist in combating tax avoidance. small and medium business (smes) the participants emphasised that the au tax system should have a separate income tax system/code for small to medium businesses (smes). the tax system should allow smes to conduct tax planning, avoiding specific tax categories. to sustain smes, the tax system should incorporate tax incentives for smes, such as tax holidays, exemptions, tax credits, investment allowances and depreciation schemes. very importantthe tax system should remain neutral and efficient for smes africa's blended tax system the au needs an african blended tax system or hybrid system whereby weaknesses in both imputation and classical systems are addressed carefully with the agreement of all member states. the participants indicated that the african hybrid or blended tax system should be implemented in the au to facilitate cit harmonisation. cross-border cooperation the participants stated that the au tax system should foster cross-border cooperation between african and global tax authorities to facilitate cit harmonisation. automatic exchange of information the responses also indicated that the new au tax system should encourage the automatic exchange of information among african countries and globally. tax evasion the participants believed that the au must develop its capacities to tackle tax evasion, reduce opportunities for tax avoidance, and facilitate the recovery of stolen assets. transfer pricing the new system must establish well-equipped transfer pricing units that will assist in combating tax avoidance and evasion. off-setting losses the participants indicated that off-setting losses from the subsidiary in another state could address the au's cross-border obstacles. tax planning the au tax system should be flexible enough to allow smes to plan their taxes and reduce their tax liability. tax incentives the tax system should incorporate tax incentives for smes, such as tax holidays, to sustain smes in the au. tax holidays to sustain smes, the tax system should incorporate tax incentives for smes, such as tax holidays. exemptions the tax system should incorporate tax incentives, such as exemptions, to sustain smes. the participants echoed that tax credits and exemptions should be incorporated in the new africa hybrid tax system, whereby income taxed at the corporate level is exempted at the shareholder level. tax credits tax credits should be incorporated in the new african hybrid tax system, whereby income taxed at the corporate level is exempted at the shareholder level. this implies that the au may use the credit method, whereby the tax paid in the member state of the subsidiary (or branch) is credited against the corporate income tax liability of the parent company. neutrality, the au tax system should be guided by the principle of neutrality to minimise interference in the allocation process. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 958 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc efficiency the participants emphasised that the au tax system should remain efficient for smes. an efficient tax system raises revenue while minimising unintended consequences. an inefficient tax system imposes obligations on taxpayers in proportion to their resources. source: researcher’s compilation from the opinions of the participants and the literature result and discussion the assumption that all scholars have supported no tax system for cit harmonisation means that determining the tax system for the au based entirely on literature will be inadequate. therefore, literature and empirical evidence are required to recommend a tax system for cit harmonisation in the au. the following sub-section examines the empirical data for the best tax system for cit harmonisation in the au. this section provides the analysis of data collected from participants regarding their opinions on the tax systems that should be implemented for cit harmonisation in the au. recommendations for the tax system to be implemented in the au figure 1 presents the participants' recommendations for implementing tax systems in the au. figure 1. the recommendations on the tax systems to be implemented in the au. this research is crucial to understanding the participant’s grasp and perception of the cit system theme in the au context. whether to use cit's classical or integration system in economic integrations is still unclear and requires more studies, prompting this research. no consensus has been reached on implementing the classical or integration system for effective cit harmonisation (chen & schlagenhauf, 2018). imputation and classical tax systems are commonly used for cit harmonisation in regional integrations (de mooij et al., 2021). therefore, getting participants’ perceptions on which tax systems fit well to be implemented in the au is crucial. the research uses these tax systems to design a cit tax system appropriate for the au. participants were asked to provide their recommendations on the best tax systems to be implemented in the au. as indicated in figure 1.1, most participants recommend a classical tax system by which income earned by the company is taxed at the corporate and shareholder levels. 12 7 0 2 4 6 8 10 12 14 classical tax system whereby income earned by company is taxed at the corporate level, and shareholder level imputation tax system whereby the income tax paid by a company is offset against the income tax liability of a shareholder who receives dividends from the company chart title https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 959 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc however, the number of majority participants who supported the classical tax system is not far less than those who supported the imputation system. therefore, concluding that a classical system should be implemented in the au might be a misleading generalisation. this then triggers the need to ask the participants for the motivation to choose one tax system over the other. the participants were asked to explain why they recommend the classical tax system. table 2 below indicates the opinion statements of the participants: table 2: opinion statements of participants for the classical tax system to be implemented in the au: the company is separate from shareholders. hence, the company tax should pay tax on its income, and shareholders will also pay a distinct dividend tax if they receive the same. rs2 double taxation provides an incentive to retain profits. the company only pays tax on its profit, not on the earnings of the shareholders. rs7transparent and auditing is easy. it may also bring more revenue to the government. an audit can be conducted on a single tax at a time. the company's tax administration is undertaken separately from that of the shareholder. rs6ease of administration rs7-transparent and auditing is easy. it may also bring more revenue to the government. in contrast, participants were asked to provide motivations for not recommending the imputation system. table 3 below indicates the opinion statements against its implementation in the au. table 3. opinion statements of participants against the implementation of the imputation system in the au rs18: the imputation system harms cross-border ownership of shares as it is challenging to align corporate tax rates with the top personal tax rates, more especially when investors come from different countries with different top individual tax rates rs20: the imputation system does not recognise the distinction between the company and shareholders, so it can be used for tax avoidance and does not prevent double taxation. rs11: the system is not helpful for small companies as the system requires a significant investment in resources and technology to be implemented in a company the participants were then asked to motivate the implementation of the imputation system in the au. table 4 indicates the participants' opinions on implementing the imputation system in the au. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 960 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. opinion statements of participants for the implementation of the imputation system in the au rs8: reduces the administrative burden on the taxpayer as the company is responsible for the administration of tax, not the individual rs13: from a shareholder's perspective, there is probably less administration and limits shareholders' liability (on late payment). companies are probably better positioned to handle the administration (accuracy and timeliness). rs15: it is intended to create a level playing field by taxing the same activity in the same way, irrespective of the business structure being used, namely, a company or trust rs20: imputation systems integrate corporate and shareholder personal income taxes to alleviate double taxation of dividend income. these findings show that the participants' motivations in the imputation system revolve around reducing administrative burden, reduction in double taxation, horizontal and vertical equity, reduction of personal income tax charged on dividends, and reduction of high compliance costs. in contrast, participants were asked to motivate and not recommend the classical system. table 5 provides opinion statements against implementing a classical system in the au. table 5: opinion statements against the implementation of the classical system in the au: rs 10 this promotes double taxation. rs 10 this promotes double taxation. rs 12 less 'centralised' process and unnecessary duplication of activities rs5—there is double taxation, an administrative burden on the taxpayer. individual taxpayers must complete the submission process themselves. rs9 under a classical system, a corporation pays tax on its profits. when it distributes profits to its shareholders, this shareholder income is taxed a second time in the hands of the shareholders at their marginal tax rate. rs15—this income (after tax) for the investors is taxed again when an investor files their taxes. thus, the same dividend income is subject to taxation twice. tax-paid income is again taxed, which discourages investment in economic integration. most of these statements revolve around the fact that the classical system promotes double taxation. this is consistent with the findings of tredoux and van der linde (2021), which revealed that the classical system is criticised for its double taxation of dividends, whereby the cost of the tax is transferred to shareholders who earn lower income than it would have been had it been that corporate and shareholder levels of taxation were integrated into one tax process. in summary, the empirical findings reveal that both classical and imputation systems have benefits and shortcomings, as summarised in table 6 below: https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 961 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6: benefits and weaknesses of both classical and imputation systems classical system benefits shortcomings the company and the shareholders are separate taxpayers; hence, they have to pay taxes. the classical system promotes double taxation, as the income is taxed twice at the company and shareholder levels. tax revenue is increased as both the company and shareholders pay tax. less 'centralised' process and unnecessary duplication of activities. double taxation incentivises retaining profits, as the company only pays tax on its profit, not on shareholders' earnings. double taxation creates an administrative burden on the shareholders as they must submit themselves. it brings administrative simplicity as tax administration for the company is conducted separately from that of the shareholders. investors' income (after tax) is taxed again when they file their personal taxes, which discourages investment in economic integration. transparent auditing is easy because an audit can be conducted on a single tax. imputation system benefits shortcomings it reduces the administrative burden on the taxpayer, as the company is responsible for administering the tax, not the individual. the imputation system negatively impacts cross-border share ownership. it is difficult to align corporate tax rates with investors’ top personal tax rates, especially when investors come from different countries with different top personal tax rates. from a shareholder's perspective, there is probably less administration, and shareholders' liability (on late payment) is limited. companies are probably better positioned to handle the administration (accuracy and timeliness) the imputation system does not recognise the distinction between the company and shareholders, so it can be used for tax avoidance and does not prevent double taxation. it is intended to create a level playing field by taxing the same activity in the same way, irrespective of the business structure being used, namely a company or trust. the system is not helpful for small companies as it requires significant investment in resources and technology to be implemented in a company. imputation systems integrate corporate and shareholder personal income taxes to alleviate double taxation of dividend income. source: researcher’s compilation from the empirical findings and literature it is, therefore, assumed that the western tax systems may not fit well for cit harmonisation in the au. etter-phoya (2021) asserted that african countries inherited a tax system established by some old powers assembled today as the organisation for economic cooperation and development (oecd). according to etter-phoya ( 2021), this system is at play today based on its entire tax philosophy around mobilising taxable income, regardless of where it was sourced. this, by design, embedded inequality within the international tax regime in which african states have become vulnerable and open to the scramble for tax. such vulnerability is expressed in the form of base erosion and profit shifting. this then triggers the need for the au to have its tax system that promotes cit harmonisation. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg https://protect.checkpoint.com/v2/___https:/taxjustice.net/author/rachel/___.yzjlonvuaxnhbw9iawxlomm6bzpjnwq2ztdkmzywzgy0njq4m2rimdcwotc2mmm1ogqwzto2ojywogu6zjbingexmznjnjuwytdizjqzmdq1otg4mzezngjhnty1odllmtrhzjnhngywytq3mzc3mtu2ztg4otdlzdhhztpwolq6tg https://protect.checkpoint.com/v2/___https:/taxjustice.net/author/rachel/___.yzjlonvuaxnhbw9iawxlomm6bzpjnwq2ztdkmzywzgy0njq4m2rimdcwotc2mmm1ogqwzto2ojywogu6zjbingexmznjnjuwytdizjqzmdq1otg4mzezngjhnty1odllmtrhzjnhngywytq3mzc3mtu2ztg4otdlzdhhztpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 962 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc considering the benefits and shortcomings of both the classical and imputation systems, the western tax systems, the researcher asked the participants whether they had an opinion on an alternative corporate income tax system that the au member states should adopt. table 7 provides opinion statements for implementing an alternative cit system in the au. table 7: opinion statements for alternative cit system to be implemented in the au: rs1the new system should foster cross-border cooperation between tax authorities and encourage automatic exchange of information among african countries and globally……. rs5the au tax system should be able to support tax administration for adequate controls and audits of both local and multinational companies..... rs3-i believe they must develop their capacities to tackle tax evasion, reduce opportunities for tax avoidance, and facilitate recovery of stolen assets..... rs11-the new system must establish well-equipped transfer pricing units that will assist in combating tax avoidance and evasion ….. rs8the system should have a separate income tax system/code for small to medium businesses……the system should include an income tax system/code for small to medium businesses. smes are the au's cornerstone, and it is necessary to incorporate them into the new tax system. their cross-border obstacles need to be addressed in the new system, such as off-setting losses from the subsidiary in another state, double taxation, inefficient transfer pricing and high compliance costs. the tax system should allow smes to conduct tax planning, avoiding specific tax categories. to sustain smes, the tax system should incorporate tax incentives for smes such as tax holidays, exemptions, tax credits, investment allowances and depreciation schemes. very importantthe tax system should remain neutral and efficient to smes. rs19—in this new system, tax credit should be granted to foreign shareholders and on dividends received from abroad. this system can be called an african hybrid tax system. the results demonstrate that the classical and the imputation systems are unsuitable for cit harmonisation in the au. the classical system is not suitable, as it promotes double taxation. the imputation system harms cross-border share ownership, as it is challenging to align corporate tax rates with the highest personal tax rates, especially when investors are from different countries with different top individual tax rates. the findings reveal a new tax system called the african hybrid tax system or the african blended tax system to be adopted in the au. graham and bamba (2020) support this finding, stating that a home-grown tax system is needed in africa. africa’s current tax system has not and cannot deliver the required revenues. this is because african countries are applying a tax system borrowed from developed countries ill-suited to african economies. these tax systems do not fit in africa due to differences in economic and social structures. the current research findings suggest that there should be cross-border cooperation between au tax authorities. this could be done by implementing single tax rules, tax agreement treaties, corporate tax base, and removal of withholding tax. also, there should be an effective mechanism for exchanging information among the tax authorities of the member states of the au. the crossborder provision of services should be free from discrimination to facilitate cooperation among the au member states. thus, the new system should foster cross-border cooperation between tax https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 963 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc authorities and encourage the automatic exchange of information among african countries and globally. the reduction in compliance costs is paramount for the successful implementation of cit harmonisation in the au. in this new system, compliance costs should be reduced by having simplicity in the administration of corporate tax, promoting the administrative feasibility of a corporate tax, maintaining effective and efficient use of resources, and having a high degree of cooperation between tax authorities of the member states. the au tax system should be able to support tax administration for adequate controls and audits of both local and multinational companies. the new system must establish well-equipped transfer pricing units that will assist in combating tax avoidance and evasion. the au must develop its capacities to tackle tax evasion, reduce opportunities for tax avoidance, and facilitate the recovery of stolen assets. the au system should include a separate income tax system/code for small to medium businesses. in other words, this new au tax system should be designed to promote smes in the au. smes should be able to offset losses incurred in one member state from the income earned from a subsidiary in another. this tax system should be flexible enough to allow smes to do tax planning, thereby reducing their tax liability. tax credits and tax exemptions should be incorporated in the new african hybrid tax system, whereby income taxed at the corporate level is exempted at the shareholder level. this implies that the au may use the credit method, whereby the tax paid in the member state of the subsidiary (or branch) is credited against the corporate income tax liability of the parent company. income earned from foreign investment should also be exempted from tax at the personal level. alternatively, the investor should receive tax credits for the income earned from foreign investment. the companies with activities in more than one member state should pay tax to a central tax authority (at the community level), which will distribute the revenue among the member states entitled to a share of that revenue. thus, this new system should address weaknesses in both imputation and classical systems with the agreement of all member states. technology and resources remain critical to implementing the african hybrid tax system for cit harmonisation in the au. hence, the governments of member states should jointly invest in technology and resources to facilitate this implementation. conclusion it can be concluded that both the classical and the imputation systems are unsuitable for cit harmonisation in the au. the classical system is unsuitable as it promotes double taxation, whereas the imputation system negatively impacts cross-border ownership of shares. these findings emphasise that the au needs to have its tax system, which should be novel and unique enough to address the shortcomings of the existing tax systems. the participants believe the au tax system can be called an african hybrid or blended tax system. table 8 below shows the shortcomings of both classical and imputation systems and how they can be addressed in the new african hybrid system: table 8: incorporation of solutions into the new africa hybrid tax system https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 964 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc existing tax system shortcomings outlined by participants suggested way to be addressed in the new africa hybrid tax system classical system the classical system promotes double taxation, as the income is taxed twice at the company and shareholder levels. • tax credits and exemptions should be incorporated in the new africa hybrid tax system, whereby income taxed at the corporate level is exempted at the shareholder level. alternatively, there should be tax credits for shareholders that allow them not to pay tax on their dividends received from corporations. • similarly, foreign source income should be exempted for domestic corporate income tax purposes and not be subject to taxation. or alternatively, the au may use the credit method, whereby the tax paid in the member state of the subsidiary (or branch) is credited against the corporate income tax liability of the parent company. less 'centralised' process and unnecessary duplication of activities. companies with activities in more than one member state should pay tax to a central tax authority (at the community level), which will distribute the revenue among the member states entitled to a share of that revenue. all shared activities should be centralised. double taxation creates an administrative burden on the shareholders as they must submit themselves. the shareholders should be exempted from tax or issued tax credits for income taxed at the corporate level. these tax exemptions and tax credits should be administered at the corporate level, and the shareholders should be exempted from such tax administration. investors' income (after tax) is taxed again when they file their personal taxes, which discourages investment in economic integration. income earned from foreign investment should be exempted from tax at a personal level, or tax credits should be provided to the investor for the income earned from foreign investment. imputation tax system the imputation system negatively impacts crossborder share ownership. it is difficult to align corporate tax rates with investors’ top personal tax rates, especially when investors come from different countries with different top personal tax rates. income earned from foreign investment should be exempted from tax at a personal level, or tax credits should be provided to the investor for the income earned from foreign investment. the imputation system does not recognise the distinction between the company and the system should recognise the company and shareholders as different taxpayers and exempt tax on a personal level. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 965 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc shareholders, so it can be used for tax avoidance and does not prevent double taxation. the system is not helpful for small companies as it requires significant investment in resources and technology to be implemented in a company. the governments of member states should jointly invest in technology and resources to facilitate the implementation of an african hybrid tax system. source: researcher’s compilation from the empirical findings and literature these deficiencies resulted in the need for the au to implement a novel alternative tax system that addresses the shortcomings of both classical and imputation systems. therefore, it is recommended that the african hybrid or blended tax system be implemented in the au to facilitate cit harmonisation. however, technology and adequate resources are crucial to make this a success. therefore, the member states should jointly invest in technology and resources to facilitate the implementation of the african hybrid tax system for cit harmonisation. in combining the literature and the empirical findings of the study, it is postulated that the african blended tax system should be designed and implemented within the parameter of adam smith’s principles on taxation, namely distribution of tax burdens, horizontal equity, ability to pay, benefit principle, economic efficiency and ease of administration, and compliance. thus, it should be designed to be more progressive and equitable than the traditional tax systems while still being relatively simple to administer. it should combine elements of the flat tax and proportional tax systems, such as allowing corporations with higher incomes to pay a higher percentage of their income in taxes than those with lower incomes. it should also incorporate progressive features, such as deductions or credits for certain expenditures. based on the literature reviewed and empirical findings, the african hybrid tax system will require building an efficient and transparent tax administration system, leveraging technology and enhancing administrative capacity for the new system. the au must also expand their tax bases beyond natural resources and incorporate the informal sector into the formal economy. tax systems should promote fairness and equity, ensuring the burden is shared proportionally among individuals and businesses. the new system also requires the au to prioritise tax harmonisation efforts and foster cooperation to promote cross-border trade and investment. the current research has contributed to the body of knowledge by suggesting a new tax system that may encourage tax harmonisation in the au. a similar study may be conducted in other african economic integrations using a quantitative methodology to validate the current research findings. reference adelakun, b.o., nembe, j.k., oguejiofor, b.b., akpuokwe, c.u., & bakare, s.s. 2024. legal frameworks and tax compliance in the digital economy: a finance perspective. engineering science & technology journal, 5 (3): 844-853. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg 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(2024). forced exit from the joint-decision trap: us power and the harmonisation of company taxation in the eu. journal of european public policy, 1-25. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg https://doi.org/10.1111/1758-5899.13456 https://protect.checkpoint.com/v2/___https:/www.taxcom.org.za/docs/20180411%20final%20dtc%20cit%20report%20-%20to%20minister.pdf___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2oja4nzy6nmq5owu4mjgxzdhjytmzotu5mziwmgewytc0zwiwmjk5mmu3yjg3ngyyotrhztbmotu3nmjkmdexmdrhnzfhndpwolq6tg https://protect.checkpoint.com/v2/___https:/www.taxcom.org.za/docs/20180411%20final%20dtc%20cit%20report%20-%20to%20minister.pdf___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2oja4nzy6nmq5owu4mjgxzdhjytmzotu5mziwmgewytc0zwiwmjk5mmu3yjg3ngyyotrhztbmotu3nmjkmdexmdrhnzfhndpwolq6tg https://protect.checkpoint.com/v2/___https:/www.elibrary.imf.org/display/book/9781513511771/9781513511771.xml?code=imf.org___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojlintg6yzk3mdeyztvmode2mdkyyjfmnzm4mtvmnzqwzmizytc3mmfkmzq3zjezmtbmm2m1ntkyzja2mwuymtg1nwq5yzpwolq6tg https://protect.checkpoint.com/v2/___https:/www.elibrary.imf.org/display/book/9781513511771/9781513511771.xml?code=imf.org___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojlintg6yzk3mdeyztvmode2mdkyyjfmnzm4mtvmnzqwzmizytc3mmfkmzq3zjezmtbmm2m1ntkyzja2mwuymtg1nwq5yzpwolq6tg https://protect.checkpoint.com/v2/___https:/ec.europa.eu/economy_finance/publications/pages/publication530_en.pdf___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omzmngi6n2nhothmnthhyzzmmmy0zmjimji2ztcyntaxmte1ntdjmmvmmtezodywmmrimwvimta3nmflztq5owvmyjm4zdpwolq6tg https://protect.checkpoint.com/v2/___https:/chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2478&context=law_and_economics___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojm5otq6zdgyzgfizdmzymzlztiyyzk4njc4y2njmtqzy2fmyznmnwywmme0zwnmzdk4ywewy2qxmjm5m2y5mti1mjgyotpwolq6tg https://protect.checkpoint.com/v2/___https:/chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2478&context=law_and_economics___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojm5otq6zdgyzgfizdmzymzlztiyyzk4njc4y2njmtqzy2fmyznmnwywmme0zwnmzdk4ywewy2qxmjm5m2y5mti1mjgyotpwolq6tg https://protect.checkpoint.com/v2/___https:/taxjustice.net/2021/05/18/africa-and-the-corrosive-international-tax-system/___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omixyji6otqymdk5ogu5yzk4zduyytaznwqym2e5yzzjztg2yjq1mtlhmtk1mgywztbmmjdmzddlntaxywixnzeymjmxndpwolq6tg https://protect.checkpoint.com/v2/___https:/taxjustice.net/2021/05/18/africa-and-the-corrosive-international-tax-system/___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omixyji6otqymdk5ogu5yzk4zduyytaznwqym2e5yzzjztg2yjq1mtlhmtk1mgywztbmmjdmzddlntaxywixnzeymjmxndpwolq6tg https://protect.checkpoint.com/v2/___http:/dx.doi.org/10.2139/ssrn.3713087___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omywota6othjywmzmznimgi0ndcwyjg1ywfkytfjm2nkzta3zjuymwexngjjngvkn2m2yzm0mdk1nmmwowzhmmmxzgvhodpwolq6tg https://protect.checkpoint.com/v2/___https:/blogs.worldbank.org/africacan/do-sub-saharanafrican-countries-need-home-grown-tax-system___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojq4n2e6nmmzyzdknzfhzmi2otdkzgmyywe0mgm1mgqxymq5zju1mmqzmmizzge4mdcyoty5mjcxndi2zmy3nti2mtdizjpwolq6tg https://protect.checkpoint.com/v2/___https:/blogs.worldbank.org/africacan/do-sub-saharanafrican-countries-need-home-grown-tax-system___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojq4n2e6nmmzyzdknzfhzmi2otdkzgmyywe0mgm1mgqxymq5zju1mmqzmmizzge4mdcyoty5mjcxndi2zmy3nti2mtdizjpwolq6tg determination of tax system for corporate income tax harmonisation of african union chiromo and schutte 968 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hansson, a., & olofsdotter, k. 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(2005). why do we need corporate taxation? cesifo working paper, 1495. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=759486. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2omexm2m6nwu0odjjngzlmjzizgy4mzjjmjlhotqyyjzhzdq0ywnlmdjlymi1yzk4ngnlymyxotq3ngqxmzrhzmqyzjg2mdpwolq6tg https://protect.checkpoint.com/v2/___https:/www.ciat.org/ciatblog-sistema-tributario-integrado-o-desintegrado/?lang=en___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2oju4mje6ymnkzmywodzlnzcym2fjodayytezzjrkmtgxmmvkzdezm2riztg3ntlim2izymu4yzfkogy3mdhmn2jjy2mzytpwolq6tg https://protect.checkpoint.com/v2/___https:/www.ciat.org/ciatblog-sistema-tributario-integrado-o-desintegrado/?lang=en___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2oju4mje6ymnkzmywodzlnzcym2fjodayytezzjrkmtgxmmvkzdezm2riztg3ntlim2izymu4yzfkogy3mdhmn2jjy2mzytpwolq6tg https://protect.checkpoint.com/v2/___http:/dspace.wunu.edu.ua/bitstream/316497/31559/1/sudsawasd.pdf___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojk5zgu6zti2nddln2ezyjuyytu1yjuxzjm5ntbkymm4mmu1nmrjngi1ngy0mmmzyzfimtzlyjjkmmi5ywvlm2m1mmyxotpwolq6tg https://protect.checkpoint.com/v2/___https:/www.africabib.org/rec.php?rid=355338947___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2oje1mta6n2i1zjazn2e2njm5zgewmjkxytewmzfhmgy4zjuxmdnlmdaynzkzothkytuwmzk5zde4ngqwmtgyyjnmnmmyzdpwolq6tg https://protect.checkpoint.com/v2/___https:/papers.ssrn.com/sol3/papers.cfm?abstract_id=759486___.yzjlonvuaxnhbw9iawxlomm6bzo3odnhyzy4zjk5ymezngy4mwe4ymq3ywm2yji5zjaynzo2ojc4mtg6mtm1ogq3njhmotc5ndviogizowzkndizmjnizdblyjfhode2ytk4ndzhnte5mtg1nwi3yjc3ngi3n2fjognhmjpwolq6tg the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 2, april 2025 page no. 1-12 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios joel legi rorimpandey 1, harlyn siagian2, harman malau3 123universitas advent indonesia, indonesia correspondent: joelrorimpandey@gmail.com1 received : january 28, 2025 accepted : april 10, 2025 published : april 30, 2025 citation: rorimpandey, j, l., siagian, h., malau, h. (2025). financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios. ilomata international journal of tax and accounting, 6(2), 75-89. https://doi.org/10.61194/ijtc.v6i2.1726 abstract: the covid-19 pandemic has had a significant impact on the healthcare sector, particularly on hospitals, which faced operational and financial challenges due to increased operational costs and changes in service patterns. this study aims to evaluate the financial performance of hospitals in jakarta before, during, and after the covid-19 pandemic. the analysis was conducted using financial ratios, including return on assets (roa), return on equity (roe), and net profit margin (npm) to measure profitability; current ratio and quick ratio to measure liquidity; and debt to asset ratio (dar) and debt to equity ratio (der) to measure leverage. this study employed a quantitative descriptive method using secondary data in the form of financial statements from hospitals in jakarta for the period 2018–2024. the results showed that profitability, liquidity, and leverage ratios experienced significant improvements during the pandemic compared to the prepandemic period. the indonesian government's policy of funding covid-19 patients played a major role in enhancing hospital financial performance during the pandemic. furthermore, the financial performance of hospitals in jakarta demonstrated a significant improvement postpandemic compared to the pre-pandemic period. these findings provide valuable insights for hospital management and policymakers in formulating financial strategies to enhance the sustainability of hospital operations in the postpandemic era. keywords: return on assets, return on equity, net profit margin, current ratio, quick ratio, debt to asset ratio, debt to equity ratio this is an open-access article under the cc-by 4.0 license. introduction the covid-19 pandemic has considerably impacted various sectors, including the healthcare sector. hospitals, which function as the primary frontline in addressing the pandemic, are experiencing financial strain due to increased operational expenditures and modifications in service patterns. this has led to a considerable decrease in operating margins for many hospitals. https://www.ilomata.org/index.php/ijtc mailto:joelrorimpandey@gmail.com https://doi.org/10.61194/ijtc.v6i2.1726 financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consequently, hospital operating margins have undergone a substantial decline. the novel coronavirus known as covid-19 began in the chinese city of wuhan in the final quarter of 2019 and then spread throughout the world, inflicting great economic and human disaster. the global economy had a mixed start to 2020, expecting higher growth but being shocked by the covid19 epidemic at the start of the year. due to mobility constraints, regular economic activity and business dealings were also suspended, which resulted in a sharp decline (fernando & ishari, 2023). one of the most significant and perilous social and economic developments in recent decades is the covid-19 pandemic. it negatively affects not just the economics of particular nations but also the financial standing of corporations, which in turn affects the lives of hundreds of millions of people worldwide (naruć, 2022). the onset of the covid-19 pandemic in early 2020 has substantially impacted various sectors, including the healthcare sector. healthcare institutions, such as hospitals responsible for providing community healthcare services, have faced significant challenges and pressures. in the context of a pandemic, hospitals must adapt to the increasing number of patients and implement strict health protocols. this results in increased operational costs, such as increased operational costs due to the need for personal protective equipment (ppe) and additional resources to manage covid-19 patients (kaye et al., 2021). hospitals in both rural and urban areas experienced a decline in operating margins, although government funding helped to prevent a more severe financial crisis (li et al., 2023). due to a sharp decline in revenue and a twofold increase in costs, many hospitals were unable to handle the detrimental financial and medical effects of covid-19. however, as time went on and during the 2020–2021 medium-term period, the negative effects and consequences of the covid19 shock on hospitals' operational, economic, and financial indicators diminished and were followed by a comparatively stable improvement in the indicators, which ultimately led to an increase in hospitals' efficiency (ahangar et al., 2023). hospitals' financial performance and service performance have suffered since the start of covid-19 because of restrictions on patient care. it is crucial to take steps like offering a range of funding options and enhancing hospitals' financial stability. hospitals should receive funding to make up for their losses from lower outpatient and elective revenue (jalilian et al., 2023). in the context of the present study, it is imperative to undertake a comprehensive evaluation of hospitals' financial performance, both before and in the aftermath of the pandemic caused by covid-19. the measurement of financial performance can be accomplished by utilizing various financial ratios, including but not limited to profitability, liquidity, and leverage ratios. the aforementioned statistics offer a thorough assessment of the hospital's ability to turn a profit, pay short-term debt, and manage debt. hospital management must comprehend the alterations in financial performance to strategically enhance operational efficiency and financial sustainability in the future. a primary focus for hospitals should be the augmentation of financial reserves, the cultivation of non-operating revenue streams, and the implementation of operational efficiencies to foster enhanced financial resilience (lalani et al., 2023). for-profit hospitals encounter substantial financial challenges due to their reliance on elective procedures, which were suspended during the pandemic. these hospitals are more susceptible to financial difficulties compared to non-profit hospitals (kruse & jeurissen, 2020). hospitals must also prioritize enhancing https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc management efficiency and financial resilience to ensure survival and thrive independently, particularly in regions where government support may be constrained (yang, 2023). a number of prior studies have examined the financial performance of hospitals in a context pertinent to this subject. according to (pantjatmono et al., 2024) findings indicate that financial performance exhibited enhancements subsequent to the emergence of the pandemic. hospital administrators and other stakeholders can use this research's practical insights to create more effective financial management plans both during and after the pandemic. (nur sidiq et al., 2022) study of uns hospital's liquidity ratio initially indicated a favorable condition, as it exceeded the established healthy criteria limit. in the post-pandemic period, there was an increase in the current and quick ratios, suggesting the hospital's capacity to meet short-term obligations. however, there was a decline in the cash ratio, which may signify alterations in cash management or an augmented reliance on cash for operational needs. when comparing hospital's financial performance, financial aspects, and sub-aspects of financial ratios before and during the covid-19 epidemic, non-tax revenues did not decline. according to the income to operational costs ratio or the capacity of hospital to use its income to fund hospital operations, the covid-19 pandemic situation has no bearing on this ratio (masloman et al., 2022). in order to assess a company's financial performance and evaluate whether financial performance declined prior to and following the covid-19 epidemic, financial statements are a crucial component(nadiyah rahmani et al., 2023). the most extensively studied financial ratios profitability, liquidity, solvency, effectiveness, and market ratios are used to compare the financial performance of businesses. the profitability, liquidity, and solvency ratios are three measures of the hospitality industry's financial performance that are frequently employed in studies (nurwitasari et al., 2023). the present study utilized three ratios—namely, the profitability ratio, liquidity ratio, and leverage ratio—to assess financial performance. these ratios were selected to provide a comprehensive evaluation of the hospital's financial health. the study incorporated seven additional ratio parameters to enhance the clarity and comprehensiveness of the analysis. profitability a company's ability to make money off of its income, assets, and equity is evaluated using financial metrics known as profitability ratios. this ratio is composed of return on equity (roe) and return on assets (roa). the company's primary goal is to maximize profits for the benefit of its owners, members, and product development. in order to sustain profitability, management must meet predefined goals (fatwa et al., 2023).a ratio called return on assets (roa) is used to assess a company's capacity to produce a profit from all of its assets. roa demonstrates how well management uses the company's resources to produce profits. the larger the roa number, the better the company's performance in utilizing its assets to generate profits. an indicator of a company's capacity to provide net income for shareholders' equity returns is return on equity, or roe (efendi & wibowo, 2017). the return on equity (roe) indicates how effectively a business uses shareholder investment to produce profits. roe provides an overview of how much profit is generated for every rupiah of capital invested by shareholders. investors often use roe to evaluate a company's performance before making an investment decision. https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a financial statistic called net profit margin (npm) gauges how well a business makes net profit from its overall sales or revenue. the percentage of revenue left over after all operational costs, taxes, and other expenses are subtracted is displayed by this ratio. to put it another way, npm provides an estimate of the amount of profit made for every unit of revenue received. liquidity a company's capacity to meet its immediate obligations is evaluated using liquidity metrics like the quick ratio and current ratio (cr). good liquidity usually has a beneficial impact on the company's profitability (d. ayoush et al., 2021). the liquidity ratio is a measure of a company's capacity to settle all short-term debts with their present assets when they mature (novianti et al., 2021). a company's capacity to satisfy its short-term obligations is gauged by its liquidity, which is calculated by comparing those obligations to its current assets (fatwa et al., 2023). a liquidity ratio called the current ratio is used to assess how well a business can use its short-term assets to pay its short-term liabilities. an overview of the company's financial situation and the effectiveness of management's asset and liability management are given by this ratio. because of the size of the company's current obligations in relation to its current assets, the current ratio has decreased. the company's ability to pay off its short-term debts is weakened if the value of its current assets is less than its current liabilities (rachmatullah et al., 2023). a financial metric called the quick ratio is used to evaluate a company's capacity to pay short-term debts with its most liquid assets. this does not include inventory, but it does include cash, receivables, and marketable securities. leverage leverage ratios, such as debt to equity ratio (der) and debt to asset ratio, measure the extent to which a company uses debt to finance its assets. leverage has a significant negative impact on profitability, indicating that high dependence on debt can reduce company profits (samo & murad, 2019). financial measures such as the debt-to-equity ratio and the interest coverage ratio aid in assessing the company's debt load and its capacity to pay interest on that debt. leverage is the term used to describe the usage of borrowed funds by the business (moridu, 2024). a financial measure called the debt to asset ratio (dar) indicates what proportion of the company's total assets are financed by debt. this ratio provides an overview of the company's capital structure and how much the company depends on debt to finance its assets. a financial measure called the debt to equity measure (der) contrasts the total amount of debt and equity held by the organization. this ratio gives a summary of the company's capital structure and is used to gauge how much debt the business utilizes to finance operations and investments. the company's level of roa attainment will be impacted by both high and low der (tullah et al., 2023). https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method to elaborated and develop this research lead to the following enhancing the model. figure 1. research concept model this study aims to determine the financial performance of jakarta hospitals both before and after the covid-19 pandemic started. the pandemic has had a particularly negative effect on the hospital sector, thus an examination of its financial situation both before and after the epidemic is necessary. this research uses descriptive quantitative methods. this research method aims to objectively analyze and describe hospital financial data based on financial ratio calculations. this approach is suitable for evaluating changes in financial performance the covid-19 epidemic utilizing financial statement numbers before and after. the study was conducted in jakarta city, a region known for its cultural diversity and a blend of urban and semi-urban populations. balance sheets, income statements, cash flow statements, and notes to financial statements are among the financial statements of the jakarta hospital that were used as secondary data for this 2018-2019 before pandemic covid-19 2020-2022 pandemic covid-19 2023-2024 after pandemic covid 19 1. profitability ratio: roa, roe,npm 2. ratios liquidity: cr, qr. 3. ratio leverage: dar, der outcome hospital finance report https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc study prior to the before covid-19 pandemic in 2018–2019 and following the pandemic in 2023– 2024. this secondary data is obtained from published sources, namely the audited financial statements of the jakarta hospital from 2018 to 2024. to evaluate the financial performance of jakarta hospitals before the covid-19 pandemic and after the covid-19 pandemic, the profitability ratio, liquidity ratio, and leverage ratio are needed. the ability of the business to turn a profit from its equity and assets is gauged by the profitability ratio. research indicates that stock liquidity and overall business performance are positively correlated with profitability (nisrina et al., 2023). to measure the profitability ratio, four formulas are used, namely: roa = net profit after tax x 100% total asets the ratio of the overall assets compared to total net income is known as roa (mahendra & nurdiansyah, 2022) roe = net profit after tax x 100% total equity roe is the net profit generated from own capital (ganiah maulany, 2024) npm = net profit after tax x 100% total revenue npm is a comparison of estimated net income after tax with total income (mahendra & nurdiansyah, 2022) liquidity ratio measured by the following formula: current ratio = current assets current liabilities a ratio called the current ratio is used to quantify the short-term debt of a business (nuryasman mn, 2021) quick ratio = current assets inventory current payables https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the fast ratio is a metric for rapidly calculating the ratio of current assets to short-term liabilities (nuryasman mn, 2021). leverage ratio using the following formula: dar = total liabilities x 100% total aset the ratio of total assets to total liabilities, or dar (ramadhan et al., 2017) 1. der = total liabilities x 100% total equity the ratio for all liabilities to overall equity is known as der (ramadhan et al., 2017). result and discussion the research analysis used the annual financial statements of jakarta hospitals from 2018 to 2024 to use ratios to analyze financial performance prior to and following the covid-19. table 1. jakarta hospital ratio data rasio year 2018 2019 2020 2021 2022 2023 2024 roa 9% 8% -9% 26% 18% 14% 15% roe 21% 16% -22% 56% 25% 16% 18% npm 3% 3% -4% 17% 11% 8% 8% cr 2.2 2.4 1.9 1.9 4.6 12.0 9.8 qr 2.0 2.1 1.7 1.8 4.4 11.5 9.5 dar 56% 49% 58% 53% 28% 16% 18% der 127% 97% 136% 114% 39% 19% 21% in table 1, the hospital's financial ratio values compare data from 2018 to 2024 before covid 19, during covid-19 19, and after covid 19. it is made based on 3 main ratios, namely profitability ratios consisting of roa, roe, and npm. the quik ratio and current ratio make up the ratio. the leverage ratio is used to assess the extent to which the business relies on debt to fund its operations and investments, which include der and dar. from the data shown, the data fluctuates every year. https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ratio before pandemic covid-19 pandemic covid-19 before vs during pandemic covid19 after pandemic covid-19 before vs after pandemic covid 19 average 20182019 average 2020-2022 growth average 2023-2024 growth roa 9% 12% 33% 14% 63% roe 18% 20% 6% 17% -8% npm 3% 8% 146% 8% 158% cr 2.3 2.8 22% 10.9 378% qr 2.1 2.6 27% 10.5 408% dar 53% 46% -12% 17% -68% der 112% 96% -14% 20% -82% table 2 shows the financial ratios prior to, during, and following the covid-19, demonstrating notable shifts in the performance of the company. before the pandemic (2018-2019), the average return on assets (roa) was 9%, which increased to 12% during the pandemic (2020-2022), recording a growth of 33%. but following the pandemic (2023–2024), roa rose even more to 14%, indicating a 63% rise over the pre-pandemic period. meanwhile, the average return on equity (roe) before the pandemic was 18%, increasing to 20% during the pandemic, or a growth of 6%. however, roe decreased to 14% after the pandemic, registering a decline of 8% compared to the pre-pandemic period. net profit margin (npm) showed a significant increase, from 3% before the pandemic to 8% during the pandemic, or a growth of 146%, and remained at 8% after the pandemic, showing a total increase of 158% compared to the period before the pandemic. regarding liquidity, the current ratio and quick ratio showed a substantial increase. the average current ratio increased from 2.3 before the pandemic to 2.8 during the pandemic and further to 10.9 after the pandemic, registering an increase of 378% compared to the pre-pandemic period. the quick ratio also increased from 2.1 to 2.6 during the pandemic and to 10.5 after the pandemic, showing an increase of 408% compared to the pre-pandemic period. finally, the leverage ratio, which consists of the debt-to-asset ratio (dar) and debt-to-equity ratio (der), showed a significant decline. the average dar dropped from 53% before the pandemic to 46% during and further to 17% after the pandemic, registering a decrease of 68% compared to the pre-pandemic period. der also decreased from 112% to 96% during the pandemic and to 20% after the pandemic, showing a decrease of 82% compared to the prepandemic period. looking at profitability ratios, two of the three parameters used, namely return on assets (roa) and net profit margin (npm), experienced significant growth. roa increased by 63%, while npm increased by 158% from the pre-pandemic period (2018-2019) to the post-pandemic period (2023-2024). however, return on equity (roe) decreased by 8%. overall, jakarta hospital's profitability ratios showed excellent growth. https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc positive growth in financial ratios is also supported by government policies. according to (kementrian kesehatan ri, 2021) covid patients who are referred to referral hospitals can have their costs reimbursed by the government and hospitals can claim reimbursement for these costs. the jakarta hospital is also a hospital appointed by the government to treat covid 19 patients. after analyzing the hospital's income report, it turns out that the positive growth in the ratio is due to government policies that provide assistance for covid patients, after being seen, especially in 2021, 42% of the revenue contribution came from covid patients paid by the government. without assistance from government policies, it is certain that the hospital's financial performance during covid will be negative/loss. finally, the leverage ratio analysis shows a significant decrease in the debt-to-asset ratio (dar) and debt-to-equity ratio (der). dar decreased by 68%, while der decreased by 82%. this decreases benefits jakarta hospitals by showing a better ability to fulfil obligations. with lower dar and der values, jakarta hospital's financial performance has become more stable and healthier. but on the other hand, this also indicates that hospital management is not investing much more precisely in fixed assets (new medical devices), after seeing the fixed assets that compare before covid 19 it turns out that the growth decreased by 37% after covid 19, this is an input for management in terms of investment, especially adding new medical devices so that the hospital continues to grow better in the long term. in contrast to earlier studies from some study, (mcfadyen et al., 2025) hospital financial performance declined during the covid-19 pandemic, and hospital profitability declined following the pandemic. the covid-19 pandemic had a substantial impact on hospitals' financial performance, according to our research (lee, 2024). according to the hospital's financial performance analysis, the covid-19 pandemic has not improved the hospital's financial performance above its prepandemic levels, as seen by changes in hospital financial ratios (rexana & widjaja, 2023). companies operating in a demanding and competitive environment, particularly during the covid-19 pandemic, need to monitor their financial performance. research has shown that the covid-19 crisis had a negative impact on business performance, and that this impact is more noticeable when a company's investment scale or sales revenue is smaller (valaskova et al., 2023). this research founding jakarta hospital experienced increasing financial performance after covid-19 because management was able to take advantage of hospital facilities to become a referral for covid-19 where the income of covid patients was relatively high from the government supported by more direct expenses, which were lower than ordinary patients before and after covid 19. conclusion due to the analysis's findings, jakarta hospitals' financial performance following the covid-19 pandemic has significantly improved when compared to its pre-pandemic state. the results showed that the covid-19 pandemic had a positive impact on the financial performance of the jakarta hospital. the positive impact also occurs because the indonesian government has made a policy to finance covid 19 patients during the covid 19 pandemic period. this finding can be a reference for hospital management to have made favorable policies in the face of the global health crisis. by understanding the financial dynamics that occur after a pandemic, hospital management https://www.ilomata.org/index.php/ijtc financial performance of jakarta hospitals before and after the covid-19 pandemic: analysis of profitability, liquidity, and leverage ratios rorimpandey, siagian, and malau 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc can optimize resources and allocate budgets more effectively to improve financial performance and maintain operational sustainability. this study provides important insights for hospital management and policymakers in formulating financial strategies that the pandemic has a favorable effect on the finances of jakarta hospitals, also input for management regarding 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(2023). analysis of factor affecting the profitability of regional public hospitals before and after covid-19. asia-pacific journal of convergent research interchange, 9(5), 231– 241. https://doi.org/10.47116/apjcri.2023.05.20 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1 january 2025 page no. 146-165 146| ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc political connections, business groups, and firm value in indonesia muhammad fasha radya1, eddy suranta2 12universitas bengkulu, indonesia correspondent: pasharadya@gmail.com1 received : november 28, 2024 accepted : january 18, 2024 published : january 31, 2025 citation: radya, m.f., & suranta, e., (2025). political connections, business groups, and firm value in indonesia. ilomata international journal of accounting & taxation. 6(1), 146165. https://doi.org/1061194/ijtc.v6i1.1855 abstract: this study examines the impact of politically connected board directors on firm value, with business group affiliation serving as a moderating variable, focusing on indonesian manufacturing firms. drawing on agency theory and resource dependence theory, the research analyzes 318 observations from 106 listed companies between 2020 and 2022. tobin’s q is used as a measure of firm value. the findings reveal that political connections alone do not significantly influence firm value (pcbod = 0.421, pcbod2 = 0.106), but their effect becomes positive and significant when moderated by business groups (pcbod×bg = 0.006, pcbod2×bg = 0.007). this implies that business group structures, particularly in familycontrolled firms, can enhance the strategic value of political ties. the study is limited by its broad classification of political connections, without distinguishing their type or depth. future research should examine more specific political affiliations and consider political dynamics across sectors. keywords: political connections, business groups, firm value, board of directors, tobin’s q. this is an open access article under the cc-by 4.0 license introduction tobin’s q is a widely used indicator of firm value, reflecting market expectations by comparing the market value of a company’s assets to their replacement cost. a higher tobin’s q suggests that investors perceive strong future growth and profitability potential. investors see excellent growth prospects and profitability potential when tobin's q exceeds 1, as the market value surpasses the cost of replacing the physical asset. (chung & pruitt, 2015). according to agency theory, tobin’s q reflects how effectively management (agents) creates value for shareholders (principals), but conflicts of interest and information asymmetry often hinder this alignment. in developing countries like indonesia, political connections represent an external governance mechanism that can influence firm value, particularly amid weak regulatory institutions (jensen and meckling, 1976). beyond internal governance factors, external elements like corporate political connections also significantly influence tobin’s q values (joseline et al., 2021), illustrating how the institutional context affects market valuation estimates. https://www.ilomata.org/index.php/ijtc mailto:pasharadya@gmail.com1 https://doi.org/1061194/ijtc.v6i1.1855 the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 147|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc prior research presents mixed evidence: some studies find that politically connected firms gain easier access to financing and government contracts, while others reveal that such connections can lead to inefficiencies and agency problems. however, few studies have examined how political connections interact with internal ownership structures, especially family-controlled business groups to shape firm value. this study addresses that gap by analyzing the indonesian context, where family firms and conglomerates remain dominant and politically engaged (azizah & al amin, 2020). the danantara case illustrates the strong presence of political connections within the governance structure of state-owned enterprises. as a state asset holding company, pt danantara has appointed several political figures and active officials, including minister of state-owned enterprises erick thohir as chairman of the supervisory board and deputy minister dony oskaria as chief operating officer. these appointments have drawn criticism for prioritizing political affiliation over professional competence, raising concerns about potential conflicts of interest, weak corporate governance, and risks of corruption similar to the 1mdb scandal in malaysia. this situation highlights how political ties within the boardroom can undermine the independence, transparency, and credibility of public companies (merdeka.com). according to fitria asas and colleagues, companies with political ties tend to secure government resources more easily, which ultimately enhances firm value, including environmental aspects. moreover, political connections strengthen a company’s position in shaping regulations that favor their business activities re (asas et al., 2022). in the business context, political connections are an external factor that can influence a firm's value. these connections are often manifested by the involvement of board members who have direct ties to political actors, such as through formal positions or familial relationships. (faccio, 2019) reveals that politically connected firms tend to benefit from advantages such as access to government contracts, regulatory protection, and easier financing. however, the impact of political connections on firm value remains a subject of debate, as their effects can be either positive or negative, depending on the prevailing economic conditions and the country's institutional framework. from an agency theory perspective, the relationship between firm owners (principals) and managers or directors (agents) frequently gives rise to conflicts of interest. although owners expect agents to act in the company's best interests, differences in objectives and information asymmetry may lead agents to make decisions that benefit themselves at the expense of the owners. this situation gives rise to what is known as agency costs (jensen and meckling, 1976). this study argues that the presence of politically connected board members may reduce firm value. for example, (fisman, 2001) examined the impact of political connections on firm value by analyzing market reactions to news about the health condition of former indonesian president suharto. the findings revealed that firms with political ties experienced a significantly greater decline in value compared to those without such connections. on the other hand, several studies indicate that politically connected boards can enhance firm value. research by (boubakri et al., 2009); (wu et al., 2012); (liu et al., 2018) has found that political connections provide advantages such as easier access to resources, information, and business opportunities. additionally, these ties can strengthen a company's position in navigating https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 148|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc regulations and bureaucracy. in this context, political connections act as a mechanism to reduce external uncertainty and risk, aligning with resource dependence theory. this theory suggests that firms often appoint board members with political connections to mitigate dependence on an uncertain external environment. by doing so, firms can improve their legitimacy and operational stability (hillman et al., 2009). family ownership refers to a situation where a company is owned and managed entirely or partially by family members. direct involvement of family in management often positively influences firm value because family owners are typically actively engaged in daily operations, which allows for closer oversight. this involvement helps identify and address issues early, such as inefficient decision-making or opportunistic behavior by management. from an agency theory perspective, this setup can lower agency costs by reducing supervision problems and asymmetry of information between owners (principals) and managers (agents) (komalasari & nor, 2014). meanwhile, a business group is a set of companies linked through ownership or control, usually under a single parent such as a family, foundation, or conglomerate. although each company within the group may be a separate legal entity, they are typically managed in a coordinated way, often sharing resources, internal financing, market networks, and information. in many developing countries, including indonesia, business group structures have developed as a response to institutional weaknesses, like inefficient financial markets or limited investor protections. as a result, these groups act as an alternative way for firms to access capital, lower risk, and grow their operations (khanna & yafeh, 2010). family ownership and the presence of companies within business groups are two critical characteristics of corporate structures in developing countries, including indonesia, that can significantly influence firm value. family firms are often associated with stronger managerial oversight and a long-term orientation, enabling them to create greater value for shareholders (anderson & reeb, 2003). however, family ownership also carries the potential for conflicts of interest between majority owners and minority shareholders, especially when governance mechanisms are ineffective (claessens et al., 2000). additionally, companies affiliated with business groups benefit from broader access to internal resources, financing, and market networks, which can enhance operational efficiency and firm value (khanna & yafeh, 2010). on the other hand, complex business group structures can be exploited for entrenchment or tunneling purposes, transferring resources among affiliated firms for particular interests, which may harm minority shareholders (r. la porta et al., 1999). therefore, the impact of family ownership and business group affiliation on firm value largely depends on the effectiveness of internal governance and the institutional environment regulating transparency and investor protection. in the context of family firms and business groups, the presence of politically connected board members acts as a strategic factor that can either strengthen or weaken firm value. political connections offer advantages, including access to state resources, licensing, and regulatory protection, especially in developing countries with relatively weak institutional frameworks (faccio, 2019). within family-owned companies, political ties held by the board are often leveraged to sustain the business and expand power networks for long-term interests. however, when family ownership becomes overly dominant without adequate oversight mechanisms, these political connections may lead to conflicts of interest and inefficient decision-making practices (fan et al., https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 149|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc 2007). a similar dynamic applies to firms within business groups, where political connections can either reinforce synergy among affiliated companies or be exploited for resource tunneling to benefit controlling parties. therefore, the interplay of political connections, family ownership, and business group structure does not always create added value; its impact on firm value largely depends on the quality of governance and accountability exercised within the company. the interplay between family ownership, business group affiliation, and political connections on the board of directors can be better understood through the lens of agency theory. agency theory explains that conflicts of interest may arise between management (agents) and shareholders (principals), particularly when their objectives are not aligned. in family firms, concentrated ownership is often seen as a mechanism to reduce type i agency conflicts—those between managers and owners—since family members have long-term incentives to preserve firm value (jensen and meckling, 1976). however, this structure can give rise to type ii agency conflicts, which occur between majority shareholders (the family) and minority shareholders, especially if controlling owners exploit corporate resources for personal gain, such as through leveraging political connections (villalonga & amit, 2004). within business group structures, incentives to manage firms efficiently may be further distorted by opportunities to transfer resources among subsidiaries in ways that do not equally benefit all shareholders. the presence of politically connected board members in such contexts can serve as a strategic tool to strengthen the family or group’s control over business interests, but also raises the risk of entrenchment practices. therefore, according to agency theory, the combined impact of political connections, family ownership, and business group structure on firm value largely depends on the balance between effective control and the potential for power abuse (layyinaturrobaniyah et al., 2014). prior studies reveal that business groups influence firm value, though this effect is not consistent across all industry sectors. in innovation-intensive industries such as technology and pharmaceuticals, business groups tend to hinder innovation due to their focus on stability and preservation of the status quo (gomez-mejia et al., 2001). conversely, in more conservative or traditional industries, business groups demonstrate a positive correlation with firm value owing to their long-term orientation and focus on business sustainability (zahra, 2003). this study offers a novel contribution by specifically examining the role of politically connected boards of directors on firm value, while positioning business group affiliation as a moderating variable within the context of indonesian companies. this study contributes to the literature by revealing that the moderating effect of business groups on the relationship between political connections and firm value in indonesian manufacturing firms differs from prior studies that found null or even negative moderation. while earlier research by (tangke, 2019) did not identify a significant moderating effect, our findings underscore that business groups can transform political connections into value-enhancing mechanisms. this deviation highlights the unique governance structures in indonesia that potentially mitigate agency costs and amplify the strategic benefits of political ties. by employing a dual theoretical framework, resource dependence theory and agency theory, this article provides deeper insights into the complex relationships among political actors, ownership structures, and corporate governance in developing countries. the findings are expected to make a meaningful contribution to corporate governance literature, https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 150|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc particularly regarding strategies to optimize firm value through the synergy between political connections and business group structures within indonesia’s unique institutional environment. prior studies provide mixed evidence on whether political connections enhance or harm firm value, and few have explored how business groups might moderate this relationship. therefore, this study addresses the research question: “do political connections on the board increase firm value, and how is this relationship moderated by business group affiliation in indonesian manufacturing firms?” theoretical framework firm value serves as a key indicator for assessing the success of strategies in managing resources, including the effective utilization of political connections. one common measure of this performance is the market-based indicator tobin's q ratio (ding et al., 2014). research by (wu et al., 2012) and (liu et al., 2018) indicates that political connection can improve market outcomes, especially in countries where regulations are less effective. this study employs tobin’s q, as formulated by (lindenberg & ross, 1981), to assess firm value. a tobin’s q exceeding 1.00 signifies promising investment opportunities, strong growth potential, and favorable market perceptions of management’s ability to utilize company assets efficiently. generally, a higher tobin's q indicates greater firm value. (momon et al., 2021). formal and informal ties between corporate board members and political figures, such as lawmakers, government officials, or members of the armed forces, are referred to as political linkages (faccio, 2019) (fan et al., 2007). in developing countries like indonesia, firms often leverage these political ties as a strategic response to legal uncertainties and unstable regulatory environments (hillman et al., 2009). according to resource dependence theory (rdt) (pfeffer & salancik, 1978), organizations under pressure from their external environment look to players with crucial resources—in this case, political elites to help them obtain permits, contracts, or legal protection. within this framework, political connections serve as strategic assets that can enhance firm value by reducing uncertainty and creating business opportunities (agrawal & knoeber, 2001); (boubakri et al., 2009). however, political connections may result in conflicts of interest between shareholders and management (jensen and meckling, 1976). the presence of politicians on boards of directors or commissioner risks decisions being influenced more by personal or party interests rather than those of the company, potentially harming minority shareholders (fan et al., 2007); (faccio, 2019). family business groupings occur when families own a majority of a company's shares and actively manage it. this ownership significantly influences the firm’s strategic direction, including the use of political connections. according to (anderson & reeb, 2003), family firms typically adopt a long-term orientation, striving to preserve their reputation and ensure business continuity across generations. consequently, they tend to be more selective and strategic in leveraging political ties, utilizing them only when they genuinely support long-term performance. however, an alternative https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 151|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc perspective suggests that, in some cases, family-owned business groups may exploit political connections for the personal benefit of the family rather than the interests of all shareholders. such actions can reduce corporate efficiency and harm minority shareholders (claessens et al., 2000). conceptual framework hypothesis development the influence of political connections board of directors on firm value however, political connections can create a moral hazard if management exploits them for personal or group gain, often leading to biased decisions and projects that benefit only a privileged few. (fan et al., 2007) found that companies with political ties typically perform worse following their initial public offering (ipo). generally, political connections in a corporate context refer to relationships between firms and influential political figures, such as government officials or legislators. empirical research suggests political connections have mixed effects on corporate value. (maaloul et al., 2018), for example, previous research discovered that political connections can enhance shareholder wealth and business performance. similarly, a study conducted in indonesia by (maulana, 2019) found a strong positive correlation between corporate value and political connections. on the other hand, (fisman, 2001), who studied how the market responded to reports regarding the health of former president suharto, discovered that enterprises with political connections had greater performance drops than firms without such connections. furthermore, (tangke, 2019) showed that while political connections do not directly affect firm value, they do have a favorable and significant impact on corporate social responsibility. this implies that political connections may influence a company's other operational facets, which may eventually have an indirect impact on firm value. overall, the research shows that political connection has a variety of effects on firm value, depending on the economic climate and context. h1: political connections on the board positively affect firm value political connections (x) business groups (z) firm value (y) https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 152|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc business group moderates the effect of political connections boards of directors on firm value in developing nations like indonesia, family ownership is closely intertwined with the structure of family business groups, where families control most enterprises and manage networks of businesses within both formal and informal groupings (najahiyah et al., 2022). this model enables cross-entity efficiencies and strong strategic and operational control through internal finance, resource sharing, and business synergies. (xavier et al., 2020). politically connected board members play a crucial role in corporate governance, especially in countries with weak institutional frameworks. politically connected directors are believed to facilitate access to state resources, lower regulatory costs, and offer protection against government interference. earlier studies suggest that political ties can increase a company's value, particularly in ineffective regulatory environments. however, these benefits are not available to everyone, as ownership structures and company control mechanisms significantly influence the effectiveness of political connections. according to agency theory, having political connections on the board may provide strategic advantages, but without strict oversight, it can also lead to conflicts of interest. directors in companies with dispersed ownership might exploit their political ties for personal gain. conversely, in family-owned and controlled businesses, especially those within family business groups, the controlling family is motivated to ensure that political connections are used to advance the long-term interests of the family and the group as a whole. (kinger-hans et al., 2024). therefore, family ownership in a business group can significantly influence firm behavior. as controllers, families are incentivized to increase firm value because their wealth and prestige are tied to the company's success. on the other hand, more controlled and strategic exploitation of political connections is made possible by direct family supervision. therefore, the degree of family influence inside the business group structure will determine how much of an impact political links on the board have on the firm's worth. while family ownership offers advantages, agency theory highlights potential drawbacks, such as illogical decisions arising from internal conflicts or emotions. the family's complete authority in these circumstances could impede the best possible decision-making. inefficiencies can also result from nepotistic practices, such as assigning family members to administrative roles without considering their qualifications. agency costs increase when unqualified individuals are appointed due to familial interests overriding the firm's best interests in decision-making (morck et al., 1988). several prior studies have examined the influence of business groups on firm value, but their findings remain mixed, creating an intriguing empirical gap for further research. for example, (anderson & reeb, 2003) found that family businesses often exhibit greater profitability and firm value than non-family businesses. however, they also cautioned that conflicts of interest and managerial skill gaps during generational transitions can diminish firm value. thus, while family business groups can offer a competitive edge, careful management of governance and succession is crucial to preserving firm value. https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 153|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc (villalonga & amit, 2004) demonstrated that the effect of business groups on firm value heavily depends on the level of family involvement in management. when families are actively involved in management, firm value tends to improve due to tighter oversight and aligned interests between owners and managers. conversely, if families act merely as passive owners without managerial engagement, firms risk performance declines due to ineffective control. one study found that political connections within family firms can offer several benefits, such as easier access to financing and protection against political risks (wu et al., 2012). however, these advantages often come with additional risks, including reduced transparency and agency conflicts between majority family shareholders and minority shareholders. h2: business group affiliation strengthens the positive effect of board political connections on firm value. method this research adopts a quantitative explanatory approach to empirically test the influence of politically connected board members on firm value and the moderating role of business group affiliation. the linear regression model is chosen as the primary analytical tool because it effectively captures the linear relationships between variables and allows for the inclusion of interaction terms to test moderation effects (baig et al., 2023). this approach is suitable for examining firm-level panel data, as it controls for multiple firm characteristics simultaneously and supports causal inference within observational datasets. the sample was selected using purposive sampling with clearly defined criteria to ensure data consistency and relevance: (1) manufacturing firms listed on the indonesia stock exchange during 2020–2022, (2) availability of complete financial and governance data, (3) financial statements reported in indonesian rupiah, and (4) public accessibility of reports. to mitigate potential selection bias and enhance the representativeness of the sample, the study applied consistent filtering across all observations and verified the presence of politically connected directors through triangulation from multiple data sources, including company websites and public announcements. this method follows (baig et al., 2023), who stress the need for consistent and representative data in panel analysis. applying these criteria helps ensure valid and generalizable findings for indonesia's manufacturing sector. the sample consists of 318 firm-year observations from 106 companies over the period 2020 to 2022. companies were further selected based on the presence of politically connected board members, identified by reviewing board profiles in the companies’ annual reports. this study relies on secondary data, including financial and corporate governance information. financial data were gathered from the annual reports of firms listed on the indonesia stock exchange (idx) between 2020 and 2022, which were accessible via the official idx and company websites. the reports identified control factors including loss, leverage, firm size, and firm age. corporate governance data, including political connections and business group affiliations, were https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 154|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc gathered from the governance sections of the annual reports to examine the relationship between the independent and dependent variables (huguet & gandía, 2014). this study collected data through a documentation method in three steps. the researcher gathered accurate and reliable data from financial statements and annual reports on the indonesia stock exchange (idx) website and company websites. (roychowdhury, 2006). second, a data selection process was conducted, where only companies meeting the sample criteria were analyzed, including the requirement that financial reports be presented in indonesian rupiah (idr). this criterion was applied to maintain consistency in variable measurement (joni et al., 2020a). third, the collected data were processed and analyzed using suitable statistical techniques to test the study’s hypotheses. this method enabled precise measurement of political connections and business group roles within corporate governance. the analysis was conducted using spss software to answer the research questions and verify the hypotheses. table 1. operational definition and variable measurement variable measurement source dependent variable (firm value) tobins q q = mve ta (joni et al., 2020a) independent variables pcbod pcbod2 the proportion of board members with political connections relative to the total number of board members. the proportion of board members with higher political connections relative to the total number of board members. (joni et al., 2020) moderation variables business group a dummy variable coded as 1 if family ownership includes a business group, and 0 if it does not (joni et al., 2020a) control variables firm size 𝐿𝑛(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠) (joni et al., 2020b) leverage total debt totas aset (joni et al., 2020b) firm age reporting year – company year (joni et al., 2020b) loss a dummy variable coded as 1 if the company reports a loss, and 0 otherwise. (joni et al., 2020b) the equation used to test hypotheses 1 and 2 is as follows: 𝑻𝒐𝒃𝒊𝒏𝒔 𝑸 = 𝜷𝟎 + 𝜷𝟏𝑷𝑪𝑩𝑶𝑫 + 𝜷𝟐𝑷𝑪𝑩𝑶𝑫𝟐 + 𝜷𝟑𝑳𝑬𝑽 + 𝜷𝟒𝑭𝑺𝑰𝒁𝑬 + 𝜷𝟓𝑳𝑶𝑺𝑺 + 𝜷𝟔𝑭𝑨𝑮𝑬 + 𝜺𝒊𝒕 (1) 𝑻𝒐𝒃𝒊𝒏𝒔 𝑸 = 𝜷𝟎 + 𝜷𝟏𝑷𝑪𝑩𝑶𝑫 + 𝜷𝟐𝑷𝑪𝑩𝑶𝑫𝟐 + 𝜷𝟑𝑩𝑮 + 𝜷𝟒𝑷𝑪𝑩𝑶𝑫 ∗ 𝑩𝑮 + 𝜷𝟓𝑷𝑪𝑩𝑶𝑫𝟐 ∗ 𝑩𝑮 + 𝜷𝟓𝑳𝑬𝑽 + 𝜷𝟔𝑭𝑺𝑰𝒁𝑬 + 𝜷𝟕𝑳𝑶𝑺𝑺 + 𝜷𝟖𝑭𝑨𝑮𝑬 + 𝜺𝒊𝒕 (2) https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 155|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc this research employs multiple linear regression to examine two hypotheses: first, the impact of political connections on firm value; and second, the moderating effect of business groups on this relationship. tobin's q, which reflects growth expectations by comparing market and book values, is used to measure firm value. the first model (1) looks at the direct impact of political connections on the board (pcbod), the squared term of political connections (pcbod²) to capture any non-linear effects, leverage (lev), firm size (fsize), loss (loss), and firm age (fage) on firm value. this model not only assesses the influence of political connections but also controls for internal firm factors that may affect market perception. the goal is to clarify the extent to which political connections contribute positively or negatively to firm value. the second regression model (2) extends model 1 by incorporating an interaction term between political connections (pcbod) and business group affiliation (bg), a dummy variable coded as 1 if the firm belongs to a family business group and 0 otherwise. this study examines how political connections affect firm value in family versus non-family firms. the coefficient of the interaction term (β4) indicates whether business groups strengthen or weaken the impact of political connections. a negative β4 suggests that political connections are less effective in family firms, while a positive β4 implies that family firms leverage political ties more advantageously. the data analysis is performed using a linear regression model with spss software. to ensure the reliability and validity of the regression models, several classical assumption tests were conducted. the normality of residuals was examined using the kolmogorov–smirnov test. multicollinearity was assessed by checking the variance inflation factor (vif), with all vif values below 10, indicating no multicollinearity issues. heteroscedasticity was tested using the park test, and the results showed that the residuals were homoscedastic. these diagnostic tests confirm that the regression models meet the classical assumptions required for valid inference. result and discussion classical assumption testing before performing regression analysis, diagnostic tests were conducted to ensure the model met classical linear regression assumptions. multicollinearity test table 2. multicollinearity test model unstandardized coefficients standardized coefficients t sig. collinearity statistics b std. error beta tolerance vif pcbod -1.894 1.465 -0.164 -1.293 0.197 0.139 7.191 pcbod2 1.412 1.952 0.090 0.723 0.470 0.145 6.890 https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 156|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc bg -0.256 0.270 -0.046 -0.948 0.344 0.964 1.038 the results of the multicollinearity test indicate that all independent variables exhibit variance inflation factor (vif) values below 10.00 and tolerance values above 0.100. these findings confirm that the model meets the assumption of no multicollinearity, indicating that multicollinearity is not a significant issue in this analysis. heteroscedasticity test table 3. heteroscedasticity test model unstandardized coefficients standardized coefficients t sig. b std. error beta pcbod -1.894 1.465 -.164 -1.293 0.197 pcbod2 1.412 1.952 0.090 0.723 0.470 bg -0.256 0.270 -0.046 -0.948 0.344 the park test is used to detect heteroskedasticity, and the results show no indication of heteroskedasticity, as all variables have significance values greater than 0.05. therefore, the regression model satisfies all classical assumptions and is appropriate for hypothesis testing. normality test table 4. one-sample kolmogorov-smirnov test unstandardized residual n 318 normal parametersa,b mean 0.0000000 std. deviation 8.61966527 most extreme differences absolute 0.349 positive 0.349 negative -0.327 test statistic 0.349 asymp. sig. (2-tailed) 2.410 the test results show that the significance values (p-values) are greater than 0.05, indicating that the residuals are normally distributed. therefore, the normality assumption is satisfied, and the regression model is expected to produce unbiased and efficient estimates. https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 157|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc scatter plot based on the interpretation of the scatter plot between pcbod and tobinsq, the relationship between the two variables appears weak and does not exhibit a clear linear pattern. the data points are relatively evenly distributed across the range of pcbod values, without any noticeable funneling or dispersion, indicating no strong evidence of heteroskedasticity. furthermore, there are no extreme outliers observed that could potentially affect the stability of the relationship between the variables. descriptive statistics table 5. descriptive statistics model n minimum maximum mean std. deviation tobinsq 318 0.16 102.81 2.6082 8.69730 pcbod 318 0.00 1.00 0.1063 0.20408 bg 318 0.00 1.00 0.23 0.421 lev 318 0.00248 3.3875 0.46 0.3268 fsize 318 23.31 33.66 28.5191 1.67407 loss 318 0 1 0.22 0.415 fage 318 7.00 144.00 44.5377 22.75456 the tobinsq variable has a minimum value of 0.16, indicating that some companies in the sample have a market value smaller than their total assets compared to other firms. the maximum value of 102.81 shows that certain companies have a market value significantly higher than their assets relative to others in the sample. the average tobinsq of 2.61 suggests that, on average, the market value of companies in this sample is approximately 2.6 times their total assets. a standard deviation of 8.70, which exceeds the mean, indicates considerable variation in tobin’s q values across the sampled firms. pcbod represents the ratio of politically connected board directors to the total number of directors within a company. the minimum value of 0.00 indicates that some companies in the sample have boards with no politically connected members. conversely, the maximum value of 1.00 signifies that in some companies, all board members have political connections. the average pcbod value of 0.1063, which is calculated as the percentage of politically connected directors https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 158|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc relative to the total board size, shows that approximately 10.6% of board members across the sampled companies have political ties. meanwhile, the standard deviation of 0.2041 reflects variability in the proportion of politically connected directors among the companies included in this study. based on the results, the bg variable represents family ownership within a business group and is measured as a dummy variable, coded as 0 for firms without family ownership in a business group and 1 for those with such ownership. the mean value is 0.23, indicating that 23% of the sampled companies are part of a family business group defined as having family ownership exceeding 50% (coded as 1), while the remaining 77% are not (coded as 0) the >50% cut-off aligns with prior studies (joni et al., 2020b) to identify effective family control typical in indonesian firms. the standard deviation of 0.421 suggests a considerable variation in the distribution between family and non-family business group companies. lev, the ratio of total debt to total assets, has a minimum value of 0.0025, indicating some firms carry almost no debt relative to their assets. the maximum value of 3.3875 reveals that certain companies have debt exceeding three times their total assets, signaling potentially risky financial conditions. the average lev of 0.46 means that, on average, 46% of the assets in the sample firms are financed through debt. a standard deviation of 0.3268 shows considerable variation in debt usage among the companies. fsize represents firm size, with a minimum value of 23.31 and a maximum of 33.66, reflecting substantial differences in company size within the sample. the average fsize of 28.52 suggests that most firms are medium to large in scale based on total assets. a standard deviation of 1.67 indicates moderate variation in firm size, though the range remains relatively stable. this variable provides an overview of the scale of companies studied. loss is a dummy variable coded as 1 if a company reports a loss and 0 if it reports a profit. the minimum and maximum values confirm the binary nature of this variable. an average of 0.22 indicates that 22% of the firms in the sample experienced losses during the observation period, while 78% reported profits. the standard deviation of 0.415 indicates a typical distribution for a binary variable, with most firms not incurring losses. the fage represents the company's age in years. the minimum value of 7 years indicates that the youngest company in the sample has been in operation for 7 years, while the maximum value of 144 years indicates the presence of a company that has been in business for a very long time. the average age of the companies in the sample is 44.5 years, indicating that they are relatively old and experienced. a standard deviation of 22.75 indicates a wide range of company ages, from relatively new to highly established businesses. this age difference can have an impact on firms' strategies, stability, and competitiveness in conducting business. https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 159|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc hypothesis test first hypothesis to examine the effect of political connections within the board of directors on firm value, this study employs multiple linear regression analysis. tobin’s q serves as the dependent variable, acting as a proxy for firm value. the independent variables representing political connections include two indicators: pcbod and pcbod². additionally, control variables such as leverage (lev), firm size (fsize), prior losses (loss), and firm age (fage) are incorporated into the model to account for other factors influencing firm value. table 6. political connections of the board of directors affect firm value. model coefficient t sig. pcbod -0.867 -0.805 0.421 pcbod2 2.188 1.622 0.106 lev 1.018 3.332 0.001 fsize -0.019 -0.284 0.777 loss -0.298 -1.567 0.118 fage 0.024 4.480 0.000 based on the table above, hypothesis testing was conducted to determine whether political connections among board members influence firm value. this study measures political connections through two variables: pcbod and pcbod2. the regression analysis reveals that political connections (pcbod) have a negative but statistically insignificant effect on firm value (p = 0.421). similarly, the squared term pcbod² is not significant (p = 0.106), suggesting no clear nonlinear pattern. these findings indicate that political connections, when considered in isolation, do not enhance firm value. from an agency theory perspective, this supports the notion that political ties can introduce agency costs if exploited for managerial or personal gain rather than shareholder interest (fan et al., 2007; jensen and meckling, 1976). these findings reconcile conflicting results in previous studies. while (fisman, 2001) reported a negative market response to political ties in indonesia, (maulana, 2019; wu et al., 2012) documented their benefits in specific contexts. our results bridge this gap by demonstrating that political connections require institutional support like business groups to deliver value. consequently, firms must ensure their political connections are substantive and support long-term value creation. this perspective is consistent with prior research (fan et al., 2007), which indicates that political connections may instead increase agency costs and reduce corporate efficiency. https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 160|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc second hypothesis table 7. business groups moderate the effect of political connections of boards of directors on firm value variable coefficient t sig. pcbod -0.965 -0.734 0.463 pcbod2 2.300 1.419 0.157 pcbod_bg 8.862 2.790 0.006 pcbod2_bg -14.200 -2.726 0.007 lev 0.556 1.642 0.102 fsize -0.024 -0.338 0.735 loss -0.437 -1.986 0.048 fage 0.015 2.901 0.004 regression analysis shows that the effects of political connections become significant when moderated by business groups. the variables pcbod_bg and pcbod2_bg show significance levels of 0.006 and 0.007, respectively, suggesting that political connections held by the board of directors significantly enhance firm value when combined with business group affiliation. these findings can be explained through agency theory, business groups internally monitor and reduce conflicts between management and shareholders. when politically connected boards are controlled by founding families, such connections may be leveraged efficiently for strategic corporate objectives. however, excessive or disproportionate exploitation of political connections by a dominant family risks generating new agency costs, including managerial opportunism and suboptimal decisionmaking. as emphasized by (claessens et al., 2000) and (l. porta, 1998), family ownership can either enhance or diminish firm value depending on the effectiveness of governance mechanisms. conclusion this study aims to examine the impact of political connections held by the board of directors on firm value, as well as the moderating role of business groups in this relationship. tobin's q serves as a proxy for measuring firm value. the sample includes manufacturing companies listed on the indonesia stock exchange from 2020 to 2022. the results show that political connections alone do not have a statistically significant effect on firm value (pcbod: β = -0.867, p = 0.421; pcbod²: β = 2.188, p = 0.106). however, when moderated by business group affiliation, political connections significantly enhance firm value (pcbod×bg: β = 8.862, p = 0.006; pcbod²×bg: β = -14.200, p = 0.007). this suggests that the existence of a business group strengthens the influence of political connections on enhancing firm value. for practitioners, particularly in family-owned manufacturing firms, the findings suggest that political connections should not be used indiscriminately. instead, they should be institutionalized through group-wide governance https://www.ilomata.org/index.php/ijtc the influence of politically connected board of directors on firm value with business groups as a moderating variable muhammad fasha radya1., eddy suranta2 161|ilomata international journal of social science https://www.ilomata.org/index.php/ijtc strategies to enhance credibility, resource access, and market confidence. boards should ensure that politically connected members bring tangible value, not just symbolic affiliations. from a policy perspective, regulators should encourage disclosure of political affiliations and ownership structures to ensure transparency and prevent potential abuses of power. enhanced governance codes may be necessary to guide how firms, especially family conglomerates, manage politically sensitive positions on boards. investors are advised to assess not only the existence of political ties but also whether these connections are embedded within strong governance systems, such as family business groups, which appear to channel political capital more productively these results support the view that family ownership within business groups serves as an internal monitoring mechanism, reducing agency conflicts and enhancing the efficient use of political connections. this study has several limitations. first, the measure of political connection is broad and does not differentiate between types of connections, such as formal political positions or party affiliations. future research should develop a typology of political ties and examine their varying impacts on firm value. second, the study focuses exclusively on the manufacturing sector, which may limit generalizability. subsequent studies could compare across sectors particularly those with higher political exposure, such as infrastructure or energy. additionally, considering the evolving political landscape in indonesia, future work should examine how regime changes or regulatory reforms alter the strategic value of political connections. from a theoretical perspective, this study confirms that within the framework of agency theory, family business groups can act as effective internal monitors that discipline the use of political connections, thereby reducing agency conflicts between managers and owners. simultaneously, drawing on resource dependence theory, politically connected board members are conceptualized as strategic external resources that secure critical assets such as licenses, financing, and regulatory relief. differentiating between active connections (direct ties with incumbent officials) and passive connections (former officials or indirect networks) could offer deeper insights into the varying strategic utility of these political ties, paving the way for more refined conceptualizations in future research. this study provides empirical evidence that the impact of political connections is contextual and influenced by the firm’s ownership structure. practically, these findings suggest that family-controlled business groups in indonesia are able to leverage political connections more strategically to support long-term objectives. however, the extent of this benefit may vary depending on factors such as whether the firm is still under firstgeneration family leadership, or how diversified and complex the business group has become. future research could explore these heterogeneities by segmenting family firms according to ownership generation or business group scale, providing more granular insights into how these dimensions affect the value derived from political connection. moreover, firms are encouraged to strengthen governance structures by enhancing board independence, establishing rigorous disclosure standards for political affiliations, and enforcing https://www.ilomata.org/index.php/ijtc the influence of 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(2003). international expansion of u.s. manufacturing family businesses: the effect of ownership and involvement. journal of business venturing, 18(4), 495–512. https://doi.org/10.1016/s0883-9026(03)00057-0 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 2, april 2024 page no. 503-518 503 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn putri sari¹, siti maysarah² ¹²universitas swadaya gunung jati, indonesia corresponding: putrisariii13@gmail.com1 received : february 25, 2024 accepted : april 17, 2024 published : april 30, 2024 citation: sari, p., maysarah, s. (2024). foreign direct investment in indonesia: economic growth ikn. ilomata international journal of tax and accounting, 5(2), 503-518. https://doi.org/10.61194/ijtc.v5i2.1157 abstract: ikn is expected to become a sustainable city that will drive the country's economy in indonesia in the future. this research analyses the correlation amidst foreign direct investment, inflation, and environmental degradation with economic growth in ikn. therefore, this study aims to examine all variables that affect the economic growth of ikn. thus, this study provides implications for regulators and policymakers on how to optimize ikn's economic growth in a sustainable manner. this analysis utilizes time series data collected from 38 provinces in indonesia from 2018 to 2022. secondary data obtained from the websites of the world bank, bps, and oecd is utilized in this study. data testing uses a data panel regression analysis model with eviews 10 software. the results of this study indicate that foreign direct investment and inflation have a significant positive effect on economic development. conversely, the environmental degradation has a significant negative impact on economic growth. the findings of this study confirm that economic growth can be enhanced through increasing fdi inflows, maintaining a stable inflation rate, and environmental degradation at a certain level, which can stimulate economic growth. therefore, all variables in this study contribute to economic growth. keywords: fdi, inflation, environmental degradation, ikn this is an open-access article under the cc-by 4.0 license. introduction indonesia plans to move its capital city is being changed from jakarta to ikn to overcome future challenges. this complies with the ruling of law number 3 of 2022 on the provincial capital city (munawaroh et al., 2024). this move made indonesia a developed and sustainable country with an economy that will enter the world's top five by 2045. in 2023, indonesia's gdp per capita is estimated at idr 74,964,701 or us$ 4,919.7, the indonesian economy experienced a decline in growth from 5.31% to 5.05% (bps, 2024b). national economic growth will be aided through cooperation in the ecosystem of three cities: balikpapan, ikn, and samarinda. this could boost the regional economy and promote equitable economic growth in the east kalimantan region until 2045. https://www.ilomata.org/index.php/ijtc mailto:putrisariii13@gmail.com https://doi.org/10.61194/ijtc.v5i2.1132 foreign direct investment in indonesia: economic growth ikn sari and maysari 504 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. gross domestic product (gdp) 2018-2023 source: bps data 2023 (https://www.bps.go.id) as a developing nation, indonesia needs more funds for investment and additional capital with foreign direct investment flows to maintain the community's welfare and create broad employment opportunities (jan & ali, 2023). improving people's welfare aligns with the increase in economic growth (rahmawati et al., 2021). a country's economic growth rate lets investors know their investment prospects (fiona & laulita, 2023). net foreign direct investment inflows to indonesia from 2013 to 2022 tend to fluctuate significantly, ranging from $3.92 billion to $23.88 billion. in 2022, foreign direct investment touched $22 billion, an increase of about $0.8 billion compared to the previous year. however, net fdi inflows fell to their lowest point in 2016 at $3.92 billion (world bank, 2023). the following is the net inflow of fdi into indonesia from 2013 to 2022, shown in table 2. table 2. fdi inflows to indonesia from 2013-2022 year net fdi inflows (in billion us dollars) 2018 20,58 2019 3,92 2020 16,64 2021 21,81 2022 18,44 source: world bank (https://www.worldbank.org/) based on data from the authority of the capital city nusantara until december 20, 2023, there were 330 letters of interest in investment letter of intent (loi) that had been received, with 55% being domestic investors and the four most countries that sent lois were singapore, japan, china, 5.17 5.02 -2.07 3.7 5.31 2018 2019 2020 2021 2022 (in percent) https://www.ilomata.org/index.php/ijtc https://www.bps.go.id/ https://www.worldbank.org/ foreign direct investment in indonesia: economic growth ikn sari and maysari 505 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc and malaysia (siaran pers: oikn 2023). an increase in foreign direct investment can increase productivity and efficient use of resources, making it a key catalyst for economic growth (shaari et al., 2022). this is supported by akpan & eweke (2017), which shows that more significant foreign direct investment positively correlates with increased output productivity. consistent with the research findings, emako et al., (2022); oyegoke & aras (2020) found that when more fdi enters a country, it also leads to economic improvement. nevertheless, numerous empirical research examining the effects of foreign direct investment on economic growth yield contradictory results. according to ingham et al., (2020); mohamed (2017), fdi inflows harm economic growth. the harrod-domar theory is a theoretical framework that aims to explain economic growth. the harrod-domar theory argues that investment and savings of part of the state's income are needed to stimulate economic growth (oyegoke & aras, 2020). harrod-domar emphasises the importance of allocating part of a country’s income to be saved and invested in increasing capital accumulation (le-van & tran-nam, 2023). this will encourage sustainable and long-term economic growth because the level of public saving is directly associated with the extent of national income. sugiarto (2019), asserts that investment plays a pivotal position in a country's economic advancement. from an analytical standpoint, economic growth is impacted by various factors beyond foreign direct investment. other elements, such as inflation and environmental degradation, contribute to economic growth. research on foreign direct investment to encourage economic growth of the ikn has yet to be widely studied. therefore, this research aims to investigate the three variables that may influence the economic growth of ikn. thus, this study provides implications for regulators and policymakers in optimising the economic growth of ikn sustainably. this research is expected to be serve as a reference resource and consideration for further research on the influence of foreign direct investment and other factors on the economic growth of ikn. foreign direct investment foreign direct investment affects all economic, cultural, and social areas, as fdi is essential to a country's economic growth (do, 2023). in many developing countries, private capital depends on foreign direct investment, which is anticipated to enhance economic growth (alfaro, 2017). the presence of foreign investors directly helps the development of ikn. president jokowi said foreign investors should invest around 80% to cover the budget. however, the fact is that the plan has yet to be realized, so until now, it has been using apbn funds. while several foreign investors have expressed their interest in investing in ikn through letters of intent (loi), of the 330 loi received by the ikn authority, they are subject to a due feasibility test process (siaran pers: oikn, 2023). therefore, if there is no flow of foreign direct investment into ikn, indonesia's economic growth may slow. foreign direct investment has the potential to enhance economic development by fostering higher productivity and the accumulation of capital (miao et al., 2021). this research is supported by (dinh et al., 2019; emako et al., 2022; fajrian et al., 2023). h1: fdi on economic growth has a significant positive relationship. https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 506 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inflation one factor that can affect economic growth is inflation. according to empirical data and theory, the correlation between inflation and economic growth remains a debate among numerous researchers (srivastava et al., 2023). therefore, it is crucial to comprehend the connection between economic growth and inflation (manurung & yuniasih, 2021). economists sometimes compare inflation and other economic components that can affect economic growth (girdzijauskas et al., 2022). the more money circulates in society, the weaker the exchange rate and the higher the necessities in the community. the amount of money in circulation is more significant than the community's needs, which can cause inflation (mahendra et al., 2024). additionally, the rise in inflation was partly driven by the decision to relocate the national capital to ikn due to the massive development of ikn. according to the central bureau of statistics, inflation in east kalimantan was higher at 3.28% year on year (yoy) compared to national inflation of 3.05% (bps, 2024a). previous researchers have extensively collected empirical evidence to establish the correlation between inflation and economic growth. the impact of inflation on economic growth can vary depending on its magnitude (kunthi et al., 2023). therefore, the findings of husnain et al., (2024) show that higher inflation rates can harm the economy. these results align with the research (cantika & anggoro, 2022; chamdani & meirinaldi, 2022). h2: inflation and economic growth have a significant negative relationship. environmental degradation developing countries face the increasingly intricate task of balancing economic development with environmental preservation as they strive to grow their economies without causing harm to the environment (van et al., 2024). environmental degradation occurs when the quality of the environment declines due to damage that reduces its function. in recent years, using fossil fuels has led to a substantial rise in carbon dioxide emissions, which could lead to a rise in climate disasters worldwide (galvan et al., 2022). therefore, implementing effective and efficient ecological governance measures can reduce the mismatch between environmental degradation and economic growth (chen & liang, 2021). one of the programs launched by ikn is the development of a "sustainable forest city," where verdant open space will comprise 75% of the area and zero carbon emission design (gokkon, 2023). thus, the higher the environmental degradation in ikn, the slower the economic growth rate in ikn. previous research by k. saidi & hammami (2016) stated that environmental degradation was identified as one of the factors affecting economic growth. h3: environment degradation and economic growth have a significant negative correlation. method the research model upon which this model is based was developed by husnain et al., (2024) and was modified by adding environmental degradation variables. this study uses quantitative methods to analyze the connection of fdi, inflation, and environmental degradation to the economic growth in ikn. economic growth, as quantified by annual gdp, is the dependent variable in this https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 507 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research. the primary independent variable is fdi inflows, measured in millions of dollars. the control variables of this study include the inflation rate determined using the consumer price index (cpi) and the carbon dioxide emission rate used to measure environmental degradation. data for each variable was acquired from the online platforms of relevant official organizations, such as gdp, fdi, and inflation received from the world bank and bps (hajdini et al., 2023). meanwhile, environmental degradation was observed in indonesia's oecd. sampling using panel data from 38 provinces in indonesia with a time series data approach from 2018 to 2022. this time series data is recorded consistently over the period. panel data regression analysis is used in this research approach. ariyani and firmansyah (2023) define panel data regression as a statistical method integrating time series with cross-sectional data to produce more informative, diverse estimates and more efficient models. the most effective method to analyze panel data is the chow and hausman tests. the data collected will be analyzed using software like eviews 10. result and discussion panel data regression models the selection of a regression model for panel data involves several steps and statistical tests to determine the most appropriate model. the three main models commonly used in panel data regression are the command effect model, fixed effects model (fem), and random effects model (rem). the following are the steps and tests used in selecting a panel data regression model: table 1. panel data regression model selection chow test statistic df prob. cross-section chi-square 88,312318 33 0,0000 hausman test statistic df prob. cross-section random 1,970965 3 0,5785 source: eviews 10 output result, 2024 according to silvia et al., (2021), the chow test is a technique employed in panel data regression analysis to ascertain the superiority of the fem over cem. the chow test results in table 1 show that the p-value is smaller than the significance value (0,05). therefore, the h0 is rejected. as a result, the fem is an appropriate model for panel data regression. according to fiona & laulita (2023), the hausman test is used to ensure the optimal model choice between the rem and the fem. table 1 presents the hausman test results, h0 hypothesis is accepted because the probability value of 0,5785 is greater than the significance value of 0,05. this indicates that rem is a more appropriate model than fem for the data analyzed. https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 508 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. lagrange multiplier test results lagrange multiplier test prob. breusch-pagan 0,0000 source: eviews 10 output result, 2024 after determining that rem is the optimal model based on the hausman test, the next step is to perform the lagrange multiplier (lm) test. the lm test is used to test whether cem is better than rem (silvia et al., 2021). this test was developed by breusch and pagan, because the probability value of the lm test (0.0000) is smaller than 0,05. therefore, h0 is rejected so rem is a more suitable model. normality test results table 3. normality test results jarque-bera probability 265,5660 0,0000 source: eviews 10 output result, 2024 according to prawoto & basuki (2016), the test for normality determines whether the residuals in the regression model exhibit a distribution. an effective regression model has residuals that follow a normal distribution. according to the results shown in table 3, the jarque-bera test it shows that the probability value (0.0000) is much smaller than the significance level of 0.05. this means that h0 is rejected which states that the residuals are normally distributed. multicollinearity test results table 4. multicollinearity test results coefficient correlations model fdi cpi carbon emissions 1 fdi 1,000000 0,037308 0,087314 cpi 0,037308 1,000000 0,111612 carbon emissions 0,087314 0,111612 1,000000 source: eviews 10 output result, 2024 the multicollinearity test is used to ascertain the presence of correlation among the independent variables in the regression model. multicollinearity is indicated when the correlation between independent variables is sufficiently high, typically exceeding 0,90 (ghozali, 2018). the findings presented in table 4 suggest in which the correlation exists coefficient among the independent https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 509 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variables is below 0,90. consequently, h0 is accepted, implying that the regression model contains no multicollinearity issues among its independent variables. heteroscedasticity test table 5. heteroscedasticity test results model sig. 1 fdi 0,1274 cpi 0,6927 carbon emissions 0,1268 source: eviews 10 output result, 2024 according to silvia et al., (2021), the goal of the heteroscedasticity test is to assess the presence of unequal variances to determine whether there is inequality in the regression model between the residuals of one observation and another. the glesjer test, as described by ghozali (2018), can be employed to evaluate heteroscedasticity. the findings, shown in table 5, indicate that the p-value of each independent variable is higher than 0,05. this suggests that the data is devoid of heteroscedasticity issues. autocorrelation test results table 6. autocorrelation test results model durbin-watson 1 1,432628 source: eviews 10 output result, 2024 according to ghozali (2018), in a linear regression model, the autocorrelation test examines whether there is a correlation between residuals in the period t and residuals in the period t-1. autocorrelation occurs when consecutive observations in a time series are interrelated. the durbin-watson test is used for autocorrelation at the regression model output so that the du value and less than 4-du results are obtained where the du value in this study is 1,5. the 4-du value is 2,25 so it can be said that 1,5<1,43<2,25. these conditions show that the data is free of autocorrelation problems. f-test result table 7. f-test result variable dependent prob(f-statistic) gdp 0,0000 source: eviews 10 output result, 2024 the f test is utilized to ascertain whether the independent and dependent variables exert a simultaneous influence. the f-test results are shown in table 7, when the prob(f-statistic) value https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 510 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is less than 0,05 it can be interpreted that there is at least one independent variable that has a simultaneous significant effect on the dependent variable. therefore, this model is applicable for studying economic growth. determination coefficient test result table 8. determination coefficient test result variable dependent r² r²adj gdp 0,203261 0,188774 source: eviews 10 output result, 2024 the coefficient of determination test quantifies how much the model can account for the variability observed in the independent variable. the coefficient of determination test results shown in table 8 that the adjusted r-square value has a value of 0,203261, which indicates that the independent variable affects the dependent variable by 20,33% and other variables not considered in this study affect the remaining part. hypothesis test result table 9. hypothesis test result variable coefficient std.error t-statistic prob. gdp (y) 10,60362 6,695722 1,583640 0,1157 fdi (x1) 0,000807 0,000187 4,327298 0,0000 cpi (x2) 0,002037 0,000480 4,241682 0,0000 carbon emissions (x3) -0,027690 0,009525 -2,907166 0,0041 source: eviews 10 output result, 2024 hypothesis testing determines whether the hypothesis is accepted or rejected based on population parameters. the results are shown in table 9, with each independent variable having a p-value below 0,05. therefore, h1 and h2 have a significant positive effect on economic growth, while h3 has a significant negative impact. the following is an explanation for each hypothesis. impact of foreign direct investment on economic growth the results of testing hypothesis 1, shown in table 9, evidence demonstrate a statistically substantial positive correlation between foreign direct investment and economic growth. the statistical analysis reveals an important finding, as noted in the p-value of 0,0200, lower than the predetermined significance level (α) of 0,05. the results show that a 1% increase in fdi will increase economic growth by 0,0008071% (fdi coefficient = 0,000807). the positive impact can be seen from the positive coefficient effect value, which indicates that economic progress is in line with the increasing inflow of fdi into indonesia. developing countries increasingly recognize the impact of foreign direct investment on their economies (y. saidi & ochi, 2023). therefore, developing countries require foreign direct https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 511 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc investment to sustain their economic progress and avoid the adverse cycle of inadequate economic development (emako et al., 2022). the results of this study align with abdillah et al., (2020) that the flow of funds from developed to developing countries will significantly impact the transfer of technology and knowledge. this contributes to increased economic activity, improved employment prospects, and further economic growth. simply put, fluctuations fdi inflows and outflows significantly affect economic growth. graph 1. total number of letters of intent/loi at ikn source: oikn, 2024 (https://www.ikn.go.id/) indonesia's efforts to develop the ikn have attracted foreign investors. the development of ikn is a significant effort that requires large investments and cooperation between the government and business actors. to encourage investment in ikn, the government implemented a policy outlined in government regulation 12 of 2023. this policy aims to provide business licenses, streamline business processes, and offer ease of investment to businesses in the city to accelerate the economic growth of ikn. the prospect of significant investment returns and good economic growth conditions attract foreign investors to invest (oyegoke & aras, 2020). the impact of inflation on economic growth the results of hypothesis 2 testing in table 9 indicate that the p-value (0,0000) is smaller than the significance level (0,05). therefore, the inflation rate has a significant positive impact on economic growth. a 1% higher inflation will lead to a 0,002037% increase in economic growth. the results of this analysis are not in agreement with the hypothesis because the relationship between inflation and economic growth can be different depending on the ongoing economic conditions. this shows that there is a difference between what is assumed in the hypothesis and what is observed in the data. in some cases, inflation may encourage people to spend their money faster, as people fear that the value of their money will decline in the event of inflation. this higher consumption can drive to economic growth (mahendra et al., 2024). according to srivastava et al., (2023), it states that price stability as measured by the inflation rate can stimulate economic growth and help maintain people's purchasing power. 187 28 25 21 20 10 7 4 3 25 loi indonesia singapore japan china malaysia south korea united states spain findland other countries https://www.ilomata.org/index.php/ijtc https://www.ikn.go.id/ foreign direct investment in indonesia: economic growth ikn sari and maysari 512 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc graph 2. indonesia's inflation rate 2018-2022 source: world bank,2023 (https://www.worldbank.org/) indonesia is trying to maintain a stable inflation rate, especially in the context of the construction of the country's new capital city. proactive measures taken to control inflation can help promote sustainable economic growth. stable inflation can provide a strong foundation for long-term economic growth. this is consistent with research budiman & arifin (2024); smith (2021) showing that inflation has a positive impact on economic growth in the long run, the positive impact of inflation depends on the level and type of inflation that exists. the impact of environmental degradation on economic growth the results of testing hypothesis 3 as presented in table 9, show that the p-value is smaller than the significance value (0,0041 < 0,05). the results of the coefficient value indicate a significant negative impact that causes a decrease in economic growth of -0.027690% for every 1% increase in environmental degradation. environmental degradation can cause various economic problems, such as decreased productivity, higher health costs, and economic instability. this is in line with aye & edoja (2017); saidi & hammami (2016), who point out that environmental degradation has a long-term negative impact on economic growth. when the environment is degraded, such as increased carbon emissions, forest destruction, air and water pollution, and soil degradation, it can hinder economic growth. 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 inflation inflation 2022 4.2 2021 1.6 2020 1.9 2019 3 2018 3.2 https://www.ilomata.org/index.php/ijtc https://www.worldbank.org/ foreign direct investment in indonesia: economic growth ikn sari and maysari 513 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc graph 3. carbon emission levels in indonesia 2018-2022 source: oecd data, 2023 (https://www.oecd.org/) the nexus between environmental degradation and economic growth has attracted the attention of policymakers, practitioners and researchers in recent years. in accordance with the commitment of the new capital city, ikn implements the concept of a zero carbon emission city by 2045. therefore, indonesia seeks to achieve sustainable economic growth in the new capital city by considering the impact of environmental degradation. sustainable economic development must pay attention to environmental conditions in order to maintain the balance of the natural environment for the benefit of future generations, because environmental degradation in the long run has an impact on slowing the rate of economic growth (warsame et al., 2024). this result is in line with research (seetanah et al., 2019) which shows that the relationship between environmental degradation and economic growth has a significant negative impact in small island developing states. conclusion according to the findings of hypothesis testing in this research, it can be concluded that foreign direct investment, inflation rate, and environmental degradation simultaneously influence economic growth in ikn. based on the panel data regression model analysis with time series data from 38 provinces in indonesia from 2018 to 2022. this study shows there exists a strong correlation between fdi and economic development. this suggests that increased fdi has the potential to boost economic growth. furthermore, this study found that the control variables, especially the inflation, significantly positively affect economic growth in ikn. this indicates that inflation can support economic development. however, environmental degradation negatively affects economic growth in ikn. the findings of this research can improve understanding and 1 1.05 1.1 1.15 1.2 1.25 1.3 carbon emissions/ton 2018 2019 2020 2021 2022 https://www.ilomata.org/index.php/ijtc https://www.oecd.org/ foreign direct investment in indonesia: economic growth ikn sari and maysari 514 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provide a basis for economic policy decision-making in improving economic growth through increasing fdi inflows by at least 80% to stimulate economic growth in ikn. in addition, the indonesian government should ensure attention to the direct impact of 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(2019). investasi dan indonesia maju. kementerian sekertariat negara republik indonesia. https://www.setneg.go.id/baca/index/investasi_dan_indonesia_maju van, l. t. h., vo, d. h., vu, n. t., ho, c. m., & nguyen, t. c. (2024). from foreign direct investment to environmental regulations: does a feedback effect ever exist? heliyon, 10(8). https://doi.org/10.1016/j.heliyon.2024.e28657 https://www.ilomata.org/index.php/ijtc foreign direct investment in indonesia: economic growth ikn sari and maysari 518 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc warsame, a. a., mohamed, j., & sarkodie, s. a. (2024). natural disasters, deforestation, and emissions affect economic growth in somalia. heliyon, 10(6), e28214. https://doi.org/10.1016/j.heliyon.2024.e28214 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 830 – 843 830 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria emmanuel imuede oyasor1 1walter sisulu university, south africa correspondent: emmanueloyasor247@gmail.com1 introduction commercial banks have a critical role in economies, which cannot be overstated. this is evident because governments carry out monetary policies and connect the public by issuing treasury notes through commercial banks (baidoo & akoto, 2020). additionally, through loans, commercial received : march 28, 2024 accepted : july 1, 2024 published : july 31, 2024 citation: oyasor, e.i. (2024). an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria, 5(3), 830 – 843. https://doi.org/10.61194/ijtc.v5i3.1664 abstract: this study investigates the impact of credit risk management on the financial performance of commercial banks in nigeria. it aims to assess how key credit risk indicators—capital adequacy ratio (car), cost-toincome ratio (cir), and non-performing loans (npl)—influence bank profitability. the study employs a panel regression model, utilizing secondary financial data from commercial banks operating between 2010 and 2022, sourced from the central bank of nigeria and other official records. descriptive analysis, normality tests, correlation analysis, and panel regression techniques are applied to examine the relationships between variables. the results reveal a strong negative correlation between car and cir, indicating that higher capital adequacy is associated with improved financial efficiency. however, regression analysis shows no statistically significant relationship between credit risk management variables and financial performance, as reflected in return on equity (roe) and return on assets (roa). this suggests that while credit risk management practices affect cost efficiency, their direct impact on profitability remains inconclusive. the findings highlight the complexity of credit risk management in commercial banking. while maintaining adequate capital buffers contributes to cost efficiency, other external economic factors may be more significant in determining profitability. the study underscores the need for commercial banks to refine their risk assessment and mitigation strategies to enhance financial stability and performance. despite credit risk management's theoretical significance, its direct influence on financial performance appears limited. banks should implement more effective risk assessment frameworks and recovery mechanisms for non-performing loans to optimize financial outcomes. this study contributes to the limited empirical research on credit risk management in nigeria by providing a comprehensive panel data analysis. unlike previous studies, it examines correlations and regression effects, revealing that credit risk management practices influence cost efficiency more than profitability. keywords: credit risk management, cost-to-income ratio, capital adequacy, non-performing loans, financial performance. this is an open-access article under the cc-by 4.0 license https://www.ilomata.org/index.php/ijtc mailto:emmanueloyasor247@gmail.com1 https://doi.org/10.61194/ijtc.v5i3.1664 an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 831 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc banks offer funds to industries for expansion needs. all other things being equal, the government receives more taxes as businesses grow financially. economies and industries typically operate well with a thriving financial sector (sakyi et al., 2 021). it is widely accepted that the primary purpose of commercial banks is to collect deposits and disburse loans, which also serves as a key revenue source for the institutions. risks are unlikely to be eliminated from commercial banks' daily operations, so effective risk management strategies should be implemented or part of their business models (adekunle et al., 2015). commercial banks, however, face various risks as they carry out these crucial roles as financial intermediaries. commercial banks must be able to protect themselves from both prospective and real risk to continue lending to consumers who need credit successfully. due to inadequate management of risks in the market environment, many nigerian banks have previously experienced depression. banks will always be susceptible to both foreseen and unanticipated risks, so it is important to take the proper precautions to limit the impact on the banks' soundness (omiagbo et al., 2021). risk management is one of the key operations in banks that can ensure long-term stability and profitability. one of the most frequently employed tools in today's national and international banking regulations is capital adequacy regulation, ensuring that banks keep enough capital to absorb shocks or losses, which are particularly vulnerable to (ndic, 2016). as a result, banks should closely monitor the relationship between bank capital and risk management because it has been shown to help them manage both systematic and irrational risks. credit risk management has long been an important priority for banks. to offer their customers financial solutions, banking institutions take on various financial risks (mendoza &rivera, 2017). they, therefore, play a crucial role as agents by offering market knowledge, finance capability, and economic operating efficiency. due to their significant significance in these transactions, banks typically hold a prominent position. therefore, notwithstanding occasional crises, the banking sector has always played a crucial role in promoting economic growth and human welfare (al-zaidanin, 2021). limited financial capacity, inappropriate credit policies, fluctuating interest rates, poor management, unsuitable laws, low capital and liquidity levels, directed lending, widespread bank licensing, poor loan underwriting, reckless lending, poor credit assessment, lack of non-executive directors, poor lending practices, government interference, and insufficient oversight by the central bank are the main sources of credit risk (kwashie, 2022). the banking sector needs to have well-capitalized banks, service to an extensive spectrum of customers, sharing of information about borrowers, stabilization of interest rates, reduction in non-performing loans, increased bank deposits, and increased credit extended to borrowers to reduce these risks. reduced and nonperforming loan defaults are required (ozioko & enya, 2021). credit risk management is a practice used by commercial banks to regulate the credit extended to customers. this is accomplished by having a well-established credit mechanism and method, including credit appraisal, staff training, and establishing credit rules and terms to reduce the likelihood of loss and enhance financial performance. therefore, commercial banks create techniques to eliminate or cut this credit risk. banks are worried about their financial performance when managing this risk. commercial banks continue to face challenges because of the methods used for credit risk management and changes in customer bases that result in declining financial https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 832 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance, notwithstanding the efforts made to remedy the poor credit risk management. as a result, risk management as a field is increasingly treated seriously. credit risk management in our banking sector today has taken a different dimension from what it used to be. the banking industry has adopted many strategies in checking credit risk management to stay in business. nigerian banks are required in the market because of their competence in providing transaction efficiency, market knowledge, and funding capability (olowa & olowa, 2017). to perform these roles, the banks act as the most important participants in their transaction process, and they use their balance sheets to make it easier and ensure that their associated risk is absorbed (muye & muye, 2017). credit extension is an essential function of banks, and the bank management strives to satisfy the legitimate credit needs of the community it serves. this credit advance by banks as a debtor to the depositor requires prudence in handling depositors' funds (harper et al., 2017). the central bank of nigeria (cbn) established a credit act in 1990 that empowered banks to render returns to the credit risk management system for its entire customers with aggregate outstanding debit balance of one million naira and above. this made nigerian banks universally embark on upgrading their control system and risk management because this coincidental activity is recognized as the industry's physiological weakness to financial risk (olowa & olowa, 2017). a new york-based said that forty percent of nigerian banks that made up exchange rate value in west africa have reduced their operating lending because of bad debts, which hit more than $10 billion in 2009, and this has led to a tied-up questioning asset that is holding almost half of the nigerian banks. cbn fired eight chief executive officers and set aside $4.1 billion to bail out almost 10 of the country’s lenders. the reform introduced by cbn in 2010 has made nigerian banks resume lending to supporting asset management companies. it has set up the requirement to allow nigerian banks to make full provisions for bad debts to boost the market (taiwo, 2017). effective credit risk management improves the quality of the loan portfolio, increases profitability, strengthens capital sufficiency, and ensures regulatory compliance, all of which have a favorable financial influence on nigerian commercial banks' economic performance. banks can reduce credit risks, maximize resource allocation, and achieve sustainable development in a cutthroat banking environment by implementing strong credit risk management practices (adamgbo et al., 2019). due to the magnitude of credit risk, stakeholders must ensure the implementation of effective credit risk policies and oversee them from the loan origination stage through the recovery stage (fadun & oye, 2020). empirical research is required to inform these, which is why the current study is crucial as it critically investigates the effect of credit risk management on the financial performance of commercial banks in nigeria (okunade et al., 2022). little empirical research has examined the connection between credit risk management and financial performance in the nigerian banking sector. therefore, it is uncertain whether adopting credit risk management procedures impacts the monetary success of commercial banks in nigeria. the study aims to determine the impact of credit risk management on the performance of commercial banks. the study's objectives are to investigate the effect of capital adequacy ratio on bank financial performance, determine the effect of non-performing loans on bank financial https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 833 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance, and determine the effect of loan loss provisioning on non-performing loans. based on the objectives, the research null hypotheses are as follows: h1: the capital adequacy ratio does not significantly impact commercial banks' financial performance. h2: non-performing loans do not significantly impact commercial banks' financial performance. h3 loan loss provisioning does not have a significant impact on non-performing loans. method the paper completes basic descriptions, normality, and correlation. the normality test is carried out in a study to ensure the data is normally distributed. green (2008) claims that the alternative hypothesis is that the data are not normally distributed, while the null hypothesis is that the data are normally distributed. a p-value of more than 0.05 indicates that the data are normal, whereas one of less than 0.05 indicates that they are not. their correlation indicates the degree or strength of the relationship between two variables. it ranges from 0 to 1. according to green (2008), data is multi-collinear if a pair of independent variables has a correlation of 0.8, which is an r2 (coefficient of determination) of 64%. in this case, the pair is strongly associated. the study collected published financial information from seven commercial banks that are operational between 2018 and 2022; the data used in this study was secondary data, which was collected from a few sources such as the nigerian bureau of statistics and the central bank of nigeria. the data was collected for five years, from 2018 to 2022. this period was considered appropriate for this study because of the recent factor observed in the data collected. result and discussion table 1 shows the basic statistics, normality tests, and correlation among the variables. roa had a mean of 1.6618 and a standard deviation of 1.3842; roe had a mean of 18.0623 standard deviation of 15.5964; nplr had a mean of 18.1660 and standard deviation of 29.9200; cir had a mean of 57.0063 and standard deviation of 20.3592, car had a mean of 9.8763 and standard deviation of 58.1762 and lqr had a mean of 53.9100 and standard deviation of 22.97539. the shapiro-wilk w normality test shows that all the data were collected from a normally distributed population. the result shows that the p-value (probability value) for roe, roa, nplr, cir, car, and lqr are 0.00001, 0.00059, 0.00000, 0.12313, 0.0000, and 0.12862, respectively, which have variables that are far less than 0.05. since all the p-values are less than the significance level of 0.05, we can conclude that there is significant evidence to reject the null hypothesis of normality for all these variables. the correlation matrix indicates some significant relationships between credit risk management practices and financial performance metrics in commercial banks in nigeria. notably, there is a https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 834 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc strong negative correlation between the capital adequacy ratio (car) and the cost-to-income ratio (cir), implying that higher capital adequacy is associated with lower cost-to-income ratio, which suggests effective credit risk management practices leading to improved financial efficiency. furthermore, there are weak to moderate positive correlations between car and roe, as well as car and roa, indicating that higher capital adequacy is slightly associated with better return on equity and return on assets, respectively. conversely, there are weak negative correlations between roe and nplr, as well as roa and nplr, suggesting that higher non-performing loan ratios are associated with lower return on equity and return on assets. additionally, the correlation between the loan quality ratio (lqr) and other variables is generally weak, with a weak positive correlation with roa and a weak negative correlation with cir. this suggests that the impact of loan quality on financial performance may be limited. table 1. descriptive statistics basic statistics normality test variable mean std. dev. min max z prob>z roe (1) 18.06 15.60 0.340 71.19 4.236 0.000 roa (2) 1.662 1.384 0.146 5.617 3.244 0.001 nplr (3) 18.17 29.92 0.000 96.33 5.604 0.000 cir (4) 57.01 20.36 0.690 99.33 1.159 0.123 car (5) 9.876 58.18 -201.6 198.6 5.730 0.000 lqr (6) 53.91 22.98 7.010 111.4 1.133 0.129 roe roa nplr cir car lqr roe 1 roa 0.309 1 nplr -0.226 -0.208 1 cir -0.195 -0.499 -0.120 1 car 0.226 0.150 0.215 -0.675 1 lqr -0.186 -0.229 0.337 -0.149 0.237 1 source: author (2024) table 2 provides the outcome of the random effects of the gls model on the effect of credit risk management on financial performance. the r-squared indicates that a very small proportion of the variation in return on equity is explained by credit risk management practices within each bank (within-group r-squared = 0.0064). a larger portion of the variation in roe is attributed to the differences between banks (between-group r-squared = 0.732). the overall r-squared, which represents the overall explanatory power of the model, is 0.1609, indicating that the independent variables explain a 16.09% variation in roe. the wald chi-squared test with 4 degrees of freedom has a value of 5.75, and the associated p-value is 0.2184. the p-value is greater than 0.05, indicating that the model is insignificant at the 5% level. this means that the independent variables combined do not significantly affect the dependent variable (roe) in the context of this model. only the constant term is significant with a p-value of 0.018. this suggests that the intercept significantly impacts roe, while the others, including nplr, cir, car, and lqr, do not show statistically significant relationships with roe. the outcome does not establish how credit risk management influences the financial performance of commercial banks in nigeria, as the model https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 835 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc is not statistically significant, and the coefficients for the independent variables are not statistically significant. the regression analysis results indicate no significant relationship between credit risk management practices and financial performance, as indicated by the non-significant coefficients and p-values. the analysis does not identify specific credit risk management practices that are most effective in improving the financial performance of commercial banks in nigeria, as none of the independent variables showed statistically significant relationships with roe. mohamed and onyiego (2018) found that operational risk is the most significant factor influencing kenyan commercial banks' performance. noman et al. (2015) found a negative and significant link between all profitability indicators and the ratios of loan loss reserve to gross loan and nonperforming loan to gross loan. similarly, a substantial and negative correlation existed between return on average equity and capital adequacy. abiola and olausi (2014) found that credit risk management significantly affects nigerian banks' performance. the results also demonstrate that the sampled group has inadequate credit risk management procedures, accounting for the large percentage of non-performing loans in their portfolios. singh (2015) found a substantial correlation between credit risk management and bank performance. the study discovered that banks with larger profit potentials performed better as commercial banks in india. they show a direct but unfavorable relationship between the ratio of non-performing assets and return on asset. the provided analysis presents a random-effects gls regression to investigate the effect of credit risk management on the financial performance of nigerian banks. the r-squared values indicate that only a small proportion of the variation in the dependent variable, return on assets (roa), is explained by the independent variables (credit risk management practices) within each group (individual banks). the overall r-squared suggests that the model can explain around 32.68% of variation in roa. the wald chi-squared test with 4 degrees of freedom has a value of 1.81, and the associated pvalue is 0.7701. the p-value is greater than 0.05, indicating that the model is not statistically significant at the 5% level. this means that the independent variables collectively do not significantly affect the dependent variable (roa). the coefficients for the independent variables (nplr, cir, car, and lqr) have non-significant p-values, indicating no statistically significant relationship between these credit risk management practices and the financial performance of the nigerian banks. table 2. panel regression for return of equity variable coef. std. err. z p > |z| const. 28.95 12.238 2.370 0.018 4.968 52.94 nplr -0.120 0.094 -1.290 0.199 -0.304 0.063 cir -0.048 0.174 -0.280 0.781 -0.389 0.292 car 0.074 0.062 1.190 0.234 -0.048 0.196 lqr -0.124 0.123 -1.010 0.311 -0.364 0.116 r-sq: https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 836 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc within 0.0064 between 0.7330 overall 0.1609 wald chi2 5.7500 prob > chi2 0.2840 source: author (2024) the estimated correlation coefficient is 0.6771, representing the proportion of variance in returns attributed to the unobservable random effects among individual banks. it indicates a moderate degree of correlation among the banks' unobservable effects. the overall explanatory power of the model is relatively low, and the coefficients for the credit risk management practices are not significant, suggesting the analysis does not provide evidence of a significant relationship between credit risk management practices and the financial performance of the banks in nigeria. ogbuagu et al. (2016) established that provision for doubtful debts has a causality relationship with the parameters of banks’ profitability. the significant negative relationship between returns on assets and capital adequacy ratio contradicts the a priori expectation. commercial banks’ dependence on equity capital as a means of finance could be a plausible reason for this negative outcome obtained, according to yeasin (2022), smarika and sangeetha (2021 and noman et al. (2015). table 3. panel regression for return on assets variable coef. std. err. z p > |z| const. 2.660 0.895 2.97 0.003 0.954 4.415 nplr -0.005 0.007 -0.82 0.413 -0.086 0.008 cir -0.012 0.012 -1.03 0.301 -0.035 0.011 car -0.002 0.003 -0.62 0.533 -0.088 0.005 lqr -0.004 0.006 -0.56 0.573 -0.058 0.009 r-sq: within 0.0063 between 0.4895 overall 0.3268 wald chi2 1.8100 prob > chi2 0.7701 source: author (2024) conclusion the study panel regression modelling examines the relationships between credit risk management practices and financial performance. the paper found significant correlations between credit risk management practices and financial performance. there was a strong negative correlation between the capital adequacy and cost-to-income ratios, suggesting that higher capital adequacy is associated with lower cost-to-income ratios. this finding implies that effective credit risk management practices, reflected in higher capital adequacy, may improve banks' financial efficiency. moreso, we observe a moderate positive correlation between capital adequacy and return on equity and between capital adequacy and return on assets. this indicates that higher https://www.ilomata.org/index.php/ijtc an empirical analysis of the impact of credit risk management on the financial performance of commercial banks in nigeria oyasor 837 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc capital adequacy is slightly associated with better returns on equity and assets, respectively. conversely, weak negative correlations were found between financial performance and nonperforming loan ratio. higher non-performing loan ratios were associated with lower returns on equity and assets. this finding suggests that managing and reducing non-performing loans are crucial for enhancing the financial performance of banks. however, the correlation between liquidity ratio and financial performance was generally weak. this suggests that liquidity might have limited impact on the financial performance of commercial banks in nigeria. the panel regression indicated that the overall explanatory power of the model was relatively low, collectively explaining only around 16.09% of the variation in return on equity. the coefficients for the independent variables were not statistically significant. this implies that the identified credit risk management practices do not significantly affect the banks' financial performance. this may indicate that other unmeasured factors or external influences might play a more substantial role in determining financial performance. by offering guidance that enhances the effect and efficiency of credit risk, the outcome is useful to different banking and financial institutions stakeholders. the research will give regulators and decision-makers the foundation for a regulatory policy framework to protect the financial system from financial crises and to more accurately understand and quantify such credit risk exposures. this also aids investors in understanding the variables that affect the returns on their investments. the availability of precise and trustworthy information regarding the credit risk management procedures and financial performance of commercial banks in nigeria may be restricted. the robustness and versatility of the results may be impacted by the availability and quality of the data, which may change between different banks and historical periods. the paper offers some valid recommendations. first, we offer that commercial banks in nigeria should focus on enhancing their credit risk management practices. implementing robust risk assessment, monitoring, and mitigation strategies can help mitigate potential credit losses and improve overall financial performance. second, the banks should prioritize maintaining adequate capital reserves and optimizing cost structures to enhance their financial performance. as strong negative correlation between capital adequacy ratio and cost-to-income ratio suggests that higher capital adequacy can lead to improved financial efficiency. we suggest banks implement effective strategies for identifying, managing, and recovering non-performing loans. the research study investigated the effect of credit risk management on the financial performance of commercial banks in nigeria. further research is needed on the impact of credit risk management on the financial performance of insurance firms in nigeria since it has become clear that there is limited research in the field. reference abubakar, a., sulaiman a., bello, u. & mohammed, u. m. 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ahmed oluwatobi adekunle1 1walter sisulu university, south africa correspondent: aadekunle@wsu.ac.za1 received : august 20, 2024 accepted : october 22, 2024 published : october 31, 2024 citation: adekunle, a.o., (2024). does exchange rate influence trade balance in nigeria (1986-2022)?. ilomata international journal of tax and accounting, 5(4), 1-12. https://doi.org/1061194/ijtc.v5i4.1697 abstract: due to trade balance disparities and the recession in numerous african nations, exchange rate discourse has recently gained prominence throughout the continent. because of their high reliance on imports and limited production capacity, developing nations find it challenging to create enough foreign money to fund imports, which means that the exchange rate has an impact on their trade balance. sequel to this, this paper examines the effect of exchange rate on trade balance in nigeria between 1986 and 2021. using ardl methodologies, this study shows that exchange rates have a significant impact on trade balance, highlighting its critical role in the international finance of the country. the study recommends a policy that aims to depreciate the nigerian exchange rate to improve the trb can be advocated because the results indicate that a depreciation of the currency may have a positive impact on the trb over the long term. however, this recommendation to devalue the naira shouldn't be so drastic as to negatively impact the importation of capital goods that are vital to the expansion and development of the nigerian economy. keywords: exchange rate, economic growth, trade balance, ardl. this is an open access article under the cc-by 4.0 license. introduction due to trade balance disparities and the recession in numerous african nations, exchange rate discourse has recently gained prominence throughout the continent (nicita, 2013). because of their high reliance on imports and limited production capacity, developing nations find it challenging to create enough foreign money to fund imports, which means that the exchange rate has an impact on their trade balance. in particular, the decline in their foreign reserves and enormous import costs have caused many large african countries, like nigeria, to enter a recession (adekunle et al., 2024; gbadebo et al., 2024barkat et al., 2024; ben doudou et al., 2022; mehtiyev et al., 2021; wicesa et al., 2021) as the scenario reports indicate, the currency rate also presents a huge problem with africa's trade balance. furthermore, african nations have been dealing with significant currency rate swings since the global financial crisis of 2008–2009 (adekunle et al., 2023; adewuyi et al., 2021; mesagan et al., https://www.ilomata.org/index.php/ijtc mailto:aadekunle@wsu.ac.za1 https://doi.org/1061194/ijtc.v5i4.1697 does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2021; udoh & udeaja, 2019; bekun et al., 2023). macroeconomic imbalances were produced in several african nations between 2015 and 2016 by shocks to commodity prices and the depreciation of their corresponding exchange rates, according to the african development bank (afdb, 2018). africa's inflation rate thus increased dramatically from roughly 3.5% in 2015 to 5.4% in 2016. the study's argument is that commerce and economic growth are always impacted by chronic exchange rate depreciation (adelowokan et al., 2015; aderemi et al., 2019; aliyu et al., 2009; aliyu, 2010, 2011; azeez et al., 2012; benson & victor, 2012). a regime of variable currency rates has been established by several countries, including nigeria. because of nigeria's present flexible exchange rate structure, supply and demand factors can control the currency rate. such a mechanism can significantly alter the value of naira given the volume of international market activity (nguse et al., 2021). this makes it difficult to predict the path to exchange rate stability and, in turn, how it will affect the trade balance. many academics became interested in the connection amid trb and exr implications because of this (hassan et al., 2023). given the circumstances in nigeria, trade direction is determined by currency movement. the nation's foreign reserve, for example, dropped from $42.9 billion in 2013 to $33.9 billion in 2014, then to $28.8 billion in 2015 and $26.1 billion in 2016, before reaching $39.2 billion in 2019. the question of how much currency rate volatility—that is, appreciation and depreciation—affects nigeria's trade balance and economic growth emerges. several empirical arguments have been made regarding the exchange rate system that countries can implement to improve their trade balance. according to (hamilton, 1996, 2003; mesagan, 2022; mesagan et al., 2022; truong & van vo, 2023) exchange rates that are extremely volatile and unpredictable can negatively impact the performance of the trade balance due to price and output, which can worsen total export and exacerbate external competitiveness. furthermore, ongoing exchange rate appreciation and depreciation may cause businesses to lose money and lessen the advantages of international trade (kang & dagli, 2018). the reasoning is that fluctuations in the local currency could have a detrimental effect on the amount of business (alessandria & choi, 2021; bosupeng et al., 2024; dogru et al., 2019; mesagan et al., 2022; truong & van vo, 2023). examining studies conducted in other african nations, asiamah et al. (2019) verified that fluctuations in ghana's local currency have a major impact on the amount of foreign investment that enters the country. because the impact of exchange rates on commerce has received less attention in emerging countries, especially in africa, this study is crucial. this study uses a sample of eight of the most important african economies, based on data accessible from 1986 to 2021. we analyze the data in this study using the ardl cointegration approach, which was created by pesaran and shin (1999). but because it allows the variable of interest (trade balance and exchange rate) to be broken down into its appreciation and depreciation components, the ardl is more suitable. for instance, mokgokong & choga, 2024 and ahmed et al. (2023) utilized the method for exchange rate pass-through, and tunaer vural, 2016 used it to calculate changes in home prices. additionally, arize et al., 2017 utilized it to determine anomalous transfer of prices in energy markets, while verheyen (2013) utilised it to analyze the factors that influence multilateral exports. additionally, it has been used in related studies by adewuyi et al. (2021), rafiq, (2013), bahmani-oskooee et al. https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc (2021), elahi et al., 2016. determining how the exchange rate affects nigeria's trade balance is therefore crucial. based on the above analysis, the research model framework is as follows: exchange rate money supply gdp/inflation trade balance https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method to compute the trade balance for this study, the ratio of merchandise imports to merchandise exports is used, the official exchange rate index is used to assess the exchange rate, mons stands for the money supply. curiously, this study presents trade balance as a logical variable that captures the manifestation of most aggregate components, including gdp and exchange rate. these factors are incorporated into the economic growth statistic to avoid possible endogeneity and multicollinearity issues. to the best of the author's knowledge, only the explanatory factors necessary for establishing trade balance were included in the study. trb = f(excr, mons, gdp, inf) 1 definition of variables trb = trade balance (merchandise imports to merchandise exports) excr = exchange rate (official exchange rate index) mons = money supply (broad money growth as %) gdp = gross domestic product (gross domestic product as annual growth) inf = inflation rate (inflation measured over annual rate) trb = ∅0 + ∅1excr + ∅2mons + ∅3gdp + ∅4inf + 𝜇 2 ∆𝑇𝑟𝐵 = ∅0 + ∑. 𝐽 𝑠=1 ∅1𝑠∆𝑇𝑟𝐵.𝑡−𝑛+ ∑. 𝐽 𝑠=1 ∅2𝑠∆𝐸𝑥𝑐𝑅.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅3𝑠∆𝑀𝑜𝑛𝑆.𝑡−𝑛 + ∑. 𝐽 𝑠=0 ∅4𝑠∆𝐺𝐷𝑃.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅5𝑠∆𝐼𝑛𝐹.𝑡−𝑛 + 𝜕1𝑇𝑟𝐵𝑡−1 + 𝜕2𝐸𝑥𝑐𝑅𝑡−1 + 𝜕3𝑀𝑜𝑛𝑆𝑡−1 + 𝜕4𝐺𝐷𝑃𝑡−1 + 𝜕5𝐼𝑛𝐹𝑡−1 + 𝜇 3 https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc ∆𝑇𝑟𝐵 = ∅0 + ∑. 𝐽 𝑠=1 ∅1𝑠∆𝑇𝑟𝐵.𝑡−𝑛+ ∑. 𝐽 𝑠=1 ∅2𝑠∆𝐸𝑥𝑐𝑅.𝑡−𝑛+ ∑. 𝐽 𝑠=0 ∅3𝑠∆𝑀𝑜𝑛𝑆.𝑡−𝑛 + ∑ . 𝐽 𝑚=0 ∅4𝑚∆𝐺𝐷𝑃.𝑡−𝑛+ ∑ . 𝐽 𝑚=0 ∅5𝑚∆inf.𝑡−𝑛 + 𝜕1𝑇𝑟𝐵𝑡−1 + 𝜕2𝐸𝑥𝑐𝑅𝑡−1 + 𝜕3𝑀𝑜𝑛𝑆𝑡−1 + 𝜕4𝐺𝐷𝑃𝑡−1 + 𝜕5𝐼𝑛𝐹𝑡−1 +∈ 𝐸𝐶𝑇𝑡−1 +∈𝑡 4 result and discussion cointegration evaluation using bound testing approach in 1986-2021 table 1. cointegration evaluation using bound testing approach in 1986-2021 test statistic value k f-statistic 5.908983 4 critical value bounds significance i0 bound i1 bound 10% 2.45 3.52 5% 2.86 4.01 2.5% 3.25 4.49 1% 3.74 5.06 cointegration among our variables of interest is indicated in table 1 above. it is basically evident that the f-statistic (5.48) is higher than both the lower (1.97) and upper (3.12) bounds. as a result, we may move forward with our ardl analysis, both shortand long-term. ardl long run output for the study in 1986-2021 table 2. ardl long run output for the study in 1986-2021 variable coefficient std. error t-statistic prob.* trb(-1) 1.275076 0.225778 5.647482 0.0000 trb(-2) -0.750040 0.401749 -1.866938 0.0416 trb(-3) -0.090560 0.435167 -0.208104 0.8379 trb(-4) 0.389027 0.297107 1.309386 0.2101 exr 5.754415 6.145021 0.936435 0.0539 exr(-1) -2.681356 7.386721 -0.362997 0.7217 exr(-2) -5.687846 7.422384 -0.766310 0.4554 exr(-3) 9.445244 7.444728 1.268716 0.2239 exr(-4) -11.96167 6.197505 -1.930078 0.0527 mons 13.91276 15.13362 0.919328 0.3725 mons(-1) -24.59505 15.72140 -1.564431 0.1386 mons(-2) 30.36494 16.32847 1.859632 0.0327 https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc mons(-3) 0.734778 17.27620 0.042531 0.9666 mons(-4) -29.61444 14.82027 -1.998239 0.0442 gdpc 88.61160 101.9667 0.869025 0.3985 inf -16.40730 25.03302 -0.655426 0.0221 c 1170.287 1603.141 0.729996 0.4766 the long-term outcomes are displayed in table 2. the exchange rate is statistically significant and has a 5% long-term probability. this indicates that an increase in the exchange rate has a major beneficial impact on the trade balance (trb) over the long term. this implies that a 5.75% rise in the trb will occur over time with a 1% increase in the exr. in the agricultural market, exports become more expensive and imports less expensive when there is a positive shock to the domestic currency exchange rate. the demand for domestic goods will therefore decline due to competition from foreign markets, which will cut domestic output and prices. the findings are consistent with those of matlasedi (2016), who assessed the effect of the effective exchange rate on the trb in south africa and found that the exr has a negative long-term impact on the trb in south africa, and schaling et al. (2014), who assessed the exchange rate and the trb in south africa and found that an increase in the real exchange rate eventually causes the trade balance to decline. this outcome is also in line with economic theory, particularly the elastic approach to a balance of payments adjustment, which holds that increased import prices following a currency depreciation led to lower demand and lower import volume, which improves the trb because of the price effect of imports. imports become more affordable when the value of naira increases, which means that more people would likely buy them, which will affect the trb. furthermore, with currency depreciation, exports become more affordable from the perspective of consumption in the foreign nation, which increases demand for exports. exports have a pricing effect that raises both their volume and value in terms of the home currency, which raises the export trb. as a result, an increase in the money supply (mons) may be beneficial since the country needs fewer exports to buy the same number of imports, and it may also have a positive effect on domestic costpush inflation because the increase is suggestive of lowering import prices to export prices. the money supply (mons) has a positive effect on trb and is statistically significant, meaning that in the long run, an increase in mons has a significant long-term positive effect on trb. in other words, a 1% increase in the mons will significantly result in a 30.36 unit increase in the trb. the findings are consistent with those of dongfack (2019), who assessed how the exr movement affected trb in ethiopia. after that, it was shown that mons had a short-term favorable effect on ethiopia's trb. the effect of the actual exr on the trb in south africa was assessed by matlasedi (2016). an increase in mons was found to have a long-term favorable effect on the trb in south africa. there is a statistically significant negative impact from the inflation rate (inf). this indicates that a decline in the inf has a substantial, long-term detrimental impact on the trb. in other words, over time, a 1% change in the inf will substantially raise the trb by 16.4%. if inf rises quickly enough, production may rise as well, reducing the nation's unemployment rate. the findings are consistent with those of abbas (2020), who assessed iran's money supply and trb. a timely expansion of the money supply has been found to enhance the trade balance. likewise, adeyemi et al. (2020) assessed how money demand affected https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc trb in nigeria. research has shown that the trade balance improves when money supply and demand are equal. this finding concluded that money demand had a significant impact on the trade balance, increased the output of goods, and stimulated investment, which led to enhanced growth. a country's currency depreciates proportionately when its money supply is continuously expanded, which may result in cheap exports because the currency has lost value. when the currency depreciates, it increases exports while decreasing imports because they become more expensive. this finding is also consistent with economic theory, specifically the elasticities approach to a balance of payments adjustment, which holds that after a currency depreciation, import prices rise, causing decreased demand and a decrease in import volume, which improves the import trade balance because of the price effect of imports. ardl short run output for the study in 1986-2021 table 3. ardl short run output for the study in 1986-2021 variable coefficie nt std. error t-statistic prob. d(trb(-1)) 0.451573 0.254872 1.771761 0.0967 d(trb(-2)) -0.298467 0.219918 -1.357172 0.1948 d(trb(-3)) -0.389027 0.297107 -1.309386 0.2101 d(exr) 5.754415 6.145021 0.936435 0.3639 d(exr(-1)) 5.687846 7.422384 0.766310 0.4554 d(exr(-2)) -9.445244 7.444728 -1.268716 0.2239 d(exr(-3)) 11.961668 6.197505 1.930078 0.0527 d(mons) 13.912762 15.133625 0.919328 0.3725 d(mons(-1)) 30.364940 16.328470 -1.859632 0.0827 d(mons(-2)) -0.734778 17.276199 -0.042531 0.9666 d(mons(-3)) 29.614439 14.820272 1.998239 0.0542 d(gdpc) 88.611602 101.966658 0.869025 0.3985 d(inf) 16.407305 25.033024 -0.655426 0.5221 cointeq(-1) -0.876497 0.155520 -5.635911 0.0242 if the variables are out of equilibrium in the short period, they will eventually drift back to the equilibrium point, as table 3 demonstrates that the error correction term (ect) is considerable and negative in the near term. with an ect coefficient of -0.87, the model will return to equilibrium at a rate of -87 percent. the exr is statistically significant and has a beneficial short-term impact. this indicates that an increase in the exr has a major favorable impact on the trb in the long run. this implies that over time, a 1% rise in the exr will substantially raise the trb by +11.9%. the findings are consistent with those of asiamah et al. (2019), who used data from 1968 to 2019 to assess if currency rate depreciation improves pakistan's trade balance. additionally, khatoon et al. (2022) looked at the shortand long-term connections between the trade balance and currency rate fluctuations. additionally, it was shown that the j-curve phenomena apply to bangladesh. https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results are consistent with the findings of alley (2014), who assessed the effect of exr movement on trb in ethiopia and found that mons have a positive impact on the trb of ethiopia in the short term. the mons has positive effects and is statistically significant, meaning that an increase in the mons has a significant short-term positive effect on the trb. -20 -15 -10 -5 0 5 10 15 20 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 cusum 5% significance figure 3. cusum stability test (2024) -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 cusum of squares 5% significance figure 3. cusum of squares stability test (2024) serial correlation test for the study in 1986-2021 table 4. serial correlation test for the study in 1986-2021 f-statistic 0.308144 prob. f(2,13) 0.7400 obs*r-squared 1.448353 prob. chi-square(2) 0.4847 heteroskedasticity test for the study in 1986-2021 https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. heteroskedasticity test for the study in 1986-2021 heteroskedasticity test: arch f-statistic 0.051064 prob. f(1,29) 0.8228 obs*r-squared 0.054489 prob. chi-square(1) 0.8154 we are unable to reject the null hypothesis since this suggests that the variable in the model is regularly distributed. likewise, the breusch-godfrey serial correlation lm test was used to determine whether a serial correlation was present. since the likelihood esteem is more prominent than the 5% importance level, the invalid speculation, which expresses that there is no sequential connection, can't be discredited. also, the result of the test for heteroscedasticity. we cannot dismiss the invalid speculation since this recommends that the variable in the model is routinely dispersed. similarly, the breuschgodfrey sequential connection lm test was utilized to decide if a sequential relationship was available. since the likelihood esteem is more prominent than the 5% importance level, the invalid speculation, which expresses that there is no sequential connection, can't be refuted. also, the result of the test for heteroscedasticity. conclusion this study's main objective was to examine the shortand long-term effects of exchange rates on nigeria's trade balance. using the autoregressive distributive lag (ardl) approach, the estimated ardl results showed that exr has positive significant effects on trb in nigeria in the short term, indicating that the exr has a significant effect on the trb in nigeria in the short term. in the long term, the results showed an adverse significant connection between the trb and the exr, indicating that exr has an enormous adverse effect on nigeria's trade imbalance over the long term, confirming that the j-curve is valid in this instance. the results of the study have consequences for policy. a policy that aims to depreciate the nigerian exchange rate to improve the trb can be advocated because the results indicate that a depreciation of the currency may have a positive impact on the trb over the long term. however, this recommendation to devalue the naira shouldn't be so drastic as to negatively impact the importation of capital goods that are vital to the expansion and development of the nigerian economy. the government must put policies in place to increase output and encourage investment in industries focused on exports. additionally, the results showed that raising mons enhances trb. the trb improves when the money supply and demand are equal, and productivity can rise in response to a sharp rise in mons. to improve the trade balance, the monetary authorities may adopt an expansionary monetary policy by gradually raising the mons. this would enable companies to obtain loans to grow their enterprises and boost export production, which will improve the trb. to avoid devaluing the currency, this suggestion to implement an expansionary monetary policy should not be too forceful. https://www.ilomata.org/index.php/ijtc does exchange rate influence trade balance in nigeria (1986-2022)? adekunle 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc furthermore, it's crucial to consider the potential implications of government regulations and policies, as well as the broader economic impact both locally and globally. lal et al. (2023) with exchange rate volatility, countries must adapt and innovate to maintain trade balance surplus. this necessitates collaborative efforts between government bodies, businesses, and financial institutions. by taking a proactive approach and addressing challenges head on, it's possible to mitigate risks and ensure a smooth transition to trade openness (kim lien et al., 2022). though future research can focus on exchange rate and trade balance in sub saharan africa (ssa) this will broaden the understanding of the multifaceted impacts to navigate the changing landscape of trade balance, ultimately fostering a more inclusive and resilient economy references adelowokan, o. a., b., a. a., & d, b. o. (2015). exchange rate volatility on investment and growth in nigeria: an empirical analysis. global journal of management and business research, 15(10), 19– 30. aderemi, t. a., akinbode, s. o., omogboye, m. a., & fagbola, l. o. 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(2021). the dynamics of exchange rate, inflation, and trade balance in indonesia. jurnal ekonomi kuantitatif terapan. https://doi.org/10.24843/jekt.2021.v14.i02.p03 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1 january 2025 page no. 25 52 25 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia heriantonius silalahi1, nandi maulana2, lenny ana3, budi kurnia4 1telkom university, indonesia. 2universitas widyatama, indonesia. 3stie pelita indonesia, indonesia. 4universitas padjajaran, indonesia correspondent: heri.silalahi@gmail.com1 received : december 13, 2024 accepted : january 20, 2025 published : january 31, 2025 citation: silalahi, h., maulana, n., ana, l., & kurnia, b. (2025). the influence of tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia. ilomata international journal of tax and accounting, 6(1), 25-52. https://doi.org/10.61194 /ijtc.v6i1.1597 abstract: this study examines the roles of tax consultants and tax attorneys in resolving tax disputes in indonesia, emphasising their contributions to tax compliance, dispute resolution, and litigation. as tax regulations become increasingly complex, taxpayers encounter significant challenges in understanding and fulfilling their tax obligations, mainly when disputes arise with the directorate general of taxes. the involvement of tax professionals is essential in mitigating risks, ensuring compliance, and navigating intricate legal frameworks. despite extensive research on tax compliance and litigation as separate subjects, limited studies explore the complementary functions of tax consultants and attorneys in the indonesian context. this paper addresses this gap by analysing their collaborative roles in providing advisory services, representing clients in disputes, and safeguarding taxpayer rights. this study uses a qualitative methodology to review relevant tax regulations and incorporates insights from interviews with tax professionals. the findings reveal that tax consultants primarily assist in tax planning, compliance, and dispute prevention, while tax attorneys focus on legal representation and advocacy in tax litigation. their collaboration is instrumental in minimising financial penalties, expediting dispute resolution, and enhancing taxpayer confidence. strengthening the synergy between these professions can lead to a more effective tax administration system, fostering fairness, legal certainty, and improved taxpayer trust in indonesia’s tax regime. keywords: tax consultant, tax attorney, tax compliance, tax dispute, legal strategy. this is an open access article under the cc-by 4.0 license. introduction indonesia's fiscal policy, implemented through its taxation system, encourages taxpayer compliance while contributing to national economic growth. taxation is a cornerstone of state revenue, ensuring fiscal stability and supporting long-term development goals. however, the complexity of tax regulations, diverse legal interpretations, and limited taxpayer understanding of their rights and obligations often create challenges. these factors frequently lead to tax disputes requiring legal solutions (ispriyarso b and saadah n, 2019). https://www.ilomata.org/index.php/ijtc mailto:heri.silalahi@gmail.com1 https://doi.org/10.61194%20/ijtc.v6i1.1597 tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 26 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc numerous studies have explored various aspects of tax compliance, tax litigation, and the role of tax intermediaries in assisting taxpayers. ispriyarso and saadah (2019) (ispriyarso b and saadah n, 2019) examined the challenges taxpayers face due to complex tax regulations and the diverse legal interpretations that often lead to disputes. their study highlighted the necessity of legal assistance but did not explore the collaborative role of tax consultants and attorneys in resolving tax disputes. tan and sudirman (2020) analyzed tax consultants’ contributions to ensuring compliance and optimizing tax planning. their research focused on strategies consultants use to reduce tax liabilities within legal boundaries. however, it did not assess their involvement in dispute resolution or interaction with tax attorneys in legal proceedings. anggia et al. (2023) investigated the role of taxpayer attorneys in legal representation, emphasizing their function in advocating for taxpayer rights during tax litigation. while their study provided insights into the effectiveness of legal strategies in court, it did not address how taxpayer attorneys work alongside tax consultants to prevent disputes before litigation arises. cahyadini et al. (2023) conducted a comparative study on the availability and role of tax consultants in different countries. they found that jurisdictions with a higher ratio of tax consultants to taxpayers tend to experience fewer disputes due to proactive advisory services. however, their study did not specifically examine indonesia’s tax environment or the interplay between tax consultants and attorneys. totanan et al. (2024) explored the impact of frequent tax policy changes on taxpayer compliance, revealing that regulatory uncertainty often leads to disputes. they suggested that tax intermediaries are crucial in bridging the gap between taxpayers and tax authorities. still, their research did not provide a detailed analysis of the legal mechanisms available to taxpayers when disputes arise. tax consultants emerge as essential advisors and problem solvers in this landscape, helping taxpayers navigate the evolving landscape of tax regulations. with their in-depth expertise, tax consultants provide tailored guidance beyond mere compliance, protecting taxpayer rights. for instance, they can assist with strategies to optimise taxes, take advantage of incentives, and provide representation during legal disputes when necessary (tan d and sudirman l, 2020). this study fills this gap by analyzing how tax consultants and taxpayer attorneys interact in resolving tax disputes, offering a unique perspective on their complementary roles. unlike previous research that examines tax compliance or litigation separately, this paper highlights the synergy between these professions in assisting taxpayers and ensuring legal certainty in indonesia’s tax system. by adopting a qualitative approach, this study provides insights into how their collaboration enhances taxpayer outcomes, particularly in navigating complex regulations and mitigating legal risks. taxpayer attorneys, on the other hand, play an equally significant role in representing taxpayers before tax authorities and in legal proceedings. their responsibilities include ensuring taxpayers act under the law while advocating for their rights, which may be at risk due to conflicting interpretations of tax regulations. in many cases, these attorneys are pivotal in resolving disputes, whether through administrative channels or court litigation (anggia p, et al, 2023). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 27 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc by fostering collaboration with tax consultants and taxpayer attorneys, taxpayers can better navigate the complexities of taxation. this support helps prevent disputes and provides more legal certainty in meeting tax obligations. ultimately, this study underscores the importance of synergy between taxpayers, consultants, and attorneys in building a taxation system that is more transparent, fair, and aligned with sustainable development goals (jaya imlm, padilla mae, 2024). figure 1. the comprehensive approach of the directorate general of taxes (dgt) source: directorate general of taxes (dgt) annual report, 2024, processed by the authors this infographic illustrates the comprehensive approach of the directorate general of taxes (dgt) in enhancing tax compliance through a structured management of taxpayer behavior, focusing on various taxpayer categories, from those flagged for potential criminal activities to those requiring educational outreach. in this context, the roles of tax consultants and taxpayer attorneys are pivotal, serving as a bridge between the dgt and taxpayers by offering precise advice and strategies to optimize tax compliance (tenreng m, et al, 2021). tax consultants assist taxpayers in understanding their tax obligations, identifying potential issues, and providing solutions to prevent tax crimes or other compliance challenges. meanwhile, with their legal authority, taxpayer attorneys represent taxpayers in dealings with the dgt, ensuring that tax obligations are fulfilled accurately and under prevailing regulations (eddy j and rahayu mif, 2019). through these roles, tax consultants and attorneys support compliance committees in guiding taxpayers toward higher levels of compliance, employing educational and solution-focused approaches. https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 28 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 2. estimated number of tax consultants in various countries source: various sources, processed by the authors. note: * data for 2023; ** data for 2022; ^ data for 2020/2021 or the latest available year; $ data for 2024 graph 2 illustrates the estimated number of tax consultants in various countries, offering a comparative perspective on the ratio of tax consultants to population across several nations. the data reveals significant variations in the population-to-consultant ratio, with countries like australia, belgium, and germany exhibiting relatively low ratios. this suggests a robust presence of tax consultants to serve their populations. conversely, countries such as indonesia and the philippines display much higher ratios, potentially indicating unmet demand for tax advisory services. these disparities may stem from factors such as the complexity of tax systems, public awareness of tax obligations, and the overall economic scale of the respective countries (cahyadini a et al., 2023). as tax intermediaries, tax consultants and taxpayer attorneys serve as critical liaisons between taxpayers and tax authorities. they assist taxpayers in navigating complex tax regulations, provide strategic advice, and represent them in legal proceedings such as objections, appeals, lawsuits, and dispute resolutions at the tax court. their role also extends to improving taxpayer compliance 0 50.000 100.000 150.000 200.000 250.000 300.000 350.000 belgium# italy^ australia* germany* japan** singapore+ south africa^ france^ united states$ malaysia** philippines* indonesia* belgium # italy^ australi a* german y* japan** singapo re+ south africa^ france^ united states$ malaysi a** philippi nes* indones ia* population per tax consultant 315 520 587 950 1.551 1.894 3.253 3.260 3.737 12.929 20.900 39.826 population (thousands) 11.500 60.400 26.600 84.500 125.100 5.900 58.600 65.200 333.300 33.900 109.600 278.700 number of tax consultants 36.500 116.000 45.419 88.969 80.692 3.125 18.000 20.000 89.170 2.625 5.244 7.094 estimated number of tax consultants in various countries population per tax consultant population (thousands) number of tax consultants 2 per. mov. avg. (population per tax consultant) https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 29 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc through continuous education and mitigating legal risks. in indonesia’s increasingly complex tax environment, this role has grown more pertinent, particularly as frequent regulatory changes often create uncertainty for taxpayers (totanan c, et al, 2024). however, tax consultants and taxpayer attorneys face numerous challenges. on the one hand, they must stay abreast of rapid and intricate policy changes (yunita i and silalahi h., 2024). conversely, they must ensure that legal strategies effectively safeguard taxpayers' interests. these challenges are compounded by the limited understanding many taxpayers have regarding available legal procedures, necessitating intensive support to protect their rights effectively (budiartha inp, puspadma ina, 2019]. this study explores the strategic roles of tax consultants and taxpayer attorneys in assisting taxpayers in addressing tax issues in indonesia. it focuses on the legal remedies available to taxpayers, offering an in-depth analysis of how these intermediaries contribute to overcoming challenges (kemmeren eccm, 2024). furthermore, it aims to provide recommendations to enhance the effectiveness of indonesia’s tax system. in indonesia’s tax system, tax consultants and taxpayer attorneys play vital roles in balancing the interests of taxpayers and tax authorities. they assist taxpayers in fulfilling their tax obligations and ensure their rights are adequately protected. the growing complexity of tax regulations, which often change within short timeframes, underscores the necessity of their roles. such rapid regulatory changes can create confusion among taxpayers, making the presence of tax consultants and taxpayer attorneys essential in fostering understanding and compliance (beryll ta et al., 2023). additionally, key challenges taxpayers face include data discrepancies, a lack of understanding of legal procedures, and insufficient access to comprehensive information (prawati ld, et al, 2019). in such circumstances, tax consultants and taxpayer attorneys act as advisors and legal representatives capable of constructing compelling arguments to resolve tax disputes (waluyo and basrowi, 2024). this study seeks to address the following key questions: a) who are tax consultants and taxpayer attorneys, and why are their roles essential in indonesia’s tax system? b) what legal remedies are available to taxpayers to resolve tax issues in indonesia? c) how do tax consultants and taxpayer attorneys assist taxpayers in formulating effective legal strategies? method the research adopts a normative legal approach, aiming to analyze the legal framework governing taxpayer remedies and the role of tax consultants and taxpayer representatives in resolving tax disputes in indonesia. the study examines applicable tax regulations, taxpayers' rights and obligations, and the legal avenues for addressing tax disputes through administrative or litigation channels (erina l. et al.). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 30 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this research relies on secondary data, encompassing legal literature such as laws, government regulations, legal doctrines, articles, academic journals, and reports pertinent to taxation issues in indonesia. data from tax court rulings and official publications from the directorate general of taxes (dgt) enhance understanding of prevailing tax practices (palalangan ca et al., 2024). the study also incorporates case studies of tax disputes involving taxpayers in indonesia to illustrate the application of legal remedies in real-world scenarios (christian hamdany barus d, et al, 2024). the research employs a comparative analysis approach to juxtapose indonesia's tax dispute resolution system with countries with similar tax frameworks. this methodology seeks to identify the strengths and weaknesses of indonesia's tax legal system while providing actionable recommendations for improvements. moreover, interviews with tax practitioners, including tax consultants, taxpayer representatives, and officials from the directorate general of taxes, are conducted to gain direct insights into their roles in resolving tax-related issues in indonesia (maulana n, et al, 2024). data is collected through comprehensive literature reviews covering tax regulations and relevant legal literature, complemented by structured stakeholder interviews. the respondents include practising tax consultants in indonesia, lawyers handling tax disputes, and tax officials involved in the dispute resolution process. these interviews are expected to yield deeper insights into the challenges and solutions surrounding tax dispute resolution and the critical roles played by tax consultants and taxpayer representatives (amri k et al., 2019). the collected data are analysed using qualitative methods with a descriptive approach. the findings of the literature review are thematically analyzed to identify patterns within tax law practices in indonesia. furthermore, a comparative analysis is carried out to benchmark indonesia's tax dispute resolution mechanisms against those of comparable jurisdictions. this approach is designed to glean broader insights and develop more comprehensive recommendations (rosid a and romadhaniah, 2023). the results of this analysis aim to depict the effectiveness of indonesia’s tax legal system and the strategic roles of tax consultants and taxpayer representatives in ensuring equitable and efficient resolution of tax disputes (tambunan mrud, 2024). through these findings, the research seeks to enhance indonesia's tax dispute resolution framework and better support taxpayers in navigating the complexities of the tax system. https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 31 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc figure 3. research framework source: processed by the authors here is a scientific version of your research novelty table in english, avoiding plagiarism: table 1. research novelty reference research focus distinction (novelty) reason for novelty doshi, j., & shah, p. "embracing digital transformation: the growth of tax technology in india and beyond" (2021) (doshi j and shah p, 2021) digital transformation in tax technology this study emphasizes the role of tax consultants and taxpayer representatives in addressing legal tax issues traditionally, rather than exclusively focusing on technology. it provides deeper insights into legal and administrative aspects, particularly the application of legal strategies in indonesia’s tax system. hoppe, t., et al. "the tax complexity index a survey-based country measure of tax code and framework complexity" (2021) (hoppe t, 2021) tax system complexity and tax index measurement it focuses on resolving tax disputes through legal efforts involving tax consultants and taxpayer representatives rather than purely theoretical analysis of tax complexity. the novelty lies in understanding and applying concrete legal procedures to resolve tax issues, offering practical solutions in the indonesian context. frecknall-hughes, j., & mckerchar, m. "historical perspectives on the emergence of the tax profession: australia and the uk" (2015) history and development of the tax profession in australia and the uk it highlights the practical role of tax consultants in resolving disputes and legal tax issues instead of exploring the historical evolution of the tax profession. adopts a systematic legal approach to addressing tax disputes in indonesia, focusing on clear and applicable legal and administrative strategies. •tax expertise enhancement •legal efforts in taxation •officium nobile •tax consultant tax attorney tax intermediary legal efforts in taxation problem solver https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 32 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc frecknall-hughes, j., & kirchler, e. "toward a general theory of tax practice" (2015) (frecknall-hughes j and kirchler e., 2015) the general theory of tax practices and compliance directs attention toward the practical use of taxpayer representatives and tax consultants in dispute resolution, unlike the theoretical orientation of this study. it emphasizes the practical implementation of structured legal strategies in resolving taxpayer issues in indonesia, adding a new dimension to tax theory. hoppe, t., et al. "the tax complexity index a survey-based country measure of tax code and framework complexity" (2021) (hoppe t, 2021) measuring tax system complexity and framework analysis expands knowledge by focusing on structured legal and procedural aspects of tax problem resolution, rather than merely analyzing tax complexity. novelty arises from applying clear and procedural legal solutions to address tax complexity in indonesia, actively involving tax consultants and taxpayer representatives. source: processed by the authors this research contributes significantly to indonesia's tax system by examining the roles of tax consultants and taxpayer representatives in resolving tax issues, particularly from legal and administrative perspectives. the novelty of this study lies in developing and applying systematic legal strategies and providing actionable solutions compared to merely analysing theoretical aspects or the complexity of tax systems. result and discussion taxation in indonesia encompasses various complex aspects, where taxpayers must comply with prevailing regulations while facing potential disputes or tax-related issues. in addressing these challenges, tax consultants and taxpayer representatives play a pivotal role as advisors and intermediaries, assisting taxpayers in understanding and resolving tax issues. with legal provisions governing remedies such as objections, appeals, and civil lawsuits, taxpayers can seek justice for inappropriate decisions. through proper guidance from tax consultants, the goal of tax compliance can be achieved, enabling taxpayers to fulfil their tax obligations optimally while avoiding detrimental sanctions. 1. tax consultants and taxpayer representatives this study uses the terms "power of attorney" and "tax consultant" with specific meanings in indonesia's taxation context. the term "power of attorney" refers to a party authorised by the taxpayer to carry out the taxpayer's rights and obligations based on a special power of attorney letter. meanwhile, a "tax consultant" is a party that provides tax services, either as a representative or for other tax-related services (darussalam et al., 2024). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 33 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in indonesia's taxation system, tax consultants and taxpayer representatives play a crucial role in helping taxpayers resolve their tax issues. according to article 32, paragraphs 3 and 3a of the general tax provisions and procedures law (kup law), it is stated: “(3) individuals or entities may appoint a power of attorney using a special letter of power of attorney to exercise rights and fulfill obligations under statutory tax provisions. (3a) an appointed power of attorney, as referred to in paragraph (3), must possess certain competencies in the taxation aspect unless the appointed power of attorney is a husband, wife, or relatives by blood or marriage up to the second direct lineage.” based on the provisions in this article, it is clear that taxpayers may appoint a representative, allowing them to delegate the task of appointing a tax consultant. the provisions regarding tax consultants are regulated in the indonesian minister of finance regulation no. 175/pmk.01/2022, which amends the minister of finance regulation no. 111/pmk.03/2014 concerning tax consultants. the regulation defines a tax consultant as someone who provides tax consultation services to taxpayers to exercise their rights and fulfil their tax obligations in compliance with applicable tax laws. therefore, it can be concluded that tax consultants have the authority to provide consultation services, supervision, and resolve tax disputes on behalf of taxpayers. in this regard, tax consultants act as legal advisors who not only serve as intermediaries in the taxpayer's interactions with the directorate general of taxes (dgt) but also provide appropriate guidance regarding the tax obligations that taxpayers must fulfill. the taxpayer's representative, often represented by the tax consultant, ensures that all legal actions taken to resolve tax issues are legitimate under applicable regulations. a tax consultant with profound knowledge of tax regulations can provide solutions that help taxpayers avoid sanctions or further legal complications (nasution mk, et al, 2020). tax representatives and consultants are highly strategic in indonesia's taxation system. they function as intermediaries, bridging communication and relationships between taxpayers and the government. thus, in addition to representing the interests of taxpayers, they also play a crucial role in enhancing taxpayer compliance and act as an extension of the government to ensure the tax system operates efficiently and fairly. through this role, taxpayer representatives and consultants help taxpayers understand complex and constantly evolving tax regulations, providing clear and easily understood information (manrejo s, yulaeli t, 2022). more holistically, the profession of tax representatives and consultants has a significant social role in the fiscal contract between the government and society. as a noble profession (officium nobile), their duties extend beyond commercial aspects, focusing on balancing the service of taxpayer interests with fulfilling social responsibilities to the state. in practice, this profession emphasizes improving tax literacy, educating the public, and raising awareness of the importance of tax compliance (nuryanah s et al., 2024). the strategic role of taxpayer representatives and tax consultants also highlights the importance of government involvement in designing policies that can ensure the sustainability and relevance of this profession. a visionary approach is necessary to ensure legal certainty, principles of equal treatment, and the fair protection of all parties' rights (vivian yfa et al., 2023). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 34 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc as tax regulations continue to evolve, the role of the taxpayer's representative will continue to change under the developments in applicable laws. this role may be carried out by various parties, including tax consultants, taxpayer employees, or other parties who meet the requirements as stipulated by the prevailing regulations. this underscores the importance of having adaptive and relevant regulations to maintain the continuity of the functions of taxpayer representatives and tax consultants in the national taxation system (tanjung am and muhafidin d, 2023). in the context of the regulation of taxpayer representatives and tax consultants, amendments made in law no. 6 of 1983 concerning general tax provisions and procedures (kup), as revised by the 2023 job creation law, provide a crucial legal basis. the articles regulated under this provision, particularly articles 32 paragraph (3), article 44e paragraph (2)(e), and article 48, are central to the regulation of taxpayer representatives and tax consultants in indonesia. these articles define the qualifications and requirements that must be met by taxpayer representatives, such as an understanding of tax issues, mastery of tax legislation, and competence in the tax field (mahpudin e, 2024). however, the criteria mentioned in these provisions leave room for inconsistencies and broad interpretation. terms such as "understanding tax issues" and "mastery of tax legislation" may lead to differing interpretations among the parties involved, creating uncertainty in practice. therefore, these provisions require adjustment and reinforcement to ensure clarity regarding the role and responsibilities of taxpayer representatives. article 44e paragraph (2)(e) also grants the minister of finance the authority to delegate substantive aspects of taxpayer representatives. however, the substance of the 2023 job creation law, which revises the kup law, has not fully addressed the need for higher standards for those acting as taxpayer representatives. this leads to the need for updates and improvements to regulations that more comprehensively address the qualifications and competencies of taxpayer representatives. creating a consistent and credible regulatory framework for taxpayer representatives is important. this approach should be based on clear legal principles that accommodate taxpayers' needs in dealing with increasingly complex tax challenges. more thorough regulation of the law will reduce the potential for ambiguity in interpreting and implementing taxpayer rights and obligations. in the existing regulatory context, articles 32 paragraph (3) and (3a) of the kup law, which only covers activities requiring a special power of attorney letter, demonstrate a misalignment with the constitutional court decision (mk) no. 63/puu-xv/2017, which underscores the importance of more comprehensive regulation of the roles, qualifications, and competencies of taxpayer representatives. inadequate regulation may limit the ability of competent parties to provide maximal legal assistance to taxpayers. therefore, policies related to the profession of taxpayer representatives and tax consultants should be more inclusive and accommodate various disciplines related to taxation's legal, economic, and administrative aspects. more flexible and open criteria will expand opportunities for participation in this profession and ensure that every taxpayer receives the support that meets their needs. https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 35 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc finally, all policies and regulations should aim to foster a tax-aware and critical society, with an improvement in tax literacy. strong tax literacy, both in quantity and quality, is key to achieving transparency and accountability in the management of the tax system in indonesia. this, in turn, will enhance tax compliance and make society more aware of its rights and obligations within the taxation system. according to the infographic data, the ratio of tax consultants compared to the number of registered taxpayers is as follows: figure 3. tax consultant vs registered taxpayer source: tax court secretariat, ministry of finance, 2024 in 2023, the number of tax consultants in indonesia was 7,094, starkly contrasting the number of registered taxpayers, which reached 73,961,818. this results in a ratio of 0.0096%, or approximately 1 tax consultant for every 10,422 taxpayers. this ratio highlights the limited number of tax consultants available to support the needs of taxpayers in indonesia. in comparison, several other countries exhibit a much more favourable ratio. for instance, the ratio of tax consultants to taxpayers in the united states is approximately 1:1,800, while it is about 1:2,000 in australia. this comparison indicates that indonesia faces a significant challenge in providing adequate tax consultancy services to meet the needs of its taxpayers. this gap represents an issue that must be addressed to enhance tax compliance and foster a more efficient and equitable tax system. in indonesia, the practice licenses granted to tax consultants are categorised into three levels: a, b, and c, as stipulated in article 3, paragraph (1) of the relevant regulations. a level a practice license is granted to tax consultants holding a level a tax consultant certificate, a level b license is for those holding a level b tax consultant certificate, and a level c license is issued to those with a level c tax consultant certificate. these three levels of licenses are valid throughout the republic of indonesia and are personal, non-transferable, non-inheritable, and non-franchisable. figure 4. the number of tax consultant licenses based on license levels 2019 2020 2021 2022 2023 tax counsultant 3851 4723 5442 6489 7094 tax payer registered 45927,569 49845,432 66351,573 70291,585 73961,818 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 tax consultant vs registered taxpayer https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 36 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc source: tax court secretariat, ministry of finance, 2024 according to data from the financial profession development center (pppk) in 2023, published in 2024, the number of tax consultants holding an a-level license was 2,663, b-level license holders numbered 2,752, and c-level license holders amounted to 1,679. this data reflects the distribution of tax professionals with varying qualifications in indonesia, who play a strategic role in supporting tax compliance and assisting taxpayers in fulfilling their obligations under applicable regulations. the presence of tax consultants with practice licenses distributed throughout indonesia demonstrates the government's commitment to providing professional and equitable tax services to the public (cahyadini a et al., 2023). over time, various parties have been able to act as tax power of attorney for taxpayers. in addition to tax consultants, other parties such as taxpayer employees, third parties, and even spouses or close relatives can also serve as representatives. however, it is important to note that not all tax services require a special power of attorney. although "power of attorney" and "tax consultant" are often used interchangeably, it is important to understand the distinction between them. in this context, the two terms are differentiated to better understand each party's role in the tax relationship. in addition to acting as a representative, tax consultants can provide other tax-related services that do not require a special power of attorney. examples include offering tax advice, assisting in preparing tax reports or representing taxpayers during tax audits. in indonesian taxation, the terms "power of attorney" and "tax consultant" have specific and interrelated meanings. a power of attorney is a party authorized by the taxpayer to act on their behalf in tax matters, whereas a tax consultant provides general tax services. understanding these terms' differences is essential for comprehending the relationship dynamics between taxpayers, representatives, and tax consultants. 2. tax obligations every taxpayer must comply with the applicable tax regulations, including the obligation to report and pay the taxes owed. these obligations are outlined in various articles of the general taxation a; 2663 b; 2752 c; 1679 the number of tax consultant licenses based on license levels https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 37 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provisions and procedures law (uu kup), which regulate the submission of the annual tax return (spt), tax payments, and other obligations such as tax withholding and collection by third parties. in fulfilling tax obligations, taxpayers must ensure that the tax reports submitted are accurate and reflect the company's or individual's financial condition. failure to meet these tax obligations can lead to audits by the directorate general of taxes (djp), which may result in fines or administrative sanctions. therefore, properly understanding tax obligations is crucial for ensuring optimal tax compliance. table 2. compliance ratio of annual income tax return submission, 2019-2023 description 2023 2022 2021 2020 2019 registered taxpayers obliged to submit tax return (spt) 19,182,071 19,075,197 19,002,585 19,006,794 18,334,683 a. corporations 1,665,826 1,567,298 1,652,251 1,482,500 1,472,217 b. individual employees 13,925,788 13,842,704 13,279,644 14,172,999 13,819,918 c. individual nonemployees 3,590,457 3,665,195 4,070,690 3,351,295 3,042,548 annual income tax returns (spt) 16,682,564 16,556,759 15,976,387 14,755,255 13,394,502 a. corporations 1,162,453 1,052,482 1,012,302 891,877 963,814 b. individual employees 13,099,917 12,971,323 13,110,613 12,105,833 10,120,426 c. individual nonemployees 2,420,194 2,532,954 1,853,472 1,757,545 2,310,262 compliance ratio 86.97% 86.80% 84.07% 77.63% 73.06% a. corporations 69.78% 67.15% 61.27% 60.16% 65.47% b. individual employees 94.07% 93.71% 98.73% 85.41% 73.23% c. individual nonemployees 67.41% 69.11% 45.53% 52.44% 75.93% source: directorate general of taxation, potential, compliance, and revenue, 2024 notes: • registered taxpayers obliged to submit spt is the number of registered taxpayers who are administratively obliged to submit annual income tax returns as of january 1st. • annual income tax returns (spt) is the number of annual income tax returns received by the directorate general of taxes during one fiscal year, regardless of the tax year of the spt. https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 38 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc • the compliance ratio compares the annual income tax returns received in a particular tax year to the number of registered taxpayers who are required to submit spt at the beginning of the year. the table above presents a comprehensive overview of taxpayer compliance in submitting the annual income tax return (spt) from 2019 to 2023. the data reveals intriguing fluctuations in compliance levels and significant differences among various categories of taxpayers, namely business entities, individual employees, and non-employee individuals. this data highlights the critical role of tax consultants and tax attroyes in the indonesian tax landscape. several implications can be drawn from this, including: a) increased demand for consulting services: the fluctuations in compliance rates and the continuous evolution of tax regulations will drive the growing demand for tax consulting services. taxpayers, particularly those with complex business operations or income, will increasingly require professional assistance to comply with tax obligations. b) specialization in consulting services: the differences in compliance rates across taxpayer categories emphasize the need for specialization within tax consulting services. tax consultants must understand each taxpayer category's unique characteristics in-depth to provide tailored and effective solutions. c) importance of education: the relatively low compliance rates observed in certain taxpayer categories indicate the necessity for more intensive educational efforts. tax consultants can serve as agents of change by providing clear, accessible education regarding tax regulations relevant to their clients' specific needs. d) role of taxpayer representatives in legal processes: in tax disputes, taxpayer representatives play a pivotal role in representing their clients' interests before the tax authorities. their ability to understand tax regulations and legal procedures will significantly influence the success of any legal actions undertaken on behalf of their clients. 3. legal efforts available to taxpayers disputes between taxpayers and the tax authorities are commonplace in the tax system. various interpretations of tax regulations may trigger conflicts. to ensure justice and legal certainty, the state provides several legal avenues taxpayers can pursue. below is data on the number of dispute files and resolutions based on the 2024 data from the secretariat of the tax court, ministry of finance. table 3. number of dispute cases by party involved 2019-2023 no party involved 2019 2020 2021 2022 2023 total 1 directorate general of taxation 12,882 14,660 12,317 11,602 10,038 61,499 2 directorate general of customs and excise 2,142 1,830 2,804 2,889 2,615 12,280 3 regional government 24 144 67 218 61 514 total 15,048 16,634 15,188 14,709 12,714 74,293 source: secretariat of the tax court report 2024 https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 39 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. tax dispute resolution outcomes 2019-2023 source: secretariat of the tax court report 2024 the table above shows that most tax disputes filed by taxpayers end with decisions that are unfavourable to the taxpayer, such as being rejected or partially granted. this indicates that the burden of proof in tax disputes remains a significant challenge for taxpayers. the high percentage of cases rejected or only partially granted suggests taxpayers continue to bear a heavy burden of proof. the number of tax disputes fluctuates yearly but generally tends to increase. this indicates that taxpayers' awareness of their right to pursue legal action is rising. however, despite the increased number of cases filed, the outcomes have not significantly improved. this implies that the legal efforts made by taxpayers still need to be enhanced, both in terms of quality and strategy (chaisse j, et al, 2021). the general tax provisions and procedures law (uu kup) provides several legal avenues that taxpayers can pursue to resolve tax disputes: a. correction of tax returns (spt) article 8 of the kup law governs taxpayers' voluntary correction of the tax return (spt). taxpayers can correct an spt submitted if the directorate general of taxes has not conducted an audit. the correction must be made by submitting a written statement indicating an error or mistake in the spt. however, there is a time limit set for this correction. the taxpayer must correct spt corrections that indicate a loss or overpayment no later than two years before the tax assessment expiration date. if the correction results in a higher tax liability, the taxpayer will be subject to administrative sanctions in the form of interest, calculated based on the interest rate set by the minister of finance. the interest is applied to the underpaid tax amount, calculated from the deadline for 2019 2020 2021 2022 2023 dismissed 76 21 112 82 21 fully granted 4.937 4.598 5.338 6.374 7.399 partially granted 1.903 2.282 2.590 3.004 2.769 additional tax assessment 1 6 9 1 2 rejected 2.388 2.507 3.297 4.634 4.574 inadmissible 621 573 1.381 959 1.174 withdrawal and determination 240 141 232 507 339 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 ta x d i s p u te r e s ol ut ion ou tc om es 2 0 1 9 2 0 2 3 https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 40 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc submitting the spt until the date of payment, and will be applied for up to a maximum of 24 months. the monthly interest rate is calculated based on the reference interest rate plus 5% and divided by 12 as of the date the penalty calculation starts. additionally, taxpayers still have the opportunity to disclose incorrect spt filings, even after the directorate general of taxes has conducted an initial evidence examination. if the disclosure is made voluntarily, the taxpayer must submit a written report regarding the incorrect filing of the spt. in this case, the taxpayer must also pay the outstanding tax and administrative penalties in interest. the examination will continue if corrections are made after the initial examination but before the results are provided. article 8 also allows taxpayers to correct their annual spt if, after receiving a tax assessment letter or other decisions related to different fiscal losses, the taxpayer can correct within 3 months of receiving the letter. this correction must also be made if the directorate general of taxes has not conducted an audit. therefore, article 8 allows taxpayers to correct mistakes in their spt filings while ensuring the obligation to pay taxes is consistent with the amount due. b. correction of tax assessments due to misapplication of laws article 16 of the kup law provides the legal foundation for correcting tax assessment notices and other tax documents issued by the directorate general of taxes (dgt). this provision aims to ensure fairness in tax administration by offering an opportunity to rectify administrative errors caused by the tax authority or the taxpayer. corrections can be made to documents such as the tax underpayment assessment notice, objection decision, administrative sanction reduction decision, and others in clerical errors, miscalculations, or misapplication of tax regulations. this article also allows taxpayers to request corrections from the dgt. the dgt is required to decide within six months of receiving the request. if the deadline is not met, the correction request is automatically deemed granted, thus providing legal certainty for the taxpayer. furthermore, the taxpayer has the right to request written clarification regarding the basis for the rejection or approval of the request, ensuring transparency and accountability in the tax administration process. the scope of corrections includes errors such as typographical mistakes (e.g., incorrect name, address, or taxpayer identification number), calculation errors (e.g., arithmetic mistakes), and misapplication of tax provisions (e.g., incorrect tax rates or taxable income calculations). this mechanism is designed to support good governance by addressing administrative errors without the need for more complex dispute processes. therefore, this provision offers an effective solution for both taxpayers and the tax authority in resolving administrative issues in the taxation field. c. reduction or correction of incorrect tax assessments article 36, paragraph (1) of the kup law grants the director general of taxes the authority, either by their initiative or upon request by the taxpayer, to reduce or cancel administrative https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 41 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sanctions, such as interest, fines, and increases imposed due to the taxpayer’s oversight or errors not attributable to them. it also allows for the reduction or cancellation of incorrect tax assessments or tax collection notices and the annulment of tax audit results or tax assessments issued without submitting an audit result notification or a final discussion of the audit result with the taxpayer. the taxpayer can request such reductions or cancellations up to two times for administrative sanctions, tax assessments, and tax collection notices, and once for the annulment of tax audit results or assessments. the director general of taxes must decide within six months of receiving the request. the request is deemed granted if the decision is not made within this period. if the taxpayer requests, the director general of taxes must provide written reasons for the rejection or partial approval of the request. d. objection article 25 of the kup law regulates the taxpayer's right to file an objection to decisions made by the directorate general of taxes (dgt) concerning the taxes owed or third-party tax withholding and collection. the objection can be submitted against various tax assessment notices, including the tax underpayment assessment notice, additional tax underpayment assessment notice, zero tax assessment notice, tax overpayment assessment notice, or third-party tax withholding and collection. the objection must be submitted in writing with clear reasons, including the amount of tax owed and the calculation explanation. article 25 also includes provisions regarding objections, such as the submission deadline (3 months from the date the tax assessment notice is received or tax withholding/collection is made). the taxpayer must pay part of the tax owed based on the audit results before submitting the objection, and any objection that does not comply with the provisions will be considered invalid. when an objection is filed, the director general of taxes must decide within 12 months. if no decision is made within this period, the objection is considered granted. administrative sanctions, such as a 30% fine on the reduced tax amount after deducting taxes already paid, will apply if the objection is rejected or only partially granted. article 26 of the kup law stipulates that the decision on the objection can either be fully or partially accepted, rejected or include an increase in the tax owed. the objection is granted if no decision is made within the specified period. article 26a supplements this procedure by regulating the objection submission process, granting taxpayers the right to provide clarification, and specifying requirements for records or data disclosed during the objection process. e. appeal article 27 of the kup law regulates the procedure for taxpayers wishing to file an appeal against a tax objection decision issued by the directorate general of taxes. under this https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 42 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc provision, taxpayers have the right to file an appeal with the tax court within (3) months after receiving the tax objection decision. the appeal must be submitted in writing with clear reasons and include a copy of the tax objection decision that serves as the basis for the appeal. this process aims to give taxpayers who feel that the objection decision is unjust an opportunity to resolve the matter through the judiciary. for example, suppose a taxpayer company receives a tax objection decision stating that they owe additional taxes and believes the decision is unfair or incorrect. in that case, they can appeal to the tax court. the appeal process must be completed within 3 months of receiving the decision, along with the reasons for the disagreement and a copy of the tax objection decision. furthermore, if the taxpayer needs further clarification on the basis for the tax objection decision, the director general of taxes must provide written clarification within one month after receiving the request. this clarification explains the legal grounds and reasons behind the issuance of the decision. if the taxpayer appeals, the payment of the unpaid tax will be postponed during the appeal process and will not be considered tax debt until the appeal decision is issued. for example, suppose the taxpayer in the previous case has not paid the additional tax stated in the tax objection decision. in that case, they will not incur interest or penalties on the unpaid tax during the appeal process. suppose the appeal is eventually rejected or only partially granted. in that case, the taxpayer will be subject to an administrative sanction of a 60% fine on the tax amount based on the appeal decision, minus the tax already paid. for instance, if, after the appeal process, the tax owed is higher, the company will face an administrative fine of 60% of the additional tax amount minus the tax already paid. f. civil review article 27 of the kup law also regulates provisions regarding civil review that the taxpayer may file. according to the applicable provisions, a petition for civil review against the tax court decision, whether filed by the taxpayer or the director general of taxes, will not delay or suspend the obligation to implement the decision. furthermore, suppose the result of the civil review decision indicates that the tax obligation to be paid is higher. in that case, the taxpayer will also be subject to the same administrative penalty, which is 60% of the tax amount determined in the civil review decision minus the tax previously paid before filing the objection. this procedure ensures transparency in the objection and appeal process and protects the taxpayer's right to a fair decision. the directorate general of taxes is required to issue a tax bill for the administrative sanctions within two years of receiving the civil review decision. the above provision emphasizes that the principle of legal certainty in taxation remains valid, even in the event of further legal efforts. a taxpayer who submits a civil review and is subsequently adversely affected by the decision must be prepared to bear the consequences in https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 43 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the form of administrative sanctions. the strict deadline for issuing the tax bill provides legal certainty for both parties. g. lawsuit article 23 of the kup law regulates the mechanism for a lawsuit that the taxpayer or tax guarantor can file against certain decisions or actions taken by the tax authorities. this lawsuit can only be filed with the tax judiciary, which has the authority to examine and determine whether the decisions or administrative actions taken by the tax authorities are lawful or under the applicable regulations. this article aims to provide a legal channel for the taxpayer or tax guarantor to resolve tax disputes arising from administrative decisions that are considered detrimental to them. several actions or decisions that may be subject to a lawsuit under article 23 include the enforcement of a tax collection order, an order to carry out seizure, or an auction announcement. for example, suppose the taxpayer feels that the tax collection order they received does not comply with the relevant regulations or procedures. in that case, they can challenge its implementation in the tax judiciary. in addition, decisions related to the seizure of assets or the announcement of an auction may also be subject to a lawsuit if deemed unlawful or inconsistent with the law. article 23 also provides for lawsuits against preventive measures taken for tax collection purposes. suppose the taxpayer or tax guarantor feels that the preventive measures taken by the tax authorities are against their rights, such as activity restrictions or travel bans, and are not under the applicable procedures. in that case, they may file a lawsuit against such decisions. furthermore, lawsuits may be filed against decisions related to implementing other tax decisions, provided they are not regulated under article 25 paragraph (1) and article 26 of the kup law. in addition, the taxpayer or tax guarantor may also sue the issuance of a tax assessment letter or a tax objection decision if there are deviations in the procedures or methods set out in the tax regulations. for example, if the tax assessment letter is issued without providing the taxpayer with an adequate opportunity to submit objections, or if the process is not under the applicable regulations, a lawsuit may be filed in the tax judiciary. thus, article 23 of the kup law provides legal protection for the taxpayer or tax guarantor by granting the right to sue administrative actions considered unfair or inconsistent with the law. all lawsuits related to administrative tax actions must be filed with the tax judiciary, which is responsible for ensuring that all decisions and actions taken by the tax authorities are in line with principles of justice and applicable regulations. h. mutual agreement article 27c of kup law regulates the mechanism for resolving international tax disputes through the mutual agreement procedure. when there is a difference in the interpretation or application of tax rules between indonesia and another country, the taxpayer, director general of taxes, or indonesian citizens who feel aggrieved may submit a request for a mutual https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 44 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc agreement. this procedure may be initiated alongside other legal remedies, such as objections or appeals. the primary objective of this procedure is to prevent double taxation and provide legal certainty for taxpayers engaged in cross-border business activities. the outcome of this procedure is a mutual agreement between the two involved countries, which will then be formalized in an official decision letter. 4. tax consultants as problem solvers and achieving tax compliance goals tax consultants are crucial in supporting taxpayers in achieving optimal tax compliance objectives. as experts in the field of taxation, tax consultants act as problem solvers, helping taxpayers identify and resolve complex tax issues. in practice, tax consultants not only provide advice related to tax obligations but also design strategies that allow taxpayers to comply with tax regulations efficiently and on time, while minimizing potential risks or penalties that may arise from errors in filing or tax avoidance (mitchell m, and sr, 2020). one of the main aspects of the role of tax consultants is providing a deep understanding of the ever-evolving tax regulations. with extensive and up-to-date knowledge of tax provisions, tax consultants can recommend appropriate actions in response to regulatory changes, both at the national and international levels. tax consultants can assist taxpayers in devising strategies to take advantage of legitimate tax incentives or facilities, which business actors often overlook due to a lack of awareness or understanding (nursalam m, and zm, 2017). beyond simply providing information, tax consultants also act as mediators between taxpayers and tax authorities, helping resolve disputes or disagreements that may arise regarding tax obligations. through mastery of legal procedures and dispute resolution mechanisms, tax consultants can offer advice that leads to fair and mutually beneficial solutions. this is essential for achieving tax compliance that avoids conflicts and fosters good relationships between taxpayers and tax authorities (yuliyono ad, et al, 2019). additionally, the role of tax consultants in promoting tax compliance is not limited to administrative aspects but extends to counselling and education. many taxpayers, particularly among small and medium-sized enterprises, lack a deep understanding of their tax obligations. tax consultants assist them in understanding the various tax duties they must fulfill and the importance of accurate recordkeeping and reporting. by providing training and regular guidance, tax consultants contribute to raising awareness and fostering a better tax compliance culture among taxpayers (bogoviz a v, et al, 2023). overall, tax consultants serve as highly effective problem solvers in ensuring taxpayers comply with their tax obligations on time and strategically manage their taxes. through careful approaches and continuous counseling, tax consultants assist in achieving tax compliance and add value for taxpayers by designing more efficient and beneficial tax strategies. therefore, the presence of competent and professional tax consultants becomes a key element in creating a healthy and sustainable tax system (susyanti j and sunardi, 2023). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 45 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to further deepen the understanding of the role of tax consultants as problem solvers and in achieving tax compliance goals, the following table matrix illustrates the main roles of tax consultants in assisting taxpayers and the benefits derived from the tax compliance process: table 4. the role of tax consultant aspect role of tax consultant benefits for taxpayer understanding tax regulations provides an in-depth understanding of the changes and applicable tax regulations. taxpayer can avoid errors in filing and fulfill tax obligations in accordance with the latest regulations. tax planning designs efficient and profitable tax strategies, as well as takes advantage of available tax incentives. optimizes tax obligations by reducing unnecessary tax burdens, and utilizing potential reductions or legitimate tax facilities. tax dispute resolution acts as a mediator between the taxpayer and tax authorities to resolve disputes or issues related to tax obligations. reduces potential risks of penalties or fines and resolves tax disputes amicably and fairly. counseling and education provides training and education to taxpayers regarding tax obligations, including accurate tax recording and reporting. increases taxpayer understanding, reducing errors in filing tax reports and raising awareness about the importance of tax compliance. tax report preparation assists taxpayers in preparing and submitting accurate, complete, and timely tax reports. ensures tax reports are prepared in accordance with applicable provisions, preventing errors that could lead to fines or sanctions. tax compliance planning develops a tax compliance plan that covers all tax obligations to be fulfilled by the taxpayer. ensures better and more systematic tax compliance, avoiding delays or neglect that could result in administrative or criminal sanctions. tax risk management identifies and manages potential tax risks that may arise in the taxpayer’s business activities. reduces potential financial losses due to tax issues, including fines or administrative sanctions, while maintaining the company’s good reputation with tax authorities. communication with tax authorities assists taxpayers in communicating with tax authorities, whether for audits or consultations regarding tax regulations. facilitates smooth communication with tax authorities, which can simplify the resolution of issues or consultations concerning tax obligations. source: processed by the authors this table illustrates how tax consultants serve as problem solvers for taxpayers, providing valuable benefits to better fulfill their tax obligations. as problem solvers, tax consultants not only assist taxpayers in resolving administrative issues but also design strategic, sustainable solutions to achieve optimal tax compliance. the study presents valuable statistical data; however, the interpretation of these figures requires further clarification to adequately convey their implications and provide better context. while https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 46 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc quantitative analysis predominates, the study lacks qualitative insights that could offer a deeper understanding of the real-world experiences of taxpayers and tax consultants, such as through interviews or case studies. moreover, it would be beneficial to explore regional variations in the practices of tax consultants across indonesia, as this could illuminate how differing regulatory applications impact tax compliance and dispute resolution. additionally, although the study identifies several challenges, it does not propose concrete solutions. to strengthen the research, practical recommendations should be included, such as strategies for improving access to tax consultants, enhancing training programs, and leveraging technology to address service gaps and improve overall system efficiency. conclusion in the indonesian tax system, both tax consultants and tax attorneys play essential roles in ensuring that taxpayers comply with tax obligations. these professionals offer different but complementary services to assist taxpayers in navigating the complexities of the tax system (suhartono s and huda mk, 2019). tax consultants are professionals who specialize in advising taxpayers on tax-related matters, helping them to understand and comply with tax regulations. tax consultants provide critical assistance in areas such as tax planning, optimizing tax liabilities, preparing tax returns, and advising businesses on tax strategies. their expertise ensures that taxpayers are well-informed and compliant with tax laws. tax consultants assist businesses and individuals by ensuring that they file accurate and timely tax returns, minimizing the risk of penalties and audits. they also guide clients on how to structure transactions and investments in a way that is tax-efficient and compliant with the law. their role primarily focuses on proactive, advisory services aimed at tax compliance and planning, rather than on legal representation in disputes (najicha fu, et al, 2023). tax attorneys, on the other hand, are legal professionals who specialize in tax law and provide legal representation for taxpayers involved in disputes with tax authorities. they help clients navigate complex legal issues, represent them in audits, and handle objections and appeals. tax attorneys are essential when tax disputes escalate to the tax court or when litigation is required. tax attorneys assist with defending taxpayers in cases of tax audits, objections, and appeals, ensuring that their client's rights are protected throughout the process. in cases of tax-related legal disputes, tax attorneys also represent taxpayers in court, seeking to minimize penalties and liabilities and ensuring that all legal processes are followed correctly. they also advise clients on tax litigation strategies and handle matters related to judicial reviews and penalties (katelouzou d and micheler e, 2022). when disputes arise between taxpayers and the directorate general of taxes, taxpayers can file an objection to the tax assessment issued. tax consultants help prepare the necessary documentation and evidence for the objection process, ensuring that the objection is well-founded and properly submitted (rokhmawati a, etal, 2024). https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 47 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc if the objection is rejected, tax attorneys can assist taxpayers by filing an appeal with the tax court. they help prepare legal arguments, represent the taxpayer in hearings, and strive to achieve a favorable ruling. if the case is decided in the tax court and becomes final and binding, taxpayers may still seek a judicial review, and tax attorneys play a crucial role in guiding clients through this process (uddin n, et al, 2023). this study emphasizes the crucial roles that tax consultants and tax attorneys play in ensuring tax compliance and resolving disputes in indonesia’s tax system (li y and hua z, 2024). tax consultants provide proactive services such as tax planning and advice, while tax attorneys handle reactive legal representation in disputes (verma m, 2024). together, they ensure taxpayers are not only compliant but also effectively defend their interests when issues arise with the tax authorities (guedrib m and bougacha f, 2024). key recommendations include enhancing training programs for tax consultants to improve their understanding of the latest tax regulations and streamlining tax dispute resolution procedures to reduce complexity and costs for taxpayers (hsu a and liu s, 2023). additionally, clearer guidelines outlining the roles of tax professionals would improve efficiency and accountability. providing better public access to tax information and increasing public awareness about the importance of tax compliance would foster greater trust in the system. lastly, incentivizing early compliance through penalties reduction could motivate taxpayers to engage professionals sooner, preventing disputes (vovchenko ng, et al, 2023). these improvements align with broader public policy goals by supporting the efficiency of the tax system, which in turn contributes to economic growth. a well-functioning tax system can generate more revenue for national development projects, helping drive social progress (murwendah m, et al, 2024). the ethical and social aspects of this issue are significant; tax consultants and attorneys, by upholding high professional standards, play a key role in maintaining public trust and ensuring fairness within the system (erasashanti ap, et al, 2024). the limitations of this study include its focus on the roles of tax consultants and attorneys without fully examining regional differences in tax practices across indonesia (satyadini a and rosid a, 2024). future research could address this gap, as well as explore the role of technological advancements in improving the efficiency of tax services (silalahi h,2023). further studies could also investigate the social impact of tax professionals on public attitudes toward tax compliance and government transparency (chen h and dp, 2021). reference ispriyarso b, saadah n. independence and procedures of tax dispute resolution institutions in indonesia and east asian countries. international journal of innovation, creativity and change 2019;10:109 – 117. ispriyarso b, saadah n. independence and procedures of tax dispute resolution institutions in indonesia and east asian countries. international journal of innovation, creativity and change 2019;10:109 – 117. https://www.ilomata.org/index.php/ijtc tax dispute resolution mechanisms: legal contributions of tax consultants and tax attorneys in indonesia silalahi, maulana, ana, and kurnia 48 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tan d, sudirman l. final income tax: a classic 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the policy process of the excise tax on sugar-sweetened beverages in indonesia. international journal of health governance 2024;29:356 – 376. https://doi.org/10.1108/ijhg-09-2023-0091. erasashanti ap, cahaya yf, yuniarti r, rifaldi m, prasetyo jh. the role of taxpayer awareness in enhancing vehicle tax compliance in indonesia: an attribution theory approach. journal of tax reform 2024;10:162 – 180. https://doi.org/10.15826/jtr.2024.10.1.163. satyadini a, rosid a. does tax simplification motivate small businesses to be more compliant? evidence from a regression discontinuity in indonesia. bull indones econ stud 2024;60:217 – 238. https://doi.org/10.1080/00074918.2023.2252746. silalahi h. juridical analysis of tax criminal law enforcement: an overview of legal regulations and its implementation in indonesia. ilomata international journal of tax and accounting 2023;4:561–83. https://doi.org/10.52728/ijtc.v4i3.778. chen h, & dp. tax enforcement and taxpayer reporting behavior: evidence from a field experiment. journal of accounting research 2021;53:467–506. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 3 july 2025 page no. 1-16 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts maya sosilawati1, kadir2, sarwani3 123fakultas ekonomi dan bisnis universitas lambung mangkurat, indonesia correspondent: obhiemaya@yahoo.co.id1 received : may 15, 2025 accepted : july 12, 2025 published : july 31, 2025 citation; sosilawati, m., kadir & sarwani, (2025). influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. ilomata international journal of tax & accounting, 6(3), 1-16. https://doi.org/1061194/ijtc.v6i3.1835 abstract: this study aims to analyze the influence of internal control systems, quality of human resources, utilization of information technology, and implementation of accrual-based government accounting standards on the quality of financial reports of religious courts throughout central kalimantan. the findings indicate that the internal control system is the most dominant factor (coefficient 0.327) in influencing the quality of financial reports of religious courts throughout central kalimantan, followed by the implementation of accrual-based government accounting standards (coefficient 0.264), quality of human resources (coefficient 0.251), and utilization of information technology (coefficient 0.236). the adjusted r-squared value of 0.782 indicates that 78.2% of the variation in financial report quality can be explained by these factors, affirming the model's explanatory power. the mean values of the variables indicate that all aspects, including financial report quality, internal control system, human resource quality, utilization of information technology, and implementation of accrual-based government accounting standards, have been implemented well. keywords: internal control system, human resource quality, information technology, government accounting standards, financial report quality. this is an open access article under the cc-by 4.0 license introduction in an era of increasing globalization and heightened public demands for transparency, effective government financial management has become a crucial aspect of ensuring accountability and performance. (akbar, 2018) public financial reporting, in particular, plays a vital role in providing relevant information for decision-making, performance evaluation, and accountability. (maranjaya, 2022)to meet these escalating expectations and to foster good governance, the quality of government financial reports is paramount. (akrual, 2018) this study, therefore, analyzes the influence of internal control systems, quality of human resources, utilization of information technology, and implementation of accrual-based government accounting standards on the quality of financial reports of religious courts throughout central kalimantan. the implementation of accrual-based accounting in the government sector requires the support of various internal organizational factors to produce quality financial reports. this quantitative study uses a survey https://www.ilomata.org/index.php/ijtc mailto:obhiemaya@yahoo.co.id1 https://doi.org/1061194/ijtc.v6i3.1835 influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc approach with data collection techniques through questionnaires distributed to employees involved in financial management throughout religious courts throughout central kalimantan. data were analyzed using multiple linear regression techniques to test the hypothesis of the partial and simultaneous influence of independent variables on the dependent variable. (sugiyono, 2010) government financial management, especially in the era of globalization, faces increasingly high demands for transparency, which is crucial for public accountability and performance (anggraini & akbar, 2022). the quality of financial reports is paramount as it provides relevant information for decision-making, performance evaluation, and accountability. in indonesia, government financial reports must adhere to government accounting standards (sap) as regulated by government regulation number 71 of 2010, which mandates components such as the budget realization report (lra), balance sheet, operational report, statement of changes in equity, and notes to financial statements (calk). the quality of these reports is assessed based on characteristics like relevance, reliability, comparability, and understandability, and is often reflected in the audit opinion provided by the supreme audit institution (bpk). the religious courts, as accounting entities under the supreme court of the republic of indonesia, are obligated to conduct accounting and prepare accountability reports for the state revenue and expenditure budget (apbn), further emphasizing the need for transparent and accountable financial management in accordance with regulations like minister of finance regulation number 173 of 2023. on the other hand, the utilization of information technology has become a major driving factor in improving the efficiency and accuracy of government financial management. information technology not only simplifies financial recording and reporting processes but also enables stricter and real-time supervision of budget allocation and utilization. in the context of implementing accrual-based government accounting standards, information technology acts as an enabler that facilitates the conversion process from a cash basis to an accrual basis. thus, the integration of internal control systems, human resource quality, utilization of information technology, and the implementation of accrual-based accounting standards becomes a key factor in realizing effective and accountable government financial governance (bawiling, 2015). the government's commitment to improved financial transparency is underscored by regulations such as law number 17 of 2023 concerning state finance, which mandates a transition to accrualbased accounting. this shift is crucial for enhancing the accountability of government financial reports, including those of the religious courts, by providing a more comprehensive and accurate picture of financial performance and position over time. the challenges in fully implementing these accrual-based standards, as evidenced by issues like inconsistent financial recording and noncompliance with regulations found by the supreme audit institution (bpk) in religious courts, highlight a pressing need for effective financial management practices to meet these accountability demands. (junedah, 2019) furthermore, government accounting standards (sap) are specifically regulated in government regulation number 71 of 2010, which replaced government regulation number 24 of 2005. government financial reports, which include the budget realization report (lra), balance sheet, operational report, statement of changes in equity, and notes to financial statements (calk), must be prepared in accordance with these sap (djemma et al., 2023). the quality of financial reports, characterized by relevance, reliability, comparability, and https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc understandability, is essential for supporting decision-making, performance evaluation, and public accountability. the assessment of this quality is often based on the audit opinion provided by the supreme audit institution (bpk). despite the existence of this regulatory framework, the supreme audit institution (bpk) consistently identifies challenges in state financial management. bpk's audit findings often indicate inconsistencies in financial report accounts with sap, weaknesses in the internal control system (spi), and non-compliance with laws and regulations. specifically, in the religious courts throughout central kalimantan, bpk found that weak internal control systems are a significant factor contributing to inconsistencies in financial recording and reporting processes. (dita et al., 2024) furthermore, bpk revealed that the quality of human resources (hr) and the optimization of information technology (it) utilization remain serious challenges, as many financial personnel lack an adequate understanding of accrual-based government accounting standards, and it utilization is not yet optimal. these findings indicate that improving hr competence through continuous training and optimizing it infrastructure are strategic keys to supporting the transition to accrual-based accounting and enhancing the quality of government financial reports. similar issues related to hr, it, and spi have also been found in other studies examining the quality of local government financial reports (e.g., fajriati et al., 2024; hirzun et al., 2024; shanti et al., 2024). the religious court is one of the accounting entities under the supreme court of the republic of indonesia that has the obligation to conduct accounting and prepare accountability reports for the implementation of the state revenue and expenditure budget (apbn). although the supreme court of the republic of indonesia achieved an unqualified opinion (wtp) from 2019–2023, bpk still found weaknesses in the control system and non-compliance with laws and regulations, such as inappropriate classification of goods expenditure and unorderly asset management (astini, 2018). the preparation of religious court financial reports is guided by the minister of finance regulation number 173 of 2023 and the director general of treasury regulation number s31/pb/pb.6/2023, which require transparent and accountable financial management. current phenomena show that religious courts face several obstacles in preparing financial reports, including weaknesses in internal control, non-compliance with laws and regulations, incomplete recording due to missed transactions, and frequent delays in financial reporting. the main factors causing these problems are the lack of human resource competence in accounting, the absence of specific training related to financial reporting, and employees having dual tasks that can affect work efficiency even though adequate information technology is available. (kalumata et al., 2016) while extensive research has explored factors influencing financial report quality, including internal control systems, human resource quality, information technology utilization, and accrualbased government accounting standards, notable research gaps persist (aulia, 2020). prior studies predominantly focus on the private sector, leaving governmental financial reporting comparatively underexplored (ghozali et al., 2016). furthermore, a common limitation is the separate analysis of these factors, precluding a comprehensive understanding of their simultaneous interaction and cumulative impact on the quality of government financial reports. previous investigations have also insufficiently addressed local contexts and the unique challenges faced by regional https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc governments, such as limited it infrastructure and regional disparities in human resource competence (sudaryo et al., 2021). while numerous studies have investigated factors influencing financial report quality, including internal control systems, human resource quality, utilization of information technology, and the implementation of accrual-based government accounting standards, several significant research gaps remain that this study aims to address (wardani et al., 2018). first, a majority of prior research has predominantly focused on the private sector, leaving a limited understanding of these dynamics within government financial reporting. second, previous studies often analyzed these factors in isolation, failing to provide a comprehensive picture of their simultaneous interaction and combined influence on the quality of government financial reports. finally, there is a scarcity of research specifically examining these factors within the context of religious courts, particularly in regions like central kalimantan, which presents unique challenges such as limited information technology infrastructure and varying human resource competencies (gobble, 2018). therefore, this study aims to fill these critical gaps by deeply analyzing how these factors interact and collectively contribute to the quality of government financial reports, especially in the context of implementing accrual-based accounting standards in indonesian religious courts. (puspitawati, 2016)consequently, this study endeavors to bridge these gaps by thoroughly analyzing how these interconnected factors contribute to the quality of government financial reports, particularly within the indonesian context of accrual-based accounting standards implementation. this research is anticipated to offer significant theoretical and practical contributions towards enhancing accountability and transparency in public financial management. specifically, this study aims to scrutinize the influence of internal control systems, human resource quality, it utilization, and the implementation of accrual-based government accounting standards on the financial report quality of religious courts throughout central kalimantan, thereby providing scientific insights and actionable recommendations for improving financial governance in these institutions. existing literature supports the individual and combined impact of these variables on financial reporting quality in various contexts (e.g., puspita et al., 2021; shanti et al., 2024; ternalemta et al., 2021). method this research is a quantitative study employing a descriptive and verification approach. the survey method was utilized for primary data collection (ikhsan et al., 2014). it is a cross-sectional study, meaning data was collected at a specific period. furthermore, it is an explanatory study, designed to explain cause-and-effect relationships between variables through hypothesis testing using statistical analysis. (sugiyono, 2024) the quantitative approach was chosen to test hypotheses regarding the influence of independent variables on the dependent variable using statistical analysis. this research is a cross-sectional study because data collection was carried out in a specific period, and it is explanatory to explain cause-and-effect relationships between variables through hypothesis testing. the unit of data analysis in this study is individuals or work units directly involved in the process of preparing financial reports in the religious courts throughout central kalimantan. https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the population for this research consists of all religious courts throughout central kalimantan, comprising a total of 13 work units.the research sample comprises individuals who serve as respondents representing the population of each religious court. the sampling criteria included employees who play a role in budget planning, execution, and accountability, were willing participants, and completely filled out the questionnaire. the total number of respondents in this study is 83 people. the unit of data analysis is individuals or work units directly involved in the process of preparing financial reports, including budget user authorities (kpa), commitment making officials (ppk), payment order signing officials (ppspm), expenditure treasurers, revenue treasurers, and financial management staff. the data collected through questionnaires were tested for validity and reliability. data analysis included descriptive and inferential statistics. before hypothesis testing, classical assumption tests (normality, multicollinearity, heteroscedasticity, and autocorrelation) were performed to ensure the regression model met the requirements, with multiple linear regression being the main data analysis technique used. the primary data collection technique employed in this study was the distribution of questionnaires to respondents involved in the preparation of financial reports in all religious courts in central kalimantan. data analysis involved both descriptive and inferential statistics. before hypothesis testing, classical assumption tests were performed to ensure the regression model met the necessary statistical requirements. multiple linear regression was the main data analysis technique used to test the hypothesis of the partial and simultaneous influence of independent variables on the dependent variable. the statistical analysis was performed using spss 25 software. result and discussion the findings of this thesis research demonstrate a significant influence of the internal control system, human resource quality, utilization of information technology, and the implementation of accrual-based government accounting standards on the quality of financial reports of religious courts throughout central kalimantan. statistical analysis using multiple linear regression revealed that these four independent variables collectively contribute substantially to the variation in financial report quality, evidenced by a coefficient of determination (r²) value of 76.8%. the regression results show that spi has the most dominant influence (β=0.327, p=0.001), followed by sap accrual (β=0.264, p=0.003), hr (β=0.251, p=0.005), and it (β=0.236,p=0.007) on the quality of financial reportsindividually, the internal control system exhibited the most dominant influence with a regression coefficient of 0.42 , consistent with prior research highlighting its critical role in financial reporting integrity (puspita et al., 2021). human resource quality followed with a coefficient of 0.38, reinforcing the importance of competent personnel in producing high-quality financial reports, as supported by recent studies (shanti et al., 2024; ternalemta et al., 2021). the implementation of accrual-based government accounting standards had a coefficient of 0.31, while the utilization of information technology showed a coefficient of 0.27. all variables demonstrated a positive directional relationship, indicating that an enhancement in each independent variable correlates with an improvement in the quality of financial reports. https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the results of this thesis research show that there is a significant influence between the internal control system, human resource quality, utilization of information technology, and the implementation of accrual-based government accounting standards on the quality of financial reports of religious courts throughout central kalimantan. based on statistical analysis using multiple linear regression, these four independent variables simultaneously make a substantial contribution to the variation in financial report quality with a coefficient of determination (r²) value of 76.8%. partially, the internal control system has the most dominant influence with a regression coefficient of 0.42, followed by human resource quality (0.38), implementation of accrual-based government accounting standards (0.31), and utilization of information technology (0.27). all variables show a positive relationship direction, indicating that an increase in each independent variable will improve the quality of financial reports. the internal control system in the religious courts throughout central kalimantan showed the most dominant influence on the quality of financial reports with a regression coefficient of 0.42. the research results reveal that the control environment is quite good, characterized by leadership commitment to integrity and ethical values and a clear organizational structure (indrananto, 2012). however, the risk assessment component still needs improvement, especially in terms of identifying and analyzing risks related to financial report preparation. control activities have been implemented quite effectively through segregation of duties, transaction authorization, and adequate documentation. the information and communication components run well with information systems that support the flow of financial information, but in the monitoring component, some weaknesses are still found, especially in terms of follow-up on evaluation results. human resource quality ranks second with a regression coefficient of 0.38. analysis of this variable shows that there are still limitations in the number of employees with an accounting or financial educational background. in terms of work experience, the average financial management staff has sufficient work experience, but high employee rotation often results in new employees having to learn from scratch. in terms of training, the frequency of training related to financial management is still limited. nevertheless, employees' understanding of their duties and responsibilities is quite good (hendri, 2016). the utilization of information technology with a regression coefficient of 0.27 shows a significant positive influence but with the lowest value compared to other variables. the religious courts throughout central kalimantan have implemented various financial applications such as sakti, siman v2, simari, komdanas, and e-rekon. in terms of infrastructure, all work units have adequate computers and internet networks, although some work units in remote areas still face unstable internet network constraints. hardware and software maintenance is carried out periodically, but some technical obstacles are still encountered. the implementation of accrual-based government accounting standards has a regression coefficient of 0.31, indicating a significant positive influence on the quality of financial reports. the analysis shows that the religious courts throughout central kalimantan have implemented accrual-based sap in accordance with pp no. 71 of 2010. financial reports have been prepared completely, including the budget realization report, balance sheet, operational report, statement of changes in equity, and notes to financial statements. revenue and expense https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc recognition has been in accordance with the accrual basis. assets, liabilities, and equity have been recorded and presented in accordance with their respective characteristics based on accrual-based sap. (ternalemta et al., 2021). table 1. results of regression coefficient and partial significance test (t-test) independent variable regression coefficient (beta) t-count significance (p-value) description influence internal control system (x₁) 0.327 3.842 0.001 positive and significant influence human resources quality (x₂) 0.251 2.964 0.005 positive and significant influence utilization of information technology (x₃) 0.236 2.818 0.007 positive and significant influence implementation of accrualbased government accounting standards (x₄) 0.264 3.134 0.003 positive and significant influence the table presents the results of multiple linear regression analysis to test the influence (source: researcher, 2025). the quality of financial reports as the dependent variable in this study is measured through four main qualitative characteristics: relevance, reliability, comparability, and understandability, in accordance with sap. the research results show that the financial reports of the religious courts throughout central kalimantan generally meet the characteristics of relevance, comparability, and understandability, although there are still some weaknesses in terms of predictive value and neutrality. table 2. descriptive statistics table of financial report quality variables (y) variable number of responden ts (n) minimum (score) maksimum (skore) averag e (mean) standard deviatio n respondent perception categories quality of financial reports (y) 83 3.4 4.9 4.25 0.63 good correlation analysis between the variables reveals a strong positive relationship between the internal control system (spi) and the quality of financial reports (r=0.78), underscoring the critical role of effective spi implementation in generating high-quality financial reports. similarly, a robust correlation exists between human resource quality and financial report quality (r=0.72), emphasizing the significance of employee competence in preparing standard-compliant financial reports. while exhibiting a moderate correlation, both the utilization of information technology (r=0.65) and the implementation of accrual-based sap (r=0.68) also demonstrate https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc significant relationships with financial report quality. these correlational findings further substantiate the regression analysis results, confirming the substantial contribution of all four independent variables in determining the quality of financial reports. this aligns with recent literature emphasizing the multifaceted determinants of financial reporting quality in public sector entities. table 3. simultaneous significance test table (f test) and determination coefficient (r²) model fcount significance (p-value) coefisien determination (r² adjusted) description multiple regression 42.756 0.000 0.782 model fit and independent variables have simultaneous influence the table shows the results of the f test (simultaneous test) and the coefficient of determination. (r² adjusted). data analysis involved a total of 83 respondents spread across six categories of financial management positions, reflecting a comprehensive financial governance structure in the religious courts throughout central kalimantan. this composition provides validity to the data obtained, where managerial and operational perspectives can be accommodated in the analysis. the presence of kpa respondents as the main persons responsible for internal control provides an overview of the effectiveness of implementing the control environment. the proportion of operational technical respondents allows for an in-depth evaluation of the practical aspects of implementing control systems and understanding accounting standards at the executor level (masanae et al., 2022). the groups of expenditure treasurer and revenue treasurer respondents provide perspectives on the effectiveness of cash control and the utilization of information technology in financial transaction processes. ppk and ppspm provide insights into verification and authorization mechanisms in the expenditure cycle. correlational analysis based on job categories reveals that respondents in managerial positions show a deeper understanding of the conceptual aspects of accrual-based sap, but with variations in its practical implementation. conversely, respondents in operational technical positions show better mastery of the practical application of accounting information systems, but with varying understandings of the accrual concept comprehensively(mulyadi, 2017). these findings indicate a gap between conceptual and practical aspects in the implementation of accrual-based government accounting standards. the distribution of respondents covering all elements in the financial management structure provides representative data to test the research hypotheses. the contribution of data from kpa respondents provides insights into the impact of strategic policies on the quality of financial reports, while financial management staff respondents provide information on technical implementation. the balanced proportion between respondents responsible for revenue and expenditure aspects allows for a comprehensive analysis of the entire financial transaction cycle. the diversity of respondents based on job category strengthens the external validity of the research findings. https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. spss output coefficients multiple linear regression analysis model unstandardized b std. error beta t sig. (constant) 0.456 0.214 — 2.131 0.038 x₁ (spi) 0.327 0.085 0.376 3.847 0.001 x₂ (sdm) 0.251 0.078 0.298 3.218 0.003 x₃ (ti) 0.236 0.091 0.271 2.593 0.014 x₄ (sap) 0.264 0.077 0.312 3.429 0.002 tabel 5. r model summary r r² adjusted r² std. error 0.899 0.808 0.782 0.317 table 6. anova table (signifikansi model) model sum of squares df mean square f sig. regression 42.521 4 10.630 41.812 0.000 residual 10.078 34 0.296 total 52.599 38 the hypothesis tests, conducted through both t-tests and f-tests, confirm the acceptance of all proposed hypotheses in this study. the f-test yielded an f-statistic of 42.63 with a significance level of 0.000 (which is less than 0.05). this indicates that the internal control system, human resource quality, utilization of information technology, and implementation of accrual-based sap collectively have a significant simultaneous effect on the quality of financial reports. furthermore, the t-test results demonstrate that each independent variable individually exerts a significant effect on the quality of financial reports. specifically, the t-statistics were 4.37 for internal control system, 3.92 for human resource quality, 2.84 for utilization of information technology, and 3.25 for implementation of accrual-based sap. all these t-statistics exceed the t-table value of 1.987, with a significance level less than 0.05. these findings strongly imply the necessity of ongoing efforts to enhance human resource competence through continuous education and training, reinforce internal control systems, optimize information technology utilization, and deepen the understanding of accrual-based government accounting standards to ultimately improve the quality of financial reports within the religious courts throughout central kalimantan. this aligns with recent literature emphasizing the multifaceted determinants of financial reporting quality in public sector entities. while the religious courts throughout central kalimantan have implemented accrual-based government accounting standards (sap) in accordance with pp no. 71 of 2010, contributing positively to financial report quality, its regression coefficient of 0.31 indicates a comparatively lower impact than the internal control system (0.42). this finding suggests that despite formal adoption and the complete preparation of financial reports—including the budget realization report, balance sheet, operational report, statement of changes in equity, and notes to financial statements, with revenue and expense recognition on an accrual basis —challenges https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc persist. these challenges include the need for deeper understanding by human resources and continued improvement in it infrastructure support. this is consistent with accrual-based accounting theory, which posits an increase in relevance and reliability, and aligns with previous research supporting the positive influence of accrual-based sap on financial report quality. for instance, a study by puspita et al. (2021) also found a positive influence of the understanding of government accounting standards on financial report quality. this study's findings consistently demonstrate that the internal control system, human resource quality, utilization of information technology, and implementation of accrual-based government accounting standards collectively and individually exert a positive and significant influence on the quality of financial reports of religious courts throughout central kalimantan. the model's strong explanatory power is evidenced by the adjusted r² value of 0.782, which indicates that 78.2% of the variation in financial report quality can be explained by these four independent variables. this suggests that the chosen factors are highly relevant and influential in determining the quality of financial reporting within these institutions, with the remaining 21.8% being attributed to other unexamined factors. internal control system (x1) the internal control system (spi) emerged as the most dominant factor influencing the quality of financial reports, with a regression coefficient (β) of 0.327 and a p-value of 0.001, indicating a highly significant positive relationship (suwanda & dailibas, 2013). the correlation analysis further supports this, showing a strong correlation (r=0.78) between spi and financial report quality. this finding aligns strongly with both agency theory and stewardship theory (jensen & meckling, 1976). setiawan (2024)from an agency perspective, a robust spi serves as a critical mechanism for principals (the public and oversight bodies) to ensure that agents (government officials) manage public funds responsibly and provide accurate accountability. under stewardship theory, a well-functioning spi empowers stewards to effectively manage resources and fulfill their obligations to stakeholders (davis et al., 1997). the analysis revealed that while the control environment, characterized by leadership commitment and a clear organizational structure, is generally good, and control activities like segregation of duties are effective, there is a clear need for improvement in risk assessment and the monitoring component, particularly in following up on evaluation results. this suggests that while controls are in place, proactive identification of financial reporting risks and consistent enforcement of corrective actions are areas requiring more attention. practical implications: to further enhance financial report quality, religious courts should prioritize strengthening their spi by implementing regular evaluations of control effectiveness, increasing internal monitoring and supervision activities, and ensuring timely and thorough followup on all audit findings and recommendations. https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc human resource quality (x2) human resource quality (sdm) demonstrated a significant positive influence on financial report quality, with a regression coefficient (β) of 0.251 and a p-value of 0.005. the correlation coefficient of r=0.72 also indicates a fairly strong relationship. this result is consistent with existing literature that emphasizes the critical role of human capital in producing high-quality financial information. competent and knowledgeable personnel are fundamental to accurately implementing accounting standards and managing financial processes. this finding also reinforces stewardship theory, as skilled human resources are better equipped to act as effective stewards of public resources, leading to more reliable financial reporting. despite the positive influence, the analysis highlighted limitations in the number of employees with accounting or financial educational backgrounds, high employee rotation, and limited frequency of financial management training. while employees generally understand their duties, these limitations can hinder the full realization of their potential contribution to financial report quality. practical implications: religious courts should invest in continuous education and training programs for their financial staff, specifically focusing on government financial management and accrual-based accounting. intensifying mentoring and technical guidance can help bridge knowledge gaps and improve practical application, especially for new employees. implementation of accrual-based government accounting standards (x4) the implementation of accrual-based government accounting standards (sap) showed a significant positive influence, with a regression coefficient (β) of 0.264 and a p-value of 0.003. the moderate correlation of r=0.68 further confirms its contribution. this finding is consistent with the accrual-based accounting theory, which posits that accrual accounting enhances the relevance and reliability of financial reports by recognizing economic events when they occur, rather than just when cash changes hands. the study confirms that religious courts have largely implemented accrual-based sap in accordance with pp no. 71 of 2010, preparing complete financial reports and recognizing revenues and expenses on an accrual basis. however, the discussion in the original text also points to ongoing challenges in the "in-depth understanding by hr" and "it infrastructure support." this suggests that while the formal implementation is in place, the full benefits of accrual-based sap may not be completely realized due to human capacity and technological limitations, which can lead to inconsistencies or delays in reporting. practical implications: to optimize the benefits of accrual-based sap, religious courts need to formulate and implement clear policies that ensure consistent and comprehensive application of these standards. developing more detailed and easily understandable technical guidelines is crucial. furthermore, establishing a special team for periodic monitoring and evaluation of financial report quality will help ensure ongoing compliance and identify areas for improvement. https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc utilization of information technology (x3) the utilization of information technology (ti) also showed a significant positive influence on financial report quality, with a regression coefficient (β) of 0.236 and a p-value of 0.007. however, it recorded the lowest beta coefficient among the independent variables, despite the presence of various financial applications (sakti, siman v2, etc.) and generally adequate computer and internet infrastructure. the correlation with financial report quality was also moderate (r=0.65). (tata, 2014) this seemingly lower impact, despite technology availability, can be attributed to the identified constraints: unstable internet networks in remote areas and persistent technical obstacles even with periodic maintenance. this suggests that the mere presence of technology is not enough; its optimal and uninterrupted utilization is key. when infrastructure is unreliable or technical issues frequently arise, the efficiency and accuracy benefits that it can offer are diminished. this highlights that effective it utilization requires not just software and hardware, but also robust connectivity and consistent technical support. practical implications: religious courts should prioritize updating their it infrastructure to ensure stable and reliable connectivity, especially in remote regions. developing more integrated information systems could streamline processes further. most importantly, providing adequate and responsive technical support is essential to minimize disruptions and maximize the efficiency gained from it. allocating sufficient budget for the development of financial information systems and the improvement of financial human resource capacity related to it is also critical. the findings collectively underscore the need for a holistic approach to improving financial report quality in religious courts. strengthening internal control systems, continuously enhancing human resource competence, optimizing information technology utilization, and ensuring a deep understanding and consistent application of accrual-based government accounting standards are interdependent efforts. increased coordination and communication between work units are also vital to ensure consistency in the implementation of accounting policies and to foster a culture of transparency and accountability. these efforts will not only improve the quality of financial reports but also reinforce public trust and support effective financial governance. conclusion this study concludes that the internal control system, human resource quality, utilization of information technology, and implementation of accrual-based government accounting standards have a positive and significant effect on the quality of financial reports of religious courts throughout central kalimantan. (rahmany & fatimah, 2020) the internal control system is found to be the most dominant factor influencing financial report quality, followed by the implementation of accrual-based government accounting standards, human resource quality, and the utilization of information technology. all variables individually demonstrate a significant influence, and collectively, they significantly impact the quality of financial reports. the model explains a substantial portion of the variation in financial report quality, reinforcing both agency and stewardship theories and highlighting the critical need to strengthen internal control systems, https://www.ilomata.org/index.php/ijtc influence of internal controls, hr quality, it, and accrual accounting on financial report quality in central kalimantan's religious courts. sosilawati, kadir and sarwani 13 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc improve human resource quality, optimize it utilization, and enhance the implementation of accrual-based government accounting standards to improve financial report quality. these results strengthen the agency theory and stewardship theory, and provide empirical evidence that to improve the quality of financial reports, institutions need to focus attention on strengthening internal control systems, improving human resource quality, optimizing the utilization of information technology, and perfecting the implementation of accrual-based government accounting standards (rahayu & kanita, 2023). based on these conclusions, several practical suggestions are proposed for the religious courts throughout central kalimantan to improve the quality of financial reports. first, it is necessary to strengthen the internal control system with regular evaluations, increased internal monitoring and supervision, and timely follow-up on audit findings (sari, 2013). second, improving human resource quality is needed through continuous education and training programs, especially related to financial management and government accounting for financial staff. mentoring and technical guidance need to be intensified (sedarmayanti, 2019). third, optimizing the utilization of information technology through updating it infrastructure, developing integrated information systems, and providing adequate technical support. suggestions for institutional policy development also need to be considered. first, the religious courts throughout central kalimantan need to formulate and implement policies that support the consistent and comprehensive implementation of accrual-based government accounting standards (rohmah et al., 2020). second, more detailed and easily understandable technical guidelines need to be developed. third, the formation of a special team to periodically monitor and evaluate the quality of financial reports. fourth, increased coordination and communication between work units to ensure consistency in the implementation of accounting policies. fifth, adequate budget allocation for the development of financial information systems and the improvement of financial human resource capacity. references akbar, r. 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(2021). pengaruh kompetensi sumber daya manusia, penerapan akuntansi berbasis akrual, sistem pengendalian internal pemerintah dan pemanfaatan teknologi informasi terhadap kualitas laporan keuangan. jurnal riset akuntansi dan auditing “goodwill,” 12(2), 264–275. wardani, d. k., ayem, s., & ningrum, t. i. (2018). pengaruh kualitas sumber daya manusia , pemanfaatan teknologi informasi dan penerapan standar akuntansi peme rintahan berbasis akrual te rhadap kualitas laporan keuangan pengadilan agama batam the influence of quality of human resources, utilization of. prosiding seminar nasional multimedia & artificial intelligence, 84, 48–66. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 867 884 867 | ilomata international journal of tax & accounting https://www. ilomata. org/index.php/ijtc transformation of dgt tax intelligence in coretax uzlifatul jannah1, ahmad rifai2 12kementrian keuangan, indonesia correspondent: anne. uzlifatul@gmail. com1 received : may 13, 2024 accepted : july 20, 2024 published : july 31, 2024 citation: jannah, u., & rifai, a. (2024). transformation of dgt tax intelligence in coretax. ilomata international journal of tax and accounting, 5(3), 867 884. https://doi. org/10. 61194/ijtc. v5i3. 1644 abstract: through tax reform volume iii, the directorate general of taxes (dgt) introduced the tax administration core system (siap) or coretax which aims to revolutionize the tax administration process to increase tax revenue and taxpayer compliance. this study aims to explore changes in the tax intelligence business process, one of the business processes in coretax. this study is an exploratory study conducted by digging up in-depth information from 14 respondents who are business process owners, users of intelligence reports, and strategic leaders to be then compared with its implementation at the australian taxation office. the study results indicate that the coretax application has excellent potential to produce actionable intelligence, namely the results of intelligence activities that are relevant, contextual, and can be used immediately. for this reason, intensive training is needed regarding the application and additional features to increase the effectiveness of the application, data integration to accelerate the exploration of taxpayer potential and ensure the relevance of the information presented, as well as continuous updates to the coretax application to face the dynamics of the global economy and technology. keywords: business intelligence, compliance risk management, coretax, tax intelligence. this is an open access article under the cc-by 4. 0 license introduction the success of a country's development is closely related to national income, which will be achieved if the country has stable and solid financial resources (enache, 2020). if the government is increasingly aggressive in implementing development programs, it will require financial resources, which will have consequences for increasing state revenues (sentanu, 2016). the taxation sector is one of the instruments of state revenue, including in indonesia, because taxes have a significant role in national development (agnes & et al., 2021). taxes are essential for generating public funds that enable the financing of public goods and serve as a means of redistributing wealth to reduce economic inequality (claus i, 2014). tax contributions to indonesia's revenues reach more than 70%, while loans mainly cover the remainder. (kemenkeu, 2023). tax targets increase every year in line with mailto:anne.uzlifatul@gmail.com1 https://doi.org/10.61194/ijtc.v5i3.1644 transformation of dgt tax intelligence in coretax jannah and rifai 868 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc growing expenditures. to ensure compliance, tax authorities must implement lenient laws and enforce system measures based on tax risks (ovcharova, 2019). since taxes are the primary source of state finances, effective and efficient tax collection is one of the government's main concerns (arbel y, 2019). the directorate general of taxes (dgt) is an echelon i unit in the ministry of finance of the republic of indonesia (kemenkeu), which is entrusted with formulating and implementing policies in the field of taxation (kemenkeu, 2021). this shows that state revenue from the tax sector is the responsibility of the directorate general of taxes. for three consecutive years, namely 2021 to 2023, the directorate general of taxes has succeeded in achieving, and even exceeding, the tax revenue target set by the government. in 2023, indonesia's tax revenue reached idr1, 869. 23 trillion, equivalent to 108. 8 percent of the 2023 state budget (apbn) target. this realization experienced an 8. 9 percent growth compared to the realization in 2022, which was idr1, 716. 77 trillion. (kemenkeu, 2023). this achievement cannot be separated from the level of taxpayer compliance. in the last five years, namely 2019 to 2023, taxpayer compliance in paying taxes has increased. factors that influence taxpayer behavior in supporting the level of tax payment compliance consist of five factors, namely 1) prevention efforts, for example the intensity of tax audits, the risk of being detected, and the level of sanctions imposed; 2) applicable norms or values; 3) opportunities, both to comply (related to low compliance costs, or simple and non-complex rules) or not to comply (related to opportunities to evade taxes); 4) fairness related to results or procedures, as well as trust in both the government (tax authority) and other taxpayers; and 5) economic factors, which include all factors related to general economic conditions, business or industry conditions, and the amount of tax to be paid (darussalam, septriadi, kristiaji, & vissaro, 2019). in its development, organizational changes become necessary where adapting is the key to surviving and developing amidst the demands of the times. the need for change and adaptation is increasingly urgent in the dynamic world of taxation. tax digitalization is one way to answer this challenge. tax digitalization involves integrating digital technology to improve various aspects of the tax system, which aims to increase efficiency, accuracy, transparency, and ease in tax-related activities (azuaje, 2023). this digitalization brings many benefits, including reduced administrative burden, minimized tax evasion, increased revenue collection efficiency, and higher transparency. successful implementation requires careful planning, strict cybersecurity controls (gao, lu, & yu, 2019), infrastructure development (meiryani, oktavianie, & teresa, 2022), and effective stakeholder communication (ullah, sepasgozar, thaheem, & al-turjman, 2021). tax authorities in developed countries have widely adopted tax digitalization, but tax authorities in developing countries face challenges. implementing digitalization is critical to the sustainability and resilience of tax authorities in the digital economy. this is more likely to happen when tax authorities experience performance benefits, easy-to-use systems, social support, and supportive infrastructure (zakaria & et.al, 2024). implementing digital transformation significantly reduces tax evasion and increases corporate productivity through tax evasion suppression. digital transformation reduces https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 869 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc corporate tax evasion through increasing innovation and efficiency in resource allocation (technology level), improving the quality of internal control (organizational level), and reducing industry competition (environmental level). the impact of digital transformation in reducing tax evasion is significantly more significant for growing and low-financed companies. in addition, lower business risk is essential to maximize the effectiveness of digital transformation and reduce corporate tax evasion. this is important for governments seeking to improve tax administration, guide market and regional development, and enhance the impact of corporate digital transformation in reducing tax evasion (zhang & she, 2024). dgt has made various efforts in tax reform to improve transparency, efficiency, and fairness of the tax system in indonesia. tax reforms rolled out by dgt include aspects of tax policy, administration, and supervision. the main goal is to create a system that can address digitalization and globalization challenges. (djp, 2023). as part of this reform, dgt has carried out three tax reforms. where in the third volume of reform, dgt introduced the core tax administration system (siap) or coretax administration system (ctas/coretax) which is one of the priority activities that is an indicator of the development target in the national medium-term development plan (rpjmn) 2020-2024 (kementerian keuangan, 2020). this project will bring fundamental changes to the applications and business processes that will make dgt's tax administration system more modern in accordance with best practice tax administration in developed countries. ultimately, coretax is expected to benefit various parties, namely taxpayers, tax authorities, dgt, and other stakeholders. ultimately, this reform is expected to help tax authorities enforce the law, making it easier for taxpayers to fulfill their tax obligations, increasing fairness for all taxpayers, and reducing tax compliance costs. (saragih & et.al., 2023). with the presence of coretax, at least 21 business processes have changed, one of which is the tax intelligence business process that utilizes compliance risk management (crm) and business intelligence (bi). through crm and bi, data collection, processing, and analysis are faster, more accurate, and more structured (djp, 2022). coretax will integrate all business processes with the implementation of crm and bi as the primary key in the input and output of tax data. this system is expected to benefit the directorate general of taxes significantly, especially in increasing the effectiveness of the tax intelligence process and taxpayer supervision. with comprehensive data and advanced analytical capabilities, the coretax application allows the directorate general of taxes to identify non-compliance risks and optimize tax supervision strategies. in the context of tax intelligence business processes, the dgt has issued regulation of the director general of taxes number per-15/pj/2019, which regulates the stages and functions of tax intelligence to support core business processes, as well as expanding its application to all other business processes at the dgt. however, in its implementation, the current (as is) tax intelligence business process still faces various challenges, especially in terms of speed and accuracy of data analysis. the main challenge lies in the need to improve the effectiveness and accuracy of tax intelligence, considering that most as-is business processes are still carried out manually. https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 870 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc tax intelligence is a series of activities in the intelligence cycle that includes planning, collecting, processing, and presenting data or information to produce intelligence products that can be used for tax purposes. the main objective is to collect accurate and reliable data or information to support tax supervision and compliance. data or information obtained from tax intelligence activities and observations will become part of the directorate general of taxes' tax database (djp, 2019). the resulting database can be obtained from all types of intelligence activities, namely intelligence operations, intelligence analysis in the context of developing and analyzing information, data, reports, and complaints, intelligence analysis in the context of exploring potential, security, mobilization, strategic intelligence analysis and other activities for tax purposes in the context of carrying out tasks and functions. (kusuma & maradona, 2020) most of the current tax intelligence business processes (as is) are still carried out manually so several conditions are not optimal, such as redundancy of activities due to manual and non-standard formats, dissemination of the results of tax intelligence activities manually and not yet integrated with core business processes at dgt, determination of tax intelligence activity targets that do not yet use a riskbased approach, and monitoring and evaluation processes that are less effective because document storage is not yet integrated with the system (djp, 2019). with the implementation of coretax, the tax intelligence business process (to be) will be integrated with the dgt database to support preparing planning, implementing tax intelligence activities, and implementing digital monitoring and evaluation. the results of tax intelligence activities will enrich dgt information utilized by management and/or related business processes (djp, 2022). in intelligence theory, there is an intelligence process consisting of stages of data collection, analysis, dissemination, and application of analysis results for decision-making and feedback (lowenthal, 2022). the concept of actionable intelligence emphasizes that intelligence analysis results must be relevant, timely, and can be used immediately to support strategic decisions (carter, 2014). in taxation, the ability to produce analytical results from intelligence information that can be used immediately will significantly assist the directorate general of taxes in increasing taxpayer compliance and state revenues. the australian taxation office (ato) has faced constant challenges in staying ahead of the curve to efficiently meet rising service expectations and sustain a culture of voluntary compliance, especially as tax avoidance, evasion, and related crimes have become borderless and as prevalent online as they are on the streets. the ato initially identified the benefits of technology in improving its internal efficiency and automated manual functions. the ato also developed portals to create a single point of access for tax agents and businesses to transact and interact online. one of the critical milestones was implementing a centralized system for managing and leveraging data, led by a chief knowledge officer. this system supports the delivery of new digital services, notably through the rapid growth of third-party data flows for pre-filling purposes. it also provides in-depth analysis of tax risks and enables more customized compliance strategies (granger & sawyer, 2022). with compliance model management based on pyramid regulation, where persuasion and prevention of tax violations are prioritized at the base of the pyramid, and strict law enforcement is at the top, the ato can move https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 871 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc responsively to optimize tax revenue by targeting the right compliance drivers at the right moment (braithwaite & braithwaite, 2000). based on the background explanation, the author is interested in exploring the transformation of tax intelligence business processes at dgt in coretax. in addition, the author compares the tax digitalization business process with the implementation at ato to obtain a comprehensive conclusion regarding the implementation of coretax. literature review crm and bi in taxation big data is a phenomenon that emerged in the era of the industrial revolution 4. 0. according to research by the international data corporation (idc), the global collective data volume is predicted to grow at an annual growth rate of 61%, driven by the increasing number of computer and mobile devices connected through iot (internet of things) and ios (internet of services). big data has several key characteristics: volume (size), value (utility), variety (diversity), velocity (speed), and veracity (accuracy). generally, large-sized data with low utility value necessitates an analytical process, commonly called big data analytics (bda) (djp, 2022). the development of data analytics at the directorate general of taxes (djp) formally began in 2014 with the initial development of compliance risk management (crm). crm is a risk-based compliance enhancement approach that provides differentiated treatment for taxpayers based on compliance risk levels. in 2019, djp established the directorate of tax data and information (dip) through minister of finance regulation number pmk-87/pmk-01/2019, which replaced minister of finance regulation number 217/pmk. 01/2018 on the organization and governance of the ministry of finance. this directorate is responsible for developing big data analytics (bda) and business intelligence (bi), which involve processes to transform data into valuable information and insights for organizational decision-making. crm and bi are key elements of the coretax application, enabling data collection, processing, and analysis to produce strategic insights (djp, 2022). https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 872 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc figure 1: strategic initiatives for big data analytics at djp source: crm and bi book, djp (2022) tax intelligence the regulation of the director general of taxes number per-15/pj/2019 on the implementation of tax intelligence and surveillance activities defines tax intelligence activities as a series of activities within the intelligence cycle, encompassing the planning, collection, processing, and presentation of data or information to produce intelligence products that can be utilized for taxation purposes. its primary goal is to gather accurate and reliable data or information to support tax supervision and compliance. this regulation also stipulates that data or information obtained from tax intelligence and surveillance activities will become part of the tax database of the directorate general of taxes (djp). the concept of tax intelligence as regulated in this provision aligns with the theory of the intelligence process, which involves systematic steps in intelligence activities, starting from identifying information needs to delivering analytical products to policymakers (lowenthal, 2022). the stages of this intelligence process include seven key steps closely aligned with implementing the tax intelligence business process in the era of djp’s coretax application. the first stage, identifying requirements, involves determining policy areas that require intelligence, such as detecting potential tax non-compliance or high-risk economic sectors. in the context of coretax, these requirements are determined through directives issued by leadership. the second stage, collection, focuses on gathering data through various intelligence techniques, including collecting internal data via the coretax application, designed as an automated data integration tool. coretax supports this stage with its ability to access and efficiently integrate large volumes of data. the third stage, processing and exploitation, refers to converting raw data into structured information ready for analysis. this stage remains one of the primary challenges in the current “as-is” tax intelligence https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 873 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc business process, as the volume of collected data often exceeds processing capacity, and much of the work is conducted manually, reducing efficiency and accuracy (lowenthal, 2022). the fourth stage, analysis and production, involves interpreting information to produce reports relevant to policymakers’ needs. in coretax, these reports take the form of tax intelligence reports that are distributed confidentially to intended dissemination recipients. the fifth stage, dissemination, refers to delivering the results of tax intelligence analysis to relevant business process owners within djp’s core business processes, such as supervision, auditing, collection, and/or enforcement teams, as well as other business processes. the sixth stage, consumption, addresses how policymakers or relevant business process owners utilize the recommendations in the intelligence analysis reports to support strategic decision-making, such as determining treatment for taxpayers based on their risk levels. the seventh and final stage, feedback, involves a dialogue between tax intelligence business process owners, relevant djp business process owners, and strategic leaders as policymakers to evaluate whether the intelligence reports meet their needs and adjust business processes if necessary (lowenthal, 2022). figure 2: the intelligence process: a central intelligence agency view source: intelligence from secrets to policy, lowenthal (2022) this process is cyclical, where each stage is interconnected and contributes to improving the quality of intelligence activity reports to support decision-making across all business processes within the directorate general of taxes (djp). in the context of digital tax reform through the coretax application, optimizing the “to-be” tax intelligence business process is essential to presenting critical data and information that cannot be obtained through formal (non-intelligence) processes. this optimization recommends detecting and managing tax non-compliance risks (djp, 2022). intelligence for strategic actions (actionable intelligence) the four-step approach to actionable intelligence is known as the swat framework (carter, 2014). the purpose of this framework is to simplify the complexities of big data and produce relevant, contextual, and meaningful information to support strategic decision-making. the first step, s (ask strategic business questions), aims to identify the key questions that are the focus of the business. the second step, w (wrangle data), involves managing data from various sources efficiently and cost-effectively. next, a (answer with visualization) focuses on presenting data through https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 874 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc compelling visualizations, making analysis easier and highlighting priority issues. finally, t (take action) encourages taking strategic steps based on the available information while evaluating process changes to enhance fact-based decision-making (carter, 2014). in the context of djp's coretax application, the swat framework can be adapted to strengthen the “to-be” tax intelligence business process, particularly in enhancing the effectiveness of data and information dissemination for djp's core business processes. the s (ask strategic business questions) step is utilized to identify strategic questions, such as high-risk economic sectors or specific taxpayer segments requiring intensive monitoring. the w (wrangle data) step involves managing large datasets from various sources. next, a (answer with visualization) is relevant for presenting data, such as taxpayer risk dashboards that help employees understand patterns of taxpayer non-compliance. the final step, t (take action), involves recommendations for stakeholders to take proactive measures based on data and intelligence analysis results, such as providing early detection or determining priority treatments for taxpayers. application reference in the australian taxation office (ato) the australian taxation office (ato) implements the compliance model with a pyramid regulation approach, where persuasion is prioritized as the initial step at the pyramid's base, followed by escalation toward law enforcement with stricter penalties if the initial steps fail. to support the implementation of this model, the ato employs a strategic intelligence network, a strategy designed to identify and target key actors, such as tax consultants or beneficial owners who design tax avoidance schemes (braithwaite & braithwaite, 2000). this approach is reinforced by risk leveraging, a creative, innovative, and adaptive strategy for detecting and addressing non-compliance. risk leveraging emphasizes the importance of ato’s innovation in risk management to prevent taxpayers from predicting ato's patterns in administering treatments to taxpayers. implementing this approach creates uncertainty for tax evaders, making them more likely to comply with regulations (braithwaite & braithwaite, 2000). braithwaite & braithwaite (2000) also highlight that evidence from tax administration demonstrates that compliance is influenced by various parties, including industry associations, families, advisors, tax managers, tax agents, and international organizations such as the oecd. one of the main focuses in the ato corporate plan 2024-2025 is the digital strategy framework, which supports its vision and goals toward tax digitalization. ato’s digitalization efforts go beyond transforming manual processes into digital ones; they involve implementing automated intelligence to transform systems more innovatively and efficiently. this strategy creates an interconnected ecosystem, protects data and systems, and simplifies the taxation process (ato, 2023). in positioning this digital strategy, the ato places data, analytics, and insights at the core of its service culture, early intervention activities, and its goal of preventing non-compliance early. by leveraging data and analytics, the ato makes it easier for taxpayers to comply while making potential nonhttps://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 875 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc compliance increasingly difficult (ato, 2024). regarding accelerated decision-making, the ato utilizes artificial intelligence, commonly called machine learning, which enables the analysis of large volumes of data quickly and efficiently. machine learning algorithms can complete processes that might take months manually in just a matter of days, saving both time and resources (ato, 2024). as part of this strategy, the ato developed the data matching program, designed to enhance public trust in the integrity of the taxation system. the specific data matching program allows the ato to collect data from various sources without requiring specific regulations. this program protects honest taxpayers by identifying others who may not report all their income, businesses operating outside the tax system, or taxpayers conducting business activities without filing tax returns. the ato can obtain specific data through this data matching program includes information such as credit and debit card transactions, specialized payment systems, online sales, ride-sourcing services, vehicle ownership, and cryptocurrency transactions (ato, 2023). through this comprehensive digital strategy, the ato not only improves the efficiency of its services but also strengthens public trust in the tax system by leveraging technology to detect and prevent non-compliance (ato, 2024). method to answer the problem formulation, the author uses exploratory research to explore and understand the meaning individuals or groups give to a social problem. this approach also aims to gather information and create new knowledge in areas not widely researched, focusing on developing basic ideas through open-ended questions and observation (creswell, 2014). this approach enables the grouping of perceptions, experiences, and views regarding the effectiveness of the “as-is” to “to-be” tax intelligence business processes, focusing on opinions related to using tax intelligence report data in supporting both core and other business processes within djp. the respondents in this study were 14 employees who were executors of the tax intelligence business process and users of the tax intelligence report. for simple experimental research with strict control, the sample size can be between ten and twenty (roscoe, 1975). this study measures the effectiveness and challenges of the “as-is” and “to-be” tax intelligence business processes through interviews with respondents holding various roles, tasks, and functions within djp. respondents are classified based on their roles in the tax intelligence business process at djp, including technical executors responsible for conducting tax intelligence business process activities (p1, p2, p3); relevant business process owners who use tax intelligence reports for oversight, enforcement, and collection functions (a1, a2, a3, a4, pp1, pp2, f1, j1); and strategic leaders who determine policies and governance (ks1, ks2, kb). the explanation from the respondents of this study is as shown in table 1. table 1. distribution of respondents by position respondent group respondent code position number business process executors p1, p2, p3 executors of tax intelligence business processes 3 https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 876 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc relevant business process owners supervision a1, a2, a3, a4 performing supervision functions for taxpayers 4 law enforcement pp1, pp2 performing law enforcement functions 2 auditing f1 performing auditing functions for the taxpayer 1 collection j1 performing collection functions for taxpayers 1 strategic leaders ks1, ks2, kb strategic leaders, including direct supervisors of executors 3 total 14 source: data processed (2024) in the first stage, the predetermined respondents were asked questions related to tax intelligence's "asis" and "to-be" business processes. the research questions are presented in table 2. table 2. list of research questions based on respondent group no. questions type of answer business process executors and strategic leaders relevant business process owners 1. what is your position or role within the directorate general of taxes (djp)? what is your position or role within the directorate general of taxes (djp)? short answer text 2. what is your understanding of the changes in the tax intelligence business process “to be” in the era of djp coretax? what is your understanding of the data and information disseminated by the tax intelligence unit? long answer text 3. do you understand the main objectives and benefits of the coretax application in the tax intelligence business process? if yes, please state your understanding. does the tax intelligence unit's data and information assist you in your tax revenue work? please describe your experience in using it. long answer text 4. do you anticipate any issues or challenges regarding implementing the new business process following coretax? please explain. what are the main issues you face when using data and information analyzed by tax intelligence officers? long answer text 5. how 'powerful' or effective is the to-be tax intelligence business process with coretax compared to the as-is business process? what is your understanding of the djp coretax application, particularly in facilitating followup actions from tax intelligence activities? long answer text 6. what is the impact of this to-be tax intelligence business process, particularly on improving tax in your opinion, how should the intelligence business process operate in the coretax era? is it long answer text https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 877 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc revenue and taxpayer compliance? please explain your opinion. different from the current process? 7. since coretax has not been fully implemented, what are your expectations regarding the further development of the coretax application to support the tax intelligence business process? what is your opinion on the impact of changes in the to-be tax intelligence business process with the coretax application on your work related to the tax revenue function? long answer text 8. do you have any other suggestions or recommendations for the further development of coretax to support tax intelligence tasks? what are your expectations for the development of coretax to support the efficiency and effectiveness of work related to the results and distribution of tax intelligence data and information? long answer text 9. do you have any suggestions or input regarding further developing the djp coretax application in the context of the tax intelligence business process? long answer text next, the results of filling out the questionnaire are then compiled and compared with the theoretical framework outlined, which includes (1) the basic concept of risk management in tax intelligence, highlighting the importance of integrating compliance risk management (crm) and business intelligence ( bi) to manage risks and support data-driven decision-making (djp, 2022); (2) the intelligence process in the context of taxation, which describes systematic steps from information collection to the presentation of analytical products that are relevant for supporting strategic decisions (lowenthal, 2022); and (3) intelligence for strategic actions, which adapts the swat framework (strategic business questions, wrangle data, answer with visualization, take action) to produce actionable intelligence to strengthen tax oversight (carter, 2014). as a comparison, the thematic analysis results are linked to implementation examples at the australian taxation office (ato). the ato has utilized technologies such as machine learning and the data matching program (ato, 2023, 2024), as well as strategies such as risk leveraging and the strategic intelligence network within the compliance model framework, which have proven effective in improving compliance, supporting tax administration services, and enhancing the overall integrity of the taxation system (braithwaite & braithwaite, 2000). result and discussion data and information management respondents p2, a2, pp1, and f1 stated that in the tax intelligence business process, the data collection and management process are conducted manually and dispersed across various applications, https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 878 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc slowing down intelligence data processing. furthermore, respondents p2, ks1, and a2 stated that the coretax application is expected to streamline data management through an integrated system and accelerate the processes of data collection, analysis, and distribution. from the basic concept of risk management, the compliance risk management (crm) approach aims to identify and mitigate risks based on priority. however, challenges in the as-is business process indicate that the current manual system slows down the risk analysis process and creates administrative risks, which ultimately reduces the effectiveness of crm. from the perspective of the intelligence process, the processing and exploitation stages are highly dependent on reliable technology to process data (lowenthal, 2022). furthermore, the link to intelligence theory for strategic action is also evident. in the swat framework, the wrangle data step becomes very relevant, especially since respondents emphasized the importance of data integration in the coretax application as an effort to replace manual processes that are often slow and risk producing untimely intelligence information. thus, this analysis emphasizes the need for intensive training, the development of more supportive features, and better data integration to ensure that the to-be business process can run optimally. dissemination, completeness, and accuracy of intelligence data intelligence information is often delivered manually through official memos or physical documents, which take a long time to distribute to the relevant units (a2, f1, j1). respondent j1 highlighted that the main obstacle in the collection process lies in the slow access to the required data and information, such as freezing taxpayer assets in financial institutions. respondent f1 noted that some intelligence data only serves as a trigger without sufficient details to be followed up immediately. he gave an example of a case where the data received turned out to be irrelevant due to misidentification, highlighting the importance of the validity and precision of the data used in the examination process. from an intelligence process perspective, the dissemination stage is a significant concern. the distribution of intelligence data must be fast, accurate, and relevant to support further action (lowenthal, 2022). however, complaints about slow or indicative data (pp1, j1, f1) indicate weaknesses in the as-is business process system that must be fixed through data integration and automation in the coretax application. in the analysis and production stage, challenges expressed by pp2 and f1 indicate that intelligence data often requires additional verification or adjustment for field relevance. this shows the importance of more sophisticated analytical features in the coretax application in supporting to-be business processes. the take action step in the swat framework is particularly relevant to actionable intelligence. respondents such as j1 emphasized that intelligence should support immediate action, such as asset freezes or active collections, which are currently hampered by manual systems in as-is business processes. furthermore, f1 indicated that low data validity could hinder strategic action, highlighting the importance of the wrangle data step to ensure that the data presented is free from misidentification or duplication. https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 879 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc intelligence process automation manual processes in stages such as data analysis and documentation cause inefficiencies and increase the risk of administrative errors (p1, p3, pp1). (ksi, ks2, kb) provide an optimistic view of the potential of the coretax application in supporting the transformation of tax intelligence business processes. respondent ks1 highlighted that the coretax application presents more prudent and structured governance, creating an integrated workflow from the beginning to the end. this is expected to improve supervision and validity of the process in tax intelligence. on the other hand, ks2 emphasized the importance of automation in the coretax application to support better process efficiency, stating that this system could simplify workflows and accelerate the dissemination of intelligence information to target work units. respondent kb underlined the importance of internal data integration as a top priority, emphasizing that “all internal data needed is expected to be integrated into the coretax application” so that data-based decision-making can be done more comprehensively. in addition, the lack of an integrated system with external agencies (such as property or banking data) almost completes the completeness of information needed for tax intelligence (pp1, j1). from a risk management perspective, data integration is important in compliance risk management (crm). as explained in this theoretical framework, risk-based supervision requires timely and accurate information to prioritize taxpayers with a high risk of non-compliance. strategic leaders consistently emphasize that the coretax application can meet this need if data integration includes internal information, external information from third parties, and data and information from tax intelligence activities. this is relevant to the need to improve the reliability and accuracy of data used in decision-making. the ask strategic business questions step in the swat framework is relevant to intelligence for strategic action. leaders emphasize the importance of effective task delegation based on personnel capacity and collecting relevant data to support risk-based supervision strategies. the coretax application can be a tool to support this to-be business process by providing appropriate and contextual information, allowing leaders to identify strategic questions that need to be answered through intelligence data analysis. in addition, implementing the coretax application is also closely related to the concept of pyramid regulation, which is used to improve taxpayer compliance. in this approach, valid and accurate data is essential in supporting persuasion before strict sanctions are applied to non-compliant taxpayers. kb respondents, for example, emphasized that the coretax application can help create a credible data-based supervisory environment, support the efficiency of tax potential extraction, and increase trust between tax authorities and taxpayers. overall, this group highlighted that implementing the coretax application has the potential to transform the tax intelligence business process into a more integrated, efficient, and strategic one. however, this success is highly dependent on developing advanced features in the coretax application, such as data integration with third parties, automation, and presentation of relevant data to support more adaptive taxpayer risk management strategies. https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 880 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc understanding and competence of executors executors of tax intelligence business processes face difficulties in understanding and adapting to changes in business processes, including new technologies such as coretax (p1, p3, a1). therefore, intensive training and practical guidance are expected to enhance executors' competence, enabling them to better handle digital transformation (p2, kb). to improve the skills and digital competence of employees in the tax authority, it is necessary to develop training programs so that services to stakeholders can be carried out efficiently, accurately, and proactively. (zakaria & et.al, 2024). a primary focus throughout the report is the need for the mexican public sector ‘to deploy strategies to reskill, upskill and acquire new talent to deliver on its digital ambitions’ (oecd, 2020). the analysis and recommendations support the following: 1. comprehensive training at scale across the scope of digital transformation, using digital platforms to support learning. 2. mapping the skills gaps within the public sector to identify those skills and capabilities it can build internally and those it needs to acquire, both specialist technical skills and multi-disciplinary skills to lead cross-organizational digital transformation and improve public sector performance. 3. attract and retain the right talent by ensuring hiring processes, human resource management, compensation, and recognition support digital transformation and public service leadership. 4. to ensure that highly skilled activities are recognised and performance is delivered, a clear definition of roles, responsibilities, and accountabilities equivalent to those of the private sector is essential. relevance of the coretax application to the ato taxation system the results of the analysis above indicate that the coretax application system of djp shares many similarities with the system implemented by the ato, providing a strong foundation to support djp's digital tax transformation. several features implemented in the coretax application, such as more integrated data management and the application of risk analytics, reflect approaches that the ato has successfully implemented through its compliance model and overall digital strategy. respondents acknowledged that the “to-be” tax intelligence business process designed by djp with the coretax application will bring significant improvements compared to the “as-is” tax intelligence business process, which remains fragmented and manual. expectations for real-time data distribution, automated risk analysis, and cross-agency data integration demonstrate the coretax application’s great potential to drive efficiency and accuracy. implementing the coretax application, which automates analysis and supports the electronic distribution of intelligence data, will accelerate responses in oversight, audits, data accuracy for collection activities, and precise execution in tax law enforcement. this aligns with the ato’s use of artificial intelligence, such as machine learning, to identify high-risk taxpayers more effectively, ultimately facilitating decision-making in taxpayer management. however, despite the coretax application's great potential, some areas can still be further developed to maximize https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 881 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc its efficiency and ensure that the system achieves optimal results, as demonstrated by the ato, which has implemented data matching with third parties without needing specific regulations to govern it. it can, therefore, be said that the implementation of the coretax application is on the right track and shares similarities with the strategies employed by the ato. specifically, the “to-be” tax intelligence business process will undergo significant changes, including faster data analysis and the distribution of intelligence reports because business process digitalization is becoming more potent in producing high-quality data and information through data integration in the coretax application. ultimately, tax intelligence activities will be able to provide more significant impact and benefits for supervision, audits, and even tax law enforcement processes. conclusion this study demonstrates that implementing the coretax application at the directorate general of taxes (dgt) holds significant potential to transform the tax intelligence business process. the respondent groups are optimistic about the coretax application's ability to simplify business processes, enhance efficiency, integrate data, and improve the effectiveness of taxpayer treatments. however, challenges remain as the coretax application is about to be implemented, such as respondents' limited understanding of the application, emphasizing the importance of intensive training. the relevant business process owners, particularly users of tax intelligence reports in the supervision function, expressed appreciation for the analysis reports and tax intelligence information. however, they also highlighted challenges, such as additional analysis and complex process adjustments, before the data can be effectively utilized. this issue reflects the need to improve the quality and precision of the presented data. business process owners in tax law enforcement also emphasized the importance of intelligence data as a key foundation for investigative and tax collection processes. however, challenges remain in the quality and timeliness of data dissemination. it is, therefore, essential to ensure that the coretax application can provide comprehensive analysis, real-time data dissemination, and readily usable data by relevant business process owners. the respondent group of strategic leaders offered a more optimistic perspective on transforming the to-be tax intelligence business process within the coretax application. strategic leaders appreciate the system’s potential to support more structured governance of tax intelligence activities, better workload monitoring for tax intelligence officers, and improved database creation. however, they also stressed the importance of continuous technological updates to keep pace with technological advancements and global dynamics. based on the analysis and discussion, the following are several strategic steps to support the successful implementation of the “to-be” tax intelligence business process through the coretax application: 1. strengthening training and digital literacy: dgt should conduct intensive and continuous training, such as regular in-house training sessions and video-based guides, to enhance the understanding of https://www.ilomata.org/index.php/ijtc transformation of dgt tax intelligence in coretax jannah and rifai 882 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc “to-be” tax intelligence business process executors. this should also include simulations of the coretax application's use across various case scenarios. 2. integration of third-party data: dgt must establish partnerships with other institutions to ensure that relevant external data can be accessed in real-time. 3. development of coretax application features: the coretax application should be enhanced to include features such as automated notifications, ai-based risk analysis, and visualization reports that are accessible based on the roles and responsibilities of each business process within djp. 4. continuous evaluation: djp should regularly evaluate the implementation of the coretax application to identify challenges and refine the system based on operational needs. this study attempts to explore respondents' opinions, but the number of respondents studied is still limited. to complement this research, future studies could measure the impact of changes in tax intelligence business processes through the coretax application on tax revenue and taxpayer compliance. comparative research with other countries can be continuously updated to provide deeper insights into best practices in digitalizing tax intelligence activities. with continuous development, the coretax application is expected to become the primary foundation for transforming all business processes at djp to increase tax revenue and encourage taxpayer compliance. reference agnes, & et. al. 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(2024). digital transformation and corporate tax avoidance: an analysis based on multiple perspectives and mechanisms. plos one, 19(9), 1-30. doi: https://doi. org/10. 1371/journal. pone. 0310241 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 844 855 844 | ilomata international journal of tax & accounting https://www. ilomata. org/index. php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria adedeji daniel gbadebo1 1walter sisulu university, south africa correspondent: gbadebo. adedejidaniel@gmail. com1 received : may 1, 2024 accepted : july 10, 2024 published : july 31, 2024 citation: gbadebo, a. d. (2024). working capital management and financial performance: evidence from deposit money banks in nigeria. ilomata international journal of tax and accounting, 5(3), 844 855. https://doi.org/10.61194/ijtc.v5i3.1663 abstract: clear and well-defined policies regarding working capital management are imperative for organizations. the efficient management of working capital not only enhances a bank's financial performance but also fosters customer confidence, facilitates the payment of shortterm debts, and contributes to sectoral growth and national development the paper examines the impact of working capital management on the financial performance of listed deposit money banks in nigeria. to establish the aim, the paper applies the panel generalized method of moments on published data of deposit money banks in nigeria from 2012 to 2022. the study uses variables such as working capital, gross operating profit, and cash conversion cycle, as components of working capital management and return on assets to represent financial performance. the outcome shows a positive and significant relationship between effective working capital management and financial performance. the gross operating profit was found to have a positive and significant impact on the financial performance of the banks. the paper identifies a negative but significant relationship between the cash conversion cycle and financial performance. lastly, the macroeconomic factors, such as inflation rates, and interest rates, were found to have a significant impact on the financial performance of the banks. the study highlights the importance of effective working capital management, and strategic responsiveness to macroeconomic conditions for the financial success of listed deposit money banks in nigeria. the paper offers, amongst others, that there should be regular assessments of financial performance and internal processes are essential to identify areas of improvement and ensure adherence to best practices in working capital management. keywords: working capital, gross operating profit, cash conversion cycle, macroeconomic factors, return on assets. this is an open-access article under the cc-by 4. 0 license https://www.ilomata.org/index.php/ijtc mailto:gbadebo.adedejidaniel@gmail.com1 https://doi.org/10.61194/ijtc.v5i3.1663 working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 845 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc introduction clear and well-defined policies regarding working capital management are imperative for organizations. working capital, defined as the variance between current assets and liabilities, serves as a measure of a financial institution's health, meeting short-term financial obligations and ensuring operational liquidity daily (oloye & osuma, 2015). the efficient management of working capital not only enhances a bank's financial performance but also fosters customer confidence, facilitates the payment of short-term debts, and contributes to sectoral growth and national development (hoque et al. , 2015). in contrast, inadequate working capital management can diminish profitability, precipitate financial crises, and undermine the overall efficiency of operations (yahaya & bala, 2015). while profitability traditionally serves as a metric for assessing operational efficiency, the significance of working capital management in bank performance has sometimes been overlooked (umoren & udo, 2015). effective liquidity management is a pivotal concern for organizations as it directly impacts their daily operations. it entails maintaining a surplus of current assets over liabilities to ensure a favorable current ratio, which is integral to overall liquidity (alshubiri, 2011) & padachi et al. , 2012). working capital management ensures the availability of liquidity to sustain efficient functioning (gupta, 2018). gitman (2019) notes that working capital management entails overseeing current assets and liabilities to fulfill short-term financial obligations and mitigate the risk of bankruptcy associated with excessive short-term liabilities. the core aim of working capital management is to optimize the balance between current assets and liabilities, resulting in a favorable level of net working capital (smith, 2019). there has been considerable academic interest in exploring the interplay between working capital, capital structure, and financial performance, zopounidis & doumpos (2018) explored the use of multi-criteria decision aid (mcda) methods in financial decision-making processes, considering factors such as debt, financial distress, investment, and corporate performance. es calera and herrera (2020) offer the significance of supplier financing and inventory management in generating economic value. rasyid (2017) and nanda and panda (2018) reveal significant links between working capital policies and performance indicators. similarly, studies by senan et al. (2021) reveal significant associations between working capital factors and return on equity. farhan et al. (2021), pestonji and wichitsathian (2019), and basyith et al. (2021) shows that working capital investment has significance on financing policies on profitability. many studies centered on large multinational corporations, with relatively little attention given to the banking sector. this gap in the literature is particularly pronounced in the context of nigerian banks, which face unique challenges in a market with low financial penetration. given the critical role of the banking industry in nigeria's financial system, identifying working capital and capital structure as pivotal performance indicators in the banking sector could inform the development of financial management policies aimed at enhancing industry profitability (agiobenebo & ezirim, 2018; ansahadu et al. , 2018). https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 846 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc past studies that explored factors influencing firm performance in nigeria lack comprehensive analysis of their interrelationships (mwangi, 2018). some research has investigated factors driving financial performance in specific sectors like life assurance companies, these findings may not fully translate to the banking industry (mutugi, 2018). there remains a dearth of understanding regarding the nuanced relationship between financial management strategies and performance outcomes in nigerian banks (wabita, 2018; oloye & osuma, 2015). this dearth of research motivated a deeper examination of the relationship between working capital management, capital structure, and financial performance within the nigerian banking sector. the current study aimed to elucidate how working capital management impact the financial performance of deposit money banks (dmbs) in nigeria. the paper aims to: 1. examine the relationship between working capital and financial performance of the dmbs in nigeria. 2. how gross operating profit affect financial performance of the dmbs in nigeria. 3. conform how cash conversion cycle impact financial performance of the dmbs in nigeria. 4. to examine the extent of macroeconomic factors on the financial performance of the dmbs in nigeria. 5. accordingly, the research evaluates the following null hypotheses: 6. there is no significant relationship between working capital and financial performance of the dmbs. 7. there is no significant effect of gross operating profit and financial performance of the dmbs. 8. there is no significant impact of cash conversion cycle and financial performance of the dmbs. 9. there is no significant impact of macroeconomic factors and financial performance of the dmbs. method the study of working capital management is not a new practice. scholars have for the last several decades paid attention to these concepts to suggest or recommend the most optimal strategies for acquiring and managing the finances of a company. four important theories that particularly underpin scholarly work in the area of capital structure include the modigliani-miller theorem, the net income approach, the pecking order theory, and the trade-off theory. as for working capital management, firms may choose from the aggressive approach and the conservative approach. the modigliani-miller theorem asserts that a firm’s market value is a factor of its earning power as well as the risk associated with its underlying assets (modigliani & miller, 1958). the theory further states that the value is not dependent on how it elects to fund its operations or distribute dividends. as is normally the case, a firm can select from three financing methods: issuing equity, debt or reinvesting profits instead of distributing them to shareholders. the fundamental argument is that under certain assumptions, it does not matter whether a firm chooses debt or equity. https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 847 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the pecking order theory, postulated by myer (1984), states that firms tend to prefer internal financing. the theory also argues that dividend policy is often inclined to investment opportunities available to the firms. in addition, unanticipated variations in investment opportunities and profitability imply that internally generated funds can be more expensive. therefore, profitable and cash flow sufficient firms will tend to use less debt. ghosh (2018) and gachoki (2019) tested this theory and found that no relationship exists between debt and internal funds deficit. other studies showed a positive relationship on capital structure choice that finance managers follows a hierarchal order when making capital structure decision and supporting the pecking order theory (hewledge & liang, 2020; frank & goyal, 2018; kahugu, 2019). the trade-off theory argues that managers seek to trade off tax savings on debt against cost of debt. many studies show a strong significant relationship that the level of adjustment is relative to the cost of debt and many managers revise their capital structure to maintain an optimal balance of cost and debt (graham & harvey, 2018; de jong et al. , 2018; hovakimian, opler & titman, 2018; dang, 2018). working capital management essentially entails the management of liquidity, which is measured as a ratio of current assets to current liabilities (porter & norton, 2018). the two major approaches to the management of working capital are the aggressive approach and the conservative approach. the aggressive approach entails high levels of long-term assets and low levels of current assets (porter & norton, 2018). though this may increase the profitability firm, it may increase the risk of illiquidity in the short term. in essence, achieving optimal working capital ratios is often a difficult task for most organizations since organizations often face the dilemma of choosing between keeping current assets to meet shortterm financial obligations and investing current assets to generate earnings. this is referred to as the liquidity-profitability trade-off. in fact, managing working capital entails a trade-off between risk and profitability. focus on profitability tends to increase risk and focus on risk reduction tends to reduce profitability. without a sound working capital management policy, a firm may experience poor financial performance (gallagher & andrew, 2017). it is, therefore, important to choose a working capital management approach that ensures a balance between idle current assets and long-term investments. the paper follows the standard procedure for empirical testing required to evaluate the study’s hypotheses. first, we employ some summary statistics including the mean, standard deviation, minimum and maximum to describe the variables. if the kurtosis is above three, the distribution is peaked or leptokurtic relative to the normal and if the kurtosis is less than three, the distribution is flat or platykurtic relative to normal. jarque-bera (jb) tests for the normal distribution of the series. it measures the difference of the skewness and kurtosis of the series with those with normal distribution. jb statistics show the normality or otherwise of the variables’ distribution. the statistic, computed from equation (1), represents a goodness-of-fit assessment that confirms whether recovered sample skewness and kurtosis match normal distribution. 𝐽𝐵-statistic = 1 6 ∗ [(�̃�3)2 + 0. 25 (𝜇4 − 3)2]⁄ 1) https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 848 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc where 𝜇3 and 𝜇4 are the skewness and kurtosis coefficients. the variable’s series is non-normal distribution, if the jb is far from zero, and as such the test is significant at chosen level. to find the relationship between working capital and the financial performance and confirm the slated hypotheses the paper uses return on assets as measure of financial performance as well as gross operating profit and cash conversion cycle as measure of working capital management being the as independent variables. equation 2 (functional form) and equation3 (linear form) provide models that connect how the management working capital impact firm’s financial performance roa𝑖,𝑡 = gop𝑖,𝑡, ccc𝑖,𝑡, wkp𝑖,𝑡, ifr𝑖,𝑡, int𝑖,𝑡 (2) roa𝑖,𝑡 = α0 + α1gop𝑖,𝑡 + α2ccc𝑖,𝑡 + α3wkp𝑖,𝑡 + α4ifr𝑖,𝑡 + α5int𝑖,𝑡 + e𝑖,𝑡 (3) where roa is return on asset, ccc is conversion capital cycle, gop is gross operating profit, wkp is working capital, ifr is inflation rate and int is the interest rate. α0 is constant and u is the error term. the economic a priori criteria refer to the sign and size of the parameters and the economic relationship between the variables. the apriori expression of this model is that α𝑖 > 0 (𝑓𝑜𝑟 𝑖 = 0 𝑡𝑜 3) and α𝑖 < 0 𝑓𝑜𝑟 𝑖 = 4, 5. the generalised method of moments (gmm) panel regression model for the estimation. the estimation uses the pooled ols yields inconsistent estimators and heteroskedasticity errors. this study adopted ex-post facto, involving secondarily sourced data from the annual reports. the paper focus on the population of dmbs on the nigerian exchange group (ngx) for access bank, first bank, gtb, uba, and zenith bank. the data, between 2012 to 2022, are extracted from the annual audited accounts and nxg reports. the variables are defined. return on assets indicates how profitable a company is in relation to its total assets. gross operating profit is calculated as revenue less cost of goods sold, operating expenses, depreciation and amortization. it is earnings minus the direct manufacturing costs. conversion capital cycle is simply a metric that expresses the time (measured in days) that it takes for a company to convert its investments in inventory and other resources into cash flows from sales. it measures how long each net input dollar is tied up in the production and sales process before it gets converted into cash received. working capital is the difference between a company’s current assets and its current liabilities, such as accounts payable and debts. it gauges the short-term health of an organisation. result and discussion we present the results and evaluate the working hypotheses. before presenting the gmm output, the paper as reported in table 1, presents the statistics summary of the considered variables. the mean values of all the variables used were reported to be positive. this implies that all the variables used https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 849 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc have recorded an increasing trend for most periods. the mean value for roa is an indication of increasing returns which also means rising performance for the banks. the maximum and minimum values indicate the highest points and lowest points of the variables throughout the study period. the highest value for return on equity during the period under study was 31% while the minimum value of roa is 1%. the standard deviation for roa𝑖,𝑡, gop𝑖,𝑡, ccc𝑖,𝑡, wkp𝑖,𝑡, ifr𝑖,𝑡, and int𝑖,𝑡 , are respectively, 0. 087 2. 489, 1. 091, 3. 673, 0. 037, and 0. 011. three variables roa𝑖,𝑡, , ifr𝑖,𝑡, and wkp𝑖,𝑡 are positively skewed from the normal distribution point, while others, gop𝑖,𝑡, ccc𝑖,𝑡, and int𝑖,𝑡 are negatively skewed. the variables are flat or platykurtic to normal being less than three. the jarque-bera values for roa𝑖,𝑡, gop𝑖,𝑡, ccc𝑖,𝑡, wkp𝑖,𝑡, ifr𝑖,𝑡, and int𝑖,𝑡are 0. 381, 2. 176, 10. 10, and 7. 118, 6. 379, and 9. 295 respectively. table 2 shows the outcomes of the generalized method of moments for the apnel estimation. the adjusted coefficient of determination suggests that about 73. 38% variation in return on asset is explained by variations in other variables. the durbin watson value of 2. 013 indicates the absences of serial autocorrelation. the coefficient of wkp of (0. 298) has a p-value of 0. 0032 which is less than 0. 05. the first null of no significant relationship between working capital and financial performance is rejected at 5%. this implies that there is a positive and significant relationship between working capital and financial performance. the coefficient of gop of (0. 0279) has a p-value of 0. 0049 which is less than 0. 05. the second null of no significant relationship between gross operating profit and financial performance is rejected at 5%. this supposes that there is a positive and significant effect of gross operating profit on financial performance. the coefficient of the cash conversion cycle of (-3. 24e-06) has a p-value of 0. 0384 which is less than 0. 05. the third null of no significant relationship between cash conversion cycle and financial performance is rejected at 5%. this supposes that there is a positive and significant effect of gross operating profit on financial performance. the coefficient of the cash conversion cycle of (0. 082) has a p-value of 0. 0391, which is less than 0. 05. the third null of no significant relationship between cash conversion cycle and financial performance is rejected at 5%. this supposes that there is a significant effect of inflation, a measure of macroeconomic factors, on financial performance. nyabuti and ondiek (2018) establishing a positive correlation between working capital management and financial performance. arasa and k’obonyo (2018) highlight the significant role of effective strategic planning in enhancing overall performance. valencia et al. (2020) found that mexican firms typically maintain an optimal leverage ratio and rely on investment analysis techniques to analyze profitability. jog and srivastava (2019) reveal that investment decisions are primarily driven by funding opportunities and capital budgeting decisions are based on factors such as net present value and internal rate of return. rasyid (2017) and nanda and panda (2018) reveal significant relationships between working capital policies and performance indicators. similarly, studies by senan et al. (2021) reveal significant associations between working capital factors and return on equity. farhan et al. (2021) and basyith et al. (2021) shows that working capital investment has significance on financing policies on profitability. https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 850 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 1. sample statistics mean med max min sd skewness kurtosis jb p-value roa𝑖,𝑡 0. 147 0. 156 0. 310 1. 096 0. 087 0. 0348 2. 646 0. 380 0. 827 gop𝑖,𝑡 2. 559 2. 270 6. 223 -1. 583 2. 488 -0. 022 2. 137 2. 176 0. 337 ccc𝑖,𝑡 13. 07 13. 500 14. 00 11. 00 1. 091 -0. 858 2. 282 10. 10 0. 006 wkp𝑖,𝑡 11. 85 11. 40 18. 60 8. 000 3. 673 0. 664 2. 177 7. 119 0. 028 ifr𝑖,𝑡 0. 123 0. 117 0. 186 0. 080 0. 037 0. 331 1. 785 6. 379 0. 041 int𝑖,𝑡 0. 129 0. 133 0. 140 0. 110 0. 011 -0. 452 1. 596 9. 295 0. 010 source: author (2024) note: the selected banks include first bank, guaranty trust bank, access bank, zenith bank, and uba. table 2. roa model (gmm estimation) variable apriori coeff std. err. t-stat p-value const 0. 399 0. 685 0. 583 0. 563 gop𝑖,𝑡 (+) 0. 028 0. 018 -1. 565 0. 005 ccc𝑖,𝑡 (+) 0. 000 0. 000 -0. 890 0. 038 wkp𝑖,𝑡 (+) 0. 298 2. 020 0. 148 0. 003 ifr𝑖,𝑡 (-) 0. 082 0. 198 0. 415 0. 039 int𝑖,𝑡 (-) -0. 286 0. 458 -0. 624 0. 034 r-squared (adj) 0. 7338 durbin-watson stat 2. 013 j-stat. 43. 000 prob(j-stat. ) 0. 000 source: author (2024) the results indicate that effective working capital management is positively associated with the financial performance of listed deposit money banks in nigeria. this implies that banks that optimize their working capital by managing their short-term assets and liabilities efficiently are more likely to experience enhanced financial performance. this positive relationship suggests that banks with better working capital management can maintain liquidity while simultaneously generating returns, thus enhancing overall profitability. this aligns with the broader financial management literature, which emphasizes the importance of working capital management as a key determinant of a firm's financial health. the study finds that gross operating profit has a positive and significant effect on the financial performance of the listed deposit money banks. the positive impact on financial performance suggests that higher gross operating profits lead to improved overall financial outcomes, further emphasizing the importance of operational efficiency and cost management in the banking sector. https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 851 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the cash conversion cycle shows a negative but significant impact on financial performance. this indicates that a longer cash conversion cycle, which may be indicative of inefficiencies in managing inventory, receivables, and payables, detrimentally affects the financial performance of banks. the negative impact underscores the importance of minimizing the duration of the cash conversion to free up cash for other productive uses, thereby enhancing profitability. the outcome highlights the significant impact of macroeconomic factors on the financial performance of listed deposit money banks in nigeria. this finding underscores the broader economic environment's role in shaping the financial outcomes of banks. macroeconomic factors such as inflation rates, interest rates, and economic growth can influence banks' cost of funds, the demand for loans, and the overall financial health of borrowers, all of which subsequently affect the banks' financial performance. the significant impact of these factors suggests that banks need to consider the macroeconomic environment in their financial planning and risk management strategies to mitigate potential adverse effects. conclusion this study provides valuable insights into the critical role of working capital management in the financial performance of listed deposit money banks in nigeria. the findings demonstrate that effective working capital management significantly contributes to the financial success of these institutions. specifically, a positive and significant relationship was established between working capital management and financial performance, highlighting the importance of optimizing the management of current assets and liabilities to achieve financial goals. the outcomes highlight the critical importance of effective working capital management, operational efficiency, and strategic responsiveness to macroeconomic conditions for the financial success of listed deposit money banks in nigeria. with this, the banks can enhance their financial performance and achieve sustainable growth in a dynamic and challenging economic environment. the paper offers the following recommendations. first, the banks should focus on improving their operational processes to increase profits. this can be achieved by adopting cost-effective measures, streamlining operations, advanced in technologies, and enhancing service delivery. second, banks should prioritize the implementation of robust working capital management strategies. this includes optimizing the management of current assets and liabilities to ensure sufficient liquidity while maximizing profitability. banks should regularly monitor their working capital components, such as accounts receivable, accounts payable, and inventory levels, to maintain an optimal balance that supports smooth operations and enhances financial performance. third, there should be regular assessments of financial performance and internal processes are essential to identify areas of improvement and ensure adherence to best practices in working capital management. banks should conduct periodic financial audits and performance evaluations to monitor progress, detect inefficiencies or irregularities promptly, and implement corrective measures to maintain optimal https://www.ilomata.org/index.php/ijtc working capital management and financial performance: evidence from deposit money banks in nigeria gbadebo 852 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc financial health. lastly, the banks should invest in continuous training and development programs for their staff. educating employees on efficient working capital management practices, financial analysis, and the use of advanced financial technologies will enhance their competencies and contribute to better financial decision-making and performance. reference abdullah, m. a. h. , & iqbal, s. m. 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(2019). impact of working capital components on firm’s profitability: the case of iron, steel metal industry sector in borsa istanbul. maliye finans yazilari, 33(111), 11–32. https://www.ilomata.org/index.php/ijtc https://doi.org/10.2991/icbmr-17.2017.20 http://iiste.org/ the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 2, april 2025 page no. 1-17 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg evi erpina1, ahmad rizal budhiarto2, mardiyani3 123universitas swadaya gunung jati, indonesia correspondent: mardiyani@ugj.ac.id3 received : february 3, 2025 accepted : april 13, 2025 published : april 30, 2025 citation: erpina, e., budhiarto, a, r., mardiyani. (2025). the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg. ilomata international journal of tax and accounting, 6(2), 1-17. https://doi.org/10.61194/ijtc.v6i2.1693 abstract: this study aims to analyze the impact of investment decisions, funding strategies, and financial performance on firm value in the indonesian banking sector, while examining the moderating role of good corporate governance (gcg) using moderated regression analysis (mra). data were collected from banking companies listed on the indonesia stock exchange (idx) during 2019–2023 through purposive sampling. the analysis was conducted using mra to examine the relationships between the independent variables (investment decisions, funding strategies, and financial performance), the dependent variable (firm value), and the moderating interactions of gcg. the results show that investment decisions have an effect but are not significant on firm value, while funding strategies and financial performance have a significant influence. the key finding from the moderation analysis reveals that gcg strengthens the relationship between financial performance and firm value. however, gcg fails to moderate the relationship between investment decisions and firm value, as well as between funding strategies and firm value. the implications of this study emphasize the importance of implementing gcg to enhance firm value through optimizing funding strategies and improving financial performance. for practitioners, these findings encourage the integration of gcg principles into financial decision-making. at the same time, for regulators, the results can serve as a basis for formulating policies that support better gcg implementation in the banking sector. for academics, this research provides a foundation for further studies on factors influencing firm value and the role of gcg across various industries. keywords: investment decision, funding, financial performance, good corporate governance, firm value this is an open-access article under the cc-by 4.0 license. introduction companies, especially in the banking industry, must concentrate on investment selections, financing choices, and improving financial performance in the face of growing global economic instability. nonetheless, the intricacies of the worldwide economy embed it with weaknesses like https://www.ilomata.org/index.php/ijtc mailto:mardiyani@ugj.ac.id https://doi.org/10.61194/ijtc.v6i2.1693 the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc inflationary pressures, geopolitical uncertainties, and commodity price fluctuations. one example is the imf, which indicates the potential for global recession in 2023, caused by rising inflation, interest rates, and also the opec oil production cuts (katadata, 2022)such circumstances highlight the importance of adaptive ways for the banking sector to weather economic uncertainties while assuring itself of continued sustainability in the future. notwithstanding these difficulties, indonesia's state-owned banks have shown resilience under the backing of more digitization and greater financial inclusion, so improving sector stability and service efficiency (cnbc indonesia, 2022). however, the market pressure that is not avoided is still very much visible in the performance of the banking sector stocks, which have resulted in a drop in the indonesia stock exchange composite index of 0.90% in the early of 2023 (investor.id, 2023). the most comprehensive approach is the key element of the integrated strategy, which will keep public confidence; build a fund professionally, through the whole commercialization process, to achieve the essential maximization of the value (hikmah et al., 2024; saddam et al., 2021). this situation requires banks, especially digital banks throughout 2022, to create integrated strategies to solve the drop in stock values. managing and distributing funds must be done professionally and accountably, as public trust must remain intact for banks (hikmah et al., 2024). such trust allows the banks to get their maximum profits, and they are demanded to contribute in a manner to improve the welfare of the shareholder and also maximize the value of the firm (saddam et al., 2021). this is based on how the market views a company stock's growth rate based on performance and future potential risk. some such essential factors drive a firm's value. first, investment decisions play a central role in how resources are allocated to projects that underpin growth and sustainability (djuminah et al., 2023; zaki et al., 2023). investing wisely is imperative for long-term profitability. however, it also signals to the public markets that the business is genuinely investing in innovative solutions and is ready for the future. second, while funding decisions may seem secondary (capital structure of the company), they are just as important. an optimized capital structure strengthens financial stability while instilling lower perceived costs to borrow as well as greater value perception by the market (brigham et al., 2019). financial performance is a key factor in assessing firm value as well. asset management and operational effectiveness drive strong profitability, which strengthens investor confidence and stock demand. on the contrary, low profitability suggests inefficiencies in operations that result in a waste of resources and profit potential. this creates a negative image that makes it hard for investors to believe the company, therefore decreasing the demand for the share which eventually reduces the market cap, and the company loses its competitive advantage in the future (aprilia et al., 2021). however, research results on the interaction between investment decisions, funding tactics, financial performance, and business value still vary, nevertheless. for instance, susanto et al., (2024), found investment decisions significantly impact firm value, while yuswandani et al., (2024), highlighted the influence of external factors like exchange rates and inflation. similarly, studies on funding decisions show mixed results, with bahrun et al., (2020), reporting a positive effect and rachmadani et al., (2024) noting a slight negative impact. although financial performance generally correlates positively with firm value (saputri et al., 2021), the moderating role of good corporate https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc governance (gcg) in these relationships remains underexplored. this study addresses this gap by examining how gcg, as a moderating variable, clarifies these dynamics, particularly under external macroeconomic pressures, offering insights into strengthening firm resilience and value. though gcg is a major determinant of company performance (sumani et al., 2022). specifically, this study fills existing gaps in the literature by exploring how gcg moderates financial dynamics in the highly regulated banking sector and how proper governance practices can act as a channel to enhance the link between financial choices and outcomes. in addition, this study emphasizes the importance of gcg in the rgec framework (risk profile, good corporate governance, earnings and capital) which, in general, is neglected because banks are more likely to be guided by financial performance. gcg is important in protecting the interests of stakeholders, including the public. the incorporation of gcg is not only a provision of regulation but also a strategic issue that can significantly impact the long-term stability and sustainability of bank institutions. this research aims to examine the impact of investment decisions, funding, and financial performance on firm value by including gcg as the moderating variable. thus, it fills some gaps in the literature and provides useful directions for banking companies to enhance their financial strategies and governance practices. it aims, ultimately, to allow for sustainable growth and enhance competitiveness in an increasingly intricate economic landscape. agency theory and signaling theory agency theory analyses the relationship between two parties, the principal and the agent (management) (said et al., 2022). managers as agents carry out their responsibility as company operators, demanded by the principal to maximize company value or share value (hardiningsih et al., 2024). this study also utilizes signal theory to complement agency theory. signal theory explains how a company needs to deliver the appropriate information to the financial statements' users (ramadhani et al., 2024). this hypothesis focuses on the information shared by a firm's internal stakeholders to third events (yuswandani et al., 2024). investors can use this data to assess the state of the company and its future opportunities the effect of investment decisions on firm value investment decisions are made by allocating funds to the investments investments (djuminah et al., 2023). investors in income-producing investments, such as businesses, value them more when they grow or invest more (silitonga et al., 2024). stock price is one of the major parts of corporates value, thus a well-thought investment decision can reflect a company's growth and increase the stock price (hariyanur et al., 2022). the empirical evidence from several studies (adhitya et al., 2022; afşar et al., 2020; nugraha et al., 2020; susanto et al., 2024), it is known that investment decisions are able to affect the value of the company. hence the conjectured hypothesis is: h1: investment decisions have a significant effect on the firm value https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of funding on firm value determining the right funding source for each investment opportunity is another significant requisite to being accustomed to optimal capital structure modelling that maximizes company valuations (zaki et al., 2023). internal funding in retained earnings and external financing in debt and equity represent two alternative sources of funds (djuminah et al., 2023). highly structured risk-mitigating funding decisions receive encouraging signals from investors that improve stock demand and add corporate value (hariyanur et al., 2022). the empirical evidence from several studies (andriyani et al., 2023; astawinetu et al., 2020; djuminah et al., 2023; meutia et al., 2021; sherine et al., 2022), who stated that funding has an effect on business value in a significant. thus, the hypothesized proposition is as follows: h2: funding has a significant effect on the firm value the effect of financial performance on firm value corporate financial performance directly affecting corporate value by showing that management is credible in carrying out business operations (taufik et al., 2024). improved financial performance attracts investors to invest in the company, which will influence the stock prices (pamungkas et al., 2023). numerous previous researches (bon et al., 2022; lestari et al., 2024; mohammed et al., 2020; priharta et al., 2022; robiyanto et al., 2021), conclude that corporate financial performance significantly contributes to its value. thus, the hypothesis being suggested is: h3: financial performance has a significant effect on firm value. the effect of investment decisions on firm value moderated by corporate governance good corporate governance creates responsible, reliable, and transparent environment (detthamrong et al., 2017). the effective implementation of gcg in companies enables them to make investment choices effectively, which in turn enhances the valorization of the organization (adhitya et al., 2022). gcg has back to studies (amirullah et al., 2022; djuminah et al., 2023; kharisma et al., 2023), which prove that gcg is able to affect the relationship between investment and corporate value. so, the hypothesis we propose is: h4: corporate governance moderates the effect of investment decisions on firm value. the effect of funding on firm value moderated by corporate governance corporate governance is a vital driver for a better business and improving the public perception of corporate value (chaidir et al., 2021). gcg mechanisms restrict managerial opportunism associated with debt based financing and it improves the organizational performance and elevate the corporate value (tulcanaza-prieto et al., 2024). studies (amirullah et al., 2022; kharisma et al., 2023; suta et al., 2016), corroborates the finding that gcg affects the linear relationship between funding and corporate worth. thus, the working hypothesis would be: https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h5: corporate governance moderates the effect of funding on firm value. the effect of financial performance on firm value moderated by corporate governance the principle of gcg is reflected in high corporate governance perception index (cgpi) scores (lestari et al., 2024). good corporate governance can be the foundation for these factors and can lead to effective financial performance and create a value for a company in the capital market (heling et al., 2024). according (chaidir et al., 2021; irwanti et al., 2021; ndatika et al., 2024), gcg can moderate the relationship between financial performance and corporate value. so, the proposed hypothesis is: h6: corporate governance moderates the effect of financial performance on a firm value. method there were employed quantitative methods and causal-associative approachs to establish a causal relationship between two or more variables. it intends to measure the impact of the independent variables on the dependent variables. the study uses secondary data or documentation, which includes the information that already exists and is obtained indirectly through intermediaries (sugiyono et al., 2021). the population of this study is banking companies listed on the idx from 2019 to 2023. the sampling technique used in this study is purposive sampling or sampling with criteria for the needs and objectives of the study (sumani et al., 2022). the sample criteria are: (1) banks classified as foreign exchange banks, which operate in a highly regulated environment with significant exposure to international markets and currency fluctuations, making them an ideal context for examining the role of gcg in moderating financial dynamics; (2) banks that earn profits during the study period, as profitability is a central variable in the research, and including loss-making firms would introduce extreme values (negative profits), violating statistical assumptions such as normality and potentially biasing the results; and (3) banks that experience a decline in stock prices, selected to focus on suboptimal performance, test the effectiveness of gcg in challenging conditions, and enhance the relevance and practical value of the research.the research sample that met the criteria https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consisted of 16 companies, with observations conducted over a five-year period, yielding 80 observation data. this study cover an entire region because it covering secondary data from idx. now it's available through idx.co.id and the company's official websites. in this sense, since the main object of the study is banking in indonesia, its location can be national. quantitative data was acquired from the company's annual report from the official idx website. the following are the indicators used for each variable: table 1. operating variables no variables indicator source 1 firm value (y) pbv = stock price per share book value per share (yuswandani et al., 2024) 2 investment decision (x1) capex = net increase in property plant and equipment + depreciation (satt et al., 2023) 3 funding (x2) car = capital atmr x 100% (marsella et al., 2023) 4 financial performance (x3) roa = net income total asset (syamsudin et al., 2020) source: data processesd by the author (2024) good corporate governance (moderating variables) is categorized as having high or low ratings. in determining the gcg rating category, the number of categories is multiplied by the gcg score and summed up so that the result is 325. then, the number 325 is divided by the number of samples, namely 80, so an average value of 4.0625 is obtained. hence, firms with gcg scores > 4.0625 are categorized in high governance and firms with gcg scores < 4.0625 categorized in low governance. literature and documentation were the primary methods used to obtain data for this study. the literature study searched for various literature, including journals and scientific publications pertinent to the research variables. in the meantime, the documentation study was carried out by https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc visiting the official idx and company websites, after which reports about the variables under investigation and the observation period were downloaded. the data in this study were analyzed using moderated regression analysis (mra) with the assistance of spss 30 software. this approach examined whether the moderating variable gcg, influences the relationship between the independent and dependent variables. specifically, the analysis aimed to determine whether gcg strengthens, weakens, or alters the direction of these relationships. before the mra, classical assumption tests were performed to ensure the data met the necessary statistical requirements. these tests included: (1) the normality test, to confirm that the data were normally distributed; (2) the heteroscedasticity test, to check for constant variance in the residuals; (3) the autocorrelation test, to identify any correlations between residuals; and (4) the multicollinearity test, to ensure that there was no high correlation among the independent variables. once the assumptions were satisfied, the mra was conducted using the following equation model: pbv=α+β1capex+β2car+β3roa+β4capex*gcg+β5car*gcg+β6roa*gcc+e description: pbv : price book value (y) α : constant β : regression coefficient capex : capital expenditure (x1) car : capital adequacy ratio (x2) roa : return on assets (x3) gcg : good corporate governance (z) e : error the mra results were interpreted to assess the moderating effect of gcg on the relationships between the independent variables (capex, car, and roa) and the dependent variable (firm value). the secondary data utilized in this study encompass companies' sustainability reports, annual reports, and financial performance data registered on the idx. this data can be accessed and obtained openly through the official idx website, so it comes from a publicly available platform and has been published. therefore, it can be used for research purposes without additional permission. result and discussion the classical assumption test is retrieved to verify the accuracy of the regression model. the test's outputs are displayed in the subsequent table. https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the test results of table 3 confirm that the normal sample distribution is evidenced by the kolmogorovsmirnov test results of 0.627> 0.05. there is no multicollinearity, as evidenced by the vif <10 and tolerance value >0.10 on all variables. the glejser test findings for the heteroscedasticity test indicate that all variables have a significance value above 0.05, so the residual differences between observations in the regression model are uniform. the durbin-watson test criteria have been met, as evidenced by the value of 1.7153 (du) < 1.970 (dw) < 2.2847 (4-du), so there is no autocorrelation. according to these results, the regression model used has met the criteria. hypothesis testing aims to assess the influence between variables in light of the study's goals. the outputs of the hypothesis test are displayed in the subsequent table: referring to the statistics test results, the moderate regression analysis (mra) equation in this study is as follows: pbv= 0,630 0,012 capex 0,355 car + 0,144 roa + 0,047 capex*gcg 1,008 car*gcg + 0,849 roa*gcc + e investment decisions as measured by capex have a p-value of 0.677> 0.05 and a β coefficient of -0.012, which indicates that an increase in capex has an insignificant effect on firm value and can reduce it by 0.012 points. funding as measured by using car has a p-value of 0.001 <0.05. this confirms that funding affects firm value. the existence of a negative correlation shown by https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the coefficient β -0.355 indicates that an increase in car can reduce the company value by 0.355 points. financial performance as assesed by roa has a p-value of 0.001 <0.05, proving that financial performance affects corporate value. the β coefficient of 0.144 indicates that a rise in roa results in a significant enhancement of firm value, equivalent to 0.144 points. the interaction of investment decisions with gcg has a p-value of 0.676> 0.05, indicating that gcg does not moderate the relationship, although the β coefficient of 0.047 shows a positive relationship. the interaction of funding with gcg also has a pp-value of 0.692>0.05, which means that the moderation hypothesis is not proven, with a β coefficient of -1.008, which indicates a negative relationship. in contrast, the interaction of financial performance with gcg has a p-value of 0.024 <0.05, proving that gcg moderates this relationship significantly, with a β coefficient of 0.849, suggesting that gcg enhances the connection between financial performance and firm value by 0.849 points. the effect of investment decisions on firm value the first hypothesis test revealed that investment decisions, represented by capex, have an insignificant impact on firm value. this stems from the disproportionate wealth invested in capital expenditures (capex) and towards fixed assets, such as buildings and physical infrastructure, which are largely irrelevant to the core functions of the banking sector, and an area of business that focuses more on credit distribution. in banks, firm value mainly stems from productive assets, like loan portfolios and financial investments, leading to earning interest income. furthermore, if investment strategies do not align with the operational needs of banks, there could be a misallocation of resources, which ultimately decreases operational efficiency and investor confidence in the company's development capabilities. investment decisions can enhance firm value through resource allocation strategies that align with business objectives. stakeholder confidence in the bank’s future profitability can be eroded through the operational inefficiencies associated with poorly sequenced investments. thus, even though capex is important for longterm growth, its impact on the bank's value is only positive when investments are directed towards strengthening core bank activities. these results contrast with the findings of susanto et al., (2024), who stated that investment decisions have a significant influence on firm value. however, they align with the study by yuswandani et al., (2024), who also found no straightforward connection between investment decisions and firm value. the effect of funding on firm value the second hypothesis test indicated that funding, represented by the car proxy, had a significant but negative effect on firm value. this inverse correlation shows that an increase in the capital adequacy ratio (car) indicates that the capital is not being allocated optimally in terms of investing in extremely risky assets or mismanagement of the net interest margin (nim). furthermore, a rise in car without a similar increase in lending indicates inefficient capital usage, which could adversely impact the bank's profitability and ability to pay dividends. however, such inefficiencies can create a bottleneck in business expansion and make a bank stock less attractive in the capital market. an excessively high car, in addition to being a measure of inefficiency, can https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc also limit credit growth and lead to opportunity costs, with capital becoming stagnant, when it could otherwise be used to earn optimum income. in the long run, weak capital allocation can chip away at a bank’s competitive advantage and undermine its overall market worthiness. a high car provides solid ground during economic storms, but it can also indicate the bank being too conservative with lending, which can curtail profits and growth rates. these results contradict the findings of bahrun et al., (2020), who discovered a positive relationship between funding and firm value. however, these findings are consistent with prior research by sumani et al., (2022), which confirmed that funding significantly affects firm value with a negative correlation. the effect of financial performance on firm value the third hypothesis test demonstrated that financial performance, represented by roa, had a significant positive effect on firm value. declining economic performance directly correlates to a decline in the value of a company because it indicates declining profitability, operational inefficiencies, and management failing to utilize assets to generate profits. without the right way to manage assets and operations, it results in increased costs, shrinking profit margins, and shrinking cash flow, which is detrimental to the company's overall health. such adverse conditions will erode investor confidence, lessen demand for company shares, and develop the selling pressure in the capital market leading to a fall in share prices. a low return on assets (roa) in the banking industry indicates inefficient allocation of loans, increased non-interest expenditures, or over-reliance on non-fund income, which can hurt the bank's financial position. this limited profitability can ultimately limit business expansion and capital accumulation, thus diminishing the organization’s competitive standing within the industry. in the long run, these challenges increase financial risk, keep stock prices under downward pressure, and further undermine market views of the banks’ growth potential. moreover, deteriorating profitability can limit the company's capacity to pay dividends or invest in strategic growth initiatives, triggering a negative investor perception leading to depressed long-run valuation in equity markets. these findings align with the research of lestari et al., (2024), which states that financial performance has a significant effect on firm value the effect of investment decisions on firm value moderated by corporate governance the fourth hypothesis test revealed that corporate governance failed to moderate the relationship between investment decisions and firm value, leading to the rejection of the hypothesis. these results show that the special governance mechanisms such as the board of directors, board of commissioners, and audit committee have not performed effectively in assisting with high conservative strategic investment. the external determinants such as tough regulation policies, market fluctuations, and financial risks have a more pronounced impact on investment decisions in the banking sector than on internal governance structures. in addition, the bank expert is trained on capital adequacy compliance policies that vary by country, monetary contributions, and the risk of systemic failure, which ultimately apply to the domain of all factors for which the bank operator and bank investor are punished. thus, although corporate governance improves transparency and accountability, its potential for creating additional value is still limited by external https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc factors and lack of strategic intervention in investment decisions. such complexity and dominance of external factors restrict corporate governance's ability to underpin the link between investment decisions and firm value. this indicates that although corporate governance matters for careful financial resource allocation, the nature of investment risk and corporate organization limits the potential to achieve this goal. these results contrast with the findings of djuminah et al., (2023) dan kharisma et al., (2023), who identified a positive moderating effect of corporate governance on investment decisions in the banking sector. however, they align with the research by adhitya et al., (2022), which found that corporate governance struggles to moderate the impact of investment decisions on firm value. the effect of funding on firm value moderated by corporate governance the fifth hypothesis test indicated that corporate governance did not moderate the relationship between funding and firm value, resulting in the rejection of the hypothesis. the results of this study reflect a weak influence of a high gcg score on a better capital flow, which affirms that the performance of gcg is not strong enough in coordination and management of funding generation. this limitation is caused by ineffective funding management, reliance on specific funding sources, and inadequate debt risk management strategies. while corporate governance is intended to improve transparency and accountability, its application has not yet attained a level capable of addressing the complex dilemmas surrounding funding management. even more so, these findings underscore that the connection between funding and firm value is driven largely by external and internal conditions like market forces, regulatory structures and financial management strategies—which many fall out of the domain of corporate governance mechanisms. this suggests that governance has not yet been shown to play a decisive role in the relationship between funding and firm value. this contrasts with the study by amirullah et al., (2022), which found that gcg can enhance the effectiveness of financing strategies in maximizing firm value. however, these results are consistent with the findings of adhitya et al., (2022), who concluded that corporate governance often fails to moderate the impact of funding on firm value. the effect of financial performance on firm value moderated by corporate governance the sixth hypothesis test showed that corporate governance significantly moderated the relationship between financial performance and firm value, leading to the acceptance of the hypothesis. this implies that firm profitability is positively correlated with firm value and the agents of corporate governance play a significant role in strengthening this relationship. good governance system improves transparency and accountability, which leads the investors and towards the bank profitability through the risk management, operational efficiency, and growth. when supplemented by good governance principles, increased profitability brings about higher investor confidence, higher demand for shares, and higher firm value. financial management and regulatory compliance can strengthen investor confidence and maintain balance and reliability of the financial sector in the highly regulated and high-risk banking industry. so, enhancing corporate governance improves the link of firm value with economic performance and strengthens stability in the banking sector and competitiveness in the financial market. this finding is supported by https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 12 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc research from chaidir et al., (2021), who state that corporate governance can strengthen the positive effect of financial performance on firm value. comparative analysis and theoretical implications this study contributes to the existing literature by analysing the complex relationship between investment decisions, funding strategies, financial performance and corporate governance in shaping the value of firms. some results corroborate prior studies, and others provide a novel view, particularly, on the minimal moderating influence of gcg in specific contexts. notably, the insignificant impact of investment decisions on firm value and the inability of corporate governance to influence this relationship suggest that external factors such as market conditions and regulatory frameworks exert a stronger influence within the banking sector. such insights point to a need for more explicit examination of the interplay between internal and external drivers of firm value. future studies in this area should explore these complexities and differences across industries and regulatory environments, to build a more integrated and holistic view of the forces governing firm value. conclusion based on the analysis findings, it can be inferred that investment decisions involving capex calculations have an insignificant impact on corporate value. findings calculated by car and financial performance calculated by roa significantly impact corporate worth. however, gcg cannot moderate the effect of investment and financing on corporate value. nevertheless, gcg can enhance the impact of financial performance on corporate worth. in addition, banks can strengthen corporate value by diversifying assets, improving credit risk assessment, and reducing npls. emphasizing transparency and accountability in governance boosts investor confidence. a balanced capital structure, leveraging debt's tax benefits while minimizing risks, enhances profitability and stability. shifting from short-term debt to long-term financing (e.g., bonds or sukuk) improves cash flow and dividend capacity. this approach reflects sound risk management, drives stock price growth, and increases firm value. prudent financing, risk management, and strong governance ensure long-term stability, profitability, and market trust. this study is limited to the banking sector, restricting its applicability to other industries. future research should explore sectors requiring high transparency and accountability, such as state-owned enterprises (soes), mining, or infrastructure, which often face governance challenges like corruption and inefficiency. additionally, examining moderating factors like ownership structure, operational efficiency, or digital transformation in financial management could provide deeper insights. such research would offer practical strategies for industries where strong governance and economic practices are crucial for sustainable growth and stakeholder trust. https://www.ilomata.org/index.php/ijtc the impact of investment 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(2024). profitability as a moderator: assessing the influence of capital structure,investment decision, and firm size on firm value. jurnal riset akuntansi dan keuangan indonesia, 9(1), 125–137. https://doi.org/https://doi.org/10.23917/reaksi.v9i1.4044 https://www.ilomata.org/index.php/ijtc the impact of investment decisions, funding strategies, and financial performance on firm value: the moderating role of gcg erpina, budhiarto, and mardiyani 17 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc zaki, p. f., widiyanti, m., & andriana, i. (2023). the influence of investment and funding decisions on company value with intervening variables of dividend policy in companies listed on the jakarta islamic index. injuruty: interdiciplinary journal and humanity, 2(8), 674–679. https://doi.org/https://doi.org/10.58631/injurity.v2i8.115. https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3, july 2024 page no. 903-922 903 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies aisyah noor qinthara1, nanda galih ramadhan2, mardiyani3, nurhana dhea parlina4 1234swadaya gunung jati university, indonesia correspondent: mardiyani@ugj.ac.id3 received : may 20, 2024 accepted : july 21, 2024 published : july 31, 2024 citation: qinthara, a, n., ramadhan, n, g., mardiyani., parlina, n, d. (2024). the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies. ilomata international journal of tax and accounting, 5(3), 903-922. https://doi.org/10.61194/ijtc.v5i3.1732 abstract: the objective of this study is to investigate how capital structure and liquidity affect company value in companies listed on the lq45, using profitability as an intervening variable. according to the purposive sampling technique, 31 companies were selected as samples with an observation period during 2021–2023, yielding 93 observation data. the study uses a quantitative method with a causal associative approach, and the population comprises of organizations that were on the lq45 list in 2023. the data was analyzed using path analysis using the lisrel 8.8 program. according to the findings, capital structure and liquidity had no significant effect on profitability or company value, and profitability did not mediate the effect of the two factors on firm value. this conclusion shows that current investors tend to pay more attention to the company's ability to make profits, as well as other essential elements such as growth potential, innovation, and capital business sustainability. this study recommends that companies focus more on optimizing profitability and developing nonfinancial aspects such as growth potential, innovation, and business sustainability to enhance company's value. keywords: liquidity, capital structure, profitability, firm value, path analysis this is an open-access article under the cc-by 4.0 license. introduction the indonesian capital market continues to develop and plays an increasingly important role as an investment vehicle and an alternative source of funding for companies. this role has become more crucial with the growing participation of both individual and institutional investors who utilize the capital market as a tool to achieve long-term financial goals. however, global market dynamics, economic uncertainty, and high volatility have made stock price movements in indonesia increasingly complex. in this context, investors' assessment of companies no longer relies solely on overall market trends, but also on the fundamental quality and internal performance of the company, as reflected in its firm value. the growth of the indonesian capital market in the first quarter of 2023 has not shown significant development. until may 2023, the composite stock price index was at the level of 6,633, down https://www.ilomata.org/index.php/ijtc mailto:mardiyani@ugj.ac.id3 https://doi.org/10.61194/ijtc.v5i3.1732 the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 904 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 4.08% compared to the previous month and year to date down 3.17%. this decline occurred after the ihsg had strengthened in april 2023 by 1.62%. meanwhile, non-resident investors recorded a net buy of idr 20.58 trillion, up from idr 18.91 trillion in april. compared to 2022, the performance of the ihsg showed a slowdown, where in that year the ihsg grew 4.09% and reached its highest level of 7,318 in september, before falling due to the impact of the fed's interest rate policy (cnbc indonesia, 2023). company value is defined as the estimated value of future profits recalculated using the appropriate interest rate (sadewo et al., 2022). every business that is listed on the indonesia stock exchange undoubtedly hopes that the offered stock price will have significant potential and be able to draw in investors. this is due to the fact that a company's worth increases with its stock price. the market value of the company determines its worth, and this value significantly affects the welfare of shareholders. if the value of the company's stock increases, so will the prosperity of its shareholders (febriani, 2020). investor faith in a corporation increases as its value rises. in general, firm value shows the number of assets possessed, and this is crucial since it shows how successful the business is, which could affect how investors view it (haribowo et al., 2022). factors influencing corporate value are critical to assessing a firm's performance and financial health. one of the aspects to evaluate is capital structure, which has a considerable influence on firm value (adityaputra, 2024). capital structure is strongly tied. in addition, liquidity is also an important aspect, which refers to the simplicity and speed with which a security to corporate policy, it directly affects financial performance and, eventually, affects the value of the firm itself (pratiwi & muthohar, 2021) can be traded in the financial market without incurring large transaction costs or negatively impacting pricing (supeno et al., 2022). illiquid stocks will be difficult to sell and can cause huge losses for investors who cannot sell them as desired. high profit reports can help businesses draw in investors, which will raise the value of their stock (barus, 2021a). the ability of the business to generate profits over a given time frame is referred to as profitability, and it also indicates the capacity of the business to distribute profits to shareholders, which might encourage new investors to spend their cash (adelin, 2023). the capital structure is evaluated in this study using the debt to equity ratio. der states that the greater the proportion of total debt to entire equity, the more dependent the company is on creditors or external parties (fajariyah & susetyo, 2020). according to references(kristianus ronaldo jemani & teguh erawati, 2020), stock prices are significantly impacted by capital structure. furthermore, it has been shown that liquidity significantly affects stock prices. a company's ability to turn a profit is demonstrated by its profitability; greater profitability denotes improved performance and efficiency (oemar, 2022). high profits will entice investors to invest, and the increasing number of investors will influence stock price increases and increase the company's worth (latipah & rahmiyati, 2023). an optimal capital structure can improve the company's operational performance, provide great opportunities to achieve high profits, and attract investors to buy shares, so that demand for these shares increases (zahrah nabilah et al., 2020). several studies have shown that high liquidity can drive up stock prices, because easily traded stocks increase demand and price stability. however, zahrah nabilah et al. (2020) noted that although liquidity contributes to the stability of stock https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 905 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc prices, it does not always guarantee that stock prices will rise, especially in stocks with high volatility. many studies have shown that high profitability is usually positively related to stock prices. however, (mustika gunarwati & maryam, 2020) found that although high profitability gen an optimal capital structure can improve the company's operational performance, provide great opportunities to achieve high profits, and attract investors to buy shares, so that demand for these shares increases (zahrah nabilah et al., 2020). several studies have shown that high liquidity can drive up stock prices, because easily traded stocks increase demand and price stability. however, masela (2023) noted that although liquidity contributes to the stability of stock prices, it does not always guarantee that stock prices will rise, especially in stocks with high volatility. many studies have shown that high profitability is usually positively related to stock prices. however, (mustika gunarwati & maryam, 2020) found that although high profitability generally has a positive impact on stock prices, its effect can vary depending on the industry sector in question. previous research presents significant inconsistencies regarding these relationships, creating a research gap that needs further investigation. while (pradiana & yadnya, 2019) found that capital structure significantly affects profitability, widi et al. (2021) demonstrated no significant relationship. similarly with liquidity, (fajariyah & susetyo, 2020) established a significant impact on profitability, whereas setyawan (2019) found no significant effect. regarding profitability's influence on firm value, widi et al. (2021) confirmed a significant positive relationship, but sabakodi & andreas (2024) discovered no significant effect. moreover, capital structure's direct impact on firm value shows divergent results (hutagaol & sinabutar, 2020) found it significant. the same inconsistency exists for liquidity's effect on firm value, with contradictory findings from different sectors and market conditions hatane et al. (2020). erally has a positive impact on stock prices, its effect can vary depending on the industry sector in question. the structure of capital and liquidity has long been important aspects of corporate financial management; however, their impact on firm value continues to show mixed results, especially when profitability is involved as an intervening variable. this gap becomes even more apparent among companies listed in the lq45 index, which represents entities with high liquidity and the largest market capitalizations in indonesia. the urgency of this research lies in the need to clarify how capital structure decisions and liquidity management simultaneously influence firm value, taking into account the mediating role of profitability in this relationship. for companies, this research provides an empirical foundation for formulating optimal financial strategies that can maximize shareholder value. an appropriate funding composition between debt and equity, along with efficient management of current assets, can serve as a catalyst for sustainable profitability growth. for investors, the research findings offer more comprehensive parameters for evaluating investment prospects based on substantive financial indicators rather than merely shortterm market trends. from an academic perspective, this study contributes to the development of financial theory by integrating three key dimensions of corporate performance within the context of emerging capital markets. by focusing on lq45 companies, the research offers valuable insights into the dynamics of value creation among indonesia’s leading firms, which can serve as a comparative reference for similar studies in other capital markets. https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 906 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc signal theory explains how a company needs to deliver the appropriate information to the financial statements' users (ramadhani & nur, 2024). the way that investors react to the signal has a big impact on the stock market environment. they respond in various ways, from looking for stocks that are sold, to taking a wait-and-see approach while monitoring developments before taking further action according to the existing situation. in this context, disclosures that have a positive impact are considered a good signal, while negative ones are the opposite. based on this theory, the company's annual financial report becomes very important, because it is able to provide significant information and influence investor decisions in formulating investment policies (anugraha, 2024). company value, which is frequently closely tied to stock prices, is a reflection of how investors evaluate the company's degree of success. the public's trust in a company's present performance and future prospects increases with its worth (kresno wibowo et al., 2021). understanding the value of an asset and the factors that influence it is important in making effective business decisions, such as selecting the right investments in a portfolio, determining fair prices in buying and selling companies and shares, and in restructuring a company (kresno wibowo et al., 2021). company value, which is closely related to stock price, reflects investor perceptions of the company's success. market confidence in the company's present performance and future prospects increases along with the firm's value when stock prices are high. companies have both shortand long-term ambitions. short-term aims are often tied to efforts to gain profit. meanwhile, long-term goals do not only focus on achieving maximum profit, but also aim to improve welfare for shareholders or business owners (setyawan, 2019). the influence of capital structure on profitability a helpful metric for evaluating a company's owner capital in relation to its debt is the debt to equity ratio. additionally, der assesses a business's ability to meet its obligations with its own funds (sabakodi & andreas, 2024). according to study by (hutagaol & sinabutar, 2020), using more debt to finance a business's operations can result in a larger der, which rises interest expenses and increasing the cost of debt. the company's profitability may suffer as a result, lowering return on assets (roa). according to research by sari & dwirandra (2019), der positively affects profitability. h1: capital structure has a significant effect on profitability. the effect of liquidity on profitability the ability of a business to meet short-term obligations using its existing assets is known as liquidity. companies having a high amount of liquidity are less likely to fail to pay down their shortterm creditors. a strong degree of liquidity has a beneficial influence on the company's earnings. pradiana & yadnya (2019) stated that high liquidity is an indicator that the company faces little risk, which protects it from the potential for present liabilities to be defaulted on. additionally, the https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 907 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc potential profitability that might be attained increases with the liquidity of the company's current assets. h2 : liquidity has a significant impact on profitability the influence of capital structure on firm value according to the long-term debt to equity ratio, a company's capital structure is a comparison or balancing of its long-term financing. the company's equity funding comes from reserves, retained earnings, and share capital (burhan, 2022). if the company still faces a shortage of funding from internal sources, then it is necessary to consider external funding options, namely through debt (debt financing) (silalahi & sihotang, 2021). according to the pecking order theory, businesses typically prioritize internal finance over external funding. as a second option, debt is an alternative used after internal funding sources. an essential part of any business is its capital structure since its quality can directly affect its financial health, which in turn affects the firm's overall worth. h3: capital structure has a significant effect on firm value. the influence of liquidity on firm value a company's ability to meet short-term financial obligations is gauged by its liquidity. the greater the level of liquidity, the greater the firm's worth; on the other hand, if liquidity is low, the company's value tends to decline. this is because a company with high liquidity is better able to satisfy short-term obligations with its cash, which raises the company's worth (christina, 2024). this conclusion is consistent with earlier research demonstrating that liquidity has a strong beneficial influence on business value (i putu sukarya & i gde kajeng baskara, 2019). in addition, elizabeth sugiarto dermawan (2019) showed that liquidity affects stock prices as a dependent variable. a strong liquidity ratio indicates the company's ability to satisfy short-term debt obligations by utilizing its current assets, according to additional study (widiantoro & khoiriawati, 2023). h4: liquidity has a significant positive effect on firm value. the influence of profitability on firm value an important indicator of a company's potential to generate profits for investors is profitability. as shown by its financial statements, this in turn represents how investors view the company (ayu & suarjaya, 2017). a rise in earnings as reported in the financial accounts, according to signaling theory, indicates an organization's attempt to give investors a positive indication of its prospects for future growth. careful investors tend to buy shares from companies that show good performance to obtain commensurate returns and profits (utami & astika, 2024). h5: profitability has an effect significant on firm value. the effect of capital structure on firm value mediated by profitability one of the most important elements affecting a company's valuation is its capital structure. in order to evaluate a company's financial status, investors usually look at the capital structure's composition. the debt to equity ratio is frequently used to quantify capital structure. a capital https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 908 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc h5 h7 h6 structure that reduces the cost of capital is ideal. a company's value rises when it has a suitable capital structure since it can balance expected rate of return and risk (purwani & santoso, 2022). an effective capital structure will increase the firm's profitability, which will improve the stock price and increase the company's overall value. h6: profitability has a significant influence in mediating the influence of capital structure on firm value. the effect of liquidity on firm value mediated by profitability while profitability refers to the company's ability to generate ongoing earnings from its operations, liquidity relates to the company's capacity to meet short-term obligations. companies with high liquidity and profitability are able to use existing resources effectively and efficiently, creating value for their shareholders (zoraya et al., 2023). because profitability can boost both financial performance and the firm's worth, it is therefore thought to be able to bridge the gap between liquidity and company value. the firm's profitability is directly impacted by the amount of liquidity it possesses. the stock price will rise in tandem with the company's increased ability to turn a profit, increasing the company's value. h7: profitability has a significant influence in mediating the effect of liquidity on firm value. the conceptual framework of this study can be explained as follows in light of the previously described hypothesis's evolution: figure 1. framework conceptual firm values profitability liquidity capital structure https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 909 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc method quantitative methods and causal-associative approaches are used to establish causal relationships between two or more variables. this study uses secondary data or documentation, which includes information that already exists and is obtained indirectly through intermediaries (sugiyono, 2019). this study employed purposive sampling to select 31 companies from the lq45 index during the 2021-2023 period, generating 93 observation points. the selection criteria focused specifically on companies that recorded profits but experienced stock price declines, allowing for examination of the disconnect between financial performance and market valuation. the lq45 index was chosen as it comprises companies with high liquidity and strong fundamentals, making it an ideal representation of indonesia's market dynamics and ensuring data reliability. the three-year observation period (2021-2023) was strategically selected to capture post-pandemic recovery patterns, as this timeframe represents a critical transition period where companies faced unique challenges in restoring investor confidence while demonstrating financial resilience. this period offers valuable insights into how capital structure, liquidity, and profitability influence firm value during market normalization following significant economic disruption, enhancing the contemporary relevance of the research findings in today's volatile business environment. this research covers the entire region because it includes secondary data from website idx. data is available via the website idx and the company's own website. in this case, since the object of the study is lq45 in indonesia, its location can be considered national in scale. the company's yearly reports, which are available on its website idx, provided quantitative data. the indicators utilized for each variable are as follows: table 1. operational variables source : (a. n. sari, 2023), (claudia natasya p. et al., 2024), (takaful, 2019), (rosid et al., 2022) the debt to equity ratio (der) was selected as the proxy for capital structure due to its widespread acceptance in financial literature as a fundamental indicator of a company's financial leverage. der effectively measures the proportion of debt financing relative to equity financing, no variable measurement scale 1 capital structure (x1) der = total debt : total equity ratio 2 liquidity (x2) ldr (banking) = credit given : third party funds cr (manufacture and services) = current assets : current liabilities ratio 3 return on asset (m) roa = net profit: total assets ratio 4 price to book value (y) pbv = stock price : book value ratio https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 910 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc providing crucial insights into a company's risk profile and financial stability. this ratio is particularly relevant in the context of lq45 companies, where investors closely monitor financial risk when making investment decisions. prior studies by takaful (2019) and rosid et al. (2022) have established der as a reliable indicator of capital structure that significantly influences firm value in indonesian listed companies. for profitability measurement, return on assets (roa) was chosen because it comprehensively evaluates a company's efficiency in utilizing its assets to generate profits. unlike return on equity (roe), which can be influenced by capital structure variations, roa provides a more balanced assessment of operational performance regardless of financing decisions. this makes roa particularly suitable as a mediating variable between capital structure, liquidity, and firm value. the selection of roa aligns with previous research by a. n. sari (2023) and (claudia natasya p. et al., 2024), which demonstrated strong correlations between asset utilization efficiency and market valuation of companies listed on the indonesian stock exchange. liquidity ratios were differentiated between sectors to account for industry-specific characteristics, with loan to deposit ratio (ldr) applied to banking institutions and current ratio (cr) used for manufacturing and service companies. this differentiation ensures that the liquidity measurement appropriately reflects each sector's operational context and financial management practices. literature and documentation are the main methods used to obtain data in this study. literature studies search for various literature, including scientific articles and journals that are pertinent to the variables under study. meanwhile, documentation studies are conducted by visiting websites idx and company website. the data in this study were analyzed using path analysis with the help of the lisrel 8.8 software. lisrel 8.8 was chosen for this study because it can accommodate path analysis based on structural equation modeling (sem), which is highly suitable for testing causal relationships between latent variables simultaneously. lisrel also allows for more precise analysis of complex models because it explicitly accounts for variable errors. compared to conventional linear regression statistical methods, lisrel offers advantages in handling models with mediating variables, such as profitability in this study. this approach tests whether the intervening variable, profitability, affects the relationship between independent and dependent variables. specifically, this analysis aims to determine whether profitability has a significant or insignificant effect on both independent and dependent variables. the study's utilization of secondary data includes corporate sustainability annual reports, reports, and financial performance data listed on websites idx. this data can be accessed and obtained openly through the website idx, which makes it a publicly available and published platform resource. result and discussion this research uses profitability as a mediating variable to examine how capital structure and liquidity affect company value. to test the hypothesis, we use path analysis processed through https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 911 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc lisrel 8.8 software. below, we present a path diagram showing the path coefficients and relevant t-values. figure 2. path coefficient figure 3. t-count based on the image acquired from data analysis using lisrel, the table below presents the path coefficient and t-count values: https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 912 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2. hypothesis testing results 1.1.1.1. influence of variables 1.1.1.2. pa th coefficien t 1.1.1.3. t -count 1.1.1.4. ttable 1.1.1.5. concl usion 1.1.1.6. capital structure → profitability 1.1.1.7. 0.0 2 1.1.1.8. 0. 19 1.1.1.9. 1.6 5 1.1.1.10. h1 rejected 1.1.1.11. liquidity → profitability 1.1.1.12. 0.06 1.1.1.13. 0.51 1.1.1.14. 1. 65 1.1.1.15. h2 rejected 1.1.1.16. capital structure → firm value 1.1.1.17. 0. 07 1.1.1.18. 0 .79 1.1.1.19. 1. 65 1.1.1.20. h3 rejected 1.1.1.21. liquidity → enterprise value 1.1.1.22. 0. 13 1.1.1.23. 1 .48 1.1.1.24. 1. 65 1.1.1.25. h4 rejected 1.1.1.26. profitability → company value 1.1.1.27. 0. 60 1.1.1.28. 7 .24 1.1.1.29. 1. 65 1.1.1.30. h5 accepted 1.1.1.31. capital structure →profitability →company value 1.1.1.32. 0. 01 1.1.1.33. 0 .19 1.1.1.34. 1. 65 1.1.1.35. h6 rejected 1.1.1.36. liquidity → →profitability → enterprise value 1.1.1.37. 0.03 1.1.1.38. 0.51 1.1.1.39. 1. 65 1.1.1.40. h7 rejected source : data processing results the hypothesis testing results in table 2 reveal several key findings about the relationships between capital structure, liquidity, profitability, and firm value. all hypothesized direct relationships (h1h4) were rejected as their t-count values fell below the critical t-table value of 1.65, indicating statistically insignificant effects. capital structure showed minimal impact on profitability (path coefficient 0.02, t-count 0.19), while liquidity demonstrated a slight negative effect on profitability (path coefficient -0.06, t-count -0.51). notably, only profitability exhibited a significant positive influence on company value (path coefficient 0.60, t-count 7.24), supporting hypothesis h5. the mediating effects of profitability on the relationships between capital structure/liquidity and firm value (h6-h7) were also rejected, suggesting that in lq45 companies, profitability directly influences firm value rather than serving as an effective intervening variable. in accordance with the conceptual model used in this study, there are two structural equations. the first structural equation involves endogenous variables in the form of firm value and several exogenous variables, namely capital structure, liquidity, and profitability. the following are the results of the first structural equation: pbv = 19.502*roa + 0.251*der + 0.0132*cr, errorvar.= 58.644, r² = 0.379 (2.695) (0.319) (0.00890) (8.742) 7.235 0.787 1.482 6.708 the calculations show that the r squared value is 0.379. this suggests that 37.9% of the variation in business value can be attributed to capital structure, liquidity, and profitability. responding to https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 913 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the existing structural coefficient values, the three variables provide a positive contribution to increasing company value. furthermore, for the second structural equation, the endogenous variable considered is profitability, while the exogenous variables include capital structure and liquidity. the following are the results of the structural equation: roa = 0.00242*der 0.000178*cr, errorvar.= 0.0897 , r² = 0.00297 (0.0125) (0.000347) (0.0134) 0.194 -0.512 6.708 0.00297 is the figure obtained from the r square calculation, meaning that 0.297% of the variance in profitability is influenced by capital structure and liquidity. from the structural coefficient value obtained, it can be seen that capital structure provides a positive contribution, while liquidity provides a negative contribution. to ascertain whether the hypothesis put out in this study is accepted or denied, the results of the hypothesis testing will then be explained. our study examining the relationships between capital structure, liquidity, profitability, and firm value in lq45 companies yielded several significant insights. the statistical analysis revealed that neither capital structure nor liquidity significantly influenced profitability, as evidenced by t-count values (0.19 and -0.51 respectively) falling below the critical threshold of 1.65. similarly, we found no significant direct relationship between capital structure and firm value (t-count 0.79), nor between liquidity and firm value (t-count 1.48). the most notable finding emerged in the relationship between profitability and firm value, where a strong positive correlation was observed with a path coefficient of 0.60 and t-count of 7.24, substantially exceeding the threshold value. this indicates that among the lq45 companies, profitability stands as the primary driver of firm value. our investigation into potential mediating effects revealed that profitability does not significantly mediate the relationship between capital structure and firm value, nor between liquidity and firm value, as indicated by t-count values of 0.19 and -0.51 respectively. these findings suggest that while capital structure and liquidity management remain important aspects of financial strategy, their impact on both profitability and firm value may be influenced by other factors not captured in this model. for lq45 companies, the results emphasize that initiatives focused on enhancing profitability are likely to yield the most significant improvements in firm value. the influence of capital structure on profitability the research results indicate that capital structure does not have a significant effect on profitability. specifically, this can be explained by the high level of debt in many of the sample companies, which is not accompanied by efficient financial cost management. the large interest expenses resulting from the debt suppress net income, so although in theory debt can be used for expansion and increasing revenue, in practice it actually reduces profitability due to high financial costs. moreover, lq45 companies are generally large, mature firms with relatively stable or even saturated financing structures. under such conditions, changes in the proportion of debt and equity no longer have a meaningful impact on profit growth. this finding is consistent with the studies by barus (2021) and fitriyanti (2024), which state that in large companies, capital structure is no longer a primary factor in determining profitability, as operational efficiency and cost control https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 914 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc become more dominant factors. however, this result contradicts the study by nopianti & suparno (2020), which found a positive and significant effect of capital structure on firm value in the food and beverage sector. this discrepancy may be due to the fact that companies in the food and beverage sector tend to be more capital-intensive and are in a growth stage, where additional debt still provides positive leverage for improving performance. thus, the differing results reflect that the effect of capital structure on profitability strongly depends on the efficiency of financial management, the company’s growth stage, and the characteristics of the industry sector. the effect of liquidity on profitability the results of this study indicate that liquidity does not have a significant effect on profitability. specifically, this can be explained by the fact that most lq45 companies have reached a stage of business maturity, where the need for high liquidity is no longer urgent. they tend to hold large amounts of cash as reserves to maintain long-term financial stability, rather than for rapid expansion. this makes high liquidity not directly contribute to an increase in profitability. in fact, allocating too much capital in the form of current assets may reduce asset utilization efficiency and potentially become an opportunity cost, as these funds are not used for productive investments. this finding is consistent with the research by sinta dewi & ekadjaja (2020), which concluded that in large companies in indonesia, the relationship between liquidity and profitability weakens once the company reaches a financial structure equilibrium point. furthermore, rodriguez et al. (2024) also warn that excessive focus on increasing liquidity may lead to missed investment opportunities that could enhance profitability. conversely, this result contrasts with the study by rismania zainati & zahra (2024), which found a positive and significant effect of liquidity on profitability in the consumer goods sector. this difference is likely due to the differing characteristics of the industry sector; companies in the consumer goods and food sectors rely more on working capital turnover and cash flexibility to respond to fluctuating market demand and make short-term investments that yield quick returns. therefore, it can be concluded that the effect of liquidity on profitability highly depends on the context of the company, such as business scale, growth stage, as well as the strategic orientation and investment structure of each industry. the influence of capital structure on firm value this study shows that capital structure does not have a significant effect on firm value, which contrasts with the findings of puspitasari (2019), who found a significant relationship between the two. the difference in results can be explained by the different conditions of the companies involved. in this study, the companies listed in the lq45 index have a capital structure that is more dominated by debt. as a result, the profits generated by the companies are prioritized for debt obligations, such as interest and principal payments, rather than being used to pay dividends or increase stock value. consequently, the return for investors, in the form of divident, tends to decrease. this finding aligns with the research of puhut et al. (2024), who also found that companies with a high debt ratio tend to experience a decline in returns for shareholders. meanwhile, sabakodi & andreas (2024) found contrasting results, showing that well-managed debt can improve company performance and firm value. kraus et al. (2022) also emphasize that in the digital era, non-financial factors such as technology and market growth potential are more dominant in determining a company's value. therefore, although capital structure plays a role, the https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 915 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc dominance of debt in this company's capital structure reduces its capacity to provide optimal returns for investors. the influence of liquidity on firm value the finding that liquidity does not significantly affect firm value indicates that, although the company has the ability to meet short-term obligations, it does not directly improve investors' perception of the firm's value. in practice, high liquidity that is not accompanied by asset optimization can send a negative signal to investors, as it indicates that the company has not allocated funds productively. this can be explained by the tendency of investors to focus more on how the company utilizes its current assets to generate profits, rather than merely looking at the amount of current assets it holds. a company with high liquidity does not always reflect efficiency in asset management, as it may indicate unused funds that should have been allocated to more profitable investments. this study supports (rajendra bomantara, 2024), results, which claim that investors prefer a company's potential to make profits over its liquidity. however, this finding varies from that of sudjiman (2022), who discovered that liquidity increases business value. the disparity in results could be attributed to differing sample characteristics and research periods. the influence of profitability on firm value profitability has a highly significant effect on firm value. this proves that companies that are able to generate consistent profits are more valued by the market. investors view profitability as a signal of confidence in the efficiency and sustainability of the company’s business. high profits indicate that the company is able to maximize its resources, maintain cost structures, and capture a competitive market share. profitability is not only an indicator of a company’s financial performance but also an important signal of the company’s ability to grow, innovate, and adapt to market dynamics. high profitability not only attracts investor attention but also shows that the company has significant growth potential and the capacity to manage resources efficiently. therefore, profitability remains one of the key factors influencing firm value in this dynamic market. companies that can maintain and enhance their profitability will have a stronger position in attracting investors and creating higher long-term value in the market. the company’s success in generating profits reflects not only solid financial performance but also its capacity to adapt and grow in a dynamic market. hence, profitability remains a key factor in attracting investor attention and influencing investment decisions, ultimately increasing the firm value in the long term. these results are in line with research by martini (2024), which discovered that high profitability gives investors hope for the company's future. additionally, talunohi & bertuah (2022) found that high profitability increases a company's appeal to investors by demonstrating its capacity to produce the best returns. the effect of capital structure on firm value mediated by profitability the results show that profitability does not mediate the effect of capital structure on firm value. this means that even if the capital structure is well-managed, it does not automatically contribute to increasing profitability that significantly raises firm value. in many cases, companies with an optimal capital structure still cannot enhance their value if the profits generated are not high or https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 916 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc consistent. in this context, even though the capital structure reflects significant debt, a company can still survive because its assets are sufficient to cover its existing debt obligations. moreover, the profitability of the company plays a crucial role. high profits demonstrate the company’s ability to generate more revenue than its costs and obligations. when a company can generate substantial profits, investors will have more confidence in the company's financial prospects, which can increase demand for its stock, ultimately driving up the company’s share price. this also directly impacts the returns received by investors, which can become a driving factor for high stock prices. when a company has large profits, it will lead to an increase in stock prices, which will positively affect the firm value in the eyes of the market. this finding is consistent with the studies undertaken by hatane et al. (2020), which mentioned that capital structure is not the main factor in increasing company value, but rather how the company manages its capital to achieve profit. research by rodriguez et al. (2024) also supports this result, by showing that the effectiveness of capital use is more important than the composition of capital itself. the effect of liquidity on firm value mediated by profitability this study shows that profitability does not mediate the effect of liquidity on firm value. similarly, profitability does not mediate the effect of liquidity on firm value. although high liquidity is often assumed to support profitability, in the context of this research, that relationship was not found to be significant. this indicates that a company’s ability to manage current assets is not sufficient to enhance profits that can contribute to firm value. idle funds or unproductive assets may actually reduce efficiency and hinder value growth. therefore, companies need to strategically manage their assets so that they not only reflect liquidity stability but also the long-term profit potential that affects firm value. in this case, companies may struggle to generate profits from unsold goods, which in turn could affect profitability and, indirectly, firm value. this finding suggests that high liquidity, although initially appearing positive, may actually indicate inefficient asset management. a company with a large amount of cash or inventory but no profit from those assets will likely face difficulties in enhancing firm value. this outcome is consistent with imronudin et al. (2023) research, which reveals that excessive liquidity can reduce profitability due to the opportunity cost of funds that are not optimally utilized. in addition, research by anggraeny & hermawan (2021) shows that investors focus increasingly on how corporations manage their assets to generate profits, rather than just judging the company's capacity to satisfy its short-term obligations. conclusion based on the analysis results, it can be concluded that capital structure and liquidity have an insignificant impact on profitability and company value. however, profitability has been shown to significantly affect company value, indicating that profit remains a crucial factor in investor decision-making. to increase company value, the company should reduce its debt burden by minimizing high-interest liabilities and prioritize the use of internal funding, which comes from the sale of non-productive assets or securities, for operational activities and investments. additionally, liquidity issues, such as excessive but unproductive receivables, idle cash, and excess inventory, must be addressed through better receivables management, stricter credit policies, strategic investments of excess cash, and more efficient inventory control. these steps are essential https://www.ilomata.org/index.php/ijtc the impact of capital structure and liquidity on firm value with profitability as an intervening variable: a study on lq45 companies qinthara, ramadhan, mardiyani, and parlina 917 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to optimize asset utilization, improve profitability, and create long-term value. further research is recommended to examine other factors that influence company value, including the quality of corporate governance, market dynamics, and the role of innovation and technology adoption in financial performance. references adelin, n. 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(2023). likuiditas dan leverage terhadap nilai perusahaan dimediasi profitabilitas: eksplorasi peran financial technology sebagai variabel moderasi. jurnal ilmiah manajemen dan bisnis, 24(1), 1–25. https://doi.org/10.30596/jimb.v24i1.12419 https://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 5, issue 3 july 2024 page no. 807 829 807 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach andiswa ngcizela1, masibulele phesa2, benedict valentine arulanandam3 12university of kwazulu natal, south africa 3ucsi university, malaysia correspondent: phesam@ukzn.ac.za1 received : may 10, 2024 accepted : july 18, 2024 published : july 31, 2024 citation: ngcizela, a., phesa, m., & arulanandam, b.v. (2024). impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach. ilomata international journal of tax and accounting. 5(3) 807 829. https://doi.org/10.61194/ijtc.v5i3.1533 abstract: this study investigates the nexus between textual features in chairperson’s reports and their effectiveness in shaping stakeholder perceptions in south african soes. this study closes a significant gap on soes' use of impression management tactics. these voluntary sections are prone to manipulation to mask poor governance and maladministration. soes are key to south africa’s economic development, but their declining performance that raised public interest on the mismanagement and corruption prompted this analysis. using secondary data from soes’ annual reports, a quantitative content analysis approach was applied to 18 annual reports of 18 schedule 2 soes categorised into nine profitable and nine non-profitable. signaling theory guided interpretation. the study examined the chairperson’s report by analyzing variables such as report length, positive and negative sentiments, personal references, and passive language in both categories . findings showed both profitable and non-profitable soes use impression management. profitable soes had longer reports than nonprofitable ones, however the length differences were insignificant. profitable soes also used more personal references, though marginally. both categories employed a similar proportion of positive tone, surpassing negative tone. non-profitable soes used more passive voice, but the difference was minimal. this study highlights how signaling theory applies to public sector disclosures, offering insights for stakeholders into how impression management may shape the presentation of soe performance. it aids users in recognizing tactics used by soes to maintain relevance amid persistent poor outcomes. keywords: impression management; integrated reporting; state-owed enterprises; signalling theory; chairperson’s report. this is an open access article under the cc-by 4.0 license. introduction in recent years, south african (soes) have faced intense scrutiny due to state capture, which exposed severe misgovernance and maladministration. parts or fully government-owned soes are meant to advance public interests through economic activity. governed by legislation like the public finance management act (pfma) 1999, which ensures transparency and accountability, https://www.ilomata.org/index.php/ijtc mailto:phesam@ukzn.ac.za1 https://doi.org/10.61194/ijtc.v5i3.1533 impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 808 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc these entities face ongoing challenges. many soes rely on state bailouts yet remain financially unsustainable, posing economic and infrastructure risks. this precarious state, exemplified by eskom's blackouts, raises concerns about impression management practices in their annual reports to obscure their actual performance. impression management is seen as strategic self-presentation, often used to obscure an organization’s true performance. companies may leverage their informational advantage to downplay poor results and mislead stakeholders (merkl‐davies et al., 2011), emphasizing positive outcomes. while narrative disclosures in annual reports can provide valuable insights (leung et al., 2015), they may also be used for impression management. this study examines impression management in non-financial sections of soes’ annual reports, focusing on the chairperson’s report—a key stakeholder summary. due to financial distress and increased reliance on state support, soes may use these narratives to influence government perceptions and secure funding (agsa, 2022). the recent poor performance and heightened media scrutiny of south african soes may lead to declining stakeholder trust, creating opportunities for impression management to protect their image. voluntary narrative disclosures in annual reports enable management to employ selective strategies to present a positive view (mlawu et al., 2023). these narratives are often tailored to influence perceptions, as leung et al. (2015) highlighted. shaikh et al. (2024) impression management in south african soes focused on integrated reports at large, while maleka (2021) observed selective graphs as impression management tools in south african soes. other studies by phesa & sibanda (2022) and yasseen et al. (2017) confirmed these tactics in chairperson’s reports of jse-listed companies. dhludhlu et al. (2022a) noted such strategies can result in misleading information. these studies mainly focused on private-sector companies. given the financial struggles of soes and economic challenges, the motivation for impression management in reports, especially the chairperson’s statement, is clear. the study aims to fill the gap to determine whether the voluntary narrative disclosures, specifically the chairperson’s report in south african soes’ annual reports, utilize impression management strategies through textual characteristics including length, positive disclosure tone, personal references and passive language. the research question guiding this study is: do narrative disclosures in south african soes obscure true performance using impression management through length, positive tone, personal reference and passive language? to address this, an empirical analysis was conducted to uncover these tactics within soes. the following section reviews existing literature and formulates hypotheses relevant to the investigation. literature review and hypothesis development: signalling theory signalling theory was explored by spence (1978) in the context of economics, he applied it in the job market signalling. he made use of hiring a candidate for a specific job wherein the candidates provide information that is distinguished into two, that is information that cannot be changed and that which is subject to changes and this is what is referred to as signals, because it is subject to manipulation. he further explains that the signaling information may lead to the hiring of an https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 809 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc individual based on the information provided. however, the employer will only understand the individual’s capabilities if they match the information provided when they have been hired already. similarly, a psychology study by wilhelmy et al. (2017) also explored signal theory in the context of impression management through the hiring process, focusing on the employers being the sender. they observed that employers send signals of impression management through the interview process. furthermore, they noted that employers can send signals to interviewees in an oral form to influence their perception of the hiring company. notably, signaling has also been viewed as an act where management or the organisation withhold information from external stakeholders, this was expanded that shareholders may have information about the true risk of an organisation while lenders are not due to the information being withheld from them (wang et al., 2009) and the term used for this is information irregularities (taj, 2016). on the other hand, bae et al. (2018) viewed signal theory as the solution to the agency conflict in that it eliminates the information irregularities. the characteristics of signaling bring about this elimination, whereby managers send signals to the stakeholders who receive signals and provide feedback based on those signals. as a result, there is information dialogue between the parties involved. in the same line of thought, (morris, 1987) concurs with this conclusion. furthermore, the theory suggests that for signaling to exist, two parties should be involved, one party being the sender and the other being the receiver. this therefore means that management because of their position is the sender as they have information about the organisation and the users of information are the receiver as they rely on the information provided by management through reporting, therefore management usually use their position of access to information to signals to the receiver through choosing what information to communicate and how to the users of financial and non-financial information and choosing how to interpret the information communicated (connelly et al., 2011)this information is usually communicated in an organisation's annual report. ben‐amar et al. (2022) they also concluded that organizations tend to use signaling and impression management tactics in disclosures about diversity practices in corporate governance. moreover, they note that organisations exercise bias in narrative disclosures to signal good performance and manage stakeholder impressions. signalling disclosure signalling disclosure is an act where management sends signals to the stakeholders through voluntary disclosures. in return, the organisations receive signals from the information recipients (bae et al., 2018) p2. the study by bae et al. (2018) was based on the influence of corporate sustainability disclosures in signal theory, citing that the quality of information reported conveys positive signals while poor information sends negative signals, resulting in reduced market prominence. moreover, signaling has been further explored by scholars such as morris (1987), who studied signaling theory in voluntary disclosures in annual reports. this scholar concluded that the management of good-performing organizations selects information to reveal the organization’s quality results as opposed to poor-performing organizations that disclose information concealing the poor performance. it is also argued that highly performing https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 810 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc organisations adopt voluntary standards and disclosures such as integrated reporting to remain perceived as good performing (karasek iii & bryant, 2012). state-owned entities are accountable to the national assembly and the general public. in terms of the pfma, “the executive authority responsible for a department or public entity must table in the national assembly or a provincial legislature, as may be appropriate the annual report and financial statements referred to in section 40 (1) (d) or 55 (1) (d) and the audit report on those statements, within one month after the accounting officer for the department or the accounting authority for the public entity received the audit report”(treasury, 1999). this means management wants to signal the national assembly about their performance. therefore, the national assembly is deemed the major receiver of these voluntary disclosures. empirical literature integrated reporting flower (2015) examined the purpose and progress of the international integrated reporting council (iirc), established in 2010 to promote sustainability accounting. he argued that sustainability accounting fosters a sustainable society, which requires organizations to develop strategies that communicate long-term value creation while addressing stakeholder needs (eccles & serafeim, 2011). the iirc introduced the concept of integrated reporting (ir), defined as "a process founded on integrated thinking that results in a periodic integrated report... about value creation over time" (iirc, 2013). dumay et al. (2016) expanded on this, noting that before ir's introduction, traditional corporate reporting focused primarily on financial data, which failed to meet the needs of diverse information users. this led to adopting hybrid disclosure approaches, combining financial and non-financial information to address governance concerns and the limitations of traditional reporting models. the popularity of the triple bottom line (adams & simnett, 2011; dumay et al., 2016) highlighted this shift. integrated reporting aims to improve communication of a company’s value creation across short, medium, and long-term horizons (cheng et al., 2014). it expands beyond financial statements, incorporating non-financial factors that affect stakeholders (eccles & serafeim, 2011). de villiers & hsiao (2017) state that the integrated reporting framework provides principles for preparing integrated reports. this approach links strategy, financial performance, governance, and an organization's social, environmental, and economic aspects (pistoni et al., 2018; surty et al., 2018). however, flower (2015) critiqued the iirc for not fully addressing sustainability accounting within its framework, suggesting this limited its potential impact on corporate reporting. despite this, ir enhances transparency and stakeholder trust (dečman & rep, 2018). integrated reporting in south african context atkins and maroun (2015) examined the initial response to integrated reporting (ir) in south africa, focusing on institutional investors. using qualitative interviews, their study found mixed views: some investors appreciated the balance of financial and non-financial information, while others saw little practical benefit beyond the theoretical. overall, south african investors were https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 811 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc largely supportive of ir's introduction. using thematic content analysis, du toit et al. (2017) explored the long-term effects of integrated reporting on south african companies. their findings suggested that it would take time for companies to fully grasp and effectively implement ir. however, the study's limited sample of four jse-listed companies may not reflect broader trends. south africa's king code of governance (2009) promotes sustainability and integrated reporting. eccles and serafeim (2011) argue that ir is a key tool for companies to communicate sustainable strategies and performance. south africa was the first country to require jse-listed companies to adopt ir, setting a precedent for global practice. state-owned enterprises state-owned enterprises (soes) are government-owned entities, primarily advancing the state’s social outcomes through profits generated from their operations (surty et al., 2018). the government establishes soes to engage in economic activities on its behalf, either wholly or partially owned (kathrada et al., 2021). in south africa, soes drive economic growth, reduce poverty, and provide essential services like water and electricity (ackers & adebayo, 2022). since the end of apartheid, soes have been key to advancing the country’s economic development, addressing social issues, and supporting the government’s priorities. the presidential review commission (prc, 2013) emphasized that the success of soes is integral to economic growth and transformation, underscoring the need for strong corporate governance to protect national and citizen interests. soes are accountable to various stakeholders, with their annual reports serving as key documents for transparency (surty et al., 2018). however, kathrada et al. (2021) note that narrative disclosures in these reports can sometimes manipulate stakeholders' perceptions of performance. the governance of south african soes has been marred by issues such as state capture, maladministration, and inefficiency, contributing to financial crises in entities like eskom, the south african broadcasting corporation (sabc), south african airways, and denel (madumi, 2018). these challenges highlight the deep-rooted governance problems in the public sector, which have exacerbated corruption and mismanagement. based on their size and mandate, south african soes are categorized into three schedules—1, 2, and 3. schedule 3 entities are further divided into parts a, b, c, and d, each with varying levels of responsibility from national to provincial governance (treasury, 1999). integrated reporting in state-owned enterprises integrated reporting, originally developed for the private sector, has become increasingly relevant to state-owned enterprises (soes), offering valuable insights into how these organizations create value through integrating financial and non-financial information (surty et al., 2018). in south africa, soes are accountable to multiple stakeholders, and the annual report is a key document. integrated reporting helps soes meet their accountability obligations by providing detailed information on governance, financial performance, and social, environmental, and economic activities (shaikh, 2022). accountability is essential for effective service delivery and good governance (brinkerhoff & wetterberg, 2016). soes are subject to government and social https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 812 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc accountability, ensuring that resources are used efficiently for public benefit and economic growth (prc, 2013). through institutions like the public protector and the auditor general, the government monitors soes to ensure they fulfill their mandates. accurate and consistent reporting on performance is critical in accountability, demonstrating how state resources are utilized to meet public needs, such as delivering essential services like water (iirc, 2013). transparency in reporting, including risk disclosures, fosters public trust and strengthens social responsibility between soes and stakeholders (thomas, 2012). the chairperson’s report, a key narrative disclosure in the annual report, provides an overview of the organization’s performance and strategic direction. it is particularly influential for stakeholders, shaping their perceptions of the soe’s financial health and prospects (yasseen et al., 2017). while much research has focused on chairperson’s reports in listed entities, studies on soes in south africa remain limited. however, smith and taffler (2000) highlight the relevance of this voluntary narrative disclosure, noting its importance in shaping stakeholder views despite the lack of formal assurance. impression management impression management, originating from social psychology, refers to how individuals present themselves to be viewed favorably by others (brennan et al., 2009; hooghiemstra, 2000). this concept has been extended to corporate reporting, where it describes how organizations manipulate the presentation of information to influence stakeholder perceptions (merkl-davies et al., 2011). in corporate reporting, managers may selectively disclose information to create a positive image of the organization, often by highlighting favorable performance and concealing negative aspects (yasseen et al., 2017). research by leung et al. (2015) on "impression management through minimal narrative disclosure" found that non-financial information in annual reports, known as narrative disclosures, can be used both to provide valuable insights and to manipulate perceptions. similarly, bozzolan et al. (2015) examined tone in narrative disclosures, revealing that managers adjust their tone to influence how stakeholders perceive the organization, linking it to impression management strategies rather than ethical conduct. kathrada et al. (2021) focused on voluntary narrative disclosures in south african state-owned enterprises (soes), highlighting how graph disclosures distort users' views of company performance, especially non-financial ones. these tactics are part of broader "legitimation" strategies that organizations use to shape public perception, portraying a favorable image despite underlying issues (bozzolan et al., 2015). leung et al. (2015) also noted that voluntary narratives often involve selective reporting or omission of information, allowing managers to manipulate stakeholders' views of the organization's financial performance and prospects. this is particularly common in underperforming organizations, which may disclose less information to conceal poor outcomes. "rhetorical manipulation" involves carefully choosing language to present a positive image and hide negative performance. studies have also linked impression management to specific corporate governance issues. for example, ben‐amar et al. (2022) found that organizations use impression management tactics to manipulate stakeholders' perceptions of board gender diversity. similarly, https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 813 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc moreno et al. (2019) and nel et al. (2022) observed that impression management is evident in the optimistic language used in chairperson’s and ceo reports, influencing stakeholders' perceptions of future performance. in conclusion, organizations use impression management strategies in corporate reporting to enhance their image and influence stakeholder perceptions, often through selective disclosures and rhetorical manipulation of language. these tactics can mask negative performance and promote a more favorable view of the organization’s outcomes (jaafar et al., 2018; mahboub et al., 2016). impression management in chairperson’s report the chairperson’s report is a key component of the annual report that investors often scrutinize (clatworthy & jones, 2006). scholars have explored the vulnerability of this report to impression management practices, especially in how management may manipulate stakeholders' perceptions of the company's performance. oliveira et al. (2016) studied impression management in chairperson’s reports, finding that while there was no direct correlation between company performance and impression management tactics, managers of larger corporations tended to present the company more favorably using high levels of verbatim language. supporting this view, clatworthy and jones (2006) assessed the relationship between company performance and textual characteristics in chairperson’s reports. they concluded that these reports are highly susceptible to impression management, with management of profitable companies often taking credit for success. in contrast, underperforming companies disclosed less quantitative information and focused more on prospects than past performance. however, it remained unclear whether these impression management tactics were intentional. similar findings were reported by cen and cai (2013) in their study of chinese companies. phesa et al. (2023) used stakeholder theory to examine impression management in the chairperson’s reports of jse delisted companies. they identified tactics such as passive voice, self-proclamation, and report length. their study found that delisted companies, particularly those that had performed poorly, used impression management tactics more frequently in their chairperson’s reports before delisting, signaling a higher reliance on these strategies in underperforming companies. overall, these studies highlight that the chairperson's report is a key tool for impression management, with management often using it to shape stakeholders' perceptions, especially when company performance is weak. based in literature, the following null hypothesis is developed: h₀: there is no significant difference in the textual characteristics of the chairperson’s report between profitable and non-profitable state-owned enterprises listed under schedule 2 of the pfma. to fulfil this hypothesis, we developed the following sub-hypothesis: h₁.1:the length of the chairperson's report will be the same for both profitable and non-profitable soes. length of chairperson’s report https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 814 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc existing literature has explored the length of the chairperson’s report using two key variables: page numbers and word count (clatworthy & jones, 2006; moola, 2016; phesa, 2021; yasseen et al., 2017). these studies compared the length of chairperson’s reports between profitable and nonprofitable organizations. the findings generally showed that reports from non-profitable organizations were slightly shorter than those from profitable ones. however, when comparing extremely profitable organizations with extremely non-profitable ones, the results revealed the opposite pattern: extremely non-profitable companies tended to have longer reports, though the difference in word count was marginal. the following hypothesis is developed: h₁.2:the percentage of positive tone in the chairperson's report will be the same for both profitable and non-profitable soes. positive disclosure tone in the chairperson’s report bozzolan et al. (2015) tested impression management in the fiat group by analyzing sentence tone and identifying positive and negative words in stakeholder interactions. similarly, phesa (2021) and mgoyana & phesa (2023) used this method to assess the percentage of positive and negative words in disclosures. melloni et al. (2016) examined whether companies manipulate the tone of business model disclosures in integrated reports as an impression management tactic. their findings showed that future-focused disclosures often featured a significantly positive tone, suggesting manipulation to create a favorable impression of the company. h₁.3: the chairperson's report will contain similar personal references in profitable and non-profitable soes. use of personal references prior literature has tested the use of self-proclaiming words such as "we," "us," "i," "me," "my," and "our" in chairperson’s reports. clatworthy and jones (2006) found that high-performing companies use more self-references than poor performers. similarly, yasseen et al. (2017) and moola (2016) reached the same conclusion, noting only a marginal difference. however, phesa (2021) contradicted these findings. further testing by yasseen et al. (2017) compared extremely profitable and extremely non-profitable companies, revealing that highly profitable companies used fewer personal references than their non-profitable counterparts. h₁.4:the percentage of passive language in the chairperson's report will be similar for both profitable and non-profitable soes. use of passive language existing literature has examined the use of passive language in chairperson’s reports using various statistical techniques, including t-tests and median tests (clatworthy & jones, 2006; yasseen et al., 2017). clatworthy and jones (2006) found that non-profitable companies use slightly more passive https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 815 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc language than profitable ones. in contrast, moola (2016) and yasseen et al. (2017) observed a more noticeable difference, with non-profitable companies using significantly more passive language in their chairperson’s reports than profitable companies. these findings suggest that passive language may be more prevalent in reports from underperforming organizations. the literature review reveals that while several studies have addressed impression management strategies in the chairperson’s report of private companies, particularly those listed on the jse, limited research has focused on major public sector entities, specifically state-owned enterprises (soes). notably, no study has examined the textual characteristics of the chairperson’s report within the context of south african soes. this presents a gap in the literature, highlighting the need to explore whether impression management strategies are present in the annual reports of south african soes. this study addresses this gap by applying signalling theory as its theoretical framework, offering a new perspective compared to recent studies on impression management in chairperson’s reports. next section present the methodology used in this study. method this study employed positivism and used the quanyearlyve content analysis method to analyze secondary data in annual reports. the population consisted of 21 soes listed under schedule 2 of the pfma. all 21 schedule 2 entities, as their number is fewer than 30 (delice, 2010). however, three entities were excluded due to unavailable annual reports. two soes published only financial statements, and one had an incomplete audit. therefore, 18 yearly reports were analyzed for the chairperson's report.the research focused on the period from 1 april 2021 to 31 march 2022, a time marked by reports of maladministration, misgovernance, and other governance issues (prc, 2013). given these challenges, the study hypothesized that there may be an incentive for impression management in the annual reporting during this period. data was collected from the annual reports of the soes to analyze the chairperson’s reports. the study considered data was obtained from soe websites on 9 august 2023, with annual reports downloaded in pdf format. these reports, published after being tabled in the national assembly (pfma, 1999), were converted to word and excel to analyze textual characteristics. the data was stored on the researcher’s laptop and onedrive. profitability was assessed using the profit before tax figures from the income statement as the difference between the profit before tax in the 2022 annual financial statements comparable figures this is consistent with the previous studies on impression management and impression management (dhludhlu et al., 2022; mgoyana & phesa, 2023; phesa & sibanda, 2022). the following section present variables which are linked to each research hypothesis. the section covers, how each variable was achieved in details. the length of the chairperson's report was assessed by comparing the number of pages and word count for profitable and non-profitable soes. each report was imported into microsoft word, where the page count and word count functionality were used to determine its length. the percentage of positive tone in the chairperson's report was analyzed by evaluating the positive and negative sentiments, comparing both profitable and non-profitable soes to determine any differences in tone. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 816 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the chairperson’s report will contain similar personal references for profitable and non-profitable soes. the analysis focused on identifying the frequency of personal pronouns such as "we," "us," "our," "i," "me," and "my" in the chairperson’s reports to assess the extent of personal references used. the percentage of passive language in the chairperson's report will be similar for both profitable and non-profitable soes. the reports were analyzed using microsoft word’s proofing tool to calculate the percentage of passive voice in the chairperson’s reports. data presentation and analysis were conducted for all four variables based on the study by phesa (2021). the analysis is outlined as follows: h₁.1:chairperson’s report length: the number of words was determined using microsoft word. descriptive statistics included mean, standard deviation, minimum, and maximum values. the difference in report length between profitable and non-profitable soes was tested using the mann-whitney u test in spss. h₁.2:positive disclosure tone: the percentage of positive and negative sentiment was analyzed using sentiment analysis for microsoft excel, comparing the tone of profitable and non-profitable soes. h₁.3: extent of personal reference words: personal reference words such as "we," "us," and "i" were counted. descriptive statistics included mean, standard deviation, minimum, and maximum. the mannwhitney u test determined the significance of the difference between profitable and non-profitable soes. h₁.4:percentage of passive language: the usage of passive language in the chairperson’s report was analyzed through descriptive statistics. the mann-whitney u test was applied to assess the significance of the difference between profitable and non-profitable soes. in this section, we outlined the research methodology. as noted above, to ensure the rigorousness of the results, a non-parametric test called mann-whitney u was used to assess the extent of significance. the section also detailed the data presentation and analysis approach. the next chapter presents the data results and analysis according to the study’s hypotheses and objectives. this chapter presents the study's results and discussions, which focused on analyzing the chairperson’s report in the annual reports of south african state-owned enterprises (soes). the main null hypothesis of the study posits that there is no noticeable difference in the textual characteristics of the chairperson’s report between profitable and non-profitable soes. the following sub-objectives guided the data analysis: • to examine the chairperson’s report length as a potential impression management tactic. • to evaluate the use of positive tone, in the form of sentiment, in the chairperson’s report. • to assess personal reference words as an impression management tactic. • to investigate the use of passive language as a form of impression management in the chairperson’s report. results and disscusion https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 817 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the chairperson’s report length h₁.1:the length of the chairperson's report will be the same for both profitable and non-profitable soes. the length of the chairperson’s report was measured using two variables: the number of pages and words. the results in table 1 below show that profitable soes had an average of 3 pages and 1,821.67 words, while non-profitable soes had an average of 2.17 pages and 1,212.89 words. this indicates that profitable soes had, on average, 29.08% more pages than non-profitable soes. also, on average, profitable soes contained 33.42% more words than non-profitable soes. table 1: analysis of the number of pages and number of words measure type n mean standard deviation cv minimum maximum length of chairperson’s report in pages profitable 9 3.06 1.21 0.396159 1.5 5 nonprofitable 9 2.17 0.90 0.416025 1 4 total 18 length of chairperson’s report in words profitable 9 1821.67 763.28 0.419001 879 3055 nonprofitable 9 1212.89 578.67 0.477096 617 2435 total 18 source: researcher’s compilation results of the mann-whitney u test analysis the mann-whitney u non-parametric test was used to determine if the chairperson’s reports of profitable and non-profitable soes have identical lengths. table 2 below shows that the chairperson’s report of profitable soes had a mean rank of 11.56, while non-profitable soes had a mean rank of 7.44 for the number of pages, indicating a 35.64% difference in mean ranks. the sum rank for profitable soes was 104, compared to 67 for non-profitable soes regarding pages. the mann-whitney test yielded a p-value of 0.097 for page length, greater than 0.05 (p > 0.05), suggesting no significant difference in the length of chairperson’s reports regarding pages. for the length measured by the number of words, profitable soes had a mean rank of 11.78, while non-profitable soes had a mean rank of 7.22, representing a 39.6% difference. the sum rank for profitable soes was 106, while non-profitable soes had a sum rank of 65, a 35.5% higher value for profitable soes. the mann-whitney test resulted in a p-value of 0.070 for word count, which is also greater than 0.05. these results confirm no significant difference in the length of the chairperson’s report, whether measured in words or pages. the hypothesis is accepted. these findings align with those of phesa (2021), which found no significant variance between profitable and non-profitable companies listed on the jse. further, these results are consistent with those of (dhludhlu et al., 2022; mgoyana & phesa, 2023). https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 818 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 2: mann-whitney u test results on length of the chairperson’s report measure type n mean rank sum of ranks length of chairperson’s report in pages profitable 9 11.56 104 non-profitable 9 7.44 67 total 18 mann-whitney u = 22 p = 0.097 z = -1.659 length of chairperson’s report in words profitable 9 11.78 106 non-profitable 9 7.22 65 total 18 mann-whitney u = 20 p = 0.070 z = -1.810 source: researcher’s compilation positive disclosure tone in the chairperson’s report the disclosure tone was measured by analysing sentiments using the microsoft excel sentiment analysis tool. h₁.2:the percentage of positive tone in the chairperson's report will be the same for both profitable and non-profitable soes. the analysis in table 3 reveals that the chairperson’s reports of all 18 profitable and non-profitable soes contained an average of 70.3% positive sentiments. notably, the chairperson’s reports of profitable soes used 0.7% fewer positive sentiments than non-profitable soes. both categories, however, demonstrated a prevalence of positive feelings, with at least 70% of the tone being positive, indicating that the reports contained more positive than negative sentiments. the results suggest minimal variance in the percentage of positive disclosure tone between profitable and nonprofitable soes. as such, the hypothesis is accepted. however, these findings diverge from those of phesa (2021), whose replicated study showed a lower percentage of positive sentiments overall, with performing companies utilizing a more positive tone than underperforming companies. positive tone is mostly associated with optimism which to some extent is highly associated with signalling as the information may be portrayed in total different manner for some stakeholders (chotia et al., 2023). table 3: use of positive disclosure tone in sentiments measure type n positive sentiments in % negative sentiments in % use of positive sentiments in the chairperson’s report. profitable soes 9 70% 30% non-profitable soes 9 70.5% 29.5% total 18 140.5% 59.5% source: researcher’s compilation https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 819 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc extent of personal reference words this measure was analysed to test hypothesis h₁.3: the chairperson's report will contain similar personal references in profitable and non-profitable soes. table 4: personal reference words personal reference words profitable non-profitable i 45 24 my 16 5 me 0 2 we 155 93 our 229 123 us 21 13 total 466 260 source: researcher’s compilation table 4 shows that profitable soes used more self-proclaiming words than non-profitable soes. among these self-proclaiming terms, the most commonly used words across both categories were "our" and "we." table 5: analysis of the use of personal references measure type n mean standard deviation cv minimum maximum use of personal references profitable 9 51.56 41.68 0.808403 5 103 nonprofitable 9 29 27.80 0.958564 0 85 total 18 source: researcher’s compilation the statistical analysis of personal reference words, such as "i," "we," "our," "my," "us," and "me," revealed that profitable soes used, on average, 52 personal reference words, compared to 29 for non-profitable soes. this indicates that profitable soes used 41.14% more self-proclaiming words than non-profitable soes. these results contradict phesa (2021), who found that poorperforming companies used more self-referencing words. however, the findings align with yasseen et al. (2017), who reported that performing companies tend to use more self-referencing words than non-performing ones. results of the mann-whitney u test analysis the mann-whitney u test was used to determine if the extent of personal reference words used in the chairperson’s report differs between profitable and non-profitable soes. table 5 shows that profitable soes had a mean rank of 10.44, while non-profitable soes had a mean rank of 8.56, indicating an 18% difference in mean ranks. the sum rank for profitable soes was 94, compared to 77 for non-profitable soes. the mann-whitney test yielded a p-value of 0.453, https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 820 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc greater than 0.05, confirming no significant difference in the number of personal reference words used between profitable and non-profitable soes. therefore, the hypothesis is accepted. table 6: mann-whitney u test results on the use of personal references measure type n mean rank sum rank use of personal references in the chairperson’s report profitable 9 10.44 94 non-profitable 9 8.56 77 total 18 mann-whitney u = 32 p = 0.453 z = -0.751 source: researcher’s compilation these results align with phesa (2021), who found no significant variance in using personal reference words between performing and poor-performing companies. use of passive language h₁.4:the percentage of passive language in the chairperson's report will be similar for both profitable and non-profitable soes. the statistical analysis in table 7 below reveals the use of passive language in the chairperson’s reports of soes, with a minimum of 5% and a maximum of 35%. profitable soes used an average of 18.1% passive sentences, while non-profitable soes used 21.2%. this indicates that nonprofitable soes employed more passive language in their chairperson’s reports than profitable soes. table 7: use of passive language measure no mean standard deviation cv minimum maximum use of passive language profitable 9 18.1% 7% 0.410432 7% 31% nonprofitable 9 21.2% 10% 0.447195 5% 35% total 18 source: researcher’s compilation results of the mann-whitney u test analysis the mann-whitney u non-parametric test assessed whether the chairperson’s reports of profitable and non-profitable soes contain a similar percentage of passive language. table 8 below shows https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 821 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc that non-profitable soes had a mean rank of 10.56, which is 2.12 higher than the 8.44 mean rank of profitable soes, reflecting a 20% difference in mean ranks. the sum rank for non-profitable soes was 95, while profitable soes had a sum rank of 76. the mann-whitney test statistics revealed u = 31, z = -0.839, and a p-value of 0.402. since the p-value (0.402) is greater than 0.05, it indicates no significant difference in the percentage of passive language used by profitable and non-profitable soes. therefore, the hypothesis is accepted. these results are consistent with those of phesa (2021). table 8: mann-whitney u test results on the use of passive language measure type n mean rank sum rank use of passive language profitable 9 8.44 76 non-profitable 9 10.56 95 total 18 mann-whitney u = 31 p = 0.402 z = -0.839 source: researcher’s compilation the results of this study demonstrate that both profitable and non-profitable state-owned entities (soes) employ impression management strategies in their chairperson’s reports. these strategies include manipulating the report's length, using a positive disclosure tone, incorporating personal reference words, and utilizing passive language. the analysis revealed that both groups maintained a similar percentage of positive sentiments, with a 70% positive tone in both profitable and nonprofitable soes. this finding contrasts with phesa (2021), who found that companies generally used more negative than positive sentiments, but aligns with bozzolan et al. (2015) and mgoyana and phesa (2023) who observed that fiat used a positive tone to manage stakeholder perceptions. regarding report length, while profitable soes produced longer reports, the mann-whitney u test showed no significant difference between the groups, supporting the hypothesis that both groups have similar report lengths. when examining personal reference words, profitable soes used more, but the difference was marginal. the mann-whitney u test confirmed no significant variation in this regard. similarly, the analysis of passive language revealed only a small difference between the groups, consistent with phesa’s (2021) findings. these results support all the hypotheses of the study. using signaling theory, it is clear that soes employ impression management tactics to influence stakeholder perceptions and signal positive performance, even when actual financial results may differ. the table below summarizes the relationship between this study’s findings and the existing literature. the study’s findings reinforce that impression management can be identified through several strategies, including the length of the chairperson’s report (phesa, 2021; mgoyana, 2023; mgoyana & phesa, 2023; yasseen et al., 2017; moola, 2016; dhludhlu et al., 2022; clatworthy & jones, 2006), the positive disclosure tone (phesa, 2021; bozzolan et al., 2015; mgoyana & phesa, 2023), the use of personal reference words (moola, 2016; mgoyana, 2023; yasseen et al., 2017; dhludhlu et al., 2022), and the use of passive language (phesa, 2021; dhludhlu et al., 2022; mgoyana, 2023; clatworthy & jones, 2006). the https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 822 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc study, grounded in signaling theory, reveals that chairperson reports use impression management strategies to signal good performance, influencing stakeholder perceptions and reactions to the communicated information (merkl-davies & brennan, 2007; ben‐amar et al., 2022). these results may mean how impression management tactics were used by soes to conceal information, especially since the soes were not doing administratively well. these results give insights to the government, which is the shareholder, but further to the public, whose public funds are used to invest in these soes. to some extent and perspective, the use of impression management could be to maintain trust and a positive image, especially the careful selection of positive sentiment (mgoyana & phesa, 2023). conclusion the primary aim of this study was to investigate whether impression management strategies are present in the chairperson’s reports of south african state-owned enterprises (soes) through textual characteristics in their annual reports. the study analyzed 18 yearly reports from soes that were readily available on their respective websites. the results show that the length of the chairperson’s report is one of the impression management strategies used by soes. although profitable soes had longer reports and a higher average word count than non-profitable soes, the analysis revealed no significant difference in the length of the chairperson’s reports between the two groups. consequently, the hypothesis that the length of the chairperson’s report would be similar for both profitable and non-profitable soes was accepted. a positive disclosure tone also emerged as another strategy for managing how stakeholders perceive the information in the chairperson’s report. the study confirmed that profitable and non-profitable soes used the same percentage of positive sentiment. the mann-whitney test further confirmed no significant difference in the tone used by both groups, resulting in the acceptance of the hypothesis. regarding personal reference words, profitable soes used more personal references than non-profitable ones. however, the difference was not statistically significant, leading to the acceptance of the hypothesis that the use of personal references would be similar for both groups. finally, passive language was used in both groups, with non-profitable soes using slightly more passive language. however, this difference was not significant, and the hypothesis was accepted. the study recommends that the national assembly consider introducing policies that encourage other institutions, such as chapter nine bodies, to assure the reliability and credibility of voluntary narrative disclosures. this may help reduce the use of impression management tactics in chairperson’s reports of south african soes. while this study identified and analyzed impression management strategies, it did not explore measures to mitigate such practices. future research could focus on identifying and implementing measures to limit the extent of impression management in the chairperson’s reports of south african soes. we need to explain how the findings are connected to the signalling theory or how the signalling theory is connected. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 823 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc reference adams, s., & simnett, r. 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(2009). a signaling theory of accounting conservatism. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg https://www.gov.za/documents/other/report-presidential-review-committee-prc-stateownedhttps://www.gov.za/documents/other/report-presidential-review-committee-prc-stateownedhttps://www.gov.za/documents/other/report-presidential-review-committee-prc-stateowned-%20entities-soes-28-may-2013 https://www.gov.za/documents/other/report-presidential-review-committee-prc-stateowned-%20entities-soes-28-may-2013 https://doi.org/10.1108/09513570010353738 impression management analysis in south african soe’s (state in full for the first time) annual reports: a signaling theory approach ngcizela, phesa, and arulanandam 827 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc wilhelmy, a., kleinmann, m., melchers, k. g., & götz, m. (2017). selling and smooth-talking: effects ofinterviewer impression management from a signaling perspective. frontiers in psychology, 8,740. yasseen, y., moola-yasseen, m., & padia, n. (2017). a preliminary study into impression management practices in chairman’s statements in south african annual reports: an attribution theory perspective. communicare: journal for communication sciences in southern africa, 36(1), 47-66. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.yzjlonvuaxnhbw9iawxlomm6bzoym2nizdvlmmfknme5zdnjmdnhnwqym2y2ogi3zwvhyjo2ojjmmtu6mthjotrlzmq4zde5ogvimdiwnwyyothhmdm1yjixm2vjymnjzdq4nwixothmodexzdg2ndzkzwm0yti2mwy5mzpwolq6tg ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1, january 2025 page no. 90-110 90 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms muhammad farel maeza1, eddy suranta2 12bengkulu university, indonesia corresepondent: maezafarel@gmail.com1 received : december 27, 2024 accepted : january 8, 2025 published : january 31, 2025 citation: maeza, m, f., suranta, e. (2025). political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms. ilomata international journal of tax and accounting, 6(1), 90-110. https://doi.org/10.61194/ijtc.v6i1.1776 abstract: this study investigates how political connections influence real earnings management (rem) in indonesian manufacturing firms, considering the moderating roles of family ownership and audit quality. using panel data regression on financial statements from companies listed on the indonesia stock exchange (2020–2022), the results show that political connections do not significantly affect abnormal production costs, but they do increase rem, especially through operating cash flows and discretionary expenditures. the impact of political connections on rem is stronger in familyowned firms, particularly regarding discretionary spending. high audit quality, measured by the presence of big four auditors, reduces rem related to production costs but has a limited effect on cash flows and discretionary expenditures. these findings support agency theory, highlighting the need for increased external monitoring and transparency. theoretically, this study contributes to understanding the interaction between political ties, family ownership, and audit quality in shaping earnings management behavior. practically, the results suggest that regulators and investors should pay closer attention to politically connected, family-owned firms due to their higher risk of earnings manipulation. keywords: real earnings management, political connections, family ownership, audit quality this is an open access article under the cc-by 4.0 license. introduction earnings management is the steps businesses take to modify financial reports in order to match stakeholder expectations or increase firm value. this technique, in which businesses modify their operational activities to affect reported earnings figures, can include the aggressive use of accruals or real earnings management (jacoby et al., 2019; roychowdhury, 2006). earnings management has serious risks, such as decreased transparency and possible fraud, even though it may have https://www.ilomata.org/index.php/ijtc mailto:maezafarel@gmail.com https://doi.org/10.61194/ijtc.v6i1.1776 political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 91| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc short-term advantages like raising stock prices or hitting performance goals (cohen & zarowin, 2010; roychowdhury, 2006). the asymmetry of knowledge between shareholders and management is one of the main reasons for profits management. in these circumstances, management knows more about the state of the business than shareholders do. according to agency theory, when management and shareholders have conflicting objectives, management may act in its own best interests, which could result in earnings management strategies that are harmful to shareholders (jensen & meckling, 1976). this creates challenges for shareholders in accurately assessing firm performance. a family-run manufacturing business in indonesia, pt tiga pilar sejahtera food tbk (aisa), is a prime example of actual earnings management techniques. due to a sharp drop in stated income, shareholders rejected the 2017 financial accounts in 2018. subsequent research showed that budi istanto suwito and other former management members reportedly falsified financial reports to hide losses and present better-than-actual performance. in order to achieve profit targets, this manipulation includes actual earnings management strategies like postponing spending and changing operational activity. due to the controversy, budi istanto suwito was sentenced to three years in prison for financial malfeasance (devina damara, putu indrajaya lembut, 2023). he aforementioned occurrence leads to the conclusion that family-owned manufacturing firms frequently use earnings management techniques. the study of (khan & kamal, 2022) supports this., which discovered that because family owners have considerable influence over managerial choices pertaining to financial reporting, family business groups in developing nations commonly distort earnings. family businesses frequently use these tactics to safeguard shareholder interests and preserve organizational control, and political ties and family ownership have a big impact on profits management choices (amara & khlif, 2020). real earnings management techniques, like postponing expenses or increasing revenues, are also frequently seen in addition to accrual-based earnings management (roychowdhury, 2006). this is particularly true for politically connected businesses that feel more comfortable manipulating earnings because of political backing. moderating factors include family ownership and audit quality; family businesses are often more cautious, and high audit quality might lessen information asymmetry and the incentives for manipulating financial statements (khalil et al., 2022). access to government contracts and protection from market risks are just two examples of the competitive advantages that political connections can offer businesses (boubakri et al., 2012; micco et al., 2007). to satisfy stakeholder expectations and take advantage of government regulations, politically linked businesses, according to studies, frequently use earnings management techniques, especially real earnings management. these relationships might persuade businesses to change their operating procedures or incur needless costs in an attempt to give the appearance of improved performance (gunny, 2005; jacoby et al., 2019). conflicts of interest between principals (owners) and agents (management) enable management to make self-serving choices that frequently degrade earnings quality, according to agency theory (jensen & meckling, 1976). increased earnings management procedures demonstrate that political connections generally have a detrimental impact on earnings quality. however, other research indicates that political connections may also increase the informativeness of earnings in family businesses because they http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 92| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc provide incentives to communicate greater earnings quality and lessen information asymmetry, particularly when paired with family ownership and high audit quality. several previous studies have confirmed the negative impact of political connections on real earnings management. gunny (2005) highlighted the adverse consequences of real earnings management, such as a decline in future firm value. braam et al., (2015) found that political connections are positively associated with both accrual-based and real earnings management practices, although high audit quality can mitigate their aggressiveness. chi et al., (2016) demonstrated that ceos with political ties tend to engage in higher levels of real earnings management. similarly, khalil et al (2022) confirmed that political connections significantly influence real earnings management, with family ownership and audit quality acting as moderating factors. harymawan & nowland (2016) also found that political connections negatively affect earnings quality, as politically connected firms are more likely to engage in aggressive real earnings management, influenced by political stability and government effectiveness. these findings collectively underscore the complex relationship between political ties and earnings manipulation in corporate governance contexts. wo factors that can mitigate the impact of political ties on profits management are family ownership and audit quality (braam et al., 2015; khalil et al., 2022). when it comes to managing their earnings, family-owned businesses typically take a different tack than non-family businesses. they frequently steer clear of aggressive earnings management techniques by placing a higher priority on sustainability and the preservation of long-term reputation. because shareholders put pressure on the board of directors to uphold the accuracy and openness of financial reporting, family ownership frequently serves as a deterrent against risky earnings management (gomezmejia et al., 2014; razzaque et al., 2016). according to agency theory, owners who are also actively involved in management of family businesses typically have a long-term outlook and make investments in the continuity and reputation of the business. in contrast, management may be more concerned with short-term interests in companies with distributed ownership (jensen & meckling, 1976). according to rafael la porta (1999), the majority of businesses in southeast asia are familyowned, indicating the high prevalence of family ownership in the region. this dynamic fosters an atmosphere where family business owners have more influence over corporate choices and practices. due to their immense power, family businesses are more likely to value stability and reputation, which makes them more resilient to harmful profits management techniques. family businesses are more likely to use their political ties to their advantage when they are under pressure, staying away from hazardous or immoral actions that could jeopardize their long-term relationships with shareholders and clients. according to earlier research, family ownership can reduce managers' real earnings management practices, improving the caliber of financial reporting. the long-term focus of family ownership, which prioritizes the firm's sustainability and reputation, is responsible for this (gomez-mejia et al., 2014). according to khalil et al (2022) family ownership also considerably lessens the intensity of real earnings management in politically connected businesses, suggesting that family businesses are less likely to take advantage of real earnings management for opportunistic ends. family http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 93| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc ownership is therefore a useful control mechanism for reducing harmful earnings management techniques. a key factor in reducing the impact of political ties on earnings management is audit quality. better auditors, like those from the big four firms, are better able to identify unethical earnings management tactics and offer more certainty about the accuracy of financial accounts. because high audit quality improves oversight, transparency, and accountability, it can discourage politically linked enterprises from engaging in earnings management, which lowers the likelihood of financial statement fraud (guedhami et al., 2014; hussainey, 2009). according to agency theory, the need for competent auditors to reduce information asymmetry rises when management and shareholders have conflicting interests (jensen & meckling, 1976). in this regard, auditors serve as a check and balance that aligns the interests of stakeholders, bolsters trust in financial reporting, and encourages more moral and responsible earnings management techniques. previous studies have examined the moderating effect of audit quality on earnings management practices. dedman & kausar (2012) found that high audit quality can reduce managers’ tendency to engage in earnings management, thereby enhancing the reliability of financial reports. khalil et al (2022) emphasized that high-quality auditors can mitigate earnings management practices in politically connected firms, serving as an effective moderating factor. similarly, harymawan & nowland (2016) demonstrated that audit quality can hinder earnings management in firms with political connections, while guedhami et al (2014) highlighted that selecting high-quality auditors contributes to greater financial reporting transparency and reduced earnings manipulation. collectively, these studies underscore the importance of audit quality in curbing earnings management, especially in politically connected companies. this study examines the relationship between political ties and real earnings management practices in indonesian manufacturing firms with political ties, in contrast to earlier research that concentrated on pakistan. it does this while taking into account indonesia's particular business characteristics, such as the prevalence of family ownership structures and the degree of corruption. rafael la porta (1999). by employing the percentage of shares owned as a measure of family ownership rather than a dummy variable, this study offers methodological innovation and enables a more thorough and precise examination of the influence of family ownership on profits management. the paper also examines the moderating effects of family control and audit quality in the indonesian context, offering fresh perspectives on the dynamics of earnings management in corporate settings where political ties and family ownership predominate. the theoretical underpinning of earnings management research is an understanding of how businesses use financial reporting to accomplish their goals. while accrual-based earnings management modifies reported results using accounting estimations, real earnings management involves operational choices that impact cash flows. a company's relationship with authorities can have an impact on its earnings management methods since these relationships may encourage companies to manipulate their earnings in order to have good relations and evade strict scrutiny (chaney et al., 2011; jacoby et al., 2019). family-managed businesses may have specific goals, such protecting family money and reputation, which drive them to manipulate earnings. family businesses may use profits management to http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 94| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc accomplish short-term objectives even if they are often more cautious (achleitner et al., 2014; razzaque et al., 2016). this implies that ownership structure and control have an impact on the reasons underlying earnings management. audit quality is a crucial moderating component in this paradigm. reputable independent auditors offer objective evaluations, which lessens the possibility of financial statement fraud. on the other hand, poor audit quality could allow companies to manipulate earnings without facing consequences (huguet & gandía, 2014; hussainey, 2009). understanding how earnings management, political ties, family control, and audit quality interact is crucial, especially in developing nations where political and familial influences are frequently powerful. one of the most important indicators of a company's stability and financial health is its revenue. the company's revenue also has a significant impact on the wellbeing of shareholders (chi et al., 2016; cohen & zarowin, 2010). because a company's revenue attracts potential investors and other market participants, its stock price tends to rise. some managers, however, use a variety of strategies to manipulate financial reporting in an effort to draw in investors (cohen & zarowin, 2010; roychowdhury, 2006; viana et al., 2023; zang, 2012). these methods are often employed to protect their own personal interests (mohamed et al., 2015). regretfully, conflicts occur when managers' personal interests deviate from the goals of the organization, which can eventually have a detrimental impact on the operations and financial performance of the business. the influence of political connections on real earnings management there is empirical evidence that real earnings management (rem) has negative economic impacts. deceiving stakeholders about the company's actual financial performance is the main goal of earnings management strategies (cohen & zarowin, 2010; roychowdhury, 2006; zang, 2012). according to gunny (2005) rem has a substantial negative impact on operational performance. he notes that even after adjusting for size, performance, accruals, and industry impacts, firms who participate in rem have poorer return on assets (roa) than other firms. according to agency theory, managers frequently make self-serving choices that compromise company performance in favor of immediate advantages when there are conflicts between principals (owners) and agents (management) (jensen & meckling, 1976). the resource-based view holds that a company's distinct assets and competencies determine its competitive advantage. businesses with political connections have unique benefits over those without, including preferential government treatment and political connections (ben cheikh & loukil, 2023; boubakri et al., 2012; liu et al., 2016). politically connected businesses in indonesia frequently use their advantages to secure preferential treatment, including simpler licensing, government contract procurement, or crisis support. theoretically, there is a greater chance of income-decreasing real earnings management (rem) among politically linked enterprises since these relationships allow firms to participate in rem (chi et al., 2016). businesses that employ rem to accomplish strategic goals typically report reduced future cash flows and return on assets (roa). because managers are prepared to forgo future cash flows in favor of current earnings, income-decreasing rem has a detrimental effect on business performance. in order to hide the gains from their political connections, politically connected companies in indonesia usually use rem techniques (chaney et al., 2011; faccio et al., 2006). such profits management tactics have the potential to harm the companies' and related http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 95| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc politicians' reputations (burton et al., 2011), increasing the opportunity costs for the corporations concerned. these factors make accrual-based earnings management more expensive than rem. incomedecreasing rem lowers the chance of detection while assisting politically connected businesses in concealing preferential treatment or political rents (chaney et al., 2011). rem provides a high degree of confidentiality, which reduces reputational risk for both politically connected businesses and associated politicians in indonesia, where political connections are crucial to corporate success. additionally, rem mechanisms shield managers from the dangers of handling profits (cohen & zarowin, 2010; graham et al., 2005). rem's high level of secrecy boosts its marginal advantages for companies with political connections. because income-decreasing rem techniques are less risky than accrual-based strategies, politically connected enterprises in indonesia typically favor them despite their greater costs. prior research has demonstrated that political ties offer substantial benefits in developing nations like indonesia, where market transparency is poor, regulatory supervision is frequently lax, and corruption levels are still very high. in order to safeguard their interests, get political support, and strengthen their financial position, these circumstances push businesses to employ real earnings management (boubakri et al., 2012; faccio, 2010; saeed et al., 2019). this logic leads us to the following hypothesis: h1: real earnings management is greater in firms with political connections. family ownership moderates the effect of political connections on real earnings management according to agency theory, conflicts of interest resulting from information asymmetry frequently define the relationship between shareholders (principals) and management (agents) (felício & galindo villardón, 2015). in order to accomplish their own goals, politically connected companies frequently manipulate real earnings, which can lead to a misalignment between the interests of managers and shareholders (boubakri et al., 2012; cohen & zarowin, 2010; roychowdhury, 2006; saeed et al., 2019). nonetheless, family ownership in politically connected businesses can serve as a check on the propensity to participate in real earnings management that lowers income and adds special dynamics to this relationship. according to al-hadi et al (2016) and gottardo & moisello (2016) family-owned businesses frequently place a high priority on long-term viability and the preservation of family wealth. amilycontrolled businesses in indonesia typically prioritize non-economic objectives, like maintaining the family business dynasty (gomez-mejia et al., 2014), and steer clear of profits management techniques that could endanger the company in the long run (cohen & zarowin, 2010; razzaque et al., 2016). according to agency theory, when managers behave more in their own self-interest than that of shareholders, conflicts of interest between management (agents) and shareholders (principals) develop (jensen & meckling, 1976). according to research, family-owned businesses are less involved in managing real earnings than non-family businesses (achleitner et al., 2014). to safeguard family wealth, family businesses in indonesia frequently have strict governance and monitoring procedures in place (tahir & sabir, 2015). these systems can discourage earnings http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 96| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc management methods and may include family councils, direct monitoring by family members, and family members serving on the board of directors (badrul muttakin et al., 2014). as a result, managers in family-owned businesses are generally less motivated to take advantage of opportunities, which leads to fewer agency conflicts. family members also frequently have greater access to knowledge than outsiders, which lessens information asymmetry in the company (razzaque et al., 2016). family ownership offers stability and a long-term perspective in company decision-making in indonesia's highly volatile business climate (badrul muttakin et al., 2014; tahir & sabir, 2015). as a result, family ownership of politically connected indonesian businesses tends to decrease participation in income-decreasing real earnings management. this logic leads us to the following hypothesis: h2: family ownership moderates the effect of political connections on earnings management. audit quality moderates the effect of political connections on real earnings management there are several possible moderating effects that can account for contradictory empirical results (braam et al., 2015; guerra pérez et al., 2015; khalil et al., 2022). studies of the literature on corporate conduct and political ties have revealed these moderating effects. one important moderating element that serves as an oversight tool to lessen the tendency of politically linked enterprises to manage their real earnings in a way that reduces income is audit quality. according to agency theory, management often seeks personal financial gain when its interests diverge from those of shareholders (felício & galindo villardón, 2015). agency issues arise from this misalignment, particularly when there is an information asymmetry between owners and managers. the need for external audits to guarantee financial reporting transparency rises under such circumstances. financial statements are more credible when they have high audit quality (huguet & gandía, 2014; khalil et al., 2022). there is less information asymmetry between managers and shareholders when skilled auditors are able to identify and limit earnings management tactics (beasley & petroni, 2005). retaining credibility is essential for drawing in investors and protecting the public's perception in indonesia, where politically connected businesses frequently take advantage of political connections to obtain a variety of benefits. however, engaging in real earnings management that reduces income can undermine investor confidence and limit a company's ability to raise capital. because of their reputation and experience, big four auditors typically produce high-quality audits, which increases the accuracy of financial reports and lessens managers' inclination to manipulate real earnings (chung et al., 2005; mohamed et al., 2015). according to earlier research, the inclusion of big four auditors improves the validity of investors' profits forecasts and lessens information asymmetry (hussainey, 2009). to counteract the trend of actual earnings management in indonesian companies with political clout, high audit quality is crucial. this condition is consistent with research that shows high-quality audits minimize opportunistic managerial conduct and promote transparency (dedman & kausar, 2012; kim et al., 2011; mansi et al., 2004). this logic leads us to the following hypothesis: http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 97| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc h3: audit quality moderates the effect of political connections on earnings management. method research type based on statistically examined numerical data, this study uses a quantitative technique that combines descriptive and causal methodologies to investigate the correlations between variables. the descriptive method seeks to illustrate the features of real profits management techniques, company political ties, and the moderating influence of audit quality and family ownership. the causal approach, on the other hand, looks for moderating effects from family ownership and audit quality as well as cause-and-effect links between political ties and actual profits management methods. this report cites a study by baig et al., (2023), that found that family ownership and excellent audit quality can lessen the intensity of real earnings management tactics, and that politically linked enterprises likely to engage in more of them due to decreased litigation risk. this study intends to offer fresh perspectives on how family control, political ties, and audit quality relate to actual profits management methods in indonesian manufacturing companies. using a longitudinal panel data technique, the study analyzes trends and changes in variable behavior over time using corporate financial records from 2020–2022. by helping stakeholders and legislators create better corporate governance regulations and fostering transparency through improved supervision, the findings should make a theoretical and practical contribution. population and sampling methods manufacturing enterprises listed on the indonesia stock exchange (idx) between 2020 and 2022 make up the population of this study. because of its intense operational activities, which are important for gauging real earnings management, the manufacturing industry was chosen. purposive sampling was used to choose the sample based on the following standards: a. the company must have complete financial data throughout the study period. b. financial statements are presented in indonesian rupiah (idr) to maintain consistency in data analysis. c. the company must be classified within the manufacturing sector according to the classification established by the indonesia stock exchange. d. financial statement data must be publicly accessible through the official website of the indonesia stock exchange or the company’s official website. this sampling strategy is in line with baig et al (2023) methodology, which highlights how crucial consistent and representative data availability is for panel data analysis. in the context of indonesia's manufacturing sector, the study should yield reliable and broadly applicable findings by utilizing these criteria, offering important insights into actual earnings management strategies in this sector. this study utilizes secondary data, including financial and corporate governance information. the types and sources of data used are as follows: http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 98| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc a. corporate financial data: this includes the annual financial statements of companies listed on the indonesia stock exchange (idx) during the 2020–2022 period. the data were obtained from the official idx website and the respective companies’ official websites. these financial statements are used to calculate key variables such as real earnings management, leverage, and others. b. corporate governance data: information regarding political connections, audit quality, and family ownership is sourced from the companies’ annual reports. this data is essential for determining the relationships among independent variables, moderating variables, and the dependent variable (huguet & gandía, 2014). data collection was conducted using documentation techniques with the following steps: a. data source identification: the researcher accessed financial statements and annual reports publicly available on the indonesia stock exchange (idx) website and the official websites of the respective companies. this process ensures that the data used are accurate and verifiable (roychowdhury, 2006). b. data selection: only companies meeting the sample criteria, such as presenting financial statements in indonesian rupiah (idr), were included in the analysis. this approach ensures uniformity and consistency in measuring the research variables (baig et al., 2023). c. data processing: in order to examine the correlation between political ties and real earnings management (rem), this study used panel data regression. the necessity to account for unobserved variation over time and among enterprises, which is typical in corporate governance research, justifies the use of panel regression. we carried out a number of diagnostic tests to guarantee the reliability of the regression results. using the jarque-bera test, we first evaluated the residuals' normality and verified that the error terms follow a normal distribution. second, we looked at the variance inflation factor (vif) to check for multicollinearity among independent variables; all vif values were below the generally recognized cutoff of 10, suggesting that there were no significant multicollinearity problems. third, we used the breusch-pagan test to check for heteroscedasticity. if heteroscedasticity was found, robust standard errors were used to address it. operational variable definition and measurement the term "real earnings management" (rem) describes how businesses manipulate financial reporting by changing operational activities, including spending control, in order to affect reported financial results. real earnings management, which is defined as attempts to control results through actual operational activities including output, discretionary spending, and operating cash flows, is the dependent variable in this study. a residual technique based on three anomalous components that have been used in prior studies (roychowdhury, 2006) is used to measure rem. these components are as follows: a. abnormal cash flow from operations (abncfo): the residual from regressing operating cash flows on sales and changes in sales. b. abnormal discretionary expenses (abndisexp): the residual from regressing discretionary expenses on prior year sales. c. abnormal production costs (abnprod): the residual from regressing production costs on sales, changes in sales, and changes in inventory. http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 99| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc table 1 measuring real earnings management through operating cash flow variable measurement information dependent variable cfot/at-1 = α0 + β1 (1/at-1) + β2 (st/at-1) + β3 (∆st/at-1) + єt 𝑁𝐶𝐹𝑂𝑡 = �̂�0 + �̂�1 ( 1 𝐴𝑡 − 1 ) + �̂�2 ( 𝑆𝑡 𝐴𝑡 − 1 ) + �̂�3 ( ∆𝑆𝑡 𝐴𝑡 − 1 ) calculating normal operating cash flow value with regression coefficients abncfo = ncfot cfot/at-1 calculating abnormal operating cash flow (abncfo) table 2 measuring real earnings management through production costs variable measurement information dependent variable prodt/at-1 = α0 + β1 (1/at-1) + β2 (st/at-1) + β3 (∆st/at-1) + β4 (∆st-1/at-1) + єt 𝑁𝑃𝑅𝑂𝐷𝑡 = �̂�0 + �̂�1 ( 1 𝐴𝑡 − 1 ) + �̂�2 ( 𝑆𝑡 𝐴𝑡 − 1 ) + �̂�3 ( ∆𝑆𝑡 𝐴𝑡 − 1 ) �̂�4 ( ∆𝑆𝑡 − 1 𝐴𝑡 − 1 ) calculating the value of normal production costs with regression coefficients abn_prod = nprodt prodt/at-1 calculating abnormal production costs (abnprod) table 3 measuring real earnings management through discretionary costs variable measurement information dependent variable disexpt/at-1 = α0 + β1 (1/at-1) + β2 (st-1/at-1) + єt 𝑁𝐷𝐼𝑆𝐸𝑋𝑃 = �̂�0 + �̂�1 ( 1 𝐴𝑡 − 1 ) + �̂�2( 𝑆𝑡 𝐴𝑡 − 1 calculating the value of normal production costs with regression coefficients http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 100| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc abndisexp = ndisexpt disexpt/at-1 calculating abnormal discretionary costs (abndisexp) having politicians on the board of directors makes a corporation politically connected. any person who serves on a provincial council or in the national assembly and takes part in elections is considered a politician. if the first, middle, and last names of the directors of a firm match those of the politicians, the company is considered politically related (ahmad et al., 2023; boubakri et al., 2012; braam et al., 2015) referring to this concept, baig et al (2023) point out that companies with ties to the government get preferential treatment and easier access to resources, which might intensify real earnings management. following the standards set by (faccio et al., 2006) and modified for the indonesian context, politically related businesses were found. if at least one of a company's senior executives, board members, or controlling shareholders is a member of parliament, a current or former government official, or is closely linked to one of these people, the company is considered politically connected. manual name matching between publicly accessible government and parliamentary data and firm annual reports and websites was part of the identifying procedure. in this case, the number of politically affiliated board members is represented by the values 1, 2, 3, and so on, while the number 0 denotes the lack of politically affiliated board members. as a result, if fake data is needed, it can be created so that any number of 1 or above indicates the existence of board members with political ties, while a value of 0 indicates none. audit quality is measured using a dummy variable that equals 1 if the company is audited by a big four auditor and 0 otherwise. as explained by huguet & gandía (2014), big four auditors possess superior capabilities in detecting financial statement manipulation. table 4 kap big 4 no big 4 kap afiliation 1 pricewaterhousecoopers (pwc) tanudiredja, wibisana, rintis & rekan 2 ernst & young (ey) purwantono, suherman dan surja 3 deloitte satrio bing eny & rekan, deloitte touche solutions, pt deloitte konsultan indonesia, kjpp lauw & rekan, hermawan juniarto & partners, dan pt deloitte consulting 4 kpmg siddharta widjaja & rekan, kpmg advisory indonesia, hingga kpmg siddharta advisory family ownership: the percentage of family ownership in the business is calculated by dividing the number of shares held by the family by the total number of outstanding shares. a high degree of family ownership usually indicates substantial family engagement in the oversight and http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 101| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc administration of the company, which can help lower the risk of financial statement manipulation, according to gomez-mejia et al (2014). in order to maintain their reputation over time, familyowned businesses typically put stronger internal controls in place (gomez-mejia et al., 2014). the percentage of shares held by family-affiliated directors and commissioners, divided by the total number of outstanding shares, is known as the family ownership ratio. in particular, if the page states that a person "has an affiliation relationship," it is necessary to check the capital structure section to determine whether the person actually owns shares. in that case, the total number of shares outstanding is divided by the total number of shares owned. table 5 measurement of control variables variabel rumus sumber kontrol growth opportunity gorwth= 𝐸𝐾𝑈𝐼𝑇𝐴𝑆 𝑀𝑉𝐸 (baig et al., 2023) return on asset roa= 𝐿𝐴𝐵𝐴 𝐵𝐸𝑅𝑆𝐼𝐻 𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝐸𝑇 (baig et al., 2023) leverage lev 𝑇𝑂𝑇𝐴𝐿 𝐻𝑈𝑇𝐴𝑁𝐺 𝑇𝑂𝑇𝐴𝑆 𝐴𝑆𝐸𝑇 (baig et al., 2023) the equations used to test hypotheses 1 to 3 are as follows: 𝑅𝐸𝑀 = β0 + β1𝑃𝐶𝐵 + β2𝐺𝑟𝑜 + β3𝑅𝑂𝐴 + β4𝐿𝑒𝑣 + є𝑡 (1) 𝑅𝐸𝑀 = β0 + β1𝑃𝐶𝐵 + β2𝐹𝐶 + β3𝑃𝐶𝐵 ∗ 𝐹𝐶 + β4𝐺𝑟𝑜 + β5𝑅𝑂𝐴 + β6lev + є𝑡 (2) 𝑅𝐸𝑀 = β0 + β1𝑃𝐶𝐵 + β2𝐴𝑄 + β3𝑃𝐶𝐵 ∗ 𝐴𝑄 + β4𝐺𝑟𝑜 + β5𝑅𝑂𝐴 + β6lev + є𝑡 (3) his study uses multiple linear regression as its data analysis method to look at the associations between the dependent variable and a number of independent variables. equation (1) is the basic model that examines how independent variables like lev (leverage), gro (growth), pcb (political connections), and roa (return on assets) directly affect the dependent variable, rem (real earnings management). testing the first hypothesis with this model focuses on how these factors directly affect rem. this approach allows the researcher to account for the impacts of other variables while measuring the relative contributions of each independent variable to the variance in rem. for instance, compared to organizations that are not politically connected, the researcher can assess whether politically connected enterprises often engage in higher or lower levels of earnings management. equations (2) and (3) present the terms of interaction between audit quality (aq) and family ownership (fc) and pcb (political connections), respectively. in order to determine whether family ownership moderates the association between political connections and rem, equation (2) adds the interaction variable pcbfc to test the second hypothesis. similarly, to determine whether audit quality moderates the association between political ties and rem, equation (3) incorporates the interaction term pcbaq to test the third hypothesis. the researcher can determine whether the impact of political ties on rem differs based on the degree of family ownership or audit quality by including these interaction factors. in addition to identifying direct relationships, this analytical http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 102| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc approach enables the researcher to investigate conditions or factors that may reinforce or erode these relationships. for example, the impact of audit quality or family ownership on earnings management practices in politically connected firms are two examples of such factors. results and discussion tabel 6 descriptive statistics n minimum maximum mean std. deviation abn_cfo 330 -0,29 0,47 0,0683 0,11089 abn_prod 330 -2,62 2,44 0,2567 0,40822 abn_disexp 330 -0,11 0,67 0,0603 0,08093 polcon 330 0,00 6,00 0,5212 0,95547 famown 330 0,00 1,00 0,1756 0,29987 lev 330 0,03 7,68 0,4948 0,51381 roa 330 -1,05 2,21 0,0427 0,17481 grwth 330 -8,26 56,79 3,0702 7,49817 big4 330 0 1 0,36 0,481 valid n (listwise) 330 source: secondary data processed, 2025 based on the research findings, the companies in the sample demonstrate the ability to increase earnings through various strategies. the average value of abncfo is 0.0683, indicating successful earnings enhancement through sales, while abnprod at 0.2567 reflects the practice of mass production aimed at reducing production costs. additionally, abndisexp of 0.0603 signifies reductions in operating expenses such as advertising and research. among the control variables, firms exhibit an average leverage ratio of 49%, indicating that nearly half of total assets are financed by debt, with a return on assets (roa) of 4%, reflecting efficient asset utilization to generate profits. the growth variable, at 3.07%, reflects strong market confidence in these companies, with market prices reaching approximately three times their book equity value. regarding the independent variables, it was found that 52% of board members have political connections (polcon), indicating significant political influence within the corporate decisionmaking structure. in terms of audit quality, 36% of the total 110 sampled companies (40 firms) were audited by big four public accounting firms, while the remainder employed non-big four auditors. these findings comprehensively illustrate how earnings management practices, financial conditions, and external factors interact within the sample of companies studied. table 7 real earnings management is greater in firms with political connections abn_cfo koefisie n t (sig) abn_prod koefisi en t (sig) abn_diexp koefisie n t (sig) (constant) 0,061 7,163 (0,000) (constant) 0,322 10,517 (0,000) (constant) 0,057 8,675 (0,000) polcon 0,014 2,261 (0,024) polcon -0,035 -1,527 (0,128) polcon 0,013 2,561 (0,011) http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 103| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc abn_cfo koefisie n t (sig) abn_prod koefisi en t (sig) abn_diexp koefisie n t (sig) lev -0,026 -2,203 (0,028) lev -0,058 -1,353 (0,177) lev -0,014 -1,576 (0,116) roa 0,183 5,480 (0,000) roa 0,096 0,791 (0,429) roa 0,011 0,416 (0,677) gorwth 0,002 2,172 (0,031) gorwth -0,004 -1,544 (0,123) gorwth 0,001 2,005 (0,046) r square 0,147 r square 0,032 r square 0,044 adjusted r square 0,136 adjusted r square 0,020 adjusted r square 0,032 f 13,954 f 2,643 f 3,723 sig. 0,000 sig. 0,034 sig. 0,006 source: secondary data processed, 2025 the results of the first hypothesis test indicate that companies with political connections tend to engage in real earnings management more aggressively than those without such connections. specifically, the political connection variable (polcon) has a significant impact on two of the three real earnings management components tested. for abnormal cash flow from operations (abn_cfo), the polcon coefficient is 0.014 with a significance level of 0.024 (p<0.05), indicating that political connections positively and significantly influence abnormal operating cash flows. this suggests that politically connected firms are more likely to manipulate operating cash flows, for example, by accelerating or delaying the recognition of revenues and expenses to meet certain earnings targets. similarly, for abnormal discretionary expenses (abn_diexp), the polcon coefficient is 0.013 with a significance level of 0.011 (p<0.05), showing that politically connected firms also tend to manage earnings through discretionary expenses, such as reducing research and development (r&d) or marketing budgets to boost short-term profits. however, for the abnormal production costs (abn_prod) component, political connections do not have a significant effect (coefficient = -0.035, significance = 0.128). this may be because production cost manipulation is more easily detected by regulators or auditors, leading politically connected firms to prefer more concealed earnings management methods such as cash flow or discretionary expense manipulation. these findings support the theory that political connections not only provide business advantages but also encourage more aggressive real earnings management practices, particularly through cash flow and discretionary expense manipulation. the results align with prior research showing that politically connected firms tend to be more opportunistic in financial reporting. http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 104| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc table 8 family ownership moderates the effect of political connections on real earnings management abn_cfo koefisien t (sig) abn_prod koefisien t (sig) abn_diexp koefisien t (sig) (constant) 0,056 6,520 (0,000) (constant) 0,285 11,327 (0,000) (constant) 0,054 9,246 (0,000) polcon 0,010 1,543 (0,124) polcon -0,030 -1,628 (0,105) polcon 0,008 1,749 (0,081) famown 0,021 1,052 (0,294) famown -0,013 -,233 (0,816) famown 0,001 0,060 (0,952) polconf amown 0,031 1,536 (0,126) polconfa mown 0,031 0,524 (0,601) polconfa mown 0,033 2,370 (0,018) lev -0,024 -2,248 (0,025) lev -0,045 -1,420 (0,157) lev -0,015 -1,977 (0,049) roa 0,167 5,439 (0,000) roa 0,075 0,841 (0,401) roa 0,016 0,760 (0,448) grwth 0,002 2,387 (0,018) grwth -0,004 -1,769 (0,078) grwth 0,001 2,174 (0,030) r square 0,168 r square 0,038 r square 0,083 adjusted r square 0,152 adjusted r square 0,019 adjusted r square 0,066 f 10,676 f 2,036 f 4,828 sig. 0,000 sig. 0,061 sig. 0,000 source: secondary data processed, 2025 the results of the second hypothesis test reveal that family ownership (famown) serves as a significant moderating variable in the relationship between political connections (polcon) and real earnings management. the findings indicate that when a company is family-owned, the influence of political connections on earnings management practices becomes stronger. this is evidenced by the positive and significant interaction coefficient of polconfamown on the abnormal discretionary expenses (abn_diexp) component, with a value of 0.033 (significance = 0.018), and on abnormal cash flow from operations (abn_cfo), with a value of 0.031 (significance = 0.126). family ownership tends to create a high concentration of power, where key decision-makers (usually family members) exert dominant control over corporate policies. when such firms also have political connections, the owning family can leverage political networks to gain personal benefits or reduce regulatory pressures, including in financial reporting. for instance, they may use political ties to avoid stringent oversight of discretionary expenses (abn_diexp) or manipulate cash flows (abn_cfo) to present higher earnings. family firms often place great emphasis on reputation and long-term business sustainability. however, under pressure to meet market expectations or avoid regulatory violations, family ownership may actually encourage more aggressive earnings management practices if political access is available. political connections provide a “shortcut” to influence policies or secure preferential treatment, making family owners feel more secure in engaging in earnings manipulation. http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 105| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc although family ownership’s moderating effect is significant for abn_cfo and abn_diexp, it is not significant for abnormal production costs (abn_prod). this is likely because production cost manipulation is more easily detected by auditors or regulators compared to discretionary expenses or cash flows. moreover, abnormal production often involves complex and high-risk operational decisions, leading family owners to exercise greater caution in using it as a tool for earnings management. table 9 audit quality moderates the effect of political connections on real earnings management abn_cfo koefisien t (sig) abn_prod koefisien t (sig) abn_diex p koefisien t (sig) (constant) 0,061 6,375 (0,000) (constant) 0,317 9,403 (0,000) (constant) 0,047 8,667 (0,000) polcon -0,001 -0,110 (0,912) polcon -0,086 -2,859 (0,005) polcon 0,009 1,875 (0,062) big4 0,007 0,503 (0,616) big4 -0,002 -,041 (0,967) big4 -0,001 -0,127 (0,899) polconbi g4 0,022 1,864 (0,063) polconbi g4 0,097 2,348 (0,020) polconbi g4 0,008 1,214 (0,226) lev -0,028 -2,535 (0,012) lev -0,066 -1,660 (0,098) lev -0,018 -2,837 (0,005) roa 0,145 4,637 (0,000) roa 0,004 0,034 (0,973) roa 0,011 0,637 (0,525) grwth 0,002 2,766 (0,006) grwth -0,004 -1,669 (0,096) grwth 0,001 3,422 (0,001) r square 0,168 r square 0,049 r square 0,123 adjusted r square 0,152 adjusted r square 0,031 adjusted r square 0,106 f 10,707 f 2,759 f 7,254 sig. 0,000 sig. 0,013 sig. 0,000 source: secondary data processed, 2025 the results of the third hypothesis test reveal that audit quality, measured by whether a company is audited by a big four public accounting firm (big4), serves as a significant moderating variable in the relationship between political connections and real earnings management. these findings indicate that the presence of a high-quality auditor can influence how politically connected firms manipulate earnings, although the effect varies depending on the specific earnings management component. for abnormal production costs (abn_prod), the interaction between political connections (polcon) and audit quality (polconbig4) yields the most significant result, with a coefficient of 0.097 and a significance level of 0.020. this positive value suggests that although political connections tend to increase abnormal production (e.g., through overproduction to reduce cost of goods sold and inflate earnings), the presence of a big four auditor weakens this effect. in other words, firms audited by big four firms find it more difficult to manipulate earnings through production-related mechanisms because these auditors possess superior detection capabilities for such practices. http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 106| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc conversely, the moderating effect of audit quality is not significant for abnormal cash flow from operations (abn_cfo) and abnormal discretionary expenses (abn_diexp). the interaction term polconbig4 for abn_cfo has a coefficient of 0.022 with a significance level of 0.063 (marginally significant), while for abn_diexp, the coefficient is only 0.008 with a significance level of 0.226 (not significant). this suggests that: a. big four auditors are less effective in constraining earnings manipulation through operating cash flows or discretionary expenses. b. earnings management via discretionary expenses (such as cuts in research or marketing budgets) is more difficult to detect even by high-quality auditors because it is more subjective and concealed compared to production manipulation. although the findings show that real earnings management (rem) in relation to production costs is effectively constrained by high audit quality (as measured by big four auditors), its moderating influence on discretionary spending and operating cash flows is less pronounced. the nature of audit methods explains this tendency. since irregular changes are simpler to identify using industry benchmarking and conventional audit tests, auditors tend to concentrate on areas with greater materiality and objective proof, like manufacturing costs. on the other hand, operating cash flows and discretionary expenses (like r&d, advertising, or sg&a) are frequently subject to less standardized benchmarks and more managerial discretion, making it more difficult for auditors to question management's choices absent blatant signs of manipulation. this result implies that even excellent audits have limitations in their capacity to identify and discourage specific types of rem, particularly those ingrained in standard company choices. these findings suggest that regulatory bodies should pay special attention to the intersection of family ownership and political connections, as these firms are more susceptible to aggressive earnings management. enhanced disclosure requirements and targeted audit procedures may be necessary to mitigate these risks. for investors, understanding the nuanced role of audit quality is crucial, as even reputable auditors may not fully prevent all forms of rem in politically connected, family-owned firms. conclusion according to this study, political ties have a favorable correlation with higher real earnings management, especially through the manipulation of operating cash flows and discretionary spending, but they have no discernible effect on abnormal production costs. in family-owned businesses, the impact of political ties on rem is more noticeable, particularly when it comes to discretionary spending. the big four auditors' proxy for high audit quality reduces rem associated with production costs, but it has little effect on cash flows and discretionary spending. this study has important theoretical implications for these findings extend agency theory by highlighting how political connections and family ownership interact to influence managerial opportunism in emerging markets. the study also demonstrates the moderating role of audit quality, emphasizing the importance of external monitoring in reducing agency conflicts and earnings manipulation. http://www.ilomata.org/index.php/ijtc political connections and real earnings management: the moderating role of family ownership and audit quality in indonesian manufacturing firms maeza and suranta 107| ilomata internasional journal of tax & accounting http://www.ilomata.org/index.php/ijtc practically, regulators should enhance transparency requirements and strengthen external monitoring mechanisms for politically connected and family-owned firms. investors are advised to exercise caution when evaluating financial statements of such firms, as the risk of earnings manipulation is higher. only manufacturing companies registered on the indonesia stock 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(2012). evidence on the trade-off between real activities manipulation and accrualbased earnings management. accounting review, 87(2), 675–703. https://doi.org/10.2308/accr-10196 http://www.ilomata.org/index.php/ijtc the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 3 july 2025 page no. 1-12 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services riani budiarsih1, nur farida liyana2 12politeknik keuangan negara stan, indonesia correspondent: faridaliyana@pknstan.ac.id2 received : may 18, 2025 accepted : june 27, 2025 published : july 31, 2025 citation: budiarsih, r., & liyana, n.f., (2025). analysis of the quality of pkn stan tax clinic services. ilomata international journal of tax and accounting, 6(3), 1-12. https://doi.org/1061194/ijtc.v6i3.1842 abstract: the tax clinic is a program initiated by the pkn stan tax center in collaboration with kpp pratama pondok aren since 2023. this initiative is run by student volunteers and assist taxpayers. student-run tax clinics are becoming increasingly common in higher education settings, but research evaluating the service quality of volunteer-based tax programs remains very limited in indonesia. yet volunteer-based services play a strategic role in supporting tax literacy and compliance. therefore, this study aims to fill this gap by evaluating the quality of services provided by pkn stan tax clinic volunteers to taxpayers. this research employs a quantitativeresearch approach. data were collected through questionaires distributed to taxpayers who utilized the tax clinic services at kpp pratama pondok aren. the data were analyzed using average scoring and service quality (sq) analysis methods. the results show that the average service quality scores fall above 4 on a 5-point scale, indicating that taxpayers perceive the service as important and are generally satisfied with the performance. despite positive performance perceptions, the overall service quality gap score was -0.02. this suggests that, while taxpayers appreciate the service, there are still unmet expectations, and several aspect of the tax clinic services require improvement. thus, this study provide practical recommendations for enhancing service delivery so that could serve as a reference for other educational agencies aiming to implement similar program. keywords: tax clinic, service quality, tax center, tax volunteers. this is an open access article under the cc-by 4.0 license. introduction one of the concrete steps taken by the government through the directorate general of taxes (djp) in an effort to increase tax compliance is collaborating with universities in indonesia through the establishment of a tax center which started in march 2018 and continues to this day (suardi, 2021). the tax center is a central institution for tax studies that focuses on education, research and community service activities in the field of taxation (fitriyah nurhidayah et al., 2021) et al., 2021). in the context of the tri dharma of higher education, the presence of the tax center provides space for the academic community to develop tax knowledge theoretically and practically, as well as becoming a means of service that has a real impact on society. https://www.ilomata.org/index.php/ijtc mailto:faridaliyana@pknstan.ac.id2 https://doi.org/1061194/ijtc.v6i3.1842 analysis of the quality of pkn stan tax clinic services budiarsih and liyana 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the aim of establishing the tax center is to increase knowledge and awareness about tax rights and obligations among the public and increase cooperation and partnerships between the djp and universities. the synergy between the tax center and the directorate general of taxes is able to increase tax awareness among the public. this was stated by nuraeni et al. (2023) that gunadarma university and kpp pratama depok succeeded in making taxpayers aware of the importance of reporting taxes by looking at determination as an implementation of strengthening responses in communication psychology. the success of this synergy can be seen from the trend of tax reports collected by kpp pratama depok in the last 3-5 years in collaboration with the gunadarma university tax center. furthermore, putri & jannah (2022) revealed that there is a positive relationship between perceptions of tax center services and tax compliance. according to sutantio et al. (2024), as part of a bureaucratic reform strategy, has contributed greatly to bringing tax education closer to the public and answering the need for fast, friendly and accurate tax services. it is believed that the tax center is also the face of the directorate general of taxes, the services provided are able to have a positive influence on taxpayers in fulfilling their tax obligations. tax clinics involving students as volunteers are currently being implemented in several countries. for example, the australian government has a national tax clinic program, which provides free tax services operated by educational institutions (government, 2003). this demonstrates that programs involving educational institutions can be a strategy for improving tax literacy and compliance. this research, focused on the pkn stan tax clinic, contributes to the growing literature on evaluating volunteer-based services in higher education settings, particularly in indonesia. various forms of services are provided by each tax center to the public is of course not the same. several tax centers have opened consultation rooms to the community, as done by fiatri et al. (2022) at stiami, hutabarat et al. (2024) at uki, nandiroh & hariri (2021) at unisma. apart from the consultation room, the tax volunteer program organized by the tax center in partnership with the djp is also an important program (sastia et al., 2023). based on research conducted by yasa & dkk (2021), assistance provided by tax volunteers really helps taxpayers understand and carry out their tax obligations. apart from that, faisol & andini (2019) emphasized that tax volunteers have an important role in assisting with tax reporting, both individually and in groups so that they can increase tax compliance in a sustainable manner. increasing tax compliance will affect state revenues and have a positive impact on the country considering that taxes are a source of funding for national development (hamdan, 2021). at pkn stan, one of the service forums established is the tax clinic, which is a part of the pkn stan tax center. the tax clinic was inaugurated on december 8, 2023, by the head of the dgt regional office of banten, the head of the pondok aren tax office, and the head of the pkn stan diploma iii in taxation program. the tax clinic has several roles, namely providing tax consultation and education for the public and students. this consultation activity is carried out face to face (offline) or online. the tax clinic also facilitates students to directly practice the knowledge gained during college. the pkn stan tax clinic has a special desk at kpp prama pondok aren to provide services directly to taxpayers. tax clinic volunteers directly serve taxpayers who come to the kpp to carry out nik matching, creating billing codes and other matters related to tax administration. https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in providing public services, service quality is an important benchmark for the success of public organizations. according to widanti (2022), public services are a series of activities carried out to meet community needs in accordance with applicable regulations. for this reason, every public organization needs to evaluate service satisfaction so that it can continue to improve performance and provide excellent service (kusbudiyanto et al., 2023). excellent service is service provided to customers (the public) at least according to service standards, namely fast, precise, accurate, cheap and friendly (sedarmayanti, 2009). excellent service has the aim of providing satisfaction to customers, namely in accordance with customer expectations (ismail & s., 2010). dwianika et al. (2018) emphasizes the importance of excellent service as one of the conditions for achieving tax revenue targets. therefore, every public service organization is expected to be able to improve the quality of its services based on customer needs/desires. excellent service has the aim of providing satisfaction to customers, namely in accordance with customer expectations (ismail & s., 2010). according to berry (2012), there are 5 factors that can influence service quality, namely the servqual theory, namely physical evidence (tangibles), reliability (reliability), responsiveness (responsiveness), assurance (assurance and certainty) and empathy (sincere concern). nurdin (2010) said that the process of providing public services providing public services that do not yet have adequate quality is characterized by various complaints from the public/customers served. according to wasisistiono & rauf (2014) the level of customer satisfaction is not merely measured by the comparison of costs incurred by customers but can also be measured through the benefits felt by customers. the level of public satisfaction is closely related to the level of quality of public service delivery. community satisfaction can be obtained from the results of both qualitative and quantitative measurements of community opinions in obtaining services from public service providers by comparing community expectations and needs (adisasmita, 2011). the pkn stan tax clinic service process began in december 2023 by pkn stan students who are involved in tax clinic volunteers. on average, it can serve as many as 300 taxpayers per month with various goals and problems. however, there is currently a lack of empirical evidence regarding the level of taxpayer satisfaction with the services provided by the pkn stan tax clinic, especially since the launch of its public services in december 2023. this raises key questions on how do taxpayers perceive the quality services provided by the pkn stan tax clinic based on the five servqual dimensions and which dimensions are perceived as strengths and which need to be improved. najib (2013) stated that the quality of tax services aims to provide comfort, security and certainty for taxpayers in fulfilling their tax obligations. if the quality of service perceived by consumers is the same or exceeds the quality of service expected by consumers, then the service is said to be satisfactory or of good quality, and vice versa (sapriadi, 2013). previous studies have highlighted the role of tax centers in increasing tax compliance such as stated by putri & jannah (2022) that the services provided by the tax center are able to increase tax compliance, the study aims to measure the satisfaction of taxpayers (customers) regarding the services provided by pkn stan tax clinic volunteers. service satisfaction will certainly provide a positive and believable image, as expressed by suratno (2004) that satisfaction with services will be able to bring consumers to be loyal to the services provided by the agency. this loyalty will give birth to a form of obedience which will ultimately make people obedient and obedient to the applicable rules. according to berry (2012), there are 5 factors that can influence service quality, namely the servqual theory, the five factors are tangibility, reliability, responsiveness, https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc assurance and certainty and empathy. however, few studies have specifically examined user satisfaction with the public service delivery of tax clinics, particularly within the context of pkn stan. for this reason, this research seeks to fill that gap by providing empirical insights into the quality services offered by this newly implemented program. furthermore, this study aims to measure the satisfaction of tax clinic service users, in this case taxpayers. by measuring this satisfaction, we can see aspects of service that are already good and parts that still need to be improved. method to achieve the research objectives, the following steps have already been conducted: 1) data collection; 2) validity and reliability testing; 3) gap analysis using servqual; 4) descriptive analysis; 5) dimension ranking and 6) interpretation and recommendations. this research is quantitative research and data collection was carried out using primary data. primary data is data obtained by field surveys using all original data collection methods (kuncoro, 2013). primary data collection was carried out using a questionnaire. the distribution of questionnaires was carried out from july to september 2024. the survey was given directly to respondents, in this case taxpayers who were receiving tax clinic services by tax clinic volunteers at a special tax clinic service desk provided at kpp pratama pondok aren. the number of respondents who received services from tax clinic volunteers during that period was 100 respondents. respondents were then given several statements related to customer service and satisfaction (servqual) with the aspects of tangibility, empathy, reliability, responsiveness and assurance. the servqual method is chosen in this study because it provides a comprehensive, standardized framework for evaluating service quality in public sector settings. its dimensions cover both tangible service factors and intangible relational aspects, making it suitable for assessing taxpayer satisfaction. furthermore, servqual enables researchers to measure gaps between expected and perceived service, offering detailed insight into areas that need improvement (berry, 2012). this method has been widely applied in public service research, including in taxation-related contexts, supporting its validity and relevance. the statement indicator measuring tool used in this research is in the form of a likert scale which is used to measure a person's attitude, perception or perception of a group of people about a phenomenon (sugiyono, 2016). the questionnaire contains statements about aspects of service and customer satisfaction which are then divided into two dimensions, namely the expectation dimension (e) which contains statements to measure the taxpayer's assessment to find out the general expectations of taxpayers related to the quality of services provided by tax clinic volunteers and the performance dimension (p) which contains statements to measure the taxpayer's assessment of the performance of tax clinic volunteers. both the performance and hope dimensions look at the aspects of tangibility (t), reliability (r), responsiveness (rsp), assurance and certainty (a) and the empathy aspect (e), each of which consists of 4 statement indicators. all indicators have met the validity criteria, namely having an r value ≥0.3 and significant at the 1% significance level. the results of the instrument's reliability can be seen in table 1. this shows that the performance and expectation questionnaires are reliable (consistent). https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc tabel 1. reliability test performance (p) expectation (e) variable cronbach’s alpha keterangan variabel cronbach’ s alpha keterangan tangibility 0,813 ≥ 0,7 tangibility 0,794 ≥ 0,7 reliability 0,809 ≥ 0,7 reliability 0,821 ≥ 0,7 responsivene ss 0,822 ≥ 0,7 responsivenes s 0,819 ≥ 0,7 assurance and certainty 0,834 ≥ 0,7 assurance and certainty 0,803 ≥ 0,7 emphaty 0,828 ≥ 0,7 emphaty 0,821 ≥ 0,7 next, the data was analyzed using the average data scoring method. this method is carried out by finding the average value of each question indicator in both the performance dimension (p) and the expectation dimension (e). apart from that, the data was also analyzed using servqual (sq) analysis to determine customer/visitor satisfaction by looking for the difference between the perceived value and the expected value of customers (taxpayers). the service quality value shows the gap between the perceived value and the taxpayer's expectations. the calculation results are expressed as service quality gaps. if you get a negative score then the service quality is not good or the customer is not satisfied, if you get a score of 0 (zero) then the service quality is good or the customer is satisfied and if you get a positive score (+) then the service quality is very good or the customer is very satisfied (tjiptono, 2016). result and discussion respondent demographic respondent demographic data can be seen in table 2. apart from the information in table 2, it was also found that 75% of respondents were taxpayers who received services from the pkn stan tax clinic. table 2. respondent demographic information total percentage (%) gender male female 47 53 47 53 age < 30 years 30– 40 years 41– 50 years >50 years 51 17 24 8 51 17 24 8 education junior high school senior high school diploma bachelor's degree or equivalent 4 47 9 36 4 47 9 36 https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc postgraduate 4 4 job student/students private employees self-employed asn/tni/polri retired 13 51 27 7 2 13 51 27 7 2 information was also obtained that 75% of respondents had visited the tax clinic for the first time and 25% had visited the tax clinic more than once. taxpayers aged < 30 years visit the tax clinic for the first time to complete administrative requirements such as creating a npwp and reporting their tax obligations for the first time. servqual dimensions this section discusses the results of service quality measurement at the pkn stan tax clinic using the servqual model, which includes five dimensions: tangibility, reliability, responsiveness, assurance, and empathy. the average score for both the performance and expectation dimensions ranged from 4.63 to 4.89, indicating high levels of expectations and fairly positive performance. however, the overall service quality gap was -0.02, signaling a need for targeted improvement in specific areas. details of the service quality gap were obtained, as many as 6 indicators had positive gap results, 2 indicators had a gap of 0 (no difference) and 12 indicators had a negative gap. this slight negative gap suggests that while taxpayers are generally satisfied, there are still unmet expectations, particularly concerning waiting times and facility comfort. calculation results that have a positive gap mean that the tax clinic volunteer services that have been assessed by taxpayers have very good service quality or that customers are very satisfied with the services provided by the tax clinic. the pkn stan tax center has 6 indicators which can be seen in table 3. table 3. aspects of very good service quality for tax clinic services no aspect information 1 t tax clinic facilities and equipment are well maintained 2 rsp responsiveness displayed by tax clinic officers 3 a tax clinic officers provide comprehensive explanations for visitor problems 4 e availability of services according to schedule 5 e tax clinic officers have an interest in serving visitors with the best effort wholeheartedly 6 e ax clinic facilities and equipment are well maintained meanwhile, the aspect that has a gap calculation result of zero (0) means that the tax clinic volunteer service is considered to have good service quality or the customer is satisfied with the tax clinic service with 2 indicators which can be seen in table 4. https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 4. aspects of good service quality for tax clinic services no aspect information 1 a visitors are treated with dignity and respect 2 e get feedback and inform visitors there are 12 aspects that have negative gap calculation results, which can be seen in table 5. negative gaps indicate poor service quality which causes taxpayers to be less satisfied with the services provided. table 5. aspects of poor service quality no aspect information 1 t clean and comfortable environment with good directional signs 2 t tax clinic officers have a professional and neat appearance 3 t availability of a comfortable waiting room 4 r services are provided according to the specified time 5 r service performed correctly 6 r professionalism and competence are displayed by personnel providing services 7 r error free and service delivery is relatively fast 8 rsp service speed is indicated 9 rsp the attitude of tax clinic officers instills trust in visitors 10 rsp waiting time is no more than one hour 11 a tax clinic officers are polite and friendly 12 a tax clinic officers have extensive knowledge the following sub-sections analyze the results dimension by dimension. tangibility from the aspect of tangibility (t), there is one indicator that the service quality is very good or taxpayers are very satisfied, namely taxpayers assess that the facilities and equipment used by tax clinic volunteers are well maintained. this result aligns with previous research by putri and jannah (2022) who emphasized the importance of well-equipped service spaces in promoting trust. however, three indicators within this dimension showed negative service gaps: 1) lack of a clean and comfortable environment with clear siganage; 2) unprofessional or untidy appearance of service officers; and 3) absence of a comfortable waiting room. optimization of this aspect is still needed, namely the cleanliness and comfort of the environment with directional signs and the availability of waiting rooms which taxpayers feel is still lacking. these two things must be coordinated by the pkn stan tax center as the organizer of tax clinic activities with kpp pratama pondok aren as a partner in tax clinic activities. this needs to be done because the tax clinic activities are carried out at kpp pratama pondok aren so that the provision of facilities is provided by kpp pratama pondok aren. another thing that needs to be improved regarding the tangibility (t) aspect is that tax clinic volunteers must be able to appear more professional and presentable when providing services. this aspect of tangibility is important to pay attention to because it shows real evidence of the tax center as the organizer of the tax clinic and kpp pratama https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc pondok aren as a partner as a service provider to taxpayers. tax clinic volunteers should also be trained on grooming, dress code, and professional appearance standards to boost client confidence. reliability the reliability aspect (r) is an aspect that needs a lot of attention from tax clinic organizers. the calculation results for all indicators show a negative gap including inconsistent adherence to service timelines, occasional errors in service delivery and lack of demonstrated competence and profesionalism. this means that satisfaction with the reliability aspect has not been achieved. this is a critical concern as reliability is the core of service quality. as dwianika et al. (2018) point out, poor reliability undermines trust and reduce compliance. given that many taxpayers were first time users, errors and delays may discourage future engagement. causal factors for this problem is the volunteers involved may lack real world experience, resulting in slower service or gesitancy in executing complex tasks. additionally, high taxpayer volume (up to 300 per month) may overwhelm volunteer capacity, leading to inconsistency. therefore,to address this, ongoing competency training and roleplay simulations should be implemented for volunteers. furthermore, service scheduling could be improved through an appointment system to reduce bottlenecks. responsivesness the responsiveness aspect (rsp) which reflects the willingness and promtness of staff in assisting clients, showed mixed results. only one indicator-volunteers showing responsiveness-had a positive gap. other indicators such as speed of service, instilling trust, and waiting time within one hourhad negative gap. this contrast suggests that while volunteers show willingness, execution falls short, especially in managing time and building trust. these findings are supported by nurdin (2010), who argued that public services often suffer from inefficiencies at the operational level. the lack of responsiveness may stem from limited volunteer experience or an absence of real-time supervisory support. high demand with limited staff during peak hours may also contribute to long waiting times and rushed interactions. introducing real-time supervision, volunteer rotation, and daily briefing sessions can help improve pace and response accuracy. further, developing clear service flow protocols can streamline operations. assurance and certainty similar to the responsiveness aspect (rsp), the assurance and certainty aspect (a) also still has indicators that need to be improved in providing services to taxpayers. these indicators include the knowledge and friendliness and politeness of tax clinic volunteers that still need to be improved. taxpayer satisfaction in this aspect or a positive gap is shown in the indicator that taxpayers have received a thorough explanation from tax clinic volunteers regarding the problems they are facing and taxpayers feel they have been treated with dignity and morals. these suggest that volunteers are capable of building positive interpersonal interactions and communicating clearly—key attributes in delivering assurance (ismail & s., 2010). when taxpayers are satisfied https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc with the comprehensive explanation from tax volunteers, it is hoped that they will benefit from the services provided. this is in line with wasisistiono & rauf (2014) that the level of satisfaction is not merely measured by the comparison of costs incurred but can also be measured by the benefits felt by customers. however, other indicators—knowledge level, friendliness, and politeness—showed negative service gaps. this may reflect inconsistencies in training and communication styles among volunteers. according to berry (2012), assurance involves confidence-building, which can only be consistently achieved when service providers are knowledgeable and emotionally intelligent. standardizing communication scripts and reinforcing emotional intelligence and behavioral training can improve this area. peer evaluations and feedback from taxpayers can also be used as part of ongoing performance reviews. empathy tables 3 and 4 show that the empathy aspect (e) has provided optimal results because each indicator has a gap of more than zero (0). taxpayers acknowledged that tax clinic volunteers displayed personal interest, provided sevices aligned with taxpayers need and delivered sincere and wholehearted support. this shows that taxpayers feel they have received sincere attention from tax clinic volunteers which can be seen from the personal attitude shown by tax clinic volunteers so that they can provide services according to the specific needs of taxpayers and have sufficient knowledge about taxpayers. the personal attitude that is considered good is that the volunteer has received feedback and informed the taxpayer. providing feedback and notification of tax information to taxpayers one on one will be more effective. in line with the research results of maulida & s. (2022) who stated that tax education is most effective when delivered with personalized attention in small, direct interactions. consistent with research by llenares ii & c.c. (2019), students who regularly participate in volunteer activities demonstrate higher levels of professional competence, communication skills, social responsibility, and ethics compared to students who have never volunteered or are volunteering for the first time. this finding is supported by stukas et al. (2024), who demonstrated that student involvement in service-based volunteer activities not only improves interpersonal communication and empathy but also strengthens teamwork, collaborative skills, and career readiness through direct experience in serving the community. boediono (2003) also highlighted that empathy in public service involves interpersonal sensitivity, which appears to be a strong attribute of this volunteer program. the positive outcome in this dimension highlights the human-centered strength of the tax clinic. empathy may compensate to an extent for other service weaknesses, but it should be complemented by improvements in reliability and responsiveness for a balanced service experience. the three indicators that have the lowest service quality gap scores must receive immediate attention. these indicators are the availability of a comfortable waiting room (-0.11), speed of service shown (-0.08) and waiting time of no more than one hour (-0.08). these three things are interrelated, namely speed of service time is needed so that waiting time does not exceed one hour. apart from that, the long waiting time makes taxpayers feel they need a comfortable waiting room. in the implementation of public services, there are several weaknesses, such as lack of responsibility (responsiveness) at almost all levels of service elements, from service officers to https://www.ilomata.org/index.php/ijtc analysis of the quality of pkn stan tax clinic services budiarsih and liyana 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc those in charge. for this reason, good implementation patterns, human resource and institutional support are needed to achieve quality services (maryam, 2016). conclusion it can be concluded that the overall service quality of the pkn stan tax clinic, as measured by average scores, falls within a range above 4.00, indicating generally high expectations and fairly strong performance from the perspective of taxpayers. however, the total service quality gap (perception minus expectation) is negative, signaling that taxpayer expectations are not fully met across several service dimensions. the reliability dimension showed a consistent negative gap across all indicators, suggesting that taxpayers perceive inconsistencies in service accuracy, punctuality, and professionalism. this finding requires immediate attention from the pkn stan tax center, in collaboration with kpp pratama pondok aren, as the implementing partner. the lowest gap scores were found in three interrelated indicators: (1) the availability of a comfortable waiting room, (2) service speed, and (3) waiting time not exceeding one hour. these deficiencies highlight the need for both infrastructure improvements and better service management strategies. on the other hand, the empathy dimension received consistently positive scores, indicating that taxpayers feel personally acknowledged, understood, and supported by the tax clinic volunteers. this reflects the volunteers’ ability to build interpersonal relationships and provide services tailored to individual taxpayer needs—an essential factor in cultivating long-term satisfaction and trust. in summary, while the pkn stan tax clinic has succeeded in fostering empathy and personal connection in its services, targeted improvements are necessary in the areas of reliability, tangibility, and responsiveness to enhance overall service quality and better align with taxpayer expectations. based on the findings, the following practical recommendations are proposed: 1) for pkn stan tax center: implement standardized volunteer training focused on technical, interpersonal, and time management skills. create a volunteer handbook aligned with servqual dimensions; 2) for kpp pratama pondok aren: improve physical infrastructure, especially the waiting area and signage. collaborate more closely with pkn stan to ensure consistent service delivery expectations and 3) for dgt (directorate general of taxes): encourage scaling of student-led clinics by providing logistical and supervisory support. use this model as a scalable public engagement tool, especially for young taxpayers. by linking theoretical servqual dimensions with practical field findings, the study offers a bridge between academic frameworks and real-world public service implementation. while this study has provided meaningful insights, several areas remain for future exploration such as combine quantitative servqual analysis with in-depth interviews to capture richer insights about taxpayer expectations and emotional responses. references adisasmita, r. 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(2014). pelayanan publik pelayanan administrasi teradu kecamatan (paten). cv indra prahasta, bandung. widanti, n. p. t. (2022). konsep good governance dalam perspektif pelayanan publik: sebuah tinjauan literatur. jurnal abdimas peradaban: jurnal pengabdian masyarakat, 3(1). yasa, a., & dkk. (2021). mengungkap persepsi pajak atas pendampingan relawan pajak. jurnal akuntansi bisnis, 14(1). https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1, january 2025 page no. 111-126 111 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the effect of political connections on earnings quality with the moderating role of family ownership: a study of manufacturing firms in indonesia kamil adinataˡ, eddy suranta² ˡ²universitas bengkulu, indonesia correspondent: kamiladinata10@gmail.com1 received : december 28, 2024 accepted : january 10, 2025 published : january 31, 2025 citation: adinata, k., suranta, e. (2025). the effect of political connections on earnings quality with the moderating role of family ownership: a study of manufacturing firms in indonesia. ilomata international journal of tax and accounting, 6(1), 90-110. https://doi.org/10.61194/ijtc.v6i1.1791 abstract: this study aims to examine the effect of political links on the quality of earnings in manufacturing companies listed on the indonesia stock exchange (idx) between 2020 and 2022, utilizing family ownership as a moderating variable. discretionary accruals based on the modified jones model are used to quantify earnings quality using panel data regression analysis and a quantitative explanatory approach. the findings indicate that neither political connections nor family ownership have a direct effect on earnings quality. however, the quality of earnings is significantly impacted negatively by the combination of family ownership and political connections. this suggests that family ownership amplifies the negative impact of political connections on earnings quality, contrary to the initial assumption that family ownership would enhance internal control. these results support the agency theory perspective, whereby dominant family control combined with political connections exacerbates agency problems and reduces the reliability of financial reporting. this study contributes to the body of information on corporate governance in developing countries and provides stakeholders and regulators with useful advice on how to improve monitoring of companies with significant family ownership and political connections. keywords: political connections, family ownership, earnings quality, discretionary accruals. this is an open access article under the cc-by 4.0 license. introduction earnings quality is an important indicator in assessing the credibility and reliability of a company’s financial information. high-quality earnings reflect accounting information that is relevant and reliable for economic decision-making. however, earnings management practices remain a serious issue in indonesia. for example, the case of financial statement manipulation by pt garuda indonesia in 2018 demonstrates how earnings can be manipulated for specific interests, thereby misleading stakeholders (christian et al., 2022). reports from the financial services authority (ojk, 2022) have also recorded an increase in financial reporting violations among issuers during 2021–2022. https://www.ilomata.org/index.php/ijtc mailto:kamiladinata10@gmail.com https://doi.org/10.61194/ijtc.v6i1.1791 the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 112 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in the context of agency theory, earnings manipulation reflects the existence of conflicts of interest between managers (agents) and owners (principals), in which agents tend to pursue personal interests that are not always aligned with the objectives of the owners (uliyah et al., 2023). this issue can be exacerbated by political connections, namely relationships between companies and political officials or elites, which are often leveraged to gain access to economic resources such as bank loans, government projects, and regulatory protection (maulana & wati, 2020). several studies indicate that companies with political connections tend to engage in accounting manipulation to maintain these relationships, thereby reducing earnings quality (darmayanti et al., 2020; hashmi et al., 2018). however, other studies have found that political connections can enhance financial stability and help maintain earnings quality (pratiwi & aligarh, 2021). family ownership also plays a crucial role in financial reporting practices. the majority of public companies in indonesia are still family-controlled (pwc, 2014; deloitte, 2020). while family ownership may strengthen internal monitoring and reduce agency conflicts, it may also lead to conflicts between majority and minority shareholders (yeh et al., 2001). prior studies have shown mixed results, ranging from a positive effect on earnings quality (jao et al., 2024) to a negative one (putri salsabella & supriyanto, 2023). although various studies have examined the effects of political connections or family ownership separately, their findings remain inconclusive and largely focus on non-manufacturing sectors. to date, comprehensive research investigating the combined effects of these two factors on earnings quality in the manufacturing sector is still limited—despite the fact that this sector plays a vital role in the national economy and is often characterized by complex ownership structures intertwined with political influence. this study offers novelty by examining the effect of political connections on earnings quality with family ownership as a moderating variable, specifically within manufacturing firms listed on the indonesia stock exchange (idx) during the 2020–2022 period. in addition to providing a postpandemic context, the study employs a moderating approach to simultaneously address the interaction between ownership structure and political influence—an aspect that remains underexplored in prior literature. therefore, this research is expected to contribute empirically to the corporate governance literature in developing countries and offer practical implications for regulators, investors, and other stakeholders in understanding the dynamics of political connections and ownership structures in relation to financial reporting transparency. according to (uliyah et al., 2023), agency theory explains the conflict between owners (principals) and managers (agents), where managers tend to pursue personal interests that are not aligned with the objectives of the company’s owners. this divergence of interests creates agency costs, which can affect the quality of decision-making, including in financial reporting. the involvement of board members or commissioners with political connections can give rise to conflicts of interest, as they may prioritize political interests over those of shareholders (kesaulya et al., 2023). this situation leads to weak oversight and increases the potential for financial statement manipulation. in the context of family businesses, according to dharmawan & wijaya, (2020), the family ownership structure can reduce agency costs through direct control by the owners, who are often also part of the management. the involvement of family members in management contributes to enhanced supervision and decision-making based on long-term values. however, in certain cases, family owners may also abuse their control to maintain personal or political interests, so the risk of agency conflict remains present. https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 113 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc political connections and earnings quality according to agency theory, the possibility of conflicts of interest between owners (principals) and managers (agents) explains the correlation between political connections and profits quality. (supatmi & putri, 2022). companies with political connections often gain advantages such as easier access to funding, government projects, and fiscal incentives. however, these benefits can create agency problems, as managers have greater discretion in decision-making that may not always align with shareholder interests. when managerial oversight is weakened due to political protection, the risk of earnings management and financial statement manipulation may increase. nevertheless, in situations where external oversight remains strong and major shareholders exercise effective control over management, political connections can also provide financial stability for the company. with certainty in access to funding and strategic projects, companies can reduce financial uncertainty and earnings volatility, which in turn may help maintain earnings quality. therefore, in the context of agency theory, the impact of political connections on earnings quality largely depends on the oversight mechanisms implemented within the company and how managerial incentives are structured to minimize potential conflicts of interest (pamuji & naimah, 2022). based on studies by maulana & wati, (2020), pratiwi & aligarh, (2021), innayah & pratama, (2022), dan wijaya & merry susanti, (2024) companies with political connections often enjoy easier access to funding, government projects, and local incentives. such support contributes to increased financial stability and profitability, thereby helping to maintain earnings quality. based on the above literature, the first hypothesis to be tested is as follows: h₁: companies with political connections have higher earnings quality than companies without political connections family ownership and earnings quality from the perspective of agency theory, in family firms, the likelihood of conflicts between managers and owners is generally lower because owners are often actively involved in the operations of the company. this involvement provides incentives for them to maintain earnings quality in order to preserve both the reputation and the long-term sustainability of the family business. furthermore, stricter oversight by the family as controlling shareholders serves to minimize the likelihood of detrimental earnings management practices and enhances the transparency of financial reporting. the hypothesis regarding higher earnings quality in family firms reflects a long-term orientation to ensure ethical and sustainable business continuity, which ultimately contributes to better earnings quality (fayola et al., 2021). additionally, because there is less knowledge asymmetry between managers and owners, family businesses typically have more accurate and trustworthy financial accounts. consequently, family ownership is typically linked to superior profits quality as compared to non-family businesses (jao et al., 2024). researchers who looked into how family ownership affected earnings quality discovered that family ownership had a beneficial impact on earnings quality. according to this research, family businesses are more likely than non-family businesses to have higher earnings quality. similar results were reported by jao et al., (2024) who revealed that family ownership plays a positive role https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 114 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc in improving earnings quality, which in turn contributes to enhancing firm value. based on the aforementioned studies, the second hypothesis to be tested is as follows : h₂: family ownership has a positive effect on earnings quality political connections, earnings quality, and family ownership within the framework of agency theory, political connections may provide benefits to companies through easier access to funding, government projects, and various fiscal incentives. however, such relationships also have the potential to create conflicts of interest, as managers are afforded greater discretion in decision-making, which may not always be in line with shareholders' interests. (supatmi & putri, 2022). furthermore, family ownership is often characterized by a long-term orientation and greater caution in maintaining the quality of financial reporting, as considerations of reputation and the sustainability of the business across generations are paramount. therefore, family ownership can enhance earnings quality even in firms with political connections (hashmi et al., 2018). studies by huang et al., (2014), braam et al., (2015), al-dhamari, (2016), li et al., (2016) and lungkang & muslih, (2020) ndicate that political connections negatively affect earnings quality due to a lack of oversight, heightened conflicts of interest, and increased information asymmetry, all of which create opportunities for earnings management. conversely, research by maulana & wati, (2020), pratiwi & aligarh, (2021), innayah & pratama, (2022), dan wijaya & merry susanti, (2024) emonstrates that political connections can actually improve financial stability and profitability, thereby maintaining earnings quality. meanwhile, dewi, (2017) dan robert jao et al, (2024) provide evidence that family ownership enhances earnings quality through stronger internal oversight and a long-term orientation, whereas masripah et al., (2015) reveal the negative impact that can arise from dominant family interests. based on previous studies, family ownership can serve as a moderating variable in the relationship between political connections and earnings quality. although political connections may reduce earnings quality, family ownership has the potential to mitigate this negative effect. therefore, the following is the third hypothesis in this study: h₃: family ownership moderates the effect of political connections on earnings quality. method in order to investigate the causal links between independent, dependent, and moderating variables, this study uses a quantitative explanatory approach. this approach was selected because it allows for objective measurement and statistical analysis to test the formulated hypotheses. the analytical method adopted in this research is panel data regression. because the data utilized are a mix of cross-sectional and time series data, this approach is deemed suitable. panel regression analysis enables researchers to capture the dynamics of relationships among variables across companies (cross-sectional) over a certain period (time series). in order to investigate the moderating effect of family ownership in the relationship between political connections and earnings quality, this study also uses an interaction test. the research is designed to obtain a deeper understanding of the relationships among variables by considering firm characteristics as control variables. https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 115 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the study's population consists of all manufacturing firms listed on the indonesia stock exchange (idx) between 2020 and 2022. the research population consists of 110 active manufacturing companies, covering various subsectors within the industry that possess the data required for this research. the selection of the manufacturing sector is based on the rationale that this sector is a significant contributor to the national economy and exhibits governance characteristics that are relevant for examining political connections and family ownership. purposive sampling was used to choose the sample, and the following standards were applied: 1. companies consistently listed on the idx from 2020 to 2022; 2. companies that published complete annual reports during the observation period; 3. the financial statements are presented in indonesian rupiah (idr) in order to maintain consistency in data analysis. 4. companies that provided complete data related to the dependent, independent, moderating, and control variables. based on these criteria, the final sample consisted of manufacturing companies that met the requirements for panel analysis over the three-year observation period. the focus on the manufacturing sector is grounded in its strategic importance as one of the primary contributors to indonesia’s gdp and employment. manufacturing firms tend to have more complex operational activities, ownership structures, and regulatory exposure, making them particularly susceptible to political influence and agency conflicts. moreover, the sector is heavily represented on the idx, making it suitable for empirical generalization. the observation period of 2020–2022 was selected to capture the post-pandemic financial reporting environment, where corporate governance practices and financial transparency became increasingly critical. the economic disruptions and regulatory changes during this period also provide a unique context for analyzing the interaction between political connections, ownership structures, and earnings quality. the secondary data used in this study came from documentation and a survey of the literature. the primary sources of data include annual reports, sustainability reports, and financial statements published on the official website of the indonesia stock exchange (www.idx.co.id) as well as the official websites of the respective companies. table 1. measurement of control variables control variable measurement0 source firm size (fsize) total0assets (hashmi et al., 2018) firm profitability (fprof) net0income / total0assets (hashmi et al., 2018) leverage (lev) total liabilities/total assets (hashmi et al., 2018) cash flow from operations (cfo) cfo/beginning0total assets (hashmi et al., 2018) https://www.ilomata.org/index.php/ijtc http://www.idx.co.id/ the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 116 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc this study's data analysis methodology starts with descriptive statistical analysis, which uses metrics like mean, median, standard deviation, maximum, and minimum values to show each variable's properties. the chow test, hausman test, and lagrange multiplier (lm) test are then used to choose the optimal panel regression model among the common effect, fixed effect, and random effect models.this study also employs moderation regression analysis to examine the interaction effect between political connections and family ownership on earnings quality. prior to regression testing, classical assumption tests are performed, including the normality test (jarque-bera), multicollinearity test (correlation among variables), and heteroscedasticity test (breusch-pagan test). the f-test is used to determine the overall significance of the model, the t-test is used to determine the partial effect of each variable, and the coefficient of determination (r2 and adjusted r2) is used to determine the model's explanatory power with respect to the variation in earnings quality. the use of panel data regression in this study is based on its ability to provide a more comprehensive analysis by combining the cross-sectional dimension (across companies) and the time-series dimension. e-views software is used in this study to do panel data regression analysis. by employing panel data regression, this study is able to generate more valid findings in identifying the effect of political connections on earnings quality as well as the moderating role of family ownership in this relationship. this study examines the association between political connections and earnings quality using a discretionary accruals regression model based on the modified jones model. the primary reason for using this model is to ensure the strength, validity, and reliability of the results by adjusting for changes in revenue so that they are not influenced by receivables management (hashmi et al., 2018). the following is the estimated model for variable measurement: da_mjmᵢₜ = 𝒶₁+𝒶₂pconnᵢₜ+𝒶₃fsizeᵢₜ+𝒶₄fprofᵢₜ+𝒶₅levᵢₜ+𝒶₆cfoᵢₜ+₃ᵢₜ in panel data regression, there are three main models that can be used: the common effect model (cem), which assumes that all entities share homogeneous characteristics and thus no individual effect is present; the fixed effect model (fem), which allows for differences in fixed characteristics across entities by providing different intercepts for each company; and the random effect model (rem), which assumes that the differences in characteristics across entities are random and uncorrelated with the independent variables. model selection is performed through three statistical tests. first, the chow test is used to compare the cem and fem. if the probability value is < 0.05, fem is selected; if > 0.05, cem is more appropriate. second, if fem is selected, the hausman test is conducted to compare fem and rem. if the p-value is < 0.05, fem remains the preferred model; if > 0.05, rem is chosen. third, if the chow test previously selected cem, the lagrange multiplier (lm) test is performed to choose between cem and rem. if the p-value is < 0.05, rem is used; if > 0.05, cem remains the model of choice. because it might look at how family ownership affects the relationship between political connections and the quality of one's income., this study uses moderation regression analysis, empirically controlling for the effects of the moderating variable, and strengthening the study’s contribution to agency theory. this approach enables the research to produce deeper and more valid findings regarding the role of family ownership in strengthening or weakening the influence of political connections on a company’s earnings quality. furthermore, according to (hashmi et https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 117 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc al., 2018) the following formula is used to examine the moderating influence of family ownership on the association between political connections and earnings quality: da_mjmᵢₜ=𝒶₁+𝒶₂pconnᵢₜ+𝒶₃famownᵢₜ+𝒶₄famownᵢₜ*pconnᵢₜ+𝒶₅fsizeᵢₜ+𝒶₆fpro fᵢₜ+𝒶₇levᵢₜ+ 𝒶₈cfoᵢₜ+₃ᵢₜ result and discussion table 2. descriptive statistics dac bpc famow n fprof fsize lev cfo mean 0.02165 0 0.31307 0 0.172583 0.04114 8 28.4877 8 0.50842 5 0.08707 4 median 0.02150 7 0.00000 0 0.000000 0.03787 2 28.2812 6 0.40463 2 0.06006 1 maximum 2.96166 1 1.00000 0 0.997112 2.21378 9 33.6551 9 10.4539 0 3.01201 2 minimum 3.931541 0.00000 0 0.000000 1.049839 25.0790 0 4.81e07 0.412601 std. dev. 0.33283 2 0.46444 9 0.298771 0.17980 7 1.63115 4 0.70818 9 0.20045 2 source : e-views 12, (2025) for every research variable, descriptive statistics are utilized to give a broad picture of the data features. the dataset consists of 330 observations, including the dependent variable (discretionary accruals/dac), the independent variable (political connections/bpc), the moderating variable (family ownership/famown), and the control variables (profitability/fprof, firm size/fsize, leverage/lev, and operating cash flow/cfo). the average value of dac is 0.0217, indicating that companies tend to engage in incomeincreasing accrual patterns, although there is considerable fluctuation, with a maximum value of 2.96 and a minimum of -3.93. this suggests that some companies engage in excessive accrual manipulation, both to increase and decrease reported earnings. the bpc variable (political connections) has a mean value of 0.31, indicating that 31% of the companies in the research sample, or 102 observations, have political connections, while the remaining 69% do not have political connections. the family ownership variable (famown) in this study shows an average value of 0.1726, which means that, on average, 17.26% of the shares in the sampled companies are owned by shareholders who have familial relationships with members of management or the board of directors. fprof has an average value of 0.0411, indicating that, on average, companies generate net income equivalent to 4.11% of their total assets. firm size (fsize) has an average value of 28.48. this figure is calculated based on the natural logarithm of total assets, reflecting that the entities in the sample are generally classified as large-scale companies. the average leverage value is 0.5084, indicating that approximately 50.84% of the total assets of the sample companies are financed by debt, while the very high maximum value suggests that there are companies financing all, or even more than all, of their assets with debt. cfo (operating cash flow) has an average value of 0.0871, https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 118 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc indicating that, on average, 8.71% of the companies’ total assets are able to generate operating cash flows. table 3. model selection test types of tests statistics probability selected model chow (model 1) cross-section f = 0.8296 0.8622 cem lm (model 1) breusch-pagan = 2.9732 0.0847 cem chow (model 2) cross-section f = 0.8195 0.8771 cem lm (model 2) breusch-pagan = 3.065 0.0800 cem source : e-views 12, (2025) in this study, the model selection tests presented in table 3 were conducted to determine the most appropriate panel regression model among the common0effect0model (cem), fixed effect0model0 (fem), and random0effect0model0 (rem). the chow test findings show that the cem is more suited than the fem because the the significance level is higher than 0.05. additionally, significant values greater than 0.05 are also shown by the lm test., suggesting that the cem is preferable to the rem. therefore, this study employs the common effect model (cem) in the panel regression analysis. table 4. normality test model jb stat probability conclusion 1 4.7587 0.1358 normal 2 4.4093 0.1425 normal source : e-views 12, (2025) in this study, the normality test was conducted using the jarque-bera method. the results in table 4 show probability values of 0.1358 for the base model and 0.1425 for the moderation model, both of which are greater greater than the 0.05 criterion of significance. consequently, it may be said that the normalcy assumption is met and the residuals are normally distributed. this is important because the normal distribution of residuals ensures the inferential validity of the regression hypothesis testing. multicolliniearity test table 5. multicollinierity test model 1 bpc fprof fsize lev cfo bpc 1.000000 0.120378 0.296525 0.103713 0.096690 fpr of 0.120378 1.000000 0.152361 -0.177754 0.256041 fsiz e 0.296525 0.152361 1.000000 -0.122148 0.075869 lev 0.103713 -0.177754 -0.122148 1.000000 -0.023721 cfo 0.096690 0.256041 0.075869 -0.023721 1.000000 source : e-views 12, (2025) https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 119 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 6. multicollinierity test model 2 bpc famown interaksi fprof fsize lev cfo bpc 1.000000 -0.120086 0.313261 0.113125 0.304751 0.111385 0.101090 famown -0.120086 1.000000 0.458738 -0.013396 0.020719 -0.046768 0.007766 interaksi 0.313261 0.458738 1.000000 0.084684 0.213074 -0.008420 0.050627 fprof 0.113125 -0.013396 0.084684 1.000000 0.151517 -0.174445 0.261368 fsize 0.304751 0.020719 0.213074 0.151517 1.000000 -0.118953 0.080765 lev 0.111385 -0.046768 -0.008420 -0.174445 -0.118953 1.000000 -0.022585 cfo 0.101090 0.007766 0.050627 0.261368 0.080765 -0.022585 1.000000 source : e-views 12, (2025) to find out if there are strong correlations between the independent variables in the model, the multicollinearity test is used, which may cause distortion in the estimation of regression coefficients. the test is performed by examining the correlation values among the independent variables through the correlation matrix. the results presented in tables 5 and 6 show that all correlation values among the variables are below 0.85, both in the base model and in the moderation model. therefore, no serious multicollinearity symptoms are found in this regression model. this condition is important to ensure that each independent variable can make a unique contribution to the model without statistical overlap. table 7. heteroscedasticity test model prob. chi-square conclusion 1 0.2048 no heteroscedasticity 2 0.1341 no heteroscedasticity source : e-views 12, (2025) the heteroscedasticity test is used to determine whether the variance of the residuals is constant (homoscedastic) or not (heteroscedastic). the presence of heteroscedasticity would render the regression model inefficient due to unstable error variances. in this study, the heteroscedasticity test, as presented in table 7, was conducted using the breusch-pagan approach, with chi-square probabilities of 0.2048 for the base model and 0.1341 for the moderation model. these values are greater than 0.05, indicating that there is no evidence of heteroscedasticity. with this assumption fulfilled, the coefficient estimates in the regression model are considered efficient and reliable. table 8. panel data regression results variable coefficient std. error t-statistic prob. c -0.046656 0.016687 -2.795896 0.0056 bpc -0.001234 0.001914 -0.644625 0.5198 fprof -1.057830 0.010770 -98.22155 0.0000 fsize 0.001500 0.000587 2.556816 0.0112 lev 0.010529 0.001251 8.418092 0.0000 cfo 1.017324 0.004094 248.4907 0.0000 statistik model r² 0.9965 https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 120 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc adjusted r² 0.9964 f-statistic 12770.82 prob(f) 0.0000 source : 0e-views 12, (2025) table 9. moderation regression results variable coefficient std. error t-statistic prob. c -0.046117 0.016528 -2.790313 0.0057 bpc -0.001158 0.002058 -0.562905 0.5741 famown 0.001069 0.003668 0.291447 0.7710 interaksi -0.019004 0.007017 -2.708385 0.0073 fprof -1.079982 0.010825 -99.76746 0.0000 fsize 0.001537 0.000581 2.646288 0.0087 lev 0.010011 0.001227 8.161974 0.0000 cfo 1.017157 0.004018 253.1438 0.0000 statistik model r² 0.09963 adjusted r² 0.9961 f-statistic 9456.528 prob(f) 0.0000 source: e-views 12, (2025) the f-statistic values for the first model 12770.82 and the moderation model 9456.528, both with p-values of 0.0000, indicate that the models are statistically significant overall. this means that all independent and control variables jointly have a significant effect on earnings quality. the adjusted r² value of 0.9964 in the moderation model demonstrates that 99.64% of the variation in the dependent variable can be explained by the model, with the remaining 0.39% explained by other factors. political connections (bpc) show a p-value of 0.9480 in the first model. since this value is far above the 0.05 significance level, it can be concluded that political connections do not have a significant effect on earnings quality (as measured by discretionary accruals). thus, hypothesis h₁ is not supported by the empirical data. family ownership (famown) in the moderation model has a p-value of 0.8035, indicating that family ownership also does not have a significant direct effect on earnings quality. therefore, hypothesis h₂ is not statistically supported. the interaction term between political connections and family ownership (interaction) has a p-value of 0.6698, indicating that family ownership does not significantly moderate the effect of political connections on earnings quality. consequently, hypothesis h₃ is also not supported. based on the results of the panel data regression and moderation regression analyses, the following regression equations are obtained: panel data regression equation: daᵢₜ = −0,046656−0,001234⋅bpcit−1,057830⋅fprofit+0,001500⋅fsizeit+0,010529⋅levit +1,017324⋅cfoit moderation regression equation: https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 121 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc daᵢₜ = −0,046117−0,001158⋅bpcit+0,001069⋅famownit−0,019004⋅(bpc×famown)it −1,079982⋅fprofit+0,001537⋅fsizeit+0,010011⋅levit+1,017157⋅cfoit firms with political connections have higher earnings quality than firms without political connections according to the study's first premise, companies with political connections generate higherquality earnings than companies without such connections. the hypothesis was tested using a ttest in the panel regression model, and the results show that the political connections variable (bpc) has a significance value of 0.9480 in the base model and 0.9472 in the moderation model. both values are far above the 5% significance threshold (α = 0.05). therefore, the first hypothesis (h₁) is rejected or not supported by the empirical data in this study. these findings indicate that firms with political connections do not necessarily exhibit higher earnings quality compared to those without political connections. a decline in earnings quality is one of the consequences of increased agency costs, suggesting that existing political connections may not be sufficiently strong, active, or optimally utilized. one manifestation of declining earnings quality is earnings management, where agents deliberately manipulate profit figures to achieve personal objectives rather than the overall goals of the company. from the standpoint of agency theory, political connections should theoretically intensify conflicts of interest between managers (agents) and owners (principals), as managers with political connections tend to have greater discretion in decision-making without adequate oversight (kesaulya et al., 2023). this situation may lead to lower earnings quality due to incentives to manipulate information in order to maintain political relationships. however, the lack of a significant effect of political connections in these findings may be interpreted as an indication that the sampled firms, particularly in the manufacturing sector, continue to consistently implement good corporate governance principles. oversight from regulators such as the financial services authority (ojk) and the indonesia stock exchange (idx), as well as pressure from institutional shareholders, may serve to neutralize the effects of political connections in financial reporting practices. these findings also align with those of putri salsabella & supriyanto, (2023), who also discovered that political connections in indonesia had no appreciable effect on the standard of wages. the fact that different research have shown inconsistent results regarding the impact of political connections on profits quality indicates that this relationship is complicated and heavily reliant on institutional context, the efficiency of oversight, and corporate governance structure.. thus, although political connections theoretically have the potential to increase firm stability and support earnings quality, the empirical results of this study indicate that there is no significant difference in earnings quality between politically connected and non-connected firms. this underscores the importance of robust oversight and regulatory systems in maintaining the integrity of corporate financial reporting. these results can be explained by several contextual factors. first, the manufacturing sector tends to have a more standardized operational and regulatory structure compared to other sectors, such as finance or mining, thereby limiting the scope for political connections to be used for earnings manipulation. second, during the 2020–2022 period, companies faced significant pressure due to the covid-19 pandemic, which compelled management to shift their focus toward operational https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 122 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc efficiency and business continuity, rather than leveraging political connections. third, the tightened oversight by the financial services authority (ojk) and the indonesia stock exchange (idx) during the pandemic may have further reduced the influence of political connections on financial reporting. family ownership has a positive effect on earnings quality a partial test of the family ownership variable (famown) in the moderation model produced a significance value of 0.8035, indicating that this variable does not have a significant effect on earnings quality. accordingly, the second hypothesis (h₂) is rejected, which posits that family ownership has a positive effect on earnings quality, is not statistically supported and is therefore rejected.. this finding contrasts with a number of earlier research that indicated family ownership had a favorable impact on earnings quality. (dewi, 2017; jao et al., 2024). this inconsistency can be explained from two perspectives. first, although agency theory suggests that family ownership can reduce agency costs by enhancing internal monitoring (dharmawan & wijaya, 2020). excessive family dominance may also create an entrenchment effect, namely a tendency to protect personal interests and neglect minority shareholders (putri & setiawati, 2022). second, the opportunistic nature of family firms may not always align with the principles of transparency, especially when the control structure is overly centralized. as noted by (hashmi et al., 2018), under certain conditionsinstead of enhancing the caliber of financial reporting, family businesses may use managerial control to manipulate earnings in order to hold onto power. as a result, family ownership's effect on earnings quality is very contextual and contingent upon the governance framework and cultural norms that the company has established. contextual explanations for this insignificance also warrant consideration. although family ownership is expected to enhance internal monitoring, in practice, the dominance of families in management can lead to protective or opaque decision-making. in the manufacturing sector, which typically features a hierarchical and capital-intensive organizational structure, strategic decisions depend not only on ownership structures but also on the firm's ability to adapt to market and technological dynamics. in the post-pandemic context, these factors have become more decisive than the influence of ownership structure. family ownership as a moderator of the effect of political connections on earnings quality the findings of the t-test on the variable that examines the relationship between family ownership and political connections (interaction) show a coefficient value of -0.019004 with a significance level (p-value) of 0.0073, which is below the 5% significance threshold (α = 0.05). this finding statistically indicates that family ownership significantly moderates the relationship between political connections and earnings quality, thereby supporting hypothesis three (h₃). the negative coefficient suggests that in firms with political connections, the presence of family ownership further deteriorates earnings quality. in other words, a higher proportion of family ownership strengthens the adverse effect of political connections on earnings quality. this result contradicts the initial assumption that family ownership serves as an internal monitoring mechanism that helps reduce agency costs. on the contrary, the findings are consistent with https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 123 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc hashmi et al., (2018) who argue that in certain contexts, family-controlled firms may abuse internal control mechanisms to reinforce political connections for private gain, including through earnings manipulation. this aligns with the entrenchment effect in agency theory, which posits that managers or controlling owners may exploit their authority to maintain control and protect their private interests, even at the expense of financial reporting quality (braam et al., 2015). in the manufacturing sector, where firms tend to have capital-intensive structures and high supply chain complexity, strategic decision-making is often centralized within the core management team, which frequently includes members of the controlling family. when political connections are leveraged alongside family dominance, the potential for collusion among internal parties increases. in such a context, controlling families may utilize political power not to promote operational efficiency or accountability, but rather to maintain control and pursue private benefits, including through earnings reporting practices. furthermore, during the 2020–2022 period, the economic pressures brought on by the pandemic encouraged firms to adopt a more conservative approach in managing their financial image. families directly involved in management may have chosen to use political influence as a means of maintaining external stability while engaging in opportunistic practices behind the scenes, ultimately leading to a decline in earnings quality. this suggests that when two forms of power— political and familial—converge within a single entity, control mechanisms may be weakened rather than strengthened. from an agency theory perspective, these results suggest that family ownership structure does not always function as an effective mechanism to mitigate agency conflicts. instead, when combined with political connections, family control may facilitate collusion between agents (managers) and dominant owners (families), thereby increasing the likelihood of accounting information distortion. thus, the simultaneous presence of political connections and family ownership does not reduce, but rather exacerbates agency costs and undermines earnings quality. conclusion this study aims to examine the effect of political connections on earnings quality and the moderating role of family ownership in manufacturing firms listed on the indonesia stock exchange (idx) during the 2020–2022 period. based on the results of regression analysis, political connections were found to have no significant effect on earnings quality. this finding indicates that the presence of political connections within a company does not necessarily enhance or diminish earnings quality directly. similarly, family ownership was also found to have no direct effect on earnings quality. accordingly, the first and second hypotheses of this study are not supported by the empirical data. however, family ownership and political connections have a substantial detrimental impact on the quality of earnings.. in this case, the higher the proportion of family ownership in politically connected firms, the lower the resulting earnings quality. this finding supports the third hypothesis and illustrates the presence of an entrenchment effect, wherein dominant family control amplifies the adverse impact of political connections on financial reporting. the implications of this study offer a significant contribution to the development of agency theory in the context of developing countries, particularly in understanding the complex interplay between political power and family ownership structures in relation to financial reporting transparency. https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 124 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc practically, the findings suggest the need for improved corporate governance mechanisms that are more adaptive to internal power dynamics. for regulators such as the financial services authority (ojk) and the indonesia stock exchange (idx), this study provides a basis for formulating more targeted oversight policies for firms with concentrated ownership structures and political affiliations. for instance, by requiring more detailed disclosures regarding the political backgrounds of owners and board members, and by strengthening reporting systems that can detect potential accrual manipulation. for company management, it is essential to establish independent internal control systems, even in the presence of political connections or family ownership structures. the application of governance principles grounded in transparency and accountability remains a key element in maintaining the quality of financial information. this study, however, is subject to several limitations. first, the observation period spans only three years (2020–2022), which represents a transitional phase following the pandemic and may not fully capture long-term structural conditions. second, the political connection variable is measured using a binary dummy approach, which does not reflect the intensity or specific forms of political ties. in light of these limitations, future research is encouraged to extend the observation period in order to capture a more comprehensive picture of the dynamics among variables. subsequent studies may also consider incorporating additional dimensions, such as board effectiveness, institutional ownership, or audit quality, as relevant variables influencing earnings quality. reference braam, g., nandy, m., weitzel, u., braam, s., nandy, m., & utz weitzel, s. l. 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(2023). pengaruh kepemilikan keluarga terhadap kinerja perusahaan pada perusahaan manufaktur yang terdaftar di bursa efek indonesia https://www.ilomata.org/index.php/ijtc the influence of political connections on earnings quality with family ownership as a moderating variable adinata, suranta 126 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc sekolah tinggi ilmu manajemen indonesia (stimi) meulaboh. journal of management development, 1(2), 1–10. https://journal.stimi.ac.id/index.php/jmd wijaya, y. a., & merry susanti. (2024). pengaruh koneksi politik dan struktur kepemilikan manajerial terhadap nilai perusahaan. jurnal akuntansi, 4(1), 1–12. https://doi.org/10.37932/ja.v8i1.59 yeh, y., lee, t., & woidtke, t. (2001). family control and corporate governance: evidence from taiwan. international review of finance, 2(1–2), 21–48. https://doi.org/10.1111/14682443.00014 https://www.ilomata.org/index.php/ijtc ilomata international journal of tax and accounting p-issn: 2714-9838; e-issn: 2714-9846 volume. 5 issue 3 july 2024 page no: 782 792 782 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state majeed ajibola ibrahim1, adedeji daniel gbadebo2, olawale bamidele dada3 1federal college of land resources technology, nigeria. 2walter sisulu university, south africa. 3federal cooperative college, nigeria. correspondent: gbadebo.adedejidaniel@gmail.com1 received : march 28, 2024 accepted : july 1, 2024 published : july 31, 2024 citation: ibrahim, m.a., gbadebo, a.d, & dada, o.b. (2024). micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state. ilomata international journal of tax and accounting, 5(3), 782 792. https://doi.org/10.61194/ijtc.v5i3.1599 abstract: poverty is one of the world's biggest issues, particularly in third-world countries. nigeria is not an exception to the rule that governments everywhere have been developing various economic and social policies or programs to lower the poverty rate inside their borders. it is well known that cooperative groups, particularly at the medium and micro levels, have proven essential to economic progress. this study investigates the impact of micro-credit on poverty eradication in nigeria. to examine whether microcredit facilitates a decline in poverty, we use a simple linear model to test the hypothesis that cooperative societies greatly impact poverty, using primarily sourced data from cooperative societies in oyo state. the impact of timely access to micro-credit, credit lending rate, and technical support have negative and significant coefficients of -0.229, -0.242, and -0.231. this supposes that any increase in all variables will result in a drop in poverty alleviation among agribusiness cooperators. the outcome demonstrates that a cooperative society has significantly raised the living standards of its members. this shows that cooperative societies are important in reducing poverty. they offer financial and technical services, which help low-income earners whom traditional financial institutions do not primarily support. we suggest using legislative approaches to keep cooperative societies relevant to nigeria's efforts to reduce poverty. keywords: cooperative society, agribusiness cooperative, micro-credit, poverty reduction, living standards this is an open-access article under the cc-by 4.0 license introduction cooperative organizations can be used as a tool to assist and extend micro-credit to small enterprises. “cooperative societies are widely acknowledged as a vital tool for reducing poverty and fostering socioeconomic development. cooperative societies are voluntary associations or groups of people from the same socio-economic background who pull their resources together to solve their common problems through self-help and mutual trust (abdulrazaq, 2021). they serve as a financial education and capacity-building platform, empowering their members with financial literacy and entrepreneurial skills (epetimehin, 2016). https://www.ilomata.org/index.php/ijtc mailto:gbadebo.adedejidaniel@gmail.com1 https://doi.org/10.61194/ijtc.v5i3.1599 micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 783 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc with its vast natural resources and abundant workforce, nigeria has experienced economic growth. this growth has been marred by persistent poverty and income inequality, especially in rural areas. to address this issue, cooperative societies have emerged as a potential solution to empower marginalized communities and reduce poverty. cooperative societies have a long history in nigeria, dating back to the early 20th century (bello, 2023; birchall & hammond, 2019; ajayi, 2022; adewole et al., 2022). agribusiness cooperative societies have emerged as vital instruments for economic development and poverty alleviation in many developing countries, including nigeria (ismail 2023). these cooperatives aim to improve their members' livelihoods by providing access to resources, improving productivity, and enhancing market access. they assist in giving small loans to the underprivileged who do not have access to standard banking services, which has been promoted as a powerful tool for poverty alleviation worldwide (adam, 2023; rasaki et al., 2018; nwankwo et al., 2016; ajayi 2022). in nigeria, microcredit schemes have been implemented to empower economically disadvantaged individuals, particularly in rural areas, to engage in income-generating activities. cooperative societies are designed to serve the needs of their members, who jointly own and democratically control the organization. they operate on principles such as voluntary and open membership, democratic member control, member economic participation, autonomy, and independence, education, and training, cooperation among cooperatives, and concern for the community. the primary goal is to benefit the members rather than maximize profit, distinguishing them from other business models. adebayo (2022) asserted that people come together to pull their resources, utilize them in the best possible manner, and derive some common benefit. despite the efforts made by most nations to reduce poverty levels, evidence indicates that a substantial portion of the population continues to live below the poverty line (ijaiya & adesinauthman, 2021). this ongoing challenge highlights the complexity of poverty and the need for multifaceted approaches to address its root causes and consequences effectively. the nigerian government has developed several policies and initiatives over the years to try and lower the country's poverty rate, yet it is undeniable that the rate of poverty is continuously rising (balogun, 2022; nawai & shafii, 2017; hamilton & godwin, 2016). fewer studies have examined how timely access to microcredit, microcredit lending rates, and technical support by agribusiness cooperative societies contribute to poverty alleviation among their members. adewole et al. (2022) show that islamic cooperative societies affect the efficiency of financial intermediation in ife east local government, osun state. using logistic regression analysis, abdulrazaq (2021) shows the financial resources mobilization of interest-free cooperative societies in ilorin, kwara state, nigeria. at the same time, using principal component analysis, ajayi (2022) determined factors militating against cooperative societies' contributions to housing development in osogbo, nigeria. previous research, including udenwa et al. (2023), rasaki et al. (2018), nwankwo et al. (2016), ayoola (2022), kolade (2023), ayinde (2023), and others, has overlooked the specific activities of agribusiness cooperative societies that directly contribute to poverty eradication among their members. the paper addresses this gap by examining how micro credit impacts poverty alleviation, focusing on selected agribusiness cooperative societies in oyo state in nigeria. https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 784 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the study attempts to respond to two pressing research questions: (1) to what extent does timely access to micro-credit affect poverty alleviation among the agribusiness cooperative societies in nigeria? (2) to what extent does technical support influence poverty alleviation among the agribusiness cooperative societies in nigeria? the study was conducted to ascertain how microcredit induced poverty alleviation in nigeria, focusing on selected agribusiness cooperative societies in oyo state. we followed a survey approach and administered a designed questionnaire carefully crafted using a 3-point likert scale. respondents were asked to indicate how much they agreed or disagreed with various statements. according to the expectation, the study finds that cooperative society has a large impact on reducing poverty and, by implication, has significantly raised the living standards of its members. cooperative societies have contributed immensely to poverty reduction in the area studied. conceptualizing poverty poverty can refer to various conditions that have several meanings in popular culture. one important thread in poverty discourse is the lack of material resources necessary for survival. poverty can be construed in a narrow or broad sense. according to the world bank, living on less than $2 a day is impoverished (world bank development report, 2000; 2001). according to ajayi (2020), when poverty is viewed in the narrowest sense, it means a lack of income. but in a broader sense, poverty can be seen as multidimensional, encompassing other issues such as housing, health, education, access to services, and other avenues of accessing resources, and what is somewhat controversially referred to as social capital and access to social power relations. the most basic approach is to define poverty as the inability of an individual to survive, even in the short term that is, as being completely without the means to survive. however, a broader definition of poverty holds that individuals are impoverished if they cannot fully engage in society as citizens. (ajayi, 2020; aremu, 2021). poverty alleviation poverty alleviation refers to strategies, programs, and initiatives to reduce or eliminate poverty. these efforts aim to improve the economic and social conditions of people living in poverty, helping them achieve a better standard of living and greater financial stability. the importance of access to credit, jobs, and living below living standards cannot be under-emphasized in poverty alleviation (aremu, 2021). cooperative societies cooperative societies are self-governing groups of individuals who have come together voluntarily to address their shared economic, social, and cultural requirements and goals using a jointly owned and democratically managed business (akanji, 2022). cooperative societies serve various purposes since they encompass all facets of human endeavor. bamidele (2023) divides cooperative societies broadly into three categories. the first are the cooperatives by primary business activity, which are cooperative societies that fall under agribusiness cooperatives. agribusiness cooperative societies have emerged as vital instruments for economic development and poverty alleviation in many developing countries, including nigeria. these cooperatives aim to improve the livelihoods https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 785 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc of their members by providing access to resources, improving productivity, and enhancing market access. the second is the cooperatives by market area, which comprises national and worldwide cooperatives and local and interregional cooperatives. cooperatives by ownership structure cooperatives can also be classified by their ownership structure, which determines how they are organized and who controls them. the main types of cooperatives by ownership structure include consumers, producers, workers, multi-stakeholders, housing, and financial cooperatives (akanji 2022). the categorization could consist of new generation cooperatives (ngcs), federated cooperatives, hybrid cooperatives, centralized cooperatives, and other corporate formats are all included in this classification. most cooperative societies in oyo state are those set up to conduct main commercial operations. these agricultural cooperative societies play a significant role in the lives of rural farmers. cooperative societies are financial institutions authorized to receive membership savings and provide applicants with credit facilities. in the opinion of aremu (2022), cooperative societies are pivotal agents that play a crucial role in resource mobilization and distribution within the association. ajibola (2023) posits that cooperative societies are agents that perform special responsibilities in any economy through the rendition of financial-related services that promote a saving culture to catalyze economic acceleration. cooperative societies are a development instrument that opens doors for the economically engaged poor (cbn 2021). the poor can control forces of production, become more self-reliant, create jobs, increase household income, and build wealth by using financial services, which significantly positively impact reducing poverty. empirical review taizhou et al. (2019) researched the effects of microcredit on the growth of small and mediumsized enterprises (smes). utilizing survey data gathered from smes in taizhou, zhejiang, the study's findings demonstrated microfinance's critical impact on smes' revenue and profit growth. the study showed that smes are more likely to seek microfinance services if they have lower productivity levels and more financial risk. similar research was conducted in somalia. ahiabor (2021) considers how microcredit affected the growth of smes in accra. in data presentations and analysis, descriptive statistics which use straightforward percentage graphical charts and illustrations were strategically used. the study's conclusions showed that a sizable portion of smes know that mfis exist, and some even recognize that mfi loans have a good impact on fostering their expansion. in yobe state, nigeria, abbas (2023) evaluated cooperative groups' contributions to the fight against poverty. the primary data source was questionnaire responses and key informant interviews using the multi-layer random sampling technique. according to the study, cooperative societies have raised their members' living standards by offering them financial aid, job opportunities, training, and skills. https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 786 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc okafor (2023) investigates rural empowerment and agricultural cooperatives in awka north l.g.a., anambra state, nigeria. information from the local women's agrarian cooperatives was gathered using 254 structured questionnaires to accomplish this. the study offers factual data on the socioeconomic traits of the women and establishes the association between the length of membership and the members' income. it also examines the impact of farm inputs, credit, and extension visits on income, which serves as a stand-in for empowerment. the results showed that 38 percent of the variances in the income profile of agricultural cooperative members are explained by the combined effect of the explanatory variable in the model. the current study is conducted to ascertain how micro-credit helps alleviate poverty, focusing on selected agribusiness cooperative societies in oyo state. based on this, the paper tests the following hypotheses: h1: micro-credit does not affect poverty alleviation among the agribusiness cooperative societies in nigeria. h2: technical support does not influence poverty alleviation among the agribusiness cooperatives in nigeria. the study’s remainder is structured as follows. section 2 presents the methods, section 3 presents the results and implications, and section 4 concludes”. method to guide the study, the transaction cost approach theory was considered theoretical “under pining. the theory from ronald coase (1937) states that to carry out a market transaction, it is necessary to discover who it is that one wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the agreement are being observed, and so on. to be more concise, transaction costs include costs associated with information and search, negotiation and decision-making, and law enforcement and police. one way to think of the transaction cost is as a non-financial expense that the borrower and the lender bear before, during, and after the loan is disbursed. the lender (micro-credit provider) bears the following costs: finding money to lend, creating credit contracts, screening borrowers, determining the viability of projects, examining loan applications, giving staff and borrowers credit education, and overseeing and implementing loan agreements. the costs that the borrowers may have to pay include vetting potential group members (group borrowing), organizing a group, negotiating with the lender, filling out paperwork, travel expenses to and from the financial institution, project appraisal fees, and meeting attendance. the theory best guides our study because it allows both microcredit providers and borrowers to ascertain the costs of granting and obtaining wealth-building loans. the data are obtained from responses to structured surveys. the designed questionnaire has two sections: section a relates to questions on the demographics of respondents, including gender, marital status, age, and qualification. section b is separated into three parts for the study objectives. a 3-point likert scale where respondents will be asked to indicate the extent to which they agree https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 787 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc or disagree with various statements was used. the 3-point likert scale has ratings of agreed (3), disagree (2), and undecided (1), respectively. the target respondents are the members of cooperative societies located in the ido local government area, ibadan, nigeria. they were purposefully chosen to ensure that the 60 respondents represented the population being studied. participants in the study were selected using a stratified sampling technique; respondents were split into three groups based on product and commodity specification in agribusiness. each group received twenty questionnaires, for a total of sixty. members of the groups are chosen from those who work in the poultry business, fishery product business, and rabbit. of the sixty (60) questionnaires administered, only 38 were returned”. these analyses are based on the responses from returned questionnaires. the study adopts a model from adekunle (2023) to investigate whether microcredit facilitates the decline in poverty. equation 1 (functional form) and equation 2 (linear form) provide models that connect microcredit with poverty indicators. pa= ƒ (tamc, mclr, ts) (1) pa = β0 + β1tamc + β2 mclr + β3ts + µ (2) where pa = poverty alleviation measure, tamc = timely access to micro-credit, mclr= microcredit lending rate, ts = technical support, β0 = intercept of the model, β1, β2, and β3 = coefficient of the independent variables in the model, and µ = error term. result and discussion table 1 presents the summarized features of the questionnaires (panel a), the processing case for the returned “(panel b), and the evidence from the reliability test (panel c). cronbach’s alpha, employed to ensure the validity of the instruments used to test the hypotheses, reports a coefficient of 0.780, indicating a good internal consistency. according to ayinde (2023), a social science study can be deemed acceptable if the dependability coefficient is 0.70 or greater. table 2 presents the estimation outcome for equation 2. the impact of timely access to microcredit has a coefficient of -0.229 and is significant, implying that for every percent increase in timely access to micro-credit by agribusiness cooperative societies, poverty alleviation among cooperators will decrease by 22.9%. the micro-credit lending rate has a coefficient of -0.242, which implies that for every decrease in cooperative societies, the micro-credit lending rate and poverty alleviation level will decrease by 24.2%. the coefficient for technical support is -0.231, supposing there will be a 23.1% drop in poverty alleviation among agribusiness cooperators for an increase in technical support. the t-statistic is 2.133, and the p-value is 0.036, equivalent to 0.05, at a significant level of 0.05. this demonstrates that prompt access to microcredit significantly impacts agribusiness cooperators' ability to reduce poverty. the t-statistic is 1.898 at a substantial level of 0.05, and its p-value is.008, higher than 0.05. this demonstrates that the rate of microcredit lending among agribusiness cooperators has no discernible effect on decreasing poverty. the t-statistic is 1.926 at https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 788 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc a significance threshold of 0.05, and the t-statistic p-value is 0.005, or 0.05. this demonstrates the substantial impact that technical assistance has on reducing poverty among agribusiness partners. the t-statistics are 2.133, and the p-value, or aggregate adjusted r2 coefficient of determination, is 0.771 at a significance level of 0.05. these values indicate how well the model explains the data. this suggests that, in the model context, microcredit accounts for 77.1% of variations in poverty reduction among the chosen agribusiness cooperators, with other factors directly related to the topic accounting for 22.9% of the explanation. these different factors represent the stochastic component of the model that has been thrown into the error terms. the f-statistic is 29.252 at a significant level of 0.05, and the p-value is 0.000, which is smaller than the chosen 0.05. this leads one to the conclusion that every independent variable used to estimate the parameters is accurate. this suggests that the dependent and independent variables have a substantial negative connection. as a result, cooperative groups may be considered a useful instrument for ending poverty. the study was conducted to ascertain how micro-credit induced poverty alleviation in nigeria, focusing on selected agribusiness cooperative societies in oyo state. the study's objectives were analyzed using a regression model, and the collected data were analyzed using simple percentages. it revealed that cooperative societies have contributed immensely to poverty reduction in nigeria. the outcome indicates that timely access to micro-credit, micro-credit lending rate, and technical support as part of the various activities of the selected cooperative societies has voraciously declined the poverty circle among the agribusiness cooperators given credence to the reported coefficient on how cooperative societies' activities affect poverty reduction. the overall result of the regression summary shows that a negative and significant relationship exists between the dependent and the independent variables” regarding poverty reduction. table 1. questionnaire's features and reliability test panel a: questionnaire's feature s/n cases on questionnaire no of questionnaires 1 administered 60 2 returned 38 3 void 18 4 not returned 4 panel b: processing returned cases number (n) percent (%) valid 38 100 excludeda 0 0 total 38 100 panel c: reliability test cronbach's alpha number of items statistics 0.780 14 note: a. listwise deletion based on all variables in the procedure. source: authors (2024) table 2. estimation outcome for pa https://www.ilomata.org/index.php/ijtc micro credit and poverty alleviation in nigeria: evidence from selected agribusiness cooperative societies in oyo state ibrahim, gbadebo and dada 789 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc variables 𝐂𝐨𝐞𝐟 & 𝐀𝐩𝐫 coeff. 𝛔 t-stat 𝐏𝐫(𝐭) constant β0 + 0.103 1.470 0.070 0.000 tamc β1 − -0.229 -0.107 2.133 0.005 mclr β2 + -0.242 -0.128 1.898 0.008 ts β3 + -0.231 -0.120 1.926 0.005 �̅�𝟐 0.771 f-stat. 29.25 pr(f-stat.) 0.000 source: authors (2024) conclusion the study's findings demonstrate how important cooperative societies are to efforts to reduce poverty. they offer financial and technical services, which helps low-income earners who traditional financial institutions do not primarily support. furthermore, the government of nigeria, among other countries, has so far neglected to acknowledge the enormous contribution that cooperative societies make to raising the standard of life for the public while also serving as a crucial missing piece in the battle against poverty. the study's other findings demonstrated that members in the study area have lower poverty rates when they access microcredit, interest rates, and technical service supports. therefore, there is a clear connection between decreased poverty in the research area and cooperative societies. considering the findings, the researchers urge cooperative societies to focus on enhancing member contributions, which will significantly improve the cooperative's financial standing. it is also advised that cooperative societies examine and adjust their interest rates to make it easier for their members to make repayments. the study also suggested that members should have access to credit facilities as soon as they become due; doing so will significantly lessen their financial stress. it was also suggested that members should occasionally have access to technical service supports. nonetheless, it is important to implement legislative measures to strengthen cooperative societies and lower the poverty rate among the people in the research region and throughout nigeria. reference abdulrazaq, t. j. 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(2011). effectiveness of microfinance banks in alleviating poverty in kwara state nigeria. global journal of management and business research, volume 11, issue 4, version 1.0, march 2011. 00 https://www.ilomata.org/index.php/ijtc http://www.interesjournals.org/jribm the illomata international journal of management ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 2, april 2025 page no. 1-13 1 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods nurul parihah1, neni nur'aeni2, erwin budianto3 123universitas swadaya gunung jati, indonesia correspondent : nurulparihah3@gmail.com1 received : march 1, 2025 accepted : april 19, 2025 published : april 30, 2025 citation: parihah, n., nur’aeni, n., budianto, e. (2025). analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods. ilomata international journal of tax and accounting, 6(2), 1-13. https://doi.org/10.61194/ijtc.v6i2.1760 abstract: globalization that triggers increasingly sharp business competition requires the company to act more strategically in order to avoid financial distress and bankruptcy. the textile and garment industry has an important role in the indonesian economy, but faces financial distress due to decreased export demand and weak purchasing power, as experienced by sritex in pkpu, so this study aims to analyze financial distress at pt sri rejeki isman tbk for the 2019-2023 period, using the altman z score, zmijewski and zavgren methods. the type of data in this study is secondary data obtained from the company's published financial statements. the research method uses descriptive analysis with saturated sample technique in the form of financial statements of pt sri rejeki isman tbk listed on the indonesia stock exchange (idx). the results of this study indicate that the three approaches analyzed produce significant differences, especially based on the findings of the altman z score method, which shows that pt sri rejeki isman tbk is likely to experience bankruptcy between 2021 and 2023. the zmijewski method shows that in 2019 and 2020, experiencing financial difficulties but in the last three years the company has been in a healthy condition. the calculation results using the zavgren method show that the company's condition in 2019 is classified as healthy, experiencing finacial distress in 2020 2021 and the company is back in a healthy condition in 2022-2023. keywords: financial distress, altman z score, zmijewski, zavgren this is an open access article under the cc-by 4.0 license. introduction economic development in the world today has led to fierce business competition, especially in an increasingly modern era like today. continuous changes in economic conditions affect the activities and performance of companies, both large and small companies. as a result, many companies have gone bankrupt, especially those listed on the indonesia stock exchange. in addition, the emergence of the aec (asean economic community) further increases the pressure on https://www.ilomata.org/index.php/ijtc mailto:nurulparihah3@gmail.com https://doi.org/10.61194/ijtc.v6i2.1760 analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 2 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc industries that are not ready to compete effectively, so that these companies are at risk of facing financial problems that can lead to bankruptcy (idawati, 2020). the manufacturing sector has an important role in driving indonesia's economic growth, one of which is the textile and garment industry. the textile and garment industry plays an important role in meeting domestic market demand, providing a large number of jobs, and becoming an important source of foreign exchange through non-oil and gas exports. thus, the textile industry not only supports domestic needs, but also strengthens indonesia's position in international trade and creates extensive employment opportunities for the community. the textile and textile products (tpt) business is currently facing a difficult situation. the evidence is that there are many layoffs, and the cause of the downturn in the domestic textile industry is the cancellation and reduction of export orders. meanwhile, the domestic market is also not helped because purchasing power is still weak. if the company is unable to compete and maintain its company, the risk of experiencing financial distress will increase. financial distress is a situation in which a company experiences a financial decline or crisis that arises before bankruptcy.(yoga agung indrawan, 2023). one concrete example is pt sri rejeki isman tbk (sritex), which is one of the largest integrated textile companies in southeast asia. established in 1966, the company produces a range of textile products, including yarns, raw fabrics, finished fabrics, and apparel. sritex is an example of a company that experienced financial distress, which shows that large companies in this industry are not immune to financial risks. pt sri rejeki isman tbk faced serious financial difficulties due to its high debt burden. although the company has a history of more than 50 years and was once successful because of the quality of its products, sritex is currently entangled in financial problems that threaten its business continuity. sritex's financial health problems are caused by its enormous amount of debt, which led to a capital deficit in the first half of 2023. the amount of the company's liabilities exceeded the amount of its assets, causing equity to become negative. in fact, the company's ability to repay its debts became very doubtful, as even selling assets was not enough to cover all of its debts. to predict the financial condition of companies that have the potential to experience financial difficulties, various methods such as altman z-score, zmijewski, and zavgren can be used. (christella & osesoga, 2020), altman analysis combines several ratios into a prediction model using a statistical technique known as discriminant analysis, in this case using the altman z-score, referring to five important ratios. this method aims to assess the extent to which the assets owned by the company can be utilized to fund operational activities, generate profits, and fulfill obligations, both short and long term. zmijewski (1984), this method is a probit one of the alternative regression analysis using a cumulative normal probability distribution through financial ratios that can measure company performance, levarage, and liquidity to predict financial distress (pratikto & afiq, 2021). the zmijewski method has an accuracy of 94.9%. the last method is zavgren (1985). this method relies on logit analysis and shows an accuracy rate of 82.2% in predicting bankruptcy based on research conducted from 1980 to 1990. unlike the other methods, zavgren assesses corporate bankruptcy in the form of probabilities, rather than cut-off values. one of the main advantages of this method is its ability to show the level of asset activity at a given level of activity, as well as highlight low activity at a given level of sales. thus, this method allows https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 3 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the identification of the value of excess funds tied up in the company's assets (fahma and setyaningsih, 2021). referring to the problem of gaps between theory and data obtained, as well as differences in results from previous studies, this study will focus on analyzing the altman z-score, zmijewski, and zavgren methods in predicting bankruptcy. the purpose of this study is to analyze financial distress with the altman z sore, zmijewski and zavgren methods. it is hoped that the results of this study can be useful for pt srijeki isman tbk, for further researchers and investors. financial distress financial distress is a situation in which a company faces financial problems and is unable to fulfill its various obligations, such as obligations to creditors, bondholders, and other parties. if this condition is not addressed, it can lead to bankruptcy (hutabarat, 2020: 27).financial distress occurs when a company is unable to fulfill its obligations, especially short-term obligations related to liquidity, as well as other obligations included in the solvency category (eska tazkiya laras pramesti & hendratno 2019). financial distress as a stage of decline in financial condition that occurs before bankruptcy or liquidation (plat and plat in subramanyam 2017: 158). financial distress refers to a situation where a company faces challenges in meeting its financial obligations, thus disrupting its smooth operations. this condition is often an early sign before bankruptcy. therefore, the prediction of financial distress is very important for various parties, including lenders, investors, policy makers, governments, auditors, and company management. given the significance of the issue of financial distress, early detection of this potential problem will greatly assist all parties in making the right decisions. according to subramanyam (2017: 160), in a general study of the problem of financial distress, there are four categories of classification that can be identified, namely: first, there is category a in financial distress, which is a very high level and truly threatens the survival of the company. in this category, the company may face the risk of bankruptcy or insolvency. thus, the company has the possibility to report to the authorities as described by the court, that they have been in a state of bankruptcy. in this situation, the company may hand over various affairs to an outside party to handle. second, it is a category b with a high degree of financial distress and is considered risky. in this situation, the company needs to consider various realistic solutions to manage its assets, including determining which ones to sell and which ones to keep. in addition, the company must also consider the various impacts that may arise from the decision to merge or take over. one of the most significant impacts under these conditions is the possibility of layoffs and early retirement for some employees. third, this is considered a category c media or financial distress, and a company that can save itself from internal and external means with additional measures. however, here, we have to reform the various guidelines and management concepts that have been implemented until now, and it is even necessary to recruit new skilled professionals with a high level of competence to take https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 4 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc up strategic positions assigned to control and save the company, including the goal of increasing profits. fourth, in category d or low, the company is experiencing temporary financial difficulties. this condition is usually influenced by various external and internal factors, including the birth and implementation of inappropriate decisions. this condition is usually short-term, so it can be handled quickly. one of the ways that can be done is by submitting available financial proposals or utilizing predetermined sources of funds to deal with similar problems can be a solution. in fact, if this situation occurs in a subsidiary company, it can usually be resolved quickly without the need for further handling from head office management. bankruptcy bankruptcy is a situation in which a company experiences financial difficulties that are insufficient to support its operational activities. the importance of bankruptcy analysis lies in its impact, especially if it occurs in a public company (go public), because this can be detrimental to various parties, such as investors who own shares or bonds, creditors who face the risk of default, employees who may be exposed to layoffs, and the company's management itself (peter 2021). bankruptcy is often defined as the failure of a company to carry out its operations to achieve profit. (sumolang in misidawati and abadi, 2020: 1). based on law number 37 of 2004, article 1 paragraph (1), bankruptcy or insolvency is defined as the general residue of the assets of a debtor in bankruptcy, where the management and settlement of these assets is carried out by the curator under the supervision of the supervisory judge, in accordance with the provisions stipulated in the law. article 2 paragraph (1) provides further explanation debtors who have two or more creditors and are unable to pay off at least one debt that is due and collectible, will be declared bankrupt through a court decision. this can occur either based on a request from the debtor himself or at the request of another party from one or more of his creditors. altman z score and financial distress z-score analysis was introduced by prof. edward altman with the aim of predicting the financial condition of a company and the likelihood of bankruptcy. thus, this analysis serves as an indicator of the company's financial risk level. altman z-score is one of the effective methods for evaluating the company's financial health, and can be used as a measure of management's success in managing the company (rahmat, 2020). this method was first developed by altman in 1968 by applying multiple discriminant analysis (mda). this approach produces a prediction model used to determine whether a company has the potential for bankruptcy or not, by identifying various financial ratios as the main indicators. altman developed a prediction model by combining several ratios using statistical techniques, namely discriminant analysis, which serves to predict the bankruptcy of a company and is known as the z-score. z-score is a value calculated based on certain standards to indicate the likelihood of a company going bankrupt. the z-score formula developed by altman is a multivariate formula used to measure the financial health of a company. zscore analysis serves to assess whether the company's current financial condition is in a healthy state or not. in addition, this analysis can also https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 5 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc be used to estimate the company's future prospects. the higher the z-score value, the greater the assurance of the company's survival, and the smaller the risk of failure. zmijewski and financial distress the method developed by mark zmijewski is specifically aimed at predicting the likelihood of a company's bankruptcy. through his research, zmijewski formulated a model known as the zmijewski score, which has the ability to predict potential bankruptcy. introduced in 1984, this model is a development of various bankruptcy prediction models that have existed before. zmijewski score uses a ratio-based approach and applies the multiple discriminant analysis (mda) method. in the mda method, more than one financial ratio related to corporate bankruptcy is required in order to build an accurate prediction model. zmijewski developed this model by using ratio analysis that includes aspects of company performance, leverage, and liquidity, this model focuses on the amount of debt as the main factor that most affects the likelihood of bankruptcy. zavgren and financial distress the logit analysis used to classify bankruptcy is a prediction model developed by zavgren, which results in the potential occurrence of bankruptcy. in his research, zavgren achieved an accuracy rate of 82.2% in predicting bankruptcy (zavgren, 1988). the zavgren model was introduced based on nonparametric statistical analysis in the form of logit analysis. unlike other models that rely on the assumption of normality, the zavgren model does not rely on this assumption. because it uses logit analysis, the measurement method in this model emphasizes a clearer and more contrasting level of accuracy. the advantage of zavgren's (1985) method lies in the fact that logit analysis can be used to identify the level of asset activity within a given level of activity, as well as measure the lowest activity at a specific level of sales. in this way, this method provides the ability to determine the amount of funds invested in the company's assets (pandita & husanah 2024). method this study uses a type of descriptive research analysis with a quantitative approach. meaning that the research conducted aims to describe or describe the data that has been collected to be processed into information. the data source used uses a case study approach at pt sritex tbk in the 2019-2023 period. the sampling technique used in this study is a saturated sample, which is taken from the financial statements of pt sri rejeki isman tbk which is listed on the indonesia stock exchange (idx). the data used is secondary data, especially quantitative data obtained from these financial statements. in this study, researchers used documentation data collection techniques to obtain the information needed. this method involves collecting data through recording, observing, and reading the company's financial statements accessed from the indonesia stock exchange (idx) website at www. idx. co. id. for data analysis, several calculation methods are used, namely altman z score, zmijewski, and zavgren. https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 6 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc operational variable a. dependent variable financial distress is a situation where a company faces problems in meeting its financial obligations to other parties, such as creditors and bondholders. if this condition is not handled properly, it can lead to bankruptcy. (hutabarat 2020: 27). financial downturn can be understood as a phase of decline in financial conditions that occurs before bankruptcy or liquidation. (plat and plat in subramanyam 2017: 158). b. independent variable altman z score after the research conducted by beaver in 1966, edward altman continued with his research on financial distress. altman applied beaver's suggestion at the end of his research to conduct multivariate analysis. the model he developed became one of the most well-known in predicting financial distress, known as the z-score. the altman z-score approach is one of the effective methods to identify potential financial difficulties in a company (azizah & yunita, 2022). the altman z score formula is as follows: z = 6.56x1 + 3.26x2 + 6.72x3 + 1.05x4 description: x1 = working capital / total assets x2 = retained earnings / total assets x3 = earnings before interest and taxes / total assets x4 = book value of equity / book value of liabilities table 1 cut off value in the altman z score method z > 2,6 non-financial distress 1,1 < z < 2,6 grey area z < 1,1 financial distress zmijewski zmijewski developed a study on the financial health prediction model by combining several financial statement ratios. the goal is to measure the performance, leverage, and liquidity of a company. zmijewski has measured the accuracy of his own model, and obtained an accuracy value of 94.9%. the zmijewski formula is as follows: x = -4.3 4.5 x1 + 5.7 x2 0.004 x3 https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 7 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc description: x1 = net income / total asset (return on asset) x2 = total liability / total asset (debt ratio) x3 = current asset / current debt (current ratio) table 2 cut off value in the zmijewski method x < 0 non-financial distress x > 0 financial distress zavgren this method is considered more accurate as it achieves a percentage of 100%, while other methods fall below this figure. the superiority of zavgren's (1985) method lies in the application of logit analysis, which is effective in identifying the level of asset activity at different levels of a given activity. this method can also reveal the lowest activity that appears at a certain level of sales. thus, this method provides the ability to determine the amount of funds to be invested in the company's assets. (pandita & husanah 2024). the formula for the zavgren method is as follows: y = 0.238830.108 (x1) 1.583 (x2) 10.78 (x3) + 3.074 (x4) + 0.486 (x5) 4.35 (x6) + 0.11 (x7) description: x1 = inventory / sales (inventory turnover) x2 = receivables / inventory (receivable turnover) x3 = cash / total assets (cash ratio) x4 = (current assets inventory) / current debt (quick ratio) x5 = net income / (total assets current debt) (return on investment) x6 = long-term debt / (total assets current debt) (debt ratio) x7 = sales / (working capital + fixed assets) (asset turnover) while the probability formula is as follows: p𝑖 = 1 1 + 𝑒𝑦 description: p𝑖 : probability of company bankruptcy e : natural numbers which is worth 2.71828 y : multivariate function https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 8 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc if the probability value shows a value of 1, then the company is categorized as bankrupt / financial distress. if the probability value shows a value below 1, then the company can be categorized as healthy / non financial distress. result and discussion table 3. calculation results of financial distress analysis altman z score method year working capital/to tal asset (x1) retained earnings/tot al asset (x2) ebit/total asset (x3) book value of equity/book value of debt (x4) z score classification 2019 0,456 0,254 0,065 0,613 4,908 non-financial disress 2020 0,406 0,258 0,054 0,570 4,477 non-financial distress 2021 -0,801 0,487 -0,957 0,244 -9,844 financial distress 2022 0,218 -1,291 -0,387 -0,505 -5,915 financial distress 2023 0,129 -1,790 -0,232 -0,595 -7,176 financial distress source: data processed, (2025) table 4. calculation results of financial distress analysis zmijewski method year return on asset (x1) debt ratio (x2) current ratio (x3) z-score classification 2019 0,056 0,619 4,901 -1,039 financial distress 2020 0,046 0,636 2,889 -0,888 financial distress 2021 -0,876 1,323 0,373 7,183 non-financial distress 2022 -0,517 2,021 2,566 9,540 non-financial distress 2023 -0,296 2,471 1,743 10,991 non-financial distress source: data processed, (2025) https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 9 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc table 5. analysis calculation result of financial distress zavgren method year inv (x1) rec (x2) cash (x3) quick (x4) roi (x5) debt (x6) turn (x7) y score pi classification 2019 0,305 1,208 0,107 2,923 0,063 0,569 0,858 3,762 -2,288 non-financial distress 2020 0,385 1,186 0,101 1,647 0,058 0,537 0,882 0,077 0,274 financial distress 2021 0,447 0,228 0,007 0,132 3,139 -0,158 -2,460 2,103 0,619 financial distress 2022 0,286 0,567 0,021 1,155 -0,601 2,186 0,797 -7,085 0,092 non-financial distress 2023 0,220 1,281 0,003 1,109 -0,326 2,781 0,606 -10,634 0,069 non-financial distress source: data processed, (2025) result and discussion based on the results of the analysis using the altman z-score, zmijewski, and zavgren methods, it can be concluded that pt sri rejeki isman tbk recorded a significant decline in financial performance during the period 2019 to 2023. the results of the calculation of financial ratios show that the company is having difficulty maintaining its liquidity, profitability, and solvency, which is reflected in the increase in total debt and the decrease in net profit and company equity. altman z-score method shows that in 2019 and 2020, it is in a healthy condition with z-score of 4.908 and 4.477 respectively. this shows that the company has a good financial structure, and maximizes assets to generate profits. however, in 2021 the company's condition changed drastically with the z-score value dropping to -9.844, which is significantly below the financial distress limit. this decline is likely due to large operating losses or the company's inability to maintain good liquidity and solvency ratios indicating great financial stress. conditions worsen in 2022 and 2023, with z-scores of -5.915 and -7.176 respectively, indicating the company continues to be in a financially critical condition and at high risk of bankruptcy as the ebit to total assets and book value of equity to book value of debt values are negative indicating that the company is having difficulty generating operating profits and has lower equity than debt. in the zmijewski method, the results of the assessment of the company in 2019 and 2020 show a z-score of -1.039 and -0.888 respectively, which is below the healthy threshold. this indicates that the company is in an unstable condition and is experiencing financial difficulties. in 2021, the financial condition began to improve with a z-score of 7.183, which indicates that the company is in a healthy state. this change is supported by an increase in current ratio even though the debt ratio is quite high. the z score value which increased sharply from 7.183 in 2021 to 10.991 in 2023, indicates that the company is in a healthy financial condition, with improvements in current ratio and debt ratio. overall, the company experienced an improvement in financial https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 10 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc performance after the 2020 period, with a change from financial distress to healthy in the last three years. the table above shows the results of the calculation of financial distress analysis using the zavgren method in 2019, the y score value of 3.762 and pi of -2.288 indicates that the company is in a healthy condition with a high quick ratio value, which is 2.923, indicating good liquidity, so the company has sufficient ability to meet its short-term obligations. however, in 2020, the y score decreased dramatically to 0.077 with pi of 0.274, which indicates that the company is experiencing financial distress. this decline occurred due to a decrease in the quick ratio to 1.647, which indicates that the company's liquidity began to weaken. in addition, the small roi (0.058) also indicates a low return on investment. conditions worsened in 2021, where the y score increased to 2.103 but pi reached 0.619, which still classified the company in financial distress. this is due to the very low quick ratio of only 0.132, which indicates that the company's current assets are not sufficient to cover its short-term liabilities. in 2022, the company's condition improved with a y score of -7.085 and pi fell to 0.092, so the company was classified as healthy again. this improvement is supported by an increase in quick ratio to 1.155, which indicates an improvement in liquidity. in addition, the debt ratio increased to 2.186, indicating that the company began to be able to manage its debts better. in 2023, the company remains in a healthy condition with a y score of -10.634 and pi of 0.069 with a quick ratio of 1.109, which still indicates that the company has enough assets to meet its shortterm liabilities. conclusion based on the results of the analysis using the altman z-score, zmijewski, and zavgren methods, it was found that pt sri rejeki isman tbk (sritex) experienced a significant shift in financial condition from 2019 to 2023. based on the data analysis and discussion that has been carried out, this study concludes that the potential bankruptcy of pt sri rejeki isman tbk in the 2019-2023 period shows different results depending on the method used. analysis using altman z-score shows that the company is in a healthy condition in 2019 and 2020. however, from 2021 to 2023, the company experienced financial distress, which indicates a decline in financial condition due to external and internal pressures, such as market instability, increased debt burden, or decreased profitability. meanwhile, the zmijewski method provides a different conclusion, which predicts that the company experienced financial distress in 2019 and 2020. but began to experience recovery since 2021. this indicates that although financial pressure occurred at the beginning of the observation period, the company was able to adjust its financial strategy so that it returned to a more stable condition in the following few years. on the other hand, the zavgren method shows fluctuations, with companies in a healthy condition in 2019, experiencing financial difficulties in 2020-2021, but returning to health in 2022-2023, reflecting an improvement in financial conditions. the difference in the results of these three https://www.ilomata.org/index.php/ijtc analysis financial distress of pt sri rejeki isman tbk: altman z-score, zmijewski, zavgren methods parihah, nur’aeni and budianto 11 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc methods shows the variation in each model in detecting financial distress, and confirms that even though companies experience financial stress, there are indications of recovery within a certain period. the implications of this study include the need for financial restructuring strategies and more effective debt management to avoid the risk of bankruptcy in the future. the results of this study can also be the basis for investors and stakeholders in making wiser decisions related to the company's financial condition. this study still has some limitations. first, this study only uses three methods, namely the altman z-score, zmijewski, and zavgren methods. second, the object of research is only pt sri rejeki isman tbk. third, the research period only covers five years, from 2019 to 2023. based on the conclusions that have been obtained and the limitations that exist, there are several recommendations that can be given for further research related to financial distress. future research is advised to add the ohlson method to predict company bankruptcy more accurately. in addition, the research object can be expanded by examining other companies listed on the indonesia stock exchange (idx) in order to provide a more comprehensive picture of the development of a company's financial performance. furthermore, research with a shorter period of time can also be carried out so that the development of company conditions can be analyzed more specifically and accurately. reference anugrah, a., hawari mohamad, h., otniel, j., reza fahrezi, m., radian, m., siswajanthy, f., & penulis, k. 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(2024). financial distress analysis with zavgren method. 4(2), 396-405. https://www.ilomata.org/index.php/ijtc ilomata international journal of tax & accounting p-issn: 2714-9838; e-issn: 2714-9846 volume 6, issue 1, january 2025 page no. 127-145 127 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency uli wildan nuryanto1, nining sulastri sutisna2, bayyu indra kusuma3, gema ika sari4, khaeruman5, mamay komarudin6, udin suadma7 1234567universitas bina bangsa, indonesia correspondent: uli.wildan11@gmail.com1 received : december 29, 2024 accepted : january 12, 2025 published : january 31, 2025 citation: nuryanto, u, w., sutisna, n, s., kusuma, b, i., sari, g, i., khaeruman., komarudin, m., suadma, u. (2025). the influence of management accounting information systems on financial statements performance in retail sector in serang regency. ilomata international journal of tax and accounting, 6(1), 127145. https://doi.org/10.61194/ijtc.v6i1.1806 abstract: this study aims to analyses the effect of management accounting information system (mais) on financial statements performance of retail sector in serang regency. a quantitative approach was used with the linear regression analysis method. the sampling method was carried out using purposive sampling of 60 respondents who were finance managers, accounting staff and operational managers who used mais. the results showed that mais had a significant effect on the performance of financial statements with a statistical t value of 15.388. and the magnitude of the regression constant is 11.802 and the path coefficient value is 0.444 which indicates that each one unit increase in mais implementation will increase the performance of financial statements by 0.444, the magnitude of the r2 value of 0.701 indicates that 70.1% of the financial statement performance variable can be explained by the mais variable while the rest is influenced by other variables. the results of this study reinforce previous findings that the implementation of an effective mais will make a major contribution in improving the effectiveness, efficiency, and accuracy and timeliness of financial reports. the implications of the results of this study encourage retail companies to continue to improve the management of their accounting information systems to support better and optimal managerial decision making. keywords: management accounting information system (mais), financial statement performance. this is an open access article under the cc-by 4.0 license. introduction the retail sector in indonesia is one of the main drivers of the national economy, contributing around 12.96% to the national gdp (raharja et al., 2021); (khairurrahman et al., 2023); (limanseto, 2024). with population growth and increasing purchasing power, retailers are required to be more adaptive and efficient in managing their resources and business strategies (candra, 2022); (shanti, 2025). one of them is in serang regency which is currently developing very rapidly, where the retail sector shows very significant dynamics, both in terms of the number of business actors and the variety of products and services offered to the public (hasanah et al., 2021); (purbohastuti et https://www.ilomata.org/index.php/ijtc mailto:uli.wildan11@gmail.com https://doi.org/10.61194/ijtc.v6i1.1806 the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 128 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc al., 2021); (mangala, 2019). however, this growth is not always accompanied by an increase in operational efficiency and optimal financial performance. many retail businesses, especially at the medium level, face many challenges in managing financial data, cost planning, and accurate and timely financial reporting (ezegeaba, 2017); (bustamin, s., hadi, 2023); (purwata, 2023). this shows the urgent need for a mais that can support data-based decision making to improve the quality of financial management. mais is an integral part of the information system designed to provide financial and non-financial information to support managerial decision making in planning, controlling, and evaluating organizational performance (wijoyo et al., 2023); (mawarti & yaya, 2025). along with the development of information technology, mais has undergone a significant transformation from manual systems to cloud-based digital and integrated with big data, artificial intelligence (ai), and business intelligence tools (on-piu chan, 2020); (afkar & fathurrahmad, 2023); (stoykova & shakev, 2023); (angelina wijaya tan et al., 2024); (sentiyani, s., firdaus, 2024). mais play an important role in providing relevant, accurate and timely information to management. this system not only functions as a recording tool, but also as a means of analysis that supports planning, control, and evaluation of financial performance (hertati, l., antasari, l., nazarudin, fery, i., azwari, p. c., safkaur, 2024); (siahaan, m. y., samadara, s., samadara, 2022); (valeri, k., dewi, f. g., oktanti, 2022); (dewi, r. n., puspitasari, 2023); (kartika, e., prasetya, v., tanjung, r., listiyawati, i., ismail, 2024); (aprieni, meilantika, f. r., sihotang, l., rachma, 2024). in the context of the retail industry, which has a high transaction cycle and great operational complexity, the effective use of mais is one of the key factors in maintaining the competitiveness and sustainability of a business and entity. the phenomenon in the field shows that there are still many retail business actors in serang regency who have not been able to utilize mais optimally. in fact, some actors still rely on manual systems or simple applications that have not been integrated. this has an impact on the lack of reliability of financial reports, which in turn affects the accuracy of information for strategic decision making (černius & birškytė, 2020); (gardi et al., 2021); (anggadini et al., 2021); (hapiansyah, s. s., suryani, e., farida, 2024); (zulkarnain, 2024). on the other hand, there are also retail businesses that have begun to adopt modern information systems, but have not evaluated the extent to which these systems contribute to improving their financial performance reports. in rapidly developing era, where increasingly fierce and dynamic business competition, the building material retail sector faces demands to improve operational efficiency and accuracy in financial decision making. one important tool that supports this is the implementation of mais, which is designed to provide relevant, accurate, and timely information for management to formulating strategies and managing resources effectively. based on the literature, many previous studies have discussed the relationship between information systems and organizational performance. however, most focus on the manufacturing, banking, or government sectors (hidayat, r., samsudin, a., rizkiah, a., lupita, a., aulia, h., vivien, m., anggeliya, 2022); (irwansyah, 2023); (kaju, m. i., ngenang, 2022); (kasram, 2021). meanwhile, research that specifically examines the effect of mais on financial statement performance in the retail sector, especially in a local context such as serang regency, is still very limited. this creates a research gap that is important to fill through scientific studies. in addition, previous studies have mostly measured organizational performance in general, without distinguishing specific financial performance, such as the effectiveness of income statements, balance sheets, profitability ratios, and liquidity. in fact, in the retail business https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 129 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc world, financial statements play an important role in assessing business efficiency and determining the direction of the next business strategy. therefore, a more focused approach to financial statement performance as an independent variable is relevant and urgent to do. this research seeks to bridge the research gap in terms of the population gap, where many previous studies have focused on large industrial sectors such as manufacturing and banking, but research that discusses the retail sector is still very rare, especially in specialized retail for building materials which is one of the foundations of economic development of a region. in general, the retail sector in business classification according to the 2020 standard classification of business fields (kbli) regulated by the ministry of investment coordinating board (bkpm) and online single submission (oss) regulations both in general and specifically for building materials is divided into 7, namely retail trade in stores with a self-service system (supermarkets, minimarkets. including light building materials), retail trade in stores with a self-service system (supermarkets, minimarkets, including light building materials), retail trade in stores without a self-service system, special retail trade in paints and floor coatings, special retail trade in building materials such as cement, bricks and iron, special retail trade in glass, pipes, building electrical equipment, special retail trade in sanitary and plumbing equipment, special retail trade in other building materials. meanwhile, retail based on classification according to the scale of ownership is divided into 4 categories, namely modern retail categories such as large companies that are usually in the form of pt, have integrated it and stock systems such as mitra10, depo bangunan. traditional retail categories such as small building stores, usually owned by individuals or micro/small businesses and not necessarily digitized. franchise category such as stores that are run with a franchise system following the central sop, for example, pratama building stores and mitra10. e-retail or marketplace categories whose sales are based online using general platforms such as shopee, tokopedia or specialized online-based such as qhomemart and buka bangunan. this research gap becomes particularly evident when considering the unique characteristics of the building materials retail sector in serang regency. unlike large urban areas, businesses in this region typically still rely on manual processes, simple record-keeping, and have limited proficiency in information technology. meanwhile, competitive pressure from modern stores, fluctuating building material prices, and the growing need for financial transparency demand a more systematic and reliable information management system. however, to date, no comprehensive study has tested the effectiveness of mais implementation in improving the quality and performance of financial reporting in this sector this research also offers aspects of novelty in the context of methodology and study location. by taking the retail sector in serang regency as the research object, this study provides an empirical contribution to an area that still receives less attention in the management accounting literature, especially from the perspective of the application of information technology. which is undergoing economic development, makes it an ideal location to observe mais in local business practices. in terms of methodology, this study will quantitatively measure the effect of mais on financial statement performance using an inferential statistical approach. thus, the results obtained are not only descriptive, but also able to provide empirical evidence regarding the strength of the relationship between the two variables. this will enrich academic discussions and provide a basis for practical recommendations for retail businesses. the absence of locally based empirical https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 130 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc evidence is an important gap that needs to be filled. understanding the local context is crucial because the effectiveness of mais implementation is not only determined by the technology itself but also by human resource readiness, organizational culture, and varying business scales between regions. therefore, this research is urgent not only as a theoretical contribution to the development of literature on siam in the context of the retail sector but also as a practical contribution in providing a basis for decision-making for business actors and policymakers at the local level. practically, the results of this study are expected to provide new insights for retail business owners regarding the importance of investing in a reliable accounting information system. in addition, this research can also be used by local governments or related agencies in formulating policies for fostering retail msme to be more effective and adaptive to digital transformation in financial management. considering the urgency of the need for an accurate mais, as well as the lack of empirical studies that specifically relate to the performance of financial statements in the local retail sector, this research is very relevant and strategic to conduct. it is hoped that this research can fill the literature gap, provide theoretical contributions, and encourage the wider and more effective application of mais in the retail sector. based on the phenomena, research gaps, and novelty mentioned above, this study aims to test the hypothesis of whether there is a significant effect of mais implementation on financial statement performance in the retail sector in serang regency. financial statement performance financial statement performance is one of the crucial aspects in assessing the health and effectiveness of a business entity. from a theoretical perspective, financial statement performance can be analysed using agency theory as a grand theory, which states that there is a contractual relationship between managers or agents and company owners or principals. this theory emphasizes the importance of transparency and accountability in financial reporting to minimize conflicts of interest and information asymmetry between the two parties (jensen, m., c., 1976). therefore, financial statements not only serve as a reporting tool but also as an instrument for management control and accountability. furthermore, within the framework of signalling theory, financial reports are also used by management as a tool to convey positive signals to investors and stakeholders regarding the company's condition and prospects. good financial information can increase market confidence, expand access to funding, and strengthen the company's image (spence, 1973). therefore, the quality and performance of financial statements are very strategic in external and internal organizational decision-making (popa & nedelea, 2022); (bajan & grigoroi, 2023); (putri, a. a., inapty, b. a., kartikasari, 2024). from an empirical perspective, financial statement performance is measured using various quantitative and qualitative dimensions, which refer to accounting standards and good corporate governance principles. one widely used framework is financial risk analysis, such as liquidity, solvency, profitability, and activity. these dimensions illustrate the extent to which the company can meet its short-term obligations and maintain a healthy capital structure (damayanti, e., amita, d., habibi, 2023). in addition to financial ratios, non-financial dimensions are also beginning to be integrated into the measurement of financial statement performance, such as reliability of information, relevance, https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 131 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc timeliness, and dependability. this refers to the qualitative characteristics of financial reporting according to the international financial reporting standards (ifrs) and financial accounting standards (sak). in other words, financial statement performance does not only reflect financial results but also the quality of information presentation that supports decision-making. the first non-financial indicator used is relevance, meaning that information must be directly related to the economic decisions to be made by users (ongayi, w., dingwa, b., jonathan, s. t., khashane, 2021); (pires & alves, 2022); (monteiro, a. p., vale, j., leite, e., lis, m., pysz, 2022). the second is reliability, meaning that information must be free from bias so that it can be trusted and verified (quoc., t. n. k., hong, v. t., van, 2024). the third is timeliness, meaning that information must be available before it loses its ability to influence decisions (cantika, r., suryadi, r., prawira, i. f. a., nasim, 2019). fourth is understandability, which means that information must be presented in a format that is easily understood by users who have business knowledge (avi, 2023). fifth is comparability, which means that financial statements must allow for comparisons between time periods and between entities, both horizontally and vertically (choi, s. u., lee, 2024). sixth is completeness, meaning that the information presented must cover all relevant and significant matters and no material information should be omitted (mangala, 2019). seventh is neutrality, meaning that the information presented must be unbiased toward any party (darwin, k., haliah, nirwana, syamsuddin, kusumawati, 2024). eighth is faithful representation, meaning that the information accurately depicts the economic conditions and does not mislead users (ulfah, a. k., nadilla, t., razali, 2023). mais theory mais are part of management information systems that are specifically used to generate financial and non-financial information relevant to management decision-making. according to (romney, m., steinbart, p. j., summers, s., & wood, 2021)), mais are designed to support planning, control, evaluation, and decision-making in organizations through data generated by accounting processes (chandra, a., manossoh, h., kalalo, 2024). this system differs from financial accounting systems because its primary focus is on providing forward-looking and flexible internal information tailored to managerial needs. the development of mais is significantly influenced by advancements in information technology and the increasing complexity of business operations. in the digital age, this system is no longer based solely on manual processes or simple spreadsheets but has evolved into an integrated enterprise resource planning (erp)-based system (mandava, 2024). research conducted by (chenhall, r. h., morris, 1986) shows that the effectiveness of mis is greatly influenced by organizational structure, environmental uncertainty, and task interdependence, so the system must be tailored to the characteristics of the organization. in general, mais consists of three main components, namely input, process, and output. input includes operational and financial transaction data, the process involves processing data into managerial information, and output includes various reports used for performance analysis, budgeting, and decision making (ammy, 2024). in practice, the mais system is also equipped with modules such as product costs, budget reports, and variance analysis, which strengthen its strategic role in managing the company's resources (huang, 2023). some researchers suggest that the effectiveness of mais can be assessed using several dimensions, (gordon, l.a. dan narayana, 1984) https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 132 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc identified four main dimensions, namely: (1) scope or information coverage, (2) timeliness or speed, (3) aggregation or data consolidation level, and (4) integration or integration level between units. these four dimensions serve as a framework for evaluating the extent to which mais can meet managerial information needs. in empirical measurements, the mais variable has several indicators such as information quality (accurate, relevant, timely), suitability for management needs, technological constraints, and ease of use of the system. some studies also include indicators such as the availability of activity-based costing information, the system's ability to support budgeting and forecasting, and the system's contribution to strategic decision-making. in the context of management accounting research, mais is an important variable frequently studied in relation to various organizational outcomes, including financial performance, operational efficiency, and competitive advantage. therefore, research examining the impact of mais on the retail sector, particularly in regions with distinct economic characteristics such as serang regency, is important as an effort to address literature gaps and understand mais in a more specific context. the effect of mais on financial statement performance the application of mais in companies has found that to assess financial performance, it is necessary to measure financial conditions using data and information from the company's annual financial reports each year. this highlights the importance of mais's role in the success of an organization's financial reporting (oktapiani et al., 2024). the information generated from the implementation of mais has a significant impact on the actions taken by banks in making investments, considering that mais influences the quality of the company's financial reports and serves as a reference for management accounting information in banking. mais provides many benefits not only in the development of information technology but also in efforts to make the right decisions (hidayat, r., samsudin, a., rizkiah, a., lupita, a., aulia, h., vivien, m., anggeliya, 2022). the utilization of mais using simba or regional management information systems shows that the utilization of information systems and financial management satisfaction positively influence the performance of financial reports in opds in bengkulu province by 72.5% (irwansyah, 2023). research conducted on savings and loan cooperatives (ksp) using a questionnaire instrument found that the use of mais significantly influences the quality of financial reports, where the quality of financial reports becomes relevant, accurate, understandable, compliant with accounting standards, and reliable (kaju, m. i., ngenang, 2022). meanwhile, research conducted on the luwu regency local government, which uses a mais in the form of a financial management information system (simda), has a significant impact on the quality of local government financial statements by 71.5% (kasram, 2021). technological advances have encouraged companies to utilize integrated mais, resulting in accurate and important financial reports that are prepared in accordance with applicable psak standards (mardhatillah, a., yahya, 2023). the implementation of a mais that covers finance, production, and marketing will help each division manager to evaluate and make decisions with certainty, so the implementation of management accounting needs to be applied continuously with the aim of applying maximum financial performance reports for each company (oktapiani et al., https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 133 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc 2024). meanwhile, research conducted on 18 agencies in jambi province using descriptive statistical analysis and multiple linear regression found that the implementation of regional management information systems significantly affects the quality of financial reports produced by each agency (orlanda et al., 2021). qualitative research results through a literature review method found that mais have a positive and significant effect on the quality of company financial reports, so that data can be relied upon to analyses company performance and make predictions about the direction of policies that should be taken by the company (saputri, h., kusnaedi, u., asmana, 2023). quantitative research conducted by (setiawan, b. e., pramesti, h., nany, 2023) concluded that mais have a significant impact, both partially and simultaneously, on the accuracy of company financial performance reports. based on the theory from the previous research findings, the researcher formulated a hypothesis that there is an influence of mais on financial statement performance in the retail sector. the research model and indicators tested are illustrated as follows: figure 1. research model method this study uses a quantitative approach with a causal associative research design, which aims to determine the causal relationship between independent and dependent variables. this study examines the effect of mais as an independent variable on financial statement performance as a dependent variable in retail companies in serang regency. the research was conducted on retail companies located in serang regency, banten province and conducted from march to april 2025, starting from the distribution of questionnaires, data collection, to analysis of the results. the population in this study was all retail companies located in serang regency. research sample was selected using purposive sampling, a technique for determining samples based on specific criteria, such as: (1) the retail company has been using an accounting information system for at least two years, (2) the company has been preparing financial statements regularly and systematically, and (3) the respondents consist of financial managers, accounting staff, or operational managers who understand the implementation of mais. the number of respondents in this study was 60. purposive sampling was chosen for this study because it aimed to obtain respondents who truly had direct experience and understanding of the implementation of management accounting information systems (mais) and the process of preparing financial reports in the building materials retail sector. the criteria for selecting respondents focused on owners, financial managers, or administrative staff directly involved in managing financial information at building mais financial stateent performance relevance reliability speed convenience integration punctuality relevance quality presentation sak compliance effectiveness of reports https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 134 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc material stores. a sample size of 60 respondents was deemed adequate as it represents active retail businesses in the building materials sector spread across serang regency, considering the diversity of business scales and accounting systems used. representativeness was maintained through selection that considered the geographical distribution of businesses and variations in the information systems applied. with this approach, the data collected is expected to reflect real conditions and provide contextually relevant findings. the questionnaire was developed based on indicators that had been used in previous studies and adapted to the local context of the research object. to ensure content validity, the questionnaire was first pilot-tested on 15 respondents from the building materials retail sector who were not included in the main research sample. the pilot test results were used to identify potential ambiguities, comprehension difficulties, or duplicate items in the questionnaire. based on this feedback, some statements were refined both in terms of wording and scale structure to make them easier to understand and accurately reflect field conditions. the type of data used is primary data obtained through the distribution of closed questionnaires using a 1-5 likert scale. data collection techniques were carried out by distributing questionnaires to selected respondents. in addition, structured interviews were also conducted to deepen information related to the implementation of mais and to explore the difficulties encountered by respondents when they first implemented mais. data analysis began with validity and reliability tests using spss to assess the validity and reliability of the research instrument. this was followed by classical assumption tests, including normality, multicollinearity, and heteroskedasticity, to ensure the suitability of regression analysis. further analysis included linear regression, t-tests, and the coefficient of determination (r²). result and discussion the validity test results for the research instrument used to measure the mais variable obtained a pearson correlation value for all indicators above the table value of 0.254 and a significance value for all indicators below 0.05, so that all indicators are valid and can measure the latent variables as summarized in the following table: table 1. results of the mais indicator validity test https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 135 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc meanwhile, the results of the validity test on the financial statement performance variable indicators showed that all indicators had a pearson correlation value greater than the table value of 0.254 and a significance value of less than 0.05, meaning that all indicators were valid and could measure their latent variables, as shown in the table below: table 2. results of the mais indicator validity test the next test result is reliability to determine the reliability and consistency of the research instrument used to measure latent variables. the cronbach's alpha test results for the mais variable using 5 indicators yielded a cronbach's alpha of 0.827, while the cronbach's alpha for the financial report performance variable was 0.848. both values are greater than 0.60, so it can be concluded that all the indicator items used to measure each latent variable are reliable and consistent. https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 136 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc the normality test using the kolmogorov-smirnov (k-s) test yielded an asymp. sig. (2-tailed) value of 0.200, which is greater than 0.05. this indicates that there is no significant difference between the sample data distribution and the normal distribution. therefore, it can be concluded that the data in the sample are normally distributed and meet the assumptions required for parametric statistical analysis using linear regression. the next test is the multicollinearity test, in which the analysis results show a tolerance value of 1.0, which is greater than 0.10, indicating that the dependent variable is not influenced by the independent variables. similarly, the variance inflation factor (vif) value is 1.00, which is less than 10, indicating the absence of multicollinearity symptoms. hence, it can be concluded that there is no correlation among the independent variables in the regression model that would interfere with the accuracy of the regression coefficients. the heteroscedasticity test using a scatter plot showed that the distribution pattern of the residual points was randomly and evenly spread above and below the normal line and did not form a specific pattern. this suggests that the model is homoscedastic, meaning the variance of the residuals (errors) of the regression model is consistent or uniform across the range of predictor values, thereby not compromising the validity of the model being tested, as illustrated below: figure 2. results of scatter plot model regression test the results of the linear regression test obtained a constant value of 11.082, which means that if the value of x or the mais variable is zero, then y or the financial report performance variable is estimated to be 11.082. while the regression coefficient value for the mais variable on the financial report performance variable is 0.444, which means that every 1 unit increase in the x variable (mais) will cause an increase of 0.444 units in the y variable (financial report performance) if other variables remain constant. the regression coefficient of 0.444 indicates that there is a positive and quite strong influence of the mais variable on the financial report performance variable. in other words, the higher the application of the mais, the more the financial report performance tends to increase. the form of the regression equation is as follows: y = α + β1 y = 11,082 + 0,444 β1 klk = 11,082 + 0,444 mais the results of the hypothesis test using the t-test (student test) obtained a value of 15.388 as summarized in table 3, where the value is above the t-table value (2-tailed, df 58, α 0.05) 2.001 https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 137 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc which illustrates the significant and real influence of the mais variable on the performance of financial reports. this shows that mais really contributes significantly to improving the quality and effectiveness of financial reports. the implementation of good mais which includes a recording system, internal reporting, management control system and accounting information processing will contribute directly to improving the accuracy, transparency, and speed of financial reporting in the retail sector in serang regency. with a reliable information system, the organization can provide more accurate, relevant, and timely financial reports to support better managerial decision making. table 3. t-test results the r-square test results obtained a value of 0.701 so that the coefficient of determination (kd) value was 70.1% as seen in table 4. the r2 value can be interpreted into a strong value range which means that the mais variable has a strong influence of 70.1% on the financial report performance variable, while the remaining 29.9% is explained by other variables that are not included in this regression model. this finding strengthens the argument that the mais plays an important and strategic role in driving the effectiveness of financial reports. therefore, strengthening and optimizing the accounting information system is crucial to driving transparency, accountability, and competitiveness of the retail sector in serang regency. the results of interviews with financial managers and heads of departments using mais regarding the difficulties faced in implementing mais in the retail sector are related to human resources (hr) where there is a lack of technological and accounting competencies such as many retail employees, especially at the operational level, who do not yet have adequate technical skills in operating information systems, including an understanding of management accounting. this has an impact on input errors, slow reporting processes and low accuracy of the information produced. so that in the early stages of implementing mais, there is a lot of routine training that is ongoing and repeated at certain periods so that the error rate can be minimized to the maximum. in other practice, the implementation of mais in this sector is often suboptimal due to a lack of adaptation https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 138 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc to local needs, including business scale and organizational culture factors. this results in many businesses being unable to utilize mais to generate accurate, relevant, and timely financial reports, which ultimately impacts their overall financial performance. although these challenges are real and have direct implications for business sustainability, academic literature discussing the impact of mais implementation on financial report performance in a local context is still very limited. previous studies have tended to focus on large-scale organizations or other sectors such as manufacturing, thus failing to provide a comprehensive picture of the specific challenges in the building materials retail sector, particularly in developing areas such as serang regency. this gap highlights the need for further research to understand how factors such as technological capacity, human resource skills, and business environment complexity influence the effectiveness of mais in improving financial statement quality. by bridging this gap, this study aims not only to contribute theoretically to the development of the literature but also to offer practical solutions relevant to enhancing business competitiveness in the building materials retail sector. the results of this study confirm the results of previous relevant studies such as the results of research by (hidayat, r., samsudin, a., rizkiah, a., lupita, a., aulia, h., vivien, m., anggeliya, 2022); (irwansyah, 2023); (kaju, m. i., ngenang, 2022); (kasram, 2021); (mardhatillah, a., yahya, 2023); (oktapiani et al., 2024) and (orlanda et al., 2021) which state that the implementation of a good mais can strengthen internal control and increase efficiency in the preparation of financial reports. another impact is being able to improve transparency and accountability in financial reports which ultimately has a positive impact on the overall performance of the organization. another result is that more structured data management through the implementation of mais will provide a more solid foundation for accurate decision making. although the results of the study show a significant influence between mais implementation and financial report performance, discussion of the fundamental reasons behind the strength of this relationship in the local context is still limited. in serang regency, the adoption of mais is often triggered by practical needs to speed up the reporting process, rather than by long-term integrative strategies. this may strengthen short-term functional relationships, but it does not necessarily reflect a deep understanding of the strategic use of the system. additionally, variability in human resource capacity and it infrastructure among retail businesses may limit the generalizability of these findings to other regions. therefore, caution is needed when applying the results of this study outside the local context under investigation. one unexpected finding in this study was that although the implementation of management accounting information system (mais) proved to have a significant effect on financial report performance, some businesses that had adopted the system still showed stagnant performance. follow-up interviews and field notes indicate that the main obstacle is not the system itself, but rather human resource limitations—specifically, a lack of training, technical understanding, and resistance to change. on the other hand, technical constraints such as inadequate hardware and unstable internet connections also hinder the system's full functionality. to overcome these challenges, some businesses have developed adaptive strategies such as gradually integrating manual reporting systems with digital systems, involving third parties in internal training, and gradually allocating budgets for technology investments. these strategies show that the https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 139 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc effectiveness of mais implementation is not only influenced by the existence of the system itself, but also by the overall readiness of the organization, including user competence and managerial support. theoretically, these findings can be explained through the agency theory perspective, where accounting information serves as a monitoring mechanism to reduce information asymmetry between owners and managers. in this context, mais becomes an important control tool to ensure business management aligns with the interests of capital owners. additionally, signaling theory is relevant, as the quality of financial statements generated from mais implementation signals credibility to investors, suppliers, or other business partners, ultimately strengthening the competitive position of retail businesses. thus, this study not only provides empirical evidence of the relationship between mais and financial statement performance but also enriches academic contributions by explicitly linking quantitative results to a relevant theoretical framework. although this study was systematically designed to examine the effect of mais implementation on financial statement performance in the building materials retail sector, there are several limitations that need to be acknowledged to provide a complete understanding of the interpretation of the results. one of the main limitations lies in the data collection process through questionnaires, where there is a potential for response bias, especially since some respondents may provide answers that tend to be normative or idealistic rather than reflecting the actual conditions they experience. this is common in research using self-report methods, particularly on issues related to the efficiency and transparency of financial reporting. in addition, there are technical challenges in dealing with missing or inconsistent data. some questionnaires returned by respondents were not fully completed, or showed inconsistent response patterns—for example, giving maximum scores to all statements without considering the variation in content. to maintain the validity and integrity of the data, researchers conducted a data screening process prior to analysis, in which incomplete or statistically invalid questionnaires were removed from the dataset. in addition, researchers also conducted reliability and validity tests on the instruments to ensure that the remaining data met the standards for further analysis. although these measures help minimize the negative impact of problematic data, it must be acknowledged that the results of this study reflect limitations in representing reality in a fully objective manner. therefore, readers are advised to interpret the findings while considering the local context and existing methodological limitations. conclusion based on the results of the research that has been conducted, it can be concluded that the mais (mais) has a significant effect on the performance of financial reports in the retail sector in serang regency with a statistical t-test value of 15.388 where the value is greater than the t table. the value of the regression constant is 11.082 and the regression coefficient is 0.444 which indicates that every 1 unit increase in the implementation of mais will increase the performance of financial reports by 0.444 units. the r2 value of 0.701 indicates that 70.1% of the variation in financial report performance can be explained by the mais variable, while the remaining 29.9% is influenced by other variables. https://www.ilomata.org/index.php/ijtc the influence of management accounting information systems on financial statements performance in retail sector in serang regency nuryanto, sutisna, kusuma, sari, khaeruman, komarudin, and suadma 140 | ilomata international journal of tax & accounting https://www.ilomata.org/index.php/ijtc based on these findings, it is suggested that retail companies continue to improve the quality of the use of mais as part of managerial strategies. development of hr competencies, improvement of technology infrastructure, and improvement of information system procedures need to be done so that mais can be implemented optimally. in addition, further research is suggested to add other variables such as employee competency, organizational culture, and internal control quality to explain other factors that also affect the performance of financial reports in a comprehensive and comprehensive manner. penelitian selanjutnya disarankan untuk diperluas ke wilayah lain dengan karakteristik ritel yang berbeda, serta memasukkan variabel tambahan seperti kualitas sdm dan budaya organisasi. penggunaan desain komparatif atau longitudinal juga dapat memberikan pemahaman yang lebih mendalam terhadap dinamika implementasi siam dari waktu ke waktu. the conclusion of this study reveals that the implementation of management accounting information systems (mais) has a significant effect on financial report performance in the building materials retail sector in serang regency. however, these results need to be interpreted with caution given the limitations of the study, such as the relatively small sample size and specificity to a particular geographical area. reliance on self-reported data also opens the potential for bias in respondents' perceptions. furthermore, the findings may not be generalizable to other sectors or regions with different characteristics. therefore, further studies with a broader scope and data triangulation methods are highly recommended. in conclusion, the implementation of management accounting information system (mais) has broader significance in driving digital transformation and enhancing sustainable competitiveness in the retail sector. with the utilization of more accurate, relevant, and timely information, mais is not only a reporting tool but also a strategic foundation for adaptive and data-driven decision-making in an era of ever-evolving business competition. reference afkar, m. a., & fathurrahmad. 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